Trust for Advised Portfolios N-CSRSCertified semi-annual shareholder report (management investment company)

June 30, 2023

Patient Opportunity Trust

Table of contents

Patient Opportunity Trust 2023 Semi-Annual Report

Patient Opportunity Trust manager commentary

(unaudited)

“On Growth and Change” — Patient Opportunity Trust 2Q23 Commentary

The Struggle

Edgar A. Guest

Life is a struggle for peace,

A longing for rest, 

A hope for the battles to cease,

A dream for the best; 

And he is not living who stays

Contented with things, 

Unconcerned with the work of the days

And all that it brings.

He is dead who sees nothing to change,

No wrong to make right; 

Who travels no new way or strange

In search of the light; 

Who never sets out for a goal

That he sees from afar

But contents his indifferent soul

With things as they are.

Life isn’t rest- it is toil;

It is building a dream;

It is tilling a parcel of soil

Or bridging a stream;

It’s pursuing the light of a star

That but dimly we see,

And in wresting from things as they are

The joy that should be.

What a strange poem to begin an investment letter, you may think. I love this poem and see so many connections to life, personally, professionally and for the markets. Guest writes about the struggle, about striving and the pursuit of goals, about change, about the joy that comes with effort and acceptance. We may think we want it easy, but really, we don’t. Growth requires change (and pain!).

The past quarter, and year, ushered in significant change and transformation. We finalized Bill Miller’s succession plan. Patient Capital now owns and manages what was Miller Value’s Opportunity business, including all supporting employees and infrastructure, bringing our quarter end assets to $1.7B. Our identity changed, but most of how we operate did not. It’s still the same team, the same process, the same office location, etc. Bill remains a mentor, advisor, investor and friend. We’re now fortunate to “toil… (to) build..a dream.”

Patient Opportunity Trust manager commentary

(unaudited) (cont’d)

Markets too faced significant change. A year ago, in the second quarter of 2022, the S&P 500 entered official bear market territory losing 20%+ from the highs (losses peaked at -27.5% in the third quarter). Inflation raged, peaking in June 2022 at 9.1%. The Federal Reserve had just started its aggressive effort to stamp out inflation with the fastest rate increases in 40 years, along with quantitative tightening. Fear and pessimism reigned supreme.

In contrast, in the most recent quarter, the S&P entered a new bull market, conventionally defined as a 20% gain off the lows. Inflation has fallen significantly from the highs. The Fed kept rates flat at its most recent meeting (though another bump is expected in July). First quarter GDP growth was recently revised higher, to 2%, and the job market has remained robust. Skepticism about market prospects remains high.

^a Performance greater than one year is annualized. 

^b Performance for the 6 months period ending 6/30/2023 (not annualized). 

* S&P 500 since inception return represented from 12/30/99, the Fund’s oldest share class. 

Expenses (gross/net) (%): Class A 1.53 (1.52); Class C 2.26 (2.26); Class FI 1.60 (1.60); Class I 1.27 (1.25); Class IS 1.30 (1.29); Class R 1.76 (1.76).

Performance shown represents past performance and is no guarantee of future results. Current performance may be higher or lower than the performance shown. Investment return and principal value will fluctuate so shares, when redeemed, may be worth more or less than the original cost. Class A shares have a maximum front-end sales charge of 5.75%. Class C shares have a one-year contingent deferred sales charge (CDSC) of 1.0%. If sales charges were included, performance shown would be lower. Total returns assume the reinvestment of all distributions at net asset value and the deduction of all Fund expenses. Total return figures are based on the NAV per share applied to shareholder subscriptions and redemptions, which may differ from the NAV per share disclosed in Fund shareholder reports. Performance would have been lower if fees had not been waived in various periods. YTD is calculated from January 1 of the reporting year. All classes of shares may not be available to all investors or through all distribution channels. For the most recent month-end information, please call 800-655-0324 or visit patientcapitalmanagement.com/opportunity-trust.

