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)
The Corporation Trust Company
1209 Orange Street Wilmington, DE 19801
(Name and address of agent for service)
Registrant's telephone number, including area code: 631-490-4300
Date of fiscal year end: 6/30
Date of reporting period: 6/30/23
Item 1. Reports to Stockholders.
HCM Defender 100 Index ETF |
QQH |
HCM Defender 500 Index ETF |
LGH |
Annual Report |
June 30, 2023 |
1-770-642-4902 |
www.howardcmetfs.com |
Distributed by Northern Lights Distributors, LLC |
Member FINRA/SIPC |
June 30th, 2023
Annual Shareholder letter
Howard Capital Management ETF Family
2023 2nd Quarter
We are pleased to present you with the HCM Defender 100 Index ETF and HCM Defender 500 Index ETF Annual Report for the year ended June 30, 2023. We appreciate your continued trust and support as we navigate these dynamic market conditions and strive to deliver value to our shareholders.
The fiscal year was marked by significant challenges and opportunities in the global economy and financial markets. We witnessed a rollercoaster ride of market volatility, driven by concerns over inflation, the Federal Reserve’s actions, geopolitical tensions, and global economic uncertainties. Inflationary pressures remained a central focus throughout the year, and the Federal Reserve took steps to combat inflation, leading to apprehensions among market participants. However, there were encouraging signs of relief as inflation began to roll over at a considerable pace. Supply chain challenges eased, the housing market stabilized, and labor markets experienced a slowdown. These developments signaled the potential for the Federal Reserve to gradually slow the pace and magnitude of rate increases. Volatility remained a prevalent theme throughout the year, reflecting the challenging market conditions experienced in the previous year. The actions and statements of the Federal Reserve, particularly those of Fed Chair Powell, had a significant impact on market movements. Investors closely monitored the Federal Reserve’s decisions, as they had far-reaching consequences for the overall economy and financial markets. The unpredictability and mixed messages from the Federal Reserve created uncertainty among investors, contributing to market volatility. Within specific market segments, opportunities and valuations varied. The S&P 500 ex-FAANG companies demonstrated attractive valuations, with a price-to-earnings (P/E) ratio of approximately 14.8 around the first week of March. It is important to note that the higher multiples associated with FAANG stocks were justified given their strong financial performance even in a volatile market environment. Consumer confidence played a crucial role in gauging economic sentiment. The Conference Board’s Consumer Confidence Index experienced fluctuations throughout the year. While the index faced periodic declines, it generally remained above pandemic lows, indicating a continued economic expansion. Consumer expectations occasionally wavered, reflecting concerns about the economic outlook. We closely monitored these indicators as early signs of potential changes in market sentiment and economic conditions.
Our proprietary quantitative model, the HCM-BuyLine®, remained a valuable tool for guiding our investment decisions. As we enter the new fiscal year, the financial landscape remains dynamic and subject to various factors. The Federal Reserve’s actions, economic indicators, and global events will continue to shape market movements. We remain committed to navigating these conditions with vigilance and prudence, always seeking opportunities for growth while managing risk.
The HCM ETFs began the fiscal year with no equity exposure but were instead invested in cash and cash equivalents in an effort to preserve capital.
If you trade a system, which we do, you must commit to the system and expect that not all trades will be winners, but over a full market cycle a good system should produce very strong gains.
1145 Hembree Rd. | Roswell,GA30076 | | (770) 642-4902 | www.howardcm.com |
1
One year performance (NAV), as of 6/30/2023, for our ETFs is as follows: HCM Defender 100 Index ETF: 27.77%; HCM Defender 500 Index ETF: 14.06%. The HCM-BuyLine®, our proprietary quantitative indicator that helps us determine when and how much to be invested in the equity market, has remained positive since Mid-January 2023.
We appreciate your trust and support as we strive to deliver value for our shareholders. Together, we will navigate the ever-changing financial landscape and pursue long-term growth and prosperity.
Thank you for being a shareholder of the HCM Defender 100 Index ETF and HCM Defender 500 Index ETF.
Sincerely,
Vance Howard, CEO |
HCM-071923-75
1145 Hembree Rd. | Roswell,GA30076 | | (770) 642-4902 | www.howardcm.com |
2
HCM Defender 100 Index ETF
PORTFOLIO REVIEW (Unaudited)
June 30, 2023
The Fund’s performance figures* for the period ended June 30, 2023, compared to its benchmarks:
Annualized | |||
Annualized | Since Inception** - | ||
One Year | Three Year | June 30, 2023 | |
HCM Defender 100 Index ETF - NAV | 27.77% | 16.04% | 18.67% |
HCM Defender 100 Index ETF - Market Price | 27.79% | 16.01% | 18.69% |
HCM Defender 100 Index*** | 29.78% | 16.11% | 19.85% |
Nasdaq 100 Total Return Index **** | 33.13% | 15.23% | 21.02% |
* | The Fund’s past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns are calculated with the traded NAV on June 30, 2023. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.howardcmetfs.com or by calling 1-770-642-4902. The Fund’s per share net asset value or “NAV” is the value of one share of the Fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV of the Fund and the market return is based on the market price per share of the Fund. Since November 2, 2020, market price returns are calculated using the closing price and account for distributions from the Fund. Prior to November 2, 2020, market price returns were calculated using the midpoint price and accounted for distributions from the Fund. Market price and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at market price and NAV, respectively. The Fund’s total annual operating expenses are 1.02% per the November 1, 2022 prospectus. Please see the Financial Highlights for a more recent expense ratio. |
** | Inception date is October 9, 2019. |
*** | Prior to July 12, 2022, the HCM Defender 100 Index was comprised of securities in the Solactive US Technology 100 Index (“Tech Equity Sub-Index”), which are the largest and most liquid companies classified in the technology sector as defined by the TRBC Sector Classification, securities in the Solactive 1-3 month US TBill Index (“Treasury Sub-Index”), which are U.S. dollar denominated T-Bills with a time to maturity of 1 to 3 months, or a combination of both. The HCM Defender 100 Index alternated exposure among a full position of securities in the Tech Equity Sub-Index, a full position of securities in the Treasury Sub-Index, or a 50/50 position of securities in the Tech Equity Sub-Index/Treasury Sub-Index. Investors cannot invest directly in an index. |
**** | The Nasdaq 100 Total Return Index includes 100 of the largest domestic and international non-financial companies listed on the NASDAQ Stock Market based on market capitalization. Investors cannot invest directly in an index. |
3
HCM Defender 100 Index ETF
PORTFOLIO REVIEW (Unaudited)(Continued)
June 30, 2023
Comparison of the Change in Value of a $10,000 Investment
4
HCM Defender 100 Index ETF
PORTFOLIO REVIEW (Unaudited)(Continued)
June 30, 2023
The Fund’s holdings by investment type as of June 30, 2023 were as follows:
Industry Sector/Investment Type | % of Net Assets | |||
Exchange Traded Funds | ||||
Equity - Large Cap Blend | 21.4 | % | ||
Common Stocks | ||||
Software | 14.1 | % | ||
Semiconductors | 13.9 | % | ||
Technology Hardware | 13.6 | % | ||
Internet Media & Services | 9.7 | % | ||
E-Commerce Discretionary | 4.9 | % | ||
Automotive | 3.6 | % | ||
Biotech & Pharma | 2.8 | % | ||
Beverages | 1.8 | % | ||
Technology Services | 1.7 | % | ||
Retail - Consumer Staples | 1.6 | % | ||
Medical Equipment & Devices | 1.4 | % | ||
Cable & Satellite | 1.2 | % | ||
Leisure Facilities & Services | 0.9 | % | ||
Electric Utilities | 0.8 | % | ||
Diversified Industrials | 0.8 | % | ||
Retail - Discretionary | 0.8 | % | ||
Food | 0.7 | % | ||
Entertainment Content | 0.7 | % | ||
Transportation & Logistics | 0.6 | % | ||
Telecommunications | 0.5 | % | ||
Commercial Support Services | 0.2 | % | ||
Wholesale - Discretionary | 0.2 | % | ||
Transportation Equipment | 0.2 | % | ||
Advertising & Marketing | 0.2 | % | ||
Industrial Support Services | 0.2 | % | ||
Oil & Gas Services & Equipment | 0.2 | % | ||
Renewable Energy | 0.1 | % | ||
Other Assets in Excess of Liabilities | 1.2 | % | ||
100.0 | % |
Please refer to the Schedule of Investments in this Annual Report for a detailed listing of the Fund’s holdings.
5
HCM Defender 500 Index ETF
PORTFOLIO REVIEW (Unaudited)
June 30, 2023
The Fund’s performance figures* for the period ended June 30, 2023, compared to its benchmarks:
Annualized | |||
Annualized | Since Inception** - | ||
One Year | Three Year | June 30, 2023 | |
HCM Defender 500 Index ETF - NAV | 14.06% | 16.45% | 13.28% |
HCM Defender 500 Index ETF - Market Price | 14.12% | 16.53% | 13.31% |
HCM Defender 500 Index*** | 13.35% | 12.62% | 11.66% |
S&P 500 Total Return Index **** | 19.59% | 14.60% | 13.85% |
* | The Fund’s past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Total returns are calculated with the traded NAV on June 30, 2023. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions, if any, or the redemption of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.howardcmetfs.com or by calling 1-770-642-4902. The Fund’s per share net asset value or “NAV” is the value of one share of the Fund as calculated in accordance with the standard formula for valuing mutual fund shares. The NAV return is based on the NAV of the Fund and the market return is based on the market price per share of the Fund. Since November 2, 2020, market price returns are calculated using the closing price and account for distributions from the Fund. Prior to November 2, 2020, market price returns were calculated using the midpoint price and accounted for distributions from the Fund. Market price and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at market price and NAV, respectively. The Fund’s total annual operating expenses are 1.01% per the November 1, 2022 prospectus. Please see the Financial Highlights for a more recent expense ratio. |
** | Inception date is October 9, 2019. |
*** | Prior to July 12, 2022, the HCM Defender 500 Index was comprised of securities in the Solactive US Large Cap Index (“Large Cap Equity Sub - Index”), which are common stocks issued by 500 large – capitalization companies traded on American stock exchanges, securities in the Solactive 1 - 3 month US T - Bill Index (“Treasury Sub - Index”), which are U.S. dollar denominated T - Bills with a time to maturity of 1 to 3 months, or a combination of both. The HCM 500 Index alternated exposure among a full position of securities in the Large Cap Equity Sub-Index, a full position of securities in the Treasury Sub-Index, or a 50/50 position of securities in the Large Cap Equity Sub-Index/Treasury Sub-Index. Investors cannot invest directly in an index. |
**** | The S&P 500 Total Return Index is a widely accepted, unmanaged index of U.S. stock market performance which does not take into account charges, fees and other expenses. Investors cannot invest directly in an index. |
6
HCM Defender 500 Index ETF
PORTFOLIO REVIEW (Unaudited)(Continued)
June 30, 2023
Comparison of the Change in Value of a $10,000 Investment
7
HCM Defender 500 Index ETF
PORTFOLIO REVIEW (Unaudited)(Continued)
June 30, 2023
The Fund’s holdings by investment type as of June 30, 2023 were as follows:
Industry Sector/Investment Type | % of Net Assets | Industry Sector/Investment Type | % of Net Assets | |||||||
Exchange Traded Funds | Common Stocks (continued) | |||||||||
Equity - Large Cap Blend | 20.1 | % | Cable & Satellite | 0.4 | % | |||||
Common Stocks | Specialty Finance | 0.3 | % | |||||||
Software | 9.5 | % | Infrastructure Reit | 0.3 | % | |||||
Technology Hardware | 8.7 | % | Residential Reit | 0.3 | % | |||||
Internet Media & Services | 6.1 | % | Commercial Support Services | 0.3 | % | |||||
Semiconductors | 5.3 | % | Apparel & Textile Products | 0.2 | % | |||||
Biotech & Pharma | 4.9 | % | Oil & Gas Services & Equipment | 0.2 | % | |||||
Technology Services | 4.1 | % | Industrial Reit | 0.2 | % | |||||
Oil & Gas Producers | 3.2 | % | Home Construction | 0.2 | % | |||||
E-Commerce Discretionary | 3.0 | % | Industrial Support Services | 0.2 | % | |||||
Medical Equipment & Devices | 2.9 | % | Data Center Reit | 0.2 | % | |||||
Insurance | 2.5 | % | Transportation Equipment | 0.2 | % | |||||
Health Care Facilities & Services | 2.4 | % | Metals & Mining | 0.2 | % | |||||
Banking | 2.3 | % | Wholesale - Consumer Staples | 0.2 | % | |||||
Automotive | 1.9 | % | Retail Reit | 0.1 | % | |||||
Retail - Discretionary | 1.7 | % | Construction Materials | 0.1 | % | |||||
Electric Utilities | 1.6 | % | Wholesale - Discretionary | 0.1 | % | |||||
Household Products | 1.3 | % | Health Care Reit | 0.1 | % | |||||
Aerospace & Defense | 1.2 | % | Self-Storage Reit | 0.1 | % | |||||
Chemicals | 1.2 | % | Steel | 0.1 | % | |||||
Retail - Consumer Staples | 1.2 | % | Advertising & Marketing | 0.1 | % | |||||
Beverages | 1.1 | % | Containers & Packaging | 0.1 | % | |||||
Leisure Facilities & Services | 1.1 | % | Gas & Water Utilities | 0.1 | % | |||||
Transportation & Logistics | 1.1 | % | Engineering & Construction | 0.1 | % | |||||
Diversified Industrials | 1.0 | % | Renewable Energy | 0.1 | % | |||||
Institutional Financial Services | 0.8 | % | Gaming Reit | 0.1 | % | |||||
Asset Management | 0.8 | % | Timber Reit | 0.0 | % * | |||||
Electrical Equipment | 0.7 | % | Real Estate Services | 0.0 | % * | |||||
Machinery | 0.7 | % | Office Reit | 0.0 | % * | |||||
Telecommunications | 0.7 | % | Specialty Reit | 0.0 | % * | |||||
Food | 0.6 | % | Hotel Reit | 0.0 | % * | |||||
Entertainment Content | 0.6 | % | Multi Asset Class Reit | 0.0 | % * | |||||
Tobacco & Cannabis | 0.4 | % | Right | |||||||
Medical Equipment & Devices | 0.0 | % * | ||||||||
Other Assets Less Liabilities | 0.7 | % | ||||||||
100.0 | % | |||||||||
* Percentage rounds to less than 0.1%. |
Please refer to the Schedule of Investments in this Annual Report for a detailed listing of the Fund’s holdings.
