Palmer Square Opportunistic Income Fund
10/08/2024 | Press release | Distributed by Public on 10/08/2024 10:57
Annual Report by Investment Company Form N CSR
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 811-22969
PALMER SQUARE OPPORTUNISTIC INCOME FUND
(Exact name of registrant as specified in charter)
1900 Shawnee Mission Parkway Suite 315
Mission Woods, KS 66205
(Address of principal executive offices) (Zip code)
Stacy Brice Chief Compliance Officer and Legal Counsel
1900 Shawnee Mission Parkway Suite 315
Mission Woods, KS 66205
(Name and address of agent for service)
(816) 994-3200
Registrant's telephone number, including area code
Date of fiscal year end: July 31
Date of reporting period: July 31, 2024
Item 1. Report to Stockholders.
(a) The registrant's annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the "Investment Company Act"), is as follows:
Palmer Square Opportunistic Income Fund
(PSOIX)
ANNUAL REPORT
JULY 31, 2024
Palmer Square Opportunistic Income Fund
Table of Contents
| Letter to Shareholders | 1 |
| Fund Performance | 12 |
| Consolidated Schedule of Investments | 13 |
| Consolidated Statement of Assets and Liabilities | 38 |
| Consolidated Statement of Operations | 39 |
| Consolidated Statements of Changes of Net Assets | 40 |
| Consolidated Statement of Cash Flows | 41 |
| Consolidated Financial Highlights | 42 |
| Notes to Consolidated Financial Statements | 43 |
| Report of Independent Registered Public Accounting Firm | 60 |
| Supplemental Information | 61 |
| Expense Example | 63 |
This report and the financial statements contained herein are provided for the general information of the shareholders of the Palmer Square Opportunistic Income Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
www.palmersquarefunds.com
Palmer Square Opportunistic Income Fund (PSOIX)
2024
Fund Refresher
As a refresher, the Palmer Square Opportunistic Income Fund ("PSOIX" or the "Fund") seeks to not only capture a high level of current income, but also long-term capital appreciation by investing with a flexible mandate to find the best relative value opportunities across corporate credit and structured credit.
Performance Summary
The Fund returned +15.82% (net of fees) for the fiscal year ending 7/31/2024. We remain confident in our positioning in CLO (Collateralized Loan Obligation) Debt, bank loans as well as high yield bonds and believe the total return outlook still remains very attractive.
Fund Performance Net of Fees as of 07/31/2024 (inception 8/29/2014)
| YTD 2024 | 2023 |
2022 |
2021 |
2020 |
2019 |
2018 |
2017 |
2016 |
2015 |
2014* |
|
| PSOIX | 7.88% | 18.94% | -4.48% | 6.66% | 5.92% | 7.61% | -0.47% | 11.04% | 12.10% | -5.32% | -0.76% |
|
1 Year |
3 Years |
5 Years |
Since Inception Annualized | |
| PSOIX | 15.82% | 7.56% | 7.24% | 5.71% |
Annual Expense Ratio: Gross 2.28%/Net 2.28% with expense waivers that are in effect until December 1, 2024. See expense waiver details in Notes and Disclosures. The performance returns shown above are calculated by comparing the net asset value (NAV) on the first day of the time period to the NAV on the last day of the time period and reflect reinvested dividends and capital gains. Returns less than 1 year are not annualized. The performance data quoted represents past performance and that past performance does not guarantee future results. Investment return and principal value 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. To obtain performance information current to the most recent month-end please call 866-933-9033.
Portfolio Snapshot
Please refer to the table below for a historical portfolio snapshot.
| 6/30/2023 | 9/30/2023 | 12/31/2023 | 3/31/2024 | 7/31/2024 | |
| Interest Rate Duration | 0.43 yrs | 0.40 yrs | 0.38 yrs | 0.40 yrs | 0.42 yrs |
| Spread Duration | 3.23 yrs | 2.90 yrs | 2.79 yrs | 2.59 yrs | 2.40 yrs |
| Credit Spread | 835 | 707 | 665 | 544 | 447 |
| Weighted Average Price | $92.0 | $95.4 | $96.8 | $98.5 | $99.5 |
| Yield to Expected Call | 12.85% | 11.44% | 10.24% | 9.65% | 8.59% |
| Yield to Maturity | 11.81% | 10.80% | 9.68% | 9.34% | 8.40% |
| Current Yield | 11.40% | 10.73% | 10.70% | 10.13% | 9.63% |
Past performance does not guarantee future results. *Please see Notes and Disclosures for definitions.
Relative Value and Current Upside Potential
| ● | We believe the Fund is well positioned for potential upside going forward as high breakeven spread levels appear to currently exist. As shown in the highlighted box below, this could help serve as a cushion in a spread widening environment. If spreads would move to their average levels seen over the past 10 years, the potential value of an investment over 1-year would be positive, while a return to the 10-year tights on spreads would be even better. Also given the very high coupon and spread levels currently, there is a very high hurdle to not capture a positive return over a 1-year holding period. The 1yr Forward Breakeven column below shows the spread levels each asset class would need to hit to not earn a positive return over the next year. At a Fund level, we would need to see over 457bps (basis points or 0.01%) of widening from current levels, which would put us at worse levels than we saw during COVID-19 Pandemic. |
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
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| ● | Most notably, we see value in CLO debt at current levels, as spreads are still wide compared to other areas of corporate credit. Investment Grade and High Yield corporate credit are hovering near all-time tights seen in 2021, and to get to tighter levels you would need to go all the way back to 2007. However, CLO debt levels are still near their longer-term averages and if they return to their tight post crisis spreads, total return potential is still attractive. We continue to favor shorter duration CLO deals with cleaner portfolios at a discount. Please see the table of indices below highlighting current price and spreads as well as potential upside from current levels. Yield to Expected (YTE) illustrates the yields if spreads were to stay the same and the bonds pull to par by maturity. The Average 1-yr Upside represents an opportunity for the 1 year total return if spreads return to their 10 year average levels, and the Tight 1yr Upside represents an opportunity for the 1 year total return if spreads return to their 10 year tight levels.1,2 |
| PALMER SQUARE OPPORTUNISTIC INCOME FUND | 1yr Forward Breakeven3 | 3/31/20204 | 2/28/20165 | ||||||
| Rating | Allocation | Price | Spread | YTE* | Average 1yr Upside1 | Tight 1yr Upside2 | Spread | Spread | Spread |
| CLO AAA | 7.6% | 100.12 | 136 | 5.90% | 6.07 | 6.60% | 391 | 243 | 186 |
| CLO AA | 1.0% | 96.50 | 228 | 6.31% | 5.56 | 6.28% | 443 | 349 | 284 |
| CLO BBB | 32.6% | 100.00 | 326 | 7.81% | 7.45 | 9.45% | 594 | 755 | 661 |
| CLO BB | 30.8% | 100.38 | 616 | 10.83% | 10.56 | 12.92% | 962 | 1384 | 1193 |
| CLO B | 3.0% | 94.95 | 1000 | 14.57% | 16.12 | 21.65% | 1282 | 1949 | 1653 |
| CLO Equity | 3.0% | 35.78 | 1585 | 20.63% | 25.65 | 30.65% | 2620 | 2000 | 1850 |
| CMBS | 0.5% | 60.41 | 680 | 11.22% | 31.00 | 33.75% | 1060 | 1030 | 665 |
| Corp HY | 4.0% | 92.77 | 358 | 7.86% | 6.28 | 9.06% | 3196 | 880 | 726 |
| Corp IG | 0.2% | 90.86 | 27 | 3.00% | 1.21 | 4.33% | 79 | 272 | 197 |
| Bank Debt | 17.3% | 98.82 | 313 | 8.40% | 9.32 | 9.55% | 804 | 844 | 639 |
| Total | 100.0% | 99.02 | 458 | 9.28% | 9.48 | 11.39% | 915 | 1000 | 849 |
Source: Bloomberg, Palmer Square, as of 6/30/2024. *YTE, also known as Yield to Expected Call, is a Yield to Call metric that assumes callable bonds are not called at their call date, but some later date prior to maturity. 1Refers to the potential increase in value of the investment in one year if spreads return to 10-year average levels. 2Refers to the potential increase in value of the investment in one year if spreads return to 10-year tight levels. The potential increase in value is calculated by determining the return resulting from the positive or negative difference between the current price of the securities and the price of the securities at the respective spread levels noted in the above performance (i.e., spread levels at 10-year averages) plus the income from anticipated coupon payments over the next 12 months. For purposes of this analysis, anticipated coupon payments incorporate the forward LIBOR/SOFR curve. 3Refers to the level at which spreads would need to widen in order to cause a negative value in an individual investment over a one-year period. This is determined by reducing a security's price by its expected coupon payments over the next 12 months and then calculating the level of spread widening that would need to occur to move the security's actual price to the reduced price. For purposes of this analysis, anticipated coupon payments incorporate the forward LIBOR/SOFR curve. 4Month end during Covid-19 dislocation. 5Month end of energy market dislocation. Below investment grade ratings are subject to higher risks including that of repayment. Figures shown are not indicative of the performance of the Fund. The presented performance does not reflect the impact of material economic and market factors on decision-making, any changes to the strategy over time, and was prepared with the benefit of hindsight. Past performance is no guarantee of future returns.
| PALMER SQUARE CLO INDEX LEVELS AND 1YR UPSIDE TO AVERAGE/TIGHTS | |||||
| Rating |
Current Average Price |
Discount Margin |
Yield to Expected |
Average 1yr Upside1 |
Tight 1yr Upside2 |
| CLO AAA | $100.13 | 125 | 6.24% | 6.61% | 6.86% |
| CLO AA | $100.21 | 167 | 6.69% | 7.02% | 7.52% |
| CLO A | $100.21 | 201 | 7.16% | 7.45% | 7.95% |
| CLO BBB | $99.98 | 319 | 8.18% | 8.34% | 9.84% |
| CLO BB | $97.83 | 698 | 11.79% | 12.37% | 15.43% |
| CLO B | $76.98 | 1185 | 16.23% | 26.21% | 35.95% |
Source: JPM / Intex / Palmer Square. As of 6/30/2024. Below investment grade ratings are subject to higher risks. Figures shown are not indicative of the performance of the Fund. 1Refers to the potential increase in value of the investment in one year if spreads return to 10-year average levels. 2Refers to the potential increase in value of the investment in one year if spreads return to 10-year tight levels. The potential increase in value is calculated by determining the return resulting from the positive or negative difference between the current price of the securities and the price of the securities at the respective spread levels noted in the above performance (i.e., spread levels at 10-year averages) plus the income from anticipated coupon payments over the next 12 months. For purposes of this analysis, anticipated coupon payments incorporate the forward LIBOR/SOFR curve. The presented performance does not reflect the impact of material economic and market factors on decision making, any changes to the Fund over time, and was prepared with the benefit of hindsight. Please see Notes and Disclosures for definitions.
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
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Allocation / Attribution Summary
Select Portfolio Attribution and Characteristic Dashboard
| Allocation |
7/31/2024 |
8/1/23 - 7/31/24 |
Average Price |
Yield to Expected Call* |
| CLO Debt | 75% | 13.21% | $100.1 | 8.43% |
| Bank Loans | 18% | 2.14% | $99.1 | 8.04% |
| High Yield Bonds | 4% | 0.97% | $94.6 | 8.00% |
| Sub Notes | 3% | 0.79% | n/a | 20.70% |
| ABS/MBS | 1% | -0.05% | $75.9 | 11.27% |
Asset-backed Securities (ABS), Mortgage-backed Securities (MBS).
Historic Positioning Detail by Asset Type:
|
6/30/2023 Allocation |
9/30/2023 Allocation |
12/31/2023 Allocation |
3/31/2024 Allocation |
7/31/2024 Allocation |
8/1/23 - 7/31/24 |
|
| CLO Debt | 69% | 71% | 71% | 71% | 75% | 13.21% |
| Bank Loans | 19% | 18% | 19% | 19% | 18% | 2.14% |
| High Yield Bonds | 7% | 6% | 6% | 6% | 4% | 0.97% |
| Sub Notes | 5% | 5% | 5% | 5% | 3% | 0.79% |
| ABS/MBS | 1% | 1% | 1% | 1% | 1% | -0.05% |
Please note the allocation above is on a gross exposure basis as a percent of NAV and does not include cash. Gross attribution does not include hedges, expenses and fees if applicable. Investment return and principal value 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. Attribution refers to the process of measuring returns generated by various sources.
| ● | Performance and Attribution: The Fund returned 15.82% (net of fees) for the fiscal year ending 7/31/2024. The positive absolute performance was driven by a broad-based rally in credit spreads, particularly within our CLO exposure, which in turn was driven by stronger expected growth and earnings data. Also, as Fed cuts have slowly been priced out over the course of the year, technicals for floating rate products have been favorable. The Fund's exposure to CLO debt and sub notes provided the largest contribution at +14%, followed by bank loans at +2% and HY (High Yield) bonds at approximately +1%. There were no meaningful detractors during the fiscal year. |
| ● | Macro Takeaways: There are a few key recent macro and credit market takeaways. First and foremost, the May CPI report (released on June 12th) was a major positive development in the Fed's war on inflation. The report showed inflation slowing at the headline, core and "super core" level, and reversed several months of price re-acceleration. It was also the lowest monthly reading for core inflation since 2021. This was followed by another positive CPI report released on July 11th that most likely provides the Fed with the justification it needs to cut rates later this year. At the beginning of the year, the market was pricing in 6-7 rate cuts while we expected 1-2. At the time of writing this letter, the market is pricing in precisely 2 cuts this year. That said, we are also sticking with our view that the long end of the curve (5-10 year U.S. Treasuries) could easily remain in a 4.25-4.75% range indefinitely; concurrent with a Fed cutting cycle. We believe it would take a significant slowing of growth to push longer end yields much below 4%. |
| ● | Outside of the U.S. markets, a G7 central bank initiated the first rate cut since the pandemic when the ECB (European Central Bank) expectedly lower its policy rate by 25bps in June. Inflation data in Europe has been quicker to normalize compared to the U.S. for several reasons: more prudent fiscal policy, deeper structural deflationary socioeconomics, and arguably, a lower neutral rate which is at least partially due to higher national debt levels. |
| ● | Overall, market expectations have moved much closer to our long-held view of a soft or no landing and higher-for-longer rates. Our preference for floating rate assets bore fruit once again, as the long duration trade has once again been delayed, with short duration and floating rate instruments outperforming during the fiscal year. With credit spreads moving closer to fully pricing in good economic conditions and dispersion continuing to decline, asset and security selection will be a key factor in avoiding pitfalls and taking advantage of opportunities when they arise. |
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
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| ● | Below is a summary of major benchmark performance for comparison. |
| Selected Indices* | Performance 8/1/23 - 7/31/24 |
| Bloomberg U.S. Treasury Index | +4.64% (Yield -0.29%) |
| Bloomberg U.S. Aggregate Bond Index | +5.70% (spread -10bps) |
| Bloomberg U.S. Corporate Index | +7.48% (spread -22bps) |
| Bloomberg 1-3 Year U.S. Corporate Index | +6.59% (spread -10bps) |
| Bloomberg U.S. High Yield Index | +11.37% (spread -58bps) |
| iBoxx Liquid Leveraged Loan Index | +9.23% (DM -66bps) |
| Palmer Square CLO Senior Debt Index | +8.19% (DM -45bps) |
| Palmer Square CLO Debt Index | +16.06% (DM -152bps) |
| S&P 500 Index | +22.46% |
| STOXX 600 Index | +11.97% |
Source: Bloomberg as of 07/31/2024. *Please see Notes and Disclosures for definition
| ● | CLO Allocation/Opportunity to Capture Income and Total Return: As of 7/31/2024, 78% (i.e. CLO Debt and Sub Notes) of the portfolio was invested in CLO debt. CLO BBBs are currently trading on average at a spread of 326bps and BBs are at a spread of 610bps with prices in the high $90s for higher quality portfolios. When looking across corporate and structured credit, CLO BBB and BBs are one of the few asset classes that are still trading close to their historical averages and continue to look compelling vs. corporates. Given wider spreads and high base rates, breakeven spread widening on CLO BBB and BB is still very high. As indicated on the table above, BBBs are approximately 268bps and BBs 346bps below their 1yr Forward Breakeven spreads, indicating spreads could widen a further 268bps and 346bps, respectively, over the next 12 months before one lost money on $1 invested. That type of spread widening from here would put us back at levels last seen during the wides of 2022. We also believe another tailwind for CLO debt going forward is the increase in SOFR* and our view that rates will stay high in the near term. We continue to add to CLO portfolios that are higher quality and more liquid as we believe they will continue to outperform portfolios with more risky collateral. |
CLO BBs remain a significant allocation in the portfolio and at current valuations offer a lot of potential value on an absolute and relative basis. As compared to High Yield (HY) opportunities, CLO BBs on a historical basis still look very cheap. CLO BBs currently pick up 363bps of spread versus HY, which looking back to 2012 is a 72nd percentile reading (meaning CLO BBs have been relatively cheaper only 28% of the time). The median spread differential over the same time period is 260bps, which means CLO BBs need to tighten* about 103bps just to get back to historical average levels vs HY.
| * | Please see Notes and Disclosures for definitions. |
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
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CLO BB vs HY Spreads
Source: Bloomberg as of 7/8/2024. Current performance is not a guarantee of future performance of the Fund. *Please see Notes and Disclosure for definitions.
| ● | Bank Loan Allocation: As of 7/31/2024, bank loan exposure was 18% of the portfolio. We remain focused on selecting high-quality primary opportunities, with select discounted secondary investments. The primary market remains very busy, but is heavily skewed towards refinancing and repricing transactions, which has limited the number of attractive new money opportunities. In addition to modest net primary volumes, CLO issuance and retail inflows remain robust, creating a supportive price environment and driving incremental spread compression. We continue to view the asset class as attractive given the combination of high current income and low interest rate duration and will continue to focus our efforts on seeking high quality/lower risk credits. |
| ● | High Yield Bond Allocation: As of 7/31/2024, HY corporate bond exposure was 4% of the portfolio. Valuations remain challenging with spreads near all-time lows and very limited spread volatility or dispersion during the fiscal year. The Bloomberg Ba/B US High Yield Bond Index reached a YTD low of 212bps during the second quarter of 2024, the lowest level since 2007, and ended the period at 220bps. The overall opportunity set in HY remains limited; however, we continue to find idiosyncratic opportunities in the secondary market (USD and EUR HY) and are selectively participating in the new issue market. Although spread valuations are tight, limited net new supply, positive net fund flows, and resilient fundamentals, all remain supportive of current market levels. We remain focused on identifying credit-specific opportunities we believe can outperform the current tight spread environment. |
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
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Outlook / Focus on CLO Relative Value
| ● | CLO Issuance Forecast and Outlook: CLO issuance is off to its busiest start of the year ever with $100.8B in new issue volumes, up about 82% from 2023. Reset/refi activity has also trended higher with $73B pricing so far in 2024. The size of the CLO market continues to grow in the U.S. and has surpassed $1 trillion and $1.4 trillion globally, which is now the largest credit sector within securitized products. We expect demand to continue for 3 main reasons: 1) higher for longer rates continue and demand for floating rate instruments remains strong. 2) demand from banks at the AAA level is returning and 3) an uptick in deal liquidations from out of reinvestment deals force investors to put capital to work in new issue transactions. We estimate that even though gross issuance has been record setting, net issuance for AAAs is actually negative on the year when factoring in liquidations and amortizations. |
Outlook: Measured Pace of Cuts, Economy & Credit Fundamentals Resilient, Tight Spreads + Little Dispersion
| ● | The Fed Will Cut Rates, But at a Data-Dependent Pace: We think the recent CPI data combined with some modest weakening of the labor market and signs of consumer stress provides the Fed with the justification it has been looking for to cut rates for the first time since the Pandemic. However, given that core inflation remains well above target and the various other structural inflation headwinds, we think the Fed will take a very measured approach to the pace of rate cuts. |
| ● | Economy Remains Resilient: While the U.S. economy has slowed modestly from a high point in Q3 2023, the labor market remains strong and growth forecasts still call for 2-2.5% growth in 2024 and 1.5-2.0% in 2025. We remain constructive on the economic outlook and believe there is potential for GDP growth to surprise to the upside in 2024, with the possibility of another year of above-trend growth similar to what was witnessed in 2023. |
| ● | Corporate Fundamentals Stabilizing: After a brief earning recession in late 2022 - early 2023, corporate earnings have regained their footing over the last couple of quarters, including S&P 500 year-over-year earnings growth of 8% in Q1 2024. Analysts are even more optimistic for the full year 2024 with current estimates calling for 5.0% revenue and 7.0% earnings growth. This is filtering through to credit markets with Q2 2024 net ratings upgrades in the IG (Investment Grade) Corporate market positive (more upgrades than downgrades) for the ninth consecutive quarter and the highest dollar increase since Q2 2023. |
We are also seeing this show up in leveraged credit markets, where defaults rates remain contained and an accommodative primary market has helped to alleviate some lingering concerns surrounding near term maturities. The HY default rate of 2.0% for the trailing 12-months ending May 2024 is well below the long-term average of 4.0% and a recent peak of 2.6% in October 2023. Lower rates will benefit corporates both in terms of lower interest expense and looser financial conditions.
| ● | Tighter Spreads + Less Dispersion = Discipline and Patience: The trend of tighter spreads and less dispersion that emerged at the end of last year continued into 2024 and in some cases accelerated. For example, IG corporate spreads are in the bottom decile on a long-term historical basis and spread dispersion is at its lowest level since 2007! It's important to remember that in a tight spread / low dispersion environment, we are rewarded morefrom avoiding the losers versus picking the winners. Our conservative positioning and prudent relative value framework leaves us well prepared to take advantage of opportunities when they inevitably arise. |
| ● | Floating Rate Continues to be an Attractive Relative Value Play: Despite recent repricing of the rate curve to more closely match our expectations, floating rate credit continues to be an attractive place to be due to a number of factors. These include: (i) floating rate assets still provide a considerable current yield advantage with the 3M/10Y 100bps inverted, (ii) potential for rate cuts to materialize even slower than the current market expects, and (iii) longer-term fiscal concerns that could prevent any material tightening of the long end of the curve. |
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
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Fundamentals
| ● | Loan defaults are hovering around long-term averages at 1.79%. Current defaults in CLO portfolios are lower at 0.57%. We expect defaults will stay rangebound in the next year and remain in the 2-4% range which is the long-term average. The percentage of underlying CLO collateral trading at distressed levels (under $80) is currently around 4.9%, which is typically a good barometer of future defaults (Palmer Square deals are much lower in the 2-3% range). Also, loans with maturities before 2026 represent a small portion of the loan market at about 10%, meaning refinancing risk is low. The current CCC% in CLO portfolios is 5-7% (Palmer Square deals are lower in the 3-4% range) and still have ample cushion to withstand an uptick in downgrades. |
Exhibit 1: Loan default rates off the lows, but still below long term average
Source: J.P.Morgan Research 7/1/2024
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
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Exhibit 2: Loan maturity walls ($BN)
Source: ICE, Pitchbook LCD, Morgan Stanley Research as of 6/12/2024.