Relative to expectations a year ago, the economy and the markets have shown remarkable resilience allowing stocks to climb the proverbial wall of worry. Many risks priced into markets haven’t come to fruition. The debt ceiling was resolved without issue. Rate hikes have slowed. Inflation is improving. We appear to have avoided a recession so far.

Patient Opportunity Trust class I shares (LMNOX) performed strongly in this environment, rising 13.75% net of fees for the second quarter versus the S&P 500’s 8.74% gain. Over the past year, Patient Opportunity Trust class I shares, net of fees, grew 22.45% versus the market’s 19.59% increase. Performance improved in the latter half of May as market breadth expanded.

Despite the improvement, people remain concerned about inflation, continued interest rate increases and recession. With core PCE1 stuck between 4-5%, the Fed’s 2% target may seem out of reach2. Yet the market doesn’t see an inflation problem. Five-year inflation break-evens sit at ~2.2%. The St Louis Fed’s 3-month annualized sticky price consumer price index (CPI) excluding housing, food and energy fell to 1.4% in June. Truflation’s3 real-time measurement is also in the low 2%’s.

The Fed’s not convinced. Prospects for continued tightening amidst an inverted yield curve keep recession fears elevated. With cyclicals recently breaking out relative to defensive stocks, the market apparently doesn’t share this concern.

At our investor day in May, Bill Miller reminded us of an important lesson: no one has privileged access to knowledge about the future. A year ago, no one forecasted a strong, nearly 20%, gain over the next year. People myopically focused on the significant downside risk we faced to market lows. Several people shared charts noting the similarity between the 2022 bear market and some of the worst in history (2000 and 2008).

While painful, buying stocks in such an environment is often fruitful. When people fear the worst, prospects are the best. It’s important to remember that historically, the S&P 500 has risen more than 70% of years.

When we couldn’t find any bulls last year, we examined market history to understand prospects after a 20% selloff. The answer: historically the S&P 500 rose an average of 16% in the following year. Amazingly, the market gained that exact amount the next year (which almost never happens!).

Patient Opportunity Trust manager commentary

(unaudited) (cont’d) 

We recently updated the analysis to understand prospects for the second year following a 20% loss. Good news: historical evidence suggests markets should continue up.

A year ago, we also wrote about how we saw a once-in-a-decade opportunity in travel-related stocks. Many had traded back near pandemic lows while demand was booming. We expected pent-up demand to prove more sustainable than expected. It took nearly a year, but the market finally came around to our view.

Carnival Corp (which we don’t own but did mention) was the top performing stock in the S&P 500 in the second quarter (+86%). Norwegian Cruise Line was second (+62%). Delta Airlines also made the top ten (+36%). Meta Platforms made the list too, bringing our holdings to three of the top ten. All were hated a year ago.

Travel has been booming for the last year. Valuations remained depressed and the stocks lagged until recently. The delayed outperformance isn’t unusual. Its why patience is paramount in investing. It’s also why we assess market expectations separately from fundamentals. The former eventually follow the latter. As Ben Graham said, “In the short-run, the market is a voting machine but in the long run, it is a weighing machine.”

We continue to have significant exposure to travel, and believe the names continue to be mispriced. Some of the stocks are overbought in the short term, but spending has yet to normalize to pre-pandemic levels. Aram Rubinson of Rubinson Research, who specializes on the consumer, estimates the category will grow at twice the rate of overall consumer spend next year. Yet the stock valuations remain depressed.

People often question how we can get an edge in relatively efficient large cap stocks. While it’s nearly impossible to get an informational or even an analytical edge on well understood large companies, it’s certainly possible to get a behavioral edge. How else could Meta Platforms, an $800B market cap company, nearly double in a year?

When Bill was asked at our investor day if it’s gotten more difficult to beat the market, he pointed out that while information is disseminated and reflected in stock prices more quickly than ever before, human nature hasn’t changed at all over his 50-year investing career. People still reach extremes in fear and greed. Losses remain twice as painful as proportional gains are pleasurable. While the market is hyper-efficient at incorporating real time data, it’s much less efficient at longer time horizons.

