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 811-22920
The Advisors’ Inner Circle Fund III
(Exact name of registrant as specified in charter)
SEI Investments
One Freedom Valley Drive
Oaks, PA 19456
(Address of principal executive offices) (Zip code)
SEI Investments
One Freedom Valley Drive
Oaks, PA 19456
(Name and address of agent for service)
Registrant’s telephone number, including area code: (877) 446-3863
Date of fiscal year end: July 31, 2021
Date of reporting period: July 31, 2021
Item 1. | Reports to Stockholders. |
A copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act or 1940, as amended (the “Act”) (17 CFR § 270.30e-1), is attached hereto.
The Advisors’ Inner Circle Fund III
KBI Global Investors Aquarius Fund
ANNUAL REPORT | JULY 31, 2021 |
Investment Adviser: KBI Global Investors (North America) Ltd.
|
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
1 | ||||
4 | ||||
8 | ||||
9 | ||||
10 | ||||
11 | ||||
12 | ||||
25 | ||||
27 | ||||
29 | ||||
Trustees and Officers of The Advisors’ Inner Circle Fund III | 30 | |||
38 |
The Fund files its complete schedule of investments with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q or as an exhibit to its reports on Form N-PORT within sixty days after period end. The Fund’s Form N-Q and Form N-PORT reports are available on the SEC’s website at http://www.sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330.
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to Fund securities, as well as information relating to how a Fund voted proxies relating to fund securities during the most recent 12-month period ended June 30, is available (i) without charge, upon request, by calling 1-833-658-4739; and (ii) on the SEC’s website at http://www.sec.gov.
KBI GLOBAL INVESTORS | ||||
AQUARIUS FUND | ||||
JULY 31, 2021 (Unaudited) |
Dear Shareholders,
We are pleased to provide the 2020/2021 financial report for the KBI Global Investors Aquarius Fund (the “Fund”) for the year ended July 31, 2021.
The period began as global markets continued their robust recovery from the March 2020 lows caused by the Covid-19 pandemic and by and large the recovery continued over the period although mostly at a more moderate rate. There were significant developments over the period which helped continue the positive market trend, albeit with some dips, seen mainly in September/October of 2020. Expectations of a vaccine materialised and were rapidly rolled out across the developed world, helping to reopen economies safely. The US election result in November was received favourably by markets, and the Biden administration’s supportive economic policy and robust infrastructure and spending bills have largely supported markets since. The economic policy of governments more widely has been similarly supportive, with widespread efforts to bolster economies and maintain low interest rates, with rising inflation more recently proving a test for these policies. The Covid-19 pandemic was a stark reminder of the fragility of the world’s balance, and as a result climate change and biodiversity management have come to dominate the global agenda. Overall, the period has been one of positive and sustained market recovery.
With regards the Fund, we entered the period under review with an optimistic outlook, as the strategy earnings we expected to be significantly more resilient than the broader market in 2020. The strategy was well diversified, with a bias towards infrastructure spending and utility services, areas we expected to be more resilient given the late stage in the economic cycle, and because of their essential nature. While we had seen volatility in valuations, we anticipated minimal intrinsic value destruction for our companies as they emerge on the other side of the pandemic. This conviction has held up over the period. Short-cycle industrial markets continue to have a robust recovery from the lows of 2020, while low interest rates and housing inventory continue to be a tailwind for residential construction. One of the most significant developments impacting the Water strategy was and continues to be the progress on a Federal Infrastructure bill in the US. This bill will result in spending increases in the years ahead in some key water infrastructure and water technology markets. Recent economic policy developments at a global level are favourable for infrastructure spending and municipal end markets. Meanwhile leading economic indicators remain positive with key water markets such as construction, industrial and agriculture all trending in the right direction. Agriculture has also been strong in 2021, with higher crop prices and improved farmer sentiment resulting in positive commentary on irrigation spending in numerous important global markets. Strong demand and productivity savings are offsetting commodity price inflation as most companies await the lagged impact of price increases, they are successfully pushing
1
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 (Unaudited) |
through. In terms of macro trends, we think the pandemic accelerates two: digitisation/smart water adoption and universal sanitation. Furthermore, climate change has emerged as a major topic of priority, which we think will continue to accelerate and become more relevant, driving cities and companies to think about the security and sustainability of their water supply.
Fund performance over the period has been very strong, returning 46.86% (net of fees), outperforming the MSCI AC World Index (NR) return of 33.18%. The Fund has been consistently strong, with positive absolute returns in 8 out 12 months. The balanced nature of the portfolio has come in to play over 2020, as the water Infrastructure and technology contributed heavily to performance over the fiscal year 2020-2021, following the outperformance of water utilities during the sharp downturn earlier in 2020.
Looking forward, we continue to be optimistic about the potential for infrastructure, short-cycle industrial markets, and residential construction, and position the portfolio accordingly. We expect the long-term superior earnings growth experienced by the Water strategy to continue, driven by the positive end market expectations mentioned above, further supported by the cost actions taken by our companies in 2020 which continue to benefit profitability. Inflation and supply chain tightness have been key market issues this year and our companies have managed this extremely well. Top line growth has been very strong, and we are expecting stronger margins at our companies in the latter half of 2021 as they implement pricing increases to recover this raw material inflation.
We thank you for your investment in the Fund and look forward to helping you achieve your investment goals in the future.
Warm Regards,
Noel O’Halloran
Chief Investment Officer
This commentary represents the manager’s opinion. It should not be regarded as investment advice or recommendation of specific securities.
There are risks involved with investing, including possible loss of principal. Past performance is no guarantee of future results.
Definition of Comparative Index
The MSCI AC World Index is a market capitalization weighted index that is designed to measure the equity market performance of developed and emerging market countries.
2
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 (Unaudited) |
Growth of a $100,000 Investment
AVERAGE ANNUAL RETURN FOR THE YEAR ENDED JULY 31. 2021 | ||||
1 Year Return | Annualized Inception to Date* | |||
Institutional Shares | 46.86% | 18.10% | ||
MSCI AC World Index | 33.18% | 16.60% |
* The Fund commenced operations on October 12, 2018.
