Advisory Research Investment Management

Solutions

Advisory Research provides access to institutional-caliber investment management with specialized expertise in targeted asset classes. We offer a wide range of strategies across the asset spectrum, paying close attention to downside protection and the pursuit of attractive risk-adjusted returns.

Strategic Income Fund

Investment Overview

The Advisory Research Strategic Income Fund’s objective is to seek high current income and long-term capital appreciation by investing in several types of income-generating securities, including: preferred stocks, convertible preferred stocks, common stocks, closed-end funds and corporate bonds.

as of 9/30/2017

Fund Facts

Ticker: ADVNX
CUSIP: 46141P503
Inception 12/31/2012
Minimum Investment $2,500
Net Expense Ratio 0.94%
Gross Expense Ratio 2.02%
Portfolio Managers Jim Langer,
Bruce Zessar,
Adam Dabrowski

Asset Allocation

Top Ten Holdings

M&T Bank Corp. FTF ‘24 6.45% Perpetual 3.35%
J.P. Morgan Chase & Co. FTF ‘24 6.75% Perpetual 3.19%
Stanley Black & Decker, Inc. FTF ‘21 5.75% 12/15/53 2.99%
General Electric Co. FTF ’21 5.00% Perpetual 2.85%
Southern California Edison FTF ’22 6.25% Perpetual 2.63%
Charles Schwab Corp. 7.00% Perpetual 2.56%
United States Treas. 1.8750% Perpetual 2.46%
United States Treas. 2.1250% Perpetual 2.46%
United States Treas. 1.5000% Perpetual 2.45%
Actuant Corp. 5.6250% Perpetual 2.24%
Total 27.18%

Holdings are subject to change and risk.

Monthly Fund PerformancePerformance as of October 31, 2017

1 Month Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception1

Quarterly Fund PerformancePerformance as of September 30, 2017

3 Months Year to Date 1 Year 3 Year 5 Year 10 Year Since Inception1

1Performance since inception is reported from 06/30/2003. The inception date of the Advisory Research Strategic Income Fund is 12/31/2012. Performance shown prior to 12/31/2012 is derived from the performance of a limited partnership account, which commenced on 06/30/2003 (the “Predecessor Account”). The predecessor entity was not registered under the 1940 Act. The fund will be managed in a materially equivalent manner to the predecessor. If the Predecessor Account were subject to the same requirements and restrictions as the Fund, the performance may have been adversely affected. Please see the prospectus for more information.

Performance for periods over one year is annualized. The performance data quoted presents past performance and post performance is not a guarantee of future results. Investment return and principal value of an investment will fluctuate, so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information quoted. A redemption fee of 2.00% will be imposed on redemptions of Fund shares owned less than 90 days.

The Fund’s advisor has contractually agreed to waive its fees and/or absorb expenses of the Fund to ensure that total annual fund operating expenses (excluding taxes, leverage interest, brokerage commissions, dividend expenses on short sales, acquired fund fees and expenses as determined in accordance with Form N-1A, expenses incurred in connection with any merger or reorganization, or extraordinary expenses such as litigation) do not exceed “Net Expense Ratio” listed on the Portfolio tab. This agreement is in effect until March 1, 2017, and it may be terminated before that date only by the Trust’s Board of Trustees. The Fund’s advisor is permitted to seek reimbursement from the Fund, subject to limitations, for fees it waived and Fund expenses it paid for three years from the date of any such waiver or payment.

Barclays Intermediate Credit Index: Measures the performance of investment grade corporate debt and agency bonds that are dollar denominated and have a remaining maturity of greater than one year and less than ten years.

Merrill Lynch U.S. Preferred Stock Fixed Rate Index: Consists of fixed-rate, U.S.-dollar-denominated preferred securities and fixed-to-floating rate securities that are callable prior to the floating rate period and are at least one year from the start of the floating rate period. Securities must be rated investment grade, including the country of risk, and must be issued as public securities or 144a filing and a minimum outstanding of $100 million. The index includes perpetual preferred securities, American Depository Shares/Receipts (ADS/R), domestic and Yankee trust preferred securities having a minimum remaining term of at least one year, both DRD-eligible and non-DRD-eligible preferred stock and senior debt.

Principal Risks of Investing

Before you decide whether to invest in the Fund, carefully consider these risk factors and special considerations associated with investing in the Fund, which may cause you to lose part or all of your investment in the Fund.

Investment Risks: An investment in the Fund is subject to investment risk, including the possible loss of the entire principal amount that you invest.

Preferred Securities Risks: Preferred securities represent equity interests in a company that generally entitle the holder to receive, in preference to the holders of other stocks such as common stocks, dividends and a fixed share of the proceeds resulting from a liquidation of the company. Preferred securities are generally subordinated to bonds and other debt instruments in a company’s capital structure in terms of having priority to corporate income, claims to corporate assets and liquidation payments, and therefore will be subject to greater credit risk than more senior debt instruments. Preferred securities are subject to issuer-specific and market risks applicable generally to equity securities and are sensitive to changes in the issuer’s credit worthiness and to changes in interest rates, and may decline in value if interest rates rise. In addition, preferred securities often have features that can adversely affect their returns, including the following:

  • Preferred securities may include provisions that permit the issuer, at its discretion, to defer or omit distributions for a stated period without any adverse consequences to the issuer.
  • Preferred securities frequently have call features that allow the issuer to repurchase the security prior to its stated maturity.
  • An issuer may be able to exercise an option to redeem its preferred securities at par earlier than scheduled. Certain preferred securities, for example, have redemption features that are triggered by changes in U.S. federal income tax or securities laws.