The best investors prioritize reason over emotion, and patience over immediate gratification. They are willing to endure short term pain for long term gain.

Which brings us back to The Struggle. Often, our biggest challenge is managing ourselves. We are evolutionarily wired to run from pain and loss. Yet enduring these essential aspects of life and investing leads to growth, both personally and financially. In markets, our instincts kick in at the worst times.

I was fortunate to recently meet with Khandro Kunga Bhuma, also known as Khandro-la. Khandro-la studied with the Dalai Lama for 30 years, reaching rare levels of enlightenment. He instructed her to spread her teachings to the world. William Green, author of the excellent book and podcast, Richer, Wiser, Happier was kind to invite me. Khandro-la had a message to share with the business community.

It’s impossible to effectively convey the experience. Many people say when you’re in the presence of enlightened people, you’re filled with joy, openness, and a calm, loving essence. That’s an excellent description. I experienced an energy unlike anything I’ve previously encountered.

Khandro-la’s message: the world faces great suffering and risk including pandemics, environmental challenges, the potential for World War 3. The business community can help solve these problems by advocating for the proper solution. The solution: every individual needs to build “a good mind” and a good heart. Khandro-la said taming the mind, through practices such as meditation and understanding the mind, is the path to happiness. She believes it can solve all our problems. When we tame the mind, we feel love and compassion, which positively impacts those close to us, and spreads from there.

If this sounds out there, it’s not as farfetched as you might think. Famous investors, like Ray Dalio, tout the advantages of meditation. There’s significant evidence that a daily gratitude practice offers myriad benefits, such as improved happiness, sleep, compassion, kindness, immunity, health, longevity and many more. It can even improve our financial prospects!

Northeastern University’s Leah Dickens’ and David DeSteno’s research demonstrates that gratitude improves patience and lowers temporal discounting (our tendency to value future dollars much less than today’s dollars). Gratitude improves self-control, meaning it can be used as a tool to improve investment outcomes.

Patient Opportunity Trust manager commentary

(unaudited) (cont’d)

Self-control was crucial a year ago when the prospect of further losses tempted investors to lower market exposure at the worst time.

Despite the recent gains, we continue to have confidence in our portfolio’s prospects. Portfolio activity has fallen, with annualized turnover of 29% in the past quarter. Our activity picks up during times of volatility when the opportunity set shifts dramatically. This happened during the volatile pandemic years. Now it’s fallen back to lower levels.

We initiated two new positions in the quarter and exited one. Interactive Corp (IAC) is our most material new position with a 2.5% weight. The market gave us the opportunity to buy a company with an excellent capital allocation track record around the price of its liquid securities, MGM Resorts International (MGM), Angi Inc. (ANGI) and cash. This means we got the rest of the company, including Dotdash Meredith, Care.com and Turo, and all future value creation nearly for free. At $69, the stock remains well below the 2021 highs ($179) and our assessment of what it’s worth. We like the collection of businesses, see significant opportunity in each one and believe management will continue to grow shareholder value.

We also bought Western Alliance (WAL $41). We initiated the Western Alliance position during the second bank selloff in May. The stock reflected the risk of a bank run. We thought these concerns were overdone since the company published frequent positive deposit updates. We were able to buy the stock at 3-4x earnings believing it should normalize at least back to its April price in the $40s.

Though we think they are undervalued, we exited ADT and Teva Pharmaceuticals to fund new ideas. Both names have disappointed, and we took some losses.

We believe having a mix of different types of misvalued securities makes sense, specifically what some label growth and value. We view growth as an input in the value equation, as Warren Buffett says, and don’t divide the world this way. Yet the market has tended to favor one group over the other during different periods, which makes diversification beneficial.

Much has been made of the narrow market this year. Early in the quarter, people noted the top 7 “growth” stocks generated 90% of the S&P 500’s gains (Tesla, Apple, Microsoft, Amazon, Nvidia, Alphabet, Meta Platforms). This return concentration isn’t unusual. This year’s gains mostly just recoup 2022’s losses. Over the 18-month period, only 3 of the companies (Nvidia, Apple and Microsoft) made money and outperformed. Their median return (-15%) remains well below the market’s (-4%). Recently, gains have broadened out to other stocks.