The performance data quoted herein represents past performance and the return and value of an investment in the Fund will fluctuate so that, when redeemed, may be worth less than its original cost. The performance data quoted represents past performance. Past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost, and current performance may be higher or lower than the performance quoted. The Fund’s performance assumes the reinvestment of all dividends and all capital gains. Index returns assume reinvestment of dividends but, unlike a fund’s returns, do not reflect the deduction of any fees or expenses. If such fees and expenses were included in the index returns the performance would have been lower. Please note that one cannot invest directly in an unmanaged index.
There are no assurances that the Fund will meet its stated objectives. The Fund’s holdings and allocations may change at any given time; they do not constitute, and should not be considered, recommendations to buy individual securities.
Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
See definition of the comparative index on page 2.
3
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
SECTOR WEIGHTINGS (Unaudited)†
|
COMMON STOCK — 98.6% |
| |||||||
Shares | Value | |||||||
Austria — 1.9% |
| |||||||
ANDRITZ | 64,338 | $ | 3,547,409 | |||||
|
|
| ||||||
Brazil — 2.0% |
| |||||||
Cia de Saneamento Basico do Estado de Sao Paulo ADR | 284,582 | 1,932,312 | ||||||
Cia de Saneamento de Minas Gerais-COPASA | 638,800 | 1,699,951 | ||||||
|
|
| ||||||
3,632,263 | ||||||||
|
|
| ||||||
Canada — 1.6% |
| |||||||
Stantec | 62,703 | 2,919,037 | ||||||
|
|
| ||||||
France — 10.1% |
| |||||||
Suez | 259,377 | 6,052,202 | ||||||
Veolia Environnement | 374,599 | 12,300,145 | ||||||
|
|
| ||||||
18,352,347 | ||||||||
|
|
| ||||||
Germany — 1.9% |
| |||||||
Norma Group | 67,036 | 3,545,078 | ||||||
|
|
| ||||||
Hong Kong — 4.6% |
| |||||||
Beijing Enterprises Water Group | 5,190,000 | 1,903,386 | ||||||
China Everbright Environment | 3,462,000 | 1,875,529 | ||||||
China Water Affairs Group | 2,816,580 | 2,120,277 | ||||||
Guangdong Investment | 1,468,000 | 2,055,274 | ||||||
SIIC Environment Holdings | 3,909,000 | 558,346 | ||||||
|
|
| ||||||
8,512,812 | ||||||||
|
|
|
The accompanying notes are an integral part of the financial statements.
4
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
COMMON STOCK — continued
|
| |||||||
Shares | Value | |||||||
India — 0.7% |
| |||||||
VA Tech Wabag | 244,871 | $ | 1,216,869 | |||||
|
|
| ||||||
Japan — 2.9% |
| |||||||
Ebara | 19,400 | 951,388 | ||||||
Kurita Water Industries | 91,400 | 4,415,660 | ||||||
|
|
| ||||||
5,367,048 | ||||||||
|
|
| ||||||
Mexico — 2.1% |
| |||||||
Orbia Advance | 1,402,400 | 3,821,925 | ||||||
|
|
| ||||||
Netherlands — 3.6% |
| |||||||
Aalberts | 78,137 | 4,756,866 | ||||||
Arcadis | 40,536 | 1,794,569 | ||||||
|
|
| ||||||
6,551,435 | ||||||||
|
|
| ||||||
South Korea — 2.9% |
| |||||||
Woongjin Coway | 70,727 | 5,275,702 | ||||||
|
|
| ||||||
Sweden — 1.0% |
| |||||||
Alfa Laval | 43,664 | 1,822,968 | ||||||
|
|
| ||||||
United Kingdom — 17.3% |
| |||||||
Costain Group | 1,591,270 | 1,234,228 | ||||||
Ferguson | 31,697 | 4,445,564 | ||||||
HomeServe | 389,645 | 5,064,053 | ||||||
Pennon Group | 253,148 | 4,497,000 | ||||||
Severn Trent | 74,445 | 2,897,417 | ||||||
United Utilities Group | 681,489 | 10,164,267 | ||||||
Weir Group | 130,514 | 3,134,861 | ||||||
|
|
| ||||||
31,437,390 | ||||||||
|
|
| ||||||
United States — 46.0% |
| |||||||
Health Care — 6.7% | ||||||||
Agilent Technologies | 35,669 | 5,465,561 | ||||||
Danaher | 22,970 | 6,833,345 | ||||||
|
|
| ||||||
12,298,906 | ||||||||
|
|
| ||||||
Industrials — 31.6% |
| |||||||
AECOM* | 68,255 | 4,297,335 | ||||||
Core & Main, Cl A * | 159,604 | 4,229,506 |
The accompanying notes are an integral part of the financial statements.
5
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
COMMON STOCK — continued
|
| |||||||
Shares | Value | |||||||
United States — continued |
| |||||||
Industrials — continued |
| |||||||
Evoqua Water Technologies * | 78,286 | $ | 2,584,221 | |||||
Fortune Brands Home & Security | 53,628 | 5,227,121 | ||||||
Granite Construction | 61,682 | 2,369,822 | ||||||
IDEX | 11,286 | 2,558,423 | ||||||
Lindsay | 4,682 | 752,351 | ||||||
Masco | 66,374 | 3,963,192 | ||||||
Mueller Water Products, Cl A | 177,872 | 2,636,063 | ||||||
Pentair | 76,246 | 5,617,043 | ||||||
Rexnord | 35,465 | 1,997,743 | ||||||
Roper Technologies | 12,633 | 6,207,098 | ||||||
SPX* | 41,133 | 2,741,926 | ||||||
Toro | 21,601 | 2,456,898 | ||||||
Valmont Industries | 16,622 | 3,938,583 | ||||||
Vidler Water Resouces* | 239,533 | 3,226,510 | ||||||
Xylem | 21,962 | 2,763,918 | ||||||
|
|
| ||||||
57,567,753 | ||||||||
|
|
| ||||||
Materials — 2.6% |
| |||||||
Ecolab | 21,110 | 4,661,721 | ||||||
|
|
| ||||||
Utilities — 5.1% |
| |||||||
Consolidated Water | 60,446 | 766,455 | ||||||
Essential Utilities | 130,963 | 6,432,903 | ||||||
SJW Group | 32,316 | 2,227,542 | ||||||
|
|
| ||||||
9,426,900 | ||||||||
|
|
| ||||||
83,955,280 | ||||||||
|
|
| ||||||
TOTAL COMMON STOCK | ||||||||
(Cost $133,404,886) | 179,957,563 | |||||||
|
|
| ||||||
TOTAL INVESTMENTS — 98.6% | ||||||||
(Cost $133,404,886) | $ | 179,957,563 | ||||||
|
|
|
Percentages are based on Net Assets of $182,566,407.
