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 811-22655
Northern Lights Fund Trust III
(Exact name of registrant as specified in charter)
225 Pictoria Drive, Suite 450, Cincinnati, OH 45246
(Address of principal executive offices) (Zip code)
Eric Kane
80 Arkay Drive, Hauppauge, NY 11788
(Name and address of agent for service)
Registrant's telephone number, including area code: 631-470-2688
Date of fiscal year end: 12/31
Date of reporting period: 6/30/21
Item 1. Reports to Stockholders.
(a) |
ACM Dynamic Opportunity Fund |
Class A Shares – ADOAX |
Class I Shares – ADOIX |
ACM Tactical Income Fund |
Class A Shares – TINAX |
Class I Shares – TINIX |
Semi-Annual Report |
June 30, 2021 |
1-844-798-3833 |
www.acm-funds.com |
Distributed by Northern Lights Distributors, LLC |
Member FINRA |
ACM Dynamic Opportunity Fund
Portfolio Review (Unaudited)
June 30, 2021
Average Annual Total Return through June 30, 2021*, as compared to its benchmarks:
Since | |||||
6 Months | 1 Year | 3 Year | 5 Year | Inception***** | |
ACM Dynamic Opportunity Fund - Class A | 7.21% | 28.93% | 9.24% | 8.81% | 7.18% |
ACM Dynamic Opportunity Fund - Class A with load | 1.05% | 21.54% | 7.10% | 7.52% | 6.19% |
ACM Dynamic Opportunity Fund - Class I | 7.27% | 28.91% | 9.41% | 9.02% | 7.37% |
S&P 500 Total Return Index ** | 15.25% | 40.79% | 18.67% | 17.65% | 14.66% |
S&P 500 Price Index *** | 14.41% | 38.62% | 16.49% | 15.41% | 12.41% |
HFRX Equity Hedge Index **** | 7.86% | 20.40% | 4.11% | (4.08)% | 3.21% |
* | The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. The Fund’s advisor has contractually agreed to waive its fees and reimburse expenses of the Fund, at least until April 30, 2022, to ensure that Total Annual Fund Operating Expenses After Fee Waiver and Reimbursement (exclusive of any any front-end or contingent deferred loads; brokerage fees and commissions, acquired fund fees and expenses; borrowing costs (such as interest and dividend expense on securities sold short); taxes; and extraordinary expenses, such as litigation expenses (which may include indemnification of Fund officers and Trustees, contractual indemnification of Fund service providers (other than advisor) will not exceed 2.40% and 2.15% of average daily net assets attributable to Class A and Class I shares, respectively. The Fund’s total gross operating expenses, per the most recent prospectus is 2.07% and 1.82% for Class A and Class I shares, respectively. Class A shares are subject to a maximum sales charge of 5.75%. Redemptions made within 30 days of purchase may be assessed a redemption fee of 1.00%. For performance information current to the most recent month-end, please call 1-844-798-3833. |
** | The S&P 500 Total Return Index, is a market capitalization-weighted index of 500 widely held common stocks. Investors cannot invest directly in an index. |
*** | The S&P 500 Price Index, is a stock market index that measures the stock performance of 500 large companies listed on the stock exchange. Investors cannot invest directly in an index. |
**** | The HFRX Equity Hedge Index is an index managed by Hedge Fund Research, Inc. (“HFR”). HFR is the established global leader in the indexation, analysis and research of the hedge fund industry. With over 150 indices ranging from broad composites down to specific, niche areas of sub-strategy and regional investment focus, the HFRX Indices are considered the industry standard benchmarks of hedge fund performance. The HFRX branded indices are daily indices utilitzing a rigorous quantitative selection process to represent the larger hedge fund universe. Investors cannot invest directly in an index. |
***** | Inception date is January 20, 2015. |
Portfolio Composition as of June 30, 2021 | % of Net Assets | |||
Internet Media & Services | 10.5 | % | ||
Retail - Discretionary | 5.7 | % | ||
SemiConductors | 5.6 | % | ||
Technology Services | 5.0 | % | ||
Oil & Gas Producers | 4.2 | % | ||
Electrical Equipment | 4.0 | % | ||
Software | 3.7 | % | ||
Technology Hardware | 3.6 | % | ||
Institutional Financial Services | 3.3 | % | ||
E-Commerce Discretionary | 3.0 | % | ||
Other assets in excess of liabilities - net | 51.4 | % | ||
100.0 | % |
Please refer to the Schedule of Investments in this semi-annual report for a detailed listing of the Fund’s holdings.
1
ACM Tactical Income Fund
Portfolio Review (Unaudited)
June 30, 2021
Average Annual Total Return through June 30, 2021*, as compared to its benchmark:
6 Months | 1 Year | Since Inception*** | |
ACM Tactical Income Fund - Class A | 2.34% | 7.80% | 5.81% |
ACM Tactical Income Fund - Class A with load | (3.52)% | 1.64% | 3.33% |
ACM Tactical Income Fund - Class I | 2.46% | 7.96% | 6.04% |
Bloomberg U.S. Aggregate Bond Index ** | (1.60)% | (0.33)% | 5.76% |
* | The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. The Fund’s advisor has contractually agreed to waive its fees and reimburse expenses of the Fund, at least until April 30, 2022, to ensure that Total Annual Fund Operating Expenses After Fee Waiver and Reimbursement (exclusive of any front-end or contingent deferred loads; brokerage fees and commissions, acquired fund fees and expenses; borrowing costs (such as interest and dividend expense on securities sold short); taxes; and extraordinary expenses, such as litigation expenses (which may include indemnification of Fund officers and Trustees, contractual indemnification of Fund service providers (other than the advisor)) will not exceed 2.25% and 2.00% of average daily net assets attributable to Class A and Class I shares, respectively. The Fund’s total gross operating expenses, per the most recent prospectus is 2.36% and 2.11% for Class A and Class I shares, respectively. Class A shares are subject to a maximum sales charge of 5.75%. Redemptions made within 30 days of purchase may be assessed a redemption fee of 1.00%. For performance information current to the most recent month-end, please call 1-844-798-3833. |
** | The Bloomberg U.S. Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade, fixed rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and ten years. Investors cannot invest directly in an index. |
*** | Inception date is December 31, 2018. |
Portfolio Composition as of June 30, 2021 | % of Net Assets | |||
Exchange Traded Funds - Fixed Income | 72.5 | % | ||
Exchange Traded Funds - Equity | 10.6 | % | ||
Common Stock - Business Development Companies | 6.7 | % | ||
Exchange Traded Funds - Mixed Allocation | 4.8 | % | ||
Closed End Funds - Fixed Income | 2.2 | % | ||
Common Stock - Mortgage Finance | 2.1 | % | ||
Other assets in excess of liabilities - net | 1.1 | % | ||
100.0 | % |
Please refer to the Schedule of Investments in this semi-annual report for a detailed listing of the Fund’s holdings.
2
ACM DYNAMIC OPPORTUNITY FUND |
SCHEDULE OF INVESTMENTS (Unaudited) |
June 30, 2021 |
Shares | Fair Value | |||||||
COMMON STOCKS — 69.7% | ||||||||
ADVERTISING & MARKETING - 1.1% | ||||||||
15,000 | Trade Desk, Inc.(a),(b),(f) | $ | 1,160,400 | |||||
APPAREL & TEXTILE PRODUCTS - 1.7% | ||||||||
44,000 | Canada Goose Holdings, Inc.(b) | 1,924,560 | ||||||
ASSET MANAGEMENT - 2.1% | ||||||||
30,000 | B Riley Financial, Inc. | 2,265,000 | ||||||
AUTOMOTIVE - 1.7% | ||||||||
32,000 | General Motors Company(b) | 1,893,440 | ||||||
BANKING - 2.2% | ||||||||
35,000 | Citigroup, Inc. | 2,476,250 | ||||||
BIOTECH & PHARMA - 1.8% | ||||||||
12,000 | CRISPR Therapeutics A.G.(b),(f) | 1,942,680 | ||||||
CHEMICALS - 1.0% | ||||||||
35,000 | Mosaic Company | 1,116,850 | ||||||
E-COMMERCE DISCRETIONARY - 3.0% | ||||||||
965 | Amazon.com, Inc.(a),(b) | 3,319,754 | ||||||
ELECTRICAL EQUIPMENT - 4.0% | ||||||||
7,000 | Generac Holdings, Inc.(b),(f) | 2,906,050 | ||||||
55,000 | Vertiv Holdings Company | 1,501,500 | ||||||
4,407,550 | ||||||||
INDUSTRIAL SUPPORT SERVICES - 1.0% | ||||||||
31,000 | Textainer Group Holdings Ltd.(b) | 1,046,870 | ||||||
INSTITUTIONAL FINANCIAL SERVICES - 3.3% | ||||||||
35,000 | Moelis & Company | 1,991,150 | ||||||
20,000 | Tradeweb Markets, Inc. | 1,691,200 | ||||||
3,682,350 | ||||||||
See accompanying notes which are an integral part of these financial statements.