Many technicians and quantitative strategists expect growth stocks to continue to outperform. There’s a good shot that’s right but longer term, we remain more optimistic on classic value. People remain enamored with growth investing. Value stocks trade at a discount to historical valuations unlike growth stocks, which trade at a premium.

Take two high quality stocks as an example, Costco (“growth”) vs. JP Morgan (“value”). Costco has a long history of excellent performance, earning attractive returns on capital with consistent growth. Over the past 30 years, it’s grown earnings per share (EPS) at 9% per year, but it’s compounded capital at better than 16% annually as the price to earnings (P/E) multiple expanded from ~12x to 37x this fiscal year’s5 earnings. Sell-side consensus expects EPS growth to continue at roughly the same rate for the next 5 years. If it sustains the current multiple, the 9% implied return would be solid. But with valuations near all-time highs, and interest rates on the rise, there’s clear risk to that valuation.

JP Morgan has also posted excellent performance. It was profitable even during the financial crisis. Since Jamie Dimon took the reins in 2005, it’s grown earnings per share 11% per year (almost exactly the same rate as Costco over the same period). The stock’s annualized gains of roughly the same rate. Its P/E ratio has fallen from 12x in 2005 to 10x today. It guides for a normalized 17% return on tangible capital but earned 23% in the most recent quarter.

Costco’s P/E grew from 18x to 37x during the same time JP Morgan’s fell from 12x to 10x. This makes sense to a certain extent because while both companies delivered improving returns on capital, Costco’s improved more. Valuations are sensitive to interest rates. Since JPM experienced no valuation expansion, it also seems to have less valuation risk.

We can calculate the justified P/E based on return on capital, cost of capital and growth rate. For companies with very high returns on capital and strong growth (like Costco), very high P/Es can be justified, especially in a low interest rate environment. We also analyze market implied expectations by calculating the implied growth rates. For Costco, it’s about 5.3% — in perpetuity! That seems elevated to us! For JP Morgan, it’s less than 0.5%. Way too low in our opinion.

That’s emblematic of the opportunity set we see in the market. The market is paying a hefty premium for quality, growth and stability while shunning cyclicality and “boring” value stocks.

We’ve recently been adding to Citigroup (C). After perennially disappointing for decades, even the most bullish financial investors aren’t interested (a good thing in our view!). CEO Jane Fraser is making all the right moves: exiting underperforming consumer businesses, investing to improve the tech and operating infrastructure, returning capital to shareholders. These actions should result in improving returns on equity. The market reaction is a giant shrug.

Patient Opportunity Trust manager commentary

(unaudited) (cont’d) 

We should start to see serious cost improvements in late 2024 accompanied by improving returns on equity. The stock trades at ~$46, 55% of its $85 tangible book value. The company is confident it can reach 11-12% return on tangible common equity by 2025 when it’s tangible book should be greater than $100. If it reaches its return target, as we believe, Citi should trade back to tangible book, implying a more than double over the next couple years. Meanwhile, you collect the 4.5% annual dividend, which is currently a better yield than long-term treasuries.

We like other names mostly ignored by the market for similar reasons. Names like Expedia, General Motors and Delta Airlines. These companies have strong returns on capital (14%+), good competitive positions, cheap valuations (all double-digit free cash flow yields), and are returning capital to shareholders. We trust the managements to take advantage of their depressed stock prices and create long-term shareholder value.

Those aren’t the only names we find compelling. The CEOs of Mattel (MAT), OneMain Financial (OMF) and Farfetch (FTCH) all spoke at our investor day. We encourage you to listen to the fireside chats to understand why we see attractive investment opportunities in these names.

In early July as we write this, we see significant potential upside in the portfolio. The embedded potential gains have normalized as the fund rallied, but still sit at the high end of our historical range. We have high confidence in our long-term performance potential. As always, we know it won’t be a smooth ride.