Exhibit 3: Median CCC assets in CLO portfolios
Source: J.P.Morgan Research 6/12/2024
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
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Exhibit 4: Loan gross leverage still near multi year low, trending lower
Bank Loan Net Leverage (TM)
Source: J.P.Morgan Research 6/20/2024
Exhibit 5: Interest coverage ratios in line with historical averages, larger companies outperforming
Source: J.P.Morgan Research 6/20/2024
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
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Notes and Disclosures
This overview is for informational and comparative purposes only and does not constitute an offer to sell or a solicitation of an offer to buy any interests in the Palmer Square Opportunistic Income Fund, the ("Fund"), and/ or any other securities, or to provide any other advisory services. Any offer to invest in the funds will be made pursuant to the Fund's prospectus, which will contain material information not contained herein and to which prospective investors are directed. Before investing, you should carefully read such materials in their entirety.
This overview is not intended to replace such materials, and any information herein should not be relied upon for the purposes of investing in the Funds or for any other purpose. This overview is a summary and does not purport to be complete.
The Palmer Square Opportunistic Income Fund is a closed-end interval fund. You should not expect to be able to sell your Shares other than through the Fund's repurchase policy, regardless of how the Fund performs.
The Fund's advisor has contractually agreed to waive or reduce its management fees and/ or reimburse expenses of the Fund to ensure that total annual Fund operating expenses (excluding taxes, leverage interest, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses, expenses incurred in connection with any merger or reorganization, and extraordinary expenses such as litigation expenses) do not exceed 1.50% of the Fund's average daily net assets. This agreement is in effect until December 1, 2024, and it may be terminated before that date only by the Fund's Board of Trustees. The Fund's advisor is permitted to seek reimbursement from the Fund, subject to certain limitations, of fees waived or payments made to the Fund for a period of three years from the date of the waiver or payment.
Interest Rate Duration measures a portfolio's sensitivity to changes in interest rates. Spread Duration measures the sensitivity of a bond price based on basis point changes of more than 100. Yield To Call is the yield of a bond or note if you were to buy and hold the security until the call date. Yield To Maturity is the rate of return anticipated on a bond if held until the end of its lifetime. Current Yield Yield is a weighted calculation of the annual coupon rate divided by the price of each individual security within the portfolio and represents the return an investor would expect if the securities were held for a year and the price did not change. Beta describes an investment's volatility in relation to that of the stock or bond market as a whole. For example, the S&P 500 is typically considered to be "the equity market" and it has a beta of 1.0. Yield to Expected Call is a Yield to Call metric that assumes callable bonds are not called on their call date, but at some later date prior to maturity. Yield to Expected Call considers contractual terms in a bond's indenture or other similar governing document. A bond may be called before or after this date, which has the potential to increase or decrease the Yield to Expected Call calculation. All else equal, when a bond's price is below par, Yield to Expected Call is a more conservative yield metric than Yield to Call. If a bond is not callable, Yield to Expected Call calculates the bond's Yield to Maturity. Credit Spreads are often a good barometer of economic health - wide or widening (bearish sentiment) and narrowing/tight or tightening (bullish sentiment). The option-adjusted spread (OAS) is the measurement of the spread of a fixed-income security rate and the risk-free rate of return, which is then adjusted to take into account an embedded option. Typically, an analyst uses Treasury yields for the risk-free rate. The original issue discount (OID) is the difference between the original face value amount and the discounted price paid for a bond. The option-adjusted spread (OAS) is the measurement of the spread of a fixed-income security rate and the risk-free rate of return.
The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index of publicly issued investment grade corporate, US Treasury and government agency securities with remaining maturities of one to three years. The Bloomberg Barclays 1-3 Year US Corporate Index measures the performance of investment grade, US dollar-denominated, fixed-rate, taxable corporate and government-related debt with 1 to 2.9999 years to maturity. It is composed of a corporate and a non-corporate component that includes non-US agencies, sovereigns, supranationals and local authorities. S&P 500 Index is a market-capitalization- weighted index of 500 leading publicly traded companies in the U.S. U.S. Treasury index is an index based on recent auctions of U.S. Treasury bills and is commonly used as a benchmark when determining interest rates, such as mortgage rates. Bloomberg Barclays U.S. Corporate Bond Index measures the investment grade, fixed-rate, taxable corporate bond market. Bloomberg Barclays U.S. High Yield Index measures the USD-denominated, high yield, fixed-rate corporate bond market. Bloomberg Barclays U.S. HY BB Corporates Index tracks the performance of USD-denominated below investment grade rated corporate debt publicly issued in the U.S. domestic market. Credit Suisse Leveraged Loan Index tracks the investable market of the U.S. dollar denominated leveraged loan market. The STOXX 600 Index seeks to offer broader exposure to European companies. Thus, it's often cited as a close European alternative to Standard & Poor's 500 Index (S&P 500). Palmer Square CLO Senior Debt Index (CLOSE) seeks to reflect the investable universe for U.S. dollar denominated CLOs. CLOSE is comprised of original rated AAA and AA debt issued after January 1, 2009 subject to certain inclusion criteria. Palmer Square CLO Debt Index (CLODI) seeks to reflect the investable universe for U.S. dollar denominated CLOs. CLODI is comprised of original rated A, BBB, and BB debt issued after January 1, 2009 subject to certain inclusion criteria. Palmer Square CLO BB TR Index (PCLOBBTR) seeks to reflect the investable universe for U.S. dollar denominated CLOs. The index is comprised of original rated BB debt issued after January 1, 2009 subject to certain inclusion criteria. LIBOR (London Interbank Offered Rate) is the benchmark interest rate at which major global banks lend to one another. As of January 1, 2022, many banks are no longer required to submit the data needed to calculate the LIBOR rate. In June 2023, LIBOR was replaced by SOFR. The Secured Overnight Financing Rate (SOFR) is a broad measure of the cost of borrowing cash overnight collateralized by Treasury securities. A Reference Rate is an interest rate benchmark used to set other interest rates. Various types of transactions use different reference rate benchmarks, but the most common include the Fed Funds Rate, SOFR, the prime rate, and the rate on benchmark U.S. Treasury securities. Unlike mutual funds, indices are not managed and do not incur fees or expenses. It is not possible to invest directly in an index.
The allocation and credit quality distribution figures shown are used for illustrative purposes only. Palmer Square does not guarantee to execute that allocation and credit quality distribution. Allocation and exposures information, as well as other referenced categorizations, reflect classifications determined by Palmer Square as well as certain Palmer Square assumptions based on estimated portfolio characteristic information. Allocation and credit quality distribution figures may not sum to 100%. Ratings listed herein are assigned by Standard & Poor's (S&P) and Moody's Investor Service (Moody's). Credit quality ratings are measured on a scale with S&P's credit quality ratings ranging from AAA (highest) to D (lowest) and Moody's credit quality ratings ranging from Aaa (highest) to C (lowest). We use the higher of the two ratings. Credit ratings listed are subject to change. Please contact Palmer Square for more information.
Market opportunities and/or yields shown are for illustration purposes only and are subject to change without notice. Palmer Square does not represent that these or any other strategy/opportunity will prove to be profitable or that the Fund's investment objective will be met.
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
10
Notes and Disclosures (cont'd)
This material represents an assessment of the market environment at a specific point in time, is subject to change without notice, and should not be relied upon by the reader as research or investment advice. With regard to sources of information, certain of the economic and market information contained herein has been obtained from published sources and/or prepared by third parties. While such sources are believed to be reliable, Palmer Square or their employees or representatives do not assume any responsibility for the accuracy of such information. Palmer Square is under no obligation to verify its accuracy.
The performance presented here is past performance and not indicative of future returns. Different types of investments involve varying degrees of risk and there can be no assurance that any specific investment will be profitable. Please note that the performance of the funds may not be comparable to the performance of any index shown. Palmer Square has not verified, and is under no obligation to verify, the accuracy of these returns. Past performance does not guarantee future results.
Collateralized Loan Obligations Risk - The Fund may invest in CLOs. The Fund is subject to asset manager, legal and regulatory, limited recourse, liquidity, redemption, and reinvestment risks as a result of the structure of CLOs in which the Fund may invest. A CLO's performance is linked to the expertise of the CLO manager and its ability to manage the CLO portfolio. Changes in the regulation of CLOs may adversely affect the value of the CLO investments held by the Fund and the ability of the Fund to execute its investment strategy. CLO debt is payable solely from the proceeds of the CLO's underlying assets and, therefore, if the income from the underlying loans is insufficient to make payments on the CLO debt, no other assets will be available for payment. CLO debt securities may be subject to redemption and the timing of redemptions may adversely affect the returns on CLO debt.
The CLO manager may not find suitable assets in which to invest and the CLO manager's opportunities to invest may be limited. The risks of an investment in a collateralized debt obligation depend largely on the type of the collateral securities and the class of the debt obligation in which the Fund invests. Collateralized debt obligations are generally subject to credit, interest rate, valuation, prepayment and extension risks. These securities are also subject to risk of default on the underlying asset, particularly during periods of economic downturn. Defaults, downgrades, or perceived declines in creditworthiness of an issuer or guarantor of a debt security held by the Fund, or a counterparty to a financial contract with the Fund, can affect the value of the Fund's portfolio. Credit loss can vary depending on subordinated securities and non-subordinated securities.
If interest rates fall, an issuer may exercise its right to prepay their securities. If this happens, the Fund will not benefit from the rise in market price, and will reinvest prepayment proceeds at a later time. The Fund may lose any premium it paid on the security. If interest rates rise, repayments of fixed income securities may occur more slowly than anticipated by the market which may result in driving the prices of these securities down. The Fund is "non-diversified," meaning the Fund may invest a larger percentage of its assets in the securities of a smaller number of issuers than a diversified fund. Investment in securities of a limited number of issuers exposes the Fund to greater market risk and potential losses than if its assets were diversified among the securities of a greater number of issuers.
Foreign investments present additional risk due to currency fluctuations, economic and political factors, government regulations, differences in accounting standards and other factors. Investments in emerging markets involve even greater risks. High yield securities, commonly referred to as "junk bonds," are rated below investment grade by at least one of Moody's, S&P or Fitch (or if unrated, determined by the Fund's advisor to be of comparable credit quality high yield securities).
The Palmer Square Opportunistic Income Fund is distributed by Foreside Fund Services LLC.
Palmer Square Capital Management LLC ("Palmer Square") is an SEC registered investment adviser with its principal place of business in the State of Kansas. Registration of an investment adviser does not imply a certain level of skill or training. Palmer Square and its representatives are in compliance with the current registration and notice filing requirements imposed upon registered investment advisers by those states in which Palmer Square maintains clients. Palmer Square may only transact business in those states in which it is notice filed, or qualifies for an exemption or exclusion from notice filing requirements. Any subsequent, direct communication by Palmer Square with a prospective client shall be conducted by a representative that is either registered or qualifies for an exemption or exclusion from registration in the state where the prospective client resides. For additional information about Palmer Square, including fees and services, send for our disclosure statement as set forth on Form ADV using the contact information herein or refer to the Investment Adviser Public Disclosure web site (www.adviserinfo.sec.gov). Please read the disclosure statement carefully before you invest or send money.
Investors should consider the investment objectives, risks, charges and expenses carefully before investing. For a prospectus, or summary prospectus, that contains this and other information about the Funds, call 866-933-9033 or visit our website at www.palmersquarefunds.com. Please read the prospectus carefully before investing. An investment in the Fund is not designed to be a complete investment program and should be considered speculative. Investing in the Fund entails substantial risk and may result in a loss of some or all of the amount invested. An investment in the Fund is not appropriate for investors with a short-term investing horizon and/or cannot bear the loss of some or all of their investment.
| Palmer Square Capital Management LLC | 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205 | www.palmersquarefunds.com |
11
Palmer Square Opportunistic Income Fund
FUND PERFORMANCE at July 31, 2024 (Unaudited)
This graph compares a hypothetical $250,000 investment in the Fund's shares, made at its inception, with a similar investment in the Bloomberg Barclays US Aggregate Bond Index. Results include the reinvestment of all dividends and capital gains.
The Bloomberg Barclays US Aggregate Bond Index is an unmanaged index of publicly issued investment grade corporate, US Treasury and government agency securities with remaining maturities of one to three years. The index does not reflect expenses, fees or sales charge, which would lower performance. The index is unmanaged and it is not possible to invest in an index.
| Average Annual Total Return as of July 31, 2024 | 1 Year | 5 Years | Since Inception | Inception Date |
| Palmer Square Opportunistic Income Fund | 15.82% | 7.24% | 5.71% | 8/29/14 |
| Bloomberg Barclays US Aggregate Bond Index | 5.10% | 0.19% | 1.51% | 8/29/14 |
The performance data quoted here represents past performance and past performance is not a guarantee of future results. Investment return and principal value 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. The most recent month end performance may be obtained by calling (866) 933-9033.
Expense ratio for the Fund was 2.28%, which was the amount stated in the current prospectus dated November 30, 2023. For the Fund's current one year expense ratios, please refer to the Financial Highlights Section of this report. The Advisor has contractually agreed to waive or reduce its fee and/or to absorb other operating expenses (excluding taxes, leverage interest, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses, expenses incurred in connection with any merger or reorganization, and extraordinary expenses such as litigation expenses) do not exceed 1.50% of the Fund's average daily net assets. In the absence of such waivers, the Fund's returns would be lower. This agreement is in effect until December 1, 2024, and it may be terminated before that date only by the Fund's Board of Trustees.
Returns reflect the reinvestment of distributions made by the Fund, if any. The graph and the performance table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
12
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BANK LOANS - 18.4% | ||||||||
| 734,694 |
Acrisure LLC 8.594% (1-Month Term SOFR+325 basis points), 11/6/20302,3,4 |
$ | 734,889 | |||||
| 500,000 |
Ahead DB Holdings LLC 9.585% (3-Month Term SOFR+425 basis points), 2/3/20312,3,4 |
501,920 | ||||||
| 1,238,125 |
AI Aqua Merger Sub, Inc. 8.843% (1-Month Term SOFR+350 basis points), 7/31/20282,3,4 |
1,243,308 | ||||||
| 746,084 |
Aimbridge Acquisition Co., Inc. 9.208% (1-Month Term SOFR+375 basis points), 2/2/20262,3,4 |
731,087 | ||||||
| 638,380 |
Alliance Laundry Systems LLC 8.899% (3-Month Term SOFR+350 basis points), 10/8/20272,3,4 |
643,219 | ||||||
| 602,276 |
Alliant Holdings Intermediate LLC 8.845% (1-Month Term SOFR+350 basis points), 11/6/20302,3,4 |
605,513 | ||||||
| 500,000 |
American Rock Salt Co. LLC 12.859% (1-Month Term SOFR+725 basis points), 6/11/20292,4 |
392,813 | ||||||
| 496,256 |
Amynta Agency Borrower, Inc. 9.094% (1-Month Term SOFR+375 basis points), 2/28/20282,3,4 |
497,941 | ||||||
| 475,707 |
AP Gaming I LLC 9.094% (1-Month Term SOFR+400 basis points), 2/15/20292,3,4 |
479,721 | ||||||
| 496,250 |
Aretec Group, Inc. 9.344% (1-Month Term SOFR+400 basis points), 8/9/20302,3,4 |
488,858 | ||||||
| 748,125 |
AssuredPartners, Inc. 8.844% (1-Month Term SOFR+350 basis points), 2/14/20312,3,4 |
751,495 | ||||||
| 750,000 |
Astoria Energy LLC 6.615% (1-Month Term SOFR+350 basis points), 12/10/20272,3,4 |
752,520 | ||||||
| 159,863 |