3
ACM DYNAMIC OPPORTUNITY FUND |
SCHEDULE OF INVESTMENTS (Unaudited) (Continued) |
June 30, 2021 |
Shares | Fair Value | |||||||
COMMON STOCKS — 69.7% (Continued) | ||||||||
INTERNET MEDIA & SERVICES - 10.5% | ||||||||
1,200 | Alphabet, Inc., Class A(a),(b) | $ | 2,930,148 | |||||
8,000 | Facebook, Inc.(a),(b),(f) | 2,781,680 | ||||||
6,600 | Fiverr International Ltd.(b),(f) | 1,600,434 | ||||||
1,000 | Shopify, Inc.(a),(b) | 1,460,980 | ||||||
41,000 | Snap, Inc.(b) | 2,793,740 | ||||||
11,566,982 | ||||||||
LEISURE PRODUCTS - 1.5% | ||||||||
17,500 | YETI Holdings, Inc.(b) | 1,606,850 | ||||||
MEDICAL EQUIPMENT & DEVICES - 1.5% | ||||||||
47,500 | Avantor, Inc.(b),(f) | 1,686,725 | ||||||
OIL & GAS PRODUCERS - 4.2% | ||||||||
35,000 | ConocoPhillips(f) | 2,131,500 | ||||||
18,000 | EOG Resources, Inc. | 1,501,920 | ||||||
32,500 | Ovintiv, Inc. | 1,022,775 | ||||||
4,656,195 | ||||||||
RENEWABLE ENERGY - 1.6% | ||||||||
9,500 | Enphase Energy, Inc.(b) | 1,744,485 | ||||||
RETAIL - DISCRETIONARY - 5.7% | ||||||||
38,000 | Academy Sports & Outdoors, Inc.(b),(f) | 1,567,120 | ||||||
6,000 | AutoNation, Inc.(b) | 568,860 | ||||||
5,700 | Lululemon Athletica, Inc.(a),(b),(f) | 2,080,329 | ||||||
47,500 | Urban Outfitters, Inc.(b) | 1,957,950 | ||||||
6,174,259 | ||||||||
SEMICONDUCTORS - 5.6% | ||||||||
28,500 | Advanced Micro Devices, Inc.(a),(b),(f) | 2,677,005 | ||||||
2,300 | NVIDIA Corporation(f) | 1,840,230 | ||||||
14,000 | Taiwan Semiconductor Manufacturing Company Ltd. - ADR | 1,682,240 | ||||||
6,199,475 | ||||||||
SOFTWARE - 3.7% | ||||||||
6,000 | Five9, Inc.(a),(b) | 1,100,340 | ||||||
7,200 | Microsoft Corporation(a),(f) | 1,950,480 | ||||||
See accompanying notes which are an integral part of these financial statements.
4
ACM DYNAMIC OPPORTUNITY FUND |
SCHEDULE OF INVESTMENTS (Unaudited) (Continued) |
June 30, 2021 |
Shares | Fair Value | |||||||||||
COMMON STOCKS — 69.7% (Continued) | ||||||||||||
SOFTWARE - 3.7% (Continued) | ||||||||||||
21,000 | Sailpoint Technologies Holdings, Inc.(b) | $ | 1,072,470 | |||||||||
4,123,290 | ||||||||||||
SPECIALTY FINANCE - 1.4% | ||||||||||||
25,000 | OneMain Holdings, Inc. | 1,497,750 | ||||||||||
STEEL - 0.6% | ||||||||||||
20,000 | ArcelorMittal S.A. - ADR | 621,200 | ||||||||||
TECHNOLOGY HARDWARE - 3.6% | ||||||||||||
21,000 | Apple, Inc. | 2,876,160 | ||||||||||
25,000 | NCR Corporation(b) | 1,140,250 | ||||||||||
4,016,410 | ||||||||||||
TECHNOLOGY SERVICES - 5.0% | ||||||||||||
2,000 | Coinbase Global, Inc.(b) | 506,600 | ||||||||||
3,500 | EPAM Systems, Inc.(b),(f) | 1,788,360 | ||||||||||
6,200 | PayPal Holdings, Inc.(a),(b),(f) | 1,807,176 | ||||||||||
5,800 | Visa, Inc. (a) | 1,356,156 | ||||||||||
5,458,292 | ||||||||||||
TRANSPORTATION & LOGISTICS - 1.9% | ||||||||||||
15,000 | XPO Logistics, Inc.(b) | 2,098,350 | ||||||||||
TOTAL COMMON STOCKS (Cost $53,303,421) | 76,685,967 | |||||||||||
Principal | Coupon Rate | |||||||||||
Amount ($) | (%) | Maturity | Fair Value | |||||||||
U.S. GOVERNMENT & AGENCIES — 0.9% | ||||||||||||
U.S. TREASURY BILLS — 0.9% | ||||||||||||
1,000,000 | United States Treasury Bill(a),(c),(d) | 0.03% | 07/08/21 | 999,994 | ||||||||
TOTAL U.S. GOVERNMENT & AGENCIES (Cost $999,992) | 999,994 | |||||||||||
See accompanying notes which are an integral part of these financial statements.
5
ACM DYNAMIC OPPORTUNITY FUND |
SCHEDULE OF INVESTMENTS (Unaudited) (Continued) |
June 30, 2021 |
Contracts(e) | Counterparty | Expiration Date | Exercise Price | Notional Value | Fair Value | |||||||||||||||
EQUITY OPTIONS PURCHASED - 0.5% | ||||||||||||||||||||
CALL OPTIONS PURCHASED - 0.3% | ||||||||||||||||||||
90 | VanEck Vectors Oil Services ETF | GOL | 01/21/2022 | $ | 210 | $ | 1,970,370 | $ | 294,750 | |||||||||||
TOTAL CALL OPTIONS PURCHASED (Cost - $264,365) | ||||||||||||||||||||
PUT OPTIONS PURCHASED - 0.2% | ||||||||||||||||||||
45 | NVIDIA Corporation | GOL | 08/20/2021 | $ | 775 | $ | 3,600,450 | $ | 169,650 | |||||||||||
20 | Shopify, Inc. | GOL | 07/16/2021 | 1,470 | 2,921,960 | 104,000 | ||||||||||||||
TOTAL PUT OPTIONS PURCHASED (Cost - $309,701) | 273,650 | |||||||||||||||||||
TOTAL EQUITY OPTIONS PURCHASED (Cost - $574,066) | 568,400 | |||||||||||||||||||
TOTAL INVESTMENTS - 71.1% (Cost $54,877,479) | $ | 78,254,361 | ||||||||||||||||||
CALL OPTIONS WRITTEN - (0.6)% (Proceeds - $621,261) | (702,929 | ) | ||||||||||||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES- 29.5% | 32,523,538 | |||||||||||||||||||
NET ASSETS - 100.0% | $ | 110,074,970 | ||||||||||||||||||
Contracts(e) | Counterparty | Expiration Date | Exercise Price | Notional Value | Fair Value | |||||||||||||||
WRITTEN EQUITY OPTIONS - (0.6)% | ||||||||||||||||||||
CALL OPTIONS WRITTEN- (0.6)% | ||||||||||||||||||||
300 | Academy Sports & Outdoors, Inc. | GOL | 07/16/2021 | $ | 44 | $ | 1,237,200 | $ | 29,700 | |||||||||||
285 | Advanced Micro Devices, Inc. | GOL | 07/09/2021 | 95 | 2,677,005 | 50,160 | ||||||||||||||
200 | Avantor, Inc. | GOL | 07/16/2021 | 35 | 710,200 | 23,400 | ||||||||||||||
300 | ConocoPhillips | GOL | 07/02/2021 | 60 | 1,827,000 | 38,400 | ||||||||||||||
53 | CRISPR Therapeutics A.G. | GOL | 07/02/2021 | 155 | 858,017 | 44,520 | ||||||||||||||
40 | EPAM Systems, Inc. | GOL | 08/20/2021 | 530 | 2,043,840 | 53,200 | ||||||||||||||
80 | Facebook, Inc. | GOL | 07/09/2021 | 353 | 2,781,680 | 25,600 | ||||||||||||||
66 | Fiverr International Ltd. | GOL | 07/16/2021 | 260 | 1,600,434 | 36,960 | ||||||||||||||
70 | Generac Holdings, Inc. | GOL | 07/16/2021 | 380 | 2,906,050 | 265,370 | ||||||||||||||
57 | Lululemon Athletica, Inc. | GOL | 07/02/2021 | 365 | 2,080,329 | 20,805 | ||||||||||||||
75 | Microsoft Corporation | GOL | 07/16/2021 | 270 | 2,031,750 | 31,275 | ||||||||||||||
23 | NVIDIA Corporation | GOL | 07/02/2021 | 810 | 1,840,230 | 11,270 | ||||||||||||||
23 | NVIDIA Corporation | GOL | 07/16/2021 | 820 | 1,840,230 | 36,915 | ||||||||||||||
62 | PayPal Holdings, Inc. | GOL | 07/09/2021 | 295 | 1,807,176 | 18,104 | ||||||||||||||
150 | Trade Desk, Inc. | GOL | 07/09/2021 | 81 | 1,160,400 | 17,250 | ||||||||||||||
TOTAL CALL OPTIONS WRITTEN (Proceeds - $621,261) | 702,929 | |||||||||||||||||||
TOTAL EQUITY OPTIONS WRITTEN (Proceeds - $621,261) | $ | 702,929 |
ADR - American Depositary Receipt
ETF - Exchange-Traded Fund
LTD - Limited Company
S.A. - Société Anonyme
GOL - Goldman Sachs
(a) | All or a portion of the security is held as collateral for written options as of June 30, 2021. Total collateral for call options written is $15,870,711 and $999,990 in government obligations and $4,583 in cash. |
(b) | Non-income producing security. |
(c) | Zero coupon bond. |
(d) | Interest rate reflects effective yield on June 30, 2021. |
(e) | Each option contract allows the holder of the option to purchase or sell 100 shares of the underlying security. |
(f) | Subject to call options written. |
See accompanying notes which are an integral part of these financial statements.