8
HCM DEFENDER 100 INDEX ETF |
SCHEDULE OF INVESTMENTS |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 77.4% | ||||||||
ADVERTISING & MARKETING - 0.2% | ||||||||
8,054 | Trade Desk, Inc. (The), Class A(a) | $ | 621,930 | |||||
AUTOMOTIVE - 3.6% | ||||||||
44,366 | Tesla, Inc.(a) | 11,613,688 | ||||||
BEVERAGES - 1.8% | ||||||||
2,570 | Coca-Cola Europacific Partners plc | 165,585 | ||||||
15,207 | Keurig Dr Pepper, Inc. | 475,523 | ||||||
12,933 | Monster Beverage Corporation(a) | 742,872 | ||||||
24,696 | PepsiCo, Inc. | 4,574,192 | ||||||
5,958,172 | ||||||||
BIOTECH & PHARMA - 2.8% | ||||||||
2,264 | Alnylam Pharmaceuticals, Inc.(a) | 430,024 | ||||||
9,636 | Amgen, Inc. | 2,139,384 | ||||||
2,542 | Biogen, Inc.(a) | 724,089 | ||||||
1,708 | BioNTech S.E. - ADR(a) | 184,344 | ||||||
22,383 | Gilead Sciences, Inc. | 1,725,058 | ||||||
5,851 | Moderna, Inc.(a) | 710,897 | ||||||
1,796 | Regeneron Pharmaceuticals, Inc.(a) | 1,290,498 | ||||||
2,401 | Seagen, Inc.(a) | 462,096 | ||||||
4,301 | Vertex Pharmaceuticals, Inc.(a) | 1,513,565 | ||||||
9,179,955 | ||||||||
CABLE & SATELLITE - 1.2% | ||||||||
1,838 | Charter Communications, Inc., Class A(a) | 675,226 | ||||||
77,973 | Comcast Corporation, Class A | 3,239,778 | ||||||
3,915,004 | ||||||||
COMMERCIAL SUPPORT SERVICES - 0.2% | ||||||||
1,542 | Cintas Corporation | 766,497 | ||||||
DIVERSIFIED INDUSTRIALS - 0.8% | ||||||||
12,585 | Honeywell International, Inc. | 2,611,389 | ||||||
E-COMMERCE DISCRETIONARY - 4.9% | ||||||||
106,988 | Amazon.com, Inc.(a) | 13,946,955 |
See accompanying notes to financial statements.
9
HCM DEFENDER 100 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 77.4% (Continued) | ||||||||
E-COMMERCE DISCRETIONARY - 4.9% (Continued) | ||||||||
10,082 | eBay, Inc. | $ | 450,565 | |||||
811 | MercadoLibre, Inc.(a) | 960,711 | ||||||
9,205 | PDD Holdings, Inc. - ADR(a) | 636,434 | ||||||
15,994,665 | ||||||||
ELECTRIC UTILITIES - 0.8% | ||||||||
9,383 | American Electric Power Company, Inc. | 790,049 | ||||||
5,927 | Constellation Energy Corporation | 542,617 | ||||||
17,726 | Exelon Corporation | 722,157 | ||||||
10,179 | Xcel Energy, Inc. | 632,828 | ||||||
2,687,651 | ||||||||
ENTERTAINMENT CONTENT - 0.7% | ||||||||
12,983 | Activision Blizzard, Inc.(a) | 1,094,467 | ||||||
4,877 | Electronic Arts, Inc. | 632,547 | ||||||
42,110 | Warner Bros Discovery, Inc.(a) | 528,059 | ||||||
2,255,073 | ||||||||
FOOD - 0.7% | ||||||||
14,407 | Kraft Heinz Company (The) | 511,449 | ||||||
24,579 | Mondelez International, Inc., Class A | 1,792,792 | ||||||
2,304,241 | ||||||||
INDUSTRIAL SUPPORT SERVICES - 0.2% | ||||||||
9,951 | Fastenal Company | 587,009 | ||||||
INTERNET MEDIA & SERVICES - 9.7% | ||||||||
6,287 | Airbnb, Inc., CLASS A(a) | 805,742 | ||||||
58,202 | Alphabet, Inc., Class A(a) | 6,966,779 | ||||||
57,759 | Alphabet, Inc., Class C(a) | 6,987,107 | ||||||
682 | Booking Holdings, Inc.(a) | 1,841,625 | ||||||
40,868 | Meta Platforms, Inc., Class A(a) | 11,728,299 | ||||||
7,954 | Netflix, Inc.(a) | 3,503,657 | ||||||
31,833,209 | ||||||||
LEISURE FACILITIES & SERVICES - 0.9% | ||||||||
4,986 | Marriott International, Inc., Class A | 915,878 | ||||||
19,899 | Starbucks Corporation | 1,971,195 | ||||||
2,887,073 |
See accompanying notes to financial statements.
10
HCM DEFENDER 100 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 77.4% (Continued) | ||||||||
MEDICAL EQUIPMENT & DEVICES - 1.4% | ||||||||
1,313 | Align Technology, Inc.(a) | $ | 464,329 | |||||
6,784 | DexCom, Inc.(a) | 871,812 | ||||||
1,430 | IDEXX Laboratories, Inc.(a) | 718,189 | ||||||
2,645 | Illumina, Inc.(a) | 495,911 | ||||||
6,267 | Intuitive Surgical, Inc.(a) | 2,142,938 | ||||||
4,693,179 | ||||||||
OIL & GAS SERVICES & EQUIPMENT - 0.2% | ||||||||
18,099 | Baker Hughes Company | 572,109 | ||||||
RENEWABLE ENERGY - 0.1% | ||||||||
2,279 | Enphase Energy, Inc.(a) | 381,687 | ||||||
RETAIL - CONSUMER STAPLES - 1.6% | ||||||||
7,906 | Costco Wholesale Corporation | 4,256,432 | ||||||
3,755 | Dollar Tree, Inc.(a) | 538,843 | ||||||
12,890 | Walgreens Boots Alliance, Inc. | 367,236 | ||||||
5,162,511 | ||||||||
RETAIL - DISCRETIONARY - 0.8% | ||||||||
2,161 | Lululemon Athletica, Inc.(a) | 817,939 | ||||||
1,095 | O’Reilly Automotive, Inc.(a) | 1,046,053 | ||||||
6,023 | Ross Stores, Inc. | 675,359 | ||||||
2,539,351 | ||||||||
SEMICONDUCTORS - 13.9% | ||||||||
29,032 | Advanced Micro Devices, Inc.(a) | 3,307,035 | ||||||
9,215 | Analog Devices, Inc. | 1,795,174 | ||||||
15,390 | Applied Materials, Inc. | 2,224,471 | ||||||
7,144 | Broadcom, Inc. | 6,196,920 | ||||||
1,268 | GLOBALFOUNDRIES, Inc.(a) | 81,887 | ||||||
75,885 | Intel Corporation | 2,537,594 | ||||||
2,538 | KLA Corporation | 1,230,981 | ||||||
2,464 | Lam Research Corporation | 1,584,007 | ||||||
14,660 | Marvell Technology, Inc. | 876,375 | ||||||
9,960 | Microchip Technology, Inc. | 892,316 | ||||||
19,912 | Micron Technology, Inc. | 1,256,646 |
See accompanying notes to financial statements.
11
HCM DEFENDER 100 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 77.4% (Continued) | ||||||||
SEMICONDUCTORS - 13.9% (Continued) | ||||||||
39,213 | NVIDIA Corporation | $ | 16,587,883 | |||||
4,595 | NXP Semiconductors N.V. | 940,505 | ||||||
7,436 | ON Semiconductor Corporation(a) | 703,297 | ||||||
20,125 | QUALCOMM, Inc. | 2,395,680 | ||||||
16,529 | Texas Instruments, Inc. | 2,975,551 | ||||||
45,586,322 | ||||||||
SOFTWARE - 14.1% | ||||||||
8,138 | Adobe, Inc.(a) | 3,979,401 | ||||||
1,534 | ANSYS, Inc.(a) | 506,634 | ||||||
2,416 | Atlassian Corp plc, CLASS A(a) | 405,429 | ||||||
3,783 | Autodesk, Inc.(a) | 774,040 | ||||||
4,617 | Cadence Design Systems, Inc.(a) | 1,082,779 | ||||||
3,614 | Crowdstrike Holdings, Inc., Class A(a) | 530,788 | ||||||
4,568 | Datadog, Inc., Class A(a) | 449,400 | ||||||
12,042 | Fortinet, Inc.(a) | 910,255 | ||||||
4,926 | Intuit, Inc. | 2,257,044 | ||||||
93,823 | Microsoft Corporation | 31,950,484 | ||||||
4,952 | Palo Alto Networks, Inc.(a) | 1,265,286 | ||||||
2,661 | Synopsys, Inc.(a) | 1,158,626 | ||||||
3,498 | Workday, Inc., Class A(a) | 790,163 | ||||||
3,958 | Zoom Video Communications, Inc., Class A(a) | 268,669 | ||||||
46,328,998 | ||||||||
TECHNOLOGY HARDWARE - 13.6% | ||||||||
212,104 | Apple, Inc. | 41,141,813 | ||||||
68,978 | Cisco Systems, Inc. | 3,568,922 | ||||||
44,710,735 | ||||||||
TECHNOLOGY SERVICES - 1.7% | ||||||||
7,635 | Automatic Data Processing, Inc. | 1,678,097 | ||||||
9,872 | Cognizant Technology Solutions Corporation, Class A | 644,444 | ||||||
7,458 | CoStar Group, Inc.(a) | 663,762 | ||||||
5,762 | Paychex, Inc. | 644,595 | ||||||
21,169 | PayPal Holdings, Inc.(a) | 1,412,607 | ||||||
2,808 | Verisk Analytics, Inc. | 634,692 | ||||||
5,678,197 |
See accompanying notes to financial statements.
12
HCM DEFENDER 100 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 77.4% (Continued) | ||||||||
TELECOMMUNICATIONS - 0.5% | ||||||||
11,443 | T-Mobile US, Inc.(a) | $ | 1,589,433 | |||||
TRANSPORTATION & LOGISTICS - 0.6% | ||||||||
38,545 | CSX Corporation | 1,314,384 | ||||||
1,758 | Old Dominion Freight Line, Inc. | 650,021 | ||||||
1,964,405 | ||||||||
TRANSPORTATION EQUIPMENT - 0.2% | ||||||||
8,376 | PACCAR, Inc. | 700,652 | ||||||
WHOLESALE - DISCRETIONARY - 0.2% | ||||||||
7,703 | Copart, Inc.(a) | 702,591 | ||||||
TOTAL COMMON STOCKS (Cost $200,001,166) | 253,825,726 | |||||||
EXCHANGE-TRADED FUNDS — 21.4% | ||||||||
EQUITY - 21.4% | ||||||||
472,390 | ProShares Ultra QQQ | 30,412,468 | ||||||
973,515 | ProShares UltraPro QQQ | 39,914,115 | ||||||
TOTAL EXCHANGE-TRADED FUNDS (Cost $52,418,870) | 70,326,583 | |||||||
TOTAL INVESTMENTS - 98.8% (Cost $252,420,036) | $ | 324,152,309 | ||||||
OTHER ASSETS IN EXCESS OF LIABILITIES - 1.2% | 3,904,805 | |||||||
NET ASSETS - 100.0% | $ | 328,057,114 |
ADR | - American Depositary Receipt |
ETF | - Exchange-Traded Fund |
NV | - Naamioze Vennootschap |
PLC | - Public Limited Company |
(a) | - Non-income producing security. |
See accompanying notes to financial statements.
13
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% | ||||||||
ADVERTISING & MARKETING - 0.1% | ||||||||
1,208 | Omnicom Group, Inc. | $ | 114,941 | |||||
2,220 | Trade Desk, Inc. (The), Class A(a) | 171,429 | ||||||
286,370 | ||||||||
AEROSPACE & DEFENSE - 1.2% | ||||||||
3,012 | Boeing Company(a) | 636,014 | ||||||
1,265 | General Dynamics Corporation | 272,165 | ||||||
1,921 | Howmet Aerospace, Inc. | 95,205 | ||||||
1,019 | L3Harris Technologies, Inc. | 199,490 | ||||||
1,402 | Lockheed Martin Corporation | 645,452 | ||||||
773 | Northrop Grumman Corporation | 352,333 | ||||||
8,098 | Raytheon Technologies Corporation | 793,279 | ||||||
242 | Teledyne Technologies, Inc.(a) | 99,489 | ||||||
1,097 | Textron, Inc. | 74,190 | ||||||
257 | TransDigm Group, Inc. | 229,802 | ||||||
3,397,419 | ||||||||
APPAREL & TEXTILE PRODUCTS - 0.2% | ||||||||
6,607 | NIKE, Inc., Class B | 729,215 | ||||||
ASSET MANAGEMENT - 0.8% | ||||||||
533 | Ameriprise Financial, Inc. | 177,041 | ||||||
2,243 | Apollo Global Management, Inc. | 172,285 | ||||||
740 | BlackRock, Inc. | 511,444 | ||||||
3,676 | Blackstone, Inc. | 341,758 | ||||||
8,413 | Charles Schwab Corporation (The) | 476,849 | ||||||
4,330 | KKR & Company, Inc. | 242,480 | ||||||
331 | LPL Financial Holdings, Inc. | 71,969 | ||||||
1,103 | Raymond James Financial, Inc. | 114,458 | ||||||
1,290 | T Rowe Price Group, Inc. | 144,506 | ||||||
2,252,790 | ||||||||
AUTOMOTIVE - 1.9% | ||||||||
22,293 | Ford Motor Company | 337,293 | ||||||
6,962 | General Motors Company | 268,455 | ||||||
13,168 | Stellantis N.V. | 230,967 |
See accompanying notes to financial statements.