Asurion LLC 8.708% (1-Month Term SOFR+325 basis points), 12/23/20262,3,4 |
159,497 | ||||||
| 734,943 |
Autokiniton U.S. Holdings, Inc. 9.458% (1-Month Term SOFR+400 basis points), 4/6/20282,3,4 |
740,323 | ||||||
| 500,000 |
B&G Foods, Inc. 3.500% (1-Month Term SOFR+350 basis points), 10/10/20292,3,4 |
496,018 | ||||||
| 738,750 |
Barracuda Networks, Inc. 9.814% (3-Month Term SOFR+450 basis points), 8/15/20292,3,4 |
716,421 | ||||||
| 294,568 |
Birkenstock U.S. BidCo, Inc. 8.840% (3-Month Term SOFR+325 basis points), 4/28/20282,3,4 |
295,894 | ||||||
| 463,568 |
Brightview Landscapes LLC 7.835% (1-Month Term SOFR+250 basis points), 4/20/20292,3,4 |
464,147 | ||||||
| 750,000 |
Camelot U.S. Acquisition LLC 2.750% (1-Month Term SOFR+275 basis points), 1/31/20312,3,4 |
751,594 | ||||||
| 290,250 |
CCI Buyer, Inc. 9.335% (3-Month Term SOFR+400 basis points), 12/17/20272,3,4 |
290,825 | ||||||
| 150,000 |
CCS-CMGC Holdings, Inc. 14.609% (3-Month USD Libor+900 basis points), 10/1/20262,3,4 |
73,688 | ||||||
| 498,750 |
Cengage Learning Inc 9.538% (1-Month Term SOFR+425 basis points), 3/24/20312,3,4 |
501,555 |
13
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BANK LOANS (Continued) | ||||||||
| 498,750 |
Century DE Buyer LLC 9.330% (3-Month Term SOFR+400 basis points), 10/30/20302,3,4 |
$ | 501,947 | |||||
| CHG Healthcare Services, Inc. | ||||||||
| 750,000 | 8.683% (1-Month Term SOFR+325 basis points), 9/29/20282,3,4 | 751,912 | ||||||
| 746,250 | 9.094% (3-Month Term SOFR+375 basis points), 9/29/20282,3,4 | 748,235 | ||||||
| 497,500 |
CPM Holdings, Inc. 9.843% (1-Month Term SOFR+450 basis points), 9/28/20282,3,4 |
490,764 | ||||||
| 740,655 |
Creative Artists Agency LLC 8.594% (1-Month Term SOFR+325 basis points), 11/27/20282,3,4 |
745,284 | ||||||
| 800,000 |
Dedalus Finance GmbH 7.612% (6-Month Euribor+375 basis points), 7/17/20272,4 |
858,420 | ||||||
| 734,694 |
Deerfield Dakota Holding LLC 9.085% (3-Month Term SOFR+375 basis points), 4/9/20272,3,4 |
735,568 | ||||||
| 733,040 |
Dotdash Meredith, Inc. 9.443% (1-Month Term SOFR+400 basis points), 12/1/20282,3,4 |
734,261 | ||||||
| 723,811 |
ECI Macola/Max Holding LLC 9.085% (1-Month Term SOFR+375 basis points), 5/31/20302,3,4 |
729,468 | ||||||
| 750,000 |
Edgewater Generation LLC 4.250% (1-Month Term SOFR+425 basis points), 7/26/20302,3,4 |
759,844 | ||||||
| 488,444 |
EnergySolutions LLC 9.094% (1-Month Term SOFR+400 basis points), 9/23/20302,3,4 |
492,515 | ||||||
| 742,311 |
Ensemble RCM LLC 8.330% (3-Month Term SOFR+300 basis points), 8/1/20292,3,4 |
746,070 | ||||||
| 742,405 |
EP Purchaser LLC 9.096% (3-Month Term SOFR+350 basis points), 11/6/20282,3,4 |
745,453 | ||||||
| 750,000 |
EPIC Y-Grade Services LP 11.068% (3-Month Term SOFR+575 basis points), 6/29/20292,3,4 |
751,815 | ||||||
| 618,778 |
EW Scripps Co. 8.458% (1-Month Term SOFR+300 basis points), 1/7/20282,3,4 |
554,753 | ||||||
| 733,125 |
Fertitta Entertainment LLC 9.079% (1-Month Term SOFR+375 basis points), 1/29/20292,3,4 |
735,761 | ||||||
| 740,596 |
Filtration Group Corp. 8.958% (1-Month Term SOFR+350 basis points), 10/23/20282,3,4 |
745,688 | ||||||
| 731,729 |
Flexera Software LLC 8.826% (1-Month Term SOFR+350 basis points), 3/3/20282,3,4 |
735,527 | ||||||
| 703,125 |
Forest City Enterprises LP 8.958% (1-Month Term SOFR+350 basis points), 12/8/20252,3,4 |
662,780 | ||||||
| 750,000 |
Fortress Intermediate 3, Inc. 9.096% (1-Month Term SOFR+375 basis points), 6/27/20312,3,4 |
751,406 | ||||||
| 342,280 |
Generation Bridge Northeast LLC 8.844% (1-Month Term SOFR+425 basis points), 8/22/20292,3,4 |
345,418 | ||||||
| 746,250 |
Genesys Cloud Services Holdings II LLC 9.208% (1-Month Term SOFR+375 basis points), 12/1/20272,3,4 |
752,157 |
14
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BANK LOANS (Continued) | ||||||||
| 750,000 |
Grant Thornton LLP/Chicago 8.597% (1-Month Term SOFR+325 basis points), 5/30/20312,3,4 |
$ | 752,816 | |||||
| 579,124 |
Great Outdoors Group LLC 9.208% (1-Month Term SOFR+375 basis points), 3/6/20282,3,4 |
579,124 | ||||||
| 750,000 |
Grinding Media, Inc. 4.000% (3-Month Term SOFR+400 basis points), 10/12/20282,3,4 |
751,875 | ||||||
| 500,000 |
GTCR Everest Borrower LLC 3.000% (1-Month Term SOFR+300 basis points), 6/3/20312,3,4 |
496,250 | ||||||
| 500,000 |
GTCR W Merger Sub LLC 8.335% (1-Month Term SOFR+300 basis points), 1/31/20312,3,4 |
501,837 | ||||||
| 500,000 |
Hamilton Projects Acquiror LLC 9.094% (1-Month Term SOFR+375 basis points), 5/30/20312,3,4 |
505,625 | ||||||
| 744,375 |
HireRight Holdings Corp. 9.335% (3-Month Term SOFR+400 basis points), 9/30/20302,3,4 |
746,411 | ||||||
| 496,562 |
HUB International Ltd. 8.532% (3-Month Term SOFR+325 basis points), 6/20/20302,3,4 |
497,742 | ||||||
| 738,550 |
Hudson River Trading LLC 8.458% (1-Month Term SOFR+300 basis points), 3/20/20282,3,4 |
739,602 | ||||||
| 744,347 |
Hyperion Refinance Sarl 9.344% (1-Month Term SOFR+400 basis points), 4/18/20302,3,4,5 |
746,557 | ||||||
| 746,249 |
INEOS Enterprises Holdings U.S. Finco LLC 9.197% (3-Month Term SOFR+375 basis points), 7/8/20302,4 |
749,047 | ||||||
| 458,425 |
INEOS U.S. Finance LLC 8.592% (1-Month Term SOFR+375 basis points), 11/8/20272,3,4 |
459,143 | ||||||
| 445,500 |
INEOS U.S. Petrochem LLC 9.194% (1-Month Term SOFR+375 basis points), 3/1/20302,3,4 |
445,685 | ||||||
| 632,198 |
Ivanti Software, Inc. 9.833% (3-Month Term SOFR+425 basis points), 12/1/20272,3,4 |
530,967 | ||||||
| 650,864 |
Kestrel Acquisition LLC 9.708% (1-Month Term SOFR+425 basis points), 6/30/20252,3,4 |
654,528 | ||||||
| 750,000 |
LBM Acquisition LLC 3.750% (1-Month Term SOFR+375 basis points), 6/6/20312,3,4 |
724,875 | ||||||
| 750,000 |
Leia Finco U.S. LLC 3.250% (1-Month Term SOFR+325 basis points), 7/2/20312,3,4 |
741,799 | ||||||
| 736,903 |
Light & Wonder International, Inc. 7.536% (1-Month Term SOFR+225 basis points), 4/16/20292,3,4 |
742,890 | ||||||
| Lightstone Holdco LLC | ||||||||
| 1,120,162 | 11.080% (1-Month Term SOFR+575 basis points), 1/29/20272,3,4 | 1,121,915 | ||||||
| 63,358 | 11.080% (1-Month Term SOFR+575 basis points), 1/29/20272,3,4 | 63,457 | ||||||
| 500,000 |
Lorca Co.-Borrower LLC 3.500% (1-Month Term SOFR+350 basis points), 4/17/20312,3,4 |
502,500 | ||||||
| 750,000 |
Mariner Wealth Advisors LLC 3.000% (1-Month Term SOFR+300 basis points), 8/18/20282,3,4 |
751,290 |
15
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BANK LOANS (Continued) | ||||||||
| 672,870 |
Medline Borrower LP 8.094% (1-Month Term SOFR+275 basis points), 10/23/20282,3,4 |
$ | 675,730 | |||||
| 742,500 |
MH Sub I LLC 9.594% (1-Month Term SOFR+425 basis points), 5/3/20282,3,4 |
741,605 | ||||||
| 746,173 |
Midwest Veterinary Partners LLC 9.076% (1-Month Term SOFR+375 basis points), 4/27/20282,3,4 |
749,158 | ||||||
| 750,000 |
Mitchell International, Inc. 8.594% (1-Month Term SOFR+325 basis points), 6/17/20312,3,4 |
743,156 | ||||||
| 498,750 |
Motion Finco Sarl 8.835% (1-Month Term SOFR+350 basis points), 11/30/20292,3,4,5 |
500,882 | ||||||
| 734,967 |
NAB Holdings LLC 8.097% (1-Month Term SOFR+275 basis points), 11/24/20282,3,4 |
736,738 | ||||||
| 748,125 |
Nexus Buyer LLC 9.844% (1-Month Term SOFR+450 basis points), 12/13/20282,3,4 |
749,341 | ||||||
| 497,494 |
Nouryon USA LLC 8.826% (1-Month Term SOFR+350 basis points), 4/3/20282,3,4 |
500,994 | ||||||
| 498,750 |
OMNIA Partners LLC 9.074% (1-Month Term SOFR+375 basis points), 7/25/20302,3,4 |
500,738 | ||||||
| 750,000 |
OneDigital Borrower LLC 8.587% (1-Month Term SOFR+325 basis points), 7/2/20312,3,4 |
748,695 | ||||||
| 500,000 |
Outcomes Group Holdings, Inc. 9.586% (1-Month Term SOFR+425 basis points), 5/6/20312,3,4 |
502,500 | ||||||
| 618,750 |
Ovg Business Services LLC 8.345% (1-Month Term SOFR+300 basis points), 6/25/20312,3,4 |
619,913 | ||||||
| 750,000 |
Peer Holding III B.V. 8.332% (1-Month Term SOFR+325 basis points), 10/28/20303,4,5 |
754,924 | ||||||
| 730,506 |
Peraton Corp. 9.194% (1-Month Term SOFR+375 basis points), 2/1/20282,3,4 |
731,773 | ||||||
| 716,322 |
Petco Health & Wellness Co., Inc. 8.846% (3-Month Term SOFR+325 basis points), 3/6/20282,3,4 |
663,791 | ||||||
| 748,125 |
Phoenix Guarantor, Inc. 8.594% (1-Month Term SOFR+325 basis points), 2/21/20312,3,4 |
749,251 | ||||||
| 734,887 |
PODS LLC 8.591% (1-Month Term SOFR+300 basis points), 3/31/20282,3,4 |
691,392 | ||||||
| 733,125 |
Pre-Paid Legal Services, Inc. 9.208% (1-Month Term SOFR+375 basis points), 12/15/20282,3,4 |
734,243 | ||||||
| 748,125 |
Project Alpha Intermediate Holding, Inc. 9.072% (3-Month Term SOFR+375 basis points), 10/28/20302,3,4 |
752,176 | ||||||
| 746,154 |
Project Boost Purchaser LLC 8.786% (1-Month Term SOFR+350 basis points), 7/2/20312,3,4 |
748,642 | ||||||
| 301,938 |
Prometric Holdings, Inc. 10.208% (1-Month Term SOFR+475 basis points), 1/31/20282,3,4 |
304,127 | ||||||
| 498,734 |
Propulsion BC Newco LLC 9.085% (3-Month Term SOFR+375 basis points), 9/14/20292,3,4 |
501,674 |
16
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BANK LOANS (Continued) | ||||||||
| 733,040 |
RealPage, Inc. 8.458% (1-Month Term SOFR+300 basis points), 4/24/20282,3,4 |
$ | 716,547 | |||||
| 731,203 |
Red Planet Borrower LLC 8.944% (1-Month Term SOFR+375 basis points), 9/29/20282,3,4 |
701,695 | ||||||
| 750,000 |
Redstone Holdco 2 LP 13.180% (1-Month Term SOFR+775 basis points), 8/6/20292,3,4 |
595,155 | ||||||
| 744,384 |
Renaissance Holdings Corp. 9.597% (1-Month Term SOFR+425 basis points), 4/30/20302,3,4 |
747,124 | ||||||
| 735,288 |
Reverb Buyer, Inc. 8.694% (3-Month Term SOFR+325 basis points), 11/1/20282,3,4 |
589,282 | ||||||
| 744,375 |
Rocket Software, Inc. 10.094% (1-Month Term SOFR+475 basis points), 11/28/20282,3,4 |
748,123 | ||||||
| 500,000 |
Rohm Holding GmbH 5.000% (6-Month Euribor+500 basis points), 1/29/20292,3,4 |
522,148 | ||||||
| 746,250 |
Severin Acquisition LLC 8.330% (1-Month Term SOFR+300 basis points), 8/1/20252,3,4 |
748,933 | ||||||
| 975,310 |
Surf Holdings LLC 8.960% (1-Month Term SOFR+350 basis points), 3/5/20272,3,4 |
979,709 | ||||||
| Touchdown Acquirer, Inc. | ||||||||
| 134,731 | 9.304% (3-Month Term SOFR+400 basis points), 2/21/20312,3,4 | 135,110 | ||||||
| 615,269 | 9.326% (3-Month Term SOFR+400 basis points), 2/21/20312,3,4 | 617,001 | ||||||
| 884,208 |
Traverse Midstream Partners LLC 8.830% (6-Month Term SOFR+425 basis points), 9/27/20242,3,4 |
888,960 | ||||||
| 459,574 |
UGI Energy Services LLC 7.844% (1-Month Term SOFR+250 basis points), 2/22/20302,3,4 |
461,385 | ||||||
| 738,432 |
UKG, Inc. 8.555% (1-Month Term SOFR+350 basis points), 2/10/20312,3,4 |
741,496 | ||||||
| 735,000 |
Univision Communications, Inc. 9.585% (3-Month Term SOFR+425 basis points), 6/25/20292,3,4 |
730,006 | ||||||
| 550,000 |
VFH Parent LLC 8.094% (1-Month Term SOFR+275 basis points), 6/23/20312,3,4 |
551,202 | ||||||
| 583,500 |
Vision Solutions, Inc. 9.514% (3-Month Term SOFR+400 basis points), 4/24/20282,3,4 |
566,517 | ||||||
| 750,000 |
VS Buyer LLC 8.579% (1-Month Term SOFR+325 basis points), 4/14/20312,3,4 |
753,986 | ||||||
| 1,000,000 |
Wec U.S. Holdings Ltd. 8.094% (1-Month Term SOFR+275 basis points), 1/27/20312,3,4 |
1,003,245 | ||||||
| 733,125 |
Whatabrands LLC 8.094% (1-Month Term SOFR+275 basis points), 8/3/20282,3,4 |
734,602 | ||||||
| 500,000 |
Zacapa SARL 4.000% (3-Month Term SOFR+400 basis points), 3/22/20292,3,4,5 |
500,425 |
17
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BANK LOANS (Continued) | ||||||||
| 748,125 |
Zelis Payments Buyer, Inc. 8.094% (1-Month Term SOFR+275 basis points), 9/28/20292,3,4 |
$ | 750,111 | |||||
| Total Bank Loans | ||||||||
| (Cost $70,099,132) | 70,378,432 | |||||||
| BONDS - 84.5% | ||||||||
| ASSET-BACKED SECURITIES - 78.9% | ||||||||
| 522 Funding CLO Ltd. | ||||||||
| 1,000,000 | Series 2020-6A, Class F, 13.585% (3-Month Term SOFR+830.16 basis points), 10/23/20343,4,6 | 907,779 | ||||||
| 1,500,000 | Series 2019-5A, Class ER, 12.061% (3-Month Term SOFR+676 basis points), 4/15/20353,4,6 | 1,485,509 | ||||||
| 4,200,000 |
AGL CLO 22 Ltd. Series 2022-22A, Class A, 7.182% (3-Month Term SOFR+190 basis points), 10/20/20353,4,6 |
4,207,077 | ||||||
| 1,000,000 |
AIMCO CLO Ltd. Series 2019-10A, Class ARR, 6.692% (3-Month Term SOFR+141 basis points), 7/22/20373,4,6 |
1,004,394 | ||||||
| 1,500,000 |
Alinea CLO Ltd. Series 2018-1A, Class D, 8.644% (3-Month Term SOFR+336.16 basis points), 7/20/20313,4,6 |
1,509,669 | ||||||
| 1,500,000 |
AMMC CLO 22 Ltd. Series 2018-22A, Class D, 8.246% (3-Month Term SOFR+296.16 basis points), 4/25/20313,4,6 |
1,506,185 | ||||||
| 1,000,000 |
Anchorage Credit Funding Ltd. Series 2015-1A, Class ERV, 6.700%, 7/28/20373,6 |
964,006 | ||||||
| 1,050,000 |
Annisa CLO Ltd. Series 2016-2A, Class DRR, 8.082% (3-Month Term SOFR+280 basis points), 7/20/20313,4,6 |
1,051,288 | ||||||
| Apidos CLO | ||||||||
| 1,900,000 | Series 2018-18A, Class E, 11.244% (3-Month Term SOFR+596.16 basis points), 10/22/20303,4,6 | 1,912,605 | ||||||
| 1,250,000 | Series 2017-28A, Class D, 11.044% (3-Month Term SOFR+576.16 basis points), 1/20/20313,4,6 | 1,252,423 | ||||||
| 1,750,000 | Series 2015-20A, Class DR, 11.248% (3-Month Term SOFR+596.16 basis points), 7/16/20313,4,6 | 1,746,246 | ||||||
| 1,500,000 | Series XXXA, Class C, 8.541% (3-Month Term SOFR+326.16 basis points), 10/18/20313,4,6 | 1,495,996 | ||||||
| Apidos CLO | ||||||||
| 1,500,000 | Series 2018-29A, Class C, 8.296% (3-Month Term SOFR+301.16 basis points), 7/25/20303,4,6 | 1,506,298 | ||||||
| 2,250,000 | Series 2017-28A, Class C, 8.044% (3-Month Term SOFR+276.16 basis points), 1/20/20313,4,6 | 2,241,347 |
18
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 1,000,000 | Series 2020-33A, Class ER, 11.895% (3-Month Term SOFR+661.16 basis points), 10/24/20343,4,6 | $ | 1,006,057 | |||||
| Ares CLO Ltd. | ||||||||
| 1,500,000 | Series 2016-40A, Class DR, 11.913% (3-Month Term SOFR+661.16 basis points), 1/15/20293,4,6 | 1,497,367 | ||||||
| 1,500,000 | Series 2018-47A, Class D, 8.263% (3-Month Term SOFR+296.16 basis points), 4/15/20303,4,6 | 1,505,748 | ||||||
| 650,000 | Series 2015-38A, Class DR, 8.044% (3-Month Term SOFR+276.16 basis points), 4/20/20303,4,6 | 653,123 | ||||||
| 875,000 | Series 2014-32RA, Class C, 8.484% (3-Month Term SOFR+316.16 basis points), 5/15/20303,4,6 | 877,857 | ||||||
| 2,150,000 | Series 2018-50A, Class D, 8.463% (3-Month Term SOFR+316.16 basis points), 1/15/20323,4,6 | 2,159,512 | ||||||
| 1,000,000 |
ASSURANT CLO Ltd. Series 2017-1A, Class ER, 12.744% (3-Month Term SOFR+746.16 basis points), 10/20/20343,4,6 |
974,992 | ||||||
| 1,000,000 |
Bain Capital Credit CLO Series 2018-2A, Class DR, 0.000% (3-Month Term SOFR+295 basis points), 7/19/20313,4,6 |
1,000,000 | ||||||
| Ballyrock CLO Ltd. | ||||||||
| 750,000 | Series 2019-1A, Class DR, 12.313% (3-Month Term SOFR+701.16 basis points), 7/15/20323,4,6 | 753,302 | ||||||
| 1,100,000 | Series 2023-23A, Class D, 13.455% (3-Month Term SOFR+817 basis points), 4/25/20363,4,6 | 1,142,360 | ||||||
| 1,000,000 |
Barings CLO Ltd. Series 2016-2A, Class DR2, 8.694% (3-Month Term SOFR+341.16 basis points), 1/20/20323,4,6 |
1,005,499 | ||||||
| 1,775,000 |
Barings Clo Ltd. Series 2015-2A, Class ER, 11.994% (3-Month Term SOFR+671.16 basis points), 10/20/20303,4,6 |
1,773,175 | ||||||
| Barings CLO Ltd. | ||||||||
| 2,500,000 | Series 2018-4A, Class D, 8.463% (3-Month Term SOFR+316.16 basis points), 10/15/20303,4,6 | 2,516,203 | ||||||
| 1,000,000 | Series 2015-2A, Class DR, 8.494% (3-Month Term SOFR+321.16 basis points), 10/20/20303,4,6 | 1,003,852 | ||||||
| 1,000,000 | Series 2015-IA, Class DR, 8.144% (3-Month Term SOFR+286.16 basis points), 1/20/20313,4,6 | 1,003,151 | ||||||
| 1,500,000 |
Barings Euro CLO DAC Series 2015-1X, Class DRR, 7.335% (3-Month Euribor+365 basis points), 7/25/20353,4 |
1,632,988 | ||||||
| 500,000 |
Battalion CLO Ltd. Series 2016-10A, Class CR2, 8.995% (3-Month Term SOFR+371.16 basis points), 1/25/20353,4,6 |
483,509 |
19
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 1,000,000 |
Bean Creek CLO Ltd. Series 2015-1A, Class DR, 8.294% (3-Month Term SOFR+301.16 basis points), 4/20/20313,4,6 |
$ | 1,004,092 | |||||
| Benefit Street Partners CLO Ltd. | ||||||||
| 1,050,000 | Series 2017-12A, Class C, 8.613% (3-Month Term SOFR+331.16 basis points), 10/15/20303,4,6 | 1,054,162 | ||||||
| 2,000,000 | Series 2017-12A, Class D, 11.973% (3-Month Term SOFR+667.16 basis points), 10/15/20303,4,6 | 2,009,805 | ||||||
| 500,000 | Series 2015-8A, Class DR, 11.144% (3-Month Term SOFR+586.16 basis points), 1/20/20313,4,6 | 500,130 | ||||||
| 1,250,000 | Series 2018-14A, Class E, 10.894% (3-Month Term SOFR+561.16 basis points), 4/20/20313,4,6 | 1,242,477 | ||||||
| 1,000,000 | Series 2019-18A, Class DR, 8.963% (3-Month Term SOFR+366.16 basis points), 10/15/20343,4,6 | 1,006,038 | ||||||
| 1,500,000 | Series 2020-21A, Class ER, 12.263% (3-Month Term SOFR+696.16 basis points), 10/15/20343,4,6 | 1,513,539 | ||||||
| 1,000,000 | Series 2019-18A, Class ER, 12.313% (3-Month Term SOFR+701.16 basis points), 10/15/20343,4,6 | 1,010,629 | ||||||
| 1,000,000 |
BlueMountain CLO Ltd. Series 2020-29A, Class D2R, 9.796% (3-Month Term SOFR+451.16 basis points), 7/25/20343,4,6 |
1,003,034 | ||||||
| 1,500,000 |
Bristol Park CLO Ltd. Series 2016-1A, Class ER, 12.563% (3-Month Term SOFR+726.16 basis points), 4/15/20293,4,6 |
1,507,330 | ||||||
| Bryant Park Funding Ltd. | ||||||||
| 750,000 | Series 2023-21A, Class E, 13.749% (3-Month Term SOFR+847 basis points), 10/18/20363,4,6 | 772,261 | ||||||
| 1,000,000 | Series 2024-22A, Class D, 9.612% (3-Month Term SOFR+430 basis points), 4/15/20373,4,6 | 1,021,072 | ||||||
| 1,000,000 | Series 2024-22A, Class E, 12.442% (3-Month Term SOFR+713 basis points), 4/15/20373,4,6 | 1,014,743 | ||||||
| 1,000,000 | Series 2024-23A, Class E, 12.057% (3-Month Term SOFR+673 basis points), 5/15/20373,4,6 | 998,704 | ||||||
| 500,000 |
Canyon Capital CLO Ltd. Series 2014-1A, Class CR, 8.267% (3-Month Term SOFR+301.16 basis points), 1/30/20313,4,6 |
501,262 | ||||||
| Carlyle Global Market Strategies CLO Ltd. | ||||||||
| 1,000,000 | Series 2014-4RA, Class D, 11.213% (3-Month Term SOFR+591.16 basis points), 7/15/20303,4,6 | 982,700 | ||||||
| 1,000,000 | Series 2013-1A, Class DR, 12.064% (3-Month Term SOFR+674.16 basis points), 8/14/20303,4,6 | 1,005,015 | ||||||
| 750,000 | Series 2014-1A, Class DR, 8.147% (3-Month Term SOFR+286.16 basis points), 4/17/20313,4,6 | 750,415 |
20
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 2,000,000 | Series 2014-2RA, Class C, 8.384% (3-Month Term SOFR+306.16 basis points), 5/15/20313,4,6 | $ | 2,010,700 | |||||
| CBAM Ltd. | ||||||||
| 1,000,000 | Series 2017-1A, Class E, 12.044% (3-Month Term SOFR+676.16 basis points), 7/20/20303,4,6 | 1,007,811 | ||||||
| 2,000,000 | Series 2017-4A, Class D, 8.163% (3-Month Term SOFR+286.16 basis points), 1/15/20313,4,6 | 2,002,627 | ||||||
| 2,000,000 |
CIFC European Funding CLO Series 3X, Class D, 7.285% (3-Month Euribor+360 basis points), 1/15/20343,4 |
2,170,794 | ||||||
| CIFC Funding Ltd. | ||||||||