6
ACM TACTICAL INCOME FUND |
SCHEDULE OF INVESTMENTS (Unaudited) |
June 30, 2021 |
Shares | Fair Value | |||||||
CLOSED END FUNDS — 2.2% | ||||||||
FIXED INCOME - 2.2% | ||||||||
60,000 | Eaton Vance Ltd. Duration Income Fund | $ | 795,600 | |||||
27,500 | PIMCO Corporate & Income Opportunity Fund | 544,225 | ||||||
1,339,825 | ||||||||
TOTAL CLOSED END FUNDS (Cost $1,185,225) | 1,339,825 | |||||||
COMMON STOCKS — 8.8% | ||||||||
BUSINESS DEVELOPMENT COMPANIES - 6.7% | ||||||||
70,000 | Ares Capital Corporation | 1,371,300 | ||||||
69,000 | FS KKR Capital Corporation | 1,484,190 | ||||||
30,000 | Main Street Capital Corporation | 1,232,700 | ||||||
4,088,190 | ||||||||
MORTGAGE FINANCE - 2.1% | ||||||||
75,000 | AGNC Investment Corporation | 1,266,750 | ||||||
TOTAL COMMON STOCKS (Cost $5,124,960) | 5,354,940 | |||||||
EXCHANGE-TRADED FUNDS — 87.9%(a) | ||||||||
EQUITY - 10.6% | ||||||||
30,000 | Alerian MLP ETF | 1,092,300 | ||||||
80,000 | iShares Mortgage Real Estate ETF | 2,969,600 | ||||||
141,000 | VanEck Vectors BDC Income ETF(a) | 2,419,560 | ||||||
6,481,460 | ||||||||
FIXED INCOME - 72.5% | ||||||||
180,000 | Invesco Senior Loan ETF(a) | 3,987,000 | ||||||
120,000 | Invesco Taxable Municipal Bond | 3,981,600 | ||||||
18,000 | iShares iBoxx $ Investment Grade Corporate Bond | 2,418,480 | ||||||
64,500 | iShares JP Morgan USD Emerging Markets Bond ETF | 7,253,670 | ||||||
25,000 | iShares National Muni Bond ETF | 2,930,000 | ||||||
185,000 | iShares Preferred & Income Securities ETF(a) | 7,276,975 | ||||||
20,500 | SPDR Bloomberg Barclays Convertible Securities ETF | 1,777,965 |
See accompanying notes which are an integral part of these financial statements.
7
ACM TACTICAL INCOME FUND |
SCHEDULE OF INVESTMENTS (Unaudited) (Continued) |
June 30, 2021 |
Shares | Fair Value | |||||||
EXCHANGE-TRADED FUNDS — 87.9%(a) (Continued) | ||||||||
FIXED INCOME - 72.5% (Continued) | ||||||||
66,000 | SPDR Bloomberg Barclays High Yield Bond ETF | $ | 7,257,360 | |||||
115,000 | VanEck Vectors High Yield Muni ETF(a) | 7,315,150 | ||||||
44,198,200 | ||||||||
MIXED ALLOCATION - 4.8% | ||||||||
120,000 | Invesco CEF Income Composite ETF | 2,940,000 | ||||||
TOTAL EXCHANGE-TRADED FUNDS (Cost $51,299,886) | 53,619,660 |
Contracts(b) | Counterparty | Expiration Date | Exercise Price | Notional Value | Fair Value | |||||||||||||||
EQUITY OPTIONS PURCHASED - 0.0% (c) | ||||||||||||||||||||
PUT OPTIONS PURCHASED - 0.0%(c) | ||||||||||||||||||||
400 | iShares 20+ Year Treasury Bond ETF | GOL | 07/16/2021 | $ | 137 | $ | 5,774,000 | $ | 3,600 | |||||||||||
TOTAL PUT OPTIONS PURCHASED (Cost - $88,800) | ||||||||||||||||||||
TOTAL EQUITY OPTIONS PURCHASED (Cost - $88,800) | 3,600 | |||||||||||||||||||
TOTAL INVESTMENTS - 98.9% (Cost $57,698,871) | $ | 60,318,025 | ||||||||||||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES- 1.1% | 700,162 | |||||||||||||||||||
NET ASSETS - 100.0% | $ | 61,018,187 | ||||||||||||||||||
ETF - Exchange-Traded Fund
LTD - Limited Company
SPDR - Standard & Poor’s Depositary Receipt
GOL - Goldman Sachs
(a) | All or a portion of the security is held as collateral for written options. |
(b) | Each option contract allows the holder of the option to purchase or sell 100 shares of the underlying security. |
(c) | Percentage rounds to less than 0.1%. |
See accompanying notes which are an integral part of these financial statements.
8
ACM Funds |
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) |
June 30, 2021 |
ACM Dynamic | ACM Tactical | |||||||
Opportunity Fund | Income Fund | |||||||
ASSETS | ||||||||
Investment securities, at value (Cost $54,877,479 and $57,698,871) | $ | 78,254,361 | $ | 60,318,025 | ||||
Cash | 35,339,412 | 3,092,706 | ||||||
Deposits with broker for options written | — | 326,195 | ||||||
Receivable for securities sold | 259,042 | 3,180,809 | ||||||
Receivable for fund shares sold | 60,862 | 187,719 | ||||||
Dividend and interest receivable | 11,840 | 67,161 | ||||||
Prepaid expenses | 25,760 | 1,801 | ||||||
TOTAL ASSETS | 113,951,277 | 67,174,416 | ||||||
LIABILITIES | ||||||||
Written options, at value (Premium received $621,261 and $0) | 702,929 | — | ||||||
Payable for investments purchased | 1,255,733 | 6,085,031 | ||||||
Investment advisory fees payable | 109,541 | 48,917 | ||||||
Payable for fund shares repurchased | 12,399 | 5,557 | ||||||
Payable to related parties | 42,752 | 1,616 | ||||||
Due to broker | 1,735,156 | — | ||||||
Dividends payable | 5,652 | — | ||||||
Distribution (12b-1) fees payable | 1,309 | 1,603 | ||||||
Accrued expenses and other liabilities | 10,836 | 13,505 | ||||||
TOTAL LIABILITIES | 3,876,307 | 6,156,229 | ||||||
NET ASSETS | $ | 110,074,970 | $ | 61,018,187 | ||||
Composition of Net Assets: | ||||||||
Paid in capital | $ | 82,027,185 | $ | 59,433,096 | ||||
Accumulated Earnings | 28,047,785 | 1,585,091 | ||||||
NET ASSETS | $ | 110,074,970 | $ | 61,018,187 | ||||
Net Asset Value Per Share: | ||||||||
Class A Shares: | ||||||||
Net Assets | $ | 3,657,922 | $ | 4,016,601 | ||||
Shares of beneficial interest outstanding ($0 par value, unlimited shares authorized) | 165,104 | 378,282 | ||||||
Net asset value (Net Assets ÷ Shares Outstanding) and redemption price per share (a) | $ | 22.16 | $ | 10.62 | ||||
Maximum offering price per share (net asset value plus maximum sales charge of 5.75%) | $ | 23.51 | $ | 11.27 | ||||
Class I Shares: | ||||||||
Net Assets | $ | 106,417,048 | $ | 57,001,586 | ||||
Shares of beneficial interest outstanding ($0 par value, unlimited shares authorized) | 4,741,583 | 5,366,211 | ||||||
Net asset value (Net Assets ÷ Shares Outstanding), offering price and redemption price per share (a) | $ | 22.44 | $ | 10.62 |
(a) | The Fund imposes a 1.00% redemption fee for any redemptions of Fund shares occurring within 30 days of purchase. |
See accompanying notes to financial statements.
9
ACM Funds |
STATEMENTS OF OPERATIONS (Unaudited) |
For the Six Months Ended June 30, 2021 |
ACM Dynamic | ACM Tactical | |||||||
Opportunity Fund | Income Fund | |||||||
INVESTMENT INCOME | ||||||||
Dividend Income (Foreign withholding tax $3,627, $0) | $ | 319,913 | $ | 1,234,838 | ||||
Interest | (6,536 | ) | 2,235 | |||||
TOTAL INVESTMENT INCOME | 313,377 | 1,237,073 | ||||||
EXPENSES | ||||||||
Advisory fees | 609,775 | 256,563 | ||||||
Distribution (12b-1) fees: | ||||||||
Class A | 4,010 | 4,769 | ||||||
Dividend expense on securities sold short | 14,410 | — | ||||||
Administrative services fees | 38,258 | 12,135 | ||||||
Third party administrative services fees | 30,167 | 25,314 | ||||||
Accounting services fees | 26,260 | 12,423 | ||||||
Transfer agent fees | 12,610 | 10,941 | ||||||
Registration fees | 18,100 | 12,925 | ||||||
Printing and postage expenses | 9,890 | 4,924 | ||||||
Compliance officer fees | 9,846 | 8,161 | ||||||
Audit fees | 8,160 | 8,582 | ||||||
Trustees fees and expenses | 6,923 | 7,498 | ||||||
Legal fees | 6,677 | 9,021 | ||||||
Custodian fees | 5,026 | 4,729 | ||||||
Insurance expense | 724 | 362 | ||||||
Other expenses | 1,940 | 4,494 | ||||||
TOTAL EXPENSES | 802,776 | 382,841 | ||||||
NET EXPENSES | 802,776 | 382,841 | ||||||
NET INVESTMENT INCOME (LOSS) | (489,399 | ) | 854,232 | |||||
NET REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||
Net realized gain (loss) from: | ||||||||
Investments and foreign currency transactions | 6,242,653 | 92,315 | ||||||
Options written | 658,193 | 30,563 | ||||||
Securities sold short | (216,259 | ) | (8,938 | ) | ||||
Net realized gain | 6,684,587 | 113,940 | ||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||
Investments and foreign currency translation | 834,047 | 323,867 | ||||||
Options written | (170,120 | ) | 4,560 | |||||
Net change in unrealized appreciation on investments | 663,927 | 328,427 | ||||||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 7,348,514 | 442,367 | ||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 6,859,115 | $ | 1,296,599 |
See accompanying notes to financial statements.
