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Forum Funds – ‘N-CSR’ for 3/31/18

On:  Monday, 6/4/18, at 3:38pm ET   ·   Effective:  6/4/18   ·   For:  3/31/18   ·   Accession #:  1435109-18-370   ·   File #:  811-03023

Previous ‘N-CSR’:  ‘N-CSR’ on 3/2/18 for 12/31/17   ·   Next:  ‘N-CSR’ on 6/26/18 for 4/30/18   ·   Latest:  ‘N-CSR’ on 9/4/18 for 6/30/18   ·   Referenced via Accession #:  By:  Forum Funds – ‘N-CSR/A’ on 7/5/18 for 3/31/18

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  As Of                Filer                Filing    For·On·As Docs:Size              Issuer               Agent

 6/04/18  Forum Funds                       N-CSR       3/31/18    4:10M                                    Atlantic Fd Admi..LLC/FAAbsolute Capital Opportunities Fund Institutional Shares (CAPOX)Absolute Convertible Arbitrage Fund Institutional Shares (ARBIX)Absolute Strategies Fund Institutional Shares (ASFIX) — R Shares (ASFAX)Adalta International Fund ADAQXBeck, Mack & Oliver Partners Fund BMPEXLMCG Global Market Neutral Fund Institutional Shares (GMNIX) — Investor Shares (GMNRX)LMCG Global MultiCap Fund Institutional Shares (GMCIX) — Investor Shares (GMCRX)LMCG International Small Cap Fund Institutional Shares (ISMIX) — Investor shares (ISMRX)Merk Absolute Return Currency Fund Institutional Share Class (MAAIX) — Investor (MABFX)Merk Hard Currency Fund Institutional Share Class (MHCIX) — Investor Shares (MERKX)Payson Total Return Fund PBFDX

Certified Annual Shareholder Report by a Management Investment Company   —   Form N-CSR
Filing Table of Contents

Document/Exhibit                   Description                      Pages   Size 

 1: N-CSR       Certified Annual Shareholder Report by a            HTML   2.85M 
                          Management Investment Company                          
 4: EX-99.906 CERT  Miscellaneous Exhibit                           HTML      8K 
 3: EX-99.CERT  Miscellaneous Exhibit                               HTML     17K 
 2: EX-99.CODE ETH  Miscellaneous Exhibit                           HTML     67K 


N-CSR   —   Certified Annual Shareholder Report by a Management Investment Company


This is an HTML Document rendered as filed.  [ Alternative Formats ]



 C: 
As filed with the Securities and Exchange Commission on June 4, 2018

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 811-03023

FORUM FUNDS
Three Canal Plaza, Suite 600


Jessica Chase, Principal Executive Officer
Three Canal Plaza, Suite 600
207-347-2000


Date of fiscal year end: March 31

Date of reporting period: April 1, 2017March 31, 2018

 
 
 

ITEM 1. REPORT TO STOCKHOLDERS.
 

 
 

 
ANNUAL REPORT
 
 

 

 


The views in this report were those of Absolute Investment Advisers LLC (“AIA” and “Absolute”), the investment  adviser to the Absolute Strategies Fund, Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund (each a “Fund” and collectively the “Funds”) as of March 31, 2018, and may not reflect their views on the date this report is first published or any time thereafter. These views are intended to assist shareholders in understanding their investment in the Funds and do not constitute investment advice. None of the information presented should be construed as an offer to sell or recommendation of any security mentioned  herein.
 
The Absolute Strategies Fund utilizes multi-manager strategies with multiple sub-advisers, they may be exposed to varying forms of risk. These risks include, but are not limited to, general market risk, multi-manager risk, focused portfolio risk, small company risk, foreign risk, interest rate risk, credit risk, prepayment risk, IPO risk, liquidity risk, high turnover risk, leverage risk, derivatives risk and cash and cash equivalents holdings risk. For a complete description of the Funds’ principal investment risks, please refer to each Fund’s prospectus.
 
Beta is a measure of an asset’s sensitivity to broad market moves, as measured for instance by the S&P 500® Index. A fund with a realized beta of 0.5 with respect to the S&P 500® Index infers that about 50% of the fund’s  returns were explained by the performance of the index (the rest of the performance was independent of the index). The HFR Indices are equally weighted performance indexes, utilized by numerous hedge fund managers as a benchmark for their own hedge funds. One cannot invest directly in an index.
 
Absolute Strategies Fund, Absolute Funds, and Absolute Investment Advisers are registered service marks.  Other marks referred to herein are the trademarks, service marks or registered trademarks of their respective owners.


ABSOLUTE STRATEGIES FUND
A MESSAGE TO OUR SHAREHOLDERS (Unaudited)

 
Dear Shareholder,

We are pleased to present the Annual Report for the Absolute Strategies Fund (the “Fund”) for the year ended March 31, 2018.

Capital preservation/downside protection through unique risk and return positioning that helps diversify traditional portfolios are important themes of the Fund. Achieving these over the course of an investment cycle often means constructing a portfolio of investments that looks very different from other investment funds, including alternative ones. It requires being defensive at times when others are overly aggressive. It requires looking for value in areas of the market that are over-looked or unloved by other investors. Achieving these goals also means that the Fund’s performance is likely to go through periods of under-performance as well as out-performance versus other strategies. We believe that over time the uniqueness of the strategy creates significant non-correlation and diversification characteristics. The markets provided favorable conditions for the Fund during the volatile months of February and March of 2018. For those two months the Fund (Institutional Shares) returned 3.46% vs. -3.38% and -6.13% for the HRFX Global Hedge Fund Index and the S&P 500 Index respectively. For much of the remainder of the Fund’s fiscal  year, however, extreme low levels of volatility hindered our ability to generate performance and the Fund (Institutional Shares) returned -4.45% over the 12 months ended March 31, 2018. By comparison, the HRFX Global Hedge Fund Index returned 3.20% and the S&P 500 Index returned 13.99%.

We believe that recent dynamics have resulted in a market that is narrow and highly inefficient. Since the introduction of asset purchases by central banks (also known as quantitative easing), financial assets have become increasingly expensive and highly correlated; price-discovery and volatility are artificially suppressed. We believe that constructing  a portfolio of various industry-favored hedge fund strategies will not achieve the risk-adjusted results we desire. Traditional assets classes and most hedge fund strategies have become a correlated beta trade that acts in unison  with the overall equity markets. We believe there is little, if any, potential for a diversified portfolio of typical hedge fund strategies to produce anything other than the returns of a traditional portfolio. In effect, the entire hedge fund universe has become as crowded as the ETF universe, and both are taking nearly the same risks that also require abnormally low levels of volatility. A repricing of financial markets caused by artificially suppressed interest rates  would very likely result in large losses across equities, fixed income and many alternative investments. To produce alpha within such an environment would require an investment strategy to do something very different including, at times, to take the other side. While this approach has been frustrating over the past few years, we believe the eventual unwind of correlated asset risks creates an opportunity to set up a portfolio that can generate significant outperformance. We believe markets are setting up for an extensive long/short opportunity that takes advantage of confusion and continuous volatility. In fact, it may have already begun. Extended periods of extreme low levels of volatility are an historical anomaly. We believe the long-awaited return to normal levels of market volatility will provide a much improved environment for the Fund’s performance while creating challenges for funds geared toward passive market beta.

During the year, our discipline and process was preserved and the Fund maintained a balance of long and short exposures. We  continue to allocate capital based on opportunities to be long and short. The challenge has come from a market cycle that has been skewed by central bank intrusions. In this regard, as prudent investors who view markets through a lens of capital at risk, we must take into account what we believe are extreme levels of high valuations, the proliferation of momentum/trend investing, and artificially suppressed volatility when constructing the Fund’s portfolio.  All of these have been coiled against us in both time and price.  From a long/short perspective, we tend to favor underpriced or out of favor long ideas vs a short portfolio of overpriced or crowded areas. Many of these positions are simply relative-value relationships that revert to the mean as assets begin to seek value once areas of perfection eventually turn out to be illusory.  Volatility is used to help monetize these relationships over   time.  Our performance has been directly impacted by a lack of volatility, and an extreme turn of the market cycle that has punished out-of-favor longs while rewarding crowded, over-valued indexing.  This  has  created  a  large  spread between our long and short positions that has pushed our overall portfolio to opportunity levels we have not seen since 2009. We are now currently positioned for extensive mean reversion opportunities that have been  stretched  over several
 
 
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A MESSAGE TO OUR SHAREHOLDERS (Unaudited)

 
years and have recently reached historic levels. Details of these opportunities along with recent performance are outlined below.

Value vs Growth. One major side effect from all of the central bank activity and momentum chasing is that value investing is currently stuck in one of the worst stretches on record. Value stocks have significantly lagged growth stocks over the past year, compounding a gap that has persisted since the end of the financial crisis almost ten years ago. Growth has outperformed value by 14% over the past 12 months and by approximately 70% since 2007. This has caused the bulk of our poor returns this year. However, the last time value underperformed growth to this degree was in 1999.   During the next three years, value outperformed growth by more than 100%.   We believe this is a significant market-neutral, risk/reward opportunity. Approximately 40-45% of our portfolio is positioned for this mean reversion idea of long value, short  growth/indices.

Short Equity. Market indices are trading at valuation levels only seen near 1929 and 2000 peaks. The median price/ sales for the S&P 500 is over 2.5x, or nearly 50% higher than the prior peak in 2007. The Russell 2000 Index trades for a P/E near 100. The Nasdaq Composite P/E is over 50.  While having a net short equity allocation has had a  negative impact on Fund performance, we believe many securities in various global markets and sectors are at risk of significant repricing, some upwards of 50% or more. Approximately 20% of the portfolio is currently positioned net short  equity securities.

Convertible Arbitrage. Convertible arbitrage is one of few areas of the financial markets that is not flooded with excess capital and has provided modest returns. Hedged convertible securities currently offer attractive return and risk characteristics relative to most other areas of the bond market. This strategy also offers a relatively steady return profile to diversify away from other areas of our portfolio. Approximately 20% of the portfolio is allocated to convertible arbitrage.

Energy. Energy is another area that is seeing significant divergence as compared to the overall market. The energy sector is close to its lowest weighting in the S&P 500 on record of only 4-5%; this was last seen near the 2000 bubble peak. Oil services companies recently traded near 2009 financial crisis lows.  Relative underperformance of energy  year to date versus the S&P 500 is -25%, and this has contributed to negative performance. However, following the  last low weighting in the S&P in 2000, energy companies outperformed the S&P by over 50% during the next three years and over 150% during the next six years. Approximately 10-12% of our portfolio is positioned long energy vs short  market indices.

Commodities. Other commodities are also at an extreme low vs overall equity market indices. The CRB Commodity Index has underperformed the S&P 500 by 40% over the last few years, a deficit nearly identical to that during the late 1990s. The ratio of commodities/S&P 500 is also on par with the early 1970s, a period that preceded significant commodity inflation. Both time periods saw commodities outperform the S&P 500 by over 100% during the following three years. A more modest 5-7% of our portfolio is targeted for long commodity-sensitive securities vs market  indices.

Volatility. Up until very recently, volatility has never been more compressed than it is today. The US equity market recently set a record for the number of days without a 3% dip in prices. Market players across financial markets are now using volatility as an input for risk taking. This is most certainly the case with risk parity strategies, but institutions and retail investors are also using short volatility trading to generate income or excess yield. This is very similar to the idea of selling credit default swaps (selling insurance) during the housing bubble which then led to the financial crisis.  It is estimated that risk parity, quants and Commodity Trading Adviser (CTA) strategies amount to $1 trillion in implicit short volatility strategies. Additionally, tens of billions are being bet directly on short volatility through ETFs. Volatility has never been more suppressed and, as seen in recent months, can return quickly.  We believe our overall portfolio is set up to benefit from an increase in volatility and should be able to capitalize on large spikes in market movements both long and  short.

In summary, many of the Fund’s long securities don’t have a big story or theme attached to them and may not be a major part of an index. The Fund’s short securities may be expensive and/or exhibiting low growth with significant  economic
 
 
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ABSOLUTE STRATEGIES FUND
A MESSAGE TO OUR SHAREHOLDERS (Unaudited)


sensitivity. Equity index securities are also used on the short side to create relative-value arbitrage opportunities versus Fund long securities.  Sub-adviser strategies based on long equity exposure were the Fund’s  top performers  over the last year with the exception of energy related securities, which provided negative performance. Convertible arbitrage also performed well during the period. This is notable because the strategy typically exhibits low sensitivity  to equity markets. Strategies that included short exposure were the largest detractors. Shorting has been particularly difficult as few things seemed to have gone down in price regardless of how poorly a company or group of companies performed. The Fund’s short exposure remains flexible and has varied over the past year as large spikes in volatility have offered opportunities to monetize short term gains. During periods of low volatility the Fund has maintained a large amount of short exposure due to historically high valuations and weak fundamentals (see below). The timing is uncertain but we believe the payoff in short opportunities could be significant. Long periods of low volatility and high valuations have historically given way to periods of high volatility, leading to market valuations reverting to the  mean.

We believe markets move in cycles over time. Occasionally cycles reach extremes, which has actually been a common occurrence over the past 20 years. Additionally, some markets may be nearing the end of an extreme bull cycle while others may be ending an extreme bear cycle. It is very difficult to know the timing of when a market cycle turns, and patience can be especially tested when both long and short positions are fighting the last trend.
 
In late 2008, it seemed as if the market would never stop going down.  Price-insensitive  sellers  dominated  the market.  Yet, we removed the bulk of our shorts and increased our net long position to the largest ever at the time.   We were early, but the opportunity was very large. Today, we see the inverse of that cycle. The market seems as if it  will never go down and price-insensitive buyers are dominating the market. Again, we may be early but the opportunity warrants our positioning.
 
Comment on recent market volatility and positioning:
 
In a prior commentary, we stressed that much of the distortions in asset prices were being leveraged further by large momentum players betting on short volatility, which could contribute a spark for an eventual market turbulence and we were well positioned for this turbulence in early  2018:
 
“We  have witnessed historic financial market intrusions by central banks that has created extreme distortions in asset prices and caused volatility to collapse. A lack of volatility has led risk-parity strategies, quant funds and momentum players to bet further on these extremes.  We  are even witnessing a massive bet on “short volatility”  which is essentially a replay of the “selling of insurance” gravy train that led up to the financial crisis. Is this a permanent new paradigm? Is it really different this time?  Those questions have been repeated throughout history  and the predictions have always proved incorrect.”
 
We continue to remind investors of what we see as extreme market risks in our dialogue, and it should, at a minimum, serve as a warning for what could eventually materialize into a much larger problem.  It is hard to tell exactly where   we go from here but we feel certain that downside risks are as great as anything we can analyze historically. At this time, we are maintaining our positioning. Should markets experience a large drawdown, there may be a short term opportunity to reduce some of our net short exposure. Option positions have also been utilized opportunistically for
 
 
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A MESSAGE TO OUR SHAREHOLDERS (Unaudited)


both upside and downside tail risk. In effect, the Fund may capitalize on either significant spikes up or down in market indices.

The volatility shock of February 2018 should serve as a glimpse of what we believe is likely to come in the future. Just as the sub-prime and CDS crisis, it may not happen all at once. Sometimes a slower progression with large intermediate swings in asset prices can hurt just the same as an undiversified portfolio erodes over time.

Sincerely,
 
-s- Jay Compson
 
Jay Compson
Portfolio Manager
Absolute  Investment  Advisers LLC
 
 
4
ABSOLUTE FUNDS


ABSOLUTE STRATEGIES FUND
PERFORMANCE CHART AND ANALYSIS (Unaudited)
 
The following charts reflect the change in the value of a hypothetical $1,000,000 investment in Institutional Shares and a $250,000 investment in R Shares, including reinvested dividends and distributions, in Absolute Strategies Fund (the “Fund”) compared with the performance of the benchmarks, S&P 500 Index (“S&P 500”), Bloomberg Barclays U.S. Aggregate Bond Index (“Barclays Index”), the HFRX Global Hedge Fund Index (“HFRX”) and the MSCI World Index (“MSCI World”), over the past ten fiscal years. The S&P 500 is a broad-based, measurement of the U.S. stock market based on the performance of 500 widely held large capitalization common stocks. The Barclays Index is a broad based measurement of the U.S. dollar-denominated, investment-grade, fixed-rate, SEC registered taxable bond market. The HFRX is a broad-based measurement of the performance of the hedge fund universe; it is comprised of eight strategies - convertible arbitrage, distressed securities, equity hedge, equity market neutral, event driven, macro, merger arbitrage, and relative value arbitrage. The strategies are asset-weighted based on the distribution of assets in the hedge fund industry. The MSCI World measures the performance of a diverse range of 24 developed countries’ stock markets including the United States and Canada, and countries in Europe, the Middle East; Asia and the Pacific. The total return of the indices include the reinvestment of dividends and income. The total return of the Fund includes operating expenses that reduce returns, while the total return of the indices do not include expenses. The Fund is professionally managed, while the indices are unmanaged and are not available for investment.
 
Comparison of Change in Value of a $1,000,000 Investment
Absolute Strategies Fund - Institutional Shares vs. S&P 500 Index, Bloomberg Barclays U.S. Aggregate Bond Index,
HFRX Global Hedge Fund Index and MSCI World Index
 
(LINE GRAPH)
 
 
Average Annual Total Returns
Periods Ended March 31, 2018
One Year
Five Year
Ten Year
 
 
Absolute  Strategies  Fund  -  Institutional   Shares
-4.45%
-1.54%
0.60%
 
 
S&P 500 Index
13.99%
13.31%
9.49%
 
 
Bloomberg Barclays U.S. Aggregate Bond   Index
1.20%
1.82%
3.63%
 
 
HFRX Global Hedge Fund  Index
3.20%
1.29%
-0.24%
 
 
MSCI World Index
13.59%
9.70%
5.90%
 
 
 
5
ABSOLUTE FUNDS


ABSOLUTE STRATEGIES FUND
PERFORMANCE CHART AND ANALYSIS (Unaudited)
MARCH  31,  2018
 
Comparison of Change in Value of a $250,000 Investment
Absolute Strategies Fund - R Shares vs. S&P 500 Index, Bloomberg Barclays U.S. Aggregate Bond Index,
HFRX Global Hedge Fund Index and MSCI World  Index
 
(LINE GRAPH)
 
 
Average Annual Total Returns
Periods Ended March 31, 2018
One Year
Five Year
Ten Year
 
 
Absolute  Strategies  Fund  -  R    Shares
-5.30%
-2.12%
0.10%
 
 
S&P 500 Index
13.99%
13.31%
9.49%
 
 
Bloomberg Barclays U.S. Aggregate Bond   Index
1.20%
1.82%
3.63%
 
 
HFRX Global Hedge Fund  Index
3.20%
1.29%
-0.24%
 
 
MSCI World Index
13.59%
9.70%
5.90%
 
 
Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than original cost. As stated in the Fund’s prospectus, the annual operating expense ratios (gross) for Institutional Shares and R Shares are 2.94% and 3.56%, respectively. Excluding the effect of expenses attributable to dividends and interest on short sales and acquired fund fees and expenses, the Fund's total annual operating expense ratios for Institutional Shares and R Shares would be 1.94% and 2.51%, respectively. However, the Fund’s adviser has contractually agreed to waive its fee and/or reimburse Fund expenses to limit Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement (excluding all taxes, interest, portfolio transaction expenses, dividend and interest expenses on short sales, acquired fund fees and expenses, proxy expenses and extraordinary expenses) to 1.99% and 2.24% for Institutional Shares and R Shares, respectively, through August 1, 2019 (the “Expense Cap”). The adviser may be reimbursed by the Fund for fees waived and expenses reimbursed by the adviser pursuant  to the Expense Cap if such payment is made within three years of the fee waiver or expense reimbursement, and does not cause the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement to exceed the lesser of (i) the then-current expense cap, or (ii) the expense cap in place at the time the fees/expenses were waived/reimbursed. During the period, certain fees were waived and/or expenses reimbursed; otherwise, returns would have been lower. To the extent that the Fund invests in another fund sponsored by the Fund's adviser or its affiliates, the adviser may waive certain fees and expenses. The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Returns greater than one year are annualized. For the most recent month-end performance, please  call  (888) 992-2765.
 
 
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ABSOLUTE FUNDS


ABSOLUTE CAPITAL OPPORTUNITIES FUND
A MESSAGE TO OUR SHAREHOLDERS (Unaudited)
 
Dear Shareholder,
 
For the year ending March 31, 2018, the Absolute Capital Opportunities Fund (the “Fund”) returned 14.13%. By comparison, the HFRX Equity Hedge Index returned 8.35%.
 
Over the past year, the Fund has been positioned defensively but has also owned broad market equity options, mostly on the S&P 500 Index, that should benefit from increased stock market volatility regardless of direction. Much of the Fund’s return was generated from these options in the first quarter of 2018 when market volatility returned. The options also detracted from performance in parts of 2017 when volatility was muted.
 
Kovitz Investment Group Partners, LLC (“Kovitz”), the Fund’s subadviser, utilizes a core equity long-short portfolio with opportunistic tail hedging, both upside and downside. This hedging allowed the Fund to generate a solid return, despite maintaining a value bias on the long side, in an environment where value under-performed growth by a significant margin (as measured by Russell 3000 Value and Growth Indices).
 
The Fund continues to be positioned much as it was in the first quarter of 2018. The Fund continues to be well hedged toward the downside. Kovitz believes the level of defensive positioning is prudent given the heightened starting valuations, low but potentially rising interest rates, and the potential (not probable) for geopolitical missteps. It is worth noting that the Fund does own a portfolio of competitively advantaged businesses generally trading at 12-16 times Kovitz’ estimation of normalized earnings, and call options designed to benefit from continued upside volatility or a generally rising stock market.
 
We believe the Fund is positioned well for a variety of market environments, particularly if equity markets remain volatile.