| 2,000,000 | Series 2015-3A, Class ER, 10.491% (3-Month Term SOFR+521.16 basis points), 4/19/20293,4,6 | 2,014,522 | ||||||
| 1,000,000 | Series 2014-2RA, Class B2, 11.235% (3-Month Term SOFR+595.16 basis points), 4/24/20303,4,6 | 995,068 | ||||||
| 2,000,000 | Series 2017-4A, Class D, 11.645% (3-Month Term SOFR+636.16 basis points), 10/24/20303,4,6 | 2,009,986 | ||||||
| 1,500,000 | Series 2013-4A, Class DRR, 8.325% (3-Month Term SOFR+306.16 basis points), 4/27/20313,4,6 | 1,504,131 | ||||||
| 1,000,000 | Series 2013-4A, Class ERR, 10.975% (3-Month Term SOFR+571.16 basis points), 4/27/20313,4,6 | 999,858 | ||||||
| 1,500,000 | Series 2018-3A, Class D, 8.391% (3-Month Term SOFR+311.16 basis points), 7/18/20313,4,6 | 1,504,345 | ||||||
| 500,000 | Series 2018-3A, Class E, 11.041% (3-Month Term SOFR+576.16 basis points), 7/18/20313,4,6 | 501,618 | ||||||
| 1,000,000 | Series 2016-1A, Class D2RR, 9.794% (3-Month Term SOFR+451.16 basis points), 10/21/20313,4,6 | 995,089 | ||||||
| 997,000 | Series 2014-3A, Class ER2, 11.644% (3-Month Term SOFR+636.16 basis points), 10/22/20313,4,6 | 992,085 | ||||||
| 2,500,000 | Series 2021-4A, Class A, 6.613% (3-Month Term SOFR+131.16 basis points), 7/15/20333,4,6 | 2,500,000 | ||||||
| 1,500,000 | Series 2019-6A, Class A1R, 6.778% (3-Month Term SOFR+145 basis points), 7/16/20373,4,6 | 1,505,179 | ||||||
| 2,000,000 | Series 2021-4A, Class AR, 0.000% (3-Month Term SOFR+136 basis points), 7/23/20373,4,6 | 2,000,000 | ||||||
| 1,000,000 |
Clear Creek CLO Series 2015-1A, Class DR, 8.494% (3-Month Term SOFR+321.16 basis points), 10/20/20303,4,6 |
1,001,264 | ||||||
| Crestline Denali CLO Ltd. | ||||||||
| 1,300,000 | Series 2018-1A, Class D, 8.144% (3-Month Term SOFR+286.16 basis points), 1/20/20303,4,6 | 1,303,250 |
21
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 1,250,000 | Series 2017-1A, Class D, 9.274% (3-Month Term SOFR+399.16 basis points), 4/20/20303,4,6 | $ | 1,251,740 | |||||
| 1,000,000 | Series 2016-1A, Class DR, 8.895% (3-Month Term SOFR+361.16 basis points), 10/23/20313,4,6 | 996,905 | ||||||
| 2,000,000 |
Cumulus Static CLO Series 2024-1A, Class E, 10.065% (3-Month Euribor+624 basis points), 11/15/20333,4,6 |
2,148,682 | ||||||
| 1,750,000 |
Dartry Park CLO DAC Series 1X, Class CRR, 7.036% (3-Month Euribor+335 basis points), 1/28/20343,4 |
1,900,292 | ||||||
| 1,000,000 |
Denali Capital CLO Ltd. Series 2016-1A, Class DR, 8.313% (3-Month Term SOFR+301.16 basis points), 4/15/20313,4,6 |
996,869 | ||||||
| 1,500,000 |
Dewolf Park CLO Ltd. Series 2017-1A, Class E, 11.763% (3-Month Term SOFR+646.16 basis points), 10/15/20303,4,6 |
1,500,648 | ||||||
| Dryden CLO Ltd. | ||||||||
| 4,000,000 | Series 2020-86A, Class SUB, 0.000%, 7/17/20303,6,7 | 1,880,984 | ||||||
| 750,000 | Series 2018-65A, Class D, 8.641% (3-Month Term SOFR+336.16 basis points), 7/18/20303,4,6 | 749,035 | ||||||
| 995,000 | Series 2018-57A, Class D, 8.134% (3-Month Term SOFR+281.16 basis points), 5/15/20313,4,6 | 985,286 | ||||||
| 330,000 | Series 2018-57A, Class E, 10.784% (3-Month Term SOFR+546.16 basis points), 5/15/20313,4,6 | 309,978 | ||||||
| 1,025,000 | Series 2019-80A, Class DR, 8.386% (3-Month Term SOFR+310 basis points), 1/17/20333,4,6 | 1,005,616 | ||||||
| 1,000,000 | Series 2020-77A, Class ER, 11.457% (3-Month Term SOFR+613.16 basis points), 5/20/20343,4,6 | 948,562 | ||||||
| 1,000,000 | Series 2020-77A, Class FR, 13.177% (3-Month Term SOFR+785.16 basis points), 5/20/20343,4,6 | 872,037 | ||||||
| 1,000,000 | Series 2022-106A, Class D, 11.001% (3-Month Term SOFR+570 basis points), 10/15/20353,4,6 | 1,012,146 | ||||||
| Dryden Euro CLO | ||||||||
| 1,000,000 | Series 2013-29X, Class B2RE, 2.050%, 7/15/20323 | 1,047,335 | ||||||
| 1,000,000 | Series 2021-91X, Class D, 8.524% (3-Month Euribor+485 basis points), 4/18/20353,4 | 1,089,634 | ||||||
| 1,250,000 | Series 2021-103X, Class B2, 7.500%, 1/19/20363 | 1,371,391 | ||||||
| Dryden Senior Loan Fund | ||||||||
| 2,500,000 | Series 2013-30A, Class DR, 8.184% (3-Month Term SOFR+286.16 basis points), 11/15/20283,4,6 | 2,500,089 | ||||||
| 1,000,000 | Series 2013-30A, Class FR, 12.834% (3-Month Term SOFR+751.16 basis points), 11/15/20283,4,6 | 914,441 |
22
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 750,000 | Series 2014-36A, Class DR3, 9.253% (3-Month Term SOFR+395.16 basis points), 4/15/20293,4,6 | $ | 751,564 | |||||
| 963,000 | Series 2014-36A, Class ER2, 12.443% (3-Month Term SOFR+714.16 basis points), 4/15/20293,4,6 | 956,101 | ||||||
| 1,875,000 | Series 2015-38A, Class DR, 8.563% (3-Month Term SOFR+326.16 basis points), 7/15/20303,4,6 | 1,867,114 | ||||||
| 750,000 | Series 2016-45A, Class DR, 8.713% (3-Month Term SOFR+341.16 basis points), 10/15/20303,4,6 | 747,590 | ||||||
| Eaton Vance CLO Ltd. | ||||||||
| 1,575,000 | Series 2015-1A, Class DR, 8.044% (3-Month Term SOFR+276.16 basis points), 1/20/20303,4,6 | 1,579,594 | ||||||
| 500,000 | Series 2014-1RA, Class E, 11.263% (3-Month Term SOFR+596.16 basis points), 7/15/20303,4,6 | 485,160 | ||||||
| 1,500,000 | Series 2013-1A, Class D3R, 12.363% (3-Month Term SOFR+706.16 basis points), 1/15/20343,4,6 | 1,511,217 | ||||||
| 1,000,000 | Series 2020-2A, Class ER, 12.063% (3-Month Term SOFR+676.16 basis points), 1/15/20353,4,6 | 1,007,560 | ||||||
| Elmwood CLO Ltd. | ||||||||
| 1,000,000 | Series 2019-2A, Class DR, 8.544% (3-Month Term SOFR+326.16 basis points), 4/20/20343,4,6 | 1,007,159 | ||||||
| 2,500,000 | Series 2022-1A, Class E, 11.632% (3-Month Term SOFR+635 basis points), 4/20/20353,4,6 | 2,512,648 | ||||||
| 3,500,000 | Series 2020-1A, Class AR, 6.783% (3-Month Term SOFR+146 basis points), 4/18/20373,4,6 | 3,516,786 | ||||||
| 1,000,000 | Series 2019-3A, Class A1RR, 6.701% (3-Month Term SOFR+138 basis points), 7/18/20373,4,6 | 999,916 | ||||||
| 2,500,000 | Series 2020-3A, Class ARR, 6.719% (3-Month Term SOFR+138 basis points), 7/18/20373,4,6 | 2,499,843 | ||||||
| Flatiron CLO Ltd. | ||||||||
| 5,425,000 | Series 2017-1A, Class SUB, 0.000%, 5/15/20303,6,7 | 2,254,420 | ||||||
| 3,500,000 | Series 2018-1A, Class SUB, 0.000%, 4/17/20313,6,7 | 1,628,250 | ||||||
| 750,000 | Series 2021-2A, Class E, 11.763% (3-Month Term SOFR+646.16 basis points), 10/15/20343,4,6 | 757,200 | ||||||
| 1,000,000 | Series 2020-1A, Class ER, 11.731% (3-Month Term SOFR+645 basis points), 5/20/20363,4,6 | 1,003,516 | ||||||
| 1,000,000 |
Galaxy CLO Ltd. Series 2023-32A, Class E, 12.612% (3-Month Term SOFR+733 basis points), 10/20/20363,4,6 |
1,036,156 | ||||||
| 1,000,000 |
Galaxy XXVI CLO Ltd. Series 2018-26A, Class F, 13.588% (3-Month Term SOFR+826.16 basis points), 11/22/20313,4,6 |
964,595 |
23
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| Generate CLO Ltd. | ||||||||
| 2,687,111 | Series 2A, Class AR, 6.694% (3-Month Term SOFR+141.16 basis points), 1/22/20313,4,6 | $ | 2,688,641 | |||||
| 1,250,000 | Series 2A, Class DR, 8.144% (3-Month Term SOFR+286.16 basis points), 1/22/20313,4,6 | 1,255,757 | ||||||
| 750,000 | Series 2A, Class F, 12.794% (3-Month Term SOFR+751.16 basis points), 1/22/20313,4,6 | 754,300 | ||||||
| 1,000,000 | Series 9A, Class E, 12.394% (3-Month Term SOFR+711.16 basis points), 10/20/20343,4,6 | 1,002,532 | ||||||
| 2,000,000 | Series 2023-11A, Class D, 11.033% (3-Month Term SOFR+575 basis points), 4/20/20353,4,6 | 2,023,617 | ||||||
| 1,000,000 | Series 3A, Class D2R, 10.182% (3-Month Term SOFR+490 basis points), 10/20/20363,4,6 | 1,027,531 | ||||||
| 1,250,000 | Series 7A, Class D1R, 9.282% (3-Month Term SOFR+400 basis points), 4/22/20373,4,6 | 1,285,102 | ||||||
| 2,000,000 |
Gilbert Park CLO Ltd. Series 2017-1A, Class E, 11.963% (3-Month Term SOFR+666.16 basis points), 10/15/20303,4,6 |
2,017,007 | ||||||
| 750,000 |
GoldenTree Loan Management EUR CLO DAC Series 5X, Class E, 8.938% (3-Month Euribor+525 basis points), 4/20/20343,4 |
805,658 | ||||||
| GoldenTree Loan Management U.S. CLO Ltd. | ||||||||
| 1,000,000 | Series 2019-5A, Class DRR, 0.000% (3-Month Term SOFR+280 basis points), 10/20/20323,4,6 | 1,000,000 | ||||||
| 1,000,000 | Series 2020-7A, Class FR, 13.294% (3-Month Term SOFR+801.16 basis points), 4/20/20343,4,6 | 1,001,235 | ||||||
| 750,000 | Series 2021-10A, Class F, 13.334% (3-Month Term SOFR+805.16 basis points), 7/20/20343,4,6 | 745,396 | ||||||
| 1,000,000 | Series 2021-9A, Class FR, 13.742% (3-Month Term SOFR+846 basis points), 4/20/20373,4,6 | 1,008,551 | ||||||
| 1,000,000 |
Goldentree Loan Opportunities Ltd. Series 2016-12A, Class DR, 8.444% (3-Month Term SOFR+316.16 basis points), 7/21/20303,4,6 |
999,683 | ||||||
| 1,500,000 |
GoldenTree Loan Opportunities Ltd. Series 2016-12A, Class ER, 10.944% (3-Month Term SOFR+566.16 basis points), 7/21/20303,4,6 |
1,481,905 | ||||||
| 1,500,000 |
Golub Capital Partners CLO Ltd. Series 2024-74A, Class A, 6.815% (3-Month Term SOFR+150 basis points), 7/25/20373,4,6 |
1,501,097 | ||||||
| 500,000 |
Greenwood Park CLO Ltd. Series 2018-1A, Class E, 10.513% (3-Month Term SOFR+521.16 basis points), 4/15/20313,4,6 |
496,265 |
24
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 1,000,000 |
Griffith Park CLO DAC Series 1X, Class DR, 9.350% (3-Month Euribor+552 basis points), 11/21/20313,4 |
$ | 1,082,294 | |||||
| Grippen Park CLO Ltd. | ||||||||
| 4,000,000 | Series 2017-1A, Class SUB, 0.000%, 1/20/20303,6,7 | 944,000 | ||||||
| 1,000,000 | Series 2017-1A, Class E, 11.244% (3-Month Term SOFR+596.16 basis points), 1/20/20303,4,6 | 1,006,953 | ||||||
| 1,000,000 |
Hartwick Park CLO Ltd. Series 2023-1A, Class D, 9.782% (3-Month Term SOFR+450 basis points), 1/21/20363,4,6 |
1,009,491 | ||||||
| Highbridge Loan Management Ltd. | ||||||||
| 850,000 | Series 3A-2014, Class CR, 9.141% (3-Month Term SOFR+386.16 basis points), 7/18/20293,4,6 | 855,855 | ||||||
| 1,250,000 | Series 5A-2015, Class DRR, 8.713% (3-Month Term SOFR+341.16 basis points), 10/15/20303,4,6 | 1,238,254 | ||||||
| 3,500,000 | Series 12A-18, Class SUB, 0.000%, 7/18/20313,6,7 | 697,704 | ||||||
| HPS Loan Management Ltd. | ||||||||
| 1,500,000 | Series 8A-2016, Class DR, 8.444% (3-Month Term SOFR+316.16 basis points), 7/20/20303,4,6 | 1,500,028 | ||||||
| 500,000 | Series 8A-2016, Class ER, 11.044% (3-Month Term SOFR+576.16 basis points), 7/20/20303,4,6 | 497,298 | ||||||
| 1,000,000 | Series 13A-18, Class DR, 8.251% (3-Month Term SOFR+295 basis points), 10/15/20303,4,6 | 1,000,611 | ||||||
| 1,500,000 | Series 6A-2015, Class CR, 8.098% (3-Month Term SOFR+276.16 basis points), 2/5/20313,4,6 | 1,503,278 | ||||||
| 2,000,000 | Series 15A-19, Class ER, 12.082% (3-Month Term SOFR+680 basis points), 1/22/20353,4,6 | 2,009,836 | ||||||
| 1,000,000 |
Invesco CLO Ltd. Series 2022-3A, Class D, 10.282% (3-Month Term SOFR+500 basis points), 10/22/20353,4,6 |
1,013,295 | ||||||
| 750,000 |
LCM LP Series 18A, Class DR, 8.344% (3-Month Term SOFR+306.16 basis points), 4/20/20313,4,6 |
731,757 | ||||||
| Magnetite Ltd. | ||||||||
| 1,000,000 | Series 2018-20A, Class E, 10.894% (3-Month Term SOFR+561.16 basis points), 4/20/20313,4,6 | 1,005,370 | ||||||
| 1,000,000 | Series 2023-39A, Class D, 9.435% (3-Month Term SOFR+415 basis points), 10/25/20333,4,6 | 1,005,437 | ||||||
| 750,000 | Series 2022-35A, Class ER, 12.535% (3-Month Term SOFR+725 basis points), 10/25/20363,4,6 | 768,524 |
25
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 800,000 |
Milos CLO Ltd. Series 2017-1A, Class ER, 11.694% (3-Month Term SOFR+641.16 basis points), 10/20/20303,4,6 |
$ | 804,001 | |||||
| 657,165 |
MKS CLO Ltd. Series 2017-2A, Class E, 11.844% (3-Month Term SOFR+656.16 basis points), 1/20/20313,4,6 |
657,165 | ||||||
| Morgan Stanley Eaton Vance CLO Ltd. | ||||||||
| 1,000,000 | Series 2021-1A, Class E, 12.295% (3-Month Term SOFR+701.16 basis points), 10/20/20343,4,6 | 1,005,035 | ||||||
| 1,250,000 | Series 2022-16A, Class E, 12.151% (3-Month Term SOFR+685 basis points), 4/15/20353,4,6 | 1,256,081 | ||||||
| 1,250,000 | Series 2022-17A, Class E, 13.182% (3-Month Term SOFR+790 basis points), 7/20/20353,4,6 | 1,270,019 | ||||||
| 1,000,000 | Series 2022-18A, Class E, 13.782% (3-Month Term SOFR+850 basis points), 10/20/20353,4,6 | 1,019,532 | ||||||
| 1,000,000 | Series 2023-19A, Class E, 14.182% (3-Month Term SOFR+890 basis points), 7/20/20363,4,6 | 1,053,543 | ||||||
| 750,000 |
Mountain View CLO Ltd. Series 2019-1A, Class DR, 9.503% (3-Month Term SOFR+420.16 basis points), 10/15/20343,4,6 |
746,313 | ||||||
| 1,000,000 |
Mountain View Clo XV Ltd. Series 2019-2A, Class DR, 9.901% (3-Month Term SOFR+460 basis points), 7/15/20373,4,6 |
999,926 | ||||||
| 5,000,000 |
Neuberger Berman CLO Ltd. Series 2015-20A, Class SUB, 0.000%, 7/15/20343,6,7 |
1,757,921 | ||||||
| Neuberger Berman Loan Advisers CLO Ltd. | ||||||||
| 1,250,000 | Series 2017-24A, Class E, 11.561% (3-Month Term SOFR+628.16 basis points), 4/19/20303,4,6 | 1,256,225 | ||||||
| 1,250,000 | Series 2024-55A, Class E, 11.823% (3-Month Term SOFR+650 basis points), 4/22/20383,4,6 | 1,268,168 | ||||||
| 1,000,000 | Series 2018-27A, Class D2R, 9.801% (3-Month Term SOFR+450 basis points), 7/15/20383,4,6 | 999,943 | ||||||
| 1,175,000 | Series 2018-27A, Class ER, 12.051% (3-Month Term SOFR+675 basis points), 7/15/20383,4,6 | 1,174,904 | ||||||
| 1,000,000 |
Neuberger Berman Loan Advisers Euro CLO Series 2021-1X, Class D, 6.662% (3-Month Euribor+300 basis points), 4/17/20343,4 |
1,087,171 | ||||||
| 1,000,000 |
New Mountain CLO Ltd. Series CLO-3A, Class E, 12.144% (3-Month Term SOFR+686.16 basis points), 10/20/20343,4,6 |
1,008,796 | ||||||
| New Mountain CLO Ltd. | ||||||||
| 1,175,000 | Series CLO-2A, Class E, 11.923% (3-Month Term SOFR+662.16 basis points), 4/15/20343,4,6 | 1,185,088 |
26
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 1,500,000 | Series CLO-1A, Class ER, 12.243% (3-Month Term SOFR+694.16 basis points), 10/15/20343,4,6 | $ | 1,513,269 | |||||
| 1,000,000 | Series CLO-5A, Class E, 12.151% (3-Month Term SOFR+685 basis points), 4/20/20363,4,6 | 1,007,533 | ||||||
| 500,000 | Series CLO-4A, Class E, 13.432% (3-Month Term SOFR+815 basis points), 4/20/20363,4,6 | 518,243 | ||||||
| 1,500,000 |
Newark BSL CLO 2 Ltd. Series 2017-1A, Class D, 11.846% (3-Month Term SOFR+656.16 basis points), 7/25/20303,4,6 |
1,451,663 | ||||||
| 1,250,000 |
Newark BSL CLO Ltd. Series 2017-1A, Class CR, 8.696% (3-Month Term SOFR+341.16 basis points), 7/25/20303,4,6 |
1,246,940 | ||||||
| 1,250,000 |
Oak Hill Credit Partners Ltd. Series 2014-10RA, Class D2R, 10.294% (3-Month Term SOFR+501.16 basis points), 4/20/20343,4,6 |
1,263,308 | ||||||
| OCP CLO Ltd. | ||||||||
| 2,000,000 | Series 2014-6A, Class CR, 8.747% (3-Month Term SOFR+346.16 basis points), 10/17/20303,4,6 | 2,007,078 | ||||||
| 1,000,000 | Series 2017-14A, Class C, 8.187% (3-Month Term SOFR+286.16 basis points), 11/20/20303,4,6 | 1,003,047 | ||||||
| 2,050,000 | Series 2014-5A, Class CR, 8.441% (3-Month Term SOFR+316.16 basis points), 4/26/20313,4,6 | 2,050,713 | ||||||
| 500,000 | Series 2020-8RA, Class D, 12.547% (3-Month Term SOFR+726.16 basis points), 1/17/20323,4,6 | 503,541 | ||||||
| 2,500,000 | Series 2020-18A, Class AR, 6.634% (3-Month Term SOFR+135.16 basis points), 7/20/20323,4,6 | 2,503,219 | ||||||
| 1,250,000 | Series 2020-18A, Class ER, 11.974% (3-Month Term SOFR+669.16 basis points), 7/20/20323,4,6 | 1,259,377 | ||||||
| 1,700,000 | Series 2019-16A, Class ER, 11.916% (3-Month Term SOFR+661.16 basis points), 4/10/20333,4,6 | 1,699,240 | ||||||
| 1,000,000 | Series 2016-12A, Class ER2, 12.429% (3-Month Term SOFR+715 basis points), 4/18/20333,4,6 | 1,010,059 | ||||||
| 1,000,000 | Series 2021-22A, Class D, 8.644% (3-Month Term SOFR+336.16 basis points), 12/2/20343,4,6 | 1,003,758 | ||||||
| 1,000,000 | Series 2023-28A, Class E, 13.686% (3-Month Term SOFR+840 basis points), 7/16/20363,4,6 | 1,046,641 | ||||||
| 1,500,000 | Series 2023-30A, Class E, 12.373% (3-Month Term SOFR+709 basis points), 1/24/20373,4,6 | 1,532,008 | ||||||
| 1,000,000 | Series 2024-32A, Class D2, 9.050%, 4/23/20373,6 | 1,022,971 | ||||||
| 1,750,000 | Series 2024-32A, Class E, 12.086% (3-Month Term SOFR+676 basis points), 4/23/20373,4,6 | 1,789,106 | ||||||
| 1,025,000 | Series 2020-18A, Class A1R2, 0.000% (3-Month Term SOFR+137 basis points), 7/20/20373,4,6 | 1,025,000 |
27
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 1,305,000 | Series 2020-18A, Class ER2, 0.000% (3-Month Term SOFR+625 basis points), 7/20/20373,4,6 | $ | 1,305,000 | |||||
| 1,500,000 | Series 2022-25A, Class A1R, 6.702% (3-Month Term SOFR+142 basis points), 7/20/20373,4,6 | 1,500,375 | ||||||
| Octagon Investment Partners Ltd. | ||||||||
| 1,500,000 | Series 2018-2A, Class C, 8.396% (3-Month Term SOFR+311.16 basis points), 7/25/20303,4,6 | 1,491,273 | ||||||
| 1,805,000 | Series 2013-1A, Class DR2, 8.046% (3-Month Term SOFR+276.16 basis points), 1/25/20313,4,6 | 1,799,438 | ||||||
| 1,000,000 | Series 2018-18A, Class C, 8.248% (3-Month Term SOFR+296.16 basis points), 4/16/20313,4,6 | 994,713 | ||||||
| 750,000 | Series 2020-1A, Class ER, 11.794% (3-Month Term SOFR+651.16 basis points), 7/20/20343,4,6 | 728,693 | ||||||
| 1,000,000 |
OSD CLO Ltd. Series 2021-23A, Class E, 11.547% (3-Month Term SOFR+626.16 basis points), 4/17/20313,4,6 |
1,004,754 | ||||||
| OZLM Ltd. | ||||||||
| 1,500,000 | Series 2014-8A, Class DRR, 11.627% (3-Month Term SOFR+634.16 basis points), 10/17/20293,4,6 | 1,500,985 | ||||||
| 1,500,000 | Series 2017-21A, Class C, 8.214% (3-Month Term SOFR+293.16 basis points), 1/20/20313,4,6 | 1,505,574 | ||||||
| 1,750,000 | Series 2014-6A, Class CT, 7.924% (3-Month Term SOFR+263.84 basis points), 4/17/20313,4,6 | 1,750,329 | ||||||
| 1,000,000 | Series 2014-6A, Class DS, 11.597% (3-Month Term SOFR+631.16 basis points), 4/17/20313,4,6 | 957,498 | ||||||
| 1,500,000 | Series 2018-20A, Class C, 8.494% (3-Month Term SOFR+321.16 basis points), 4/20/20313,4,6 | 1,492,483 | ||||||
| 1,000,000 |
Park Avenue Institutional Advisers CLO Ltd. Series 2018-1A, Class C, 8.874% (3-Month Term SOFR+359.16 basis points), 10/20/20313,4,6 |
1,000,600 | ||||||
| Post CLO Ltd. | ||||||||
| 1,500,000 | Series 2022-1A, Class E, 12.032% (3-Month Term SOFR+675 basis points), 4/20/20353,4,6 | 1,507,380 | ||||||
| 2,000,000 | Series 2023-1A, Class E, 13.182% (3-Month Term SOFR+790 basis points), 4/20/20363,4,6 | 2,068,313 | ||||||
| 1,000,000 | Series 2024-1A, Class E, 12.072% (3-Month Term SOFR+680 basis points), 4/20/20373,4,6 | 1,020,765 | ||||||
| 750,000 |
PPM CLO Ltd. Series 2019-3A, Class ER, 12.157% (3-Month Term SOFR+687.16 basis points), 4/17/20343,4,6 |
711,456 | ||||||
| Recette CLO Ltd. | ||||||||
| 1,000,000 | Series 2015-1A, Class YRR, 0.100%, 4/20/20343,6 | 27,230 |
28
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 1,750,000 | Series 2015-1A, Class FRR, 14.014% (3-Month Term SOFR+873.16 basis points), 4/20/20343,4,6 | $ | 1,633,751 | |||||
| Regatta Funding Ltd. | ||||||||
| 1,882,500 | Series 2018-4A, Class D, 12.046% (3-Month Term SOFR+676.16 basis points), 10/25/20313,4,6 | 1,873,062 | ||||||
| 1,000,000 | Series 2019-2A, Class E, 12.563% (3-Month Term SOFR+726.16 basis points), 1/15/20333,4,6 | 1,012,038 | ||||||