14
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
AUTOMOTIVE - 1.9% (Continued) | ||||||||
17,922 | Tesla, Inc.(a) | $ | 4,691,441 | |||||
5,528,156 | ||||||||
BANKING - 2.3% | ||||||||
37,239 | Bank of America Corporation | 1,068,387 | ||||||
9,647 | Citigroup, Inc. | 444,148 | ||||||
2,458 | Citizens Financial Group, Inc. | 64,105 | ||||||
3,702 | Fifth Third Bancorp | 97,029 | ||||||
7,129 | Huntington Bancshares, Inc. | 76,851 | ||||||
21,994 | JPMorgan Chase & Company | 3,198,808 | ||||||
5,959 | KeyCorporation | 55,061 | ||||||
841 | M&T Bank Corporation | 104,082 | ||||||
2,352 | PNC Financial Services Group, Inc. (The) | 296,234 | ||||||
4,593 | Regions Financial Corporation | 81,847 | ||||||
6,895 | Truist Financial Corporation | 209,263 | ||||||
7,114 | US Bancorp | 235,047 | ||||||
19,124 | Wells Fargo & Company | 816,212 | ||||||
6,747,074 | ||||||||
BEVERAGES - 1.1% | ||||||||
1,485 | Brown-Forman Corporation, Class B | 99,168 | ||||||
20,602 | Coca-Cola Company (The) | 1,240,652 | ||||||
786 | Constellation Brands, Inc., Class A | 193,458 | ||||||
4,276 | Keurig Dr Pepper, Inc. | 133,711 | ||||||
3,948 | Monster Beverage Corporation(a) | 226,773 | ||||||
7,371 | PepsiCo, Inc. | 1,365,257 | ||||||
3,259,019 | ||||||||
BIOTECH & PHARMA - 4.9% | ||||||||
9,439 | AbbVie, Inc. | 1,271,716 | ||||||
647 | Alnylam Pharmaceuticals, Inc.(a) | 122,891 | ||||||
2,839 | Amgen, Inc. | 630,315 | ||||||
786 | Biogen, Inc.(a) | 223,892 | ||||||
905 | BioMarin Pharmaceutical, Inc.(a) | 78,445 | ||||||
10,944 | Bristol-Myers Squibb Company | 699,869 | ||||||
6,326 | Eli Lilly and Company | 2,966,767 | ||||||
6,810 | Gilead Sciences, Inc. | 524,847 |
See accompanying notes to financial statements.
15
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
BIOTECH & PHARMA - 4.9% (Continued) | ||||||||
1,095 | Horizon Therapeutics plc(a) | $ | 112,621 | |||||
903 | Incyte Corporation(a) | 56,212 | ||||||
19,744 | Johnson & Johnson | 3,268,028 | ||||||
13,157 | Merck & Company, Inc. | 1,518,186 | ||||||
1,662 | Moderna, Inc.(a) | 201,933 | ||||||
30,338 | Pfizer, Inc. | 1,112,798 | ||||||
512 | Regeneron Pharmaceuticals, Inc.(a) | 367,892 | ||||||
1,939 | Royalty Pharma plc, Class A | 59,605 | ||||||
760 | Seagen, Inc.(a) | 146,270 | ||||||
1,209 | Vertex Pharmaceuticals, Inc.(a) | 425,459 | ||||||
6,587 | Viatris, Inc. | 65,738 | ||||||
2,325 | Zoetis, Inc. | 400,388 | ||||||
14,253,872 | ||||||||
CABLE & SATELLITE - 0.4% | ||||||||
522 | Charter Communications, Inc., Class A(a) | 191,767 | ||||||
22,796 | Comcast Corporation, Class A | 947,174 | ||||||
1,138,941 | ||||||||
CHEMICALS - 1.2% | ||||||||
1,147 | Air Products and Chemicals, Inc. | 343,561 | ||||||
614 | Albemarle Corporation | 136,977 | ||||||
391 | Avery Dennison Corporation | 67,174 | ||||||
1,183 | CF Industries Holdings, Inc. | 82,124 | ||||||
3,638 | Corteva, Inc. | 208,457 | ||||||
3,951 | Dow, Inc. | 210,430 | ||||||
2,389 | DuPont de Nemours, Inc. | 170,670 | ||||||
1,335 | Ecolab, Inc. | 249,231 | ||||||
588 | FMC Corporation | 61,352 | ||||||
1,304 | International Flavors & Fragrances, Inc. | 103,785 | ||||||
1,379 | LyondellBasell Industries N.V., Class A | 126,634 | ||||||
1,626 | Mosaic Company (The) | 56,910 | ||||||
2,611 | New Linde plc | 995,001 | ||||||
1,184 | PPG Industries, Inc. | 175,587 | ||||||
588 | RPM International, Inc. | 52,761 |
See accompanying notes to financial statements.
16
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
CHEMICALS - 1.2% (Continued) | ||||||||
1,236 | Sherwin-Williams Company (The) | $ | 328,183 | |||||
3,368,837 | ||||||||
COMMERCIAL SUPPORT SERVICES - 0.3% | ||||||||
454 | Cintas Corporation | 225,674 | ||||||
1,005 | Republic Services, Inc. | 153,936 | ||||||
2,131 | Waste Management, Inc. | 369,558 | ||||||
749,168 | ||||||||
CONSTRUCTION MATERIALS - 0.1% | ||||||||
316 | Carlisle Companies, Inc. | 81,063 | ||||||
352 | Martin Marietta Materials, Inc. | 162,515 | ||||||
690 | Vulcan Materials Company | 155,554 | ||||||
399,132 | ||||||||
CONTAINERS & PACKAGING - 0.1% | ||||||||
1,756 | Ball Corporation | 102,216 | ||||||
2,028 | International Paper Company | 64,511 | ||||||
567 | Packaging Corp of America | 74,935 | ||||||
241,662 | ||||||||
DATA CENTER REIT - 0.2% | ||||||||
1,402 | Digital Realty Trust, Inc. | 159,646 | ||||||
457 | Equinix, Inc. | 358,261 | ||||||
517,907 | ||||||||
DIVERSIFIED INDUSTRIALS - 1.0% | ||||||||
3,072 | 3M Company | 307,476 | ||||||
706 | Dover Corporation | 104,241 | ||||||
2,083 | Eaton Corp plc | 418,891 | ||||||
3,392 | Emerson Electric Company | 306,603 | ||||||
5,440 | General Electric Company | 597,584 | ||||||
3,676 | Honeywell International, Inc. | 762,771 | ||||||
1,425 | Illinois Tool Works, Inc. | 356,478 | ||||||
2,854,044 | ||||||||
E-COMMERCE DISCRETIONARY - 3.0% | ||||||||
65,403 | Amazon.com, Inc.(a) | 8,525,935 | ||||||
2,728 | eBay, Inc. | 121,914 |
See accompanying notes to financial statements.
17
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
E-COMMERCE DISCRETIONARY - 3.0% (Continued) | ||||||||
761 | Etsy, Inc.(a) | $ | 64,388 | |||||
8,712,237 | ||||||||
ELECTRIC UTILITIES - 1.6% | ||||||||
3,695 | AES Corporation (The) | 76,597 | ||||||
1,383 | Alliant Energy Corporation | 72,580 | ||||||
1,431 | Ameren Corporation | 116,870 | ||||||
2,689 | American Electric Power Company, Inc. | 226,414 | ||||||
3,290 | CenterPoint Energy, Inc. | 95,904 | ||||||
1,625 | CMS Energy Corporation | 95,469 | ||||||
1,860 | Consolidated Edison, Inc. | 168,144 | ||||||
1,832 | Constellation Energy Corporation | 167,720 | ||||||
4,009 | Dominion Energy, Inc. | 207,626 | ||||||
1,088 | DTE Energy Company | 119,702 | ||||||
4,099 | Duke Energy Corporation | 367,844 | ||||||
1,869 | Edison International | 129,802 | ||||||
1,150 | Entergy Corporation | 111,976 | ||||||
1,231 | Evergy, Inc. | 71,915 | ||||||
1,838 | Eversource Energy | 130,351 | ||||||
5,305 | Exelon Corporation | 216,126 | ||||||
2,947 | FirstEnergy Corporation | 114,579 | ||||||
10,077 | NextEra Energy, Inc. | 747,712 | ||||||
7,957 | PG&E Corporation(a) | 137,497 | ||||||
4,192 | PPL Corporation | 110,920 | ||||||
2,858 | Public Service Enterprise Group, Inc. | 178,939 | ||||||
1,746 | Sempra Energy | 254,200 | ||||||
5,885 | Southern Company (The) | 413,421 | ||||||
1,603 | WEC Energy Group, Inc. | 141,449 | ||||||
2,888 | Xcel Energy, Inc. | 179,547 | ||||||
4,653,304 | ||||||||
ELECTRICAL EQUIPMENT - 0.7% | ||||||||
1,239 | AMETEK, Inc. | 200,569 | ||||||
3,207 | Amphenol Corporation, Class A | 272,436 | ||||||
4,633 | Carrier Global Corporation | 230,306 | ||||||
1,862 | Fortive Corporation | 139,222 |
See accompanying notes to financial statements.
18
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
ELECTRICAL EQUIPMENT - 0.7% (Continued) | ||||||||
328 | Hubbell, Inc. | $ | 108,752 | |||||
3,770 | Johnson Controls International plc | 256,888 | ||||||
967 | Keysight Technologies, Inc.(a) | 161,924 | ||||||
2,138 | Otis Worldwide Corporation | 190,303 | ||||||
641 | Rockwell Automation, Inc. | 211,177 | ||||||
1,300 | Trane Technologies PLC | 248,638 | ||||||
1,376 | Trimble, Inc.(a) | 72,845 | ||||||
2,093,060 | ||||||||
ENGINEERING & CONSTRUCTION - 0.1% | ||||||||
616 | Jacobs Solutions, Inc. | 73,236 | ||||||
687 | Quanta Services, Inc. | 134,961 | ||||||
208,197 | ||||||||
ENTERTAINMENT CONTENT - 0.6% | ||||||||
3,681 | Activision Blizzard, Inc.(a) | 310,308 | ||||||
1,406 | Electronic Arts, Inc. | 182,358 | ||||||
2,561 | Paramount Global, Class B | 40,746 | ||||||
1,503 | ROBLOX Corporation, Class A(a) | 60,571 | ||||||
717 | Take-Two Interactive Software, Inc.(a) | 105,514 | ||||||
9,120 | Walt Disney Company (The)(a) | 814,233 | ||||||
12,172 | Warner Bros Discovery, Inc.(a) | 152,637 | ||||||
1,666,367 | ||||||||
FOOD - 0.6% | ||||||||
2,576 | Conagra Brands, Inc. | 86,863 | ||||||
3,165 | General Mills, Inc. | 242,756 | ||||||
800 | Hershey Company (The) | 199,760 | ||||||
1,677 | Hormel Foods Corporation | 67,449 | ||||||
490 | J M Smucker Company (The) | 72,358 | ||||||
1,473 | Kellogg Company | 99,280 | ||||||
4,345 | Kraft Heinz Company (The) | 154,248 | ||||||
772 | Lamb Weston Holdings, Inc. | 88,741 | ||||||
1,285 | McCormick & Company, Inc. | 112,091 | ||||||
7,304 | Mondelez International, Inc., Class A | 532,753 | ||||||
1,561 | Tyson Foods, Inc., Class A | 79,673 | ||||||
1,735,972 |
See accompanying notes to financial statements.
19
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
GAMING REIT - 0.1% | ||||||||
5,307 | VICI Properties, Inc. | $ | 166,799 | |||||
GAS & WATER UTILITIES - 0.1% | ||||||||
974 | American Water Works Company, Inc. | 139,039 | ||||||
665 | Atmos Energy Corporation | 77,366 | ||||||
216,405 | ||||||||
HEALTH CARE FACILITIES & SERVICES - 2.4% | ||||||||
756 | AmerisourceBergen Corporation | 145,477 | ||||||
1,289 | Cardinal Health, Inc. | 121,901 | ||||||
2,966 | Centene Corporation(a) | 200,057 | ||||||
317 | Charles River Laboratories International, Inc.(a) | 66,649 | ||||||
1,586 | Cigna Group (The) | 445,032 | ||||||
6,771 | CVS Health Corporation | 468,079 | ||||||
1,248 | Elevance Health, Inc. | 554,474 | ||||||
1,161 | HCA Healthcare, Inc. | 352,340 | ||||||
652 | Humana, Inc. | 291,529 | ||||||
898 | IQVIA Holdings, Inc.(a) | 201,843 | ||||||
491 | Laboratory Corp of America Holdings | 118,493 | ||||||
714 | McKesson Corporation | 305,099 | ||||||
329 | Molina Healthcare, Inc.(a) | 99,108 | ||||||
680 | Quest Diagnostics, Inc. | 95,581 | ||||||
7,032 | UnitedHealth Group, Inc. | 3,379,861 | ||||||
6,845,523 | ||||||||
HEALTH CARE REIT - 0.1% | ||||||||
2,774 | Healthpeak Properties, Inc. | 55,757 | ||||||
2,034 | Ventas, Inc. | 96,147 | ||||||
2,418 | Welltower, Inc. | 195,592 | ||||||
347,496 | ||||||||
HOME CONSTRUCTION - 0.2% | ||||||||
1,588 | DR Horton, Inc. | 193,243 | ||||||
1,285 | Lennar Corporation, Class A | 161,023 | ||||||
1,504 | Masco Corporation | 86,300 | ||||||
14 | NVR, Inc.(a) | 88,909 | ||||||
529,475 |
See accompanying notes to financial statements.