10
ACM Funds |
STATEMENTS OF CHANGES IN NET ASSETS |
ACM Dynamic Opportunity Fund | ||||||||
For the Six Months Ended | For the Year Ended | |||||||
June 30, 2021 | December 31, 2020 | |||||||
(Unaudited) | ||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | ||||||||
Net investment loss | $ | (489,399 | ) | $ | (1,040,377 | ) | ||
Net realized gain on investments, options written and securities sold short | 6,684,587 | 4,097,765 | ||||||
Net change in unrealized appreciation on investments, options written and securities sold short | 663,927 | 2,355,851 | ||||||
Net increase in net assets resulting from operations | 6,859,115 | 5,413,239 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From distributable earnings | ||||||||
Class A | — | (112,102 | ) | |||||
Class I | — | (3,406,422 | ) | |||||
From return of capital | ||||||||
Class A | — | (2,543 | ) | |||||
Class I | — | (77,260 | ) | |||||
Total distributions to shareholders | — | (3,598,327 | ) | |||||
SHARES OF BENEFICIAL INTEREST | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 1,177,077 | 1,577,053 | ||||||
Class I | 20,990,338 | 9,157,617 | ||||||
Net asset value of shares issued in reinvestment of distributions: | ||||||||
Class A | — | 108,701 | ||||||
Class I | — | 3,453,030 | ||||||
Redemption fee proceeds: | ||||||||
Class A | 18 | 213 | ||||||
Class I | 1,694 | 5,792 | ||||||
Payments for shares redeemed: | ||||||||
Class A | (335,823 | ) | (3,063,756 | ) | ||||
Class I | (5,099,769 | ) | (10,675,229 | ) | ||||
Net increase from shares of beneficial interest transactions | 16,733,535 | 563,421 | ||||||
NET INCREASE IN NET ASSETS | 23,592,650 | 12,526,373 | ||||||
NET ASSETS | ||||||||
Beginning of Period | 86,482,320 | 73,955,947 | ||||||
End of Period | $ | 110,074,970 | $ | 86,482,320 | ||||
SHARE ACTIVITY | ||||||||
Class A: | ||||||||
Shares Sold | 54,507 | 80,007 | ||||||
Shares Reinvested | — | 5,241 | ||||||
Shares Redeemed | (15,592 | ) | (168,143 | ) | ||||
Net increase (decrease) in shares of beneficial interest outstanding | 38,915 | (82,895 | ) | |||||
Class I: | ||||||||
Shares Sold | 964,630 | 476,501 | ||||||
Shares Reinvested | — | 164,508 | ||||||
Shares Redeemed | (233,264 | ) | (574,430 | ) | ||||
Net increase in shares of beneficial interest outstanding | 731,366 | 66,579 |
See accompanying notes to financial statements.
11
ACM Funds |
STATEMENTS OF CHANGES IN NET ASSETS |
ACM Tactical Income Fund | ||||||||
For the Six Months Ended | For the Year Ended | |||||||
June 30, 2021 | December 31, 2020 | |||||||
(Unaudited) | ||||||||
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS | ||||||||
Net investment income | $ | 854,232 | $ | 1,111,825 | ||||
Net realized gain (loss) on investments, options written and securities sold short | 113,940 | (844,077 | ) | |||||
Net change in unrealized appreciation on investments | 328,427 | 1,972,007 | ||||||
Net increase in net assets resulting from operations | 1,296,599 | 2,239,755 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From distributable earnings | ||||||||
Class A | (60,071 | ) | (70,543 | ) | ||||
Class I | (828,087 | ) | (950,157 | ) | ||||
From return of capital | ||||||||
Class A | — | (4,737 | ) | |||||
Class I | — | (5,348 | ) | |||||
Total distributions to shareholders | (888,158 | ) | (1,030,785 | ) | ||||
SHARES OF BENEFICIAL INTEREST | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 662,993 | 2,570,194 | ||||||
Class I | 17,843,985 | 34,684,568 | ||||||
Net asset value of shares issued in reinvestment of distributions: | ||||||||
Class A | 32,351 | 41,119 | ||||||
Class I | 806,629 | 992,000 | ||||||
Redemption fee proceeds: | ||||||||
Class A | 85 | 4,467 | ||||||
Class I | 1,033 | 58,105 | ||||||
Payments for shares redeemed: | ||||||||
Class A | (596,509 | ) | (89,360 | ) | ||||
Class I | (5,447,423 | ) | (12,603,037 | ) | ||||
Net increase from shares of beneficial interest transactions | 13,303,144 | 25,658,056 | ||||||
NET INCREASE IN NET ASSETS | 13,711,585 | 26,818,887 | ||||||
NET ASSETS | ||||||||
Beginning of Period | 47,306,602 | 20,487,715 | ||||||
End of Period | $ | 61,018,187 | $ | 47,306,602 | ||||
SHARE ACTIVITY | ||||||||
Class A: | ||||||||
Shares Sold | 62,736 | 247,993 | ||||||
Shares Reinvested | 3,070 | 3,982 | ||||||
Shares Redeemed | (56,485 | ) | (8,581 | ) | ||||
Net increase in shares of beneficial interest outstanding | 9,321 | 243,394 | ||||||
Class I: | ||||||||
Shares Sold | 1,685,587 | 3,377,165 | ||||||
Shares Reinvested | 76,487 | 96,070 | ||||||
Shares Redeemed | (516,442 | ) | (1,250,269 | ) | ||||
Net increase in shares of beneficial interest outstanding | 1,245,632 | 2,222,966 |
See accompanying notes to financial statements.
12
ACM Dynamic Opportunity Fund |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout each Period Presented |
Class A | ||||||||||||||||||||||||
For the | ||||||||||||||||||||||||
Six Months Ended | For the Year Ended | For Year Ended | For Year Ended | For the Year Ended | For the Year Ended | |||||||||||||||||||
June 30, 2021 | December 31, 2020 | December 31, 2019 | December 31, 2018 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 20.67 | $ | 17.63 | $ | 17.33 | $ | 17.71 | $ | 15.07 | $ | 15.85 | ||||||||||||
Increase (decrease) from investment operations: | ||||||||||||||||||||||||
Net investment loss (1) | (0.13 | ) | (0.30 | ) | (0.20 | ) | (0.25 | ) | (0.25 | ) | (0.24 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 1.62 | 4.25 | 0.56 | 0.04 | (7) | 2.89 | (0.54 | ) | ||||||||||||||||
Total from investment operations | 1.49 | 0.36 | 0.36 | (0.21 | ) | 2.64 | (0.78 | ) | ||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net realized gains | — | (0.89 | ) | (0.06 | ) | (0.17 | ) | — | — | |||||||||||||||
Return of capital | — | (0.02 | ) | — | — | — | — | |||||||||||||||||
Total distributions | — | (0.91 | ) | (0.06 | ) | (0.17 | ) | — | — | |||||||||||||||
Redemption fees collected (1) | 0.00 | (2) | 0.00 | (2) | — | 0.00 | (2) | 0.00 | (2) | 0.00 | (2) | |||||||||||||
Net asset value, end of period | $ | 22.16 | $ | 20.67 | $ | 17.63 | $ | 17.33 | $ | 17.71 | $ | 15.07 | ||||||||||||
Total return (3) | 7.21 | % (5) | 22.37 | % | 2.09 | % | (1.15 | )% | 17.52 | % | (4.92 | )% | ||||||||||||
Net assets, at end of period (000s) | $ | 3,658 | $ | 2,609 | $ | 3,686 | $ | 8,961 | $ | 4,121 | $ | 28,895 | ||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||
Ratio of expenses to average net assets including dividends from securities sold short and interest expense (4) | 1.89 | % (6) | 2.07 | % | 1.95 | % | 2.04 | % | 2.10 | % | 2.13 | % | ||||||||||||
Ratio of expenses to average net assets excluding dividends from securities sold short and interest expense (4) | 1.86 | % (6) | 1.97 | % | 1.93 | % | 1.92 | % | 1.98 | % | 2.01 | % | ||||||||||||
Ratio of net investment loss to average net assets (4) | (1.24 | )% (6) | (1.61 | )% | (1.10 | )% | (1.37 | )% | (1.54 | )% | (1.54 | )% | ||||||||||||
Portfolio Turnover Rate | 198 | % (5) | 437 | % | 325 | % | 271 | % | 224 | % | 481 | % |
(1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year. |
(2) | Represents less than $0.01 per share. |
(3) | Total returns shown exclude the effect of applicable sales charges and redemption fees and assumes reinvestment of all distributions. |
(4) | Does not include the expenses of other investment companies in which the Fund invests. |
(5) | Not annualized. |
(6) | Annualized for periods less than one full year. |
(7) | Net realized and unrealized gain on investments does not accord with the net amount reported in the Statements of Operations due to timing of shareholder subscriptions and redemptions relative to fluctuating net asset values during the year. |
See accompanying notes to financial statements.