That’s fine because growth requires change, and challenge. We maximize our chance of success with patience, perseverance, and acceptance. To maximize returns, we endeavor to remain rational, especially during times of extreme emotion. As always, we look forward to the toil required to outperform and we appreciate all the support and interest during these transformative times. Please let us know if we can help you.

Stock prices at time written: July 13, 2023

Source: Bloomberg

CPI: Consumer Price Index measures the monthly change in prices paid by U.S. consumers.

PCE: Personal consumption expenditures includes a measure of consumer spending on goods and services among households in the US.

PCE, CPI, and inflation rates based on available data at the time the piece was written and are not guaranteed to stay the same in the future.

The S&P 500 Index is a market capitalization-weighted index of 500 widely held common stocks

The information presented should not be considered a recommendation to purchase or sell any security and should not be relied upon as investment advice. It should not be assumed that any purchase or sale decisions will be profitable or will equal the performance of any security mentioned. References to specific securities are for illustrative purposes only. Portfolio composition is shown as of a point in time and is subject to change without notice.

Equity securities are subject to price fluctuation and possible loss of principal. Small- and mid-cap stocks involve greater risks and volatility than large-cap stocks. The Fund may focus its investments in certain regions or industries, increasing its vulnerability to market volatility. International investments are subject to special risks, including currency fluctuations and social, economic and political uncertainties, which could increase volatility. Derivatives, such as options and futures, can be illiquid, may disproportionately increase losses, and have a potentially large impact on Fund performance. The manager’s investment style may become out of favor and/or the manager’s selection process may prove incorrect, which may have a negative impact on the Fund’s performance. Short selling is a speculative strategy. Unlike the possible loss on a security that is purchased, there is no limit on the amount of loss on an appreciating security that is sold short.

The views expressed are those of the portfolio managers as of the date indicated, are subject to change, and may differ from the views of other portfolio managers or the firm as a whole. These opinions are not intended to be a forecast of future events, a guarantee of future results, or investment advice. All data referenced are from sources deemed to be reliable but cannot be guaranteed. Discussions of individual securities are intended to inform shareholders as to the basis (in whole or in part) for previously made decisions by a portfolio manager to buy, sell or hold a security in a portfolio. References to specific securities are not intended and should not be relied upon as the basis for anyone to buy, sell or hold any security. Portfolio holdings and sector allocations may not be representative of the portfolio manager’s current or future investment and are subject to change at any time.

Patient Opportunity Trust is distributed by Quasar Distributors, LLC.

Patient Opportunity Trust manager commentary

(unaudited) (cont’d)

Before investing, carefully consider a Fund’s investment objectives, risks, charges and expenses. You can find this and other information in each prospectus, or summary prospectus if available, which is available at https://patientcapitalmanagement.com/opportunity-trust. Please read it carefully.

©2023 Patient Capital Management

Fund at a glance⁺ (unaudited)

Fund expenses (unaudited)

As a shareholder of the Fund, you may incur two types of costs: (1) transaction costs, including front-end and back-end sales charges (loads) on purchase payments; and (2) ongoing costs, including management fees; service and/or 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 Fund 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 on January 1, 2023 and held for the six months ended June 30, 2023.

Actual Expenses

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

Hypothetical Example for Comparison Purposes

The table below titled “Based on hypothetical actual return” provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio and an assumed rate of return of 5.00% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information provided in this table to compare the ongoing costs of investing in the Fund and other funds. To do so, compare the 5.00% hypothetical example relating to the Fund with the 5.00% hypothetical examples that appear in the shareholder reports of the other funds.

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

Schedule of investments (unaudited)

June 30, 2023

Schedule of investments (unaudited) (cont’d)

June 30, 2023

ADR — American Depositary Receipt

The Global Industry Classification Standard (GICS^®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS is a service mark of MSCI and S&P and has been licensed for use by U.S. Bancorp Fund Services, LLC.

The Accompanying Notes are an Integral Part of these Financial Statements.

Statement of assets and liabilities (unaudited) 

June 30, 2023

The Accompanying Notes are an Integral Part of these Financial Statements.