* Non-income | producing security. |
Cl — Class
ADR – American Depositary Receipt
The accompanying notes are an integral part of the financial statements.
6
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
As of July 31, 2021, all of the Fund’s investments in securities were considered Level 1, in accordance with the authoritative guidance on fair value measurements and disclosure under U.S. GAAP.
For the year ended July 31, 2021, there were no transfers in or out of Level 3.
For more information on valuation inputs, see Note 2 – Significant Accounting Policies in the Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.
7
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
Assets: | ||||
Investments, at Value (Cost $133,404,886) | $ | 179,957,563 | ||
Foreign Currency, at Value (Cost $79,725) | 79,714 | |||
Cash | 2,229,231 | |||
Dividends and Interest Receivable | 494,260 | |||
Receivable for Investment Securities Sold | 376,644 | |||
Reclaims Receivable | 120,001 | |||
Unrealized Appreciation on Spot Currency Contracts | 577 | |||
Prepaid Expenses | 17,180 | |||
|
|
| ||
Total Assets | 183,275,170 | |||
|
|
| ||
Liabilities: | ||||
Payable for Investment Securities Purchased | 473,593 | |||
Payable Due to Adviser | 110,378 | |||
Accrued Foreign Capital Gains Tax on Appreciated Securities | 61,160 | |||
Professional Fees Payable | 23,330 | |||
Due to Administrator | 18,036 | |||
Chief Compliance Officer Fees Payable | 2,092 | |||
Trustees Fees Payable | 11 | |||
Other Accrued Expenses | 20,163 | |||
|
|
| ||
Total Liabilities | 708,763 | |||
|
|
| ||
Net Assets | $ | 182,566,407 | ||
|
|
| ||
Net Assets Consist of: | ||||
Paid-in Capital | $ | 133,271,956 | ||
Distributable Earnings | 49,294,451 | |||
|
|
| ||
Net Assets | $ | 182,566,407 | ||
|
|
| ||
Net Asset Value, Offering and Redemption Price Per Share*: | ||||
Institutional Shares ($182,566,407 ÷ 12,859,103 shares) | ||||
(unlimited authorization — no par value) | $ | 14.20 | ||
|
|
|
* | Redemption price may vary depending on length of time that shares are held. |
The accompanying notes are an integral part of the financial statements.
8
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
FOR THE YEAR ENDED JULY 31, 2021 |
|
Investment Income: | ||||
Dividend Income | $ | 5,391,555 | ||
Interest Income | 388 | |||
Less: Foreign Taxes Withheld | (155,900 | ) | ||
|
| |||
Total Investment Income | 5,236,043 | |||
|
| |||
Expenses: | ||||
Investment Advisory Fees | 1,281,882 | |||
Administration Fees | 180,973 | |||
Trustees�� Fees | 17,775 | |||
Chief Compliance Officer Fees | 6,805 | |||
Professional Fees | 60,390 | |||
Registration Fees | 30,926 | |||
Transfer Agent Fees | 29,640 | |||
Custodian Fees | 25,168 | |||
Printing Fees | 21,995 | |||
Other Expenses | 53,148 | |||
|
| |||
Total Expenses | 1,708,702 | |||
|
| |||
Less: | ||||
Waiver of Investment Advisory Fees | (50,105 | ) | ||
|
| |||
Net Expenses | 1,658,597 | |||
|
| |||
Net Investment Income | 3,577,446 | |||
|
| |||
Net Realized Gain on Investments | 13,463,054 | |||
Net Realized Gain on Foreign Currency Transactions | 1,426 | |||
Net Change in Unrealized Appreciation on Investments | 40,378,441 | |||
Net Change in Unrealized Depreciation on Foreign Currency Transactions and Translation of Other Assets and Liabilities Denominated in Foreign Currencies | (10,841 | ) | ||
Net Change in Accrued Foreign Capital Gains Tax on Appreciated Securities | (60,040 | ) | ||
|
| |||
Net Realized and Unrealized Gain on Investments, Foreign Currency Transactions and Translation of Other Assets, Liabilities Denominated in Foreign Currencies and Accrued Foreign Capital Gains Tax on Appreciated Securities | 53,772,040 | |||
|
| |||
Net Increase in Net Assets Resulting from Operations | $ | 57,349,486 | ||
|
|
The accompanying notes are an integral part of the financial statements.
9
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
Year Ended July 31, 2021 | Year Ended July 31, 2020 | |||||||
Operations: | ||||||||
Net Investment Income | $ | 3,577,446 | $ | 619,729 | ||||
Net Realized Gain on Investments, Forward Foreign Currency Contracts and Foreign Currency Transactions | 13,464,480 | 371,051 | ||||||
Net Change in Unrealized Appreciation on Investments, Accrued Foreign Capital Gains Tax on Appreciated Securities and Translation of Other Assets and Liabilities Denominated in Foreign Currencies | 40,307,560 | 4,861,765 | ||||||
|
|
|
| |||||
Net Increase in Net Assets Resulting from Operations | 57,349,486 | 5,852,545 | ||||||
|
|
|
| |||||
Distributions: | ||||||||
Institutional Shares | (14,795,193 | ) | (1,468,635 | ) | ||||
|
|
|
| |||||
Total Distributions | (14,795,193 | ) | (1,468,635 | ) | ||||
|
|
|
| |||||
Capital Share Transactions:(1) | ||||||||
Institutional Shares | ||||||||
Issued | 5,565,584 | 68,399,005 | ||||||
Reinvestment of Distributions | 14,542,444 | 1,355,372 | ||||||
Redeemed | (1,032,772 | ) | (382,327 | ) | ||||
|
|
|
| |||||
Net Institutional Shares Share Transactions | 19,075,256 | 69,372,050 | ||||||
|
|
|
| |||||
Net Increase in Net Assets from Share Transactions | 19,075,256 | 69,372,050 | ||||||
|
|
|
| |||||
Total Increase in Net Assets | 61,629,549 | 73,755,960 | ||||||
|
|
|
| |||||
Net Assets: | ||||||||
Beginning of Year | 120,936,858 | 47,180,898 | ||||||
|
|
|
| |||||
End of Year | $ | 182,566,407 | $ | 120,936,858 | ||||
|
|
|
|
(1) | For share transactions, see Note 7 in the Notes to Financial Statements. |
The accompanying notes are an integral part of the financial statements.