20
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
HOTEL REITS - 0.0%(b) | ||||||||
4,364 | Host Hotels & Resorts, Inc. | $ | 73,446 | |||||
HOUSEHOLD PRODUCTS - 1.3% | ||||||||
1,221 | Church & Dwight Company, Inc. | 122,381 | ||||||
697 | Clorox Company (The) | 110,851 | ||||||
4,240 | Colgate-Palmolive Company | 326,650 | ||||||
1,140 | Estee Lauder Companies, Inc. (The), Class A | 223,873 | ||||||
1,683 | Kimberly-Clark Corporation | 232,355 | ||||||
18,298 | Procter & Gamble Company (The) | 2,776,539 | ||||||
3,792,649 | ||||||||
INDUSTRIAL REIT - 0.2% | ||||||||
4,625 | Prologis, Inc. | 567,164 | ||||||
INDUSTRIAL SUPPORT SERVICES - 0.2% | ||||||||
3,088 | Fastenal Company | 182,162 | ||||||
387 | United Rentals, Inc. | 172,358 | ||||||
214 | WW Grainger, Inc. | 168,758 | ||||||
523,278 | ||||||||
INFRASTRUCTURE REIT - 0.3% | ||||||||
2,406 | American Tower Corporation | 466,620 | ||||||
2,187 | Crown Castle, Inc. | 249,187 | ||||||
589 | SBA Communications Corporation, A | 136,507 | ||||||
34 | Texas Pacific Land Corporation | 44,761 | ||||||
897,075 | ||||||||
INSTITUTIONAL FINANCIAL SERVICES - 0.8% | ||||||||
3,563 | Bank of New York Mellon Corporation (The) | 158,625 | ||||||
611 | Cboe Global Markets, Inc. | 84,324 | ||||||
1,845 | CME Group, Inc. | 341,860 | ||||||
1,858 | Goldman Sachs Group, Inc. (The) | 599,279 | ||||||
2,772 | Intercontinental Exchange, Inc. | 313,458 | ||||||
6,581 | Morgan Stanley | 562,017 | ||||||
1,593 | Nasdaq, Inc. | 79,411 | ||||||
1,083 | Northern Trust Corporation | 80,294 |
See accompanying notes to financial statements.
21
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
INSTITUTIONAL FINANCIAL SERVICES - 0.8% (Continued) | ||||||||
1,868 | State Street Corporation | $ | 136,700 | |||||
2,355,968 | ||||||||
INSURANCE - 2.5% | ||||||||
3,129 | Aflac, Inc. | 218,404 | ||||||
1,587 | Allstate Corporation (The) | 173,046 | ||||||
3,998 | American International Group, Inc. | 230,045 | ||||||
1,029 | Aon PLC, Class A | 355,211 | ||||||
1,960 | Arch Capital Group Ltd.(a) | 146,706 | ||||||
1,035 | Arthur J Gallagher & Company | 227,255 | ||||||
9,851 | Berkshire Hathaway, Inc., Class B(a) | 3,359,192 | ||||||
1,233 | Brown & Brown, Inc. | 84,880 | ||||||
2,030 | Chubb Ltd. | 390,897 | ||||||
713 | Cincinnati Financial Corporation | 69,389 | ||||||
1,658 | Hartford Financial Services Group, Inc. (The) | 119,409 | ||||||
69 | Markel Group, Inc.(a) | 95,439 | ||||||
2,656 | Marsh & McLennan Companies, Inc. | 499,540 | ||||||
3,190 | MetLife, Inc. | 180,331 | ||||||
1,429 | Principal Financial Group, Inc. | 108,375 | ||||||
3,129 | Progressive Corporation (The) | 414,186 | ||||||
2,026 | Prudential Financial, Inc. | 178,734 | ||||||
1,211 | Travelers Companies, Inc. (The) | 210,302 | ||||||
1,059 | W R Berkley Corporation | 63,074 | ||||||
594 | Willis Towers Watson PLC | 139,887 | ||||||
7,264,302 | ||||||||
INTERNET MEDIA & SERVICES - 6.1% | ||||||||
1,745 | Airbnb, Inc., Class A(a) | 223,639 | ||||||
44,193 | Alphabet, Inc., Class A(a) | 5,289,903 | ||||||
39,608 | Alphabet, Inc., Class C(a) | 4,791,380 | ||||||
205 | Booking Holdings, Inc.(a) | 553,568 | ||||||
1,384 | DoorDash, Inc., Class A(a) | 105,765 | ||||||
714 | Expedia Group, Inc.(a) | 78,104 | ||||||
641 | GoDaddy, Inc., Class A(a) | 48,158 | ||||||
16,622 | Meta Platforms, Inc., Class A(a) | 4,770,182 | ||||||
2,310 | Netflix, Inc.(a) | 1,017,532 |
See accompanying notes to financial statements.
22
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
INTERNET MEDIA & SERVICES - 6.1% (Continued) | ||||||||
2,886 | Pinterest, Inc., Class A(a) | $ | 78,903 | |||||
5,301 | Snap, Inc., Class A(a) | 62,764 | ||||||
9,530 | Uber Technologies, Inc.(a) | 411,410 | ||||||
468 | VeriSign, Inc.(a) | 105,754 | ||||||
17,537,062 | ||||||||
LEISURE FACILITIES & SERVICES - 1.1% | ||||||||
127 | Chipotle Mexican Grill, Inc.(a) | 271,653 | ||||||
677 | Darden Restaurants, Inc. | 113,113 | ||||||
212 | Domino’s Pizza, Inc. | 71,442 | ||||||
1,482 | Hilton Worldwide Holdings, Inc. | 215,705 | ||||||
1,812 | Las Vegas Sands Corporation(a) | 105,096 | ||||||
1,404 | Marriott International, Inc., Class A | 257,901 | ||||||
3,799 | McDonald’s Corporation | 1,133,659 | ||||||
1,974 | MGM Resorts International | 86,698 | ||||||
1,216 | Royal Caribbean Cruises Ltd.(a) | 126,148 | ||||||
5,892 | Starbucks Corporation | 583,662 | ||||||
1,549 | Yum! Brands, Inc. | 214,614 | ||||||
3,179,691 | ||||||||
MACHINERY - 0.7% | ||||||||
2,796 | Caterpillar, Inc. | 687,956 | ||||||
1,484 | Deere & Company | 601,302 | ||||||
420 | IDEX Corporation | 90,409 | ||||||
2,246 | Ingersoll Rand, Inc. | 146,799 | ||||||
654 | Parker-Hannifin Corporation | 255,086 | ||||||
859 | Stanley Black & Decker, Inc. | 80,497 | ||||||
884 | Xylem, Inc. | 99,556 | ||||||
1,961,605 | ||||||||
MEDICAL EQUIPMENT & DEVICES - 2.9% | ||||||||
8,913 | Abbott Laboratories | 971,695 | ||||||
1,617 | Agilent Technologies, Inc. | 194,444 | ||||||
413 | Align Technology, Inc.(a) | 146,053 | ||||||
3,336 | Avantor, Inc.(a) | 68,521 | ||||||
2,828 | Baxter International, Inc. | 128,844 |
See accompanying notes to financial statements.
23
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
MEDICAL EQUIPMENT & DEVICES - 2.9% (Continued) | ||||||||
1,470 | Becton Dickinson and Company | $ | 388,095 | |||||
934 | Bio-Techne Corporation | 76,242 | ||||||
7,138 | Boston Scientific Corporation(a) | 386,094 | ||||||
295 | Cooper Companies, Inc. (The) | 113,112 | ||||||
3,408 | Danaher Corporation | 817,920 | ||||||
2,098 | DexCom, Inc.(a) | 269,614 | ||||||
3,194 | Edwards Lifesciences Corporation(a) | 301,290 | ||||||
2,007 | GE HealthCare Technologies, Inc. | 163,049 | ||||||
1,261 | Hologic, Inc.(a) | 102,103 | ||||||
418 | IDEXX Laboratories, Inc.(a) | 209,932 | ||||||
863 | Illumina, Inc.(a) | 161,804 | ||||||
345 | Insulet Corporation(a) | 99,477 | ||||||
1,855 | Intuitive Surgical, Inc.(a) | 634,299 | ||||||
6,977 | Medtronic PLC | 614,674 | ||||||
109 | Mettler-Toledo International, Inc.(a) | 142,969 | ||||||
751 | PerkinElmer, Inc. | 89,211 | ||||||
647 | ResMed, Inc. | 141,370 | ||||||
505 | STERIS plc | 113,615 | ||||||
1,774 | Stryker Corporation | 541,230 | ||||||
2,004 | Thermo Fisher Scientific, Inc. | 1,045,587 | ||||||
302 | Waters Corporation(a) | 80,495 | ||||||
389 | West Pharmaceutical Services, Inc. | 148,781 | ||||||
1,015 | Zimmer Biomet Holdings, Inc. | 147,784 | ||||||
8,298,304 | ||||||||
METALS & MINING - 0.2% | ||||||||
7,452 | Freeport-McMoRan, Inc. | 298,080 | ||||||
4,352 | Newmont Corporation | 185,656 | ||||||
483,736 | ||||||||
MULTI ASSET CLASS REIT - 0.0%(b) | ||||||||
904 | WP Carey, Inc. | 61,074 | ||||||
OFFICE REIT - 0.0%(b) | ||||||||
796 | Alexandria Real Estate Equities, Inc. | 90,338 |
See accompanying notes to financial statements.
24
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
OIL & GAS PRODUCERS - 3.2% | ||||||||
1,705 | APA Corporation | $ | 58,260 | |||||
1,164 | Cheniere Energy, Inc. | 177,347 | ||||||
14,005 | Chevron Corporation | 2,203,686 | ||||||
6,780 | ConocoPhillips | 702,475 | ||||||
4,014 | Coterra Energy, Inc. | 101,554 | ||||||
3,173 | Devon Energy Corporation | 153,383 | ||||||
858 | Diamondback Energy, Inc. | 112,707 | ||||||
2,883 | EOG Resources, Inc. | 329,930 | ||||||
1,461 | EQT Corporation | 60,091 | ||||||
31,146 | Exxon Mobil Corporation | 3,340,408 | ||||||
1,323 | Hess Corporation | 179,862 | ||||||
10,625 | Kinder Morgan, Inc. | 182,963 | ||||||
3,691 | Marathon Oil Corporation | 84,967 | ||||||
2,667 | Marathon Petroleum Corporation | 310,972 | ||||||
4,614 | Occidental Petroleum Corporation | 271,303 | ||||||
2,158 | ONEOK, Inc. | 133,192 | ||||||
2,413 | Phillips 66 | 230,152 | ||||||
1,176 | Pioneer Natural Resources Company | 243,644 | ||||||
1,006 | Targa Resources Corporation | 76,557 | ||||||
2,013 | Valero Energy Corporation | 236,125 | ||||||
6,265 | Williams Companies, Inc. (The) | 204,427 | ||||||
9,394,005 | ||||||||
OIL & GAS SERVICES & EQUIPMENT - 0.2% | ||||||||
4,856 | Baker Hughes Company | 153,498 | ||||||
4,290 | Halliburton Company | 141,527 | ||||||
7,011 | Schlumberger Ltd. | 344,381 | ||||||
639,406 | ||||||||
REAL ESTATE SERVICES - 0.0%(b) | ||||||||
1,493 | CBRE Group, Inc., Class A(a) | 120,500 | ||||||
RENEWABLE ENERGY - 0.1% | ||||||||
709 | Enphase Energy, Inc.(a) | 118,744 | ||||||
426 | First Solar, Inc.(a) | 80,978 | ||||||
199,722 |
See accompanying notes to financial statements.
25
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
RESIDENTIAL REIT - 0.3% | ||||||||
735 | AvalonBay Communities, Inc. | $ | 139,113 | |||||
641 | Camden Property Trust | 69,786 | ||||||
2,030 | Equity Residential | 133,919 | ||||||
342 | Essex Property Trust, Inc. | 80,131 | ||||||
3,181 | Invitation Homes, Inc. | 109,426 | ||||||
627 | Mid-America Apartment Communities, Inc. | 95,216 | ||||||
668 | Sun Communities, Inc. | 87,147 | ||||||
1,852 | UDR, Inc. | 79,562 | ||||||
794,300 | ||||||||
RETAIL - CONSUMER STAPLES - 1.2% | ||||||||
2,312 | Costco Wholesale Corporation | 1,244,734 | ||||||
1,211 | Dollar General Corporation | 205,604 | ||||||
1,052 | Dollar Tree, Inc.(a) | 150,962 | ||||||
3,343 | Kroger Company (The) | 157,121 | ||||||
2,339 | Target Corporation | 308,514 | ||||||
3,499 | Walgreens Boots Alliance, Inc. | 99,687 | ||||||
7,563 | Walmart, Inc. | 1,188,752 | ||||||
3,355,374 | ||||||||
RETAIL - DISCRETIONARY - 1.7% | ||||||||
101 | AutoZone, Inc.(a) | 251,829 | ||||||
1,213 | Best Buy Company, Inc. | 99,405 | ||||||
750 | Genuine Parts Company | 126,923 | ||||||
7,820 | Home Depot, Inc. (The) | 2,429,204 | ||||||
3,250 | Lowe’s Companies, Inc. | 733,525 | ||||||
335 | O’Reilly Automotive, Inc.(a) | 320,026 | ||||||
1,708 | Ross Stores, Inc. | 191,518 | ||||||
5,921 | TJX Companies, Inc. (The) | 502,042 | ||||||
576 | Tractor Supply Company | 127,354 | ||||||
247 | Ulta Beauty, Inc.(a) | 116,237 | ||||||
4,898,063 | ||||||||
RETAIL REIT - 0.1% | ||||||||
3,492 | Kimco Realty Corporation | 68,862 | ||||||
2,991 | Realty Income Corporation | 178,832 |
See accompanying notes to financial statements.
26
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
RETAIL REIT - 0.1% (Continued) | ||||||||
1,632 | Simon Property Group, Inc. | $ | 188,463 | |||||
436,157 | ||||||||
SELF-STORAGE REIT - 0.1% | ||||||||
655 | Extra Space Storage, Inc. | 97,497 | ||||||
777 | Public Storage | 226,791 | ||||||
324,288 | ||||||||
SEMICONDUCTORS - 5.3% | ||||||||
8,331 | Advanced Micro Devices, Inc.(a) | 948,984 | ||||||
2,715 | Analog Devices, Inc. | 528,909 | ||||||
4,564 | Applied Materials, Inc. | 659,681 | ||||||
2,016 | Broadcom, Inc. | 1,748,739 | ||||||
644 | Entegris, Inc. | 71,368 | ||||||
21,799 | Intel Corporation | 728,959 | ||||||
782 | KLA Corporation | 379,286 | ||||||
698 | Lam Research Corporation | 448,716 | ||||||
4,392 | Marvell Technology, Inc. | 262,554 | ||||||
2,737 | Microchip Technology, Inc. | 245,208 | ||||||
5,816 | Micron Technology, Inc. | 367,048 | ||||||
251 | Monolithic Power Systems, Inc. | 135,598 | ||||||
16,570 | NVIDIA Corporation | 7,009,440 | ||||||
2,296 | ON Semiconductor Corporation(a) | 217,156 | ||||||
5,654 | QUALCOMM, Inc. | 673,052 | ||||||
739 | Skyworks Solutions, Inc. | 81,800 | ||||||
787 | Teradyne, Inc. | 87,617 | ||||||
4,911 | Texas Instruments, Inc. | 884,078 | ||||||
15,478,193 | ||||||||
SOFTWARE - 9.5% | ||||||||
2,391 | Adobe, Inc.(a) | 1,169,176 | ||||||
849 | Akamai Technologies, Inc.(a) | 76,300 | ||||||
494 | ANSYS, Inc.(a) | 163,153 | ||||||
666 | Atlassian Corp plc, CLASS A(a) | 111,761 | ||||||
1,131 | Autodesk, Inc.(a) | 231,414 | ||||||
1,292 | Cadence Design Systems, Inc.(a) | 303,000 | ||||||
1,137 | Cloudflare, Inc., Class A(a) | 74,326 |
See accompanying notes to financial statements.