Statement of assets and liabilities (unaudited) (cont’d)

June 30, 2023

The Accompanying Notes are an Integral Part of these Financial Statements.

Statement of operations (unaudited)

For the Six Months Ended June 30, 2023

The Accompanying Notes are an Integral Part of these Financial Statements.

Statements of changes in net assets

The Accompanying Notes are an Integral Part of these Financial Statements.

Statement of cash flows (unaudited) 

For the Six Months Ended June 30, 2023

The Accompanying Notes are an Integral Part of these Financial Statements.

Financial highlights

The Accompanying Notes are an Integral Part of these Financial Statements.

The Accompanying Notes are an Integral Part of these Financial Statements.

Financial highlights (cont’d)

The Accompanying Notes are an Integral Part of these Financial Statements.

The Accompanying Notes are an Integral Part of these Financial Statements.

Financial highlights (cont’d)

The Accompanying Notes are an Integral Part of these Financial Statements.

The Accompanying Notes are an Integral Part of these Financial Statements.

Notes to financial statements

1. Organization 

Patient Opportunity Trust, formerly known as Miller Opportunity Trust and Opportunity Trust, (the “Fund”) is a separate diversified investment series of the Trust for Advised Portfolios (the ”Trust”), a Delaware Statutory Trust registered under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund converted to the Trust on February 24, 2017, and was previously organized in the Legg Mason Investment Trust as the Legg Mason Opportunity Trust (the “Predecessor Fund”). The Fund seeks to provide long-term growth of capital.

2. Significant accounting policies 

The following is a summary of significant accounting policies consistently followed by the Fund in preparation of its financial statements. These policies are in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) for investment companies. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Topic 946. The presentation of financial statement in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses. Actual results may differ from those estimates.

(a)  Investment valuation. Investments in securities traded on a national securities exchange are valued at the last reported sales price on the exchange on which the security is principally traded. Securities traded on the NASDAQ exchanges are valued at the NASDAQ Official Closing Price (“NOCP”). Exchange-traded securities for which no sale was reported and NASDAQ securities for which there is no NOCP are valued at the mean of the most recent quoted bid and ask prices quoted. Exchange traded options are valued at the composite mean price, which calculates the mean of the highest bid price and lowest ask price across the exchanges where the option is principally traded. These investments are categorized as Level 1 of the fair value hierarchy. Pricing services may use various valuation methodologies, including matrix pricing and other analytical models as well as market transactions and dealer quotations. Long-term fixed income securities are valued using prices provided by an independent pricing service approved by the Board. Securities for which market quotations are not readily available are valued at their estimated fair value as determined in good faith by Patient Capital Management, LLC (the “Adviser”) under procedures approved by the Board.

Various inputs are used in determining the value of the Fund’s investments. These inputs are summarized into three broad levels and described below:

The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following is a summary of the fair values of the Fund’s investments in each category investment type as of June 30, 2023:

* See Schedule of Investments for additional detailed categorizations.

Notes to financial statements (cont’d)

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

The following table summarizes the valuation techniques and unobservable inputs used to determine the fair value of Level 3 investments:

(b) Purchased options. When the Fund purchases an option, an amount equal to the premium paid by the Fund is recorded as an investment on the Statement of Assets and Liabilities, the value of which is marked-to-market to reflect the current market value of the option purchased. If the purchased option expires, the Fund realizes a loss equal to the amount of premium paid. When an instrument is purchased or sold through the exercise of an option, the related premium paid is added to the basis of the instrument acquired or deducted from the proceeds of the instrument sold. The risk associated with purchasing put and call options is limited to the premium paid. 

(c)  Security transactions and investment income. Security transactions are accounted for on a trade date basis. Interest income, adjusted for amortization of premium and accretion of discount, is recorded on the accrual basis. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as practicable after the Fund determines the existence of a dividend declaration after exercising reasonable due diligence. The cost of investments sold is determined by use of the specific identification method.