10
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
| Selected Per Share Data & Ratios For a Share Outstanding Throughout Each Year/Period |
|
Institutional Shares | Year Ended July 31, 2021 | Year Ended July 31, 2020 | Period Ended July 31, 2019* | |||||||||
Net Asset Value, Beginning of Year/Period | $ | 10.55 | $ | 10.37 | $ | 10.00 | ||||||
|
|
|
|
|
| |||||||
Income (Loss) from Operations: | ||||||||||||
Net Investment Income(1) | 0.30 | 0.11 | 0.12 | |||||||||
Net Realized and Unrealized Gain | 4.59 | 0.38 | 0.25 | |||||||||
|
|
|
|
|
| |||||||
Total from Operations | 4.89 | 0.49 | 0.37 | |||||||||
|
|
|
|
|
| |||||||
Dividends and Distributions: | ||||||||||||
Net Investment Income | (0.09) | (0.11) | —(2) | |||||||||
Net Realized Gain | (1.15) | (0.20) | — | |||||||||
|
|
|
|
|
| |||||||
Total Dividends and Distributions | (1.24) | (0.31) | — | |||||||||
|
|
|
|
|
| |||||||
Net Asset Value, End of Year/Period | $ | 14.20 | $ | 10.55 | $ | 10.37 | ||||||
|
|
|
|
|
| |||||||
Total Return† | 46.86% | 4.58% | 3.75% | |||||||||
|
|
|
|
|
| |||||||
Ratios and Supplemental Data | ||||||||||||
Net Assets, End of Year/Period (Thousands) | $ | 182,566 | $ | 120,937 | $ | 47,181 | ||||||
Ratio of Expenses to Average Net Assets | 1.10% | 1.10% | 1.10%** | |||||||||
Ratio of Expenses to Average Net Assets (Excluding Waivers) | 1.13% | 1.35% | 1.82%** | |||||||||
Ratio of Net Investment Income to Average Net Assets | 2.37% | 1.04% | 1.40%** | |||||||||
Portfolio Turnover Rate | 36% | 33% | 33%*** |
(1) | Calculated using average shares. |
(2) | Amount is less than $0.005 per share. |
* | Commenced operations on October 12, 2018. |
** | Annualized |
*** | Not Annualized |
† | Total Return is for the period indicated and has not been annualized. Total return would have been lower had certain expenses not been waived and assumed by the Adviser during the period. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
The accompanying notes are an integral part of the financial statements.
11
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
|
1. Organization:
The Advisors’ Inner Circle Fund III (the “Trust”) is organized as a Delaware statutory trust under a Declaration of Trust dated December 4, 2013. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with 47 funds. The financial statements herein are those of the KBI Global Investors Aquarius Fund (the “Fund”). The investment objective of the Fund is to seek long-term total return, consisting of capital appreciation and income. The Fund is classified as a non-diversified investment company. KBI Global Investors (North America) Ltd. serves as the Fund’s investment adviser (the “Adviser”). The Fund currently offers Institutional Shares. Investor Shares of the Fund are currently not offered. The Fund commenced operations on October 12, 2018. The financial statements of the remaining funds of the Trust are presented separately. The assets of each fund are segregated, and a shareholder’s interest is limited to the fund in which shares are held.
2. Significant Accounting Policies:
The following are significant accounting policies, which are consistently followed in the preparation of the financial statements of the Fund. The Fund is an investment company that applies the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board (“FASB”).
Use of Estimates — The preparation of financial statements in conformity with U.S. GAAP (“U.S. GAAP”) requires management to make estimates and assumptions that affect the fair value of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and such differences could be material.
Security Valuation — Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on an exchange or market (foreign or domestic) on which they are traded on valuation date (or at approximately 4:00 pm Eastern Standard Time if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. If available, debt securities are priced based upon valuations provided by independent, third-party pricing agents. Such values generally reflect the last reported sales price if the security is actively traded. The third-party pricing agents may also value debt securities at an evaluated bid price by employing methodologies that utilize actual market
12
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
transactions, broker supplied valuations, or other methodologies designed to identify the market value for such securities. Such methodologies generally consider such factors as security prices, yields, maturities, call features, ratings and developments relating to specific securities in arriving at valuations. On the first day a new debt security purchase is recorded, if a price is not available on the automated pricing feeds from our primary and secondary pricing vendors nor is it available from an independent broker, the security may be valued at its purchase price. Each day thereafter, the debt security will be valued according to the Trust’s Fair Value Procedures until an independent source can be secured. Debt obligations with remaining maturities of sixty days or less may be valued at their amortized cost, which approximates market value provided that it is determined the amortized cost continues to approximate fair value. Should existing credit, liquidity or interest rate conditions in the relevant markets and issuer specific circumstances suggest that amortized cost does not approximate fair value, then the amortized cost method may not be used. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates.
Securities for which market prices are not “readily available” are valued in accordance with “Fair Value Procedures” established by the Fund’s Board of Trustees (the “Board”). The Fund’s Fair Value Procedures are implemented through a Fair Value Committee (the “Committee”) designated by the Board. Some of the more common reasons that may necessitate that a security be valued using Fair Value Procedures include: the security’s trading has been halted or suspended; the security has been de-listed from a national exchange; the security’s primary trading market is temporarily closed at a time when under normal conditions it would be open; the security has not been traded for an extended period of time; the security’s primary pricing source is not able or willing to provide a price; or trading of the security is subject to local government imposed restrictions. When a security is valued in accordance with the Fair Value Procedures, the Committee will determine the value after taking into consideration relevant information reasonably available to the Committee. As of July 31, 2021, there were no securities valued in accordance with the Fair Value Procedures.
For securities that principally trade on a foreign market or exchange, a significant gap in time can exist between the time of a particular security’s last trade and the time at which the Fund calculates its net asset value. The closing prices of such securities may no longer reflect their market value at the time the Fund calculates its net asset value if an event that could materially affect the value of those securities (a “Significant Event”) has occurred between the time of the security’s last close and the time that the Fund calculates net asset value.
13
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
A Significant Event may relate to a single issuer or to an entire market sector. If the Adviser of the Fund becomes aware of a Significant Event that has occurred with respect to a security or group of securities after the closing of the exchange or market on which the security or securities principally trade, but before the time at which the Fund calculates its net asset value, it may request that a Committee meeting be called.