13
ACM Dynamic Opportunity Fund |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout each Period Presented |
Class I | ||||||||||||||||||||||||
For the | ||||||||||||||||||||||||
Six Months Ended | For the Year Ended | For Year Ended | For Year Ended | For the Year Ended | For the Year Ended | |||||||||||||||||||
June 30, 2021 | December 31, 2020 | December 31, 2019 | December 31, 2018 | December 31, 2017 | December 31, 2016 | |||||||||||||||||||
(Unaudited) | ||||||||||||||||||||||||
Net asset value, beginning of period | $ | 20.92 | $ | 17.82 | $ | 17.48 | $ | 17.82 | $ | 15.12 | $ | 15.86 | ||||||||||||
Increase (decrease) from investment operations: | ||||||||||||||||||||||||
Net investment loss (1) | (0.12 | ) | (0.89 | ) | (0.15 | ) | (0.20 | ) | (0.21 | ) | (0.20 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | 1.64 | (0.02 | ) | 0.55 | 0.03 | (8) | 2.91 | (0.54 | ) | |||||||||||||||
Total from investment operations | 1.52 | (0.91 | ) | 0.40 | (0.17 | ) | 2.70 | (0.74 | ) | |||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net realized gains | — | (0.89 | ) | (0.06 | ) | (0.17 | ) | — | — | |||||||||||||||
Return of capital | — | (0.02 | ) | — | — | — | — | |||||||||||||||||
Total distributions | — | (0.91 | ) | (0.06 | ) | (0.17 | ) | — | — | |||||||||||||||
Redemption fees collected (1) | 0.00 | (2) | 0.00 | (2) | 0.00 | (2) | 0.00 | (2) | 0.00 | (2) | 0.00 | (2) | ||||||||||||
Net asset value, end of period | $ | 22.44 | $ | 20.92 | $ | 17.82 | $ | 17.48 | $ | 17.82 | $ | 15.12 | ||||||||||||
Total return (3) | 7.27 | % (6) | 22.47 | % | 2.30 | % (4) | (0.92 | )% (4) | (17.86 | )% | (4.67 | )% | ||||||||||||
Net assets, at end of period (000s) | $ | 106,417 | $ | 83,874 | $ | 70,270 | $ | 77,999 | $ | 61,152 | $ | 19,140 | ||||||||||||
Ratios/Supplemental Data: | ||||||||||||||||||||||||
Ratio of expenses to average net assets including dividends from securities sold short and interest expense (5) | 1.64 | % (7) | 1.82 | % | 1.70 | % | 1.79 | % | 1.85 | % | 1.88 | % | ||||||||||||
Ratio of expenses to average net assets excluding dividends from securities sold short and interest expense (5) | 1.61 | % (7) | 1.72 | % | 1.68 | % | 1.67 | % | 1.73 | % | 1.76 | % | ||||||||||||
Ratio of net investment loss to average net assets (5) | (0.99 | )% (7) | (1.36 | )% | (0.85 | )% | (1.12 | )% | (1.24 | )% | (1.29 | )% | ||||||||||||
Portfolio Turnover Rate | 198 | % (6) | 437 | % | 325 | % | 271 | % | 224 | % | 481 | % |
(1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year. |
(2) | Represents less than $0.01 per share. |
(3) | Total returns shown exclude the effect of redemption fees and assumes reinvestment of all distributions. |
(4) | Includes adjustments in accordance with accounting principles generally accepted in the United States and, consequently, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset values and returns for shareholder transactions. |
(5) | Does not include the expenses of other investment companies in which the Fund invests. |
(6) | Not annualized. |
(7) | Annualized for periods less than one full year. |
(8) | Net realized and unrealized gain on investments does not accord with the net amount reported in the Statements of Operations due to timing of shareholder subscriptions and redemptions relative to fluctuating net asset values during the year. |
See accompanying notes to financial statements.
14
ACM Tactical Income Fund |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout each Period Presented |
Class A | ||||||||||||
For the | ||||||||||||
Six Months Ended | For Year Ended | For the Period Ended | ||||||||||
June 30, 2021 | December 31, 2020 | December 31, 2019 (1) | ||||||||||
(Unaudited) | ||||||||||||
Net asset value, beginning of period | $ | 10.54 | $ | 10.13 | $ | 10.00 | ||||||
Increase from investment operations: | ||||||||||||
Net investment income (2) | 0.26 | 0.34 | 0.48 | |||||||||
Net realized and unrealized gain on investments | (0.03 | ) | 0.34 | 0.03 | (6) | |||||||
Total from investment operations | 0.23 | 0.68 | 0.51 | |||||||||
Less distributions from: | ||||||||||||
Net investment income | (0.16 | ) | (0.28 | ) | (0.37 | ) | ||||||
Return of capital | — | (0.01 | ) | (0.01 | ) | |||||||
Total distributions | (0.16 | ) | (0.29 | ) | (0.38 | ) | ||||||
Redemption fees collected (2) | 0.01 | 0.02 | 0.00 | (3) | ||||||||
Net asset value, end of period | $ | 10.62 | $ | 10.54 | $ | 10.13 | ||||||
Total return (4) | 2.34 | % (8) | 7.01 | % | 5.13 | % (8) | ||||||
Net assets, at end of period (000s) | $ | 4,017 | $ | 3,887 | $ | 1,272 | ||||||
Ratios/Supplemental Data: | ||||||||||||
Ratio of net expenses to average net assets before waiver/recapture (5) | 1.72 | % (9) | 1.86 | % (10) | 2.25 | % (7)(9) | ||||||
Ratio of gross expenses to average net assets after waiver/recapture (5) | 1.72 | % (9) | 1.82 | % | 2.35 | % (9) | ||||||
Ratio of net investment income to average net assets (5) | 3.09 | % (9) | (3.31 | )% | 5.08 | % (9) | ||||||
Portfolio Turnover Rate | 225 | % (8) | 478 | % | 645 | % (8) |
(1) | The inception date of the Fund was December 31, 2018 and the Fund commenced operations on January 2, 2019. |
(2) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year/period. |
(3) | Represents less than $0.01 per share. |
(4) | Total returns shown exclude the effect of applicable sales charges and redemption fees and assumes reinvestment of all distributions. |
(5) | Does not include the expenses of other investment companies in which the Fund invests. |
(6) | The amount of net realized and unrealized gain on investment per share for the year ended December 31, 2019 does not accord with the amounts in the Statement of Operations due to the timing of purchases and sales of Fund shares in relation to fluctuating market values. |
(7) | Includes less than 0.01% of interest expense. |
(8) | Not annualized. |
(9) | Annualized for periods less than one full year. |
(10) | Includes recapture of 0.04% during the year. |
See accompanying notes to financial statements.
15
ACM Tactical Income Fund |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout each Period Presented |
Class I | ||||||||||||
For the | ||||||||||||
Six Months Ended | For Year Ended | For the Period Ended | ||||||||||
June 30, 2021 | December 31, 2020 | December 31, 2019 (1) | ||||||||||
(Unaudited) | ||||||||||||
Net asset value, beginning of period | $ | 10.54 | $ | 10.13 | $ | 10.00 | ||||||
Increase from investment operations: | ||||||||||||
Net investment income (2) | 0.28 | 0.37 | 0.48 | |||||||||
Net realized and unrealized gain on investments | (0.03 | ) | 0.33 | 0.05 | (6) | |||||||
Total from investment operations | 0.25 | 0.70 | 0.53 | |||||||||
Less distributions from: | ||||||||||||
Net investment income | (0.18 | ) | (0.30 | ) | (0.39 | ) | ||||||
Return of capital | — | (0.01 | ) | (0.01 | ) | |||||||
Total distributions | (0.18 | ) | (0.31 | ) | (0.40 | ) | ||||||
Redemption fees collected (2) | 0.01 | 0.02 | 0.00 | (3) | ||||||||
Net asset value, end of period | $ | 10.62 | $ | 10.54 | $ | 10.13 | ||||||
Total return (4) | 2.46 | % (8) | 7.26 | % | 5.35 | % (8) | ||||||
Net assets, at end of period (000s) | $ | 57,002 | $ | 43,420 | $ | 19,215 | ||||||
Ratios/Supplemental Data: | ||||||||||||
Ratio of net expenses to average net assets before waiver/recapture (5) | 1.47 | % (9) | 1.61 | % (10) | 2.00 | % (7)(9) | ||||||
Ratio of gross expenses to average net assets after waiver/recapture (5) | 1.47 | % (9) | 1.57 | % | 2.10 | % (9) | ||||||
Ratio of net investment income to average net assets (5) | 3.35 | % (9) | 3.56 | % | 4.83 | % (9) | ||||||
Portfolio Turnover Rate | 225 | % (8) | 478 | % | 645 | % (8) |
(1) | The inception date of the Fund was December 31, 2018 and the Fund commenced operations on January 2, 2019. |
(2) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year/period. |
(3) | Represents less than $0.01 per share. |
(4) | Total returns shown exclude the effect of redemption fees and assumes reinvestment of all distributions. |
(5) | Does not include the expenses of other investment companies in which the Fund invests. |
(6) | The amount of net realized and unrealized gain on investment per share for the year ended December 31, 2019 does not accord with the amounts in the Statement of Operations timing of purchases and sales of Fund shares in relation to fluctuating market values. |
(7) | Includes less than 0.01% of interest expense. |
(8) | Not annualized. |
(9) | Annualized for periods less than one full year. |
(10) | Includes recapture of 0.04% during the year. |
See accompanying notes to financial statements.
16
ACM Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 2021
1. | ORGANIZATION |
The ACM Dynamic Opportunity Fund (“Dynamic Opportunity Fund”) and ACM Tactical Income Fund (“Tactical Income Fund”) (each a “Fund” and collectively, the “Funds”) are diversified series of shares of beneficial interest of Northern Lights Fund Trust III (the “Trust”), a statutory trust organized under the laws of the State of Delaware on December 5, 2011, and registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Dynamic Opportunity Fund commenced operations on January 20, 2015. The Dynamic Opportunity Fund seeks long-term capital appreciation with a short-term focus on capital preservation. The inception date of the Tactical Income Fund was December 31, 2018 and the Fund commenced operations on January 2, 2019. The Tactical Income Fund seeks to generate income, with capital preservation as a secondary objective.
Each Fund offers Class A and Class I shares. Class A shares are offered at net asset value plus a maximum sales charge of 5.75%. Class I shares of the Fund are sold at NAV without an initial sales charge and are not subject to 12b-1 distribution fees, but have a higher minimum initial investment than Class A shares. All classes are subject to a 1.00% redemption fee on redemptions made within 30 days of the original purchase. Each share class represents an interest in the same assets of the Fund and classes are identical except for differences in their sales charge structures and ongoing service and distribution charges. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its service and/or distribution plans. The Funds’ income, expenses (other than class specific distribution fees) and realized and unrealized gains and losses are allocated proportionately each day based upon the relative net assets of each class.
2. | SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of significant accounting policies followed by the Funds in preparation of their financial statements. The policies are in conformity with U.S. generally accepted accounting principles (“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 year then ended. Actual results could differ from those estimates. Each Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 “Financial Services Investment Companies” including FASB Accounting Standards Update (“ASU”) 2013-08.