| 3,500,000 | Series 2016-1A, Class A1R2, 6.755% (3-Month Term SOFR+141.16 basis points), 6/20/20343,4,6 | 3,504,261 | ||||||
| 1,000,000 | Series 2016-1A, Class ER2, 12.005% (3-Month Term SOFR+666.16 basis points), 6/20/20343,4,6 | 1,000,585 | ||||||
| 1,000,000 | Series 2023-2A, Class D, 10.535% (3-Month Term SOFR+525 basis points), 1/25/20373,4,6 | 1,026,052 | ||||||
| 1,000,000 | Series 2017-1A, Class D1R, 9.025% (3-Month Term SOFR+370 basis points), 4/17/20373,4,6 | 998,431 | ||||||
| 500,000 | Series 2017-1A, Class D2R, 10.325% (3-Month Term SOFR+500 basis points), 4/17/20373,4,6 | 508,105 | ||||||
| 2,000,000 | Series 2017-3A, Class AR, 6.809% (3-Month Term SOFR+148 basis points), 7/17/20373,4,6 | 2,009,282 | ||||||
| 1,250,000 | Series 2018-1A, Class ER, 12.052% (3-Month Term SOFR+675 basis points), 7/17/20373,4,6 | 1,251,563 | ||||||
| 625,000 |
Riserva CLO Ltd. Series 2016-3A, Class FRR, 14.051% (3-Month Term SOFR+877.16 basis points), 1/18/20343,4,6 |
565,467 | ||||||
| 1,500,000 |
RR15 Ltd. Series 2021-15A, Class C, 8.463% (3-Month Term SOFR+316.16 basis points), 4/15/20363,4,6 |
1,501,855 | ||||||
| 1,000,000 |
Shackleton CLO Ltd. Series 2013-4RA, Class C, 8.433% (3-Month Term SOFR+313.16 basis points), 4/13/20313,4,6 |
995,912 | ||||||
| Signal Peak CLO Ltd. | ||||||||
| 5,121,212 | Series 2017-4A, Class SUB, 0.000%, 10/26/20343,6,7 | 1,382,340 | ||||||
| 1,000,000 | Series 2018-5A, Class D1R, 9.485% (3-Month Term SOFR+420 basis points), 4/25/20373,4,6 | 1,031,963 | ||||||
| Sound Point CLO Ltd. | ||||||||
| 2,500,000 | Series 2017-3A, Class C, 8.544% (3-Month Term SOFR+326.16 basis points), 10/20/20303,4,6 | 2,493,166 | ||||||
| 1,000,000 | Series 2018-2A, Class D, 8.541% (3-Month Term SOFR+326.16 basis points), 7/26/20313,4,6 | 969,173 | ||||||
| 1,500,000 | Series 2019-1A, Class DR, 9.044% (3-Month Term SOFR+376.16 basis points), 1/20/20323,4,6 | 1,445,274 |
29
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 1,000,000 | Series 2019-3A, Class DR, 9.046% (3-Month Term SOFR+376.16 basis points), 10/25/20343,4,6 | $ | 955,249 | |||||
| 1,000,000 |
Symphony CLO Ltd. Series 2016-18A, Class DR, 8.795% (3-Month Term SOFR+351.16 basis points), 7/23/20333,4,6 |
997,115 | ||||||
| TCI-Flatiron CLO Ltd. | ||||||||
| 1,000,000 | Series 2016-1A, Class DR3, 8.286% (3-Month Term SOFR+300 basis points), 1/17/20323,4,6 | 1,003,495 | ||||||
| 1,500,000 | Series 2016-1A, Class ER3, 11.536% (3-Month Term SOFR+625 basis points), 1/17/20323,4,6 | 1,514,543 | ||||||
| 1,000,000 | Series 2018-1X, Class ER, 11.675% (3-Month Term SOFR+641.16 basis points), 1/29/20323,4 | 1,005,327 | ||||||
| 1,000,000 |
Thayer Park CLO Ltd. Series 2017-1A, Class ER, 14.414% (3-Month Term SOFR+913.16 basis points), 4/20/20343,4,6 |
961,569 | ||||||
| THL Credit Wind River CLO Ltd. | ||||||||
| 2,350,000 | Series 2013-2A, Class DR, 8.491% (3-Month Term SOFR+321.16 basis points), 10/18/20303,4,6 | 2,349,609 | ||||||
| 1,000,000 | Series 2014-2A, Class DR, 8.463% (3-Month Term SOFR+316.16 basis points), 1/15/20313,4,6 | 998,009 | ||||||
| 2,500,000 |
TRESTLES CLO Ltd. Series 2017-1A, Class A1RR, 6.739% (3-Month Term SOFR+146 basis points), 7/25/20373,4,6,8 |
2,500,000 | ||||||
| Trinitas CLO Ltd. | ||||||||
| 2,000,000 | Series 2023-25A, Class D1, 10.283% (3-Month Term SOFR+500 basis points), 1/23/20373,4,6 | 2,061,748 | ||||||
| 2,000,000 | Series 2024-29A, Class A1, 6.799% (3-Month Term SOFR+149 basis points), 7/23/20373,4,6 | 2,001,207 | ||||||
| 1,602,693 |
Upland CLO Ltd. Series 2016-1A, Class A1AR, 6.564% (3-Month Term SOFR+128.16 basis points), 4/20/20313,4,6 |
1,603,721 | ||||||
| 1,000,000 |
Verdelite Static CLO Ltd. Series 2024-1A, Class D, 8.144% (3-Month Term SOFR+285 basis points), 7/20/20323,4,6 |
999,687 | ||||||
| Voya CLO Ltd. | ||||||||
| 500,000 | Series 2013-1A, Class CR, 8.513% (3-Month Term SOFR+321.16 basis points), 10/15/20303,4,6 | 502,153 | ||||||
| 1,000,000 | Series 2014-1A, Class CR2, 8.341% (3-Month Term SOFR+306.16 basis points), 4/18/20313,4,6 | 999,644 | ||||||
| 1,500,000 | Series 2018-3A, Class D, 8.563% (3-Month Term SOFR+326.16 basis points), 10/15/20313,4,6 | 1,501,894 |
30
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| ASSET-BACKED SECURITIES (Continued) | ||||||||
| 2,500,000 | Series 2016-3A, Class CR, 8.791% (3-Month Term SOFR+351.16 basis points), 10/18/20313,4,6 | $ | 2,489,356 | |||||
| 1,000,000 | Series 2020-3A, Class ER, 11.944% (3-Month Term SOFR+666.16 basis points), 10/20/20343,4,6 | 992,464 | ||||||
| 1,000,000 | Series 2019-4A, Class ER, 12.273% (3-Month Term SOFR+697.16 basis points), 1/15/20353,4,6 | 987,545 | ||||||
| 1,000,000 | Series 2022-1A, Class E, 12.752% (3-Month Term SOFR+747 basis points), 4/20/20353,4,6 | 1,004,910 | ||||||
| 1,125,000 | Series 2022-3A, Class ER, 13.282% (3-Month Term SOFR+800 basis points), 10/20/20363,4,6 | 1,172,727 | ||||||
| 1,500,000 |
Voya Euro CLO DAC Series 1X, Class B2NE, 2.100%, 10/15/20303 |
1,579,575 | ||||||
| 750,000 |
Wind River CLO Ltd. Series 2014-3A, Class DR2, 8.944% (3-Month Term SOFR+366.16 basis points), 10/22/20313,4,6 |
745,903 | ||||||
| Total Asset-Backed Securities | ||||||||
| (Cost $303,506,060) | 302,730,707 | |||||||
| COMMERCIAL MORTGAGE-BACKED SECURITIES - 0.5% | ||||||||
| 203,000 |
DBUBS Mortgage Trust Series 2011-LC3A, Class PM2, 5.098%, 5/10/20443,6,7 |
156,716 | ||||||
| 1,882,935 |
GS Mortgage Securities Corp Trust Series 2012-BWTR, Class A, 2.954%, 11/5/20343,6 |
1,551,556 | ||||||
| 500,000 |
WFLD Mortgage Trust Series 2014-MONT, Class D, 3.755%, 8/10/20313,6,7 |
255,000 | ||||||
| 750,000 |
Worldwide Plaza Trust Series 2017-WWP, Class F, 3.596%, 11/10/20366,7 |
59,063 | ||||||
| Total Commercial Mortgage-Backed Securities | ||||||||
| (Cost $2,762,581) | 2,022,335 | |||||||
| CORPORATE - 5.1% | ||||||||
| BASIC MATERIALS - 0.4% | ||||||||
| 700,000 |
Nobian Finance B.V. 3.625%, 7/15/20263 |
746,588 | ||||||
| 700,000 |
SCIL USA Holdings LLC 5.375%, 11/1/20263,6 |
684,724 | ||||||
| 1,431,312 | ||||||||
| COMMUNICATIONS - 1.4% | ||||||||
| 750,000 |
Altice Financing S.A. 5.000%, 1/15/20283,5,6 |
599,713 | ||||||
| 810,000 |
Cable One, Inc. 1.125%, 3/15/20289 |
613,251 |
31
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| CORPORATE (Continued) | ||||||||
| COMMUNICATIONS (Continued) | ||||||||
| 665,000 |
Global Switch Finance B.V. 1.375%, 10/7/20303 |
$ | 652,788 | |||||
| 307,000 |
LCPR Senior Secured Financing DAC 6.750%, 10/15/20273,5,6 |
286,456 | ||||||
| 1,175,000 |
Midcontinent Communications / Midcontinent Finance Corp. 5.375%, 8/15/20273,6 |
1,157,256 | ||||||
| 700,000 |
Scripps Escrow, Inc. 5.875%, 7/15/20273,6 |
487,417 | ||||||
| 795,000 |
Summer BC Bidco B LLC 5.500%, 10/31/20263,6 |
781,871 | ||||||
| 781,000 |
Zegona Finance PLC 8.625%, 7/15/20293,5,6 |
798,622 | ||||||
| 5,377,374 | ||||||||
| CONSUMER, CYCLICAL - 1.1% | ||||||||
| 500,000 |
BCPE Ulysses Intermediate, Inc. 7.750%, 4/1/20273,6,10 |
483,239 | ||||||
| 625,000 |
Clarios Global LP / Clarios US Finance Co. 8.500%, 5/15/20273,5,6 |
630,838 | ||||||
| 800,000 |
Deuce Finco Plc 5.500%, 6/15/20273 |
988,070 | ||||||
| 460,000 |
Everi Holdings, Inc. 5.000%, 7/15/20293,6 |
455,988 | ||||||
| 700,000 |
Hanesbrands, Inc. 4.875%, 5/15/20263,6 |
686,305 | ||||||
| 900,000 |
Specialty Building Products Holdings LLC / SBP Finance Corp. 6.375%, 9/30/20263,6 |
886,820 | ||||||
| 4,131,260 | ||||||||
| CONSUMER, NON-CYCLICAL - 0.8% | ||||||||
| 800,000 |
Albion Financing 1 SARL / Aggreko Holdings, Inc. 6.125%, 10/15/20263,5,6 |
791,044 | ||||||
| 950,000 |
CAB SELAS 3.375%, 2/1/20283 |
956,142 | ||||||
| 1,000,000 |
Chrome Holdco SAS 5.000%, 5/31/20293 |
715,301 | ||||||
| 750,000 |
Cidron Aida Finco Sarl 5.000%, 4/1/20283 |
756,265 | ||||||
| 3,218,752 | ||||||||
| ENERGY - 0.7% | ||||||||
| 300,000 |
Murray Energy Corp. 11.250%, 10/17/2027*,3,6,8,11 |
- |
32
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Principal Amount1 |
Value |
|||||||
| BONDS (Continued) | ||||||||
| CORPORATE (Continued) | ||||||||
| ENERGY (Continued) | ||||||||
| 775,000 |
Nabors Industries Ltd. 7.500%, 1/15/20283,5,6 |
$ | 762,075 | |||||
| 975,000 |
Star Holding LLC 8.750%, 8/1/20313,6 |
961,613 | ||||||
| 975,000 |
Tallgrass Energy Partners LP / Tallgrass Energy Finance Corp. 5.500%, 1/15/20283,6 |
941,544 | ||||||
| 2,665,232 | ||||||||
| FINANCIAL - 0.3% | ||||||||
| 500,000 |
Acrisure LLC / Acrisure Finance, Inc. 7.500%, 11/6/20303,6 |
507,794 | ||||||
| 750,000 |
Howden UK Refinance PLC 8.125%, 2/15/20323,5,6 |
748,552 | ||||||
| 1,256,346 | ||||||||
| INDUSTRIAL - 0.2% | ||||||||
| 800,000 |
Trivium Packaging Finance B.V. 8.500%, 8/15/20273,5,6 |
786,005 | ||||||
| TECHNOLOGY - 0.2% | ||||||||
| 900,000 |
Virtusa Corp. 7.125%, 12/15/20283,6 |
853,708 | ||||||
| Total Corporate | ||||||||
| (Cost $19,817,795) | 19,719,989 | |||||||
| Total Bonds | ||||||||
| (Cost $326,086,436) | 324,473,031 |
|
Number of Contracts |
||||||||
| PURCHASED OPTION CONTRACTS - 0.0% | ||||||||
| PUT OPTIONS - 0.0% | ||||||||
| 725 |
SPDR S&P Regional Banking ETF Exercise Price: $45.00, Notional Amount: $3,262,500, Expiration Date: September 20, 2024* |
6,525 | ||||||
| Total Put Options | ||||||||
| (Cost $168,220) | 6,525 | |||||||
| Total Purchased Option Contracts | ||||||||
| (Cost $168,220) | 6,525 |
33
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
|
Number of Shares |
Value | |||||||
| SHORT-TERM INVESTMENTS - 9.1% | ||||||||
| 34,914,579 | Fidelity Investments Money Market Funds - Treasury Portfolio - Class I, 5.11%12,13 | $ | 34,914,579 | |||||
| Total Short-Term Investments | ||||||||
| (Cost $34,914,579) | 34,914,579 | |||||||
| TOTAL INVESTMENTS - 112.0% | ||||||||
| (Cost $431,268,367) | 429,772,567 | |||||||
| Liabilities in Excess of Other Assets - (12.0)% | (45,939,165 | ) | ||||||
| TOTAL NET ASSETS - 100.0% | $ | 383,833,402 |
EUR - Euro
| * | Non-income producing security. |
| 1 | Local currency. |
| 2 | Bank loans generally pay interest at rates which are periodically determined by reference to a base lending rate plus a premium. All loans carry a variable rate of interest. These base lending rates are generally (i) the Prime Rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate ("LIBOR"), (iii) the Certificate of Deposit rate, or (iv) Secured Overnight Financing Rate ("SOFR"). Bank Loans, while exempt from registration, under the Securities Act of 1933, contain certain restrictions on resale and cannot be sold publicly. Floating rate bank loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy. |
| 3 | Callable. |
| 4 | Floating rate security. |
| 5 | Foreign security denominated in U.S. Dollars. |
| 6 | Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities are restricted and may be resold in transactions exempt from registration normally to qualified institutional buyers. The total value of these securities is $304,272,167 which represents 79.27% of total net assets of the Fund. |
| 7 | Variable rate security. |
| 8 | The value of these securities was determined using significant unobservable inputs. These are reported as Level 3 securities in the Fair Value Hierarchy. |
| 9 | Convertible security. |
| 10 | Payment-in-kind interest is generally paid by issuing additional par/shares of the security rather than paying cash. |
| 11 | Security is in default. |
| 12 | All or a portion of this security is segregated as collateral for securities sold short. The market value of the securities pledged as collateral was $2,073,058, which represents 0.54% of total net assets of the Fund. |
| 13 | The rate is the annualized seven-day yield at period end. |
See accompanying Notes to Consolidated Financial Statements.
34
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
SWAP CONTRACTS
CREDIT DEFAULT SWAP CONTRACTS
|
Counterparty/ Reference Entity |
Rating(a) (Moody's/ S&P) |
Pay/(b) Receive Fixed Rate |
Fixed/Rate Frequency |
Expiration Date |
Notional Amount |
Premium Paid (Received) |
Unrealized Appreciation/ (Depreciation) | Value | ||||||||||||||
| J.P. Morgan | ||||||||||||||||||||||
| Renault SA | ||||||||||||||||||||||
| CDS EUR SR 5Y | Pay | 1%/Quarterly | 6/20/29 | $ | 5,000,000 | $ | 111,633 | $ | (21,939 | ) | $ | 89,694 | ||||||||||
| TOTAL CREDIT DEFAULT SWAP CONTRACTS | $ | 111,633 | $ | (21,939 | ) | $ | 89,694 |
| (a) | Ratings are presented for credit default contracts in which the fund has sold protection on the underlying referenced debt. Ratings for an underlying index represent the average of the ratings of all the securities included in that index. The Moody's and Standard & Poor's (S&P) ratings are believed to be the most recent ratings available at July 31, 2024. |
| (b) | If Palmer Square Opportunistic Income Fund is paying a fixed rate, the counterparty acts as guarantor of the variable instrument. If Palmer Square Opportunistic Income Fund is receiving a fixed rate,Palmer Square Opportunistic Income Fund acts as guarantor of the variable instrument. |
See accompanying Notes to Consolidated Financial Statements.
35
Palmer Square Opportunistic Income Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of July 31, 2024
FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS
| Sale Contracts | Counterparty | Currency Exchange |
Settlement Date |
Currency Amount Sold |
Value At Settlement Date |
Value At July 31, 2024 |
Unrealized (Depreciation) |
||||||||||||||
| EUR | JP Morgan | EUR per USD | 9/12/2024 | (3,968,750 | ) | $ | (4,296,382 | ) | $ | (4,303,964 | ) | $ | (7,582 | ) | |||||||
| EUR | JP Morgan | EUR per USD | 9/25/2024 | (641,000 | ) | (688,557 | ) | (695,571 | ) | (7,014 | ) | ||||||||||
| EUR | JP Morgan | EUR per USD | 10/10/2024 | (5,140,000 | ) | (5,575,861 | ) | (5,582,167 | ) | (6,306 | ) | ||||||||||
| EUR | JP Morgan | EUR per USD | 10/24/2024 | (7,700,000 | ) | (8,384,903 | ) | (8,368,145 | ) | 16,758 | |||||||||||
| EUR | JP Morgan | EUR per USD | 5/8/2025 | (2,000,000 | ) | (2,178,984 | ) | (2,192,247 | ) | (13,263 | ) | ||||||||||
| $ | (21,124,687 | ) | $ | (21,142,094 | ) | $ | (17,407 | ) | |||||||||||||
| TOTAL FORWARD FOREIGN CURRENCY EXCHANGE CONTRACTS | $ | (21,124,687 | ) | $ | (21,142,094 | ) | $ | (17,407 | ) |
EUR - Euro
USD - U.S. Dollar
See accompanying Notes to Consolidated Financial Statements.
36
Palmer Square Opportunistic Income Fund
CONSOLIDATED SUMMARY OF INVESTMENTS
As of July 31, 2024
| Security Type/Sector | Percent of Total Net Assets | |||
| Bonds | ||||
| Asset-Backed Securities | 78.9 | % | ||
| Corporate | 5.1 | % | ||
| Commercial Mortgage-Backed Securities | 0.5 | % | ||
| Total Bonds | 84.5 | % | ||
| Bank Loans | 18.4 | % | ||
| Purchased Option Contracts | ||||
| Put Options | 0.0 | % | ||
| Total Purchased Option Contracts | 0.0 | % | ||
| Short-Term Investments | 9.1 | % | ||
| Total Investments | 112.0 | % | ||
| Liabilities in Excess of Other Assets | (12.0 | )% | ||
| Total Net Assets | 100.0 | % |
See accompanying Notes to Consolidated Financial Statements.
37
Palmer Square Opportunistic Income Fund
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
As of July 31, 2024
| Assets: | ||||
| Investments, at value (cost $431,100,147) | $ | 429,766,042 | ||
| Purchased options contracts, at value (cost $168,220) | 6,525 | |||
| Foreign currency, at value (cost $1,399,139) | 1,400,652 | |||
| Cash | 3,985,800 | |||
| Cash held at broker for securities sold short and swap contracts | 273,856 | |||
| Receivables: | ||||
| Investment securities sold | 743,380 | |||
| Fund shares sold | 566,668 | |||
| Premiums paid on open swap contracts | 111,633 | |||
| Interest | 2,379,567 | |||
| Prepaid legal fees | 66,701 | |||
| Prepaid commitment fees | 53,940 | |||
| Prepaid expenses | 56,825 | |||
| Total assets | 439,411,589 | |||
| Liabilities: | ||||
| Payables: | ||||
| Unrealized depreciation on open swap contracts | 21,939 | |||
| Investment securities purchased | 16,670,386 | |||
| Funds borrowed | 38,250,000 | |||
| Unrealized depreciation on forward foreign currency exchange contracts | 17,407 | |||
| Advisory fees | 318,260 | |||
| Shareholder servicing fees (Note 6) | 52,751 | |||
| Fund accounting and administration fees | 68,093 | |||
| Transfer agent fees and expenses | 41,999 | |||
| Custody fees | 23,629 | |||
| Commitment fees payable (Note 11) | 29,345 | |||
| Trustees' fees and expenses | 22,802 | |||
| Auditing fees | 19,700 | |||
| Legal fees | 13,273 | |||
| Interest on borrowings | 7,165 | |||
| Accrued other expenses | 21,438 | |||
| Total liabilities | 55,578,187 | |||
| Net Assets | $ | 383,833,402 | ||
| Components of Net Assets: | ||||
| Paid-in capital (par value of $0.01 per share with an unlimited number of shares authorized) | $ | 381,241,904 | ||
| Total distributable earnings (accumulated deficit) | 2,591,498 | |||
| Net Assets | $ | 383,833,402 | ||
| Maximum Offering Price per Share: | ||||
| Net assets applicable to shares outstanding | $ | 383,833,402 | ||
| Shares of beneficial interest issued and outstanding | 21,228,168 | |||
| Redemption price per share | $ | 18.08 |
See accompanying Notes to Consolidated Financial Statements.
38
Palmer Square Opportunistic Income Fund
CONSOLIDATED STATEMENT OF OPERATIONS
For the Year Ended July 31, 2024
| Investment Income: | ||||
| Interest | $ | 39,594,782 | ||
| Dividends | 7,441 | |||
| Total investment income | 39,602,223 | |||
| Expenses: | ||||
| Advisory fees | 3,151,055 | |||
| Shareholder servicing fees (Note 6) | 371,087 | |||
| Fund accounting and administration fees | 335,733 | |||
| Transfer agent fees and expenses | 176,643 | |||
| Custody fees | 42,851 | |||
| Interest on borrowings (Note 11) | 2,359,421 | |||
| Commitment fees (Note 11) | 434,584 | |||
| Legal fees | 180,293 | |||
| Trustees' fees and expenses | 102,495 | |||
| Registration fees | 61,478 | |||
| Miscellaneous | 41,572 | |||
| Shareholder reporting fees | 38,998 | |||
| Brokerage expense | 25,133 | |||
| Auditing fees | 20,024 | |||
| Interest on securities sold short | 15,915 | |||
| Insurance fees | 7,229 | |||
| Total expenses | 7,364,511 | |||
| Fees paid indirectly (Note 3) | (5,863 | ) | ||
| Net expenses | 7,358,648 | |||
| Net investment income (loss) | 32,243,575 | |||
| Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | (152,314 | ) | ||
| Securities sold short | (59,613 | ) | ||
| Forward contracts | 606,320 | |||
| Swap contracts | 140,481 | |||
| Foreign currency transactions | 11,411 | |||
| Net realized gain (loss) | 546,285 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 12,641,281 | |||
| Purchased options contracts | (161,695 | ) | ||
| Forward contracts | (705 | ) | ||
| Swap contracts | (21,939 | ) | ||
| Foreign currency translations | 12,592 | |||
| Net change in unrealized appreciation (depreciation) | 12,469,534 | |||
| Net realized and unrealized gain (loss) | 13,015,819 | |||
| Net Increase (Decrease) in Net Assets from Operations | $ | 45,259,394 |
See accompanying Notes to Consolidated Financial Statements.
39
Palmer Square Opportunistic Income Fund
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS
|
For the Year Ended July 31, 2024 |
For the Year Ended July 31, 2023 |
|||||||
| Increase (Decrease) in Net Assets from: | ||||||||
| Operations: | ||||||||
| Net investment income (loss) | $ | 32,243,575 | $ | 25,351,757 | ||||
| Net realized gain (loss) on investments, securities sold short, forward contracts, swap contracts and foreign currency | 546,285 | (1,731,419 | ) | |||||
| Net change in unrealized appreciation (depreciation) on investments, purchased options contracts, forward contracts, swap contracts, and foreign currency | 12,469,534 | 10,147,269 | ||||||
| Net increase (decrease) in net assets resulting from operations | 45,259,394 | 33,767,607 | ||||||
| Distributions to Shareholders: | ||||||||
| Total distributions to shareholders | (30,127,100 | ) | (25,717,484 | ) | ||||
| Capital Transactions: | ||||||||
| Net proceeds from shares sold | 151,549,688 | 82,925,106 | ||||||
| Reinvestment of distributions | 5,432,697 | 7,144,423 | ||||||
| Cost of shares redeemed | (78,660,060 | ) | (69,122,337 | ) | ||||
| Net increase (decrease) in net assets from capital transactions | 78,322,325 | 20,947,192 | ||||||
| Total increase (decrease) in net assets | 93,454,619 | 28,997,315 | ||||||
| Net Assets: | ||||||||
| Beginning of period | 290,378,783 | 261,381,468 | ||||||
| End of period | $ | 383,833,402 | $ | 290,378,783 | ||||
| Capital Share Transactions: | ||||||||
| Shares sold | 8,533,422 | 4,994,540 | ||||||
| Shares reinvested | 309,564 | 436,791 | ||||||
| Shares redeemed | (4,505,494 | ) | (4,156,523 | ) | ||||
| Net increase (decrease) in capital share transactions | 4,337,492 | 1,274,808 |
See accompanying Notes to Consolidated Financial Statements.
40
Palmer Square Opportunistic Income Fund
CONSOLIDATED STATEMENT OF CASH FLOWS
For the Year Ended July 31, 2024
| Increase (Decrease) in Cash: | ||||
| Cash flows provided by (used for) operating activities: | ||||
| Net increase (decrease) in net assets resulting from operations | $ | 45,259,394 | ||
| Adjustments to reconcile net increase (decrease) in net assets from operations to net cash provided by (used for) operating activities: | ||||
| Purchases of long-term portfolio investments | (280,534,940 | ) | ||
| Sales of long-term portfolio investments | 185,567,892 | |||
| Purchased options contracts | (168,220 | ) | ||
| Proceeds from securities sold short | 3,394,404 | |||
| Cover short securities | (3,458,977 | ) | ||
| Purchase of short-term investments, net | (6,172,853 | ) | ||
| Return of capital dividends received | 1,309,155 | |||
| Increase in foreign currency | (1,294,711 | ) | ||
| Decrease in cash held by broker | 174,757 | |||
| Decrease in investment securities sold receivable | 1,401,513 | |||
| Increase in premiums paid on open swap contracts | (111,633 | ) | ||
| Increase in interest receivable | (402,024 | ) | ||
| Decrease in prepaid expenses | 112,925 | |||
| Increase in investment securities purchased | 13,289,918 | |||
| Increase in advisory fees payable | 85,590 | |||
| Increase in shareholder servicing fees payable | 24,080 | |||
| Increase in accrued expenses payable | 4,313 | |||
| Net amortization on investments | (2,193,647 | ) | ||
| Net realized gain | (2,209,889 | ) | ||
| Net change in unrealized appreciation/depreciation | (12,456,942 | ) | ||
| Net cash used for operating activities | (58,379,895 | ) | ||
| Cash flows provided by (used for) financing activities: | ||||
| Proceeds from shares sold | 152,281,702 | |||
| Cost of shares redeemed | (78,660,060 | ) | ||
| Dividends paid to shareholders, net of reinvestments | (24,694,403 | ) | ||
| Draw on line of credit | 9,000,000 | |||
| Repayments on line of credit | (500,000 | ) | ||
| Net cash provided by (used for) financing activities | 57,427,239 | |||
| Net decrease in cash | (952,656 | ) | ||
| Cash: | ||||
| Beginning of period | 4,938,456 | |||
| End of period | $ | 3,985,800 |
Non cash financing activities not included herein consist of $5,432,697 of reinvested dividends.
Cash paid for interest on securities sold short during the period was $41,572.
Cash paid for interest on borrowings during the period was $2,357,636.
See accompanying Notes to Consolidated Financial Statements.
41
Palmer Square Opportunistic Income Fund
CONSOLIDATED FINANCIAL HIGHLIGHTS
Per share operating performance.
For a capital share outstanding throughout each period.
| For the Year Ended July 31, | ||||||||||||||||||||
| 2024 | 2023 | 2022 | 2021 | 2020 | ||||||||||||||||
| Net asset value, beginning of period | $ | 17.19 | $ | 16.74 | $ | 18.86 | $ | 16.82 | $ | 18.64 | ||||||||||
| Income from Investment Operations: | ||||||||||||||||||||
| Net investment income (loss)1 | 1.82 | 1.56 | 1.08 | 1.02 | 1.14 | |||||||||||||||
| Net realized and unrealized gain (loss) | 0.78 | 0.48 | (1.95 | ) | 1.95 | (1.82 | ) | |||||||||||||
| Total from investment operations | 2.60 | 2.04 | (0.87 | ) | 2.97 | (0.68 | ) | |||||||||||||
| Less Distributions: | ||||||||||||||||||||
| From net investment income | (1.71 | ) | (1.56 | ) | (0.90 | ) | (0.93 | ) | (1.14 | ) | ||||||||||
| From net realized gains | - | (0.03 | ) | (0.35 | ) | - | - | |||||||||||||
| Total distributions | (1.71 | ) | (1.59 | ) | (1.25 | ) | (0.93 | ) | (1.14 | ) | ||||||||||
| Net asset value, end of period | $ | 18.08 | $ | 17.19 | $ | 16.74 | $ | 18.86 | $ | 16.82 | ||||||||||
| Total return2 | 15.82 | % | 13.04 | % | (4.96 | )% | 17.96 | % | (3.36 | )% | ||||||||||
| Ratios and Supplemental Data: | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 383,833 | $ | 290,379 | $ | 261,381 | $ | 213,306 | $ | 213,535 | ||||||||||
| Ratio of expenses to average net assets (including brokerage expense, interest expense and interest on securities sold short): | ||||||||||||||||||||
| Before fees waived and expenses absorbed/recovered3 | 2.34 | % | 2.28 | % | 1.50 | % | 1.50 | % | 1.62 | % | ||||||||||
| After fees waived and expenses absorbed/recovered3 | 2.34 | % | 2.28 | % | 1.50 | % | 1.57 | % | 1.69 | % | ||||||||||
| Ratio of net investment income to average net assets (including brokerage expense, interest expense and interest on securities sold short): | ||||||||||||||||||||
| Before fees waived and expenses absorbed/recovered | 10.23 | % | 9.34 | % | 5.98 | % | 5.63 | % | 6.70 | % | ||||||||||
| After fees waived and expenses absorbed/recovered | 10.23 | % | 9.34 | % | 5.98 | % | 5.56 | % | 6.63 | % | ||||||||||
| Senior Securities | ||||||||||||||||||||
| Total borrowings (000's omitted) | $ | 38,250 | $ | 29,750 | $ | 13,000 | $ | - | $ | - | ||||||||||
| Asset coverage per $1,000 unit of senior indebtedness 4 | $ | 11,035 | $ | 10,761 | $ | 21,106 | $ | - | $ | - | ||||||||||
| Portfolio turnover rate | 59 | % | 53 | % | 82 | % | 111 | % | 153 | % |
| 1 | Based on average shares outstanding for the period. |
| 2 | Total returns would have been lower/higher had expenses not been waived/recovered and absorbed by the Advisor. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
| 3 | If brokerage expense, commitment fees, interest expense and interest on securities sold short had been excluded, the expense ratios would have been lowered by 0.90%, 0.87%, 0.09%, 0.07%, and 0.19%, for the years ended July 31, 2024, 2023, 2022, 2021, and 2020, respectively. |
| 4 | As a result of the Fund having earmarked or segregated securities to collateralize the transactions or otherwise having covered the transactions, in accordance with releases and interpretive letters issued by the Securities and Exchange Commission (the "SEC"), the Fund does not treat its obligations under such transactions as senior securities representing indebtedness for purposes of the 1940 Act. |
See accompanying Notes to Consolidated Financial Statements.
42
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
July 31, 2024
Note 1 - Organization
The Palmer Square Opportunistic Income Fund (the "Fund") was organized as a Delaware statutory trust (the "Trust") on May 1, 2014, and is registered as a non-diversified, closed-end management investment company under the Investment Company Act of 1940, as amended. Shares of the Fund are being offered on a continuous basis (the "Shares"). The Fund commenced operations on August 29, 2014. The Fund had no operations prior to August 29, 2014 other than those relating to its organization and the sale of 5,000 shares of beneficial interest in the Fund at $20.00 per share to the Fund's advisor, Palmer Square Capital Management LLC.
The Fund is an "interval fund," a type of fund which, in order to provide liquidity to shareholders, has adopted a fundamental investment policy to make quarterly offers to repurchase between 5% and 25% of its outstanding Shares at net asset value ("NAV") per Share. Subject to applicable law and approval of the Board of Trustees of the Fund (the "Board" or "Board of Trustees"), the Fund will seek to conduct such quarterly repurchase offers typically for between 5-10% of the Fund's outstanding Shares at NAV per Share. In connection with any repurchase offer, the Fund may offer to repurchase only the minimum amount of 5% of its outstanding Shares. Repurchases may be oversubscribed, preventing shareholders from selling some or all of their tendered Shares back to the Fund. The Fund's Shares are not listed on any securities exchange and there is no secondary trading market for its Shares.
The Fund's investment objective is to seek a high level of current income. As a secondary objective, the Fund seeks long-term capital appreciation.
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 "Financial Services-Investment Companies".
Note 2 - Accounting Policies
The following is a summary of the significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America ("GAAP") requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.
(a) Consolidation of Subsidiary
On June 2, 2022, PSOIX Funding I LLC ("PSOIX SPV") was formed as a limited liability company, and it is a wholly owned subsidiary of the Fund. The Consolidated Schedule of Investments, Statement of Assets and Liabilities, Statements of Operations, Statements of Changes in Net Assets, Statement of Cash Flows and Financial Highlights of the Fund includes the accounts of PSOIX SPV. All inter-company accounts and transactions have been eliminated in the consolidation for the Fund. As of July 31, 2024, the total net assets of the PSOIX SPV were $22,952,466 or approximately 5.98% of the Fund's total net assets.
(b) Valuation of Investments
The Fund values equity securities at the last reported sale price on the principal exchange or in the principal over the counter ("OTC") market in which such securities are traded, as of the close of regular trading on the NYSE on the day the securities are being valued or, if the last-quoted sales price is not readily available, the securities will be valued at the last bid or the mean between the last available bid and ask price. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price ("NOCP"). Pricing services generally value debt securities assuming orderly transactions of an institutional round lot size, but such securities may be held or transactions may be conducted in such securities in smaller, odd lot sizes. Odd lots often trade at lower prices than institutional round lots. Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Debt securities are valued by utilizing a price supplied by independent pricing service providers. The independent pricing service providers may use various valuation methodologies including matrix pricing and other analytical pricing models as well as market transactions and dealer quotations. These models generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings and general market conditions. If a price is not readily available for a portfolio security, the security will be valued at fair value (the amount which the Fund might reasonably expect to receive for the security upon its current sale). The Board of Trustees has designated the Advisor as the Fund's valuation designee (the "Valuation Designee") to make all fair value determinations with respect to the Fund's portfolio investments, subject to the Board's oversight. As the Valuation Designee, the Advisor has adopted and implemented policies and procedures to be followed when the Fund must utilize fair value pricing.
43
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
(c) Investment Transactions, Investment Income and Expenses
Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis. Dividend income is recorded net of applicable withholding taxes on the ex-dividend date and interest income is recorded on an accrual basis. Withholding taxes on foreign dividends, if applicable, are paid (a portion of which may be reclaimable) or provided for in accordance with the applicable country's tax rules and rates and are disclosed in the Consolidated Statement of Operations. Withholding tax reclaims are filed in certain countries to recover a portion of the amounts previously withheld. The Fund records a reclaim receivable based on a number of factors, including a jurisdiction's legal obligation to pay reclaims as well as payment history and market convention. Discounts on debt securities are accreted or amortized to interest income over the lives of the respective securities using the effective interest method. Premiums for callable debt securities are amortized to the earliest call date, if the call price was less than the purchase price. If the call price was not at par and the security was not called, the security is amortized to the next call price and date. Expenses incurred by the Trust with respect to more than one fund are allocated in proportion to the net assets of each fund except where allocation of direct expenses to each Fund or an alternative allocation method can be more appropriately made.
Income from securitization vehicles and equity investments in the equity class securities of CLO vehicles (typically income notes or subordinated notes) is recorded using the effective interest method in accordance with the provisions of ASC 325-40, Beneficial Interests in Securitized Financial Assets, based upon a calculation of the effective yield to the expected redemption date based on an estimate of future cash flows, including those CLO equity investments that have not made their inaugural distribution for the relevant period end. The Fund monitors the expected residual payments, and the effective yield is determined and updated quarterly, or as required. Accordingly, investment income recognized on CLO equity securities in the GAAP statement of operations differs from both the tax-basis investment income and from the cash distributions actually received by the Fund during the period.
In conjunction with the use of futures contracts and swap contracts, the Fund may be required to maintain collateral in various forms. At July 31, 2024, such collateral is denoted in the Fund's Consolidated Statement of Assets and Liabilities. Also, in conjunction with the use of futures contracts or swap contracts, the Fund, when appropriate, utilizes a segregated margin deposit account with the counterparty. At July 31, 2024, these segregated margin deposit accounts are denoted in the Fund's Consolidated Statement of Assets and Liabilities.
(d) Asset-Backed Securities
Asset-backed securities include pools of mortgages, loans, receivables or other assets. Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities, and, in certain cases, supported by letters of credit, surety bonds, or other credit enhancements. The value of asset-backed securities may also be affected by the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or the financial institution(s) providing the credit support. In addition, asset-backed securities are not backed by any governmental agency.
44
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
Collateralized Debt Obligations ("CDOs") include Collateralized Bond Obligations ("CBOs"), Collateralized Loan Obligations ("CLOs") and other similarly structured securities. CBOs and CLOs are types of asset backed securities. A CBO is a trust which is backed by a diversified pool of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a Fund invests. CDOs carry additional risks including, but not limited to, (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments, (ii) the collateral may decline in value or default, (iii) a Fund may invest in CDOs that are subordinate to other classes, and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.
(e) Mortgage-Backed Securities
The Fund may invest in mortgage-backed securities ("MBS"), representing direct or indirect interests in pools of underlying residential or commercial mortgage loans that are secured by real property. These securities provide investors with payments consisting of both principal and interest as the mortgages in the underlying mortgage pools are paid.
The timely payment of principal and interest (but not the market value) on MBS issued or guaranteed by Ginnie Mae (formally known as the Government National Mortgage Association or GNMA) is backed by Ginnie Mae and the full faith and credit of the US government. Obligations issued by Fannie Mae (formally known as the Federal National Mortgage Association or FNMA) and Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation or FHLMC) are historically supported only by the credit of the issuer, but currently are guaranteed by the US government in connection with such agencies being placed temporarily into conservatorship by the US government.
Some MBS are sponsored or issued by private entities. Payments of principal and interest (but not the market value) of such private MBS may be supported by pools of residential or commercial mortgage loans or other MBS that are guaranteed, directly or indirectly, by the US government or one of its agencies or instrumentalities, or they may be issued without any government guarantee of the underlying mortgage assets but may contain some form of non-government credit enhancement.
Collateralized mortgage obligations ("CMO") are a type of MBS. A CMO is a debt security that may be collateralized by whole mortgage loans or mortgage pass-through securities. The mortgage loans or mortgage pass-through securities are divided into classes or tranches with each class having its own characteristics. Investors typically receive payments out of the interest and principal on the underlying mortgages. The portions of these payments that investors receive, as well as the priority of their rights to receive payments, are determined by the specific terms of the CMO class.
The yield characteristics of MBS differ from those of traditional debt securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans or other obligations generally may be prepaid at any time. Prepayments on a pool of mortgage loans are influenced by a variety of economic, geographic, social and other factors. Generally, prepayments on fixed-rate mortgage loans will increase during a period of falling interest rates and decrease during a period of rising interest rates. Certain classes of CMOs and other MBS are structured in a manner that makes them extremely sensitive to changes in prepayment rates.
45
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
(f) Swap Agreements and Swaptions
The Fund may enter into credit default swap agreements for investment purposes. A credit default swap agreement may have as reference obligations one or more securities that are not currently held by the Fund. The Fund may be either the buyer or seller in the transaction. Credit default swaps may also be structured based on the debt of a basket of issuers, rather than a single issuer, and may be customized with respect to the default event that triggers purchase or other factors. As a seller, the Fund would generally receive an upfront payment or a fixed rate of income throughout the term of the swap, which typically is between six months and three years, provided that there is no credit event. If a credit event occurs, generally the seller must pay the buyer the full face amount of deliverable obligations of the reference obligations that may have little or no value. The notional value will be used to segregate liquid assets for selling protection on credit default swaps. If the Fund were a buyer and no credit event occurs, the Fund would recover nothing if the swap is held through its termination date. However, if a credit event occurs, the buyer may elect to receive the full notional value of the swap in exchange for an equal face amount of deliverable obligations of the reference obligation that may have little or no value. The use of swap agreements by the Fund entails certain risks, which may be different from, or possibly greater than, the risks associated with investing directly in the securities and other investments that are the referenced asset for the swap agreement. Swaps are highly specialized instruments that require investment techniques, risk analyses, and tax planning different from those associated with stocks, bonds, and other traditional investments. The use of a swap requires an understanding not only of the referenced asset, reference rate, or index, but also of the swap itself, without the benefit of observing the performance of the swap under all the possible market conditions. Because some swap agreements have a leverage component, adverse changes in the value or level of the underlying asset, reference rate, or index can result in a loss substantially greater than the amount invested in the swap itself. Certain swaps have the potential for unlimited loss, regardless of the size of the initial investment.
The Fund may also purchase credit default swap contracts in order to hedge against the risk of default of the debt of a particular issuer or basket of issuers, in which case the Fund would function as the counterparty referenced in the preceding paragraph. This would involve the risk that the investment may expire worthless and would only generate income in the event of an actual default by the issuer(s) of the underlying obligation(s) (or, as applicable, a credit downgrade or other indication of financial instability). It would also involve the risk that the seller may fail to satisfy its payment obligations to the Fund in the event of a default. The purchase of credit default swaps involves costs, which will reduce the Fund's return.
The Fund may enter into total return swap contracts for investment purposes. Total return swaps are contracts in which one party agrees to make periodic payments based on the change in market value of the underlying assets, which may include a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swap agreements may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market, including in cases in which there may be disadvantages associated with direct ownership of a particular security. In a typical total return equity swap, payments made by the Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index). That is, one party agrees to pay another party the return on a stock, basket of stocks, or stock index in return for a specified interest rate. By entering into an equity index swap, for example, the index receiver can gain exposure to stocks making up the index of securities without actually purchasing those stocks. Total return swaps involve not only the risk associated with the investment in the underlying securities, but also the risk of the counterparty not fulfilling its obligations under the agreement.
An option on a swap agreement, or a "swaption," is a contract that gives a counterparty the right (but not the obligation) to enter into a new swap agreement or to shorten, extend, cancel or otherwise modify an existing swap agreement, at some designated future time on specified terms. In return, the purchaser pays a "premium" to the seller of the contract. The seller of the contract receives the premium and bears the risk of unfavorable changes on the underlying swap. The Fund may write (sell) and purchase put and call swaptions. The Fund may also enter into swaptions on either an asset-based or liability-based basis, depending on whether the Fund is hedging its assets or its liabilities. The Fund may write (sell) and purchase put and call swaptions to the same extent it may make use of standard options on securities or other instruments. The Fund may enter into these transactions primarily to preserve a return or spread on a particular investment or portion of its holdings, as a duration management technique, to protect against an increase in the price of securities the Fund anticipates purchasing at a later date, or for any other purposes, such as for speculation to increase returns. Swaptions are generally subject to the same risks involved in the Fund's use of options.
46
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
Depending on the terms of the particular option agreement, the Fund will generally incur a greater degree of risk when it writes a swaption than it will incur when it purchases a swaption. When the Fund purchases a swaption, it risks losing only the amount of the premium it has paid should it decide to let the option expire unexercised. However, when the Fund writes a swaption, upon exercise of the option the Fund will become obligated according to the terms of the underlying agreement. The Fund did not enter into any transactions in written swaptions contracts for the year ended July 31, 2024.
(g) Options Contracts
The Fund may write or purchase options contracts primarily to enhance the Fund's returns or reduce volatility. In addition, the Fund may utilize options in an attempt to generate gains from options premiums or to reduce overall portfolio risk. When the Fund writes or purchases an option, an amount equal to the premium received or paid by the Fund is recorded as a liability or an asset and is subsequently adjusted to the current market value of the option written or purchased. Premiums received or paid from writing or purchasing options which expire unexercised are treated by the Fund on the expiration date as realized gains or losses. The difference between the premium and the amount paid or received on effecting a closing purchase or sale transaction, including brokerage commissions, is also treated as a realized gain or loss. If an option is exercised, the premium paid or received is added to the cost of the purchase or proceeds from the sale in determining whether the Fund has realized a gain or a loss on investment transactions. The Fund, as a writer of an option, may have no control over whether the underlying securities may be sold (call) or purchased (put) and as a result bears the market risk of an unfavorable change in the price of the security underlying the written option.
(h) Futures Contracts
The Fund may use interest rate, foreign currency, index and other futures contracts. A futures contract provides for the future sale by one party and purchase by another party of a specified quantity of the security or other financial instrument at a specified price and time. A futures contract on an index is an agreement pursuant to which two parties agree to take or make delivery of an amount of cash equal to the difference between the value of the index at the close of the last trading day of the contract and the price at which the index contract originally was written. Although the value of an index might be a function of the value of certain specified securities, physical delivery of these securities is not always made.
A futures contract held by the Fund is valued daily at the official settlement price of the exchange on which it is traded. Each day the Fund pays or receives cash, called "variation margin", equal to the daily change in value of the futures contract. This process is known as "marking to market". Variation margin does not represent a borrowing or loan by the Fund but is instead a settlement between the Fund and the broker of the amount one would owe the other if the futures contract expired. In computing daily net asset value, the Fund will mark to market its open futures positions. The Fund also is required to deposit and to maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market value of the option and other futures positions held by the Fund. Although some futures contracts call for making or taking delivery of the underlying securities, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (involving the same exchange, underlying security or index and delivery month). If an offsetting purchase price is less than the original sale price, the Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, the Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs also must be included in these calculations.
47
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
(i) Short Sales
Short sales are transactions under which the Fund sells a security it does not own in anticipation of a decline in the value of that security. To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing the security at market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. When a security is sold short a decrease in the value of the security will be recognized as a gain and an increase in the value of the security will be recognized as a loss, which is potentially limitless. Until the security is replaced, the Fund is required to pay the lender amounts equal to dividend or interest that accrue during the period of the loan which is recorded as an expense. To borrow the security, the Fund also may be required to pay a premium or an interest fee, which are recorded as interest expense. Cash or securities are segregated for the broker to meet the necessary margin requirements. The Fund is subject to the risk that it may not always be able to close out a short position at a particular time or at an acceptable price.
(j) Forward Foreign Currency Exchange Contracts
The Fund may utilize forward foreign currency exchange contracts ("forward contracts") under which it is obligated to exchange currencies on specified future dates at specified rates, and are subject to the translations of foreign exchange rates fluctuations. All contracts are "marked-to-market" daily and any resulting unrealized gains or losses are recorded as unrealized appreciation or depreciation on foreign currency translations. The Fund records realized gains or losses at the time the forward contract is settled. Counterparties to these forward contracts are major U.S. financial institutions.
(k) Bank Loans
The Fund may purchase participations in commercial loans. Such investments may be secured or unsecured. Loan participations typically represent direct participation, together with other parties, in a loan to a corporate borrower, and generally are offered by banks or other financial institutions or lending syndicates. The Fund may participate in such syndications, or can buy part of a loan, becoming a part lender. When purchasing indebtedness and loan participations, the Fund assumes the credit risk associated with the corporate borrower and may assume the credit risk associated with an interposed bank or other financial intermediary. The indebtedness and loan participations in which the Fund intends to invest may not be rated by any nationally recognized rating service.
Bank loans may be structured to include both term loans, which are generally fully funded at the time of investment and unfunded loan commitments, which are contractual obligations for future funding. Unfunded loan commitments may include revolving credit facilities, which may obligate the Fund to supply additional cash to the borrower on demand, representing a potential financial obligation by the Fund in the future. The Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a senior floating rate interest. Commitment fees are processed as a reduction in cost.
In addition, the Fund may enter into, or acquire participations in, delayed funding loans and revolving credit facilities. Delayed funding loans and revolving credit facilities are borrowing arrangements in which the lender agrees to make loans up to a maximum amount upon demand by the borrower during a specified term. A revolving credit facility differs from a delayed funding loan in that as the borrower repays the loan, an amount equal to the repayment may be borrowed again during the term of the revolving credit facility. Delayed funding loans and revolving credit facilities usually provide for floating or variable rates of interest. These commitments may have the effect of requiring the Fund to increase its investment in a company at a time when it might not otherwise decide to do so (including at a time when the company's financial condition makes it unlikely that such amounts will be repaid). To the extent that the Fund is committed to advance additional funds, it will at all-times segregate or "earmark" liquid assets, in an amount sufficient to meet such commitments.
48
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
(l) Federal Income Taxes
The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its net investment income and any net realized gains to its shareholders. Therefore, no provision is made for federal income or excise taxes. Due to the timing of dividend distributions and the differences in accounting for income and realized gains and losses for financial statement and federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains and losses are recorded by the Fund.
Accounting for Uncertainty in Income Taxes (the "Income Tax Statement") requires an evaluation of tax positions taken (or expected to be taken) in the course of preparing a Fund's tax returns to determine whether these positions meet a "more-likely-than-not" standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the "more-likely-than-not" recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Consolidated Statement of Operations.
The Income Tax Statement requires management of the Fund to analyze tax positions taken in the prior three open tax years, if any, and tax positions expected to be taken in the Fund's current tax year, as defined by the IRS statute of limitations for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of July 31, 2024, and during the prior three open tax years, the Fund did not have a liability for any unrecognized tax benefits. The Fund has no examination in progress and is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
(m) Distributions to Shareholders
The Fund will make quarterly distributions of net investment income and capital gains, if any, at least annually. Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from GAAP.
The character of distributions made during the year from net investment income or net realized gains may differ from the characterization for federal income tax purposes due to differences in the recognition of income, expense and gain (loss) items for financial statement and tax purposes.
(n) Counterparty Risks
The Fund may be exposed to counterparty risk on institution or other entity with which the Fund has unsettled or open transactions. Although the Fund expects to enter into transactions only with counterparties believed by the Advisor or relevant Sub-Advisor to be creditworthy, there can be no assurance that a counterparty will not default and that the Fund will not sustain a loss on a transaction as a result. The Fund is subject to the risk that issuers of the instruments in which it invests and trades may default on their obligations, and that certain events may occur that have an immediate and significant adverse effect on the value of those instruments.
49
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
The Fund is subject to various Master Agreements, which govern the terms of certain transactions with select counterparties. The Master Agreements reduce the counterparty risk associated with relevant transactions by specifying credit protection mechanisms and providing standardization that improves legal certainty. Master Agreements can also help limit counterparty risk by specifying collateral posting arrangements at pre-arranged exposure levels. Under the Master Agreement, collateral is routinely transferred if the total net exposure to certain transactions (net of existing collateral already in place) governed under the relevant master agreement with a counterparty in a given account exceeds a specified threshold.
The Master Repurchase Agreement governs transactions between the Fund and the counterparty. The Master Repurchase Agreement maintains provisions for, among other things, initiation, income payments, events of default, and maintenance of collateral for Repurchase Agreements.
International Swaps and Derivatives Association, Inc. Master Agreements ("ISDA Master Agreements") govern OTC financial derivative transactions entered into by the Fund and those counterparties. The ISDA Master Agreements maintain provisions for general obligations, representations, agreements, collateral and events of default or termination. Events of termination include conditions that may entitle counterparties to elect to terminate early and cause settlement of all outstanding transactions under the applicable ISDA Master Agreement.
Note 3 - Investment Advisory and Other Agreements
The Fund entered into an Investment Advisory Agreement (the "Agreement") with Palmer Square Capital Management LLC (the "Advisor"). Under the terms of the Agreement, the Fund pays a monthly investment advisory fee to the Advisor at the annual rate of 1.00% of the Fund's average daily net assets.
The Advisor has contractually agreed to waive or reduce its management fees and/or reimburse expenses of the Fund to ensure that total annual fund operating expenses (excluding taxes, interest on borrowings, commitment fees relating to borrowings, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses, expenses incurred in connection with any merger or reorganization, and extraordinary expenses such as litigation expenses) do not exceed 1.50% of the Fund's average daily net assets. This agreement is in effect until December 1, 2024, and it may be terminated before that date only by the Fund's Board of Trustees.
The Fund's advisor is permitted to seek reimbursement from the Fund, subject to certain limitations, of fees waived or payments made to the Fund for a period ending three full fiscal years after the date of the waiver or payment. This reimbursement may be requested from the Fund if the reimbursement will not cause the Fund's annual expense ratio to exceed the lesser of (a) the expense limitation amount in effect at the time such fees were waived or payments made, or (b) the expense limitation amount in effect at the time of the reimbursement. The Fund has recovered all previously available expenses.
UMB Fund Services, Inc. ("UMBFS") serves as the Fund's fund accountant, transfer agent and co-administrator; and Mutual Fund Administration, LLC ("MFAC") serves as the Fund's other co-administrator. UMB Bank, n.a., an affiliate of UMBFS, serves as the Fund's custodian. The Fund's fees incurred for fund accounting, fund administration, transfer agency and custody services for the year ended July 31, 2024, are reported on the Consolidated Statement of Operations.
Foreside Fund Services, LLC, a wholly owned subsidiary of Foreside Financial Group, LLC (d/b/a ACA Group), serves as the Fund's distributor (the "Distributor"). The Distributor does not receive compensation from the Fund for its distribution services; the Advisor pays the Distributor a fee for its distribution-related services.
50
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
The Fund has a fee arrangement with its custodian, UMB Bank, n.a., which provides for custody fees to be reduced by earning credits based on cash balances left on deposit with the custodian. For the year ended July 31, 2024, the total fees reduced by earning credits were $5,863. Such amount is shown as a reduction of expenses, "Fees paid indirectly", on the Consolidated Statement of Operations.
Certain trustees and officers of the Trust are employees of the Advisor and its affiliate. The Fund does not compensate trustees and officers affiliated with the Fund's Advisor.
Note 4 - Federal Income Taxes
At July 31, 2024, the cost of securities on a tax basis and gross unrealized appreciation and depreciation on investments for federal income tax purposes were as follows:
| Cost of investments | $ | 431,505,952 | ||
| Gross unrealized appreciation | $ | 9,803,553 | ||
| Gross unrealized depreciation | (11,536,938 | ) | ||
| Net unrealized appreciation (depreciation) on investments | $ | (1,733,385 | ) |
The difference between cost amounts for financial statement and federal income tax purposes is due primarily to timing differences in recognizing certain gains and losses in security transactions.
GAAP requires that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended July 31, 2024, permanent differences in book and tax accounting have been reclassified to paid-in capital and total accumulated deficit as follows:
| Increase (Decrease) | |
| Paid-in Capital | Total Accumulated Deficit |
| $ 1,106 | $ (1,106) |
As of July 31, 2024, the components of accumulated earnings (deficit) on a tax basis were as follows:
| Undistributed ordinary income | $ | 4,321,723 | ||
| Undistributed long-term capital gains | - | |||
| Accumulated earnings (deficit) | 4,431,723 | |||
|
Accumulated capital and other losses |
- | |||
| Unrealized appreciation (depreciation) on investments | (1,571,691 | ) | ||
| Unrealized appreciation (depreciation) on foreign currency translations, forwards, swaps, and options contracts | (158,534 | ) | ||
| Total accumulated earnings (deficit) | $ | 2,591,498 |
The fund utilized $910,632 of its capital loss carryforwards during the year ended July 31, 2024.
51
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
The tax character of distributions paid during the fiscal years ended July 31, 2024 and July 31, 2023 were as follows:
| 2024 | 2023 | |||||||
| Distributions paid from: | ||||||||
| Ordinary income | $ | 30,127,100 | $ | 25,164,403 | ||||
| Net long-term capital gains | - | 553,081 | ||||||
| Total taxable distributions | 30,127,100 | 25,717,484 | ||||||
| Total distributions paid | $ | 30,127,100 | $ | 25,717,484 |
The Palmer Square Opportunistic Income Fund designates $0 as a long-term capital gain distribution.
Note 5 - Investment Transactions
For the year ended July 31, 2024, purchases and sales of investments, excluding short-term investments, futures contracts, options contracts, swaption contracts and swap contracts, were $279,592,562 and $184,931,162, respectively. Proceeds from securities sold short and cover short securities were $3,394,404 and $3,458,977, respectively, for the same period.
Note 6 - Shareholder Servicing Plan
The Fund has adopted a Shareholder Servicing Plan to pay a fee at an annual rate of up to 0.25% of average daily net assets of shares serviced by shareholder servicing agents who provide administrative and support services to their customers.
For the year ended July 31, 2024, shareholder servicing fees incurred are disclosed on the Consolidated Statement of Operations.
Note 7 - 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, the Fund expects the risk of loss to be remote.
Note 8 - Fair Value Measurements and Disclosure
Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. It also provides guidance on determining when there has been a significant decrease in the volume and level of activity for an asset or a liability, when a transaction is not orderly, and how that information must be incorporated into a fair value measurement.
Under Fair Value Measurements and Disclosures, various inputs are used in determining the value of the Fund's investments. These inputs are summarized into three broad Levels as described below:
| ● | Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. | |
| ● | Level 2 - Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
52
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
| ● | Level 3 - Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund's own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different Levels of the fair value hierarchy. In such cases, for disclosure purposes, the Level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest Level input that is significant to the fair value measurement in its entirety.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the inputs used, as of July 31, 2024, in valuing the Fund's assets carried at fair value:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Assets | ||||||||||||||||
| Investments | ||||||||||||||||
| Bank Loans | $ | - | $ | 70,378,432 | $ | - | $ | 70,378,432 | ||||||||
| Bonds | ||||||||||||||||
| Asset-Backed Securities | - | 300,230,707 | 2,500,000 | 302,730,707 | ||||||||||||
| Commercial Mortgage-Backed Securities | - | 2,022,335 | - | 2,022,335 | ||||||||||||
| Corporate* | - | 19,719,989 | - | 19,719,989 | ||||||||||||
| Short-Term Investments | 34,914,579 | - | - | 34,914,579 | ||||||||||||
| Total Investments | 34,914,579 | 392,351,463 | 2,500,000 | 429,766,042 | ||||||||||||
| Purchased Option Contracts | 6,525 | - | - | 6,525 | ||||||||||||
| Total Investments and Purchased Option Contracts | $ | 34,921,104 | $ | 392,351,463 | $ | 2,500,000 | $ | 429,772,567 | ||||||||
| Total Assets | $ | 34,921,104 | $ | 392,351,463 | $ | 2,500,000 | $ | 429,772,567 | ||||||||
|
Liabilities |
||||||||||||||||
| Other Financial Instruments** | ||||||||||||||||
| Forward Contracts | - | 17,407 | - | 17,407 | ||||||||||||
| Credit Default Swap Contracts | - | 21,939 | - | 21,939 | ||||||||||||
| Total Liabilities | $ | - | $ | 39,346 | $ | - | $ | 39,346 |
| * | All corporate bonds held in the Fund are Level 2 securities. For a detailed break-out by major industry classification, please refer to the Consolidated Schedule of Investments. |
| ** | Other financial instruments are derivative instruments, such as forward contracts and swap contracts. Forward contracts and swap contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
53
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining value:
| Beginning balance July 31, 2023 | $ | 980,000 | ||
| Transfers into Level 3 during the period | - | |||
| Transfers out of Level 3 during the period | (1,046,641 | ) | ||
| Total realized gain/(loss) | - | |||
| Change in unrealized appreciation/(depreciation) | 66,641 | |||
| Net purchases | 2,500,000 | |||
| Return of Capital | - | |||
| Net sales | - | |||
| Balance as of July 31, 2024 | $ | 2,500,000 |
The following table presents additional quantitative information about valuation methodologies and inputs used for investments that are measured at fair value and categorized within Level 3 as of July 31, 2024:
| Asset Class |
Fair Value at 7/31/2024 |
Valuation Technique(s) |
Unobservable Input |
Range of Input |
Weighted Average of Input |
Impact to Valuation from an Increase in Input(1) |
||||||||||
| Asset-Backed Securities | $ | 2,500,000 | Market Approach | Precedent Transaction | $ | 100.00 | N/A | Increase | ||||||||
| Corporate Bond | $ | - |
Asset Approach |
Expected Remaining Proceeds |
$ | 0.00 | N/A | Increase |
| (1) | This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect. |
Note 9 - Derivatives and Hedging Disclosures
Derivatives and Hedging requires enhanced disclosures about the Fund's derivative and hedging activities, including how such activities are accounted for and their effects on the Fund's financial position, performance and cash flows.
54
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
The effects of these derivative instruments on the Fund's financial position and financial performance as reflected in the Consolidated Statement of Assets and Liabilities and Consolidated Statement of Operations are presented in the tables below. The fair values of derivative instruments as of July 31, 2024 by risk category are as follows:
| Derivatives not designated as hedging instruments | ||||||||||||||||
|
Credit Contracts |
Equity Contracts |
Foreign Exchange Contracts |
Total | |||||||||||||
| Assets | ||||||||||||||||
| Purchased option contracts, at fair value | $ | - | $ | 6,525 | $ | - | $ | 6,525 | ||||||||
| $ | - | $ | 6,525 | $ | - | $ | 6,525 | |||||||||
| Liabilities | ||||||||||||||||
| Unrealized depreciation on forward foreign currency exchange contracts | $ | - | $ | - | $ | 17,407 | $ | 17,407 | ||||||||
| Unrealized depreciation on open swap contracts | 21,939 | - | - | 21,939 | ||||||||||||
| $ | 21,939 | $ | - | $ | 17,407 | $ | 39,346 |
| Derivatives not designated as hedging instruments | ||||||||||||||||
|
Credit Contracts |
Equity Contracts |
Foreign Exchange Contracts |
Total | |||||||||||||
|
Realized Gain (Loss) on Derivatives |
||||||||||||||||
| Swap contracts | $ | 140,481 | $ | - | $ | - | $ | 140,481 | ||||||||
| Forward contracts | - | - | 606,320 | 606,320 | ||||||||||||
| $ | 140,481 | $ | - | $ | 606,320 | $ | 746,801 |
|
Credit Contracts |
Equity Contracts |
Foreign Exchange Contracts |
Total | |||||||||||||
| Net Change in Unrealized Appreciation/Depreciation on Derivatives | ||||||||||||||||
| Purchased option contracts | $ | - | $ | (161,695 | ) | $ | - | $ | (161,695 | ) | ||||||
| Forward contracts | - | - | (705 | ) | (705 | ) | ||||||||||
| Swap contracts | (21,939 | ) | - | - | (21,939 | ) | ||||||||||
| $ | (21,939 | ) | $ | (161,695 | ) | $ | (705 | ) | $ | (184,339 | ) |
55
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
The notional amount is included on the Consolidated Schedule of Investments. The quarterly average volumes of derivative instruments as of July 31, 2024 are as follows:
| Derivatives not designated as hedging instruments | ||||||||
| Credit contracts | Credit default swap contracts | Notional amount | $ | 1,700,000 | ||||
| Equity contracts | Purchased option contracts | Notional amount | 652,500 | |||||
| Foreign exchange contracts | Forward contracts | Notional amount | (18,859,250 | ) |
Note 10 - Disclosures about Offsetting Assets and Liabilities
Disclosures about Offsetting Assets and Liabilities requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance requires retrospective application for all comparative periods presented.
A Fund mitigates credit risk with respect to OTC derivative counterparties through credit support annexes included with ISDA Master Agreements or other Master Netting Agreements which are the standard contracts governing most derivative transactions between the Fund and each of its counterparties. These agreements allow the Fund and each counterparty to offset certain derivative financial instruments' payables and/or receivables against each other and/or with collateral, which is generally held by the Fund's custodian. The amount of collateral moved to/from applicable counterparties is based upon minimum transfer amounts specified in the agreement. To the extent amounts due to the Fund from its counterparties are not fully collateralized contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance.
|
Amounts Not Offset in Consolidated Statement of Assets and Liabilities |
|||||||||||||||||
|
Description/Financial Instrument/Statement of Assets and Liabilities Category |
Counterparty |
Gross Amounts Presented in Consolidated Statement of Assets and Liabilities |
Financial Instruments* | Cash Collateral** | Net Amount | ||||||||||||
| Unrealized depreciation on open swap contracts - liability payable | J.P. Morgan | $ | 21,939 | $ | - | (21,939 | ) | - |
| * | Amounts relate to master netting agreements and collateral agreements (for example, ISDA) which have been determined by the Advisor to be legally enforceable in the event of default and where certain other criteria are met in accordance with applicable offsetting accounting guidance. |
| ** | Amounts relate to master netting agreements and collateral agreements which have been determined by the Advisor to be legally enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting guidance. The collateral amounts may exceed the related net amounts of financial assets and liabilities presented in the Consolidated Statement of Assets and Liabilities. Where this is the case, the total amount reported is limited to the net amounts of financial assets and liabilities with that counterparty. |
56
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
Note 11 - Line of Credit
The Fund together with other funds managed by the Advisor (together "Palmer Square Funds") has entered into a Senior Secured Revolving Credit Facility ("Facility") of $75,000,000 with UMB Bank, n.a. The Fund is permitted to borrow up to the lesser of the available credit line amount or an amount up to 10% of the adjusted net assets of the Fund. The purpose of the Facility is to finance temporarily the repurchase or redemption of shares of each fund. Borrowings under this agreement bear interest at the Wall Street Journal Prime rate minus 50bps, with a minimum rate of 6.00%. As compensation for holding the lending commitment available, the Palmer Square Funds are charged a commitment fee on the average daily unused balance of the Facility at the rate of 0.25% per annum. The commitment fees for the year ended July 31, 2024 were $18,935. The Fund did not borrow under the line of credit agreement during the year ended July 31, 2024.
PSOIX SPV has entered into a Senior Secured Revolving Credit Facility ("Facility") of $75,000,000 with Bank of America, n.a. The Fund is permitted to borrow up to $75,000,000 under the Facility. The purpose of the Facility is to provide financing for investment purposes. Loans under the Facility may be base rate loans or SOFR loans. Base rate loans will bear interest at the highest of (a) the Federal Funds Rate plus 1/2 of 1%, (b) the Prime Rate in effect for such day (c) SOFR published on such day by the SOFR Administrator on the Federal Reserve Bank of New York's website (or any successor source) plus 0.10% and (d) 0.00%. SOFR loans bear interest at the rate of 1.40% plus the Secured Overnight Financing Rate as administered by the Federal Reserve Bank of New York. The Facility requires the payment of 1.30% on the First Unused Amount (on and after the closing date and prior to the five-month anniversary of the closing date, $0; on and after the five-month anniversary of the closing date, the greater of $0 and an amount equity to 70% of the aggregate commitments minus total outstanding loans). The facility also requires the payment of 0.50% on the Second Unused Amount (on and after the closing date and prior to the five-month anniversary of the closing date, aggregate commitments minus total outstanding loans; on and after the five-month anniversary of the closing date, the aggregate commitments minus the greater of total outstanding loans and 70% of the aggregate commitments). The Fund paid $187,500 to Lender as an upfront fee in connection with this Credit Agreement. Such amount is shown as Prepaid commitment fees in the Consolidated Statement of Assets and Liabilities, and it is being amortized over a three-year period from the date of payment. For the year ended July 31, 2024, the average daily balance outstanding and weighted average interest rate were $34,472,678 and 6.84%, respectively. The commitment fees and interest on borrowings for year July 31, 2024 were $415,649 and $2,359,421, respectively. As of July 31, 2024, the outstanding line of credit balance was $38,250,000. The maximum amount borrowed was $38,250,000 on June 27, 2024 through July 31, 2024.
Note 12 - Capital Stock
The Fund is authorized as a Delaware statutory trust to issue an unlimited number of Shares. The minimum initial investment in the Fund by any investor is $100,000. However, there is no initial or subsequent investment minimums for accounts maintained by financial institutions (such as registered investment advisers and trusts) for the benefit of their clients who purchase shares through investment programs such as (1) fee-based advisory programs; (2) employee benefit plans (e.g., 401(k) or 457(b) retirement plans; (3) mutual fund platforms; and (4) consulting firms. In addition, there is no initial or subsequent investment minimum for Trustees or officers of the Fund, directors, officers and employees of Palmer Square Capital Management, LLC (the "Advisor") or Foreside Fund Services, LLC (the "Distributor") or any of their affiliates. Minimum investment amounts may be waived in the discretion of the Fund or the Advisor. The Distributor is not required to sell any specific number or dollar amount of the Fund's shares but will use commercially reasonable efforts to sell the shares.
A substantial portion of the Fund's investments will be illiquid. For this reason, the Fund is structured as a closed-end interval fund, which means that the Shareholders will not have the right to redeem their Shares on a daily basis. In addition, the Fund does not expect any trading market to develop for the Shares. As a result, if investors decide to invest in the Fund, they will have very limited opportunity to sell their Shares. For each repurchase offer the Board will set an amount between 5% and 25% of the Fund's Shares based on relevant factors, including the liquidity of the Fund's positions and the Shareholders' desire for liquidity. A Shareholder whose Shares (or a portion thereof) are repurchased by the Fund will not be entitled to a return of any sales charge that was charged in connection with the Shareholder's purchase of the Shares.
57
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
Pursuant to Rule 23c-3 under the Investment Company Act, on a quarterly basis, the Fund offers to repurchase at NAV outstanding shares of the Fund. The results of the repurchase offers conducted for the year ended July 31, 2024 are as follows:
|
Commencement Date |
Repurchase Request Deadline |
Repurchase Pricing date |
Net Asset Value as of Repurchase Offer Date |
Shares Repurchased |
Amount Repurchased |
Percentage of Outstanding Shares Repurchased |
| July 14, 2023 | August 9, 2023 | August 9, 2023 | $17.34 | 1,993,740.979 | $34,571,468.58 | 11.52% |
| October 13, 2023 | November 8, 2023 | November 8, 2023 | $17.31 | 1,626,499.585 | $28,154,707.82 | 9.49% |
| January 12, 2024 | February 7, 2024 | February 7, 2024 | $17.94 | 302,538.08 | $5,427,532.40 | 1.75% |
| April 12, 2024 | May 3, 2024 | May 3, 2024 | $18.03 | 582,715.026 | $10,506,351.92 |
3.02% |
Note 13 - Unfunded Commitments
The Fund may enter into unfunded loan commitments. Unfunded loan commitments may be partially or wholly unfunded. During the contractual period, the Fund is obliged to provide funding to the borrower upon demand. Unfunded loan commitments are fair valued in accordance with the valuation policy described in Note 2(a) and unrealized appreciation or depreciation, if any, is recorded on the Consolidated Statement of Assets and Liabilities. As of July 31, 2024, the Fund had no unfunded loan commitments outstanding.
Note 14 - Market Disruption and Geopolitical Risks
Certain local, regional or global events such as war, acts of terrorism, the spread of infectious illnesses and/or other public health issues, financial institution instability or other events may have a significant impact on a security or instrument. These types of events and other like them are collectively referred to as "Market Disruptions and Geopolitical Risks" and they may have adverse impacts on the worldwide economy, as well as the economies of individual countries, the financial health of individual companies and the market in general in significant and unforeseen ways. Some of the impacts noted in recent times include but are not limited to embargos, political actions, supply chain disruptions, bank failures, restrictions to investment and/or monetary movement including the forced selling of securities or the inability to participate impacted markets. The duration of these events could adversely affect the Fund's performance, the performance of the securities in which the Fund invests and may lead to losses on your investment. The ultimate impact of "Market Disruptions and Geopolitical Risks" on the financial performance of the Fund's investments is not reasonably estimable at this time. Management is actively monitoring these events.
Note 15 - New Accounting Pronouncements and Regulatory Updates
In March 2020, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) - Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848, which extends the period through December 31, 2024. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.
58
Palmer Square Opportunistic Income Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
July 31, 2024
Note 16 - Events Subsequent to the Fiscal Period End
The Fund has adopted financial reporting rules regarding subsequent events which require an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. Management has evaluated the Fund's related events and transactions that occurred through the date of issuance of the Fund's financial statements.
The Fund declared the payment of a distribution to be paid, on September 20, 2024, to shareholders of record on September 19, 2024 as follows:
| Long-Term Capital Gain | Short-Term Capital Gain | Income | ||||||||
| $ | - | $ | - | $ | 0.36991 |
There were no other events or transactions that occurred during this period that materially impacted the amounts or disclosures in the Fund's financial statements.
59
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees
and the Shareholders of the Palmer Square Opportunistic Income Fund
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities of the Palmer Square Opportunistic Income Fund (the "Fund"), including the consolidated schedule of investments, as of July 31, 2024, the related consolidated statement of operations and the consolidated statement of cash flows for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, consolidated financial highlights for each of the five years in the period then ended, and the related notes (collectively referred to as the "financial statements"). In our opinion, the consolidated financial statements present fairly, in all material respects, the consolidated financial position of the Fund as of July 31, 2024, the results of its consolidated operations and consolidated cash flows for the year then ended, the changes in its consolidated net assets for each of the two years in the period then ended, and the consolidated financial highlights for each of the five years in the 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 Fund's management. Our responsibility is to express an opinion on the Fund's 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 Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the auditor of the Fund since 2014.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its 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 Fund's internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the 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 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. Our procedures included confirmation of securities owned as of July 31, 2024 by correspondence with the custodian, agent banks, and brokers or by other appropriate auditing procedures where replies were not received. We believe that our audits provide a reasonable basis for our opinion.
| TAIT, WELLER & BAKER LLP |
Philadelphia, Pennsylvania
September 27, 2024
60
Palmer Square Opportunistic Income Fund
SUPPLEMENTAL INFORMATION (Unaudited)
Trustees and Officers Information
Additional information about the Trustees is included in the Fund's Statement of Additional Information which is available, without charge, upon request by calling (866) 933-9033. The Trustees and officers of the Fund and their principal occupations during the past five years are as follows:
| Name, Address, Year of Birth and Position(s) held with Trust | Term of Office; Length of Time Served |
Principal Occupation During the Past Five Years and Other Affiliations |
Number of Portfolios in the Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years |
| Independent Trustees: | ||||
|
Megan Leigh Webber, CPA (born 1975) Trustee and Chairperson of the Board |
Indefinite; Trustee since August 2014; Chairperson since February 2019 | Financial Reporting Manager, The Anschutz Corporation (2000 - present). Supervising Audit Senior, KPMG, LLP (1997 - 2000). | 1 |
Palmer Square Capital BDC Inc. (includes 1 portfolio); Palmer Square Funds Trust (includes 3 portfolios). |
|
James Neville Jr. (born 1964) Trustee |
Indefinite; Since August 2014 | Portfolio Manager, Great Plains Principal Trading (January 2012 - present). Proprietary Trader (1987 - 2011). | 1 |
Palmer Square Capital BDC Inc. (includes 1 portfolio); Palmer Square Funds Trust (includes 3 portfolios). |
|
Christopher C. Nelson (born 1974) Trustee |
Indefinite; Trustee Since February 2024 |
Wealth Advisor, SeaCrest Wealth Management (2018-Present). |
1 |
Palmer Square Capital BDC Inc. (includes 1 portfolio); Palmer Square Funds Trust (includes 3 portfolios). |
61
Palmer Square Opportunistic Income Fund
SUPPLEMENTAL INFORMATION (Unaudited) - Continued
| Name, Address, Year of Birth and Position(s) held with Trust | Term of Office; Length of Time Served |
Principal Occupation During the Past Five Years and Other Affiliations |
Number of Portfolios in the Fund Complex Overseen by Trustee | Other Directorships Held by Trustee During the Past Five Years |
| Officers of the Trust: | ||||
|
Jeffrey Fox (born 1975) President and Treasurer |
Indefinite; President since April 2020 and Treasurer since March 2017 |
President (March 2020 - present) and Managing Director (April 2013 - present), Palmer Square Capital Management LLC. |
N/A | N/A |
|
Scott Betz (born 1977) Chief Compliance Officer |
Indefinite; Since April 2018 |
Chief Operating Officer, Palmer Square Capital Management, LLC (March 2018 - present). Chief Compliance Officer, Palmer Square Capital Management, LLC (March 2018 - March 2021). Chief Operating Officer, Scout Investments, (December 2010 - March 2018). Chief Compliance Officer, Scout Investments (May 2016 - January 2018). |
N/A | N/A |
|
Stacy Brice (born 1980) Secretary |
Indefinite; Since November 2019 |
Chief Compliance Officer (March 2021 - present) and Legal Counsel (August 2019 - present), Palmer Square Capital Management, LLC. Vice President of Compliance, Palmer Square Capital Management, LLC (August 2019 - March 2021). Deputy Chief Compliance Officer, LibreMax Capital (January 2017 - May 2019), and Senior Compliance Officer, LibreMax Capital (September 2015 - January 2017). Compliance Officer, Glade Brook Capital Partners, LLC (March 2012 - September 2015). |
N/A | N/A |
The address for the Trustees and officers is 1900 Shawnee Mission Parkway, Suite 315, Mission Woods, KS 66205.
62
Palmer Square Opportunistic Income Fund
EXPENSE EXAMPLE
For the Six Months Ended July 31, 2024 (Unaudited)
Expense Example
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from February 1, 2024 to July 31, 2024.
Actual Expenses
The information in the row titled "Actual Performance" of the table below provides actual account values and actual expenses. You may use the information in these columns, 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 appropriate row under the column titled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the row titled "Hypothetical (5% annual return before expenses)" of the table below provides hypothetical account values and hypothetical expenses based on the Fund's actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund's actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (load) or contingent deferred sales charges. Therefore, the information in the row titled "Hypothetical (5% annual return before expenses)" is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
|
Beginning Account Value |
Ending Account Value |
Expenses Paid During Period* |
|
| 2/1/24 | 7/31/24 | 2/1/24-7/31/24 | |
| Actual Performance | $1,000.00 | $1,056.00 | $11.60 |
| Hypothetical (5% annual return before expenses) | $1,000.00 | $1,013.58 | $11.36 |
| * | Expenses are equal to the Fund's annualized expense ratio of 2.27% multiplied by the average account value over the period, multiplied by 182/366 (to reflect the six month period). Assumes all dividends and distributions were reinvested. |
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Palmer Square Opportunistic Income Fund
Investment Advisor
Palmer Square Capital Management LLC
1900 Shawnee Mission Parkway, Suite 315
Mission Woods, Kansas 66205
Independent Registered Public Accounting Firm
Tait, Weller & Baker LLP
Two Liberty Place
50 South 16th Street, Suite 2900
Philadelphia, Pennsylvania 19102
Custodian
UMB Bank, n.a.
928 Grand Boulevard, 5th Floor
Kansas City, Missouri 64106
Fund Co-Administrator
Mutual Fund Administration, LLC
2220 East Route 66, Suite 226
Glendora, California 91740
Fund Co-Administrator, Transfer Agent and Fund Accountant
UMB Fund Services, Inc.
235 West Galena Street
Milwaukee, Wisconsin 53212
Distributor
Foreside Fund Services, LLC
Three Canal Plaza, Suite 100
Portland, Maine 04101
www.acaglobal.com
FUND INFORMATION
| TICKER | CUSIP | |
| Palmer Square Opportunistic Income Fund | PSOIX | 611776 105 |
Privacy Principles of the Palmer Square Opportunistic Income Fund for Shareholders
The Fund is committed to maintaining the privacy of its shareholders and to safeguarding its non-public personal information. The following information is provided to help you understand what personal information the Fund collects, how we protect that information and why, in certain cases, we may share information with select other parties.
Generally, the Fund does not receive any non-public personal information relating to its shareholders, although certain non-public personal information of its shareholders may become available to the Fund. The Fund does not disclose any non-public personal information about its shareholders or former shareholders to anyone, except as permitted by law or as is necessary in order to service shareholder accounts (for example, to a transfer agent or third party administrator).
This report is sent to shareholders of the Palmer Square Opportunistic Income Fund for their information. It is not a Prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report.
Proxy Voting
The Fund's proxy voting policies and procedures, as well as information regarding how the Fund voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended June 30, are available, without charge and upon request by calling (866) 933-9033 or on the SEC's website at www.sec.gov.
Fund Portfolio Holdings
The Fund files its complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the Fund's Form N-PORT on the SEC's website at www.sec.gov.
Prior to the use of Form N-PORT, the Fund filed its complete schedule of portfolio holdings with the SEC on Form N-Q, which is available online at www.sec.gov.
Householding
The Fund will mail only one copy of shareholder documents, including prospectuses and notice of annual and semi-annual reports availability and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called "householding" and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those other members of your household, please call the Fund at (866) 933-9033.
Palmer Square Opportunistic Income Fund
P.O. Box 2175
Milwaukee, WI 53201
Toll Free: (866) 933-9033
(b) Not applicable.
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant's principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
The registrant undertakes to provide to any person without charge, upon request, a copy of its code of ethics by mail when they call the registrant at 1-866-933-9033.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Registrant has determined that the Registrant has the following "audit committee financial expert" as defined in Item 3(b) of Form N-CSR serving on its Audit Committee: Ms. Megan Webber. The audit committee financial expert is "independent" as that term is defined in Item 3(a)(2) of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. "Audit services" refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. "Audit-related services" refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. "Tax services" refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no "other services" provided by the principal accountant. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
|
FYE 7/31/2024 |
FYE 7/31/2023 |
||
| (a) | Audit Fees | $17,200 | $17,000 |
| (b) | Audit-Related Fees | N/A | N/A |
| (c) | Tax Fees | $2,700 | $2,700 |
| (d) | All Other Fees | N/A | N/A |
(e)(1) The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.
(e)(2) The percentage of fees billed by Tait, Weller, & Weller LLP applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:
|
FYE 7/31/2024 |
FYE 7/31/2023 |
|
| Audit-Related Fees | 0% | 0% |
| Tax Fees | 0% | 0% |
| All Other Fees | 0% | 0% |
| (f) | All of the principal accountant's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal accountant. |
The following table indicates the non-audit fees billed or expected to be billed by the registrant's accountant for services to the registrant and to the registrant's investment advisor (and any other controlling entity, etc.-not sub-advisor) for the last two years. The audit committee of the Board of Trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment advisor is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant's independence.
|
FYE 7/31/2024 |
FYE 7/31/2023 |
||
| (g) | Registrant Non-Audit Related Fees | N/A | N/A |
| (h) | Registrant's Investment Advisor | N/A | N/A |
| (i) | Not applicable. |
| (j) | Not applicable. |
Item 5. Audit Committee of Listed Registrants.
| (a) | Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934). |
| (b) | Not applicable. |
Item 6. Investments.
| (a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
| (b) | Not Applicable. |
Item 7. Financial Statements and Financial Highlights for Open-End Management Investment Companies.
Not applicable for closed-end investment companies.
Item 8. Changes in and Disagreements with Accountants for Open-End Management Investment Companies.
Not applicable for closed-end investment companies.
Item 9. Proxy Disclosures for Open-End Management Investment Companies.
Not applicable for closed-end investment companies.
Item 10. Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies.
Not applicable for closed-end investment companies.
Item 11. Statement Regarding Basis for Approval of Investment Advisory Contract.
Not applicable.
Item 12. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
In accordance with Rules 30b1-4 (new) & 206(4)-6 (new) & 204-2 (amended) of the Investment Advisers Act of 1940, Palmer Square Capital Management LLC ("Palmer Square") is providing all clients with a summary of its proxy voting procedures.
| ● | Upon opening an account with Palmer Square, clients are given the option to delegate proxy-voting discretion to Palmer Square by completing the appropriate documents. Palmer Square will only exercise proxy-voting discretion over client shares in the instances where clients give Palmer Square discretionary authority to vote on their behalf. |
| ● | It is Palmer Square's policy to vote client shares primarily in conformity with Glass Lewis & Co. recommendations, in order to limit conflict of interest issues between Palmer Square and its clients. Glass Lewis & Co. and Palmer Square retain a record of all recommendations. |
| ● | Glass Lewis & Co. is a neutral third party that issues recommendations based upon its own internal guidelines. |
| ● | Palmer Square may vote client shares inconsistent with Glass Lewis & Co. recommendations if Palmer Square believes it is in the best interest of its clients. In such a case, Palmer Square will have on file a written disclosure detailing why they believe Glass Lewis & Co.'s recommendation was not in the client's best interest. |
| ● | In situations where there is a conflict of interest in the voting of proxies due to business or personal relationships that Palmer Square maintains with persons having an interest in the outcome of certain votes, Palmer Square will take appropriate steps to ensure that its proxy voting decisions are made in the best interest of its clients. |
| ● | Palmer Square votes client shares via ProxyEdge, an electronic voting platform provided by Broadridge Financial Solutions, Inc. Additionally, ProxyEdge retains a record of proxy votes for each client. |
| ● | Annually, Palmer Square will file Form N-PX with the SEC, which will contain -the fund's complete proxy voting record. |
| ● | Palmer Square's Compliance Department will periodically review all proxy votes to ensure consistency with its procedures. |
| ● | Upon request, clients can receive a copy of Palmer Square's proxy voting procedures and Glass Lewis & Co.'s proxy voting guidelines. |
| ● | These procedures are currently in effect. |
Item 13. Portfolio Managers of Closed-End Management Investment Companies.
(a)(1) As of the filing date of this report on Form N-CSR, the portfolio managers of the Fund are as follows:
Christopher D. Long, Angie K. Long and Taylor R. Moore are jointly and primarily responsible for the day to day management of the Fund. Mr. Long and Ms. Long have managed the Fund since it commenced operations on August 29, 2014, and Mr. Moore has managed the Fund since December 1, 2019.
Christopher D. Long. Mr. Long is the President and founder of the Advisor and is responsible for the Advisor's alternative investments business and credit business, managing both the firm's investment activities and operations as well as defining its investment policy. Mr. Long was a Managing Director and Investment Committee Member at Prairie Capital Management, LLC ("Prairie") from 2006 to 2009, where he was one of the team members responsible for the firm's proprietary alternative investment products. Prior to joining Prairie, Mr. Long was at various New York City-based firms including Sandell Asset Management, Corp. ("Sandell"), a multi-billion multi-strategy hedge fund, where he, as a Research Analyst, invested in both equity and debt securities from 2005 to 2006. Prior to Sandell, he worked at Morgan Stanley in the Credit Derivatives and Distressed Securities Group as an Associate, focusing on the firm's proprietary investments during the summer of 2004. Before Morgan Stanley, Mr. Long worked at TH Lee Putnam Ventures, a $1.1 billion private equity fund sponsored by Thomas H. Lee Partners and Putnam Investments, from 1999 to 2003. In that role, he was a member of the investment team investing over $200 million of capital and served as a director and board observer at certain companies in which the fund invested. Mr. Long started his career at JPMorgan & Co. in Leveraged Finance and Mergers & Acquisitions (FIG Group), advising corporations and private equity firms on investment banking and capital markets, from 1997 through 1999. Mr. Long received an MBA from the Harvard Business School in 2005, and an undergraduate degree in Economics, cum laude, from Princeton University in 1997.
Angie K. Long, CFA. Ms. Long has been the Chief Investment Officer of the Advisor since February 2011. She is a member of the Advisor's Investment Committee and has key responsibilities for all investment-related activities with a particular focus on portfolio construction and risk management. Prior to joining Palmer Square, Ms. Long worked for JPMorgan Chase & Co. in New York from 1998 to 2011. There, she held a variety of management and trading roles, including Deputy Head of Credit Trading for North America, Head of High Yield Trading, and Head of Credit Derivatives Trading. She has been a trader within many products and strategies including high yield bonds, high yield credit derivatives, distressed debt, capital structure arbitrage and structured credit. Among other career achievements, Ms. Long is credited with creating the High Yield Debt Index, the first liquid credit trading index. She was named a managing director of JPMorgan Chase & Co. at age 29. She was responsible for building JPMorgan's High Yield Credit Derivatives business and Credit Options business. Ms. Long holds the Series 7, 63, 4, 55, and 24 securities licenses. She received an AB degree in Economics from Princeton University in 1997 and is a CFA® charterholder.
Taylor R. Moore, CFA. Prior to joining Palmer Square, Taylor worked at JPMorgan Chase & Co. in New York and Delaware. Taylor was an integral part of the firm's North American foreign exchange business serving as Associate Product Controller. In particular, Taylor played a key role in all financial operations and management of JPMorgan's Forward and Spot foreign exchange trading desks. He began his career at JPMorgan as part of the firm's Corporate Development Program, a two year selective leadership development program. Prior to JPMorgan Chase & Co., Taylor worked at Frontier Investment Bank, a boutique investment bank based out of Kansas City. He is also a CFA ® charterholder.
(a)(2) The following tables show information regarding accounts (other than the Fund) managed by each named portfolio manager as of July 31, 2024:
| With Advisory Fee based on Performance | ||||||||||||||||
| Type of Accounts | Number of Accounts |
Total Assets (in millions) |
Number of Accounts |
Total Assets (in millions) |
||||||||||||
| Christopher D. Long | ||||||||||||||||
| Registered Investment Companies: | 4 | $ | 1,141 | 0 | $ | 0 | ||||||||||
| Other pooled investment vehicles: | 59 | $ | 28,001 | 54 | $ | 25,747 | ||||||||||
| Other accounts: | 86 | $ | 2,503 | 0 | $ | 0 | ||||||||||
| Angie K. Long, CFA | ||||||||||||||||
| Registered Investment Companies: | 5 | $ | 1,299 | 0 | $ | 0 | ||||||||||
| Other pooled investment vehicles: | 59 | $ | 28,001 | 54 | $ | 25,747 | ||||||||||
| Other accounts: | 60 | $ | 2,489 | 0 | $ | 0 | ||||||||||
| Taylor R. Moore, CFA | ||||||||||||||||
| Registered Investment Companies: | 3 | $ | 291 | 0 | $ | 0 | ||||||||||
| Other pooled investment vehicles: | 0 | $ | 0 | 0 | $ | 0 | ||||||||||
| Other accounts: | 0 | $ | 0 | 0 | $ | 0 |
Portfolio Manager Potential Material Conflicts of Interest
It is possible that conflicts of interest may arise in connection with the portfolio managers' management of the Fund's investments on the one hand and the investments of other accounts or vehicles for which the portfolio managers are responsible on the other. For example, a portfolio manager may have conflicts of interest in allocating management time, resources and investment opportunities among the Fund and the other accounts or vehicles the portfolio manager advises. In addition, due to differences in the investment strategies or restrictions among the Fund and the other accounts, a portfolio manager may take action with respect to another account that differs from the action taken with respect to the Fund. In some cases, another account managed by a portfolio manager may provide more revenue to the Advisor. While this may appear to create additional conflicts of interest for the portfolio manager in the allocation of management time, resources and investment opportunities, the Advisor strives to ensure that portfolio managers endeavor to exercise their discretion in a manner that is equitable to all interested persons. In this regard, in the absence of specific account-related impediments, it is the policy of the Advisor to allocate investment ideas pro rata to all accounts with the same primary investment objective.
The goal of the Advisor is to provide high quality investment services to all of its clients, while meeting its fiduciary obligation to treat all clients fairly. The Advisor have adopted and implemented policies and procedures, including brokerage and trade allocation policies and procedures that it believes address the conflicts associated with managing multiple accounts for multiple clients.
(a)(3) Portfolio Managers' Compensation as of July 31, 2024.
The portfolio managers receive a fixed base salary. Each portfolio manager is an equity owner of the firm and shares in the firm's profits. The portfolio managers' compensation arrangements are not determined on the basis of specific funds or accounts managed.
(a)(4) Beneficial Ownership of Securities as of July 31, 2024.
| Portfolio Manager |
Dollar Range of Equity Securities of the Fund Beneficially Owned |
| Christopher D. Long | None |
| Angie K. Long, CFA | None |
| Taylor R. Moore, CFA | None |
(b) Not applicable.
Item 14. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 15. Submission of Matters to a Vote of Security Holders.
The registrant has not made any material changes to the procedures by which shareholders may recommend nominees to the registrant's Board of Trustees.
Item 16. Controls and Procedures.
| (a) | The Registrant's Principal Executive Officer and Principal Financial Officer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act")) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant's service provider. |
| (b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 17. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
The registrant did not have any Securities Lending Activities during the period covered by the report.
Item 18. Recovery of Erroneously Awarded Compensation.
(a) Not Applicable.
(b) Not Applicable.
Item 19. Exhibits.
(a)(2) Not Applicable.
(a)(3) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2022. Filed herewith.
(a)(3)(1) None.
(a)(3)(2) There was no change in the registrant's independent public accountant during the reporting period.
| (b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| (Registrant) | Palmer Square Opportunistic Income Fund | |
| By (Signature and Title) | /s/ Jeffrey D. Fox | |
|
Jeffrey D. Fox, President and Principal Executive Officer Treasurer and Principal Financial Officer |
||
| Date | 10/8/24 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By (Signature and Title) | /s/ Jeffrey D. Fox | |
|
Jeffrey D. Fox, President and Principal Executive Officer Treasurer and Principal Financial Officer |
||
| Date | 10/8/24 |