The Fund uses MarkIt Fair Value (“MarkIt”) as a third party fair valuation vendor. MarkIt provides a fair value for foreign securities in the Fund based on certain factors and methodologies (involving, generally, tracking valuation correlations between the U.S. market and each non-U.S. security) applied by MarkIt in the event that there is a movement in the U.S. market that exceeds a specific threshold established by the Committee. The Committee establishes “confidence interval” which is used to determine the level of correlation between the value of a foreign security and movements in the U.S. market before a particular security is fair valued when the threshold is exceeded. In the event that the threshold established by the Committee is exceeded on a specific day, the Fund values its non-U.S. securities that exceed the applicable “confidence interval” based upon the fair values provided by MarkIt. In such event, it is not necessary to hold a Committee meeting. In the event that the Adviser believes that the fair values provided by MarkIt are not reliable, the Adviser contacts the Administrator and can request that a meeting of the Committee be held.
If a local market in which the Fund owns securities is closed for one or more days, the Fund shall value all securities held in that corresponding currency based on the fair value prices provided by MarkIt using the predetermined confidence interval discussed above.
In accordance with U.S. GAAP, the Fund discloses fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
● | Level 1 — Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Fund has the ability to access at the measurement date |
● | Level 2 — Other significant observable inputs (includes quoted prices for similar securities, interest rates, prepayment speeds, credit risk, referenced |
14
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
indices, quoted prices in inactive markets, adjusted quoted prices in active markets, adjusted quoted prices on foreign equity securities that were adjusted in accordance with pricing procedures approved by the Board, etc.); and |
● | Level 3 — Prices, inputs or exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
Investments are classified within the level of the lowest significant input considered in determining fair value. Investments classified within Level 3 whose fair value measurement considers several inputs may include Level 1 or Level 2 inputs as components of the overall fair value measurement.
For the year ended July 31, 2021, there have been no significant changes to the Fund’s fair valuation methodology.
Federal Income Taxes — It is the Fund’s intention to qualify as a regulated investment company for Federal income tax purposes by complying with the appropriate provisions of Subchapter M of the Internal Revenue Code of 1986, as amended. Accordingly, no provisions for Federal income taxes have been made in the financial statements.
The Fund evaluates tax positions taken or expected to be taken in the course of preparing the Fund’s tax returns to determine whether it is “more-likely than-not” (i.e., greater than 50-percent) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. The Fund did not record any tax provision in the current year. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities (i.e., from commencement of operations, as applicable), on-going analysis of and changes to tax laws, regulations and interpretations thereof.
As of and during the year ended July 31, 2021, the Fund did not have a liability for any unrecognized tax benefits. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the year ended July 31, 2021, the Fund did not incur any interest or penalties.
Security Transactions and Investment Income — Security transactions are accounted for on the trade date. Costs used in determining realized gains and losses on the sale of investment securities are based on the specific
15
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
identification method. Dividend income and expense are recorded on the ex-dividend date. Certain dividends from foreign securities will be recorded as soon as the Fund is informed of the dividend if such information is obtained subsequent to the ex-dividend date.
Foreign Currency Translation — The books and records of the Fund are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars on the date of valuation. The Fund does not isolate that portion of realized or unrealized gains and losses resulting from changes in the foreign exchange rate from fluctuations arising from changes in the market prices of the securities. These gains and losses are included in net realized gain (loss) on investments and net unrealized appreciation (depreciation) on investments on the Statement of Operations. Net realized gain (loss) on foreign currency transactions and net appreciation (depreciation) on translation of other assets and liabilities denominated in foreign currencies represent net foreign exchange gains or losses from foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses realized between trade and settlement dates on securities transactions and the difference between the amount of the investment income and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid.
Forward Foreign Currency Contracts — The Fund may enter into forward foreign currency contracts to protect the value of securities held and related receivables and payables against changes in future foreign exchange rates. A forward currency contract is an agreement between two parties to buy and sell currency at a set price on a future date. The market value of the contract will fluctuate with changes in currency exchange rates. The contract is marked-to-market daily using the current forward rate and the change in market value is recorded by the Fund as unrealized gain or loss. The Fund recognizes realized gains or losses when the contract is closed, equal to the difference between the value of the contract at the time it was opened and the value at the time it was closed. Any realized gain (loss) or unrealized appreciation (depreciation) during the year is presented on the Statement of Operations. Risks may arise from unanticipated movements in the value of a foreign currency relative to the U.S. dollar. Risks may also arise upon entering into these contracts from the potential inability of counterparties to meet the terms of their contracts and are generally limited to the amount of unrealized gain on the contracts at the date of default. During the year ended July 31, 2021, the Fund did not hold any forward foreign currency contracts.
Expenses — Most expenses of the Trust can be directly attributed to a particular fund. Expenses which cannot be directly attributed to a particular fund are apportioned among the funds of the Trust based on the number of funds and/or relative net assets.
16
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
Cash — Idle cash may be swept into various time deposit accounts and is classified as cash on the Statement of Assets and Liabilities. The Fund maintains cash in bank deposit accounts which, at times may exceed United
States federally insured limits. Amounts invested are available on the same business day.
Dividends and Distributions to Shareholders — The Fund distributes substantially all of its net investment income annually. Any net realized capital gains are distributed annually. All distributions are recorded on the ex-dividend date.
Redemption Fees — The Fund retains a redemption fee of 2.00% on redemptions of capital shares held for less than 30 days. For the year ended July 31, 2021, the Fund did not retain any fees. Fees collected are retained by the Fund for the benefit of the remaining shareholders and are included in capital shares transactions in the Statement of Changes in Net Assets.
Foreign Taxes — The Fund may be subject to taxes imposed by countries in which it invests. Such taxes are generally based on either income or gains earned or repatriated. The Fund accrues and applies such taxes to net investment income, net realized gains and net unrealized gains as income and/or capital gains are earned. The Fund has accrued foreign tax in the amount of $61,160 presented on the Statement of Assets and Liabilities as of July 31, 2021.
3. Transactions with Affiliates:
Certain officers of the Trust are also employees of SEI Investments Global Funds Services (the “Administrator”), a wholly owned subsidiary of SEI Investments Company, and/or SEI Investments Distribution Co. (the “Distributor”). Such officers are paid no fees by the Trust, other than the Chief Compliance Officer (“CCO”) as described below, for serving as officers of the Trust.