Securities Valuation – Securities are valued at the last sale price on the exchange in which such securities are primarily traded, as of the close of business on the day the securities are being valued. In the absence of a sale on the primary exchange, such securities shall be valued at the mean between the current bid and ask prices on the day of valuation. NASDAQ traded securities are valued using the NASDAQ Official Closing Price (“NOCP”). Options contracts listed on a securities exchange or board of trade (not including Index Options contracts) for which market quotations are readily available shall be valued at the last quoted sales price or, in the absence of a sale, at the mean between the current bid and ask prices on the valuation date. Index Options listed on a securities exchange or board of trade for which market quotations are readily available shall be valued at the mean between the current bid and ask prices on the valuation date. Investments in open-end investment companies are valued at net asset value. Debt securities (other than short-term obligations) are valued each day by an independent pricing service approved by the Trust’s Board of Trustees (the “Board”) using methods which include current market quotations from a major market maker in the securities and based on methods which include the consideration of yields or prices of securities of comparable quality, coupon, maturity and type. The independent pricing service does not distinguish between smaller-sized bond positions known as “odd lots” and larger institutional-sized bond positions known as “round lots”. A Fund may fair value a particular bond if the advisor does not believe that the round lot value provided by the independent pricing service reflects fair value of the Fund’s holding. Short-term debt obligations having 60 days or less remaining until maturity, at time of purchase, may be valued at amortized cost.
The Funds may hold securities, such as private investments, interests 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 Board. The Board has delegated execution of these procedures to a fair value committee composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) advisor. The committee 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
17
ACM Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2021
determining a security-specific fair value. 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 committee is composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) advisor. 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 advisor, the prices or values available do not represent the fair value of the instrument. Factors which may cause the advisor 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 asked 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 a 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 advisor 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 advisor is unable to obtain a current bid from such independent dealers or other independent parties, the fair value committee 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 a 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 Funds 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 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 Funds will not change.
The Funds utilize various methods to measure the fair value of all of their 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 a 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, prices 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 a 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
18
ACM Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2021
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 June 30, 2021 for the Funds’ assets and liabilities measured at fair value:
ACM Dynamic Opportunity Fund
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments * | ||||||||||||||||
Common Stocks | $ | 76,685,967 | $ | — | $ | — | $ | 76,685,967 | ||||||||
U.S. Government Agencies | — | 999,994 | — | 999,994 | ||||||||||||
Put Options Purchased | 273,650 | — | — | 273,650 | ||||||||||||
Call Options Purchased | 294,750 | — | — | 294,750 | ||||||||||||
Total Investments | $ | 77,254,367 | $ | 999,994 | $ | — | $ | 78,254,361 | ||||||||
Liabilities * | ||||||||||||||||
Call Options Written | $ | 702,929 | $ | — | $ | — | $ | 702,929 | ||||||||
Total Liabilities | $ | 702,929 | $ | — | $ | — | $ | 702,929 |
ACM Tactical Income Fund
Assets | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Investments * | ||||||||||||||||
Exchange Traded Funds | $ | 53,619,660 | $ | — | $ | — | $ | 53,619,660 | ||||||||
Common Stocks | 5,354,940 | — | — | 5,354,940 | ||||||||||||
Closed End Funds | 1,339,825 | — | — | 1,339,825 | ||||||||||||
Put Options Purchased | 3,600 | — | — | 3,600 | ||||||||||||
Total Investments | $ | 60,318,025 | $ | — | $ | — | $ | 60,318,025 |
* | Refer to the Portfolio of Investments for industry classification. |
The Funds did not hold any Level 3 securities during the six months ended June 30, 2021.
Exchange Traded Funds – The Funds may invest in exchange traded funds (“ETFs”). ETFs are a type of fund bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although the lack of liquidity on an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Security Transactions and Related Income – Security transactions are accounted for on a trade date basis. Interest income is recognized on an accrual basis. Discounts are accreted and premiums are amortized on securities purchased over the lives of the respective securities. Dividend income is recorded on the ex-dividend date. Realized gains or losses from sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Short Sales – A “short sale” is a transaction in which a Fund sells a security it does not own but has borrowed in anticipation that the market price of the security will decline. A Fund is obligated to replace the security borrowed by purchasing it on the open market at a later date. If the price of the security sold short increases between the time of the short sale and the time a Fund replaces the borrowed security, the Fund will incur a loss, potentially unlimited in size. Conversely, if the price declines, the Fund will realize a gain, limited to the price at which the Fund sold the security short.
Option Transactions – The Funds are subject to equity price risk in the normal course of pursuing their investment objectives and may purchase or sell options to help hedge against risk. When a Fund writes put and call options, an amount
19
ACM Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2021
equal to the premium received is included in the Statement of Assets and Liability as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. If an option expires on its stipulated expiration date or if a Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option is exercised, a gain or loss is realized for the sale of the underlying security and the proceeds from the sale are increased by the premium originally received. As writer of an option, the Funds have no control over whether the option will be exercised and, as a result, retain the market risk of an unfavorable change in the price of the security underlying the written option.
Put options are purchased to hedge against a decline in the value of securities held in the Funds’ portfolios. If such a decline occurs, the put options will permit a Fund to sell the securities underlying such options at the exercise price, or to close out the options at a profit. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by a Fund upon exercise of the option, and, unless the price of the underlying security rises or declines sufficiently, the option may expire worthless to the Fund. In addition, in the event that the price of the security in connection with which an option was purchased moves in a direction favorable to a Fund, the benefits realized by the Fund as a result of such favorable movement will be reduced by the amount of the premium paid for the option and related transaction costs. Written and purchased options are non-income producing securities. With purchased options, there is minimal counterparty risk to the Fund since these options are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded options, guarantees against a possible default.
The notional value of the derivative instruments outstanding as of June 30, 2021, as disclosed in the Portfolios of Investments and the amounts realized and changes in unrealized gains and losses on derivative instruments during the period, as disclosed and within the Statements of Operations, serve as indicators of the volume of derivative activity for the Funds.
Impact of Derivatives on the Statements of Assets and Liabilities and Statements of Operations
The locations on the Statements of Assets and Liabilities of derivative instruments by type of exposure, all of which are not accounted for as hedging instruments under GAAP, are as follows:
Dynamic Opportunity Fund
Assets: | ||||||||
Location of Derivatives on | ||||||||
Derivative Investment | Primary Risk | Statements of Assets and | Fair Value of Asset | |||||
Type | Exposure | Liabilities | Derivatives | |||||
Call options purchased | Equity Risk | Investment securities, at value | $ | 294,750 | ||||
Put options purchased | Equity Risk | Investment securities, at value | $ | 273,650 | ||||
Total | $ | 568,400 |
Liabilities: | ||||||||
Location of Derivatives on | ||||||||
Derivative Investment | Primary Risk | Statements of Assets and | Fair Value of Liability | |||||
Type | Exposure | Liabilities | Derivatives | |||||
Call options written | Equity Risk | Written Options, at value | $ | 702,929 | ||||
Total | $ | 702,929 |
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ACM Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2021
Tactical Income Fund
Liabilities: | ||||||||
Location of Derivatives on | ||||||||
Derivative Investment | Primary Risk | Statements of Assets and | Fair Value of Liability | |||||
Type | Exposure | Liabilities | Derivatives | |||||
Put options purchased | Equity Risk | Investment Securities, at value | $ | 3,600 | ||||
Total | $ | 3,600 |
The following is a summary of the location of derivative investments on the Funds’ Statements of Operations for the six months ended June 30, 2021:
Derivative Investment Type | Location of Gain/Loss on Derivative |
Options purchased | Net realized gain (loss) from investments and foreign currency transactions |
Options written | Net realized gain (loss) from options written |
Options purchased | Net change in unrealized appreciation (depreciation) on investments and foreign currency translation |
Options written | Net change in unrealized appreciation (depreciation) on options written |
The following is a summary of the Funds realized gain (loss) on derivative investments recognized in the Statements of Operations categorized by primary risk exposure for the six months ended June 30, 2021:
Realized gain (loss) on derivatives recognized in the Statements of Operations | ||||||||
Total for the | ||||||||
Six Months Ended | ||||||||
June 30, 2021 | ||||||||
Dynamic Opportunity | ||||||||
Derivative Investment Type | Fund | Tactical Income Fund | ||||||
Options purchased - Equity Risk | $ | (2,960,542 | ) | $ | (18,308 | ) | ||
Options written - Equity Risk | 658,193 | 30,563 | ||||||
Total | $ | (2,302,349 | ) | $ | 12,255 | |||
Changes in unrealized appreciation (depreciation) on derivatives recognized in the Statements of Operations | ||||||||
Total for the | ||||||||
Six Months Ended | ||||||||
June 30, 2021 | ||||||||
Dynamic Opportunity | ||||||||
Derivative Investment Type | Fund | Tactical Income Fund | ||||||
Options purchased - Equity Risk | $ | 263,280 | $ | (85,200 | ) | |||
Option written - Equity Risk | (170,120 | ) | 4,560 | |||||
Total | $ | 93,160 | $ | (80,640 | ) |
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ACM Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2021
Offsetting of Financial Assets and Derivative Liabilities –
The following table presents the Funds’ liability derivatives available for offset under a master netting arrangement net of collateral pledged for options written as of June 30, 2021.
Gross Amounts Not Offset in the | ||||||||||||||||||||||||
Liabilities: | Statements of Assets & Liabilities | |||||||||||||||||||||||
Gross Amounts | ||||||||||||||||||||||||
Offset in the | Net Amounts of | |||||||||||||||||||||||
Gross Amounts of | Statements of | Liabilities Presented | ||||||||||||||||||||||
Recognized | Assets & | in the Statements of | Financial | Cash Collateral | Net | |||||||||||||||||||
Funds | Assets/Liabilities(1) | Liabilities | Assets & Liabilities | Instruments (2) | Received | Amount | ||||||||||||||||||
Dynamic Opportunity Fund | $ | 702,929 | $ | — | $ | 702,929 | $ | 702,929 | $ | — | $ | — |
(1) | Written options at value as presented in the Portfolio of Investments. |
(2) | The amount is limited to the derivative liability balance and, accordingly, does not include excess collateral pledged. |
Dividends and Distributions to Shareholders – Dividends from net investment income are declared and distributed annually for the Dynamic Opportunity Fund and declared and paid monthly for the Tactical Income Fund. Distributable net realized capital gains are declared and distributed annually. Dividends from net investment income and distributions from net realized gains are recorded on the ex-dividend date and determined in accordance with federal income tax regulations, which may differ from GAAP. These “book/tax” differences are considered either temporary (i.e., deferred losses, capital loss carry forwards) or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment. Temporary differences do not require reclassification.