27
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
SOFTWARE - 9.5% (Continued) | ||||||||
991 | Crowdstrike Holdings, Inc., Class A(a) | $ | 145,548 | |||||
1,445 | Datadog, Inc., Class A(a) | 142,159 | ||||||
3,592 | Fortinet, Inc.(a) | 271,519 | ||||||
2,240 | Gen Digital, Inc. | 41,552 | ||||||
235 | HubSpot, Inc.(a) | 125,041 | ||||||
1,412 | Intuit, Inc. | 646,964 | ||||||
54,810 | Microsoft Corporation | 18,664,998 | ||||||
377 | MongoDB, Inc.(a) | 154,943 | ||||||
8,061 | Oracle Corporation | 959,984 | ||||||
10,907 | Palantir Technologies, Inc., Class A(a) | 167,204 | ||||||
1,406 | Palo Alto Networks, Inc.(a) | 359,247 | ||||||
237 | Paycom Software, Inc. | 76,134 | ||||||
574 | PTC, Inc.(a) | 81,680 | ||||||
564 | Roper Technologies, Inc. | 271,171 | ||||||
4,999 | Salesforce, Inc.(a) | 1,056,089 | ||||||
939 | ServiceNow, Inc.(a) | 527,690 | ||||||
1,434 | Snowflake, Inc.(a) | 252,355 | ||||||
845 | Splunk, Inc.(a) | 89,646 | ||||||
886 | SS&C Technologies Holdings, Inc. | 53,692 | ||||||
740 | Synopsys, Inc.(a) | 322,203 | ||||||
945 | Twilio, Inc., Class A(a) | 60,121 | ||||||
242 | Tyler Technologies, Inc.(a) | 100,786 | ||||||
772 | Veeva Systems, Inc., Class A(a) | 152,648 | ||||||
1,205 | VMware, Inc., Class A(a) | 173,146 | ||||||
1,051 | Workday, Inc., Class A(a) | 237,410 | ||||||
1,108 | Zoom Video Communications, Inc., Class A(a) | 75,211 | ||||||
27,338,271 | ||||||||
SPECIALTY FINANCE - 0.3% | ||||||||
3,060 | American Express Company | 533,052 | ||||||
2,082 | Capital One Financial Corporation | 227,708 | ||||||
1,525 | Discover Financial Services | 178,196 | ||||||
2,356 | Synchrony Financial | 79,916 | ||||||
1,018,872 |
See accompanying notes to financial statements.
28
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
SPECIALTY REITS - 0.0%(b) | ||||||||
1,428 | Iron Mountain, Inc. | $ | 81,139 | |||||
STEEL - 0.1% | ||||||||
1,306 | Nucor Corporation | 214,158 | ||||||
922 | Steel Dynamics, Inc. | 100,433 | ||||||
314,591 | ||||||||
TECHNOLOGY HARDWARE - 8.7% | ||||||||
117,288 | Apple, Inc. | 22,750,354 | ||||||
1,307 | Arista Networks, Inc.(a) | 211,812 | ||||||
20,207 | Cisco Systems, Inc. | 1,045,510 | ||||||
4,177 | Corning, Inc. | 146,362 | ||||||
781 | Garmin Ltd. | 81,450 | ||||||
7,847 | Hewlett Packard Enterprise Company | 131,830 | ||||||
5,498 | HP, Inc. | 168,844 | ||||||
866 | Motorola Solutions, Inc. | 253,980 | ||||||
1,147 | NetApp, Inc. | 87,631 | ||||||
856 | Seagate Technology Holdings plc | 52,961 | ||||||
1,346 | Western Digital Corporation(a) | 51,054 | ||||||
251 | Zebra Technologies Corporation, Class A(a) | 74,253 | ||||||
25,056,041 | ||||||||
TECHNOLOGY SERVICES - 4.1% | ||||||||
3,418 | Accenture PLC, Class A | 1,054,726 | ||||||
2,238 | Automatic Data Processing, Inc. | 491,890 | ||||||
2,827 | Block, Inc., Class A(a) | 188,193 | ||||||
793 | Booz Allen Hamilton Holding Corporation | 88,499 | ||||||
515 | Broadridge Financial Solutions, Inc. | 85,299 | ||||||
626 | CDW Corporation | 114,871 | ||||||
2,860 | Cognizant Technology Solutions Corporation, Class A | 186,701 | ||||||
2,236 | CoStar Group, Inc.(a) | 199,004 | ||||||
285 | EPAM Systems, Inc.(a) | 64,054 | ||||||
571 | Equifax, Inc. | 134,356 | ||||||
173 | FactSet Research Systems, Inc. | 69,312 | ||||||
3,254 | Fidelity National Information Services, Inc. | 177,994 | ||||||
3,142 | Fiserv, Inc.(a) | 396,363 |
See accompanying notes to financial statements.
29
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
TECHNOLOGY SERVICES - 4.1% (Continued) | ||||||||
388 | FleetCor Technologies, Inc.(a) | $ | 97,419 | |||||
373 | Gartner, Inc.(a) | 130,666 | ||||||
1,381 | Global Payments, Inc. | 136,056 | ||||||
4,746 | International Business Machines Corporation | 635,062 | ||||||
413 | Jack Henry & Associates, Inc. | 69,107 | ||||||
775 | Leidos Holdings, Inc. | 68,572 | ||||||
6,458 | Mastercard, Inc., Class A | 2,539,932 | ||||||
793 | Moody’s Corporation | 275,742 | ||||||
393 | MSCI, Inc. | 184,431 | ||||||
1,695 | Paychex, Inc. | 189,620 | ||||||
6,182 | PayPal Holdings, Inc.(a) | 412,525 | ||||||
1,724 | S&P Global, Inc. | 691,134 | ||||||
1,134 | TransUnion | 88,826 | ||||||
822 | Verisk Analytics, Inc. | 185,797 | ||||||
12,157 | Visa, Inc., Class A | 2,887,045 | ||||||
11,843,196 | ||||||||
TELECOMMUNICATIONS - 0.7% | ||||||||
38,084 | AT&T, Inc. | 607,440 | ||||||
3,250 | T-Mobile US, Inc.(a) | 451,425 | ||||||
22,492 | Verizon Communications, Inc. | 836,477 | ||||||
1,895,342 | ||||||||
TIMBER REIT - 0.0%(b) | ||||||||
3,993 | Weyerhaeuser Company | 133,805 | ||||||
TOBACCO & CANNABIS - 0.4% | ||||||||
9,492 | Altria Group, Inc. | 429,988 | ||||||
8,035 | Philip Morris International, Inc. | 784,376 | ||||||
1,214,364 | ||||||||
TRANSPORTATION & LOGISTICS - 1.1% | ||||||||
532 | CH Robinson Worldwide, Inc. | 50,194 | ||||||
11,697 | CSX Corporation | 398,868 | ||||||
3,283 | Delta Air Lines, Inc.(a) | 156,074 | ||||||
933 | Expeditors International of Washington, Inc. | 113,014 | ||||||
1,206 | FedEx Corporation | 298,967 |
See accompanying notes to financial statements.
30
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Fair Value | |||||||
COMMON STOCKS — 79.2% (Continued) | ||||||||
TRANSPORTATION & LOGISTICS - 1.1% (Continued) | ||||||||
398 | JB Hunt Transport Services, Inc. | $ | 72,050 | |||||
1,281 | Norfolk Southern Corporation | 290,480 | ||||||
471 | Old Dominion Freight Line, Inc. | 174,152 | ||||||
2,748 | Southwest Airlines Company | 99,505 | ||||||
3,334 | Union Pacific Corporation | 682,203 | ||||||
1,572 | United Airlines Holdings, Inc.(a) | 86,256 | ||||||
3,985 | United Parcel Service, Inc., Class B | 714,311 | ||||||
3,136,074 | ||||||||
TRANSPORTATION EQUIPMENT - 0.2% | ||||||||
719 | Cummins, Inc. | 176,270 | ||||||
2,627 | PACCAR, Inc. | 219,749 | ||||||
981 | Westinghouse Air Brake Technologies Corporation | 107,586 | ||||||
503,605 | ||||||||
WHOLESALE - CONSUMER STAPLES - 0.2% | ||||||||
2,894 | Archer-Daniels-Midland Company | 218,671 | ||||||
757 | Bunge Ltd. | 71,423 | ||||||
2,577 | Sysco Corporation | 191,213 | ||||||
481,307 | ||||||||
WHOLESALE - DISCRETIONARY - 0.1% | ||||||||
2,382 | Copart, Inc.(a) | 217,263 | ||||||
1,346 | LKQ Corporation | 78,431 | ||||||
208 | Pool Corporation | 77,925 | ||||||
373,619 | ||||||||
TOTAL COMMON STOCKS (Cost $200,374,507) | 229,014,367 | |||||||
EXCHANGE-TRADED FUNDS - 20.1% | ||||||||
EQUITY - 20.1% | ||||||||
3,989 | Direxion Daily S&P 500 Bull 2X Shares | 369,142 | ||||||
641,799 | Direxion Daily S&P 500 Bull 3X | 57,749,074 | ||||||
TOTAL EXCHANGE-TRADED FUNDS (Cost $49,557,106) | 58,118,216 |
See accompanying notes to financial statements.
31
HCM DEFENDER 500 INDEX ETF |
SCHEDULE OF INVESTMENTS (Continued) |
June 30, 2023 |
Shares | Expiration Date | Exercise Price | Fair Value | |||||||||||
RIGHT - 0.0%(b) | ||||||||||||||
MEDICAL EQUIPMENT & DEVICES – 0.0%(b) | ||||||||||||||
143 | ABIOMED, Inc. - CVR(a) (c) (Cost $0) | 12/31/2029 | $ | 35 | $ | — | ||||||||
TOTAL INVESTMENTS - 99.3% (Cost $249,931,613) | $ | 287,132,583 | ||||||||||||
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.7% | 1,910,168 | |||||||||||||
NET ASSETS - 100.0% | $ | 289,042,751 |
CVR | - Contingent Value Right |
ETF | - Exchange-Traded Fund |
LTD | - Limited Company |
MSCI | - Morgan Stanley Capital International |
NV | - Naamioze Vennootschap |
PLC | - Public Limited Company |
REIT | - Real Estate Investment Trust |
(a) | - Non-income producing security. |
(b) | - Percentage rounds to less than 0.1%. |
(c) | - Illiquid security. The total fair value of these securities as of June 30, 2023 was $0, representing 0.0% of net assets. |
See accompanying notes to financial statements.
32
The HCM ETFs |
STATEMENTS OF ASSETS AND LIABILITIES |
June 30, 2023 |
HCM Defender 100 | HCM Defender 500 | |||||||
Index ETF | Index ETF | |||||||
ASSETS | ||||||||
Investment securities: | ||||||||
At cost | $ | 252,420,036 | $ | 249,931,613 | ||||
At fair value | $ | 324,152,309 | $ | 287,132,583 | ||||
Cash and cash equivalents | 4,106,733 | 2,017,597 | ||||||
Dividends and interest receivable | 47,179 | 133,106 | ||||||
Prepaid expenses | 3,500 | 3,369 | ||||||
TOTAL ASSETS | 328,309,721 | 289,286,655 | ||||||
LIABILITIES | ||||||||
Investment advisory fees payable | 196,180 | 169,163 | ||||||
Audit fees payable | 20,361 | 20,435 | ||||||
Custody fees payable | 17,159 | 37,516 | ||||||
Payable to related parties | 11,910 | 11,829 | ||||||
Accrued expenses and other liabilities | 6,997 | 4,961 | ||||||
TOTAL LIABILITIES | 252,607 | 243,904 | ||||||
NET ASSETS | $ | 328,057,114 | $ | 289,042,751 | ||||
Net Assets Consist Of: | ||||||||
Paid in capital | $ | 353,828,136 | $ | 326,809,767 | ||||
Accumulated deficit | (25,771,022 | ) | (37,767,016 | ) | ||||
NET ASSETS | $ | 328,057,114 | $ | 289,042,751 | ||||
Net Asset Value Per Share: | ||||||||
Net Assets | $ | 328,057,114 | $ | 289,042,751 | ||||
Shares of beneficial interest outstanding ($0 par value, unlimited shares authorized) | 6,950,000 | 7,350,000 | ||||||
Net asset value, offering and redemption price per share (Net Assets ÷ Shares Outstanding) | $ | 47.20 | $ | 39.33 |
See accompanying notes to financial statements.