The services provided by the CCO and his staff are paid for by the Trust, as incurred. The services include regulatory oversight of the Trust’s advisers and service providers as required by SEC regulations. The CCO’s services and fees have been approved by and are reviewed by the Board.
4. Administration, Distribution, Shareholder Servicing, Custodian and Transfer Agent Agreements:
The Fund and the Administrator are parties to an Administration Agreement under which the Administrator provides administration services to the Fund. For these services, the Administrator is paid an asset-based fee, subject to certain minimums, which will vary depending on the number of share classes and the average daily net assets of the Fund. For the year ended July 31, 2021, the Fund paid $180,973 for these services.
17
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
The Fund has adopted a distribution plan under Rule 12b-1 of the 1940 Act (the “Distribution Plan”) that allows the Fund to pay distribution and/or service fees of up to 0.25% of average daily net assets of Investor Shares of the Fund for the sale and distribution of Fund shares and for services provided to shareholders. Under the Distribution Plan, other service providers may perform, or may compensate other service providers for performing, certain shareholder and administrative services. As of July 31, 2021, Investor Shares of the Fund are not available for purchase.
Brown Brothers Harriman & Co. acts as custodian (the “Custodian”) for the Fund. The Custodian plays no role in determining the investment policies of the Fund or which securities are to be purchased or sold by the Fund.
Atlantic Fund Services, LLC, serves as the transfer agent and dividend disbursing agent for the Fund under a transfer agency agreement with the Trust.
5. Investment Advisory Agreement:
Under the terms of an investment advisory agreement, the Adviser provides investment advisory services to each of the Fund’s share classes at a fee calculated at an annual rate of 0.85% of each of the Fund’s share class’s average daily net assets. The Adviser has contractually agreed to waive fees and reimburse expenses to the extent necessary to keep Total Annual Fund Operating Expenses (excluding interest, taxes, brokerage commissions, research, 12b-1 Fees, acquired fund fees and expenses and non-routine expenses (collectively, “excluded expenses”)) from exceeding 1.10% of the average daily net assets of each of the Fund’s share classes until November 30, 2021 (the “contractual expense limit”). In addition, the Adviser may receive from the Fund the difference between the Total Annual Fund Operating Expenses (not including excluded expenses) and the contractual expense limit to recoup all or a portion of its prior fee waivers or expense reimbursements made during the three-year period preceding the date of the recoupment if at any point Total Annual Fund Operating Expenses (not including excluded expenses) are below the contractual expense limit (i) at the time of the fee waiver and/or expense reimbursement and (ii) at the time of the recoupment. As of July 31, 2021, the fees which were previously waived and reimbursed to the Fund by the Adviser which may be subject to possible future reimbursement to the Adviser were $198,250 expiring in 2022, $147,080 expiring in 2023 and $50,105 expiring in 2024.
6. Investment Transactions:
The cost of security purchases and the proceeds from security sales other than long-term U.S. Government and short-term securities, for the year ended July 31, 2021, were as follows:
Purchases | Sales and Maturities | |||||||
KBI Global Investors Aquarius Fund | $ | 60,087,765 | $ | 51,802,998 |
18
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
7. Share Transactions:
Year Ended July 31, 2021 | Year Ended July 31, 2020 | |||||||
|
| |||||||
Share Transactions: | ||||||||
Institutional Shares | ||||||||
Issued | 419,701 | 6,843,452 | ||||||
Reinvested | 1,050,338 | 119,721 | ||||||
Redeemed | (78,985 | ) | (44,851) | |||||
|
| |||||||
Net Share Transactions | 1,391,054 | 6,918,322 | ||||||
|
|
8. Federal Tax Information:
The amount and character of income and capital gain distributions to be paid, if any, are determined in accordance with Federal income tax regulations, which may differ from U.S. GAAP. As a result, net investment income (loss) and net realized gain (loss) on investment transactions for a reporting period may differ significantly from distributions during such period. These book/tax differences may be temporary or permanent. The permanent differences primarily consist of reclassification of foreign currency gain/(loss) and distributions.
There are no permanent differences that are credited or charged to Paid-in Capital and Distributable Earnings as of July 31, 2021.
The tax character of dividends and distributions declared during the fiscal year was as follows:
Ordinary Income | Long-Term Capital Gain | Total | ||||||||||
2021 | $ | 7,279,789 | $ | 7,515,404 | $ | 14,795,193 | ||||||
2020 | 1,425,163 | 43,472 | 1,468,635 |
As of July 31, 2021, the components of Distributable Earnings on a tax basis were as follows:
Undistributed Ordinary Income | $ | 2,715,730 | ||
Undistributed Long-Term Capital Gains | 181,884 | |||
Unrealized Appreciation | 46,396,837 | |||
|
| |||
Total Net Distributable Earnings | $ | 49,294,451 | ||
|
|
19
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
For Federal income tax purposes the difference between Federal tax cost and book cost primarily relates to wash sales. The Federal tax cost and aggregate gross unrealized appreciation and depreciation for the investments held by the Fund at July 31, 2021, were as follows:
Federal | Aggregate | Aggregate Gross | Net Unrealized | |||||||||||||||
$133,505,559 | $50,473,307 | $(4,021,303) | $46,452,004 |
9. Concentration of Risks:
As with all management investment companies, a shareholder of the Fund is subject to the risk that his or her investment could lose money. The Fund is subject to the principal risks noted below, any of which may adversely affect the Fund’s net asset value (“NAV”) and ability to meet its investment objective.
Equity Market Risk — The risk that stock prices will fall over short or extended periods of time, sometimes rapidly and unpredictably. The value of equity securities will fluctuate in response to factors affecting a particular company, as well as broader market and economic conditions. Broad movements in financial markets may adversely affect the price of the Fund’s investments, regardless of how well the companies in which the Fund invests perform. Moreover, in the event of a company’s bankruptcy, claims of certain creditors, including bondholders, will have priority over claims of common stock holders such as the Fund.
Small and Medium Capitalization Companies Risk — The risk that small and medium capitalization companies in which the Fund may invest may be more vulnerable to adverse business or economic events than larger, more established companies. In particular, small and medium capitalization companies may have limited product lines, markets and financial resources and may depend upon a relatively small management group. Therefore, small capitalization and medium capitalization stocks may be more volatile than those of larger companies. Small capitalization and medium capitalization stocks may be traded over-the-counter or listed on an exchange.