Federal Income Taxes – The Funds intend to continue to qualify as regulated investment companies by complying with the provisions of the Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all of their taxable income and net realized gains to shareholders. Therefore, no federal income tax provision has been recorded.
The Funds recognize the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Funds’ tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years ended December 31, 2018 through December 31, 2020, or expected to be taken in the Funds’ December 31, 2021 year-end tax returns. The Funds identify their major tax jurisdictions as U.S. federal, Ohio (Nebraska in prior years), and foreign jurisdictions where the Funds make significant investments. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
Expenses – Expenses of the Trust that are directly identifiable to a specific fund are charged to that fund. Expenses, which are not readily identifiable to a specific fund, are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expense and the relative sizes of the funds in the Trust.
Indemnification – The Trust indemnifies its officers and the Board for certain liabilities that may arise from the performance of their duties to the Trust. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnities. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the risk of loss due to these warranties and indemnities appears to be remote.
22
ACM Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2021
Cash and cash equivalents - Cash and cash equivalents are held with a financial institution. The assets of the Funds may be placed in deposit accounts at U.S. banks and such deposits generally exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The FDIC insures deposit accounts up to $250,000 for each accountholder. The Funds maintain cash balances, which, at times, may exceed federally insured limits. The counterparty is generally a single bank rather than a group of financial institutions; thus, there may be a greater counterparty credit risk. The Funds place deposits only with those counterparties which are believed to be creditworthy and there has been no history of loss.
3. | INVESTMENT TRANSACTIONS |
For the six months ended June 30, 2021, cost of purchases and proceeds from sales of portfolio securities, other than short-term investments, amounted to $200,052,852 and $143,084,982, respectively, for the Dynamic Opportunity Fund and $126,793,861 and $ 109,737,297, respectively, for the Tactical Income Fund.
4. | INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES |
Ascendant Capital Management, LLC (the “Advisor”) serves as the Funds’ investment advisor. Pursuant to an advisory agreement with the Trust, on behalf of the Funds, the Advisor, under the oversight of the Board, directs the daily operations of the Funds and supervises the performance of administrative and professional services provided by others. As compensation for its services and the related expenses borne by the Advisor, each Fund pays the Advisor a fee computed and accrued daily and paid monthly, based on the Fund’s average daily net assets and is computed at the annual rate of 1.25% for the Dynamic Opportunity Fund and 1.00% for the Tactical Income Fund. For the six months ended June 30, 2021, the Advisor earned advisory fees of $609,775 and $256,563 for the Dynamic Opportunity Fund and Tactical Income Fund, respectively.
The Advisor has contractually agreed to reduce its fees and/or absorb expenses of the Dynamic Opportunity Fund and Tactical Income Fund (“Waiver Agreement”) until at least April 30, 2022, to ensure that Total Annual Fund Operating Expenses After Fee Waiver and/or Reimbursement (exclusive of any front-end or contingent deferred loads; brokerage fees and commissions, acquired fund fees and expenses; borrowing costs (such as interest and dividend expense on securities sold short); taxes; and extraordinary expenses, such as litigation expenses (which may include indemnification of Fund officers and Trustees, contractual indemnification of Fund service providers (other than the Advisor))), will not exceed 2.40% and 2.15% of the daily average net assets attributable to Dynamic Opportunity Fund’s Class A and Class I shares, respectively, and 2.25% and 2.00% of the daily average net assets attributable to Tactical Income Fund’s Class A and Class I shares, respectively. The Advisor may seek reimbursement for expenses waived or paid by it during the prior three years; provided, however, that such expenses may only be reimbursed to the extent they were waived or paid after the date of the Waiver Agreement (or any similar agreement) and if recoupment can be achieved within the aforementioned expense limits and expense limits at the time of waiver. The Board may terminate this expense reimbursement arrangement at any time. During the six months ended June 30, 2021, each of the Dynamic Opportunity Fund and the Tactical Income Fund waived $0 in advisory fees pursuant to the Waiver Agreement. There are no recapture balances for either Fund to recoup.
Northern Lights Distributors, LLC (the “Distributor”) acts as the Funds’ principal underwriter in a continuous public offering of Fund shares. During the six months ended June 30, 2021, the Distributor received $9,542 and $3,755 in underwriting commissions for sales of Class A shares of Dynamic Opportunity Fund and Tactical Income Fund, respectively, of which $1,260 and $557 was retained by the principal underwriter or other affiliated broker-dealers.
The Trust has adopted, with respect to the Funds, the Trust’s Master Distribution and Shareholder Servicing Plan for the Funds’ Class A shares (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act, to pay for certain distribution activities and shareholder services. The Plan provides a monthly service and/or distribution fee that will be calculated at an annual rate of 0.25% per year of the average daily net assets of each Fund’s Class A shares and paid to the Distributor to be used to pay for distribution and shareholder servicing activities. For the six months ended June 30, 2021, pursuant to the Plan, Class A shares of Dynamic Opportunity Fund and Tactical Income Fund incurred costs of $4,010 and $4,769, respectively.
23
ACM Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2021
In addition, certain affiliates of the Distributor provide services to the Funds as follows:
Gemini Fund Services, LLC (“GFS”)
GFS, an affiliate of the Distributor, provides administration, fund accounting, and transfer agent services to the Trust. Pursuant to a separate servicing agreement with GFS, the Funds pays GFS customary fees for providing administration, fund accounting and transfer agency services to the Funds. Certain officers of the Trust are also officers of GFS, and are not paid any fees directly by the Funds for serving in such capacities.
Northern Lights Compliance Services, LLC (“NLCS”)
NLCS, an affiliate of GFS and the Distributor, provides a Chief Compliance Officer to the Trust, as well as related compliance services, pursuant to a consulting agreement between NLCS and the Trust. Under the terms of such agreement, NLCS receives customary fees from the Funds.
BluGiant, LLC (“BluGiant”)
BluGiant, an affiliate of GFS and the Distributor, provides EDGAR conversion and filing services as well as print management services for the Funds on an ad-hoc basis. For the provision of these services, BluGiant receives customary fees from the Funds.
5. | REDEMPTION FEES |
The Funds may assess a short-term redemption fee of 1.00% of the total redemption amount if shareholders sell their shares after holding them for less than thirty days. The redemption fee is paid directly to the Funds. Please refer to the Statements of Changes in Net Assets for the collected redemption fees.
6. | DISTRIBUTIONS AND TAX COMPONENTS OF CAPITAL |
The Statements of Assets and Liabilities represents cost for financial reporting purposes. Aggregate cost of investments for federal tax purposes including options purchased and options written is $55,386,907 and $58,613,750, respectively for the Dynamic Opportunity Fund and Tactical Income Fund and differs from market value by net unrealized appreciation/ depreciation.
Dynamic Opportunity Fund | Tactical Income Fund | |||||||
Gross unrealized appreciation: | $ | 23,616,529 | $ | 2,720,927 | ||||
Gross unrealized depreciation: | (749,075 | ) | (1,016,652 | ) | ||||
Net unrealized appreciation | $ | 22,867,454 | $ | 1,704,275 |
The tax character of distributions paid for the fiscal year ended December 31, 2020 and fiscal year ended December 31, 2019 was as follows:
For the year ended December 31, 2020: | ||||||||||||||||
Ordinary | Long-Term | Return | ||||||||||||||
Portfolio | Income | Capital Gains | of Capital | Total | ||||||||||||
Dynamic Opportunity | $ | 781,718 | $ | 2,736,806 | $ | 79,803 | $ | 3,598,327 | ||||||||
Tactical Income | 1,020,700 | — | 58,224 | 1,078,924 |
For the year ended December 31, 2019: | ||||||||||||||||
Ordinary | Long-Term | Return | ||||||||||||||
Portfolio | Income | Capital Gains | of Capital | Total | ||||||||||||
Dynamic Opportunity | $ | — | $ | 255,693 | $ | — | $ | 255,693 | ||||||||
Tactical Income | 550,227 | — | 17,041 | 567,268 |
24
ACM Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2021
As of December 31, 2020, the components of accumulated earnings/(losses) on a tax basis were as follows:
Undistributed | Undistributed | Post October Loss | Capital Loss | Other | Unrealized | Total | ||||||||||||||||||||||
Ordinary | Long-Term | and | Carry | Book/Tax | Appreciation/ | Accumulated | ||||||||||||||||||||||
Portfolio | Income | Gains | Late Year Loss | Forwards | Differences | (Depreciation) | Earnings/(Losses) | |||||||||||||||||||||
Dynamic Opportunity | $ | — | $ | — | $ | (159,678 | ) | $ | — | $ | (855,179 | ) | $ | 22,203,527 | $ | 21,188,670 | ||||||||||||
Tactical Income | — | — | — | (170,704 | ) | (28,494 | ) | 1,375,848 | 1,176,650 |
The difference between book basis and tax basis accumulated net realized gain (loss), and unrealized appreciation from investments is primarily attributable to the tax deferral of losses on wash sales and C-Corporation return of capital distributions. In addition, the amount listed under other book/tax differences is primarily attributable to the tax deferral of losses on straddles.
Capital losses incurred after October 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The Dynamic Opportunity Fund incurred and elected to defer such capital losses of $159,678.