Sincerely,
-s- Jay Compson
Jay Compson
Portfolio Manager
Absolute Investment Advisers LLC
 
 
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ABSOLUTE FUNDS


ABSOLUTE CAPITAL OPPORTUNITIES FUND
PERFORMANCE CHART AND ANALYSIS (Unaudited)
MARCH 31, 2018
 
The following chart reflects the change in the value of a hypothetical $1,000,000 investment, including reinvested dividends and distributions, in the Absolute Capital Opportunities Fund (the “Fund”) compared with the performance of the benchmarks, the HFRX Equity Hedge Index (“HFRX Equity”) and the S&P 500 Index (“S&P 500”), since inception. HFRX Equity measures the performance of strategies that maintain positions both    long and short in primarily equity and equity derivative securities. The S&P 500 is a broad-based measurement of the U.S. stock market based on the performance of 500 widely held large capitalization common stocks. The total return of the indices includes the reinvestment of dividends and income. The total return of the Fund includes operating expenses that reduce returns, while the total return of the indices do not include expenses. The Fund is professionally managed, while the indices are unmanaged and are not available for investment.

Comparison of Change in Value of a $1,000,000 Investment
Absolute Capital Opportunities Fund vs. HFRX Equity Hedge Index
and S&P 500 Index
 

 
Average Annual Total Returns
Periods Ended March 31, 2018
One Year
Since Inception
12/30/15
Absolute Capital Opportunities Fund
14.13%
10.49%
HFRX Equity Hedge Index
8.35%
4.82%
S&P 500 Index
13.99%
13.91%
 
Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than original cost. As stated in the Fund’s prospectus, the annual operating expense ratio (gross) is 3.51%. Excluding the effect of expenses attributable to dividends and interest on short sales, the Fund's total annual operating expense ratio would be 2.81%. However, the Fund’s adviser has contractually agreed  to waive its fee and/or reimburse Fund expenses to limit Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement (excluding all taxes, interest, portfolio transaction expenses, dividend and interest expenses on short sales, acquired fund fees and expenses, proxy expenses and extraordinary expenses) to 1.75%, through August 1, 2019 (the “Expense Cap”). The adviser may be reimbursed by the Fund for fees waived and expenses reimbursed by the adviser pursuant to the Expense Cap if such payment is made within three years of the fee waiver or expense reimbursement, and does not cause the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement to exceed the    lesser of (i) the then-current expense cap, or (ii) the expense cap in place at the time the fees/expenses were waived/reimbursed. During the period, certain fees were waived and/or expenses reimbursed; otherwise, returns would have been lower. The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Returns greater than one year are annualized. For the most recent month-end performance, please call (888)  992-2765.
 
 
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ABSOLUTE FUNDS


ABSOLUTE CONVERTIBLE ARBITRAGE FUND
A MESSAGE TO OUR SHAREHOLDERS (Unaudited)
MARCH  31,  2018
 
Dear Shareholder,

For the period ending March 31, 2018, the Absolute Convertible Arbitrage Fund (the “Fund”) returned 5.94%. By comparison, the HFRX Fixed Income Convertible Arbitrage Index returned 4.71%.

The Fund’s subadviser, Mohican Financial Management, LLC (“Mohican”), executes a convertible arbitrage strategy with a particular focus on small and mid-cap issues. Even though convertible bonds are hybrid securities, they are fixed income securities with some exposure to interest rates. Interest rates rose steadily during the period which put downward pressure on valuations.

Performance can be classified as “slow and steady” over the past year. Returns in each month were positive and the Fund exhibited extremely low volatility. Sensitivity to broad equity and fixed income markets has also been very low.

Mohican believes that the convertible asset class today looks healthy in terms of credit quality, short durations, security profile and liquidity. There were no convertible defaults in the first quarter following a year where the default rate was less than 1%. The average duration for the asset class is about 3 years, which we believe provides investors significant protection against interest rate fluctuations. Despite the recent drawdowns in equities, stock prices remain overvalued which means the convertible market continues to offer ample supply of “in-the-money”, heavier hedged, volatility arbitrage opportunities, and we expect liquidity to steadily improve.
 
Mohican also notes that convertible new issuance in the first quarter of 2018 was strong. 32 deals were priced which annualizes to 128 – well in excess of the 104 deals priced in 2017. Importantly, 30 of the 32 deals were issued by small and mid- cap companies and 31 of the 32 deals were not rated by the rating agencies. Mohican believes non-rated, small and mid-cap convertibles offer a consistent source of inefficiencies and value in the convertibles marketplace where returns can be extracted.

We believe the Fund is positioned for a variety of market environments, particularly if credit markets remain volatile.
 
Sincerely,
 
 
Jay Compson
Portfolio Manager
Absolute Investment Advisers LLC
 
 
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ABSOLUTE FUNDS


ABSOLUTE CONVERTIBLE ARBITRAGE FUND
PERFORMANCE CHART AND ANALYSIS (Unaudited)
 
The following chart reflects the change in the value of a hypothetical $25,000 investment, including reinvested dividends and distributions, in Absolute Convertible Arbitrage Fund (the “Fund”) compared with the performance of the benchmarks, HFRX Fixed Income Convertible Arbitrage Index ("HFRX Fixed Income"), Bloomberg Barclays U.S. Aggregate Bond Index ('Barclays Index'), IBoxx High Yield Index ("iBoxx Index") and the S&P 500 Index ("S&P 500"), over the past ten fiscal years. The HFRX Fixed Income measures the performance of hedge fund strategies that are predicated on realizing of a spread between related instruments at least one of which is a convertible fixed income instrument. The iBoxx Index consists of liquid USD high yield bonds, selected to provide a balanced representation of the broad USD high yield corporate bond universe. The S&P 500 is a broad-based measurement of the U.S. stock market based on the performance of 500 widely held large capitalization common stocks. The Barclays Index is a broad based measurement of the U.S. dollar-denominated, investment-grade, fixed-rate, SEC registered taxable bond market. The total return of the indices include the reinvestment of dividends and income. The total return of the Fund includes operating expenses that reduce returns, while the total return of the indices do not include expenses. The Fund is professionally managed, while the indices are unmanaged and are not available for investment.

Comparison of Change in Value of a $25,000 Investment
Absolute Convertible Arbitrage Fund vs. HFRX Fixed Income Convertible Arbitrage Index, Bloomberg Barclays U.S. Aggregate Bond Index,
iBoxx High Yield Index and S&P 500 Index
 
(line graph)
 
 
Average Annual Total Returns
Periods Ended March 31, 2018
One Year
Five Year
Ten Year
 
 
Absolute  Convertible  Arbitrage  Fund  -  Institutional  Shares
5.94%
4.35%
6.41%
 
 
HFRX Fixed Income Convertible Arbitrage Index
4.71%
1.82%
-2.10%
 
 
Bloomberg Barclays U.S. Aggregate Bond   Index
1.20%
1.82%
3.63%
 
 
IBoxx High Yield Index
2.83%
4.07%
6.75%
 
 
S&P 500 Index
13.99%
13.31%
9.49%
 
 
Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than original cost. As stated in the Fund’s prospectus, the annual operating expense ratio (gross) is 2.83%. Excluding the effect of expenses attributable to dividends and interest on short sales, the Fund's total annual operating expense ratio would be 2.58%. However, the Fund’s adviser has contractually agreed  to waive its fee and/or reimburse Fund expenses to limit Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement (excluding all taxes, interest, portfolio transaction expenses, dividend and interest on short sales, acquired fund fees and expenses, proxy expenses and extraordinary expenses) to 1.60%, through August 1, 2019 (the “Expense Cap”). The adviser may be reimbursed by the Fund for fees waived     and expenses reimbursed by the adviser pursuant to the Expense Cap if such payment is made within three years of the fee waiver or expense reimbursement, and does not cause the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement to exceed the    lesser of (i) the then-current expense cap, or (ii) the expense cap in place at the time the fees/expenses were waived/reimbursed. During the period, certain fees were waived and/or expenses reimbursed; otherwise, returns would have been lower. The performance table and graph do not reflect the
 
 
10
ABSOLUTE FUNDS


ABSOLUTE CONVERTIBLE ARBITRAGE FUND
PERFORMANCE CHART AND ANALYSIS (Unaudited)
 
deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Returns greater than one year are annualized. For the most recent month-end performance, please call (888)  992-2765.

In August 2017, a hedge fund managed by Mohican Financial Management LLC reorganized into the Fund. The Fund’s performance for periods prior to the commencement of operations is that of the hedge fund and is based on calculations that are different from the standardized method of calculations adopted by the SEC. The performance of the hedge fund was calculated net of the hedge fund’s fees and expenses. The performance of the hedge fund is not the performance of the Fund, has not been restated to reflect the fees, estimated expenses and fee waivers and/or expense limitations of the Fund, and is not necessarily indicative of the Fund’s future performance. If the performance of the hedge fund had been restated to reflect the applicable fees and expenses of the Fund, the performance may have been lower. The hedge fund was not registered under the Investment Company Act of 1940 (“1940 Act”) and was not subject to certain investment limitations, diversification requirements and other restrictions imposed by the 1940 Act and the Internal Revenue Code of 1986, which, if applicable, may have adversely affected its performance.
 
 
11
ABSOLUTE FUNDS


ABSOLUTE STRATEGIES FUND
PORTFOLIO HOLDINGS SUMMARY (Unaudited)

 
Portfolio Breakdown (% of Net Assets)
Long Positions
Common Stock
29.7%
Asset Backed Obligations
0.2%
Investment Companies
38.0%
Money Market Fund
24.3%
Purchased Options
0.4%
Short Positions
Common Stock
(17.6)%
Investment Company
(1.4)%
Other Assets & Liabilities, Net *
26.4%
 
100.0%
 
*
Consists of deposits with the custodian and/or brokers for securities sold short, cash, foreign currency, prepaid expenses, receivables, payables and accrued liabilities. Deposits with the custodian and/or brokers for securities sold short represent 24.6% of net assets. See Note 2 of the accompanying Notes to Financial  Statements.
 
 
(% of Equity Holdings)
Sector Breakdown
Long
Short
Consumer Discretionary
11.9%
31.5%
Consumer Staples
10.9%
13.8%
Energy
32.8%
0.0%
Financial
12.9%
23.9%
Healthcare
5.1%
0.0%
Industrial
8.9%
19.6%
Information  Technology
1.9%
7.4%
Materials
11.5%
0.8%
Telecommunication Services
2.1%
3.0%
Utilities
2.0%
0.0%
 
100.0%
100.0%
 
See Notes to Financial Statements.
12
ABSOLUTE FUNDS


ABSOLUTE STRATEGIES FUND
SCHEDULE OF INVESTMENTS

 
Shares  
Security Description
 
Value
 
Long Positions - 92.6%  
Common Stock - 29.7%
 
Consumer Discretionary - 3.6%
 
 
7,000
 
Anheuser-Busch  InBev  SA/NV, ADR
 
$
769,580
 
 
20,000
 
CVS  Health Corp.
   
1,244,200
 
 
39,630
 
Freshpet, Inc. (a)(b)
   
651,914
 
 
52,588
 
Green Plains Partners LP (a)
   
915,031
 
 
6,859
 
Lithia Motors, Inc., Class A (a)
   
689,467
 
 
106,698
 
Luby's, Inc. (b)
   
296,620
 
 
12,194
 
PetIQ, Inc. (a)(b)
   
324,360
 
 
14,600
 
The TJX Cos., Inc.
   
1,190,776
 
           
6,081,948
 
Consumer Staples - 3.2%
 
 
8,383
 
Calavo Growers, Inc. (a)
   
772,912
 
 
16,767
 
General  Mills, Inc.
   
755,521
 
 
10,000
 
Nestle SA, ADR
   
790,500
 
 
31,247
 
Pilgrim's Pride Corp.  (a)(b)
   
768,989
 
 
11,432
 
Post Holdings, Inc. (a)(b)
   
866,088
 
 
28,961
 
Sprouts Farmers Market, Inc.  (a)(b)
   
679,715
 
 
12,194
 
Tyson Foods, Inc., Class A (a)
   
892,479
 
           
5,526,204
 
Energy  -  9.7%
           
 
5,221
 
Andeavor
   
525,024
 
 
9,833
 
Antero Midstream GP LP
   
157,230
 
 
11,791
 
Antero Resources Corp. (b)
   
234,051
 
 
33,872
 
Cabot Oil & Gas  Corp.
   
812,251
 
 
23,434
 
Centennial  Resource  Development, Inc., Class  A (b)
   
430,014
 
 
18,270
 
Cheniere Energy, Inc. (b)
   
976,532
 
 
2,627
 
Cimarex Energy Co.
   
245,624
 
 
2,029
 
Concho Resources, Inc. (b)
   
305,019
 
 
10,562
 
Continental Resources, Inc./OK (b)
   
622,630
 
 
12,389
 
Devon Energy Corp.
   
393,846
 
 
5,070
 
Diamondback Energy, Inc. (b)
   
641,456
 
 
60,000
 
Enbridge, Inc.
   
1,888,200
 
 
17,991
 
Energy Transfer Partners LP
   
291,814
 
 
9,455
 
EOG Resources, Inc.
   
995,328
 
 
18,127
 
EQT Corp.
   
861,214
 
 
8,082
 
FTS International, Inc.  (b)
   
148,628
 
 
9,566
 
Halliburton Co.
   
449,028
 
 
6,177
 
HollyFrontier Corp.
   
301,808
 
 
9,716
 
Keane Group, Inc. (b)
   
143,797
 
 
6,424
 
Marathon Petroleum Corp.
   
469,659
 
 
12,774
 
MPLX LP
   
422,053
 
 
6,347
 
ONEOK, Inc.
   
361,271
 
 
1,929
 
Phillips 66
   
185,030
 
 
1,750
 
Pioneer Natural Resources Co.
   
300,615
 
 
16,965
 
Plains GP Holdings, LP
   
368,989
 
 
13,980
 
ProPetro Holding Corp. (b)
   
222,142
 
 
11,681
 
RSP  Permian, Inc. (b)
   
547,605
 
 
15,000
 
Schlumberger, Ltd.
   
971,700
 
 
29,190
 
Tallgrass Energy GP LP
   
555,194
 
 
13,401
 
Targa Resources Corp.
   
589,644
 
 
37,865
 
The  Williams  Cos., Inc.
   
941,324
 
 
20,860
 
WPX Energy, Inc. (b)
   
308,311
 
           
16,667,031
 
Financial  - 3.8%
           
 
6,600
 
Berkshire  Hathaway,  Inc., Class  B (b)
   
1,316,568
 
 
35,000
 
Brookfield Asset Management, Inc., Class A
   
1,365,000
 
 
20,000
 
Loews Corp.
   
994,600
 
 
25,000
 
The Bank of New York Mellon  Corp.
   
1,288,250
 
 
3,000
 
The Howard Hughes Corp. (b)
   
417,390
 
 
16,000
 
WR Berkley Corp.
   
1,163,200
 
           
6,545,008
 
 
See Notes to Financial Statements.
13
ABSOLUTE FUNDS
 


ABSOLUTE STRATEGIES FUND
SCHEDULE OF INVESTMENTS

 
Shares
 
Security Description
 
Value
 
Healthcare - 1.5%
     
 
45,000
 
Sanofi, ADR
 
$
1,803,600
 
 
9,603
 
Zoetis, Inc. (a)
   
801,947
 
           
2,605,547
 
Industrial - 2.7% 
       
 
6,432
 
Alamo Group, Inc.
   
706,877
 
 
32,771
 
Briggs & Stratton Corp. (a)
   
701,627
 
 
6,097
 
Deere & Co. (a)
   
946,986
 
 
10,000
 
Expeditors International of Washington, Inc.
   
633,000
 
 
6,402
 
John Bean Technologies Corp. (a)
   
725,987
 
 
22,102
 
Trimble, Inc. (a)(b)
   
793,019
 
           
4,507,496
 
Information Technology - 0.6%
       
 
53,000
 
Conduent, Inc. (b)
   
987,920
 
Materials - 3.4%
       
 
21,000
 
Axalta Coating Systems, Ltd. (b)
   
633,990
 
 
60,000
 
Cameco Corp.
   
545,400
 
 
8,383
 
Compass Minerals International, Inc.
   
505,495
 
 
8,383
 
Innophos Holdings, Inc.
   
337,080
 
 
5,000
 
Monsanto Co.
   
583,450
 
 
14,327
 
Nutrien, Ltd. (a)
   
677,094
 
 
19,500
 
Royal Gold, Inc.
   
1,674,465
 
 
8,534
 
US Silica Holdings, Inc.
   
217,788
 
 
5,911
 
Westlake Chemical Corp.
   
657,008
 
           
5,831,770
 
Telecommunication Services - 0.6%
       
 
25,000
 
Liberty Global PLC, Class C (b)
   
760,750
 
 
20,000
 
News Corp., Class A
   
316,000
 
           
1,076,750
 
 
Utilities - 0.6%
           
 
14,900
  Dominion Energy, Inc.    
1,004,707
 
               
Total Common Stock (Cost $44,295,545)
   
50,834,381
 
 
Principal
 
Security Description
 
Rate
 
Maturity
 
Value
 
Asset Backed Obligations - 0.2%
             
48,385
 
Adjustable Rate Mortgage Trust, Series 2005-12 2A1 (c)
 
3.74
%
03/25/36
   
44,586
 
 
 35,424
 
Adjustable Rate Mortgage Trust, Series 2006-1 3A3 (c)
 
3.58
 
03/25/36
   
31,456
 
 
 22,655
 
Banc of America Funding Corp., Series 2006-E 2A1 (c)
 
3.70
 
06/20/36
   
22,192
 
 
 44,630
 
Banc of America Funding Corp., Series 2007-E 4A1 (c)
 
3.54
 
07/20/47
   
37,523
 
 
 65,788
 
CitiMortgage Alternative Loan Trust, Series 2006-A7 1A12
 
6.00
 
12/25/36
   
62,377
 
 
 25,202
 
CitiMortgage Alternative Loan Trust, Series 2007-A4 1A6
 
5.75
 
04/25/37
   
23,952
 
 
28,238
 
Countrywide Alternative Loan Trust, Series 2005-50CB 1A1
 
5.50
 
11/25/35
   
26,332
 
 
 38,397
 
Countrywide Home Loan Mortgage Pass-Through Trust, Series 2007-HY5 1A1 (c)
 
3.80
 
09/25/47
   
37,424
 
 
 50,643
 
IndyMac Index Mortgage Loan Trust, Series 2006-AR25 3A1 (c)
 
3.65
 
09/25/36
   
43,875
 
 
 22,714
 
JPMorgan Mortgage Trust, Series 2007-A2 4A1M (c)
 
3.61
 
04/25/37
   
21,936
 
 
 32,375
 
Structured Adjustable Rate Mortgage Loan Trust, Series 2007-3 3A1 (c)
 
3.63
 
04/25/47
   
24,894
 
Total Asset Backed Obligations (Cost $249,667)
           
376,547
 
     
Shares
 
Security Description
 
Value
 
Investment Companies - 38.0%
       
 
1,529,930
 
Absolute Capital Opportunities Fund (b)(d)
   
19,154,722
 
 
2,840,976
 
Absolute Convertible Arbitrage Fund (d)
   
29,233,640
 
 
52,835
 
SPDR S&P 500 ETF Trust
   
13,903,530
 
 
125,000
 
VanEck Vectors Gold Miners ETF
   
2,747,500
 
Total Investment Companies (Cost $53,720,351)
   
65,039,392
 
    
Shares  
Security Description
  Value  
Money Market Fund - 24.3%         
 
41,734,470
 
State Street Institutional Treasury Money Market Fund, Premier Share Class, 1.50% (e)
(Cost $41,734,470)
   
41,734,470
 
 
See Notes to Financial Statements.
14
ABSOLUTE FUNDS


ABSOLUTE STRATEGIES FUND
SCHEDULE OF INVESTMENTS

 
 
Security Description
 
Strike Price
   
Exp. Date
   
Notional Contract Value
   
Value
 
Purchased Options - 0.4%
 
Call Options Purchased - 0.0%
 
 
3,429
 
PowerShares DB Commodity Index Tracking Fund ETF
(Premiums Paid $97,315)
 
$
17.00
     
04/18
   
$
5,829,300
   
$
68,580
 
Put Options Purchased - 0.4% 
                               
 
1,860
 
iShares Russell 2000 ETF
(Premiums Paid $574,187) 
   
150.00
     
05/18
     
28,240,380
     
619,380
 
Total Purchased Options (Premiums Paid $671,502)
                           
687,960
 
Total  Long  Positions  -  92.6%  (Cost  $140,671,535)
                           
158,672,750
 
Total Short Positions - (19.0)% (Proceeds   $(34,589,488))
                           
(32,481,023
)
Other Assets & Liabilities, Net - 26.4%
                           
45,132,462
 
Net  Assets  - 100.0%
                         
$
171,324,189
 
 
See Notes to Financial Statements.
15
ABSOLUTE FUNDS


ABSOLUTE STRATEGIES FUND
SCHEDULE OF SECURITIES SOLD SHORT

 
Shares  
Security Description
 
Value
 
Short Positions - (19.0)%
 
Common Stock - (17.6)%
 
Consumer Discretionary - (5.5)%  
 
(365
)
Amazon.com, Inc.
 
$
(528,279
)
 
(21,035
)
Bojangles', Inc.
   
(291,335
)
 
(6,859
)
Brinker International, Inc.
   
(247,610
)
 
(7,050
)
Carnival Corp.
   
(462,339
)
 
(1,067
)
Chipotle Mexican Grill, Inc.
   
(344,758
)
 
(1,981
)
Cracker Barrel Old Country Store,  Inc.
   
(315,375
)
 
(6,402
)
Dave & Buster's Entertainment,   Inc.
   
(267,220
)
 
(2,439
)
Dollarama, Inc.
   
(296,425
)
 
(13,250
)
DR Horton, Inc.
   
(580,880
)
 
(18,291
)
Duluth Holdings, Inc., Class B
   
(342,590
)
 
(6,097
)
Dunkin' Brands Group,  Inc.
   
(363,930
)
 
(10,200
)
Fiat Chrysler Automobiles NV
   
(207,110
)
 
(8,688
)
Fiesta Restaurant Group, Inc.
   
(160,728
)
 
(4,400
)
HD Supply Holdings, Inc.
   
(166,936
)
 
(2,743
)
LCI Industries
   
(285,684
)
 
(8,470
)
Leggett & Platt, Inc.
   