33
The HCM ETFs |
STATEMENTS OF OPERATIONS |
For the Year Ended June 30, 2023 |
HCM Defender 100 | HCM Defender 500 | |||||||
Index ETF | Index ETF | |||||||
INVESTMENT INCOME | ||||||||
Dividends (net of tax withholding of $1,871 and $1,425, respectively) | $ | 1,426,463 | $ | 2,445,189 | ||||
Interest | 2,429,665 | 2,442,507 | ||||||
TOTAL INVESTMENT INCOME | 3,856,128 | 4,887,696 | ||||||
EXPENSES | ||||||||
Investment advisory fees | 1,980,948 | 1,935,198 | ||||||
Administrative services | 138,870 | 148,445 | ||||||
Custodian fees | 38,951 | 101,898 | ||||||
Printing and postage expenses | 23,378 | 23,981 | ||||||
Audit fees | 21,905 | 22,005 | ||||||
Professional fees | 21,027 | 15,080 | ||||||
Trustees fees and expenses | 15,484 | 15,484 | ||||||
Legal fees | 15,263 | 15,263 | ||||||
Transfer agent fees | 12,233 | 12,513 | ||||||
Insurance expense | 5,001 | 5,000 | ||||||
Other expenses | 18,294 | 15,118 | ||||||
TOTAL EXPENSES | 2,291,354 | 2,309,985 | ||||||
NET INVESTMENT INCOME | 1,564,774 | 2,577,711 | ||||||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||
Net realized gain (loss) on: | ||||||||
In-kind redemptions | 1,724,066 | 642,838 | ||||||
Net realized loss on investments | (6,448,514 | ) | (6,423,303 | ) | ||||
Foreign currency transactions | (36 | ) | (193 | ) | ||||
(4,724,484 | ) | (5,780,658 | ) | |||||
Net change in unrealized appreciation on investments | 71,732,273 | 37,200,970 | ||||||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 67,007,789 | 31,420,312 | ||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 68,572,563 | $ | 33,998,023 |
See accompanying notes to financial statements.
34
HCM Defender 100 Index ETF |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended | Year Ended | |||||||
June 30, 2023 | June 30, 2022 | |||||||
FROM OPERATIONS | ||||||||
Net investment income (loss) | $ | 1,564,774 | $ | (1,147,736 | ) | |||
Net realized loss on investments, in-kind redemptions, and foreign currency transactions | (4,724,484 | ) | (27,279,195 | ) | ||||
Net change in unrealized appreciation (depreciation) on investments | 71,732,273 | (69,663,592 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 68,572,563 | (98,090,523 | ) | |||||
FROM SHARES OF BENEFICIAL INTEREST | ||||||||
Proceeds from shares sold | 44,605,111 | 362,188,640 | ||||||
Cost of shares redeemed | (36,340,067 | ) | (221,311,794 | ) | ||||
Net increase in net assets resulting from shares of beneficial interest | 8,265,044 | 140,876,846 | ||||||
TOTAL INCREASE IN NET ASSETS | 76,837,607 | 42,786,323 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 251,219,507 | 208,433,184 | ||||||
End of Year | $ | 328,057,114 | $ | 251,219,507 | ||||
SHARE ACTIVITY | ||||||||
Shares Sold | 1,100,000 | 7,250,000 | ||||||
Shares Redeemed | (950,000 | ) | (4,800,000 | ) | ||||
Net increase in shares of beneficial interest outstanding | 150,000 | 2,450,000 |
See accompanying notes to financial statements.
35
HCM Defender 500 Index ETF |
STATEMENTS OF CHANGES IN NET ASSETS |
Year Ended | Year Ended | |||||||
June 30, 2023 | June 30, 2022 | |||||||
FROM OPERATIONS | ||||||||
Net investment income | $ | 2,577,711 | $ | 183,782 | ||||
Net realized gain (loss) on investments, in-kind redemptions, and foreign currency transactions | (5,780,658 | ) | 90,055 | |||||
Net change in unrealized appreciation (depreciation) on investments | 37,200,970 | (57,551,430 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 33,998,023 | (57,277,593 | ) | |||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From return of capital | — | (19,389 | ) | |||||
Total distributions paid | (1,454,080 | ) | (458,426 | ) | ||||
Net decrease in net assets resulting from distributions to shareholders | (1,454,080 | ) | (477,815 | ) | ||||
FROM SHARES OF BENEFICIAL INTEREST | ||||||||
Proceeds from shares sold | 41,588,392 | 357,551,600 | ||||||
Cost of shares redeemed | (45,294,648 | ) | (235,324,196 | ) | ||||
Net increase (decrease) in net assets resulting from shares of beneficial interest | (3,706,256 | ) | 122,227,404 | |||||
TOTAL INCREASE IN NET ASSETS | 28,837,687 | 64,471,996 | ||||||
NET ASSETS | ||||||||
Beginning of Year | 260,205,064 | 195,733,068 | ||||||
End of Year | $ | 289,042,751 | $ | 260,205,064 | ||||
SHARE ACTIVITY | ||||||||
Shares Sold | 1,150,000 | 8,450,000 | ||||||
Shares Redeemed | (1,300,000 | ) | (5,850,000 | ) | ||||
Net increase (decrease) in shares of beneficial interest outstanding | (150,000 | ) | 2,600,000 |
See accompanying notes to financial statements.
36
HCM Defender 100 Index ETF |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Period |
Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2021 | June 30, 2020 (1) | |||||||||||||
Net asset value, beginning of period | $ | 36.94 | $ | 47.92 | $ | 30.21 | $ | 25.00 | ||||||||
Activity from investment operations: | ||||||||||||||||
Net investment income (loss) (2) | 0.23 | (0.18 | ) | (0.10 | ) | (0.04 | ) | |||||||||
Net realized and unrealized gain (loss) on investments | 10.03 | (10.80 | ) | 17.81 | 5.31 | |||||||||||
Total from investment operations | 10.26 | (10.98 | ) | 17.71 | 5.27 | |||||||||||
Less distributions from: | ||||||||||||||||
Net investment income | — | — | — | (0.00 | ) (5) | |||||||||||
Net realized gains | — | — | — | (0.06 | ) | |||||||||||
Total distributions | — | — | — | (0.06 | ) | |||||||||||
Net asset value, end of period | $ | 47.20 | $ | 36.94 | $ | 47.92 | $ | 30.21 | ||||||||
Market price, end of period | $ | 47.23 | $ | 36.96 | $ | 47.97 | $ | 30.25 | ||||||||
Total return (4) | 27.77 | % | (22.91 | )% | 58.62 | % | 21.11 | % (8) | ||||||||
Market price total return | 27.79 | % | (22.95 | )% | 58.58 | % | 21.27 | % | ||||||||
Net assets, at end of period (000s) | $ | 328,057 | $ | 251,220 | $ | 208,433 | $ | 101,197 | ||||||||
Ratio of net expenses to average net assets (6)(7) | 0.89 | % | 0.89 | % | 0.91 | % | 1.02 | % | ||||||||
Ratio of net investment income (loss) to average net assets (6)(7) | 0.61 | % | (0.37 | )% | (0.26 | )% | (0.18 | )% | ||||||||
Portfolio Turnover Rate (3) | 45 | % | 73 | % | 5 | % | 150 | % (8) |
(1) | The HCM Defender 100 Index ETF commenced operations on October 9, 2019. |
(2) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(3) | Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of the period. Distributions are assumed, for the purpose of this calculation, to be reinvested at the ex-dividend date net asset value per share on their respective payment dates. |
(5) | Represents less than $0.005. |
(6) | Does not include the expenses of other investment companies in which the Fund invests, as these expenses are included in the realized and unrealized gain/(loss) on investments. |
(7) | Annualized for periods less than one year. |
(8) | Not annualized. |
See accompanying notes to financial statements.
37
HCM Defender 500 Index ETF |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Period |
Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||
June 30, 2023 | June 30, 2022 | June 30, 2021 | June 30, 2020 (1) | |||||||||||||
Net asset value, beginning of period | $ | 34.69 | $ | 39.95 | $ | 25.15 | $ | 25.00 | ||||||||
Activity from investment operations: | ||||||||||||||||
Net investment income (2) | 0.36 | 0.03 | 0.09 | 0.07 | ||||||||||||
Net realized and unrealized gain (loss) on investments | 4.48 | (5.23 | ) | 14.79 | 0.13 | |||||||||||
Total from investment operations | 4.84 | (5.20 | ) | 14.88 | 0.20 | |||||||||||
Less distributions from: | ||||||||||||||||
Net investment income | (0.20 | ) | (0.06 | ) | (0.08 | ) | (0.05 | ) | ||||||||
Net realized gains | — | — | — | (0.00 | ) (5) | |||||||||||
Return of capital | — | (0.00 | ) (5) | — | (0.00 | ) (5) | ||||||||||
Total distributions | (0.20 | ) | (0.06 | ) | (0.08 | ) | (0.05 | ) | ||||||||
Net asset value, end of period | $ | 39.33 | $ | 34.69 | $ | 39.95 | $ | 25.15 | ||||||||
Market price, end of period | $ | 39.36 | $ | 34.70 | $ | 40.00 | $ | 25.12 | ||||||||
Total return (4) | 14.06 | % | (13.05 | )% | 59.23 | % | 0.78 | % (8) | ||||||||
Market price total return | 14.12 | % | (13.13 | )% | 59.62 | % | 0.66 | % | ||||||||
Net assets, at end of period (000s) | $ | 289,043 | $ | 260,205 | $ | 195,733 | $ | 91,806 | ||||||||
Ratio of net expenses to average net assets (6)(7) | 0.92 | % | 0.89 | % | 0.94 | % | 1.14 | % | ||||||||
Ratio of net investment income to average net assets (6)(7) | 1.03 | % | 0.06 | % | 0.27 | % | 0.40 | % | ||||||||
Portfolio Turnover Rate (3) | 59 | % | 73 | % | 3 | % | 128 | % (8) |
(1) | The HCM Defender 500 Index ETF commenced operations on October 9, 2019. |
(2) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(3) | Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. |
(4) | Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of the period. Distributions are assumed, for the purpose of this calculation, to be reinvested at the ex-dividend date net asset value per share on their respective payment dates. |
(5) | Represents less than $0.005. |
(6) | Does not include the expenses of other investment companies in which the Fund invests, as these expenses are included in the realized and unrealized gain/(loss) on investments. |
(7) | Annualized for periods less than one year. |
(8) | Not annualized. |
See accompanying notes to financial statements.
38
The HCM ETFs
NOTES TO FINANCIAL STATEMENTS
June 30, 2023
1. | ORGANIZATION |
The HCM Defender 100 Index ETF (“QQH”) and the HCM Defender 500 Index ETF (“LGH”) (each a “Fund” and collectively the “Funds”) are each diversified series of Northern Lights Fund Trust III (the “Trust”), a statutory trust organized under the laws of the State of Delaware on December 5, 2011, which is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. QQH’s investment objective seeks to provide investment results that correspond, before fees and expenses, generally to the performance of the HCM Defender 100 Index. LGH’s investment objective seeks to provide investment results that correspond, before fees and expenses, generally to the performance of the HCM Defender 500 Index. The investment objectives of each fund are non-fundamental. QQH and LGH commenced operations on October 9, 2019.
2. | SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of significant accounting policies followed by the Funds in preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates. The Funds are each investment companies and accordingly follow 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 listed on an exchange are valued at the last reported sale price at the close of the regular trading session of the primary exchange on the business day the value is being determined, or in the case of securities listed on NASDAQ, at the NASDAQ Official Closing Price (“NOCP”). In the absence of a sale, such securities shall be valued at the mean between the current bid and ask prices on the primary exchange on the day of valuation. 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”) based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type, indications as to values from dealers, and general market conditions or market quotations from a major market maker in the securities. Investments valued in currencies other than the U.S. dollar are converted to U.S. dollars using exchange rates obtained from pricing services. Short-term debt obligations having 60 days or less remaining until maturity, at time of purchase, may be valued at amortized cost, which approximates fair value. Investments in open-end investment companies are valued at net asset value.
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 the Adviser as its valuation designee (the “Valuation Designee”). The Board may also enlist third party consultants such a valuation specialist at a public accounting firm, valuation consultant or financial officer of a security issuer
39
The HCM ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2023
on an as-needed basis to assist the Valuation Designee in determining a security-specific fair value. The Board is responsible for reviewing and approving fair value methodologies utilized by the Valuation Designee, which approval shall be based upon whether the Valuation Designee followed the valuation procedures established by the Board.
Fair Valuation Process – Applicable investments are valued by the Valuation Designee pursuant to valuation procedures established by the Board. 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 Valuation Designee, the prices or values available do not represent the fair value of the instrument; factors which may cause the Valuation Designee to make such a judgment include, but are not limited to, the following: only a bid price or an ask price is available; the spread between bid and ask prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; and (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 investments, such as private investments or non-traded securities are valued 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 a current bid from such independent dealers or other independent parties is unavailable, the Valuation Designee shall determine, the fair value of such security using the following factors: (i) the type of security; (ii) the cost at date of purchase; (iii) the size and nature of the Fund’s holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.
Exchange Traded Funds (“ETFs”) – The Funds may invest in ETFs. ETFs are generally a type of fund bought and sold on a securities exchange. An ETF trades like common stock and represents a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they hold, 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.
40
The HCM ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2023
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 the Funds have 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 the Funds’ own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of value requires more judgment. Accordingly, the degree of judgment exercised in determining value is greatest for instruments categorized in Level 3.
The inputs used to measure 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, 2023 for the Funds’ assets measured at fair value:
HCM Defender 100 Index ETF | ||||||||||||||||
Assets* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 253,825,726 | $ | — | $ | — | $ | 253,825,726 | ||||||||
Exchange Traded Funds | 70,326,583 | — | — | 70,326,583 | ||||||||||||
Total | $ | 324,152,309 | $ | — | $ | — | $ | 324,152,309 |
HCM Defender 500 Index ETF | ||||||||||||||||
Assets* | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 229,014,367 | $ | — | $ | — | $ | 229,014,367 | ||||||||
Exchange Traded Funds | 58,118,216 | — | — | 58,118,216 | ||||||||||||
Right | — | — | — | — | ||||||||||||
Total | $ | 287,132,583 | $ | — | $ | — | $ | 287,132,583 |
The Funds did not hold any Level 2 or 3 securities during the period.
* | See Schedule of Investments for industry classification. |
41
The HCM ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2023
Security transactions and related income – Security transactions are accounted for on the trade date. Interest income is recognized on an accrual basis. 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.
Dividends and distributions to shareholders – Dividends from net investment income and net realized capital gains, if any, are declared and paid annually for each Fund. Dividends from net investment income and distributions from net realized gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These “book/tax” differences are considered either temporary (e.g., deferred losses) 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. Dividends and distributions to shareholders are recorded on the ex-dividend date.
Federal Income Taxes – The Funds intend to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of their taxable income to their shareholders. Therefore, no provision for federal income tax is required. 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 year June 30, 2020 through June 30, 2022, or expected to be taken in the Funds’ June 30, 2023 tax returns.