Sector Emphasis Risk — The securities of companies in the same business sector, if comprising a significant portion of the Fund’s portfolio, may in some circumstances react negatively to market conditions, interest rates and economic, regulatory or financial developments and adversely affect the value of the portfolio to a greater extent than if such securities comprised a lesser portion of the Fund’s portfolio or the Fund’s portfolio was diversified across a greater number of industry sectors.
Water-Related Resource Sector Risk — The Fund’s investments in the water-related resource sector may underperform relative to the general market, returns on
20
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
investments in other sectors or fixed-income securities. The water-related resource sector can be significantly affected by climactic, environmental and political events which could impact water consumption and conservation. Furthermore, because the Fund will focus its investments in the water-related resource sector, economic downturns and global and domestic events affecting the water-related resource sector will have a greater impact on the Fund than would be the case if the Fund’s investments were more diversified. These events may include governmental regulation and institutional change, inflation, an increase in the cost of raw materials, an increase in interest rates, technological advances, changes in consumer sentiment and spending and changes in government spending.
Industrials Industry Risk — Stock prices for the types of companies included in the industrials industry are affected by supply and demand both for their specific product or service and for industrial industry products in general. Government regulation, world events and economic conditions, technological developments and liabilities for environmental damage and general civil liabilities, among other factors, will likewise affect the performance of these companies.
Utilities Industry Risk — Stock prices for companies in the utilities industry are affected by supply and demand, operating costs, governmental regulation, taxes, environmental factors, liabilities for environmental damage and general civil liabilities, and rate caps or rate changes. Utility companies also are vulnerable to natural disasters, terrorist attacks, government intervention or other factors may render a utility company’s equipment unusable or obsolete and negatively impact profitability. Among the risks that may affect utility companies are the following: risks of increases in fuel and other operating costs; the high cost of borrowing to finance capital construction during inflationary periods; restrictions on operations and increased costs and delays associated with compliance with federal and state safety regulations; and the effects of energy conservation and regulatory changes.
Liquidity Risk — Liquidity risk is the risk that, due to certain investments trading in lower volumes or to market and economic conditions, the Fund may be unable to find a buyer for its investments when it seeks to sell them or to receive the price it expects based on the Fund’s valuation of the investments. Events that may lead to increased redemptions, such as market disruptions, may also negatively impact the liquidity of the Fund’s investments when it needs to dispose of them. If the Fund is forced to sell its investments at an unfavorable time and/or under adverse conditions in order to meet redemption requests, such sales could negatively affect the Fund. Liquidity issues may also make it difficult to value the Fund’s investments.
Geographic Focus Risk — To the extent that it focuses its investments in a particular country or region, the Fund may be more susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within that
21
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
country or region. As a result, the Fund may be subject to greater price volatility and risk of loss than a fund holding more geographically diverse investments.
Non-Diversified Risk — The Fund is non-diversified, which means that it may invest in the securities of relatively few issuers. As a result, the Fund may be more susceptible to a single adverse economic or political occurrence affecting one or more of these issuers and may experience increased volatility due to its investments in those securities. If the securities in which the Fund invests perform poorly, the Fund could incur greater losses than it would have had it invested in a greater number of securities. However, the Fund intends to satisfy the asset diversification requirements for qualification as a regulated investment company (“RIC”) under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).
Foreign Investment/Emerging Markets Risk — The securities of foreign issuers may be less liquid and more volatile than securities of comparable U.S. issuers. The costs associated with securities transactions are often higher in foreign countries than in the U.S. Additionally, investments in foreign securities, even those publicly traded in the United States, may involve risks which are in addition to those inherent in domestic investments. Foreign companies may not be subject to the same regulatory requirements of U.S. companies, and as a consequence, there may be less publicly available information about such companies. Foreign companies may be subject to significantly higher levels of taxation than U.S. companies, including potentially confiscatory levels of taxation, thereby reducing the earnings potential of such foreign companies. Substantial withholding taxes may apply to distributions from foreign companies. Also, foreign companies may not be subject to uniform accounting, auditing, and financial reporting standards and requirements comparable to those applicable to U.S. companies. Foreign governments and foreign economies often are less stable than the U.S. Government and the U.S. economy. The risks associated with international investing will be greater in emerging markets than in more developed foreign markets because, among other things, emerging markets may have less stable political and economic environments.
Depositary Receipts Risk — Depositary receipts, such as American Depositary Receipts (“ADRs”) and Global Depositary Receipts (“GDRs”), are certificates evidencing ownership of shares of a foreign issuer that are issued by depositary banks and generally trade on an established market. Depositary receipts are subject to many of the risks associated with investing directly in foreign securities, including, among other things, political, social and economic developments abroad, currency movements and different legal, regulatory and tax environments.
Management Risk — The success of the Fund’s strategy is dependent on the Adviser’s ability and its stock selection process to correctly identify the Fund’s
22
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
investments. The portfolio securities selected by the Adviser may decline in value or not increase in value when the stock market in general is rising, in which case
the Fund could experience losses regardless of the overall performance of the U.S. equity market.
Value Style Risk — Value investing focuses on companies with stocks that appear undervalued in light of factors such as the company’s earnings, book value, revenues or cash flow. If the Adviser’s assessment of market conditions, or a company’s value or prospects for exceeding earnings expectations, is wrong, the Fund could suffer losses or produce poor performance relative to other funds.
Growth Style Risk — The Adviser utilizes a “growth style” of investing, meaning that the Fund invests in equity securities of companies that the Adviser believes will have above-average rates of relative earnings growth and which, therefore, may experience above-average increases in stock prices. Over time, a relative growth investing style may go in and out of favor, causing the Fund to sometimes underperform other equity funds that use differing investing styles.
Currency Risk — As a result of the Fund’s investments in securities or other investments denominated in, and/or receiving revenues in, foreign currencies, the Fund will be subject to currency risk. Currency risk is the risk that foreign currencies will decline in value relative to the U.S. dollar or, in the case of hedging positions, that the U.S. dollar will decline in value relative to the currency hedged. In either event, the dollar value of an investment in the Fund would be adversely affected. Currency exchange rates may fluctuate in response to, among other things, changes in interest rates, intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities, or by the imposition of currency controls or other political developments in the United States or abroad.