(375,729
)
 
(5,680
)
Lowe's Cos., Inc.
   
(498,420
)
 
(2,290
)
Mohawk Industries, Inc.
   
(531,784
)
 
(36,582
)
Noodles & Co.
   
(276,194
)
 
(6,097
)
Red Robin Gourmet Burgers, Inc.
   
(353,626
)
 
(6,707
)
Shake Shack, Inc.
   
(279,212
)
 
(21,993
)
The Habit Restaurants, Inc., Class A
   
(193,538
)
 
(2,830
)
The Home Depot, Inc.
   
(504,419
)
 
(9,000
)
Tractor  Supply Co.
   
(567,180
)
 
(820
)
Ulta Beauty, Inc.
   
(167,501
)
 
(15,242
)
Vista Outdoor, Inc.
   
(248,750
)
 
(14,700
)
Volvo AB, Class B
   
(268,039
)
 
(1,219
)
WW Grainger, Inc.
   
(344,087
)
           
(9,469,678
)
Consumer Staples - (2.4)%
 
 
(8,530
)
AerCap Holdings NV
   
(432,642
)
 
(20,582
)
Amira Nature Foods, Ltd.
   
(85,827
)
 
(8,993
)
Archer-Daniels-Midland Co.
   
(390,026
)
 
(1,829
)
Dr.  Pepper Snapple Group, Inc.
   
(216,517
)
 
(2,050
)
FleetCor  Technologies, Inc.
   
(415,125
)
 
(15,242
)
Flowers Foods, Inc.
   
(333,190
)
 
(20,882
)
Hostess Brands, Inc.
   
(308,845
)
 
(2,591
)
Ingredion, Inc.
   
(334,032
)
 
(10,670
)
Macquarie Infrastructure Corp.
   
(394,043
)
 
(3,201
)
McCormick & Co., Inc., Non-Voting  Shares
   
(340,554
)
 
(3,201
)
PepsiCo., Inc.
   
(349,389
)
 
(2,591
)
Sanderson Farms, Inc.
   
(308,381
)
 
(3,811
)
The Kraft Heinz  Co.
   
(237,387
)
           
(4,145,958
)
Financial - (4.2)%          
 
(330,000
)
Agricultural Bank of China, Ltd., Class H
   
(187,535
)
 
(8,840
)
Air  Lease Corp.
   
(376,761
)
 
(2,025
)
Alliance Data Systems Corp.
   
(431,041
)
 
(3,280
)
Ameriprise  Financial, Inc.
   
(485,243
)
 
(71,158
)
Banco Santander SA, ADR
   
(466,085
)
 
(18,550
)
Bank of America  Corp.
   
(556,315
)
 
(338,000
)
Bank of China, Ltd., Class H
   
(181,745
)
 
(228,000
)
Bank  of  Communications  Co., Ltd., Class H
   
(178,666
)
 
(245,000
)
China CITIC Bank Corp., Ltd., Class  H
   
(167,326
)
 
(177,000
)
China  Construction  Bank  Corp., Class H
   
(181,778
)
 
(232,000
)
China Galaxy Securities Co., Ltd., Class  H
   
(154,309
)
 
(47,000
)
China Merchants Bank Co., Ltd., Class H
   
(192,536
)
 
(76,000
)
CITIC Securities Co., Ltd., Class  H
   
(173,921
)
 
(20,800
)
Deutsche  Bank AG
   
(290,784
)
 
(7,100
)
Fastighets  AB Balder
   
(178,227
)
 
(237,000
)
Industrial & Commercial Bank of China, Ltd., Class H
   
(203,234
)
 
(61,700
)
Intesa Sanpaolo SpA
   
(224,226
)
 
See Notes to Financial Statements.
16
ABSOLUTE FUNDS


ABSOLUTE STRATEGIES FUND
SCHEDULE OF SECURITIES SOLD SHORT

 
Shares
 
Security Description
 
Value
 
Financial - (4.2)% (continued)
     
 
(2,650
)
M&T Bank Corp.
 
$
(488,554
)
 
(4,775
)
OTP Bank PLC
   
(214,814
)
 
(9,300
)
Swedbank AB, Class A
   
(208,280
)
 
(16,200
)
Synchrony Financial
   
(543,186
)
 
(17,900
)
The Blackstone Group LP
   
(571,905
)
 
(10,250
)
The Charles Schwab Corp.
   
(535,255
)
           
(7,191,726
)
Industrial - (3.4)%
       
 
(3,811
)
AGCO Corp.
   
(247,143
)
 
(5,800
)
Atlas Copco AB, Class A
   
(250,899
)
 
(6,530
)
Eaton Corp. PLC
   
(521,812
)
 
(5,200
)
Emerson Electric Co.
   
(355,160
)
 
(3,060
)
Illinois Tool Works, Inc.
   
(479,380
)
 
(7,800
)
Jacobs Engineering Group, Inc.
   
(461,370
)
 
(1,430
)
Martin Marietta Materials, Inc.
   
(296,439
)
 
(16,700
)
Peab AB
   
(150,204
)
 
(11,900
)
SKF AB, Class B
   
(242,994
)
 
(1,905
)
Snap-on, Inc.
   
(281,064
)
 
(6,725
)
Spirit AeroSystems Holdings, Inc., Class A
 
(562,882
)
 
(4,800
)
Textron, Inc.
   
(283,056
)
 
(1,160
)
The Boeing Co.
   
(380,341
)
 
(5,704
)
The Middleby Corp.
   
(706,098
)
 
(2,170
)
Vulcan Materials Co.
   
(247,749
)
 
(5,300
)
Wartsila OYJ Abp
   
(117,059
)
 
(15,395
)
Welbilt, Inc.
   
(299,433
)
           
(5,883,083
)
Information Technology - (1.3)%
       
 
(2,170
)
Autodesk, Inc.
   
(272,508
)
 
(9,600
)
CA, Inc.
   
(325,440
)
 
(9,000
)
Intel Corp.
   
(468,720
)
 
(1,440
)
NVIDIA Corp.
   
(333,490
)
 
(6,600
)
Oracle Corp.
   
(301,950
)
 
(4,430
)
salesforce.com, Inc.
   
(515,209
)
           
(2,217,317
)
Materials - (0.2)%
       
 
(12,194
)
American Vanguard Corp.
   
(246,319
)
Telecommunication Services - (0.6)%
       
 
(175
)
Booking Holdings, Inc.
   
(364,068
)
 
(3,460
)
Facebook, Inc., Class A
   
(552,874
)
           
(916,942
)
Total Common Stock (Proceeds $(32,569,391)) 
   
(30,071,023
)
 
Shares  
Security Description
 
Value
 
Investment Company - (1.4)%  
 
(20,000
First Trust Dow Jones Internet Index Fund  ETF
(Proceeds $(2,020,097)) 
   
(2,410,000
)
Total Short Positions - (19.0)% (Proceeds   $(34,589,488))  
$
(32,481,023
)
 
See Notes to Financial Statements.
17
ABSOLUTE FUNDS


ABSOLUTE STRATEGIES FUND
NOTES TO SCHEDULES OF INVESTMENTS AND SECURITIES SOLD SHORT

 
ADR
American Depositary Receipt
ETF
Exchange Traded Fund
LP
Limited Partnership
PLC
Public Limited Company
(a)
All or a portion of this security is held as collateral for securities sold short.
(b)
Non-income producing security.
(c)
Variable rate security, the interest rate of which adjusts periodically based on changes in current interest rates. Rate represented is as of March 31, 2018.
(d)
Affiliated Company.
(e)
Dividend yield changes daily to reflect current market conditions. Rate was the quoted yield as of March 31, 2018.
 
At March 31, 2018, the Fund held the following exchange traded futures contracts:
Contracts          
 
Type
 
Expiration Date
 
Notional Contract Value
   
Value
   
Net Unrealized Appreciation (Depreciation)
 
(150
CME E-Mini Russell  Future
 
06/15/18
 
$
(11,373,647
)
 
$
(11,484,000
)
 
$
(110,353
)
(475
S&P 500 E-mini Future
 
06/15/18
   
(64,716,974
)
   
(62,771,250
)
   
1,945,724
 
25
 
Silver Future
 
05/29/18
   
2,075,692
     
2,033,500
     
(42,192
)
             
$
(74,014,929
)
 
$
(72,221,750
)
 
$
1,793,179
 
 
Affiliated investments are investments that are managed by the adviser, and are noted in the Absolute Strategies Fund’s Schedule of Investments. Transactions during the year with affiliates were as  follows:

Investment Companies
                                         
Absolute Capital Opportunities Fund
 
Balance 3/31/2017
   
Gross Additions
   
Gross Reductions
   
Change in Unrealized Appreciation
   
Balance 3/31/2018
   
Realized Gain/(Loss)
   
Investment Income
 
Shares/Principal
   
1,289,545
     
240,385
     
     
     
1,529,930
             
Cost
 
$
13,010,000
   
$
3,000,000
   
$
   
$
   
$
16,010,000
   
$
   
$
 
Value
   
14,146,311
     
     
     
2,008,411
     
19,154,722
                 
 
Absolute Convertible Arbitrage Fund
 
Balance 3/31/2017
   
Gross Additions
   
Gross Reductions
   
Change in Unrealized Appreciation
   
Balance 3/31/2018
   
Realized Gain/(Loss)
   
Investment Income
 
Shares/Principal
   
     
2,840,976
     
     
     
2,840,976
                 
Cost
 
$
   
$
29,047,189
   
$
   
$
   
$
29,047,189
   
$
   
$
47,189
 
Value
   
     
     
     
186,451
     
29,233,640
                 
 
The following is a summary of the inputs used to value the Fund's investments and other financial instruments and liabilities as of March 31, 2018.
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the Security Valuation section in Note 2 of the accompanying Notes to Financial Statements.
     
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Assets
                       
Investments at Value
                       
Common Stock
                       
Consumer Discretionary
 
$
6,081,948
   
$
   
$
   
$
6,081,948
 
Consumer Staples
   
5,526,204
     
     
     
5,526,204
 
Energy
   
16,667,031
     
     
     
16,667,031
 
Financial
   
6,545,008
     
     
     
6,545,008
 
Healthcare
   
2,605,547
     
     
     
2,605,547
 
Industrial
   
4,507,496
     
     
     
4,507,496
 
Information Technology
   
987,920
     
     
     
987,920
 
Materials
   
5,831,770
     
     
     
5,831,770
 
Telecommunication Services
   
1,076,750
     
     
     
1,076,750
 
Utilities
   
1,004,707
     
     
     
1,004,707
 
Asset Backed Obligations
   
     
376,547
     
     
376,547
 
Investment Companies
   
65,039,392
     
     
     
65,039,392
 
Money Market Fund
   
     
41,734,470
     
     
41,734,470
 
 
See Notes to Financial Statements.
18
ABSOLUTE FUNDS


ABSOLUTE STRATEGIES FUND
NOTES TO SCHEDULES OF INVESTMENTS AND SECURITIES SOLD SHORT


   
Level 1
   
Level 2
   
Level 3
   
Total
 
Purchased Options
 
$
687,960
   
$
   
$
   
$
687,960
 
Investments at Value
 
$
116,561,733
   
$
42,111,017
   
$
   
$
158,672,750
 
Other Financial Instruments*
                               
Futures
   
1,945,724
     
     
     
1,945,724
 
Total Other Financial Instruments*
 
$
1,945,724
   
$
   
$
   
$
1,945,724
 
Total Assets
 
$
118,507,457
   
$
42,111,017
   
$
   
$
160,618,474
 
                                 
Liabilities
                               
Securities Sold Short
                               
Common Stock
 
$
(30,071,023
)
 
$
   
$
   
$
(30,071,023
)
Investment Company
   
(2,410,000
)
   
     
     
(2,410,000
)
Securities Sold Short
 
$
(32,481,023
)
 
$
   
$
   
$
(32,481,023
)
Other Financial Instruments*
                               
Futures
   
(152,545
)
   
     
     
(152,545
)
Total Liabilities
 
$
(32,633,568
)
 
$
   
$
   
$
(32,633,568
)
 
*
Other Financial Instruments are derivatives not reflected in the Schedule of Investments and Schedule of Securities Sold Short, such as futures, which are valued at the unrealized appreciation/(depreciation) at year  end.
 
The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value.
 
     
Written Options
   
 
Balance as of 03/31/17
 
$
(126
)
 
 
Change in Unrealized Appreciation /(Depreciation)
   
(26,271
)
 
 
Sales/Covers
   
229
   
 
Realized Gain (Loss)
   
26,168
   
 
Balance as of 03/31/18
 
$
-
   
 
Net change in unrealized appreciation / (depreciation) from investments held as of 03/31/18
 
$
-
   
 
The Fund utilizes the end of period methodology when determining transfers. There were no transfers among Level 1, Level 2 and Level 3 for the year ended March 31, 2018.
 
See Notes to Financial Statements.
19
ABSOLUTE FUNDS


ABSOLUTE CAPITAL OPPORTUNITIES FUND
PORTFOLIO HOLDINGS SUMMARY (Unaudited)

Portfolio Breakdown (% of Net Assets)
 
Long Positions
 
Common Stock
60.1%
Money Market Fund
29.5%
Purchased Options
2.1%
Short Positions
 
Common Stock
(1.0)%
Investment Company
(36.6)%
Written Options
(0.4)%
Other Assets & Liabilities, Net *
46.3%
 
100.0%

*
Consists of deposits with the custodian and/or brokers for securities sold short, cash, prepaid expenses, receivables, payables and accrued liabilities. Deposits with the custodian and/or brokers for securities sold short represent 45.0% of net assets. See Note 2 of the accompanying Notes to Financial Statements.

See Notes to Financial Statements.
20
ABSOLUTE FUNDS


ABSOLUTE CAPITAL OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS
 
Shares
 
Security Description
 
Value
 
Long Positions - 91.7%
     
Common Stock - 60.1%
     
Consumer Discretionary - 7.9%
     
 
9,556
 
American Airlines Group, Inc. (a)
 
$
496,530
 
 
1,838
 
CarMax, Inc. (a)(b)
   
113,846
 
 
20,382
 
General Motors Co. (a)(c)
   
740,682
 
 
7,328
 
Harley-Davidson, Inc. (a)(c)(d)
   
314,224
 
 
7,595
 
Robert Half International, Inc.
   
439,674
 
 
4,276
 
The Cheesecake Factory, Inc.
   
206,189
 
 
2,529
 
The Walt Disney Co. (a)(c)
   
254,013
 
           
2,565,158
 
Consumer Staples - 1.6%
 
 
1,473
 
AMERCO (b)
   
508,332
 
               
Energy - 2.7%
 
 
14,559
 
Halliburton Co. (a)
   
683,400
 
 
2,850
 
Schlumberger, Ltd. (a)
   
184,623
 
           
868,023
 
Financial - 18.1%
 
 
4,221
 
American Express Co. (a)
   
393,735
 
 
3,584
 
Aon PLC (a)
   
502,943
 
 
29,019
 
Bank of America Corp. (a)
   
870,280
 
 
5,756
 
Berkshire Hathaway, Inc., Class B (a)(b)
   
1,148,207
 
 
13,833
 
CBRE Group, Inc., Class A (a)(b)
   
653,194
 
 
6,792
 
Citigroup, Inc. (a)
   
458,460
 
 
8,238
 
JPMorgan Chase & Co. (a)
   
905,933
 
 
13,593
 
The Blackstone Group LP
   
434,296
 
 
1,991
 
The Goldman Sachs Group, Inc.
   
501,453
 
           
5,868,501
 
Healthcare - 3.8%
 
 
2,757
 
Bayer AG
   
311,384
 
 
9,449
 
Henry Schein, Inc. (b)
   
635,067
 
 
2,044
 
McKesson Corp.
   
287,938
 
           
1,234,389
 
Industrial - 9.0%
 
 
5,881
 
Delta Air Lines, Inc.
   
322,338
 
 
16,995
 
General Electric Co.
   
229,092
 
 
12,767
 
Jacobs Engineering Group, Inc. (a)
   
755,168
 
 
25,542
 
Quanta Services, Inc. (a)(b)
   
877,368
 
 
1,284
 
The Boeing Co. (a)
   
420,998
 
 
2,785
 
United Parcel Service, Inc., Class B (a)
   
291,478
 
           
2,896,442
 
Information Technology - 6.6%
 
 
5,899
 
Analog Devices, Inc.
   
537,576
 
 
7,185
 
Apple, Inc. (a)
   
1,205,499
 
 
613
 
IBM
   
94,053
 
 
2,145
 
Intel Corp.
   
111,712
 
 
2,145
 
Micron Technology, Inc. (b)(d)
   
111,840
 
 
1,379
 
QUALCOMM, Inc.
   
76,410
 
           
2,137,090
 
Materials - 1.3%
 
 
3,754
 
PPG Industries, Inc.
   
418,946
 
               
Telecommunication Services - 9.1%
 
 
491
 
Alphabet, Inc., Class A (a)(b)
   
509,236
 
 
327
 
Alphabet, Inc., Class C (a)(b)
   
337,395
 
 
22,715
 
CBS Corp., Class B (a)
   
1,167,324
 
 
2,298
 
Comcast Corp., Class A
   
78,523
 
 
1,838
 
DISH Network Corp., Class A (b)
   
69,642
 
 
4,202
 
Facebook, Inc., Class A (b)(c)
   
671,437
 
 
1,225
 
Omnicom Group, Inc.
   
89,021
 
 
2,449
 
Spark Networks SE, ADR (b)
   
36,490
 
           
2,959,068
 
Total Common Stock (Cost $18,794,321)
   
19,455,949
 
 
See Notes to Financial Statements.
21
ABSOLUTE FUNDS


ABSOLUTE CAPITAL OPPORTUNITIES FUND
SCHEDULE OF INVESTMENTS

Shares
 
Security Description
 
Value
 
Money Market Fund - 29.5%
     
 
9,538,969
 
State Street Institutional Treasury Money Market Fund, Premier Share Class, 1.50% (e)
(Cost $9,538,969)
 
$
9,538,969
 

 
Security Description
 
Strike Price
   
Exp. Date
   
Notional Contract Value
   
Value
 
Purchased Options - 2.1%
                       
Call Options Purchased - 0.4%
                       
 
42
 
Caterpillar, Inc.
 
$
200.00
   
01/19
   
$
840,000
     
6,762
 
 
455
 
General Motors Co.
   
65.00
   
01/19
     
2,957,500
     
910
 
 
400
 
General Motors Co.
   
55.00
   
01/19
     
2,200,000
     
4,400
 
 
239
 
Harley-Davidson, Inc.
   
65.00
   
01/19
     
1,553,500
     
5,497
 
 
3,084
 
SPDR S&P 500 ETF Trust
   
285.00
   
04/18
     
87,894,000
     
24,672
 
 
72
 
United Continental Holdings, Inc.
   
65.00
   
01/19
     
468,000
     
82,800
 
Total Call Options Purchased (Premiums Paid $345,244)
                         
125,041
 
Put Options Purchased - 1.7%
                             
 
22
 
Comcast Corp.
   
40.00
   
01/20
     
75,174
     
18,040
 
 
19
 
DISH Network Corp.
   
47.50
   
01/20
     
71,991
     
25,080
 
 
7
 
IBM
   
165.00
   
01/20
     
107,401
     
18,410
 
 
21
 
Intel Corp.
   
42.00
   
01/20
     
109,368
     
6,615
 
 
21
 
Micron Technology, Inc.
   
42.00
   
01/20
     
109,494
     
13,493
 
 
12
 
Omnicom Group, Inc.
   
72.50
   
01/20
     
87,204
     
10,440
 
 
13
 
QUALCOMM, Inc.
   
65.00
   
01/20
     
72,033
     
20,150
 
 
472
 
SPDR S&P 500 ETF Trust
   
271.00
   
04/18
     
12,420,680
     
432,824
 
Total Put Options Purchased (Premiums Paid $519,902)            
   
545,052
 
Total Purchased Options (Premiums Paid $865,146)           
   
670,093
 
Total Long Positions - 91.7% (Cost $29,198,436)          
   
29,665,011
 
Total Short Positions - (37.6)% (Proceeds $(12,506,272))          
   
(12,139,511
)
Total Written Options - (0.4)% (Premiums Received $(138,666))            
   
(141,259
)
Other Assets & Liabilities, Net - 46.3%           
   
14,953,693
 
Net Assets - 100.0%           
 
$
32,337,934
 
 
See Notes to Financial Statements.
22
ABSOLUTE FUNDS


ABSOLUTE CAPITAL OPPORTUNITIES FUND
SCHEDULE OF SECURITIES SOLD SHORT

Shares
 
Security Description
 
Value
 
Short Positions - (37.6)%
     
Common Stock - (1.0)%
     
Industrial - (1.0)%
     
 
(2,065
)
Caterpillar, Inc. (Proceeds $(294,377))
 
$
(304,340
)
Investment Company - (36.6)%
       
 
(44,975
)
SPDR S&P 500 ETF Trust (Proceeds $(12,211,895))
   
(11,835,171
)
Total Short Positions - (37.6)% (Proceeds $(12,506,272))
 
$
(12,139,511
)
 
See Notes to Financial Statements.
23
ABSOLUTE FUNDS


ABSOLUTE CAPITAL OPPORTUNITIES FUND
SCHEDULE OF CALL AND PUT OPTIONS WRITTEN
 
 
Security Description
 
Strike Price
   
Exp. Date
   
Notional Contract Value
   
Value
 
Written Options - (0.4)%
                       
Call Options Written - (0.1)%
                       
 
(215
)
Harley-Davidson, Inc.
 
$
75.00
   
01/19
   
$
921,920
   
$
(215
)
 
(21
)
Micron Technology, Inc.
   
70.00
   
01/20
     
109,494
     
(17,955
)
 
(72
)
United Continental Holdings, Inc.
   
100.00
   
01/19
     
500,184
     
(8,280
)
Total Call Options Written (Premiums Received $(30,459))
                         
(26,450
)
Put Options Written - (0.3)%
                             
 
(16
)
Facebook, Inc., Class A
   
165.00
   
01/19
     
264,000
     
(30,640
)
 
(33
)
General Motors Co.
   
45.00
   
01/20
     
148,500
     
(36,795
)
 
(14
)
Harley-Davidson, Inc.
   
55.00
   
01/20
     
77,000
     
(20,685
)
 
(42
)
NIKE, Inc., Class B
   
45.00
   
01/19
     
189,000
     
(2,940
)
 
(55
)
The Kroger Co.
   
22.00
   
04/18
     
121,000
     
(935
)
 
(12
)
The Walt Disney Co.
   
90.00
   
01/19
     
108,000
     
(4,410
)
 
(20
)
Time Warner, Inc.
   
90.00
   
01/19
     
180,000
     
(10,700
)
 
(72
)
United Continental Holdings, Inc.
   
45.00
   
01/19
     
324,000
     
(7,704
)
Total Put Options Written (Premiums Received $(108,207))        
     
(114,809
)
Total Written Options - (0.4)% (Premiums Received $(138,666))         
   
$
(141,259
)
 
See Notes to Financial Statements.
24
ABSOLUTE FUNDS


ABSOLUTE CAPITAL OPPORTUNITIES FUND
NOTES TO SCHEDULES OF INVESTMENTS, SECURITIES SOLD SHORT AND CALL AND PUT OPTIONS WRITTEN

ADR
American Depositary Receipt
ETF
Exchange Traded Fund
LP
Limited Partnership
PLC
Public Limited Company
(a)
All or a portion of this security is held as collateral for securities sold short.
(b)
Non-income producing security.
(c)
Subject to put option written by the Fund.
(d)
Subject to call option written by the Fund.
(e)
Dividend yield changes daily to reflect current market conditions. Rate was the quoted yield as of March 31, 2018.
 
The following is a summary of the inputs used to value the Fund's investments and other financial instruments and liabilities as of March 31, 2018.

The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the Security Valuation section in Note 2 of the accompanying Notes to Financial Statements.
 
   
Level 1
   
Level 2
   
Level 3
   
Total
 
Assets
                       
Investments at Value
                       
Common Stock
                       
Consumer Discretionary
 
$
2,565,158
   
$
   
$
   
$
2,565,158
 
Consumer Staples
   
508,332
     
     
     
508,332
 
Energy
   
868,023
     
     
     
868,023
 
Financial
   
5,868,501
     
     
     
5,868,501
 
Healthcare
   
1,234,389
     
     
     
1,234,389
 
Industrial
   
2,896,442
     
     
     
2,896,442
 
Information Technology
   
2,137,090
     
     
     
2,137,090
 
Materials
   
418,946
     
     
     
418,946
 
Telecommunication Services
   
2,959,068
     
     
     
2,959,068
 
Money Market Fund
   
     
9,538,969
     
     
9,538,969
 
Purchased Options
   
140,976
     
529,117
     
     
670,093
 
Investments at Value
 
$
19,596,925
   
$
10,068,086
   
$
   
$
29,665,011
 
Total Assets
 
$
19,596,925
   
$
10,068,086
   
$
   
$
29,665,011
 
                                 
Liabilities
                               
Securities Sold Short
                               
Common Stock
 
$
(304,340
)
 
$
   
$
   
$
(304,340
)
Investment Company
   
(11,835,171
)
   
     
     
(11,835,171
)
Securities Sold Short
 
$
(12,139,511
)
 
$
   
$
   
$
(12,139,511
)
Other Financial Instruments*
                               
Written Options
   
(105,249
)
   
(36,010
)
   
     
(141,259
)
Total Liabilities
 
$
(12,244,760
)
 
$
(36,010
)
 
$
   
$
(12,280,770
)

*
Other Financial Instruments are derivatives not reflected in the Schedule of Investments and Schedule of Securities Sold Short, such as written options, which are reported at their market value at year end.
 
The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value.
 
   
Written Options
 
Balance as of 03/31/17
 
$
(14
)
Change in Unrealized Appreciation/(Depreciation)
   
(2,919
)
Sales/Covers
   
-
 
Realized Gain (Loss)
   
2,933
 
Balance as of 03/31/18
 
$
-
 
Net change in unrealized appreciation/(depreciation) from investments held as of 03/31/18
 
$
-
 

The Fund utilizes the end of period methodology when determining transfers. There were no transfers among Level 1, Level 2 and Level 3 for the year ended March 31, 2018.
 
See Notes to Financial Statements.
25
ABSOLUTE FUNDS


ABSOLUTE CONVERTIBLE ARBITRAGE
PORTFOLIO HOLDINGS SUMMARY (Unaudited)


Portfolio Breakdown (% of Net Assets)
 
Long Positions
 
Corporate Convertible Bonds
78.8%
Money Market Fund
60.4%
Short Positions
 
Common Stock
(38.5)%
Other Assets & Liabilities, Net *
(0.7)%
 
100.0%

*
Consists of prepaid expenses, deferred offering costs, receivables, payables and accrued liabilities. See Note 2 of the accompanying Notes to Financial Statements.

See Notes to Financial Statements.
26
ABSOLUTE FUNDS



ABSOLUTE CONVERTIBLE ARBITRAGE
SCHEDULE OF INVESTMENTS

 
Principal  
Security Description
 
Rate
 
Maturity
 
Value
 
Long Positions - 139.2% (a)
           
Corporate Convertible Bonds - 78.8%
             
Consumer Discretionary - 3.0%
             
$
500,000
 
Horizon Global Corp.
 
2.75
%
07/01/22
 
$
412,326
 
 
1,000,000
 
Live Nation Entertainment, Inc. (b)
 
2.50
 
03/15/23
   
1,011,681
 
 
250,000
 
Marriott Vacations Worldwide Corp. (b)
 
1.50
 
09/15/22
   
274,231
 
                   
1,698,238
 
Consumer Staples - 1.7%
               
 
600,000
 
Carriage Services, Inc.
 
2.75
 
03/15/21
   
789,404
 
 
125,000
 
Flexion Therapeutics, Inc. (b)
 
3.38
 
05/01/24
   
142,639
 
                   
932,043
 
Energy - 4.2%
                   
 
250,000
 
Bristow Group, Inc.
 
4.50
 
06/01/23
   
276,737
 
 
150,000
 
Helix Energy Solutions Group, Inc.
 
4.25
 
05/01/22
   
142,377
 
 
500,000
 
Helix Energy Solutions Group, Inc.
 
4.13
 
09/15/23
   
506,512
 
 
500,000
 
Newpark Resources, Inc. (b)
 
4.00
 
12/01/21
   
581,250
 
 
750,000
 
Renewable Energy Group, Inc.
 
2.75
 
06/15/19
   
843,119
 
                   
2,349,995
 
Financial - 1.7%
                   
 
300,000
 
Encore Capital Group, Inc.
 
3.00
 
07/01/20
   
344,100
 
 
628,000
 
Encore Capital Group, Inc.
 
2.88
 
03/15/21
   
629,884
 
                   
973,984
 
Healthcare - 21.0%
               
 
500,000
 
Accelerate Diagnostics, Inc. (b)
 
2.50
 
03/15/23
   
484,816
 
 
1,000,000
 
Accuray, Inc. (b)
 
3.75
 
07/15/22
   
1,140,000
 
 
1,300,000
 
Alder Biopharmaceuticals, Inc.
 
2.50
 
02/01/25
   
1,201,534
 
 
500,000
 
Avadel Finance Cayman, Ltd. (b)
 
4.50
 
02/01/23
   
505,750
 
 
500,000
 
DexCom, Inc. (b)
 
0.75
 
05/15/22
   
515,681
 
 
1,000,000
 
Exact Sciences Corp.
 
1.00
 
01/15/25
   
893,388
 
 
1,400,000
 
Insmed, Inc.
 
1.75
 
01/15/25
   
1,237,898
 
 
700,000
 
Insulet Corp. (b)
 
1.38
 
11/15/24
   
802,915
 
 
400,000
 
Ironwood Pharmaceuticals, Inc.
 
2.25
 
06/15/22
   
472,848
 
 
750,000
 
Jazz Investments I, Ltd. (b)
 
1.50
 
08/15/24
   
734,147
 
 
650,000
 
Novavax, Inc.
 
3.75
 
02/01/23
   
462,790
 
 
500,000
 
Pacira Pharmaceuticals, Inc.
 
2.38
 
04/01/22
   
458,125
 
 
750,000
 
Quidel Corp.
 
3.25
 
12/15/20
   
1,301,025
 
 
750,000
 
Repligen Corp.
 
2.13
 
06/01/21
   
976,564
 
 
100,000
 
Senseonics Holdings, Inc.
 
5.25
 
02/01/23
   
107,900
 
 
500,000
 
Theravance Biopharma, Inc.
 
3.25
 
11/01/23
   
508,423
 
                   
11,803,804
 
Industrial - 10.6% 
               
 
750,000
 
Fluidigm Corp.
 
2.75
 
02/01/34
   
688,428
 
 
461,000
 
Fluidigm Corp.
 
2.75
 
02/01/34
   
393,606
 
 
1,150,000
 
II-VI, Inc. (b)
 
0.25
 
09/01/22
   
1,273,050
 
 
1,100,000
 
Kaman Corp. (b)
 
3.25
 
05/01/24
   
1,253,385
 
 
1,000,000
 
Team, Inc. (b)
 
5.00
 
08/01/23
   
992,562
 
 
350,000
 
TimkenSteel Corp.
 
6.00
 
06/01/21
   
514,745
 
 
500,000
 
TTM Technologies, Inc.
 
1.75
 
12/15/20
   
833,438
 
                   
5,949,214
 
Information Technology - 26.1%
               
 
1,048,000
 
Advanced Micro Devices, Inc.
 
2.13
 
09/01/26
   
1,536,158
 
 
700,000
 
Apptio, Inc. (b)
 
0.88
 
04/01/23
   
690,900
 
 
500,000
 
Avid Technology, Inc.
 
2.00
 
06/15/20
   
421,750
 
 
1,365,000
 
Carbonite, Inc. (b)
 
2.50
 
04/01/22
   
1,782,266
 
 
1,090,000
 
Coupa Software, Inc. (b)
 
0.38
 
01/15/23
   
1,320,643
 
 
500,000
 
Integrated Device Technology, Inc.
 
0.88
 
11/15/22
   
564,500
 
 
1,000,000
 
Nutanix, Inc. (b)(c)
 
0.00
 
01/15/23
   
1,205,803
 
 
1,000,000
 
Red Hat, Inc.
 
0.25
 
10/01/19
   
2,027,092
 
 
1,500,000
 
ServiceNow, Inc. (b)(c)
 
0.00
 
06/01/22
   
1,994,475
 
 
1,000,000
 
Silicon Laboratories, Inc.
 
1.38
 
03/01/22
   
1,160,000
 
 
500,000
 
Teradyne, Inc.
 
1.25
 
12/15/23
   
763,603
 
 
1,250,000
 
Veeco Instruments, Inc.
 
2.70
 
01/15/23
   
1,140,871
 
                   
14,608,061
 

See Notes to Financial Statements.
27
ABSOLUTE FUNDS



ABSOLUTE CONVERTIBLE ARBITRAGE
SCHEDULE OF INVESTMENTS


Principal
 
Security Description
 
Rate
 
Maturity
 
Value
 
Materials - 1.7%
             
$
500,000
 
Aceto Corp.
 
2.00
%
11/01/20
 
$
441,274
 
 
500,000
 
SSR Mining, Inc.
 
2.88
 
02/01/33
   
497,188
 
                   
938,462
 
Telecommunication Services - 8.8%
               
 
569,000
 
CalAmp Corp.
 
1.63
 
05/15/20
   
609,583
 
 
1,000,000
 
Chegg, Inc. (b)
 
0.25
 
05/15/23
   
1,030,302
 
 
500,000
 
Global Eagle Entertainment, Inc.
 
3.25
 
02/15/35
   
316,000
 
 
1,000,000
 
Harmonic, Inc.
 
4.00
 
12/01/20
   
986,250
 
 
550,000
 
Pandora Media, Inc.
 
1.75
 
12/01/20
   
503,597
 
 
500,000
 
Quotient Technology, Inc. (b)
 
1.75
 
12/01/22
   
519,413
 
 
750,000
 
RingCentral, Inc. (b)(c)
 
0.00
 
03/15/23
   
755,550
 
 
250,000
 
Wayfair, Inc. (b)
 
0.38
 
09/01/22
   
238,000
 
                   
4,958,695
 
Total Corporate Convertible Bonds (Cost $42,637,553)
           
44,212,496
 

Shares  
Security Description
 
Value
 
Money Market Fund - 60.4%      
 
33,852,237
 
State Street Institutional Treasury Money Market Fund, Premier Share Class, 1.50%(d)
(Cost $33,852,237) 
   
33,852,237
 
         
Total Long Positions - 139.2% (Cost $76,489,790)    
78,064,733
 
Total Short Positions - (38.5)% (Proceeds $(21,171,559))    
(21,593,223
)
Other Assets & Liabilities, Net - (0.7)%    
(406,814
)
Net Assets - 100.0%  
$
56,064,696
 

See Notes to Financial Statements.
28
ABSOLUTE FUNDS



ABSOLUTE CONVERTIBLE ARBITRAGE
SCHEDULE OF SECURITIES SOLD SHORT


Shares
 
Security Description
 
Value
 
Short Positions - (38.5)%
     
Common Stock - (38.5)%
     
Consumer Discretionary - (0.8)%
     
 
(5,380
)
Horizon Global Corp.
 
$
(44,331
)
 
(6,400
)
Live Nation Entertainment, Inc.
   
(269,696
)
 
(953
)
Marriott Vacations Worldwide Corp.
   
(126,940
)
           
(440,967
)
Consumer Staples - (1.2)%
       
 
(21,436
)
Carriage Services, Inc.
   
(592,920
)
 
(2,900
)
Flexion Therapeutics, Inc.
   
(64,989
)
           
(657,909
)
Energy - (1.6)%
       
 
(11,100
)
Bristow Group, Inc.
   
(144,300
)
 
(22,683
)
Helix Energy Solutions Group, Inc.
   
(131,334
)
 
(35,600
)
Newpark Resources, Inc.
   
(288,360
)
 
(26,982
)
Renewable Energy Group, Inc.
   
(345,370
)
           
(909,364
)
Financial - (0.8)%
       
 
(9,577
)
Encore Capital Group, Inc.
   
(432,880
)
Healthcare - (9.4)%
       
 
(1,800
)
Accelerate Diagnostics, Inc.
   
(41,130
)
 
(117,700
)
Accuray, Inc.
   
(588,500
)
 
(41,700
)
Alder Biopharmaceuticals, Inc.
   
(529,590
)
 
(21,800
)
Avadel Pharmaceuticals PLC, ADR
   
(158,922
)
 
(2,320
)
DexCom, Inc.
   
(172,051
)
 
(7,650
)
Exact Sciences Corp.
   
(308,524
)
 
(22,000
)
Insmed, Inc.
   
(495,440
)
 
(4,900
)
Insulet Corp.
   
(424,732
)
 
(17,560
)
Ironwood Pharmaceuticals, Inc.
   
(270,951
)
 
(1,762
)
Jazz Pharmaceuticals PLC
   
(266,044
)
 
(51,200
)
Novavax, Inc.
   
(107,520
)
 
(2,750
)
Pacira Pharmaceuticals, Inc.
   
(85,663
)
 
(19,034
)
Quidel Corp.
   
(986,152
)
 
(16,500
)
Repligen Corp.
   
(596,970
)
 
(1,000
)
Senseonics Holdings, Inc.
   
(3,000
)
 
(9,000
)
Theravance Biopharma, Inc.
   
(218,250
)
           
(5,253,439
)
Industrial - (5.2)%
       
 
(34,250
)
Fluidigm Corp.
   
(200,020
)
 
(16,200
)
II-VI, Inc.
   
(662,580
)
 
(10,400
)
Kaman Corp.
   
(646,048
)
 
(26,000
)
Team, Inc.
   
(357,500
)
 
(21,940
)
TimkenSteel Corp.
   
(333,269
)
 
(46,900
)
TTM Technologies, Inc.
   
(717,101
)
           
(2,916,518
)
Information Technology - (16.5)%
       
 
(109,580
)
Advanced Micro Devices, Inc.
   
(1,101,279
)
 
(8,422
)
Apptio, Inc., Class A
   
(238,680
)
 
(4,000
)
Avid Technology, Inc.
   
(18,160
)
 
(38,800
)
Carbonite, Inc.
   
(1,117,440
)
 
(17,628
)
Coupa Software, Inc.
   
(804,189
)
 
(10,497
)
Integrated Device Technology, Inc.
   
(320,788
)
 
(14,540
)
Nutanix, Inc., Class A
   
(714,059
)
 
(13,372
)
Red Hat, Inc.
   
(1,999,248
)
 
(8,954
)
ServiceNow, Inc.
   
(1,481,439
)
 
(7,300
)
Silicon Laboratories, Inc.
   
(656,270
)
 
(13,350
)
Teradyne, Inc.
   
(610,229
)
 
(11,000
)
Veeco Instruments, Inc.
   
(187,000
)
           
(9,248,781
)
Materials - 0.0%
       
 
(300
)
Aceto Corp.
   
(2,280
)
 
(3,000
)
SSR Mining, Inc.
   
(28,800
)
           
(31,080
)

See Notes to Financial Statements.
29
ABSOLUTE FUNDS



ABSOLUTE CONVERTIBLE ARBITRAGE
SCHEDULE OF SECURITIES SOLD SHORT


Shares  
Security Description
 
Value
 
Telecommunication Services - (3.0)%      
(10,903
CalAmp Corp.
 
$
(249,461
)
 
 (22,000
)
Chegg, Inc.
   
(454,520
)
 
 (4,200
)
Global Eagle Entertainment, Inc.
   
(6,174
)
 
 (76,400
)
Harmonic, Inc.
   
(290,320
)
 
 (2,887
)
Pandora Media, Inc.
   
(14,522
)
 
 (17,600
)
Quotient Technology, Inc.
   
(230,560
)
 
 (5,725
)
RingCentral, Inc., Class A
   
(363,537
)
 
 (1,380
)
Wayfair, Inc., Class A
   
(93,191
)
           
(1,702,285
)
Total Common Stock (Proceeds $(21,171,559))    
(21,593,223
)
Total Short Positions - (38.5)% (Proceeds $(21,171,559))  
$
(21,593,223
)

See Notes to Financial Statements.
30
ABSOLUTE FUNDS



ABSOLUTE CONVERTIBLE ARBITRAGE
NOTES TO SCHEDULES OF INVESTMENTS AND SECURITIES SOLD SHORT


ADR
American Depositary Receipt
PLC
Public Limited Company
(a)
All or a portion of these securities are held as collateral for securities sold short.
(b)
Security exempt from registration under Rule 144A under the Securities Act of 1933. At the period end, the value of these securities amounted to $19,249,459 or 34.3% of net assets.
(c)
Zero coupon bond. Interest rate presented is yield to maturity.
(d)
Dividend yield changes daily to reflect current market conditions. Rate was the quoted yield as of March 31, 2018.

The following is a summary of the inputs used to value the Fund's investments and other financial instruments and liabilities as of March 31, 2018.

The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the Security Valuation section in Note 2 of the accompanying Notes to Financial Statements.

   
Level 1
   
Level 2
   
Level 3
   
Total
 
Assets
                       
Investments at Value
                       
Corporate Convertible Bonds
 
$
   
$
44,212,496
   
$
   
$
44,212,496
 
Money Market Fund
   
     
33,852,237
     
     
33,852,237
 
Investments at Value
 
$
   
$
78,064,733
   
$
   
$
78,064,733
 
Total Assets
 
$
   
$
78,064,733
   
$
   
$
78,064,733
 
                                 
Liabilities
                               
Securities Sold Short
                               
Common Stock
 
$
(21,593,223
)
 
$
   
$
   
$
(21,593,223
)
Securities Sold Short
 
$
(21,593,223
)
 
$
   
$
   
$
(21,593,223
)
Total Liabilities
 
$
(21,593,223
)
 
$
   
$
   
$
(21,593,223
)

The Fund utilizes the end of period methodology when determining transfers. There were no transfers among Level 1, Level 2 and Level 3 for the year ended March 31, 2018.

See Notes to Financial Statements.
31
ABSOLUTE FUNDS



ABSOLUTE FUNDS
STATEMENTS OF ASSETS AND LIABILITIES
MARCH 31, 2018

 
 
ABSOLUTE STRATEGIES FUND
   
ABSOLUTE CAPITAL OPPORTUNITIES FUND
   
ABSOLUTE CONVERTIBLE ARBITRAGE FUND
 
ASSETS
                 
Investments, at value (Cost $95,614,346, $29,198,436 and $76,489,790, respectively)
 
$
110,284,388
   
$
29,665,011
   
$
78,064,733
 
Investments in affiliates, at value (Cost $45,057,189, $0 and $0, respectively)
   
48,388,362
     
     
 
 
 
$
158,672,750
   
$
29,665,011
   
$
78,064,733
 
Cash
   
4,529,451
     
2,614
     
 
Deposits with broker
   
42,161,700
     
14,568,191
     
 
Foreign currency (Cost $108,878, $0 and $0, respectively)
   
110,970
     
     
 
Receivables:
                       
Fund shares sold
   
42,803
     
432,006
     
94,926
 
Investment securities sold
   
2,487,952
     
46
     
1,008,207
 
Dividends and interest
   
238,300
     
20,598
     
235,136
 
Prepaid expenses
   
12,500
     
11,724
     
1,904
 
Deferred offering costs
   
     
     
11,964
 
Total Assets
   
208,256,426
     
44,700,190
     
79,416,870
 
LIABILITIES
                       
Call options written, at value (Premiums received $0, $30,459 and $0, respectively)
   
     
26,450
     
 
Put options written, at value (Premiums received $0, $108,207 and $0, respectively)
   
     
114,809
     
 
Securities sold short, at value (Proceeds $34,589,488, $12,506,272 and $21,171,559, respectively)
   
32,481,023
     
12,139,511
     
21,593,223
 
Payables:
                       
Investment securities purchased
   
3,852,363
     
30,639
     
1,542,044
 
Fund shares redeemed
   
377,941
     
     
 
Due to custodian
   
     
     
45,341
 
Dividends on securities sold short
   
18,832
     
     
2,090
 
Accrued Liabilities:
                       
Investment adviser fees
   
3,627
     
13,418
     
104,217
 
Trustees’ fees and expenses
   
400
     
50
     
50
 
Fund services fees
   
33,638
     
4,747
     
2,424
 
Other expenses
   
164,413
     
32,632
     
62,785
 
Total Liabilities
   
36,932,237
     
12,362,256
     
23,352,174
 
NET ASSETS
 
$
171,324,189
   
$
32,337,934
   
$
56,064,696
 
COMPONENTS OF NET ASSETS
                       
Paid-in capital
 
$
196,537,608
   
$
29,145,174
   
$
55,294,361
 
Undistributed net investment income (Accumulated net investment loss)
   
(585,480
)
   
     
310,066
 
Accumulated net realized gain (loss)
   
(46,533,183
)
   
2,361,991
     
(693,010
)
Net unrealized appreciation
   
21,905,244
     
830,769
     
1,153,279
 
NET ASSETS
 
$
171,324,189
   
$
32,337,934
   
$
56,064,696
 
SHARES OF BENEFICIAL INTEREST AT NO PAR VALUE (UNLIMITED SHARES AUTHORIZED)
                       
Institutional Shares
   
19,869,235
     
2,583,325
     
5,448,972
 
R Shares
   
615,709
     
     
 
 
                       
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE
                       
Institutional Shares (based on net assets of $166,373,325, $32,337,934 and $56,064,696, respectively)
 
$
8.37
   
$
12.52
   
$
10.29
 
R Shares (based on net assets of $4,950,864, $0 and $0)
 
$
8.04
   
$
   
$
 
 
See Notes to Financial Statements.
32
ABSOLUTE FUNDS


ABSOLUTE FUNDS
STATEMENTS OF OPERATIONS
YEAR OR PERIOD ENDED MARCH 31, 2018
 
 
 
ABSOLUTE STRATEGIES FUND
   
ABSOLUTE CAPITAL OPPORTUNITIES FUND
   
ABSOLUTE CONVERTIBLE ARBITRAGE FUND*
 
INVESTMENT INCOME
                 
Dividend income (Net of foreign withholding taxes of $136,736, $5,713 and $0, respectively)
 
$
4,454,873
   
$
214,436
   
$
139,043
 
Dividend income from affiliated investment
   
47,189
     
     
 
Interest income
   
2,150,544
     
     
320,109
 
Net amortization expense
   
     
     
(429,427
)
Total Investment Income
   
6,652,606
     
214,436
     
29,725
 
EXPENSES
                       
Investment adviser fees
   
5,580,081
     
246,156
     
277,313
 
Fund services fees
   
486,104
     
48,409
     
42,503
 
Transfer agent fees:
                       
Institutional Shares
   
100,515
     
     
 
R Shares
   
54,648
     
     
 
Distribution fees:
                       
R Shares
   
31,193
     
     
 
Custodian fees
   
554,466
     
30,308
     
42,091
 
Registration fees:
                       
Institutional Shares
   
22,387
     
19,166
     
116
 
R Shares
   
18,822
     
     
 
Professional fees
   
150,294
     
47,985
     
64,791
 
Trustees' fees and expenses
   
33,236
     
5,955
     
3,384
 
Offering costs
   
     
     
59,870
 
Dividend expense on securities sold short
   
2,359,961
     
114,052
     
10,978
 
Interest expense
   
504,093
     
22,643
     
108,147
 
Other expenses
   
446,362
     
22,798
     
15,343
 
Total Expenses
   
10,342,162
     
557,472
     
624,536
 
Fees waived
   
(565,273
)
   
(136,243
)
   
(179,010
)
Net Expenses
   
9,776,889
     
421,229
     
445,526
 
NET INVESTMENT LOSS
   
(3,124,283
)
   
(206,793
)
   
(415,801
)
NET REALIZED AND UNREALIZED GAIN (LOSS)
                       
Net realized gain (loss) on:
                       
Investments in unaffiliated issuers
   
85,735,917
     
3,960,258
     
820,141
 
Foreign currency transactions
   
343,372
     
(3,395
)
   
 
Securities sold short
   
(21,589,630
)
   
(1,007,520
)
   
(692,699
)
Written options
   
1,567,689
     
75,311
     
 
Futures
   
(23,935,334
)
   
     
 
Swaps
   
(1,402,368
)
   
     
 
Net realized gain
   
40,719,646
     
3,024,654
     
127,442
 
Net change in unrealized appreciation (depreciation) on:
                       
Investments in unaffiliated issuers
   
(63,244,578
)
   
(1,262,567
)
   
1,574,943
 
Investments in affiliated issuers
   
2,194,862
     
     
 
Foreign currency translations
   
(75,514
)
   
26
     
 
Securities sold short
   
(2,939,668
)
   
345,964
     
(421,664
)
Written options
   
(708,906
)
   
(30,367
)
   
 
Futures
   
4,246,493
     
     
 
Swaps
   
981,271
     
     
 
Net change in unrealized appreciation (depreciation)
   
(59,546,040
)
   
(946,944
)
   
1,153,279
 
NET REALIZED AND UNREALIZED GAIN (LOSS)
   
(18,826,394
)
   
2,077,710
     
1,280,721
 
INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
 
$
(21,950,677
)
  $ 1,870,917     $ 864,920  
 
*
Commencement of operations was August 14, 2017.
 
See Notes to Financial Statements.
33
ABSOLUTE FUNDS


ABSOLUTE FUNDS
STATEMENTS OF CHANGES IN NET ASSETS
 


   
ABSOLUTE STRATEGIES FUND
   
ABSOLUTE CAPITAL OPPORTUNITIES FUND
   
ABSOLUTE CONVERTIBLE ARBITRAGE FUND
 
                   
   
For the Years Ended March 31,
   
For the Years Ended March 31,
     
   
2018
   
2017
   
2018
   
2017
 
OPERATIONS
                             
Net investment loss
 
$
(3,124,283
)
 
$
(7,890,519
)
 
$
(206,793
)
 
$
(199,094
)
 
$
(415,801
)
Net realized gain (loss)
   
40,719,646
     
3,597,735
     
3,024,654
     
(69,602
)
   
127,442
 
Net change in unrealized appreciation (depreciation)
   
(59,546,040
)
   
(16,429,187
)
   
(946,944
)
   
1,193,645
     
1,153,279
 
Increase (Decrease) in Net Assets Resulting from Operations
   
(21,950,677
)
   
(20,721,971
)
   
1,870,917
     
924,949
     
864,920
 
                                         
DISTRIBUTIONS TO SHAREHOLDERS FROM
                                 
Net realized gain:
                                       
Institutional Shares
   
     
(85,840,670
)
   
     
     
(94,585
)
R Shares
   
     
(3,055,044
)
   
     
     
 
Total Distributions to Shareholders
   
     
(88,895,714
)
   
     
     
(94,585
)
                                         
CAPITAL SHARE TRANSACTIONS
                                 
Sale of shares:
                                       
Institutional Shares
   
40,442,084
     
245,205,577
     
16,426,763
     
1,042,238
     
55,873,359
 
R Shares
   
4,996,291
     
12,641,234
     
     
     
 
Reinvestment of distributions:
                                       
Institutional Shares
   
     
78,733,255
     
     
     
94,585
 
R Shares
   
     
2,739,828
     
     
     
 
Redemption of shares:
                                       
Institutional Shares
   
(354,894,965
)
   
(633,166,321
)
   
(147,450
)
   
     
(673,583
)
R Shares
   
(18,458,224
)
   
(18,077,731
)
   
     
     
 
Increase (Decrease) in Net Assets from Capital Share Transactions
   
(327,914,814
)
   
(311,924,158
)
   
16,279,313
     
1,042,238
     
55,294,361
 
Increase (Decrease) in Net Assets
   
(349,865,491
)
   
(421,541,843
)
   
18,150,230
     
1,967,187
     
56,064,696
 
                                         
NET ASSETS
                                       
Beginning of Period
   
521,189,680
     
942,731,523
     
14,187,704
     
12,220,517
     
 
End of Period (Including line (a))
 
$
171,324,189
   
$
521,189,680
   
$
32,337,934
   
$
14,187,704
   
$
56,064,696
 
                                         
SHARE TRANSACTIONS
                                       
Sale of shares:
                                       
Institutional Shares
   
4,731,888
     
24,990,146
     
1,302,256
     
96,537
     
5,506,489
 
R Shares
   
599,477
     
1,377,012
     
     
     
 
Reinvestment of distributions:
                                       
Institutional Shares
   
     
8,846,433
     
     
     
9,273
 
R Shares
   
     
317,110
     
     
     
 
Redemption of shares:
                                       
Institutional Shares
   
(42,135,763
)
   
(64,717,097
)
   
(12,164
)
   
     
(66,790
)
R Shares
   
(2,260,126
)
   
(1,972,440
)
   
     
     
 
Increase (Decrease) in Shares
   
(39,064,524
)
   
(31,158,836
)
   
1,290,092
     
96,537
     
5,448,972
 
                                         
(a) Undistributed net investment income (Accumulated net investment loss)
 
$
(585,480
)
 
$
(2,836,297
)
 
$
   
$
(40,691
)
 
$
310,066
 
 
*
Commencement of operations.
 
See Notes to Financial Statements.
34
ABSOLUTE FUNDS


ABSOLUTE FUNDS
FINANCIAL HIGHLIGHTS
 


       
Investment Operations
   
Distributions to Shareholders from:
                   
Period Ended
 
Net Asset Value, Beginning of Period
   
Net Investment Income (Loss)(a)
   
Net Realized and Unrealized Gains (Losses) on Investments
   
Total from Investment Operations
   
Net Realized Gains
   
Total Distribution to Shareholders
   
Net Asset Value, End of Period
   
Total Return
   
Net Assets, End of Period (000's)
 
ABSOLUTE STRATEGIES FUND 
                                     
INSTITUTIONAL SHARES 
                                     
03/31/18
 
$
8.76
   
$
(0.07
)
 
$
(0.32
)
 
$
(0.39
)
 
$
   
$
   
$
8.37
     
(4.45
)%
 
$
166,373
 
03/31/17
   
10.40
     
(0.10
)
   
(0.23
)
   
(0.33
)
   
(1.31
)
   
(1.31
)
   
8.76
     
(3.40
)
   
501,866
 
03/31/16
   
11.04
     
(0.11
)
   
0.31
     
0.20
     
(0.84
)
   
(0.84
)
   
10.40
     
2.05
     
916,747
 
03/31/15
   
11.01
     
(0.08
)
   
0.11
     
0.03
     
     
     
11.04
     
0.27
     
1,592,872
 
03/31/14
   
11.24
     
(0.10
)
   
(0.13
)
   
(0.23
)
   
     
     
11.01
     
(2.05
)
   
2,697,675
 
R SHARES
                                                                       
03/31/18
   
8.49
     
(0.13
)
   
(0.32
)
   
(0.45
)
   
     
     
8.04
     
(5.30
)
   
4,951
 
03/31/17
   
10.17
     
(0.11
)
   
(0.26
)
   
(0.37
)
   
(1.31
)
   
(1.31
)
   
8.49
     
(3.89
)
   
19,324
 
03/31/16
   
10.88
     
(0.17
)
   
0.30
     
0.13
     
(0.84
)
   
(0.84
)
   
10.17
     
1.41
     
25,985
 
03/31/15
   
10.90
     
(0.13
)
   
0.11
     
(0.02
)
   
     
     
10.88
     
(0.18
)
   
48,577
 
03/31/14
   
11.18
     
(0.14
)
   
(0.14
)
   
(0.28
)
   
     
     
10.90
     
(2.50
)
   
66,589
 
ABSOLUTE CAPITAL OPPORTUNITIES FUND
                                 
INSTITUTIONAL SHARES 
                                                         
03/31/18
 
$
10.97
   
$
(0.15
)
 
$
1.70
   
$
1.55
   
$
   
$
   
$
12.52
     
14.13
%
 
$
32,338
 
03/31/17
   
10.21
     
(0.16
)
   
0.92
     
0.76
     
     
     
10.97
     
7.44
     
14,188
 
03/31/16(c)
   
10.00
     
(0.03
)
   
0.24
     
0.21
     
     
     
10.21
     
2.10
(d)
   
12,221
 
ABSOLUTE CONVERTIBLE ARBITRAGE FUND 
                                 
INSTITUTIONAL SHARES
                                                 
03/31/18(f)
 
$
10.00
   
$
(0.13
)
 
$
0.44
   
$
0.31
   
$
(0.02
)
 
$
(0.02
)
 
$
10.29
     
3.14
%(d)
 
$
56,065
 
 
(a)
Calculated based on average shares outstanding during each period.
(b)
Reflects the expense ratio excluding any waivers and/or reimbursements.
(c)
Commencement of operations was December 30, 2015.
(d)
Not annualized.
(e)
Annualized.
(f)
Commencement of operations was August 14, 2017.
 
See Notes to Financial Statements.
35
ABSOLUTE FUNDS


ABSOLUTE FUNDS
FINANCIAL HIGHLIGHTS
 


Ratios/Supplemental Data (Ratios to Average Net Assets)
   
Net Investment Income (Loss)
   
Net Expenses
   
Dividend and Interest Expenses
   
Net Expenses without Dividend and Interest Expenses
   
Gross Expenses
   
Portfolio Turnover
   
                                   
(0.87
)%
   
2.78
%
   
0.82
%
   
1.96
%
   
2.94
%(b)
   
86
%
 
(0.99
)
   
2.86
     
0.95
     
1.91
     
2.89
(b)
   
72
   
(1.02
)
   
2.65
     
0.81
     
1.84
     
2.66
(b)
   
70
   
(0.70
)
   
2.58
     
0.79
     
1.79
     
2.58
     
78
   
(0.85
)
   
2.45
     
0.72
     
1.73
     
2.47
(b)
   
75
   
(1.59
)
   
3.50
%
   
0.83
%
   
2.67
%
   
3.76
%(b)
   
86
%
 
(1.14
)
   
3.50
     
1.01
     
2.49
     
3.52
(b)
   
72
   
(1.59
)
   
3.23
     
0.83
     
2.40
     
3.24
(b)
   
70
   
(1.17
)
   
3.09
     
0.79
     
2.30
     
3.09
     
78
   
(1.23
)
   
2.92
     
0.73
     
2.19
     
2.93
(b)
   
75
   
                                             
(1.30
)%
   
2.66
%
   
0.86
%
   
1.79
%
   
3.52
%(b)
   
66
%
 
(1.53
)
   
2.62
     
0.70
     
1.92
     
3.70
(b)
   
29
   
(1.13
)(e)
   
2.20
(e)
   
0.25
(e)
   
1.95
(e)
   
4.37
(b)(e)
   
6
(d)
 
                                             
(2.08
)%(e)
   
2.23
%(e)
   
0.60
%(e)
   
1.63
%(e)
   
3.13
%(b)(e)
   
76
%(d)
 
 

See Notes to Financial Statements.
36
ABSOLUTE FUNDS


ABSOLUTE FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2018 
 
Note 1. Organization
 
Absolute Strategies Fund, Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund (individually, a “Fund” and collectively, the “Funds”) are diversified portfolios of Forum Funds (the “Trust”). The Trust is a Delaware statutory trust that is registered as an open-end, management investment company under the Investment Company Act of 1940, as amended (the “Act”). Under its Trust Instrument, the Trust is authorized to issue an unlimited number of each Fund’s shares of beneficial interest without par value. Absolute Strategies Fund currently offers two classes of shares: Institutional Shares and R Shares. Institutional and R Shares commenced operations on July 11, 2005. Absolute Strategies Fund seeks to achieve long-term capital appreciation with an emphasis on absolute (positive) returns and low sensitivity to traditional financial market indices, such as the S&P 500 Index. Absolute Capital Opportunities Fund currently offers Institutional Shares. Absolute Capital Opportunities Fund commenced operations on December 30, 2015. Absolute Capital Opportunities Fund seeks to achieve long-term capital appreciation with a lower sensitivity to traditional financial market indices, such as the S&P 500 Index.
 
The Absolute Convertible Arbitrage Fund commenced operations on August 14, 2017, after it acquired the net assets of the Mohican VCA Fund, LP, a privately offered hedge fund (the “Predecessor Fund”), in exchange for Fund shares. The Predecessor Fund commenced operations in 2002. The Absolute Convertible Arbitrage Fund seeks to achieve positive absolute returns over the long-term with low volatility when compared to traditional market indices. The Predecessor Fund had an investment objective and strategies that were, in all material respects, identical to those of the Absolute Convertible Arbitrage Fund. On August 14, 2017, the Predecessor Fund reorganized into the Absolute Convertible Arbitrage Fund. The reorganization of net assets from this transaction was as follows:
 
 
Date of Contribution
 
Net Assets
   
Shares
   
Market Value of Investments
   
   
$
16,686,633
     
1,668,929
   
$
10,790,692
   
 
In addition to the securities transferred in, as noted above, $5,895,941 of cash and other receivables were also transferred in as part of the reorganization.
 
Note 2. Summary of Significant Accounting Policies
 
The Funds are investment companies and follow accounting and reporting guidance under Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946, “Financial Services-Investment Companies”. These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America (“GAAP”), which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of increases and decreases in net assets from operations during the fiscal year. Actual amounts could differ from those estimates. The following summarizes the significant accounting policies of each Fund:
 
Security Valuation – Securities are valued at market prices using the last quoted trade or official closing price from the principal exchange where the security is traded, as provided by independent pricing services on each Fund business day. In the absence of a last trade, securities are valued at the mean of the last bid and ask price provided by the pricing service. Debt securities may be valued at prices supplied by a fund’s pricing agent based on broker or dealer supplied valuations or matrix pricing, a method of valuing securities by reference to the value of other securities with similar characteristics such as rating, interest rate and maturity. Futures contracts are valued at the day’s settlement price on the exchange where the contract is traded. Forward currency contracts are generally valued based on interpolation of forward curve data points obtained from major banking institutions that deal in foreign currencies and currency dealers. Exchange-traded options for which the last quoted sale price is outside the closing bid and ask price, will be valued at the mean of the closing bid and ask price. Shares of non-exchange traded open-end mutual funds are valued at net asset value (“NAV”). Short-term investments that mature in sixty days or less may be valued at amortized cost.
 
 
37
ABSOLUTE FUNDS


ABSOLUTE FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2018
 
Each Fund values its investments at fair value pursuant to procedures adopted by the Trust’s Board of Trustees (the “Board”) if (1) market quotations are not readily available or (2) the Adviser, as defined in Note 4, believes that the values available are unreliable. The Trust’s Valuation Committee, as defined in each Fund’s registration statement, performs certain functions as they relate to the administration and oversight of each Fund’s valuation procedures. Under these procedures, the Valuation Committee convenes on a regular and ad hoc basis to review such investments and considers a number of factors, including valuation methodologies and significant unobservable inputs, when arriving at fair value.
 
The Valuation Committee may work with the Adviser to provide valuation inputs. In determining fair valuations, inputs may include market-based analytics that may consider related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant investment information. Adviser inputs may include an income-based approach in which the anticipated future cash flows of the investment are discounted in determining fair value. Discounts may also be applied based on the nature or duration of any restrictions on the disposition of the investments. The Valuation Committee performs regular reviews of valuation methodologies, key inputs and assumptions, disposition analysis and market activity.
 
Fair valuation is based on subjective factors and, as a result, the fair value price of an investment may differ from the security’s market price and may not be the price at which the asset may be sold. Fair valuation could result in a different NAV than a NAV determined by using market quotes.
 
GAAP has a three-tier fair value hierarchy. The basis of the tiers is dependent upon the various “inputs” used to determine the value of each Fund’s investments. These inputs are summarized in the three broad levels listed below:
 
Level 1 - Quoted prices in active markets for identical assets and liabilities.
 
Level 2 - Prices determined using significant other observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Short-term securities with maturities of sixty days or less are valued at amortized cost, which approximates market value, and are categorized as Level 2 in the hierarchy. Municipal securities, long-term U.S. government obligations and corporate debt securities are valued in accordance with the evaluated price supplied by the pricing service and generally categorized as Level 2 in the hierarchy. Other securities that are categorized as Level 2 in the hierarchy include, but are not limited to, warrants that do not trade on an exchange, securities valued at the mean between the last reported bid and ask quotation and international equity securities valued by an independent third party with adjustments for changes in value between the time of the securities respective local market closes and the close of the U.S. market.
 
Level 3 - Significant unobservable inputs (including each Fund’s own assumptions in determining the fair value of investments).
 
The aggregate value by input level, as of March 31, 2018, for each Fund’s investments is included in each Fund’s Notes to Schedules of Investments, Securities Sold Short and Call and Put Options Written.
 
Security Transactions, Investment Income and Realized Gain and Loss – Investment transactions are accounted for on the trade date. Dividend income and expense recorded on the ex-dividend date. Non-cash dividend income is recorded at the fair market value of the securities received. Foreign dividend income and expense recorded on the ex-dividend date or as soon as possible after determining the existence of a dividend declaration after exercising reasonable due diligence. Income and capital gains on some foreign securities may be subject to foreign withholding taxes, which are accrued as applicable. Interest income is recorded on an accrual basis. Premium is amortized and discount is accreted using the effective interest method. Identified cost of investments sold is used to determine the gain and loss for both financial statement and federal income tax purposes. Each Fund estimates components of distributions from real estate investment trusts (“REITs”). Distributions received in excess of income are recorded as a reduction of the cost of the related investments.
 
Foreign Currency Translations – Foreign currency amounts are translated into U.S. dollars as follows: (1) assets and liabilities at the rate of exchange at the end of the respective period; and (2) purchases and sales of securities and
 
 
38
ABSOLUTE FUNDS


ABSOLUTE FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2018 
 
income and expenses at the rate of exchange prevailing on the dates of such transactions. The portion of the results of operations arising from changes in the exchange rates and the portion due to fluctuations arising from changes in the market prices of securities are not isolated. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
 
Foreign Currency Transactions – Each Fund may enter into transactions to purchase or sell foreign currency contracts and options on foreign currency. Forward currency contracts are agreements to exchange one currency for another at a future date and at a specified price. A fund may use forward currency contracts to facilitate transactions in foreign securities, to manage a fund’s foreign currency exposure and to protect the U.S. dollar value of its underlying portfolio securities against the effect of possible adverse movements in foreign exchange rates. These contracts are intrinsically valued daily based on forward rates, and a fund’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is recorded as a component of NAV. These instruments involve market risk, credit risk, or both kinds of risks, in excess of the amount recognized in the Statements of Assets and Liabilities. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movement in currency and securities values and interest rates. Due to the risks associated with these transactions, a fund could incur losses up to the entire contract amount, which may exceed the net unrealized value included in its NAV.
 
Futures ContractsEach Fund may purchase futures contracts to gain exposure to market changes, which may be more efficient or cost effective than actually buying the securities. A futures contract is an agreement between parties to buy or sell a security at a set price on a future date. Upon entering into such a contract, a fund is required to pledge to the broker an amount of cash, U.S. Government obligations or other high-quality debt securities equal to the minimum “initial margin” requirements of the exchange on which the futures contract is traded. Pursuant to the contract, the fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the 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 contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and value at the time it was closed. Risks of entering into futures contracts include the possibility that there may be an illiquid market and that a change in the value of the contract may not correlate with changes in the value of the underlying securities.
 
Notional amounts of each individual futures contract outstanding as of March 31, 2018, for Absolute Strategies Fund, are disclosed in the Notes to Schedule of Investments and Securities Sold Short.
 
Securities Sold Short – Each Fund may sell a security short to increase investment returns. Each Fund may also sell a security short in anticipation of a decline in the market value of a security. A short sale is a transaction in which the Fund sells a security that it does not own. To complete the transaction, the Fund must borrow the security in order to deliver it to the buyer. The Fund must replace the borrowed security by purchasing it at market price at the time of replacement; the price may be higher or lower than the price at which the Fund sold the security. The Fund incurs a loss from a short sale if the price of the security increases between the date of the short sale and the date on which the Fund replaces the borrowed security. The Fund realizes a profit if the price of the security declines between those dates.
 
Until the Fund replaces the borrowed security, the Fund will maintain on its books and records cash and long securities to sufficiently cover its short position on a daily basis. The collateral for the securities sold short includes the Deposits with Brokers as shown on the Statements of Assets and Liabilities and the securities held long as shown on the Schedules of Investments. Dividends and interest paid on securities sold short are recorded as an expense on the Statements of Operations.
 
Purchased Options – When a fund purchases an option, an amount equal to the premium paid by the fund is recorded as an investment and is subsequently adjusted to the current value of the option purchased. If an option expires on the stipulated expiration date or if the fund enters into a closing sale transaction, a gain or loss is realized. If a call option is exercised, the cost of the security acquired is increased by the premium paid for the call. If a put option
 
 
39
ABSOLUTE FUNDS


ABSOLUTE FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2018 
 
is exercised, a gain or loss is realized from the sale of the underlying security, and the proceeds from such sale are decreased by the premium originally paid. Purchased options are non-income producing securities.
 
The values of each individual purchased option outstanding as of March 31, 2018, for each Fund, if any, are disclosed in each Fund’s Schedule of Investments.
 
Written Options – When a fund writes an option, an amount equal to the premium received by the fund is recorded as a liability and is subsequently adjusted to the current value of the option written. Premiums received from writing options that expire unexercised are treated by the fund on the expiration date as realized gain from written options. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security in determining whether the fund has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the fund. The fund, as writer of an option, bears the market risk of an unfavorable change in the price of the security underlying the written option. Written options are non-income producing securities.
 
The values of each individual written option outstanding as of March 31, 2018, for each Fund, if any, are disclosed in each Fund’s Schedule of Call and Put Options Written.
 
Credit Default Swaps – Each Fund may invest in credit default swaps. A credit default swap gives one party (the buyer) the right to recoup the economic value of a decline in the value of debt securities of the reference issuer (including sovereign debt obligations) if a credit event (a downgrade or default) occurs. This value is obtained by delivering a debt security of the reference issuer to the party in return for a previously agreed payment from the other party (frequently, the par value of the debt security). Credit default swaps may require initial premium (discount) payments as well as periodic payments (receipts) related to the interest leg of the swap or to the default of a reference obligation.
 
If a fund is a seller of a credit default swap contract, the fund would be required to pay the par (or other agreed upon) value of a referenced debt obligation to the counterparty in the event of a default or other credit event by the reference issuer, such as a U.S. or foreign corporate issuer, with respect to such debt obligations. In return, the fund would receive from the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the fund would keep the stream of payments and would have no payment obligations. As the seller, the fund would be subject to investment exposure on the notional amount of the swap.
 
If a fund is the buyer of a credit default swap contract, the fund would have the right to deliver a referenced debt obligation and receive the par (or other agreed-upon) value of such debt obligation from the counterparty in the event of a default or other credit event (such as a credit downgrade) by the reference issuer, such as a U.S. or foreign corporation, with respect to its debt obligations. In return, the fund would pay the counterparty a periodic stream of payments over the term of the contract provided that no event of default has occurred. If no default occurs, the counterparty would keep the stream of payments and would have no further obligations to the fund.
 
As of March 31, 2018, there were no credit default swap agreements outstanding.
 
Interest Rate Swaps – Each Fund may enter into interest rate swaps for investment purposes to manage exposure to fluctuations in interest rates or to add leverage.
 
Interest rate swaps represent an agreement between two counterparties to exchange cash flows based on the difference in two interest rates, applied to the notional principal amount for a specified period. The payment flows are usually netted against each other, with the difference being paid by one party to the other. The Fund settles accrued net receivables or payables under the swap contracts on a periodic basis.
 
The primary risk associated with interest rate swaps is that unfavorable changes in interest rates could adversely impact the Funds.
 
 
40
ABSOLUTE FUNDS


ABSOLUTE FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2018 
 
The Funds did not enter into any interest rate swaps during the year ended March 31, 2018.
 
Restricted Securities – Each Fund may invest in securities that are subject to legal or contractual restrictions on resale (“restricted securities”). Restricted securities may be resold in transactions that are exempt from registration under the Federal securities laws or if the securities are registered to the public. The sale or other disposition of these securities may involve additional expenses and the prompt sale of these securities at an acceptable price may be difficult. Information regarding restricted securities held by each Fund is included in their Schedule of Investments, if applicable.
 
When-Issued Transactions – Each Fund may purchase securities on a forward commitment or ‘when-issued’ basis. A fund records a when-issued transaction on the trade date and will segregate with the custodian qualifying assets that have a value sufficient to make payment for the securities purchased. Securities purchased on a when-issued basis are marked-to-market daily and the fund begins earning interest on the settlement date. Losses may arise due to changes in the market value of the underlying securities or if the counterparty does not perform under the contract.
 
Distributions to Shareholders – Distributions to shareholders of net investment income, if any, are declared and paid semi-annually. Distributions to shareholders of net capital gains and foreign currency gains, if any, are declared and paid at least annually. Distributions to shareholders are recorded on the ex-dividend date. Distributions are based on amounts calculated in accordance with applicable federal income tax regulations, which may differ from GAAP. These differences are due primarily to differing treatments of income and gain on various investment securities held by each Fund, timing differences and differing characterizations of distributions made by each Fund.
 
Federal Taxes – Each Fund intends to continue to qualify each year as a regulated investment company under Subchapter M of Chapter 1, Subtitle A, of the Internal Revenue Code of 1986, as amended (“Code”), and to distribute all of their taxable income to shareholders. In addition, by distributing in each calendar year substantially all of their net investment income and capital gains, if any, the Funds will not be subject to a federal excise tax. Therefore, no federal income or excise tax provision is required. Each Fund files a U.S. federal income and excise tax return as required. Each Fund’s federal income tax returns are subject to examination by the Internal Revenue Service for a period of three fiscal years after they are filed. As of March 31, 2018, there are no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure.
 
Income and Expense Allocation – The Trust accounts separately for the assets, liabilities and operations of each of its investment portfolios. Expenses that are directly attributable to more than one investment portfolio are allocated among the respective investment portfolios in an equitable manner.
 
Absolute Strategies Fund's class-specific expenses are charged to the operations of that class of shares. Income and expenses (other than expenses attributable to a specific class) and realized and unrealized gains or losses on investments are allocated to each class of shares based on the class’ respective net assets to the total net assets of the Fund.
 
Commitments and Contingencies – In the normal course of business, each Fund enters into contracts that provide general indemnifications by each Fund to the counterparty to the contract. Each Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against each Fund and, therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote. Each Fund has determined that none of these arrangements requires disclosure on each Fund’s balance sheet.
 
Offering Costs – Offering costs for the Absolute Convertible Arbitrage Fund of $71,834 consisted of fees related to the mailing and printing of the initial prospectus, certain startup legal costs, and initial registration filings. Such costs are amortized over a twelve-month period beginning with the commencement of operations of the Absolute Convertible Arbitrage Fund.
 
 
41
ABSOLUTE FUNDS


ABSOLUTE FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2018 
 
Note 3. Cash – Concentration in Uninsured Account
 
For cash management purposes, each Fund may concentrate cash with each Fund’s custodian. This typically results in cash balances exceeding the Federal Deposit Insurance Corporation (“FDIC”) insurance limits. As of March 31, 2018, Absolute Strategies and Absolute Capital Opportunities Fund had a total of $45,690,161 and $14,320,805, respectively, at State Street Bank and Trust Company and the Fund’s brokers that exceeded the FDIC insurance limit imposed at each institution.
 
Note 4. Fees and Expenses
 
Investment Adviser – Absolute Investment Advisers LLC (the “Adviser”) is the investment adviser to each Fund. Pursuant to an investment advisory agreement, the Adviser receives an advisory fee from Absolute Strategies Fund, Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund at an annual rate of 1.60%, 1.40% and 1.40%, respectively, of each Fund’s average daily net assets. Prior to February 2, 2018, the Adviser received an advisory fee from Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund at an annual rate of 1.60%.
 
Each sub-advisory fee, calculated as a percentage of each Fund’s average daily net assets managed by each subadviser, is paid by the Adviser.
 
Distribution – Foreside Fund Services, LLC serves as each Fund’s distributor (the “Distributor”). The Distributor is not affiliated with the Adviser or Atlantic Fund Administration, LLC (d/b/a Atlantic Fund Services) (“Atlantic”) or their affiliates. Absolute Strategies Fund has adopted a Distribution Plan (the “Plan”) for R Shares of the Fund in accordance with Rule 12b-1 of the Act. Under the Plan, R Shares are subject to a Rule 12b-1 fee of up to 0.35% of the R Shares average daily net assets; however, currently the Board limits 12b-1 fees on R Shares to 0.25% of average daily net assets.
 
Other Service Providers – Atlantic provides fund accounting, fund administration, compliance and transfer agency services to each Fund. The fees related to these services are included in Fund services fees within the Statements of Operations. Atlantic also provides certain shareholder report production and EDGAR conversion and filing services. Pursuant to an Atlantic services agreement, each Fund pays Atlantic customary fees for its services. Atlantic provides a Principal Executive Officer, a Principal Financial Officer, a Chief Compliance Officer and an Anti-Money Laundering Officer to each Fund, as well as certain additional compliance support functions.
 
Trustees and Officers – Through December 31, 2017, the Trust paid each independent Trustee an annual retainer fee of $50,000 for service to the Trust ($66,000 for the Chairman), and the Audit Committee Chairman and Vice Chairman received an additional $6,000 annually. Effective January 1, 2018, each independent Trustee’s annual retainer is $31,000 ($41,000 for the Chairman), and the Audit Committee Chairman receives an additional $2,000 annually. The Trustees and Chairman may receive additional fees for special Board meetings. Each Trustee is also reimbursed for all reasonable out-of-pocket expenses incurred in connection with his duties as a Trustee, including travel and related expenses incurred in attending Board meetings. The amount of Trustees’ fees attributable to each Fund is disclosed in the Statement of Operations. Certain officers of the Trust are also officers or employees of the above named service providers, and during their terms of office received no compensation from each Fund.
 
Note 5. Expense Reimbursement and Fees Waived
 
Effective September 29, 2017, the Adviser has contractually agreed to waive its fee and/or reimburse Fund expenses to limit total annual operating expenses (excluding all taxes, interest, portfolio transaction expenses, dividend and interest expenses on short sales, acquired fund fees and expenses, proxy expenses and extraordinary expenses) of Absolute Strategies Fund’s Institutional Shares and R Shares to 1.99% and 2.24%, respectively, through August 1, 2019. During the year, Absolute Strategies Fund invested in Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund. As of March 31, 2018, Absolute Strategies Fund owned approximately 59.2% and 52.1% of Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund, respectively. The Adviser has agreed to waive fees in an amount equal to the fee it receives plus all operating expenses, if any, from Absolute Capital
 
 
42
ABSOLUTE FUNDS


ABSOLUTE FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2018 
 
Opportunities Fund and Absolute Convertible Arbitrage Fund based on Absolute Strategies Fund’s investment in Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund. Other Fund service providers have voluntarily agreed to waive a portion of their fees. For the year ended March 31, 2018, the Adviser waived fees of $529,394 and Other Fund service providers waived fees of $35,879 for Absolute Strategies Fund.
 
The Adviser has contractually agreed to waive its fee and/or reimburse expenses to limit total annual operating expenses (excluding all taxes, interest, portfolio transaction expenses, dividend and interest expenses on short sales, acquired fund fees and expenses, proxy expenses and extraordinary expenses) of Absolute Capital Opportunities to 1.75% through August 1, 2019. Prior to February 2, 2018, the Adviser had contractually agreed to waive its fee and/ or reimburse expenses to 1.85% on net assets up to $100 million, 1.75% on net assets between $100 million and $200 million, and 1.65% on net assets over $200 million. The Adviser waived fees of $136,243 for Absolute Capital Opportunities Fund for the year ended March 31, 2018.
 
The Adviser has also contractually agreed to waive its fee and/or reimburse expenses to limit total annual operating expenses (excluding all taxes, interest, portfolio transaction expenses, dividend and interest expenses on short sales, acquired fund fees and expenses, proxy expenses and extraordinary expenses) of Absolute Convertible Arbitrage Fund to 1.60% through August 1, 2019. Prior to February 2, 2018, the Adviser had contractually agreed to waive its fee and/or reimburse expenses to 1.75% on net assets up to $25 million and 1.49% on net assets exceeding $25 million. Other Fund service providers have voluntarily agreed to waive a portion of their fees. The Adviser waived fees of $163,671 and Other Fund service providers waived fees of $15,339, for Absolute Convertible Arbitrage Fund, for the period ended March 31, 2018.
 
The Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund may repay the Adviser for fees waived and expenses reimbursed pursuant to the expense cap if such payment is made within three years of the fee waiver or expense reimbursement and does not cause the total annual fund operating expenses after fee waiver and/or expense reimbursement of the Funds to exceed the lesser of (i) the then current expense cap, or (ii) the expense cap in place at the time the fees/expenses were waived/reimbursed. As of March 31, 2018, $330,692 and $163,671 for Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund, respectively, is subject to recapture by the Adviser.
 
Note 6. Security Transactions
 
The cost of purchases and proceeds from sales of investment securities (including maturities), other than short-term investments during the year or period ended March 31, 2018, were as follows:
     
Non-U.S. Government Obligations
   
     
Purchases
   
Sales
   
 
Absolute Strategies Fund
 
$
213,981,415
   
$
491,683,224
   
 
Absolute Capital Opportunities Fund
   
18,227,303
     
6,670,792
   
 
Absolute Convertible Arbitrage Fund
   
51,335,710
*
   
18,856,794
   
 
*
Amount excludes the in-kind contribution of securities from the Predecessor Fund.
 
Note 7. Summary of Derivative Activity
 
The volume of open derivative positions may vary on a daily basis as each Fund transacts derivative contracts in order to achieve the exposure desired by the Adviser. The notional value of activity for the year ended March 31, 2018, for any derivative type during the year is as follows:
 
     
Absolute Strategies Fund
   
Absolute Capital Opportunities Fund
   
 
Forward Currency Contracts
 
$
40,682,989
   
$
   
 
Futures Contracts
   
4,930,094,295
     
   
 
Purchased Options
   
11,609,655
     
2,222,807
   
 
Written Options
   
(1,269,739
)
   
(149,038
)
 
 
 
43
ABSOLUTE FUNDS


ABSOLUTE FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2018
 
Each Fund’s use of derivatives for the year ended March 31, 2018, was limited to options, forward currency contracts, futures contracts and credit default   swaps.

Following is a summary of the effect of derivatives on the Statements of Assets and Liabilities as of March 31, 2018:

Absolute Strategies Fund

 
Location:          
 
Equity Risk
   
 
Asset derivatives:
   
 
Investments, at value
 
$
687,960
   
 
Absolute Capital Opportunities Fund
 
 
Location:          
 
Equity Risk
   
 
Asset derivatives:
   
 
Investments, at value
 
$
670,093
   
 
Liability derivatives:
         
 
Call options written
 
$
(26,450
)
 
 
Put options written
 
$
(114,809
)
 
 
Total liability derivatives
 
$
(141,259
)
 
 
Realized and unrealized gains and losses on derivatives contracts for the year ended March 31, 2018, are recorded by each Fund in the following locations on the Statements of Operations:

Absolute Strategies Fund
 
 
Location:
 
Commodity
   
Credit
   
Currency
   
Equity
   
Interest
   
Total
 
Net realized gain (loss) on:
                               
Investments
 
$
   
$
   
$
   
$
(3,088,935
)
 
$
   
$
(3,088,935
)
Foreign currency transactions
   
     
     
(6,567
)
   
     
     
(6,567
)
Written options
   
     
     
     
1,567,689
     
     
1,567,689
 
Futures
   
1,324,839
     
     
707,068
     
(26,503,735
)
   
536,494
     
(23,935,334
)
Swaps
   
     
(1,402,368
)
   
     
     
     
(1,402,368
)
Total net realized gain (loss)
 
$
1,324,839
   
$
(1,402,368
)
 
$
700,501
   
$
(28,024,981
)
 
$
536,494
   
$
(25,463,147
)
                                                 
Net change in unrealized appreciation (depreciation) on:
 
Investments
 
$
   
$
   
$
   
$
5,908,678
   
$
   
$
5,908,678
 
Written options
   
     
     
     
(708,906
)
   
     
(708,906
)
Futures
   
(298,202
)
   
     
     
4,707,938
     
(163,243
)
   
4,246,493
 
Swaps
   
     
981,271
     
     
     
     
981,271
 
Total net change in unrealized appreciation  (depreciation)
 
$
(298,202
)
 
$
981,271
   
$
   
$
9,907,710
   
$
(163,243
)
 
$
10,427,536
 
 
Absolute Capital Opportunities Fund
 
 
Location:          
 
Equity
 
Net realized gain (loss) on:
 
Investments
 
$
2,466,037
 
Written options
   
75,311
 
Total net realized gain (loss)
 
$
2,541,348
 
Net change in unrealized appreciation (depreciation) on:
       
Investments
 
$
(149,346
)
Written options
   
(30,367
)
Total net change in unrealized appreciation (depreciation)
 
$
(179,713
)
 
 
44
ABSOLUTE FUNDS


ABSOLUTE FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2018
 
Asset (Liability) amounts shown in the table below represent amounts for derivative related investments at March 31, 2018. These amounts may be collateralized by cash or financial instruments.
 
   
Gross Asset (Liability) as Presented in the Statement of Assets and Liabilities
   
Financial Instruments(Received) Pledged*
   
Cash Collateral (Received) Pledged*
   
Net Amount
 
Absolute Strategies Fund
                       
Assets:
                       
Over-the-counter   derivatives**
 
$
687,960
   
$
   
$
   
$
687,960
 
Absolute Capital Opportunities Fund
                               
Assets:
                               
Over-the-counter derivatives**
   
670,093
     
     
     
670,093
 
Liabilities:
                               
Over-the-counter derivatives**
   
(141,259
)
   
141,259
     
     
 
 
*
The actual financial instruments and cash collateral (received) pledged may be in excess of the amounts shown in the table. The table only reflects collateral amounts up to the amount of the financial instrument disclosed on the Statement of Assets and Liabilities.
**
Over-the-counter derivatives may consist of options contracts. The amounts disclosed above represent the exposure to one or more counterparties. For further detail on individual derivative contracts and the corresponding unrealized appreciation (depreciation), see the Schedule of Call and Put Options Written.
 
Note 8. Federal Income Tax

As of March 31, 2018, cost for federal income tax and net unrealized appreciation (depreciation) consists of:
 
     
Tax Cost of Investments
   
Gross Unrealized Appreciation
   
Gross Unrealized Depreciation
   
Net Unrealized Appreciation (Depreciation)
 
 
Absolute Strategies Fund
 
$
111,815,399
   
$
17,903,362
   
$
(3,527,034
)
 
$
14,376,328
 
 
Absolute Capital Opportunities Fund
   
17,307,516
     
1,180,952
     
(1,104,227
)
   
76,725
 
 
Absolute Convertible Arbitrage Fund
   
56,635,814
     
2,070,909
     
(2,235,213
)
   
(164,304
)
 
Distributions paid during the fiscal years ended as noted were characterized for tax purposes as follows:

     
Ordinary Income
   
Long-Term Capital Gain
   
Total
 
 
Absolute Strategies Fund
                 
 
2018
 
$
   
$
   
$
 
 
2017
   
34,763,539
     
54,132,175
     
88,895,714
 
 
Absolute Capital Opportunities Fund
 
 
2018
   
     
     
 
 
2017
   
     
     
 
 
Absolute Convertible Arbitrage Fund
 
 
2018
   
94,585
     
     
94,585
 
 
As of March 31, 2018, distributable earnings (accumulated loss) on a tax basis were as follows:
 
   
Undistributed Ordinary Income
   
Undistributed Long-Term Gain
   
Capital and Other Losses
   
Unrealized Appreciation (Depreciation)
   
Total
 
Absolute Strategies Fund
 
$
   
$
   
$
(39,592,131
)
 
$
14,378,712
   
$
(25,213,419
)
Absolute Capital Opportunities Fund
   
1,812,983
     
1,303,026
     
     
76,751
     
3,192,760
 
Absolute Convertible Arbitrage Fund
   
934,639
     
     
     
(164,304
)
   
770,335
 
 
The difference between components of distributable earnings on a tax basis and the amounts reflected in the Statements of Assets and Liabilities are primarily due to wash sales, futures, constructive sales, straddles, cover loss deferrals, short dividends, equity return of capital, convertible bond deemed distributions, partnerships and convertible bond premium.
 
 
45
ABSOLUTE FUNDS


ABSOLUTE FUNDS
NOTES TO FINANCIAL STATEMENTS
MARCH 31, 2018
 
As of March 31, 2018, the Absolute Strategies Fund had $39,310,239 of available short-term capital loss carryforwards that have no expiration date.

For tax purposes, the current deferred late year ordinary loss was $281,892 for Absolute Strategies Fund (realized during the period January 1, 2018 through March 31, 2018). These losses were recognized for tax purposes on the first business day of the Fund’s current fiscal year, April 1, 2018.

On the Statements of Assets and Liabilities, as a result of permanent book to tax differences, certain amounts have been reclassified for the year ended March 31, 2018. The following reclassifications were the result of book to tax differences resulting from real estate investment trusts, equity return of capital distributions, partnerships, passive foreign investment holdings, straddles, constructive sales, short dividend reclassifications, currency, paydowns, convertible bond deemed distributions, convertible bond premium adjustments, contingent payment debt instruments, credit default swap income, organization cost amortization and net operating losses and has no impact on the net assets of each Fund.

     
Undistributed Net Investment Income
   
Accumulated Net Realized Loss
   
Paid-in-Capital
 
 
Absolute Strategies Fund
 
$
5,375,100
   
$
(2,625,514
)
 
$
(2,749,586
)
 
Absolute Capital Opportunities Fund
   
247,484
     
(247,484
)
   
 
 
Absolute Convertible Arbitrage Fund
   
725,867
     
(725,867
)
   
 
 
Note 9. Underlying Investment in Other Investment Companies
 
The Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund currently seek to achieve their investment objective by investing a portion of their assets in State Street Institutional Treasury Money Market Fund, Premier Share Class (the “Premier”), a registered open-end management investment company organized as a Massachusetts business trust. The Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund may redeem their investments from Premier at any time if the Adviser determines that it is in the best interest of the Fund and its shareholders to do so. The latest financial statements for Premier can be found at www.sec.gov.

The performance of the Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund may be directly affected by the performance of Premier. As of March 31, 2018, the percentage of net assets invested in Premier was 29.5% and 60.4% for the Absolute Capital Opportunities Fund and Absolute Convertible Arbitrage Fund, respectively.

Note 10. Recent Accounting Pronouncements
 
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2017-08, Receivables—Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.

Note 11. Subsequent Events
 
Subsequent events occurring after the date of this report through the date these financial statements were issued have been evaluated for potential impact, and each Fund has had no such events.
 
 
46
ABSOLUTE FUNDS


 
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
 

 
To the Board of Trustees of Forum Funds
and the Shareholders of Absolute Strategies Fund,
Absolute Capital Opportunities Fund, and Absolute Convertible Arbitrage Fund
 
Opinion on the Financial Statements
 
We have audited the accompanying statements of assets and liabilities of Absolute Strategies Fund, Absolute Capital Opportunities Fund, and Absolute Convertible Arbitrage Fund, each a series of shares of beneficial interest in Forum Funds (the “Funds”), including the schedules of investments, as of March 31, 2018, and the related statements of operations for the year or period then ended, the statements of changes in net assets for each of the years or period in the two-year period then ended and the financial highlights for each of the years or periods in the five-year period then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Funds as of March 31, 2018, and the results of their operations for the year or period then ended, the changes in their net assets for each of the years or period in the two-year period then ended and their financial highlights for each of the years or periods in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America.
 
Basis for Opinion
 
These financial statements are the responsibility of the Funds' management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities law and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
 
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.

Our audits included performing procedures to assess the risk of material misstatement of those financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of March 31, 2018 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
 
 
BBD, LLP
 
We have served as the auditor of one or more of the Funds in the Forum Funds since 2009.
 
Philadelphia, Pennsylvania
 
 
47
ABSOLUTE FUNDS


ABSOLUTE FUNDS
ADDITIONAL INFORMATION (Unaudited)
 
Investment Advisory Agreement Approval
 
At the March 27, 2018 Board meeting, the Board, including the Independent Trustees, considered the approval of a new investment subadvisory agreement between Absolute Investment Advisers LLC (the “Adviser”) and Tortoise Capital Advisors, L.L.C. (the “Subadviser”) pertaining to the Fund (the “Subadvisory Agreement”). The Subadvisory Agreement was being considered in connection with the earlier termination of the original subadvisory agreement between the Adviser and the Subadviser (the “Original Agreement”) in connection with an anticipated change in control transaction involving the Subadviser’s parent entity (“Transaction”). In preparation for its deliberations, the Board requested and reviewed written responses from the Subadviser to due diligence questionnaires circulated on the Board's behalf concerning the services to be provided by the Subadviser with respect to the portion of the Fund managed by the Subadviser (the “Managed Portion”). In addition, the Board recognized that the Original Agreement between the Adviser and Subadviser had just recently been approved at an in-person meeting of the Board held on December 8, 2017 and, in this regard, the Board considered information provided by the Subadviser at that time. The Board also discussed the materials with Fund counsel and, as necessary, with the Trust's administrator, Atlantic Fund Services. During its deliberations, the Board received an oral presentation from the Adviser and was advised by Trustee counsel.

Nature, Extent and Quality of Services

The Board received a presentation from senior representatives of the Adviser and discussed the Subadviser’s personnel, operations and financial condition. In this context, the Board considered the adequacy of the Subadviser’s resources and the quality of services to be provided by the Subadviser under the Subadvisory Agreement. The Board reviewed information regarding the experience, qualifications and professional background of the portfolio managers and other personnel at the Subadviser who, under the Original Agreement had, and under the Subadvisory Agreement would continue to have, responsibility for the Managed Portion. The Board considered the Subadviser’s representation that the portfolio managers who were responsible for the Managed Portion under the Original Agreement would continue in that role as portfolio managers under the Subadvisory Agreement and that, notwithstanding turnover on the Subadviser’s investment committee in connection with the Transaction, there would be continuity and stability with respect to the Subadviser’s investment processes. The Board considered the investment philosophy and decision-making processes of the Subadviser and the capability and integrity of the Subadviser’s senior management and staff. The Board also evaluated the anticipated quality of the Subadviser’s services with respect to regulatory compliance and compliance with client investment policies and restrictions. In addition, the Board took into consideration the Adviser’s recommendation that the Board approve the Subadviser. The Board noted the Subadviser’s representation that it is financially stable and able to provide high-quality investment advisory services to the Managed Portion. The Board concluded that, overall, it was satisfied with the nature, extent, and quality of services to be provided to the Managed Portion by the Subadviser under the Subadvisory Agreement.

Performance

Recognizing that the Subadviser was relatively new and had not yet managed the Managed Portion for a meaningful period of time, the Board evaluated the Adviser’s assessment of the Subadviser’s historical performance in managing a strategy similar to the one to be employed for the Managed Portion, noting the Adviser had expressed satisfaction with the performance and had recommended the approval of the Subadvisory Agreement. Based on the Adviser’s evaluation of the Subadviser’s performance and the Adviser’s recommendation that the Board engage the Subadviser, among other relevant facts and circumstances, the Board concluded that the Subadviser’s management of the Managed Portion could benefit the Fund and its shareholders.

Compensation

The Board reviewed the Subadviser’s proposed compensation for providing subadvisory services to the Fund and noted that the total advisory fee paid by the Fund would not change because the subadvisory fees are paid by the Adviser and not the Fund. The Board considered information regarding the proposed compensation to be paid to the Subadviser by the Adviser and also noted the arm’s-length nature of the relationship between the Adviser and the
 
 
48
ABSOLUTE FUNDS



ABSOLUTE FUNDS
ADDITIONAL INFORMATION (Unaudited)
 
Subadviser with respect to the negotiation of such subadvisory fee rate. As a result, the Board concluded that the compensation to be paid to the Subadviser for providing subadvisory services to the Fund was not a material factor in considering the approval of the Subadvisory Agreement.

Cost of Services and Profitability

The Board noted that the Adviser, and not the Fund, was responsible for paying the subadvisory fees due under the Subadvisory Agreement. In that regard, the Board emphasized the arm’s length nature of the relationship between the Adviser and the Subadviser with respect to the negotiation of the subadvisory fee rate that would apply. The Board concluded that the Subadviser’s anticipated profitability was not a material factor in determining whether or not to approve the Subadvisory Agreement.

Economies of Scale

The Board considered whether the Fund would benefit from any economies of scale with respect to the Subadvisory Agreement. The Board noted that because the Adviser, and not the Fund, pays the subadvisory fee, shareholders would not benefit from any economies of scale in the form of breakpoints in the subadvisory fee rate. Based on the foregoing information and other materials presented, the Board concluded that economies of scale were not a material factor in approving the Subadvisory Agreement.

Other Benefits

The Board noted the Subadviser’s representation that, aside from its contractual subadvisory fees, it could benefit from its relationship with the Fund by way of additional market exposure. The Board concluded that other benefits accrued by the Subadviser were not a material factor in approving the Subadvisory Agreement.

Conclusion

The Board did not identify any single factor as being of paramount importance, and different Trustees may have given different weight to different factors; however, in light of the fact that the Fund is a multi-manager Fund for which the Adviser identifies subadvisers whose strategies it seeks to combine to achieve the Fund’s investment objective, the Board gave significant weight to the Adviser’s recommendation that the Subadviser be appointed as a subadviser to the Fund and to the Adviser’s representation that the appointment of the Subadviser would positively contribute to the Adviser successfully executing the overall strategy of the Fund. Based on its review, including consideration of each of the factors referenced above, the Board (including a majority of the Independent Trustees) determined, in the exercise of its reasonable business judgment, that the subadvisory arrangement, as outlined in the Subadvisory Agreement, was fair and reasonable in light of the services to be performed, expenses to be incurred by the Fund and such other matters as the Board considered relevant.

Shareholder Proxy Vote

At a special meeting of shareholders for all the Funds in the Trust, held on December 8, 2017, shares were voted as follows on the proposals presented to shareholders:

          Matter
For
Against
Abstain
To elect David Tucker to the Board of Trustees of the Trust
108,303,928.779
1,542,957.994
0
To elect Jennifer Brown-Strabley to the Board of Trustees of the Trust
108,183,952.495
1,662,934.278
0
To elect Mark D. Moyer to the Board of Trustees of the Trust.
108,142,412.946
1,704,473.827
0
To elect Jessica Chase to the Board of Trustees of the Trust.
107,632,924.803
2,213,961.970
0
To elect Stacey E. Hong to the Board of Trustees of the Trust.
105,777,266.997
4,069,619.776
0
 
Proxy Voting Information

A description of the policies and procedures that each Fund uses to determine how to vote proxies relating to securities held in each Fund’s portfolio is available, without charge and upon request, by calling (888) 992-2765 and
 
 
49
ABSOLUTE FUNDS



ABSOLUTE FUNDS
ADDITIONAL INFORMATION (Unaudited)
 
on the U.S. Securities and Exchange Commission’s (the “SEC”) website at www.sec.gov. Each Fund’s proxy voting record for the most recent twelve-month period ended June 30 is available, without charge and upon request, by calling (888) 992-2765 and on the SEC’s website at www.sec.gov.

Availability of Quarterly Portfolio Schedules

Each Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. These filings are available, without charge and upon request on the SEC’s website at www.sec.gov or may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.

Shareholder Expense Example

As a shareholder of the Funds, you incur ongoing costs, including management fees, distribution (12b-1) 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 period and held for the entire period from October 1, 2017 through March 31, 2018.

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 entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.

Hypothetical Example for Comparison Purposes – The second line of the table below provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each 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 each Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

Please note that the expenses shown in the table are meant to highlight your ongoing costs only. 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.
 
 
50
ABSOLUTE FUNDS


ABSOLUTE FUNDS
ADDITIONAL INFORMATION (Unaudited)
 
   
Beginning
Account Value
   
Ending
Account Value
   
Expenses Paid
During Period*
   
Annualized
Expense Ratio*
 
Absolute Strategies Fund
                       
Institutional Shares
                       
Actual
 
$
1,000.00
   
$
1,000.00
   
$
10.37
     
2.08
%
Hypothetical (5% return before expenses)
 
$
1,000.00
   
$
1,014.56
   
$
10.45
     
2.08
%
R Shares
                               
Actual
 
$
1,000.00
   
$
1,000.00
   
$
15.26
     
3.06
%
Hypothetical (5% return before expenses)
 
$
1,000.00
   
$
1,009.67
   
$
15.33
     
3.06
%
Absolute Capital Opportunities Fund
                               
Actual
 
$
1,000.00
   
$
1,123.88
   
$
9.27
     
1.75
%
Hypothetical (5% return before expenses)
 
$
1,000.00
   
$
1,016.21
   
$
8.80
     
1.75
%
Absolute Convertible Arbitrage Fund
                               
Actual
 
$
1,000.00
   
$
1,021.22
   
$
8.26
     
1.64
%
Hypothetical (5% return before expenses)
 
$
1,000.00
   
$
1,016.75
   
$
13.09
     
1.64
%
 
*
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 (182) divided by 365 to reflect the half-year period.
 
Federal Tax Status of Dividends Declared during the Fiscal Year
 
For federal income tax purposes, dividends from short-term capital gains are classified as ordinary income. The Absolute Convertible Arbitrage Fund designates 100.00% of its income dividends as short term capital gain dividends exempt from U.S. tax for foreign shareholders (QSD).
 
Trustees and Officers of the Trust
 
The Board is responsible for oversight of the management of the Trust’s business affairs and of the exercise of all the Trust’s powers except those reserved for the shareholders. The following table provides information about each Trustee and certain officers of the Trust. Each Trustee and officer holds office until the person resigns, is removed, or is replaced. Unless otherwise noted, the persons have held their principal occupations for more than five years. The address for all Trustees and officers is Three Canal Plaza, Suite 600, Portland, Maine 04101. Each Fund’s Statement of Additional Information includes additional information about the Trustees and is available, without charge and upon request, by calling (888) 992-2765.
 
 Name and Year of Birth
 Position with
the Trust
 Length of
Time Served
 Principal Occupation(s)
During Past Five Years
Number of Series in Fund Complex Overseen By Trustee
Other Directorships Held By Trustee During Past Five Years
Independent Trustees
David Tucker
Born: 1958
Trustee; Chairman of the Board
Since 2011 and Chairman since 2018
Director, Blue Sky Experience (a charitable endeavor) since 2008; Senior Vice President & General Counsel, American Century Companies (an investment management firm) 1998-2008.
3
Trustee, Forum Funds II, Forum ETF Trust and U.S. Global Investors Funds
 
 
51
ABSOLUTE FUNDS


ABSOLUTE FUNDS
ADDITIONAL INFORMATION (Unaudited)
 
Name and Year of Birth
Position with
the Trust
Length of
Time Served
Principal Occupation(s)
During Past Five Years
Number of Series in Fund Complex Overseen By Trustee
Other Directorships Held By Trustee During Past Five Years
Mark D. Moyer
Born: 1959
Trustee
Since 2018
Chief Financial Officer, Freedom House (a NGO advocating political freedom and democracy) since 2017; independent consultant providing interim CFO services, principally to non-profit organizations, 2011-2017; Chief Financial Officer, Institute of International Education (a NGO administering international educational exchange programs), 2008- 2011; Chief Financial Officer and Chief Restructuring Officer, Ziff Davis Media Inc. (an integrated media company), 2005-2008; Adjunct Professor of Accounting, Fairfield University from 2009-2012.
3
Trustee, Forum Funds II, Forum ETF Trust and U.S. Global Investors Funds
Jennifer Brown-Strabley
Born: 1964
Trustee
Since 2018
Principal, Portland Global Advisors, 1996-2010.
3
Trustee, Forum Funds II, Forum ETF Trust and U.S. Global Investors Funds
Interested Trustee
Stacey E. Hong(1)
Born: 1966
Trustee
Since 2018
President, Atlantic since 2008.
3
Trustee, Forum Funds II and U.S. Global Investors Funds
Born: 1970
Trustee
Since 2018
Senior Vice President, Atlantic since 2008.
3
None
 
(1)
Stacey E. Hong is currently treated as an interested person of the Trust, as defined in the 1940 Act, due to his affiliation with Atlantic. Jessica Chase is currently treated as an interested person of the Trust, as defined in the 1940 Act, due to her affiliation with Atlantic and her role as President of the Trust.
 
 
52
ABSOLUTE FUNDS


ABSOLUTE FUNDS
ADDITIONAL INFORMATION (Unaudited)
 
Name and Year of Birth
Position with the Trust
Length of
Time Served
Principal Occupation(s) During Past 5 Years
Officers
Born: 1970
President; Principal Executive Officer
Since 2015
Senior Vice President, Atlantic since 2008.
Born: 1972
Treasurer; Principal Financial Officer
Since 2008
Senior Vice President, Atlantic since 2008.
Zachary Tackett
Born: 1988
Vice President; Secretary and Anti-Money Laundering Compliance Officer
Since 2014
Counsel, Atlantic since 2014; Intern Associate, Coakley & Hyde, PLLC, 2010- 2013.
Michael J. McKeen
Born: 1971
Vice President
Since 2009
Senior Vice President, Atlantic since 2008.
Timothy Bowden
Born: 1969
Vice President
Since 2009
Manager, Atlantic since 2008.
Geoffrey Ney
Born: 1975
Vice President
Since 2013
Manager, Atlantic since 2013; Senior Fund Accountant, Atlantic, 2008–2013.
Todd Proulx
Born: 1978
Vice President
Since 2013
Manager, Atlantic since 2013; Senior Fund Accountant, Atlantic, 2008–2013.
Carlyn Edgar
Born: 1963
Vice President
Since 2008
Senior Vice President, Atlantic since 2008; Chief Compliance Officer, 2008-2016
Dennis Mason
Born: 1967
Chief Compliance Officer
Since 2016
Fund Compliance Officer, Atlantic since 2013; Senior Specialist, Atlantic, 2011- 2013; Senior Analyst, Atlantic, 2008-2011
 
 
53
ABSOLUTE FUNDS

 

 
P.O. BOX 588
(888) 992-2765 (TOLL FREE)
(888) 99-ABSOLUTE (TOLL FREE)


 
INVESTMENT ADVISER
 
Absolute Investment Advisers LLC
18 Shipyard Drive, Suite 3C
 
TRANSFER AGENT
 
Atlantic Fund Services
P.O. Box 588
(888) 992-2765 (Toll Free)
(888) 99-ABSOLUTE (Toll Free)
 
DISTRIBUTOR
 
Foreside Fund Services, LLC
Three Canal Plaza, Suite 100
 
This report is submitted for the general information of the shareholders of the Funds. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus, which includes information regarding the Funds’ risks, objectives, fees and expenses, experience of its managements and other information.
 

 
212-ANR-0318
 

 


(COVER PAGE)


ADALTA INTERNATIONAL FUND
A MESSAGE TO OUR SHAREHOLDERS (Unaudited)

Dear Shareholders:

We are pleased to provide the Adalta International Fund’s (the “International Fund’s”) annual report for the fiscal year ending March 31, 2018 (the “Fiscal Year” or the “Period”). The International Fund’s net asset value (“NAV”) was $17.54 per share as of March 31, 2018, realizing a return of 1.85% for the Fiscal Year. This return compares with a return of 16.53% for the International Fund’s benchmark, the MSCI ACWI ex US Index (the “MSCI ACWI ex US” or the “Benchmark”) and a 14.80% return for the MSCI EAFE Index (“MSCI EAFE”)1. For the 2017 calendar year, the International Fund returned 19.97% versus 27.19% for the MSCI ACWI ex US and 25.03% for the MSCI EAFE. For a longer perspective, the International Fund’s 1-, 3-, 5-, 10-year, and since inception average annual total returns as of March 31, 2018 are as follows:

Average Annual Total Returns Periods Ended March 31, 2018
One Year
Three Year
Five Year
Ten Year
Since Inception 12/08/93
Adalta International Fund
1.85%
4.08%
2.25%
2.43%
6.71%
MSCI ACWI ex US Index
16.53%
6.18%
5.89%
2.70%
N/A
MSCI EAFE Index
14.80%
5.55%
6.50%
2.74%
5.64%

(Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than original cost. For the most recent month-end performance, please call (800) 943-6786. Shares redeemed or exchanged within 60 days of purchase will be charged a 2.00% redemption fee. As stated in the current prospectus, the International Fund’s annual operating expense ratio (gross) is 3.28%. However, the International Fund’s adviser has agreed to contractually waive its fees and/or reimburse expenses to limit total operating expenses to 1.76% through at least September 30, 2018. During the period certain fees were waived and/or expenses reimbursed, otherwise returns would have been lower. Returns greater than one year are annualized.)

During the Period, the International Fund underperformed its relevant benchmarks as a result of stock selection and allocation. Contributors to the International Fund’s performance during the Fiscal Year included NIIT Technologies, Ltd. (India), STMicroelectronics NV, ADR (Switzerland), Sony Corp. (Japan), Yoox Net-A-Porter Group S.p.A. (Italy), Dewan Housing Finance Corp., Ltd. (India), and Baidu, Inc., ADR (China). Holdings that detracted from the International Fund’s performance during the period included Controladora Vuela Compañia de Aviación SAB de CV, ADR (Mexico), Secure Property Development & Investment PLC (Cyprus), Kandi Technologies Group, Inc. (China), Genting Hong Kong, Ltd. (Hong Kong), Obsidian Energy, Ltd. (Canada), and Tarkett SA (Russian Federation).

The following tables provide details of the International Fund’s top 10 positions at the end of the Period as well as positions added and exited since our September 30, 2017 semi-annual report. The decisions to exit positions resulted from a combination of the securities hitting our valuation targets or better opportunities elsewhere.
 

1
The MSCI ACWI ex US is a stock market index that is a free float adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. Net index data is not available prior to its inception on 01/01/01. The MSCI EAFE Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the United States and Canada. The total return of the MSCI EAFE includes the reinvestment of dividends and income.  It is not possible to invest directly in any index.
1


ADALTA INTERNATIONAL FUND
A MESSAGE TO OUR SHAREHOLDERS (Unaudited)

Top 10 Common Stock Holdings as of 3/31/2018
Country
Sector
% of Net Assets
NIIT Technologies, Ltd.
India
Technology
6.84%
TCG BDC, Inc.
United States
Asset Management
6.33%
GP Investments, Ltd., BDR
Brazil
Asset Management
6.01%
Dewan Housing Finance Corp., Ltd.
India
Financials
5.84%
Sony Corp.
Japan
Consumer Discretionary
5.63%
Baidu, Inc., ADR
China
Telecommunication Services
5.53%
Dufry AG
Switzerland
Consumer Discretionary
4.81%
BYD Co., Ltd., Class H
China
Consumer Discretionary
4.48%
Cellnex Telecom SA
Spain
Telecommunication Services
4.32%
KKR & Co. LP
United States
Asset Management
4.25%
Total
   
54.04%

New Positions Established as of 03/31/18
% of Net
Assets
 
Portfolio Positions Eliminated
% of Net
Assets(2)
Koninklijke Phillips NV, ADR
2.28%
 
Rakuten, Inc.
2.88%
Kandi Technologies Group, Inc.
2.58%
 
Granite REIT
2.12%
Silvershore Internet Opportunity Fund I LP
2.87%
 
Panin Financial TBK PT
2.32%
Silvershore GO I LP
2.25%
 
Yoox Net-A-Porter Group SpA
1.85%
Migo
1.75%
     

During the Fiscal Year, the International Fund invested in Kandi Technologies Group, Inc. (Kandi). Based in China, Kandi, through its subsidiaries, is engaged in the research, development, manufacturing, and sales of different vehicle products, including electric vehicles, all-terrain vehicles, battery packs, automobile motors, controllers for electric vehicles, and air-conditioning systems. Since 2013, Kandi has increased its focus on developing pure electric vehicles and expanding its market share in China, the largest market for electric vehicles. Kandi has a 50/50 joint venture with Geely Automobile Holdings Limited (one of the largest car brands in China) involved in the production of electric vehicles. While the stock has underperformed since the International Fund’s position was initiated in the fourth quarter of 2017, we believe the company is well-positioned to perform in a market that is projected to experience significant future growth.

Based in China and founded in 2000, International Fund holding Baidu, Inc. (Baidu) operates as an internet search provider which offers marketing and search solutions. Baidu also offers an e-commerce platform, online payment tools, web application software, and human resources-related services, among others. China has the largest internet user population in the world, totaling 731 million users as of December 2016. Outside of China, Baidu sees significant opportunity in countries like Brazil, Indonesia, Thailand, Egypt and Japan. As of December 2015, Baidu had more than 260 million active users internationally. The stock rallied in the third quarter of 2017 after the company announced a 14% revenue increase and plans to strengthen its mobile and artificial intelligence services.
 

2
Percent of net asset value (“NAV”) for exited positions reflect holdings at the previous reporting period ending 9/30/2017.
2


ADALTA INTERNATIONAL FUND
A MESSAGE TO OUR SHAREHOLDERS (Unaudited)

During the fourth quarter of 2017 and the first quarter of 2018 the International Fund also undertook select private investments in what we believe are compelling opportunities for the International Fund. These investments included: Philippines based Migo, which looks to deliver digital products and services to consumers underserved by existing digital technologies; an e-commerce platform based in South Korea; and, the leading ride sharing platform in Southeast Asia.

According to the January 2018 International Monetary Fund’s (IMF) World Economic Outlook (WEO) (the “Report”), global output is estimated to have grown 3.7% in 2017, with broad-based growth and upside surprises in Europe and Asia. The Report maintains that the global economy is expected to grow 3.9% in both 2018 and 2019; this includes growth of 2.3% and 2.2% in Advanced Economies for 2018 and 2019, respectively, and growth of 4.9% and 5.0% in Emerging Markets and Developing Economies for 2018 and 2019, respectively. The Tax Cuts and Jobs Act approved last December in the US is expected to stimulate US economic activity and have a positive effect for its trading partners. The tax reform is expected to enable publicly traded companies to invest in expansion, return capital to shareholders in the form of higher dividends and repurchases of shares, and increase their employment base, therefore benefitting the US economy. Among the risks to this growth outlook are the tightening of financial terms from current low interest rates, less than expected impact from US tax reform, increased regulatory and trade barriers, and geopolitical tensions. During the first quarter of 2018, the newly appointed Federal Reserve Chairman, Jerome Powell, announced that the Fed will continue its interest rate hike program, raising the benchmark Federal Funds Rate by a 0.25% and anticipating another two rate hikes this year. The desire of the Federal Reserve is to achieve more normal interest rate levels without negatively impacting economic growth. If the foregoing fiscal and monetary policy are successful, we believe it portends an attractive environment for our investment portfolio.

Thank you for your continued trust and support. We believe your patience will be rewarded, and we remain enthusiastic shareholders with you in the International Fund.

Sincerely,

Adalta Capital Management LLC
 
IMPORTANT RISKS AND DISCLOSURE:

There is no assurance that the International Fund will achieve its investment objective. Investing overseas involves special risks, including the volatility of currency exchange rates and, in some cases, political and economic instability, and relatively illiquid markets. Emerging markets involve greater risks than more developed markets as they may be more volatile and less liquid. The International Fund’s exposure to foreign currencies may not be fully hedged at all times. Private fund securities are typically illiquid and difficult to value. The International Fund may invest in small and mid-sized capitalization companies meaning that these companies carry greater risk than is customarily associated with larger companies for various reasons such as narrower markets, limited financial resources and less liquid stock. The risk of investing in Europe may be heightened due to the recent referendum in which the United Kingdom voted to withdraw from the European Union (EU). Also, if one or more countries were to exit the EU or abandon use of the euro, the value of investments tied to those countries or the euro could decline significantly and unpredictably. The risk of investing in China may be heightened by the potential trade policy modification between the US and China.
3


ADALTA INTERNATIONAL FUND
A MESSAGE TO OUR SHAREHOLDERS (Unaudited)

The views in this report were those of the International Fund managers as of March 31, 2018 and may not reflect their views on the date this report is first published or any time thereafter. These views are intended to assist shareholders in understanding their investment in the International Fund and do not constitute investment advice. This letter may contain discussions about certain investments both held and not held in the portfolio. All current and future holdings are subject to risk and to change.
4


ADALTA INTERNATIONAL FUND
PERFORMANCE CHART AND ANALYSIS (Unaudited)

The following chart reflects the change in the value of a hypothetical $10,000 investment, including reinvested dividends and distributions, in Adalta International Fund (the “Fund”) compared with the performance of the benchmarks, the MSCI All Cap World Index except United States (“MSCI ACWI ex US”), and the secondary benchmark, the MSCI EAFE Index (“MSCI EAFE”), over the past ten years. The MSCI ACWI ex US is a stock market index that is a free float adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets outside of the United States. The MSCI EAFE is a stock market index that is designed to measure the equity market performance with dividends reinvested of developed markets outside of the United States and Canada. The total return of the indices include the reinvestment of dividends and income. The total return of the Fund includes operating expenses that reduce returns, while the total return of the indices do not include expenses. The Fund is professionally managed, while the indices are unmanaged and are not available for investment.

Comparison of a $10,000 Investment
Adalta International Fund vs. MSCI ACWI ex US Index and MSCI EAFE Index
 
(LINE GRAPH)
 
Average Annual Total Returns Periods Ended March 31, 2018
One Year
Five Years
Ten Years
Adalta International Fund
1.85%
2.25%
2.43%
MSCI ACWI ex US Index
16.53%
5.89%
2.70%
MSCI EAFE Index
14.80%
6.50%
2.74%

Performance data quoted represents past performance and is no guarantee of future results. Current performance may be lower or higher than the performance data quoted. Investment return and principal value will fluctuate so that shares, when redeemed, may be worth more or less than original cost. As stated in the Fund’s prospectus, the annual operating expense ratio (gross) is 3.28% and the annual operating expenses after the fee waiver and/ or expense reimbursement (net) is 1.76% including acquired fund fees and expenses of 0.26%. However, the Fund’s adviser has contractually agreed to waive its fee and/or reimburse Fund expenses to limit Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement (excluding all taxes, interest, portfolio transaction expenses, acquired fund fees and expenses, proxy expenses and extraordinary expenses) to 1.50%, through at least September 30, 2018 (the “Expense Cap”). During the period, certain fees were waived and/or expenses reimbursed; otherwise, returns would have been lower. Shares redeemed or exchanged within 60 days of purchase will be charged a 2.00% redemption fee. The performance table and graph do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Returns greater than one year are annualized. For the most recent month-end performance, please call (844) 284-9829.
5


ADALTA INTERNATIONAL FUND
PORTFOLIO PROFILE (Unaudited)

 
 
 
PORTFOLIO HOLDINGS (Unaudited)
   
 
% of Common Stock
   
 
Consumer Discretionary
30.1%
 
 
Asset Management
18.0%
 
 
Telecommunication Services
11.3%
 
 
Technology
11.2%
 
 
Financials
10.4%
 
 
Industrials
5.5%
 
 
Conglomerates
4.0%
 
 
Consumer Staples
3.8%
 
 
Energy
3.6%
 
 
Real Estate
2.1%
 
   
100.0%
 
6


ADALTA INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS

 
Shares  
Security Description
 
Value
 
Common Stock - 91.8%      
Belgium - 3.5%      
 
5,390
 
Anheuser-Busch InBev SA/NV, ADR
 
$
592,577
 
Brazil - 6.0%          
 
 535,300
 
GP Investments, Ltd., BDR (a)
   
1,029,595
 
Canada - 3.8%          
 
 576,750
 
Obsidian Energy, Ltd. (a)
   
564,581
 
 
 9,300
 
Points International, Ltd. (a)
   
90,861
 
           
655,442
 
China - 12.6%          
 
 4,246
 
Baidu, Inc., ADR (a)
   
947,665
 
 
 98,500
 
BYD Co., Ltd., Class H
   
768,105
 
 
 91,172
 
Kandi Technologies Group, Inc. (a)
   
442,184
 
           
2,157,954
 
Cyprus - 1.9%          
 
 2,021,534
 
Secure Property Development & Investment PLC (a)
   
326,165
 
Hong Kong - 3.6%        
 
 3,590,300
 
Genting Hong Kong, Ltd.
   
624,712
 
India - 12.7%          
 
 127,950
 
Dewan Housing Finance Corp., Ltd.
   
1,000,797
 
 
 88,400
 
NIIT Technologies, Ltd.
   
1,172,401
 
           
2,173,198
 
Indonesia - 0.0%        
 
 100
 
Panin Financial Tbk PT (a)
   
2
 
Japan - 5.6%          
 
 20,100
 
Sony Corp.
   
965,284
 
Mexico - 6.6%          
 
 80,506
 
Controladora Vuela Cia de Aviacion SAB de CV, ADR (a)
   
656,124
 
 
 4,779
 
Grupo Aeroportuario del Pacifico SAB de CV, ADR
   
476,179
 
           
1,132,303
 
Netherlands - 2.3%        
 
 10,200
 
Koninklijke Philips NV, ADR
   
390,762
 
Russian Federation - 4.2%        
 
 21,465
 
Tarkett SA
   
718,924
 
South Korea - 2.2%        
 
 2,108
 
GS Home Shopping, Inc.
   
371,604
 
Spain - 4.3%            
 
 27,764
 
Cellnex Telecom SA (b)
   
740,978
 
Switzerland - 8.2%        
 
 6,293
 
Dufry AG (a)
   
823,817
 
 
 26,278
 
STMicroelectronics NV, ADR
   
585,736
 
           
1,409,553
 
Shares  
Security Description
 
Value
 
United States - 14.3%      
 
35,846
 
KKR & Co. LP
 
$
727,674
 
 
60,604
 
TCG BDC, Inc.
   
1,084,813
 
 
20,000
 
The Blackstone Group LP
   
639,000
 
           
2,451,487
 
Total Common Stock (Cost $15,052,801)    
15,740,540
 

 
Principal
 
Security Description
 
Value
 
Private Equity Funds - 5.1%
     
Cayman Islands - 2.9%
     
$
492,966
 
Silvershore Internet Opportunity Fund I LP (a)(c)(d)
   
491,347
 
India - 0.0% 
       
 
36,915
 
Bharat Investors LP (a)(e)(f)
   
3,132
 
South Korea - 2.2%
       
 
400,000
 
Silvershore GO I LP (a)(d)(g)(h)
   
386,023
 
Total Private Equity Funds (Cost $929,882)
   
880,502
 
 
Principal  
Security Description
 
Rate
 
Maturity
 
Value
 
Fixed Income Securities - 1.8%          
Corporate Convertible Bond - 1.8%          
Philippines - 1.8%                
$
300,000
 
Migo (e)(i) (Cost $300,000)
 
7.50
%
06/14/19
   
300,000
 
Investments, at value - 98.7% (Cost $16,282,683)  
$
16,921,042
 
Other Assets & Liabilities, Net - 1.3%    
218,828
 
Net Assets - 100.0%      
$
17,139,870
 

ADR
American Depositary Receipt
BDR
Brazilian Depositary Receipt
LP
Limited Partnership
PLC
Public Limited Company

(a)
Non-income producing security.
(b)
Security exempt from registration under Rule 144A under the Securities Act of 1933. At the period end, the value of these securities amounted to $740,978 or 4.3% of net assets.
(c)
Private equity fund purchased on 03/02/18 that invests in Grab, Inc. Illiquid investment in which redemptions are not accepted. Unfunded commitments of $7,034 as of March 31, 2018.
(d)
Investment is valued using the practical expedient. For more information on the practical expedient, please refer to the Security Valuation section in Note 2 of the accompanying Notes to Financial Statements.
(e)
Security fair valued in accordance with procedures adopted by the Board of Trustees. At the period end, the value of these securities amounted to $303,132 or 1.8% of net assets.
 
 
 See Notes to Financial Statements.

7


ADALTA INTERNATIONAL FUND
SCHEDULE OF INVESTMENTS

 
(f)
Private equity fund purchased on 03/08/13 that invests in Unitech Corporate Parks PLC. Redemptions may be made on the last day of each calendar quarter upon 60 days written notice. No unfunded commitments as of March 31, 2018.
(g)
Affiliated Company.
(h)
Private equity fund purchased on 02/01/18 that invests in Greenoaks Opportunity Partners I LLC. Illiquid investment in which redemptions are not accepted. No unfunded commitments as of March 31, 2018.
(i)
Corporate convertible bond purchased on 12/13/17. Security fair valued using private transaction cost.

The following is a summary of the inputs used to value the Fund's inputs as of March 31, 2018.
 
The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the Security Valuation section in Note 2 of the accompanying Notes to Financial Statements.

Valuation Inputs
 
Investments in Securities
 
Practical expedient*
 
$
877,370
 
Level 1 – Quoted Prices
   
15,740,540
 
Level 2 - Other Significant Observable Inputs
   
 
Level 3 - Significant Unobservable Inputs
   
303,132
 
Total
 
$
16,921,042
 

*
As a practical expedient, certain investments that are measured at fair value using the net asset value per share (or its equivalent) have not been 
categorized in the fair value hierarchy. The fair value amount presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Schedule of Investments.
 
The Level 1 value displayed in this table is Common Stock. The Level 3 value displayed in this table is a Private Equity Fund and a Corporate Convertible Bond. Refer to this Schedule of Investments for a further breakout of each security by country and instrument type.
 
An affiliate is an entity in which the Fund has ownership of at least 5% of the voting securities.  Transactions during the year with affiliates were as follows:
 
   
Private Equity Fund
 
Balance 03/31/17
     
Principal
 
$
 
Cost
 
$
 
Value
 
$
 
Gross Additions
       
Principal
 
$
400,000
 
Cost
 
$
400,000
 
Gross Reductions
       
Principal
 
$
 
Cost
 
$
 
Balance 03/31/18
       
Principal
 
$
400,000
 
Cost
 
$
400,000
 
Value
 
$
386,023
 
Realized Gain/(Loss)
 
$
 
Unrealized Depreciation
 
$
(13,977
)
 
 
The following is a reconciliation of Level 3 investments for which significant unobservable inputs were used to determine fair value.

   
Preferred Stock
   
Private Equity Funds
   
Corporate Convertible Bond
 
Balance as of 03/31/17
 
$
-
   
$
4,693
   
$
-
 
Purchases
   
-
     
-
     
300,000
 
Realized loss
   
(200,000
)
   
-
     
-
 
Change in unrealized appreciation/(depreciation)
   
200,000
     
(1,561
)
   
-
 
Balance as of 03/31/18
 
$
-
   
$
3,132
   
$
300,000
 
Net change in unrealized appreciation/(depreciation) from investments held as of 03/31/18**
 
$
200,000
   
$
(1,561
)
 
$
-
 

**
The change in unrealized appreciation/(depreciation) is included in net change in unrealized appreciation/(depreciation) of investments in the accompanying Statement of Operations.
 
The Fund utilizes the end of period methodology when determining transfers. There were no transfers among Level 1, Level 2 and Level 3 for the year ended March 31, 2018.
 
See Notes to Financial Statements.

8


ADALTA INTERNATIONAL FUND
STATEMENT OF ASSETS AND LIABILITIES


ASSETS
     
Investments, at value (Cost $15,882,683)
 
$
16,535,019
 
Investments in affiliates, at value (Cost $400,000)
   
386,023
 
Investments, at value
   
16,921,042
 
Cash
   
116,344
 
Foreign currency (Cost $56,462)
   
57,151
 
Receivables:
       
Fund shares sold
   
66
 
Dividends and interest
   
72,810
 
From investment adviser
   
775
 
Prepaid expenses
   
12,010
 
Total Assets
   
17,180,198
 
LIABILITIES
       
Accrued Liabilities:
       
Trustees’ fees and expenses
   
50
 
Fund services fees
   
5,416
 
Other expenses
   
34,862
 
Total Liabilities
   
40,328
 
NET ASSETS
 
$
17,139,870
 
         
COMPONENTS OF NET ASSETS
       
Paid-in capital
 
$
17,191,042
 
Undistributed net investment income
   
77,289
 
Accumulated net realized loss
   
(768,239
)
Net unrealized appreciation
   
639,778
 
NET ASSETS
 
$
17,139,870
 
SHARES OF BENEFICIAL INTEREST AT NO PAR VALUE (UNLIMITED SHARES AUTHORIZED)
   
977,395
 
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE*
 
$
17.54
 

*
Shares redeemed or exchanged within 60 days of purchase are charged a 2.00% redemption fee.

See Notes to Financial Statements.

9


ADALTA INTERNATIONAL FUND
STATEMENT OF OPERATIONS
YEAR ENDED MARCH 31, 2018

 
INVESTMENT INCOME
     
Dividend income
 
$
440,370
 
Interest income
   
7,769
 
Total Investment Income
   
448,139
 
EXPENSES
       
Investment adviser fees
   
282,550
 
Fund services fees
   
178,115
 
Custodian fees
   
25,648
 
Registration fees
   
18,929
 
Professional fees
   
45,228
 
Trustees' fees and expenses
   
6,018
 
Other expenses
   
36,103
 
Total Expenses
   
592,591
 
Fees waived
   
(310,041
)
Net Expenses
   
282,550
 
NET INVESTMENT INCOME
   
165,589
 
NET REALIZED AND UNREALIZED GAIN (LOSS)
       
Net realized gain (loss) on:
       
Investments (Net of foreign withholding taxes of $2,391)
   
1,795,605
 
Foreign currency transactions
   
(12,733
)
Net realized gain
   
1,782,872
 
Net change in unrealized appreciation (depreciation) on:
       
Investments in unaffiliated issuers
   
(1,527,626
)
Investments in affiliated issuers
   
(13,977
)
Deferred foreign capital gains taxes
   
6,456
 
Foreign currency translations
   
2,348
 
Net change in unrealized appreciation (depreciation)
   
(1,532,799
)
NET REALIZED AND UNREALIZED GAIN
   
250,073
 
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
 
$
415,662
 

See Notes to Financial Statements.

10


ADALTA INTERNATIONAL FUND
STATEMENTS OF CHANGES IN NET ASSETS
 

 
   
For the Years Ended March 31,
 
             
    2018     2017  
OPERATIONS
           
Net investment income
 
$
165,589
   
$
156,130
 
Net realized gain
   
1,782,872
     
2,316,725
 
Net change in unrealized appreciation (depreciation)
   
(1,532,799
)
   
70,986
 
Increase in Net Assets Resulting from Operations
   
415,662
     
2,543,841
 
                 
DISTRIBUTIONS TO SHAREHOLDERS FROM
               
Net investment income
   
(376,234
)
   
(211,892
)
Total Distributions to Shareholders
   
(376,234
)
   
(211,892
)
                 
CAPITAL SHARE TRANSACTIONS
               
Sale of shares
   
213,469
     
182,535
 
Reinvestment of distributions
   
349,137
     
191,469
 
Redemption of shares
   
(2,247,042
)
   
(31,016,736
)
Redemption fees
   
54
     
5
 
Decrease in Net Assets from Capital Share Transactions
   
(1,684,382
)
   
(30,642,727
)
Decrease in Net Assets
   
(1,644,954
)
   
(28,310,778
)
                 
NET ASSETS
               
Beginning of Year
   
18,784,824
     
47,095,602
 
End of Year (Including line (a))
 
$
17,139,870
   
$
18,784,824
 
                 
SHARE TRANSACTIONS
               
Sale of shares
   
11,678
     
11,589
 
Reinvestment of distributions
   
19,131
     
12,329
 
Redemption of shares
   
(122,216
)
   
(1,971,193
)
Decrease in Shares
   
(91,407
)
   
(1,947,275
)