The Funds identify their major tax jurisdictions as U.S. federal, Ohio 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 (as determined by the Board), taking into consideration the nature and type of expense and the relative sizes of the Funds in the Trust.
Foreign Currency – The accounting records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency, and income receipts and expense payments are translated into U.S. dollars using the prevailing exchange rate at the London market close. Purchases and sales of securities are translated into U.S. dollars at the contractual currency rates established at the approximate time of the trade. Net realized gains and losses on foreign currency transactions represent net gains and losses from currency realized between the trade and settlement dates on securities transactions, gains and losses on the purchase and sale of foreign currencies and the difference between income accrued versus income received. The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities. For the year ended June 30, 2023, QQH and LGH had a realized loss of $36 and $193 on foreign currency transactions, respectively.
42
The HCM ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2023
Indemnification – The Trust indemnifies its officers and Trustees 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.
3. | INVESTMENT TRANSACTIONS |
For the year ended June 30, 2023, cost of purchases and proceeds from sales of portfolio securities (excluding in-kind transactions and short-term investments) for the Funds were as follows:
Ticker Symbol | Purchases | Sales | ||||||
QQH | $ | 328,109,785 | $ | 75,681,064 | ||||
LGH | $ | 346,386,297 | $ | 95,196,022 |
For the year ended June 30, 2023, cost of purchases and proceeds from sales of portfolio securities for in-kind transactions for the Funds were as follows:
Ticker Symbol | Purchases | Sales | ||||||
QQH | $ | 30,872,660 | $ | 26,156,898 | ||||
LGH | $ | 31,318,333 | $ | 26,772,534 |
4. | INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES |
Howard Capital Management, Inc. (the “Adviser”) serves as the Fund’s investment adviser pursuant to an Investment Advisory Agreement with the Trust (the “Advisory Agreement”). The Trust has entered into a Global Custody Agreement with Brown Brothers Harriman & Co. (the “Custodian”) to serve as custodian and to act as transfer and shareholder services agent. The Trust has also entered into an Underwriting Agreement with Northern Lights Distributors, LLC (the “Distributor”) to serve as the principal underwriter and distributor for the Trust.
Pursuant to the Advisory Agreement, the Adviser, 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 Adviser, each Fund pays the Adviser a fee, computed and accrued daily and paid monthly, at an annual rate of 0.77% of each Fund’s average daily net assets. For the year ended June 30, 2023, the Adviser earned $1,980,948, and $1,935,198 in advisory fees for QQH and LGH, respectively.
The Trust, with respect to the Funds, has adopted a distribution and service plan (“Plan”) pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Funds are authorized to pay distribution fees to the Distributor and other firms that provide distribution and shareholder services (“Service Providers”). If a Service Provider provides these services, the Funds may pay fees at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 under the 1940 Act.
43
The HCM ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2023
No distribution or service fees are currently paid by the Funds and there are no current plans to impose these fees. In the event Rule 12b-1 fees were charged, over time they would increase the cost of an investment in the Funds.
Ultimus Fund Solutions, LLC (“UFS”) – UFS provides administration and fund accounting services to the Trust. Pursuant to separate servicing agreements with UFS, the Funds pay UFS customary fees for providing administration and fund accounting services to the Funds. Certain officers of the Trust are also officers of UFS, 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 UFS 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 each Fund.
Blu Giant, LLC (“Blu Giant”) – Blu Giant, an affiliate of UFS, 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, Blu Giant receives customary fees from the Funds.
5. | CAPITAL SHARE TRANSACTIONS |
Shares are not individually redeemable and may be redeemed by the Funds at the net asset value (“NAV”) only in large blocks known as “Creation Units.” Shares are created and redeemed by the Funds only in Creation Unit size aggregations of 50,000 shares for both QQH and LGH. Only Authorized Participants or transactions done through an Authorized Participant are permitted to purchase or redeem Creation Units from the Funds. An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per share of the Funds on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the Authorized Participant or as a result of other market circumstances. In addition, the Funds may impose transaction fees on purchases and redemptions of Funds’ shares to cover the custodial and other costs incurred by the Funds in effecting trades. A fixed fee may be imposed on each creation and redemption transaction regardless of the number of Creation Units involved in the transaction (“Fixed Fee”). Purchases and redemptions of Creation Units for cash or involving cash-in-lieu are required to pay an additional variable charge to compensate the Funds and its ongoing shareholders for brokerage and market impact expenses relating to Creation Unit transactions (“Variable Charge,” and together with the Fixed Fee, the “Transaction Fees”).
44
The HCM ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2023
The Transaction Fees for the Fund’s are listed in the table below:
ETFs | Fee for In-Kind and Cash Purchases | Maximum Additional Variable Charge for Cash Purchases* |
HCM Defender 100 Index ETF | $500 | 2.00%* |
HCM Defender 500 Index ETF | $1,000 | 2.00%* |
* | The maximum Transaction Fee may be up to 2.00% of the amount invested. |
6. | DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL |
The tax character of distributions paid for the years ended June 30, 2023, and June 30, 2022, was as follows:
For the year ended June 30, 2023: | ||||||||||||||||||||
Ordinary | Long-Term | Return | Tax-Exempt | |||||||||||||||||
Portfolio | Income | Capital Gains | of Capital | Income | Total | |||||||||||||||
HCM Defender 100 Index ETF | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
HCM Defender 500 Index ETF | 1,454,080 | — | — | — | 1,454,080 | |||||||||||||||
For the year ended June 30, 2022: | ||||||||||||||||||||
Ordinary | Long-Term | Return | Tax-Exempt | |||||||||||||||||
Portfolio | Income | Capital Gains | of Capital | Income | Total | |||||||||||||||
HCM Defender 100 Index ETF | $ | — | $ | — | $ | — | $ | — | $ | — | ||||||||||
HCM Defender 500 Index ETF | 458,426 | — | 19,389 | — | 477,815 |
As of June 30, 2023, the components of accumulated earnings on a tax basis were as follows:
Undistributed | Undistributed | Undistributed | Post October Loss | Capital Loss | Other | Unrealized | Total | |||||||||||||||||||||||||
Ordinary | Ordinary | Long-Term | and | Carry | Book/Tax | Appreciation/ | Accumulated | |||||||||||||||||||||||||
Portfolio | Tax-Exempt Incom | Income | Capital Gains | Late Year Loss | Forwards | Differences | (Depreciation) | Earnings/(Deficits) | ||||||||||||||||||||||||
HCM Defender 100 Index ETF | $ | — | $ | 833,092 | $ | — | $ | (6,418,628 | ) | $ | (91,917,759 | ) | $ | — | 71,732,273 | $ | (25,771,022 | ) | ||||||||||||||
HCM Defender 500 Index ETF | — | 937,310 | — | — | (75,928,943 | ) | (147 | ) | 37,224,764 | (37,767,016 | ) |
The difference between book basis and tax basis undistributed net investment income/(loss), accumulated net realized gain/(loss), and unrealized appreciation/(depreciation) from investments is primarily attributable to the tax deferral of losses on wash sales, mark-to-market on passive foreign investment companies, and adjustments for real estate investment trusts Form 2439, and C-Corporation return of capital distributions.
Late year losses incurred after December 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The Funds incurred and elected to defer such late year losses as follows:
Late Year | ||||
Portfolio | Losses | |||
HCM Defender 100 Index ETF | $ | — | ||
HCM Defender 500 Index ETF | — |
45
The HCM ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
June 30, 2023
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 Funds incurred and elected to defer such capital losses as follows:
Post October | ||||
Portfolio | Losses | |||
HCM Defender 100 Index ETF | $ | 6,418,628 | ||
HCM Defender 500 Index ETF | — |
At June 30, 2023, the Funds had capital loss carry forwards for federal income tax purposes available to offset future capital gains, as follows:
Non-Expiring | ||||||||||||||||
Portfolio | Short-Term | Long-Term | Total | CLCF Utilized | ||||||||||||
HCM Defender 100 Index ETF | $ | 88,964,090 | $ | 2,953,669 | $ | 91,917,759 | $ | — | ||||||||
HCM Defender 500 Index ETF | 75,734,811 | 194,132 | 75,928,943 | — |
Permanent book and tax differences, primarily attributable to the tax adjustments for prior year tax returns resulted in reclassifications for the Funds for the fiscal year ended June 30, 2023, as follows:
Paid | ||||||||
In | Accumulated | |||||||
Portfolio | Capital | Earnings (Losses) | ||||||
HCM Defender 100 Index ETF | $ | 1,694,180 | $ | (1,694,180 | ) | |||
HCM Defender 500 Index ETF | 644,814 | (644,814 | ) |
7. | AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION – TAX BASIS |
Cost for | Tax Net | |||||||||||||||
Federal Tax | Unrealized | Unrealized | Unrealized | |||||||||||||
Portfolio | purposes | Appreciation | Depreciation | App/Dep | ||||||||||||
HCM Defender 100 Index ETF | $ | 252,420,036 | $ | 73,957,167 | $ | (2,224,894 | ) | $ | 71,732,273 | |||||||
HCM Defender 500 Index ETF | 249,907,819 | 42,690,042 | (5,465,278 | ) | 37,224,764 |
8. | 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.
46
Report of Independent Registered Public Accounting Firm
To the Shareholders of HCM Defender 100 Index ETF and HCM Defender 500 Index ETF and the Board of Trustees of Northern Lights Fund Trust III
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of HCM Defender 100 Index ETF and HCM Defender 500 Index ETF (collectively, the Funds), including the schedules of investments, as of June 30, 2023, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the related notes to the financial statements (collectively, the financial statements), and the financial highlights for each of the three years in the period then ended and the period from October 9, 2019 (commencement of operations) through June 30, 2020. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Funds as of June 30, 2023, the results of their operations for the year then ended, the changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended and for the period from October 9, 2019 (commencement of operations) through June 30, 2020, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements and financial highlights based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Funds in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2023, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
/s/ RSM US LLP
We have served as the auditor of one or more Howard Capital Management, Inc. investment companies since 2015.
Denver, Colorado
August 29, 2023
47
The HCM ETFs
EXPENSE EXAMPLES (Unaudited)
June 30, 2023
As a shareholder of the HCM ETFs, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund’s 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 from January 1, 2023 through June 30, 2023.
Actual Expenses
The “Actual” 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 in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The “Hypothetical” lines in the table below provide information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not any Fund’s 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 in the 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 Account | Ending | Expenses Paid During | Expenses Paid During | |||||
Value | Account Value | Period* | Period** | |||||
Actual | 1/1/2023 | 6/30/2023 | 1/1/2023 - 6/30/2023 | 1/1/2023 - 6/30/2023 | ||||
HCM Defender 100 Index ETF | $1,000.00 | $1,385.00 | $5.20 | 0.88% | ||||
HCM Defender 500 Index ETF | $1,000.00 | $1,178.30 | $4.86 | 0.90% | ||||
Beginning Account | Ending | Expenses Paid During | Expenses Paid During | |||||
Hypothetical | Value | Account Value | Period* | Period** | ||||
(5% return before expenses) | 1/1/2023 | 6/30/2023 | 1/1/2023 - 6/30/2023 | 1/1/2023 - 6/30/2023 | ||||
HCM Defender 100 Index ETF | $1,000.00 | $1,020.43 | $4.41 | 0.88% | ||||
HCM Defender 500 Index ETF | $1,000.00 | $1,020.33 | $4.51 | 0.90% |
* | Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio net of waived/reimbursed fees, multiplied by the number of days in the period (181) divided by the number of days in the fiscal year (365). |
“Hypothetical” expense information is presented on the basis of the full one-half year period to enable a comparison to other funds. It is based on assuming the same net expense ratio and average account value over the period, but is multiplied by 181/365 (to reflect the full half-year period).
** | Annualized. |
48
THE HCM ETFs
SUPPLEMENTAL INFORMATION (Unaudited)
June 30, 2023
Renewal of Advisory Agreement – HCM Defender 100 Index ETF and HCM Defender 500 Index ETF
In connection with a meeting held on February 22-23, 2023, the Board, including a majority of the Trustees who are not “interested persons” as that term is defined in the 1940 Act, discussed the renewal of the investment advisory agreement (the “Advisory Agreement”) between Howard Capital Management, Inc. (the “Adviser”) and the Trust, with respect to HCM Defender 100 Index ETF (“HCM 100”) and HCM Defender 500 Index ETF (“HCM 500”), (collectively, the “HCM ETFs”). In considering the renewal of the Advisory Agreement, the Board reviewed materials specifically relating to the HCM ETFs and the Advisory Agreement.
The Board discussed the Adviser’s presentation and materials. The Board relied upon the advice of independent legal counsel and its own business judgment in determining the material factors to be considered in evaluating the Advisory Agreement and the weight to be given to each such factor. The Board’s conclusions were based on an evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his or her conclusions with respect to the Advisory Agreement.
Nature, Extent and Quality of Services. The Board recognized that the Adviser had approximately $4.7 billion in total assets under management. The Board noted the broad investment experience and academic credentials of the Adviser’s investment personnel. The Board discussed how the Adviser utilized a proprietary quantitative model to determine when and in which market sectors the HCM ETFs should be invested and augmented its models with third-party research on interest rate direction, international markets and macroeconomic factors. The Board reviewed the Adviser’s risk management plan that employed stop losses, closely monitored the market during times of market growth, and used mathematical market ratios in an effort to avoid major market downturns. The Board noted that the Adviser had defined inputs in its proprietary model to ensure compliance with each HCM ETF’s investment limitations, and that trades were verified weekly by the Adviser’s chief compliance officer and two third-party compliance consultants. The Board observed that the Adviser selected broker/dealers on the basis of best execution.
HCM 100 & HCM 500—With respect to HCM 100 and HCM 500, the Board observed that the Adviser monitored bid/ask spreads, share price, NAV per share and volume during market hours. The Board discussed that the Adviser reviewed the quality of creation and redemption units each time shares are created or redeemed and that tracking error was monitored on a real time basis. The Board recognized that HCM 100 and HCM 500 were monitored using a checklist designed specifically for oversight of exchange traded funds.
The Board concluded that it could expect the Adviser to continue providing quality service to the HCM ETFs and their respective shareholders.
49
THE HCM ETFs
SUPPLEMENTAL INFORMATION (Unaudited)(Continued)
June 30, 2023
Performance.