At December 31, 2020, utilized remaining capital loss carry forwards for federal income tax purposes were as follows:
Non-Expiring | ||||||||||||||||
Portfolio | Short-Term | Long-Term | Total | CLCF Utilized | ||||||||||||
Dynamic Opportunity | $ | — | $ | — | $ | — | $ | — | ||||||||
Tactical Income | 170,704 | — | 170,704 | — |
7. | BENEFICIAL OWNERSHIP |
The beneficial ownership, either directly or indirectly, of more than 25% of voting securities of a fund creates a presumption of control of the Fund, under Section 2(a)(9) of the 1940 Act. As of June 30, 2021, Charles Schwab held 55.70% and 51.01% of the voting securities for the sole benefit of customers and may be deemed to control the Dynamic Opportunity Fund and Tactical Income Fund, respectively. Persons controlling the Funds can determine the outcome of any proposal submitted to the shareholders for approval, including changes to the Funds’ fundamental policies or the terms of the advisory agreement with the Advisor.
8. | MARKET AND GEOPOLITICAL RISK |
The increasing interconnectivity between global economies and financial markets increases the likelihood that events or conditions in one region or financial market may adversely impact issuers in a different country, region or financial market. Securities in the Funds may underperform due to inflation (or expectations for inflation), interest rates, global demand for particular products or resources, natural disasters, climate-change and climate-related events, pandemics, epidemics, terrorism, regulatory events and governmental or quasi-governmental actions. The occurrence of global events similar to those in recent years, such as terrorist attacks around the world, natural disasters, social and political discord or debt crises and downgrades, among others, may result in market volatility and may have long term effects on both the U.S. and global financial markets. It is difficult to predict when similar events affecting the U.S. or global financial markets may occur, the effects that such events may have and the duration of those effects. Any such event(s) could have a significant adverse impact on the value and risk profile of the Funds. The current novel coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions, as well as the forced or voluntary closure of, or operational changes to, many retail and other businesses, has had negative impacts, and in many cases severe negative impacts, on markets worldwide. It is not known how long such impacts, or any future impacts of other significant events described above, will or would last, but there could be a prolonged period of global economic slowdown, which may impact your investment. Therefore, the Funds could lose money over short periods due to short-term market movements and over longer periods during more prolonged market downturns. During a general market downturn, multiple asset classes may be negatively affected. Changes in market conditions and interest rates can have the same impact on all types of securities and instruments. In times of severe market disruptions, you could lose your entire investment.
25
ACM Funds
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2021
Please refer to the Funds’ prospectus and statement of additional information for a full listing of risks associated with the Funds’ investment strategies.
9. | SUBSEQUENT EVENTS |
Subsequent events after the date of the Statements of Assets and Liabilities have been evaluated through the date the financial statements were issued. Management has determined that no events or transactions occurred requiring adjustment or disclosure in the financial statements.
26
ACM Funds |
EXPENSE EXAMPLES (Unaudited) |
June 30, 2021 |
As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, such as sales charges (loads) on purchases and redemption fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period beginning January 1, 2021 and ending June 30, 2021.
Actual Expenses
The “Actual Expenses” lines in the table below provide information about actual account values and actual expenses. You may use the information below; 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 provided under the heading “Expenses Paid During Period”.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines in the table below provide information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds’ actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or redemption fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning | Ending Account | Expenses Paid During | ||||||||
Actual | Annualized | Account Value | Value | Period * | ||||||
Expenses | Expense Ratio | 1/1/2021 | 6/30/2021 | 1/1/2021 - 6/30/2021 | ||||||
Dynamic Opportunity Class A | 1.89% | $1,000.00 | $1,072.10 | $9.68 | ||||||
Dynamic Opportunity Class I | 1.64% | $1,000.00 | $1,072.70 | $8.38 | ||||||
Tactical Income Class A | 1.72% | $1,000.00 | $1,023.40 | $8.60 | ||||||
Tactical Income Class I | 1.47% | $1,000.00 | $1,024.60 | $7.37 | ||||||
Beginning | Ending Account | Expenses Paid During | ||||||||
Hypothetical | Annualized | Account Value | Value | Period * | ||||||
(5% return before expenses) | Expense Ratio | 1/1/2021 | 6/30/2021 | 1/1/2021 - 6/30/2021 | ||||||
Dynamic Opportunity Class A | 1.89% | $1,000.00 | $1,015.38 | $9.42 | ||||||
Dynamic Opportunity Class I | 1.64% | $1,000.00 | $1,016.64 | $8.15 | ||||||
Tactical Income Class A | 1.72% | $1,000.00 | $1,016.22 | $8.57 | ||||||
Tactical Income Class I | 1.47% | $1,000.00 | $1,017.45 | $7.34 |
* | Expenses are equal to each Fund’s annualized expense ratio, multiplied by the number of days in the period (181) divided by the number of days in the fiscal year (365). |
27
ACM Funds |
Supplemental Information (Unaudited) |
June 30, 2021 |
LIQUIDITY RISK MANAGEMENT PROGRAM
The Funds have adopted and implemented a written liquidity risk management program as required by Rule 22e-4 (the “Liquidity Rule”) under the Investment Company Act of 1940, as amended. The program is reasonably designed to assess and manage the Funds’ liquidity risk, taking into consideration, among other factors, the Funds’ investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources.
During the six months ended June 30, 2021, the Trust’s Liquidity Risk Management Program Committee (the “Committee”) reviewed the Funds’ investments and determined that the Funds held adequate levels of cash and highly liquid investments to meet shareholder redemption activities in accordance with applicable requirements. Accordingly, the Committee concluded that (i) the Funds’ liquidity risk management program is reasonably designed to prevent violations of the Liquidity Rule and (ii) the Funds’ liquidity risk management program has been effectively implemented.
28
PRIVACY NOTICE
NORTHERN LIGHTS FUND TRUST III
Rev. February 2014
FACTS | WHAT DOES NORTHERN LIGHTS FUND TRUST III DO WITH YOUR PERSONAL INFORMATION? |
Why?
| Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
What?
| The types of personal information we collect and share depend on the product or service you have with us. This information can include: ■ Social Security number and income
■ assets, account transfers and transaction history
■ investment experience and risk tolerance
When you are no longer our customer, we continue to share your information as described in this notice. |
How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Northern Lights Fund Trust III chooses to share and whether you can limit this sharing. |
Reasons we can share your personal information | Does Northern Lights Fund Trust III share? | Can you limit this sharing? |
For our everyday business purposes– such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | YES | NO |
For our marketing purposes– to offer our products and services to you | NO | We do not share |
For joint marketing with other financial companies | NO | We do not share |
For our affiliates’ everyday business purposes– information about your transactions and experiences | NO | We do not share |
For our affiliates’ everyday business purposes– information about your creditworthiness | NO | We do not share |
For our affiliates to market to you | NO | We do not share |
For nonaffiliates to market to you | NO | We do not share |
Questions? | Call 1-888-339-4230 |
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Page 2 |
What we do | |
How does Northern Lights Fund Trust III protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. Our service providers are held accountable for adhering to strict policies and procedures to prevent any misuse of your nonpublic personal information.
|
How does Northern Lights Fund Trust III collect my personal information? | We collect your personal information, for example, when you ■ open an account or give us contact information ■ provide account information or give us your income information ■ make deposits or withdrawals from your account We also collect your personal information from other companies.
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Why can’t I limit all sharing? | Federal law gives you the right to limit only ■ sharing for affiliates’ everyday business purposes—information about your creditworthiness ■ affiliates from using your information to market to you ■ sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing
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Definitions | |
Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies. ■ Northern Lights Fund Trust III does not share with our affiliates.
|
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies. ■ Northern Lights Fund Trust III does not share with nonaffiliates so they can market to you.
|
Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. ■ Northern Lights Fund Trust III does not jointly market.
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30
PROXY VOTING POLICY
Information regarding how the Funds voted proxies relating to portfolio securities for the most recent twelve month period ended June 30 as well as a description of the policies and procedures that the Funds use to determine how to vote proxies is available without charge, upon request, by calling 1-844-798-3833 or by referring to the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.
PORTFOLIO HOLDINGS
Each Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, within sixty days after the end of the period. Form N- PORT reports are available at the SEC’s website at www.sec.gov. The information on Form N-PORT is available without charge, upon request, by calling 1-844-798-3833.
INVESTMENT ADVISOR |
Ascendant Capital Management, LLC |
10866 Wilshire Blvd., Suite 1600 |
Los Angeles, CA 90024 |
ADMINISTRATOR |
Gemini Fund Services, LLC |
4221 North 203rd Street, Suite 100 |
Elkhorn, NE 68022 |
ACM-SAR21 |
(b) | Not Applicable |
Item 2. Code of Ethics.
(a) | The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party. |
(c) | During the period covered by this report, there were no amendments to any provision of the code of ethics. |
(d) | During the period covered by this report, there were no waivers or implicit waivers of a provision of the code of ethics. |
Item 3. Audit Committee Financial Expert. Not applicable.
Item 4. Principal Accountant Fees and Services. Not applicable.
Item 5. Audit Committee of Listed Companies. Not applicable to open-end investment companies.
Item 6. Schedule of Investments. Schedule of investments in securities of unaffiliated issuers is included under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders. None
Item 11. Controls and Procedures.
(a) Based on an evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of filing date of this Form N-CSR, the principal executive officer and principal financial officer of the Registrant have concluded that the disclosure controls and procedures of the Registrant are reasonably designed to ensure that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported by the filing date, including that information required to be disclosed is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no significant changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. Not applicable to open-end investment companies.
Item 13. Exhibits.
(a)(1) Not applicable.
(a)(3) Not applicable for open-end investment companies.
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) Northern Lights Fund Trust III
By (Signature and Title)
/s/ Richard Malinowski
Richard Malinowski, Principal Executive Officer/President
Date 9/1/21
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/ Richard Malinowski
Richard Malinowski, Principal Executive Officer/President
Date 9/1/21
By (Signature and Title)
/s/ Brian Curley
Brian Curley, Principal Financial Officer/Treasurer
Date 9/1/21