Convertible Securities Risks: The value of a convertible security may be affected by changes in interest rates, with investment value declining as interest rates increase and increasing as interest rates decline. The credit standing of the issuer, the ability of the issuer to repay principal and to make interest payments and other factors also may have an effect on a convertible security’s investment value.

Debt Securities Risks: Prices of debt securities tend to move inversely with changes in interest rates. Typically, a rise in rates will adversely affect debt security prices and, accordingly, the Fund’s returns and share price (“interest rate risk”). In addition, debt securities may be subject to “call” or “extension” risk. Call risk is the risk that, during a period of falling interest rates, the issuer may redeem a security by repaying it early, which may reduce the Fund’s income if the proceeds are reinvested at lower interest rates. Extension risk occurs during a rising interest rate environment because certain obligations will be paid off by an issuer more slowly than anticipated, causing the value of those securities held by the Fund to fall.

Credit Risks: An issuer of a debt security or a counterparty could suffer an adverse change in financial condition that results in a payment default, security downgrade or inability to meet a financial obligation.

Below Investment Grade Risks: Debt securities rated below investment grade (often called “junk bonds”) involve greater risk of default, downgrade or price declines and are more volatile than investment grade securities. Companies issuing high yield, fixed-income securities are less financially strong, are more likely to encounter financial difficulties and are more vulnerable to changes in the economy than those companies with higher credit ratings.

Common Stock Risks: The value of common stocks held by the Fund may fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate, or factors relating to specific companies in which the Fund invests. Also, the price of common stock is sensitive to general movements in the stock market. A drop in the stock market may depress the price of common stock held by the Fund.

Foreign Investment Risks: The Fund’s investments in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers. Adverse political, economic or social developments or changes in the regulatory environment of foreign countries could undermine the value of the Fund’s investments or prevent the Fund from realizing the full value of its investments. In addition, foreign companies are generally subject to different legal and accounting standards than U.S. companies, and foreign financial intermediaries may be subject to less supervision and regulation than U.S. financial firms. The Fund’s investments in ADRs are also subject to these risks.

Currency Risks: Investments in financial instruments related to or denominated in foreign currencies are subject to the risk that those currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency being hedged.

Covered Call Options Risks: The Fund may write (sell) covered call options on securities the Fund holds in its portfolio. This strategy is designed to generate additional gains from option premiums, but also results in certain risks. With respect to portfolio holdings on which the Fund has written a covered call option, the Fund will forgo the opportunity to benefit from potential increases in the value of that security, but will continue to bear the risk of declines in the value of the security.

Finance Sector Risks: From time to time, the Fund may invest a significant amount of its total assets in the finance sector, which may be subject to specific risks. These risks include governmental regulation of the sector and governmental monetary and fiscal policies which impact interest rates and currencies and affect corporate funding and international trade.

Management Risks: The Fund’s portfolio is actively managed. The Fund’s advisor applies investment techniques and risk analyses in making investment decisions for the Fund, but there can be no guarantee that these will result in an increase in the value of your investment or in overall performance equal to other investments.

Value Stock Risks: Value stocks involve the risk that the value of the security will not be recognized for an unexpectedly long period of time or that the security is not undervalued but is appropriately priced. The Fund’s focus on value investing may cause the Fund to underperform when growth investing is in favor.

STRATEGIC INCOME FUND MANAGEMENT

Jim Langer

JAMES LANGER, CFA

MANAGING DIRECTOR, PORTFOLIO MANAGER & RESEARCH ANALYST

Jim Langer, with 25 years of investment experience, serves as Managing Director of Advisory Research. Prior to joining the firm, he served as an investment analyst at Marquette Capital for five years. Jim’s career in finance began at the Center for Research in Security Prices at the University of Chicago, where he worked on several academic research projects. Jim holds a B.A. in economics from the University of Chicago and an M.B.A. from the Kellogg School of Management – Northwestern University.

Bruce Zessar

BRUCE ZESSAR, J.D., CFA

MANAGING DIRECTOR, PORTFOLIO MANAGER & RESEARCH ANALYST

Bruce Zessar, with 15 years of investment experience, serves as Managing Director of Advisory Research. Prior to joining the firm, Bruce was a co-founder and principal of Oasis Legal Finance, LLC, a specialty finance company. Bruce is a former partner in the law firm of Sidley Austin, where he practiced financial markets-related law, including securities, antitrust and intellectual property for 12 years. Bruce holds an A.B. magna cum laude in economics from Harvard University and a J.D. with distinction from Stanford Law School.

Adam Dabrowski

ADAM DABROWSKI, CFA, FRM

VICE PRESIDENT, PORTFOLIO MANAGER & RESEARCH ANALYST

Adam Dabrowski, with 15 years of investment experience, serves as Vice President of Advisory Research. Prior to joining the firm, he served as a senior developer for a financial services and trading firm. Adam holds a B.S. in computer science from DePaul University and an M.B.A in analytic finance from the University of Chicago.

Advisory Research Funds are distributed by IMST Distributors, LLC.


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