HCM 100—The Board commented that HCM 100 earned a 3-star Morningstar rating and had underperformed its custom index, Morningstar category, and peer group over the 1-year period. The Board further observed that HCM 100 had underperformed its custom index and Morningstar category over the 3-year and since inception periods but outperformed its peer group over the same periods. The Board noted that whipsaws and overweighting of HCM 100’s positions to the technology sector had dramatically detracted from performance over the past year. The Board also noted that the Adviser attributed underperformance to HCM 100’s use of leveraged ETFs. The Board acknowledged that HCM 100’s Standard Deviation ranked in the top quartile among its peer group and Morningstar category over the 1-year period. After further discussion, the Board concluded that the Adviser’s performance was not unsatisfactory.
HCM 500—The Board noted that HCM 500 earned a 2-star Morningstar rating and had underperformed its peer group and Morningstar category across all periods. The Board further observed that HCM 500 underperformed its custom index over the 1-year period but outperformed its index over the 3-year and since inception periods. The Board noted that whipsaws and overweighting of HCM 500’s positions to the technology sector had dramatically penalized performance over the past year. The Board also noted that the Adviser attributed underperformance to the use of leveraged ETFs. The Board acknowledged that HCM 500’s Standard Deviation ranked in the top quartile among its peer group and Morningstar category over the 1-year period. After further discussion, the Board concluded that the Adviser’s performance was not unsatisfactory and should be afforded an opportunity to manage HCM 500 over a full market cycle.
Fees and Expenses.
HCM 100—The Board observed that the advisory fee and net expense ratio for HCM 100 was higher than its peer group and Morningstar category medians and averages, but below the highs of each. The Board considered the Adviser’s explanation for its fees which included that its proprietary model had been developed over many years through extensive research. The Board discussed that the Adviser believed the utilization of its proprietary model commanded a premium, and that most of the funds in its peer group were extremely large organizations with much greater economies of scale. The Board concluded that the advisory fee for HCM 100 was not unreasonable.
HCM 500—The Board observed that the advisory fee for HCM 500 was higher than its peer group and its Morningstar category medians and averages, but below the Morningstar category high of each. The Board further observed that the net expense ratio for HCM 500 was the highest of its peer group and higher than its Morningstar category median and average. The Board considered the Adviser’s explanation that its proprietary model had been developed over many years and believed that the utilization of its proprietary model commanded a premium. The Board also recalled the Adviser’s statement that most of the funds in its peer group were
50
THE HCM ETFs
SUPPLEMENTAL INFORMATION (Unaudited)(Continued)
June 30, 2023
extremely large organizations with much greater economies of scale. The Board concluded that the advisory fee for HCM 500 was not unreasonable.
Economies of Scale.
HCM 100 & HCM 500—The Board discussed the size of HCM 100 and HCM 500 and their prospects for growth and concluded that that neither had achieved meaningful economies that would necessitate the establishment of breakpoints. The Board noted the Adviser was willing to discuss the implementation of breakpoints if the Adviser was to achieve material economies of scale related to HCM 100’s or HCM 500’s operations. The Board acknowledged that the Adviser believed it may achieve economies of scale when each of HCM 100 and HCM 500 reached specified asset levels. The Board agreed to monitor and revisit this issue at a later time.
Profitability. The Board reviewed the Adviser’s profitability analysis in connection with its advisory services provided to each of the HCM ETFs and noted that the Adviser had earned a reasonable profit in connection with each HCM ETF. The Board acknowledged the rising cost of labor, additional regulatory and compliance requirements, and the Adviser’s continuing investments in technology and the HCM-BuyLine. The Board concluded that the Adviser’s profitability for each of the HCM ETFs was not excessive.
Conclusion. Having requested and reviewed such information from the Adviser as the Board believed to be reasonably necessary to evaluate the terms of the Advisory Agreement, and as assisted by the advice of independent counsel, the Board concluded that renewal of the Advisory Agreement was in the best interests of the HCM ETFs and their respective shareholders.
* | Due to timing of the contract renewal schedule, these deliberations may or may not relate to the current performance results of the HCM ETFs. |
51
The HCM ETFs
SUPPLEMENTAL INFORMATION (Unaudited)
June 30, 2023
The Trustees and officers of the Trust, together with information as to their principal business occupations during the past five years and other information, are shown below. Unless otherwise noted, the address of each Trustee and officer is 225 Pictoria Drive, Suite 450, Cincinnati, Ohio 45246.
Independent Trustees
Name, Address, Year of Birth | Position(s) Held with Registrant | Length of Service and Term | Principal Occupation(s) During Past 5 Years | Number of Funds Overseen In The Fund Complex* | Other Directorships Held During Past 5 Years** |
Patricia Luscombe 1961 | Trustee | Since January 2015, Indefinite | Managing Director of the Valuations and Opinions Group, Lincoln International LLC (since August 2007). | 6 | Northern Lights Fund Trust III (for series not affiliated with the Fund since 2015); Monetta Mutual Funds (since November 2015). |
John V. Palancia 1954 | Trustee, Chairman | Trustee, since February 2012, Indefinite; Chairman of the Board since May 2014. | Retired (since 2011); formerly, Director of Global Futures Operations Control, Merrill Lynch, Pierce, Fenner & Smith, Inc. (1975-2011). | 6 | Northern Lights Fund Trust III (for series not affiliated with the Fund since 2012); Northern Lights Fund Trust (since 2011); Northern Lights Variable Trust (since 2011); Alternative Strategies Fund (since 2012). |
Mark H. Taylor 1964 | Trustee, Chairman of the Audit Committee | Since February 2012, Indefinite | PhD (Accounting), CPA; Professor and Director, Lynn Pippenger School of Accountancy, Muma College of Business, University of South Florida (2019 – present); Professor and Department of Accountancy Chair, Case Western Reserve University (2009-2019); President, American Accounting Association (AAA) commencing August 2022 (President- Elect 2022-2023, President 2023-2024; Past President 2024-2025). AAA Vice President-Finance (2017-2020); President, Auditing Section of the AAA; Member, AICPA Auditing Standards Board (2009-2012); Academic Fellow, Office of the Chief Accountant, United States Securities Exchange Commission (2005-2006); Center for Audit Quality research grants (2014, 2012). | 6 | Northern Lights Fund Trust III (for series not affiliated with the Fund since 2012); Northern Lights Fund Trust (since 2007); Northern Lights Variable Trust (since 2007); Alternative Strategies Fund (since June 2010). |
Jeffery D. Young 1956 | Trustee | Since January 2015, Indefinite | Co-owner and Vice President, Latin America Agriculture Development Corp. (since May 2015); President, Celeritas Rail Consulting (since June 2014); Asst. Vice President - Transportation Systems, Union Pacific Railroad Company (June 1976 to April 2014). | 6 | Northern Lights Fund Trust III (for series not affiliated with the Fund since 2015). |
* | As of June 30, 2023, the Trust was comprised of 29 active portfolios managed by 14 unaffiliated investment advisers. The term “Fund Complex” applies only to the Funds. The Funds do not hold themselves out as related to any other series within the Trust for investment purposes, nor do they share the same investment adviser with any other series. |
** | Only includes directorships held within the past 5 years in a company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or subject to the requirements of Section 15(d) of the Securities Exchange Act of 1934, or any company registered as an investment company under the 1940 Act. |
6/30/23-NLFT III-v3
52
The HCM ETFs
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
June 30, 2023
Officers of the Trust
Name, Address, Year of Birth | Position(s) Held with Registrant | Length of Service and Term | Principal Occupation(s) During Past 5 Years |
Brian Curley 1970 | President | Since May 2023, indefinite | Vice President, Ultimus Fund Solutions, LLC (since 2020); Vice President, Gemini Fund Services, LLC (2015-2020). |
Timothy Burdick 1986 | Vice President | Since May 2023, indefinite | Vice President and Senior Managing Counsel, Ultimus Fund Solutions, LLC (2023 – present); Vice President and Managing Counsel, Ultimus Fund Solutions, LLC (2022 – 2023); Assistant Vice President and Counsel, Ultimus Fund Solutions, LLC (2019 – 2022). |
Richard Gleason 1977 | Treasurer | Since May 2023, indefinite | Assistant Vice President, Ultimus Fund Solutions, LLC (since 2020); Assistant Vice President, Gemini Fund Services, LLC (2015-2020). |
Viktoriya Pallino 1995 | Secretary | Since August 2022, indefinite | Senior Legal Administrator, Ultimus Fund Solutions, LLC (since 2023); Legal Administrator II, Ultimus Fund Solutions, LLC (2021-2023); Legal Administrator I, Ultimus Fund Solutions, LLC (2019-2021); Legal Administration Associate, Gemini Fund Services, LLC (2017-2019). |
William Kimme 1962 | Chief Compliance Officer | Since February 2012, indefinite | Senior Compliance Officer of Northern Lights Compliance Services, LLC (since 2011). |
The Fund’s Statement of Additional Information includes additional information about the Trustees and is available free of charge, upon request, by calling toll-free at 1-855-969-8464.
6/30/23-NLFT III-v3
53
The HCM ETFs
SUPPLEMENTAL INFORMATION (Unaudited)
June 30, 2023
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 1940 Act. The program is reasonably designed to assess and manage the Funds’ liquidity risk, taking into consideration, among other factors, each Fund’s 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 year ended June 30, 2023, 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.
54
PRIVACY NOTICE | ||||
Rev. June 2021 | ||||
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
■ Assets
■ Retirement Assets
■ Transaction History
■ Checking Account Information | ■ Purchase History
■ Account Balances
■ Account Transactions
■ Wire Transfer Instructions
| |||
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 don’t share | ||
For joint marketing with other financial companies | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your transactions and experiences | No | We don’t share | ||
For our affiliates’ everyday business purposes – information about your creditworthiness | No | We don’t share | ||
For nonaffiliates to market to you | No | We don’t share | ||
Questions? | Call (631) 490-4300 |
35
Who we are | |
Who is providing this notice? | Northern Lights Fund Trust III
|
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
■ Provide account information
■ Give us your contact information
■ Make deposits or withdrawals from your account
■ Make a wire transfer
■ Tell us where to send the money
■ Tells us who receives the money
■ Show your government-issued ID
■ Show your driver’s license
We also collect your personal information from other companies. |
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. |
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 doesn’t jointly market. |
36
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 used to determine how to vote proxies is available without charge, upon request, by calling 1-888-985-9830 or by referring to the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Funds file a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to their 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.
INVESTMENT ADVISER |
Howard Capital Management, Inc. |
1145 Hembree Road |
Roswell, Georgia 30076 |
ADMINISTRATOR |
Ultimus Fund Solutions, LLC |
225 Pictoria Drive, Suite 450 |
Cincinnati, Ohio 45246 |
HCMETFS-AR23 |
Item 2. Code of Ethics.
(a) As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.
(b) For purposes of this item, “code of ethics” means written standards that are reasonably designed to deter wrongdoing and to promote:
(1) | Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships; |
(2) | Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant; |
(3) Compliance with applicable governmental laws, rules, and regulations;
(4) | The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and |
(5) Accountability for adherence to the code.
(c) Amendments: During the period covered by the report, there have not been any amendments to the provisions of the code of ethics.
(d) Waivers: During the period covered by the report, the registrant has not granted any express or implicit waivers from the provisions of the code of ethics.
(e) The Code of Ethics is not posted on Registrant’ website.
(f) A copy of the Code of Ethics is attached as an exhibit.
Item 3. Audit Committee Financial Expert.
(a)(1)ii The Registrant’s board of trustees has determined that Mark H. Taylor is an audit committee financial expert, as defined in Item 3 of Form N-CSR. Mr. Taylor is independent for purposes of this Item 3.
(a)(2) Not applicable.
(a)(3) In this regard, no member of the audit committee was identified as having all of the required technical attributes identified in instruction 2 (b) to item 3 of Form N-CSR to qualify as an “audit committee financial expert,” whether through the type of specialized education or experience required by that instruction. At this time, the board believes the experience provided by each member of the audit committee collectively offers the fund adequate oversight by its audit committee given the fund’s level of financial complexity. The board will from time to time reexamine such belief.
Item 4. Principal Accountant Fees and Services.
(a) | Audit Fees |
2023 – $35,500
2022 – $33,750
(b) | Audit-Related Fees |
2023 – None
2022 – None
(c) | Tax Fees |
2023 – $7,500
2022 – $7,150
Preparation of Federal & State income tax returns, assistance with calculation of required income, capital gain and excise distributions and preparation of Federal excise tax returns.
(d) | All Other Fees |
2023 - None
2022 - None
(e) | (1) Audit Committee’s Pre-Approval Policies |
The registrant’s Audit Committee is required to pre-approve all audit services and, when appropriate, any non-audit services (including audit-related, tax and all other services) to the registrant. The registrant’s Audit Committee also is required to pre-approve, when appropriate, any non-audit services (including audit-related, tax and all other services) to its adviser, or any entity controlling, controlled by or under common control with the adviser that provides ongoing services to the registrant, to the extent that the services
may be determined to have an impact on the operations or financial reporting of the registrant. Services are reviewed on an engagement by engagement basis by the Audit Committee.
(2) | Percentages of Services Approved by the Audit Committee |
2023 2022
Audit-Related Fees: 0.00% 0.00%
Tax Fees: 0.00% 0.00%
All Other Fees: 0.00% 0.00%
(f) | During the audit of registrant's financial statements for the most recent fiscal year, less than 50 percent of the hours expended on the principal accountant's engagement were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. |
(g) | The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant: |
2023 - $7,500
2022 - $7,150
(h) The registrant's audit committee has considered whether the provision of non-audit services to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant, that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence.
(i) Not applicable.
(j) Not applicable.
Item 5. Audit Committee of Listed Companies. The Registrant is a listed issuer as defined in Rule 10A-3 under the Exchange Act and has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Exchange Act. The Registrant’s audit committee members are Mark H. Taylor (chairman), Patricia Luscombe, John V. Palancia and Jeffrey D. Young.
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) Code of Ethics herewith.
(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/ Brian Curley
Brian Curley, Principal Executive Officer/President
Date 9/8/23
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/ Brian Curley
Brian Curley Principal Executive Officer/President
Date 9/8/23
By (Signature and Title)
/s/ Rich Gleason
Rich Gleason, Principal Financial Officer/Treasurer
Date 9/8/23