(d)  Distributions to shareholders. Distributions from net investment income and distributions of net realized gains, if any, are declared at least annually. Distributions to shareholders of the Fund are recorded on the ex-dividend date and are determined in accordance with income tax regulations, which may differ from U.S. GAAP.

(e)  Share class accounting. Investment income, common expenses and realized/unrealized gains (losses) on investments are allocated to the various classes of the Fund on the basis of daily net assets of each class. Fees relating to a specific class are charged directly to that share class.

(f)  Indemnifications. In the normal course of business, the Fund enters into contracts that contain a variety of representations, which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.

(g)  Federal and other taxes. It is the Fund’s policy to comply with the federal income and excise tax requirements of the Internal Revenue Code of 1986 (the “Code”), as amended, applicable to regulated investment companies. Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. Therefore, no federal or state income tax provision is required in the Fund’s financial statements.

Management has analyzed the Fund’s tax positions taken on income tax returns for all open tax years and has concluded that as of June 30, 2023, no provision for income tax is required in the Fund’s financial statements. The Fund’s federal and state income and federal excise tax returns for tax years for which the applicable statutes of limitations have not expired are subject to examination by the Internal Revenue Service and state departments of revenue.

Notes to financial statements (cont’d) 

The Fund was notified in 2017 of a tax lien filed by the Internal Revenue Service related to a previous holding. No liability for the lien has been recorded as it is currently under appeal. If the appeal is unsuccessful, the Fund has also received indemnification from previous management for any tax, penalties, or interest related to the matter.

The Fund holds interests in certain securities that are treated as partnerships for Federal income tax purposes. These entities may be subject to audit by the Internal Revenue Service or other applicable tax authorities. The Fund’s taxable income or tax liability for prior taxable years could be adjusted as a result of such an audit. The Fund may be required to pay a fund-level tax as a result of such an adjustment or may pay a “deficiency dividend” to its current shareholders in order to avoid a fund-level tax associated with the adjustment. The Fund could also be required to pay interest and penalties in connection with such an adjustment. Under the applicable foreign tax laws, a withholding tax may be imposed on interest, dividends, and capital gains at various rates.

3.  Investment management agreement and other transactions with affiliates 

The Trust has an agreement with the Adviser to furnish investment advisory services to the Fund.

Under the investment management agreement, the Fund pays an investment management fee, calculated daily and paid monthly, in accordance with the following breakpoint schedule:

Effective April 30, 2020, the Adviser has contractually agreed to reduce fees and pay expenses, (other than front-end or contingent deferred loads, taxes, interest expense, brokerage commissions, acquired fund fees and expenses, expenses incurred in connection with any merger or reorganization, portfolio transaction expenses, dividends paid on short sales, extraordinary expenses such as litigation, Rule 12b-1 fees, intermediary servicing fees, or any other class-specific expenses) through April 30, 2023, so that such annual operating expenses will not exceed 0.88%. Separately, with respect to Class I only, the Adviser has agreed to waive fees and/or reimburse operating expenses such that the previously described annual operating expenses, plus intermediary servicing fees and other class-specific expenses, will not exceed 0.93%. These arrangements cannot be terminated prior to May 1, 2023 without the Board of Trustees’ consent.

Prior to April 30, 2020, the limit on annual operating expenses was established at a class level and inclusive of 12b-1 fees and shareholder servicing fees and did not exceed the class levels set forth below. The Predecessor Fund did not have expense limitations.

During the period ended June 30, 2023, fees waived and/or expenses reimbursed amounted to $82,821.

The Adviser is permitted to recapture amounts waived and/or reimbursed to a class within 36 months of the reimbursement date if the class’s total annual operating expenses have fallen to a level below the expense limitation (“expense cap”) in effect at the time the fees were earned or the expenses incurred. In no case will the Adviser recapture any amount that would result, on any particular business day of the Fund, in the class’s total annual operating expenses exceeding the expense cap or any other lower limit then in effect.

Pursuant to these arrangements, at June 30, 2023, the Fund had remaining fee waivers and/or expense reimbursements subject to recapture by the Adviser and respective dates of expiration as follows: