united states
securities and exchange commission
washington, d.c. 20549

form n-Q

QUARTERLY SCHEDULE OF PORTFOLIO HOLDINGS OF REGISTERED MANAGEMENT INVESTMENT COMPANY

Investment Company Act file number 811-22718

 

Two Roads Shared Trust

(Exact name of registrant as specified in charter)

 

17605 Wright Street, Suite 2, Omaha, NE 68130

(Address of principal executive offices) (Zip code)

 

Richard Malinowski, Gemini Fund Services, LLC.

80 Arkay Drive, Suite 110, Hauppauge, NY 11788

(Name and address of agent for service)

 

Registrant's telephone number, including area code: 402-895-1600

 

Date of fiscal year end: 10/31

 

Date of reporting period: 7/31/18

 

Form N-Q is to be used by management investment companies, other than small business investment companies registered on Form N-5 (§§239.24 and 274.5 of this chapter), to file reports with the Commission, not later than 60 days after the close of the first and third fiscal quarters, pursuant to rule 30b1-5 under the Investment Company Act of 1940 (17 CFR 270.30b1-5). The Commission may use the information provided on Form N-Q in its regulatory, disclosure review, inspection, and policymaking roles.

 

A registrant is required to disclose the information specified by Form N-Q, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-Q unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.

 

Item 1. Schedule of Investments.

 

 

Wealthfront Risk Parity Fund
PORTFOLIO OF INVESTMENTS (Unaudited)
July 31, 2018
                 
                 
Principal Amount   SHORT-TERM INVESTMENTS - 99.4 %   Coupon Rate (%)   Maturity   Value
    U.S. GOVERNMENT - 94.7 %            
 $54,000,000   U.S. Treasury Bill    0.91   8/2/2018    $53,997,308
 18,500,000   U.S. Treasury Bill    1.67   8/9/2018    18,492,374
 10,500,000   U.S. Treasury Bill    1.82   8/23/2018    10,487,985
 5,000,000   U.S. Treasury Bill    1.85   9/13/2018    4,988,855
 30,000,000   U.S. Treasury Bill    1.86   8/30/2018    29,954,177
 1,000,000   U.S. Treasury Bill    1.86   9/6/2018    998,115
 115,000,000   U.S. Treasury Bill    1.89   9/27/2018    114,655,862
 162,000,000   U.S. Treasury Bill    1.93   10/4/2018    161,446,320
 13,000,000   U.S. Treasury Bill    1.96   8/16/2018    12,988,825
 92,000,000   U.S. Treasury Bill    1.96   10/18/2018    91,611,051
 90,000,000   U.S. Treasury Bill    1.96   10/25/2018    89,585,359
 53,000,000   U.S. Treasury Bill    2.16   9/20/2018    52,840,485
 104,000,000   U.S. Treasury Bill    2.18   10/11/2018    103,555,117
                 745,601,833
Shares   MONEY MARKET FUND - 4.7 %            
 37,474,879   First American Treasury Obligations Fund - Institutional Shares, 1.79% +        37,474,879
                 
    TOTAL SHORT-TERM INVESTMENTS (Cost - $782,941,602)        783,076,712
                 
    TOTAL INVESTMENTS - 99.4 % (Cost - $782,941,602)        $783,076,712
    OTHER ASSETS LESS LIABILITIES - 0.6 %            4,530,159
    NET ASSETS - 100.0 %            $787,606,871
                 
+ Money market fund; interest rate reflects seven-day effective yield on July 31, 2018.      

 

                 
TOTAL RETURN SWAPS              
      Interest Payable        
Notional Amount at July 31, 2018 Number of Shares Reference Entity Index Spread   Termination Date Counterparty Unrealized Appreciation/ (Depreciation)
 $1,335,076,399  12,548,506 iShares Core U.S. Aggregate Bond ETF 1 Month USD LIBOR 55-65 bps   3/13/2019-9/3/2019 JPM  $(6,798,757)
 339,824,113  3,068,736 iShares JP Morgan USD Emerging Markets Bond ETF 1 Month USD LIBOR 27-35 bps   3/13/2019-8/30/2019 JPM  (5,786,556)
 79,150,311  1,134,040 iShares MSCI EAFE ETF 1 Month USD LIBOR 30-40 bps   3/8/2019-6/3/2019 JPM  (1,185,700)
 144,275,503  538,387 SPDR S&P 500 ETF Trust 1 Month USD LIBOR 26-60 bps   3/8/2019-9/3/2019 JPM  7,002,234
 81,986,601  1,877,231 Vanguard FTSE Developed Markets ETF 1 Month USD LIBOR 35-40 bps   6/3/2019-9/3/2019 JPM  281,772
 104,774,181  2,286,121 Vanguard FTSE Emerging Markets ETF 1 Month USD LIBOR 30-40 bps   3/8/2019-9/3/2019 JPM  (4,611,179)
 173,357,568  2,239,524 Vanguard Real Estate ETF 1 Month USD LIBOR 20-40 bps   2/28/2019-8/30/2019 JPM  9,897,896
                 $(1,200,290)
ETF - Exchange-Traded Fund            
JPM - JP Morgan                
LIBOR - London Interbank Offered Rate            

 

 

Wealthfront Risk Parity Fund
PORTFOLIO OF INVESTMENTS (Unaudited)(Continued)
July 31, 2018
               
The following is a summary of significant accounting policies followed by the Fund in preparation of its financial statements. The policies are in conformity with U.S. generally accepted accounting principles in the United States of America (“GAAP”). The preparation of the financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. 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".
               
Securities Valuation – Securities listed on an exchange are valued at the last reported sale price at the close of the regular trading session of the exchange on the business day the value is being determined, or in the case of securities listed on NASDAQ at the NASDAQ Official Closing Price (“NOCP”). In the absence of a sale, such securities shall be valued at the mean between the current bid and ask prices on the primary exchange on the day of valuation. Short-term debt obligations having 60 days or less remaining until maturity, at the time of purchase, may be valued at amortized cost.
               
Valuation of Underlying Funds - The Fund may invest in portfolios of open-end or closed-end investment companies (the “Underlying Funds”).  The Underlying Funds value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value according to the methods established by the board of directors of the Underlying Funds.

Open-end investment companies are valued at their respective net asset values as reported by such investment companies. The shares of many closed-end investment companies, after their initial public offering, frequently trade at a price per share, which is different than the net asset value per share. The difference represents a market premium or market discount of such shares. There can be no assurances that the market discount or market premium on shares of any closed-end investment company purchased by the Fund will not change.
               
The Fund may hold securities, such as private investments, interest in commodity pools, other non-traded securities or temporarily illiquid securities, for which market quotations are not readily available or are determined to be unreliable. These securities will be valued using the “fair value” procedures approved by the Trust’s Board of Trustees (the “Board”). The Board has delegated execution of these procedures to a fair value team composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) Adviser.  The team may also enlist third party consultants such as a valuation specialist at a public accounting firm, valuation consultant or financial officer of a security issuer on an as-needed basis to assist in determining a security-specific fair value. The Board has also engaged a third party valuation firm to attend valuation meetings held by the Trust, review minutes of such meetings and report to the Board on a quarterly basis. The Board reviews and ratifies the execution of this process and the resultant fair value prices at least quarterly to assure the process produces reliable results.
               
Fair Valuation Process – As noted above, the fair value team is composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) Adviser.  The applicable investments are valued collectively via inputs from each of these groups.  For example, fair value determinations are required for the following securities:  (i) securities for which market quotations are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary lapse in the provision of a price by the regular pricing source), (ii) securities for which, in the judgment of the Adviser, the prices or values available do not represent the fair value of the instrument.  Factors which may cause the Adviser to make such a judgment include, but are not limited to, the following: only a bid price or an ask price is available; the spread between bid and ask prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; (iv) securities with respect to which an event that will affect the value thereof has occurred (a “significant event”) since the closing prices were established on the principal exchange on which they are traded, but prior to the Fund’s calculation of its net asset value.  Specifically, interests in commodity pools or managed futures pools are valued on a daily basis by reference to the closing market prices of each futures contract or other asset held by a pool, as adjusted for pool expenses.  Restricted or illiquid securities, such as private investments or non-traded securities are valued via inputs from the Adviser based upon the current bid for the security from two or more independent dealers or other parties reasonably familiar with the facts and circumstances of the security (who should take into consideration all relevant factors as may be appropriate under the circumstances).  If the Adviser is unable to obtain a current bid from such independent dealers or other independent parties, the fair value team shall determine the fair value of such security using the following factors: (i) the type of security; (ii) the cost at date of purchase; (iii) the size and nature of the Fund's holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.
               
Valuation of Fund of Funds - The Fund may invest in portfolios of open-end or closed-end investment companies (the “underlying funds”).  Underlying open-end funds are valued at their respective net asset values as reported by such investment companies.  The underlying funds value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the Boards of the underlying funds. The shares of many closed-end investment companies, after their initial public offering, frequently trade at a price per share, which is different than the net asset value per share.  The difference represents a market premium or market discount of such shares. There can be no assurances that the market discount or market premium on shares of any closed-end investment company purchased by the Fund will not change.  
               
Swap Agreements – The Fund may enter into various swap transactions for investment purposes or to manage interest rate, equity, or credit risk.   These would be two-party contracts entered into primarily to exchange the returns (or differentials in rates of returns) earned or realized on particular pre-determined investments or instruments.

The gross returns to be exchanged or “swapped” between parties are calculated with respect to a notional amount, i.e., the return on or increase in value of a particular dollar amount invested at a particular interest rate, or in a “basket” of securities representing a particular index or market segment.  Changes in the value of swap agreements are recognized as unrealized gains or losses in the Statement of Operations by “marking to market” on a daily basis to reflect the value of the swap agreement at the end of each day as reported by the swap counterparty.   Realized gains and losses from the decrease in notional value of the swap are recognized on trade date. A liquidation payment received or made at the termination of the swap agreement is recorded as a realized gain or loss on the Statement of Operations.
 
The notional value of swaps disclosed in the Portfolio of Investments at July 31, 2018 are a reflection of the volume of derivative activity for the Fund.
               
The Fund utilizes various methods to measure the fair value of most of its investments on a recurring basis.  GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of input are:
 
Level 1 - Unadjusted quoted prices in active markets for identical assets and 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 in an inactive market, price for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
 
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 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 necessarily an indication of the risk associated with investing in those securities.  The following tables summarize the inputs used as of July 31, 2018 for the Fund's assets and liabilities measured at fair value:

 

           
Wealthfront Risk Parity Fund          
Assets * Level 1 Level 2 Level 3 Total  
Short-Term Investments  $37,474,879  $745,601,833  $              -  $783,076,712  
Swap Contracts ^  -  17,181,902  -  17,181,902  
Total  $37,474,879  $762,783,735  $              -  $800,258,614  
           
Liabilities Level 1 Level 2 Level 3 Total  
Swap Contracts ^  $              -  $18,382,192  $              -  $18,382,192  
Total  $              -  $18,382,192  $              -  $18,382,192  
           
The Fund did not hold any Level 3 securities during the period.  
There were no transfers among Level 1, Level 2 or Level 3 during the period.  
* Refer to the Portfolio of Investments for industry, geographic, or other classifications.  
^ The amounts shown for swaps are unrealized appreciation/depreciation.  
           
Aggregate Unrealized Appreciation & Depreciation - Tax Basis      
Tax Cost Gross Unrealized Appreciation Gross Unrealized Depreciation Net Unrealized Appreciation/
(Depreciation)
   
 $782,941,602  $141,384  $(6,274)  $135,110    

 

 

 

 

 

Item 2. Controls and Procedures.

 

(a)       The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended (the “1940 Act”)) are effective, as of a date within 90 days of the filing date of this report that includes the disclosure required by this paragraph, based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended.

 

(b)       There were no significant changes in the registrant’s internal control over financial reporting that occurred during the registrant’s last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

Item 3. Exhibits.

 

Certifications required by Rule 30a-2(a) under the Investment Company Act of 1940 (17 CFR 270.30a-2(a)) (and Item 3 of Form N-Q) are 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.

 

Two Roads Shared Trust

 

By

/s/ James Colantino

James Colantino, Principal Executive Officer

 

Date 9/28/2018

 

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

/s/ James Colantino

James Colantino, Principal Executive Officer

 

Date 9/28/2018

 

By

/s/ Laura Szalyga

Laura Szalyga, Principal Financial Officer

 

Date 9/28/2018

CERTIFICATIONS

 

I, James Colantino, certify that:

 

1.       I have reviewed this report on Form N-Q of the Wealthfront Risk Parity Fund, a Series of the Two Roads Shared Trust;

 

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.       Based on my knowledge, the schedule of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;

 

4.       The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940)] for the registrant and have:

 a)       designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)       designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)       evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

d)       disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.       The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a)       all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

b)       any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: 9/28/18

 

/s/ James Colantino

James Colantino, Principal Executive Officer

Two Roads Shared Trust

 

 

 

 

 

 

 

 

 

 
 

I, Laura Szalyga, certify that:

 

1.       I have reviewed this report on Form N-Q of the Wealthfront Risk Parity Fund, a Series of the Two Roads Shared Trust;

 

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.       Based on my knowledge, the schedule of investments included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal quarter for which the report is filed;

 

4.       The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) for the registrant and have:

 

 a)       designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)       designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)       evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

d)       disclosed in this report any change in the registrant's internal control over financial reporting that occurred during the registrant's most recent fiscal quarter that has materially affected, or is reasonably likely to materially affect, the registrant's internal control over financial reporting; and

 

5.       The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a)       all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

b)       any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: 9/28/2018

 

/s/ Laura Szalyga

Laura Szalyga, Principal Financial Officer

Two Roads Shared Trust