Large Capitalization Risk — The risk that larger, more established companies may be unable to respond quickly to new competitive challenges such as changes in technology and consumer tastes.
Money Market Instruments Risk — The value of money market instruments may be affected by changing interest rates and by changes in the credit ratings of the investments. An investment in a money market fund is not a bank deposit and is not insured or guaranteed by any bank, the FDIC or any other government agency. A money market fund’s sponsor has no legal obligation to provide financial support to the fund, and there should be no expectation that the sponsor will provide financial support to the fund at any time. Certain money market funds float their net asset value while others seek to preserve the value of investments at a stable net asset value (typically, $1.00 per share). An investment in a money market fund, even an investment in a fund seeking to maintain a stable net asset value per share, is not guaranteed and it is possible for the Fund to lose money by investing in these and
23
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
other types of money market funds. If the liquidity of a money market fund’s portfolio deteriorates below certain levels, the money market fund may suspend redemptions (i.e., impose a redemption gate) and thereby prevent the Fund from selling its investment in the money market fund or impose a fee of up to 2% on amounts the Fund redeems from the money market fund (i.e., impose a liquidity fee). These measures may result in an investment loss or prohibit the Fund from redeeming shares when the Adviser would otherwise redeem shares. Money market funds and the securities they invest in are subject to comprehensive regulations. The enactment of new legislation or regulations, as well as changes in interpretation and enforcement of current laws, may affect the manner of operation, performance and/or yield of money market funds.
10. Other:
At July 31, 2021, 88% of Institutional Class Shares outstanding were held by one record shareholder owning 10% or greater of the aggregate total shares outstanding. This shareholder is comprised of an omnibus account that was held on behalf of various individual shareholders.
In the normal course of business, the Fund enters into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be established; however, based on experience, the risk of loss from such claims is considered remote.
11. Subsequent Events:
The Fund has evaluated the need for additional disclosures and/or adjustments resulting from subsequent events through the date the financial statements were issued. On September 15, 2021, a redemption-in-kind was processed for two client accounts. The total amount of these redemptions was $136,734,700. Based on this evaluation, no additional disclosures and/or adjustments were required to the financial statements as of July 31, 2021.
24
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
To the Board of Trustees of The Advisors’ Inner Circle Fund III and
Shareholders of KBI Global Investors Aquarius Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of KBI Global Investors Aquarius Fund (the “Fund”) (one of the series constituting The Advisors’ Inner Circle Fund III (the “Trust”)), including the schedule of investments, as of July 31, 2021, and the related statement 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, the financial highlights for each of the two years in the period then ended and the period from October 12, 2018 (commencement of operations) through July 31, 2019 and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund (one of the series constituting The Advisors’ Inner Circle Fund III) at July 31, 2021, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended and its financial highlights for each of the two years in the period then ended and the period from October 12, 2018 (commencement of operations) through July 31, 2019, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s 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 Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
25
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
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 July 31, 2021, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. 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.
We have served as the auditor of one or more KBI Global Investors (North America) Ltd. investment companies since 2019.
Philadelphia, Pennsylvania
September 29, 2021
26
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
All mutual funds have operating expenses. As a shareholder of a mutual fund, your investment is affected by these ongoing costs, which include (among others) costs for Fund management, administrative services, and shareholder reports like this one. It is important for you to understand the impact of these costs on your investment returns.
Operating expenses such as these are deducted from the mutual fund’s gross income and directly reduce your final investment return. These expenses are expressed as a percentage of the mutual fund’s average net assets; this percentage is known as the mutual fund’s expense ratio.
The following examples use the expense ratio and are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period from February 1, 2021 to July 31, 2021.
The table on the next page illustrates your Fund’s costs in two ways:
Actual Fund Return. This section helps you to estimate the actual expenses after fee waivers that your Fund incurred over the period. The “Expenses Paid During Period” column shows the actual dollar expense cost incurred by a $1,000 investment in the Fund, and the “Ending Account Value” number is derived from deducting that expense cost from the Fund’s gross investment return.
You can use this information, together with the actual amount you invested in the Fund, to estimate the expenses you paid over that period. Simply divide your ending starting account value by $1,000 to arrive at a ratio (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply that ratio by the number shown for your Fund under “Expenses Paid During Period”.
Hypothetical 5% Return. This section helps you compare your Fund’s costs with those of other mutual funds. It assumes that the Fund had an annual 5% return before expenses during the year, but that the expense ratio (Column 3) for the period is unchanged. This example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to make this 5% calculation. You can assess your Fund’s comparative cost by comparing the hypothetical result for your Fund in the “Expense Paid During Period” column with those that appear in the same charts in the shareholder reports for other mutual funds.
27
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
DISCLOSURE OF FUND EXPENSES (Unaudited) – concluded |
Note: Because the return is set at 5% for comparison purposes — NOT your Fund’s actual return — the account values shown may not apply to your specific investment.
Beginning Account Value 2/1/21 | Ending Account Value 7/31/21 | Annualized Expense Ratios | Expenses Paid During Period* | |||||||||||||
Actual Fund Return | ||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,204.80 | 1.10 | % | $ | 6.01 | ||||||||
Hypothetical 5% Return | ||||||||||||||||
Institutional Shares | $ | 1,000.00 | $ | 1,019.34 | 1.10 | % | $ | 5.51 |
* Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period shown).
28
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
Pursuant to Rule 22e-4 under the 1940 Act, the Fund’s investment adviser has adopted, and the Board has approved, a liquidity risk management program (the “Program”) to govern the Fund’s approach to managing liquidity risk. The Program is overseen by the Fund’s Liquidity Risk Management Program Administrator (the “Program Administrator”), and the Program’s principal objectives include assessing, managing and periodically reviewing the Fund’s liquidity risk, based on factors specific to the circumstances of the Fund.
At a meeting of the Board held on March 18, 2021, the Trustees received a report from the Program Administrator addressing the operations of the Program and assessing its adequacy and effectiveness of implementation for the period from January 1, 2020 through December 31, 2020. The Program Administrator’s report included an assessment of how market conditions caused by the COVID-19 pandemic impacted the Fund’s liquidity risk during the period covered by the report. The Program Administrator’s report noted that the Program Administrator had determined that the Program is reasonably designed to assess and manage the Fund’s liquidity risk and has operated adequately and effectively to manage the Fund’s liquidity risk during the period covered by the report. The Program Administrator’s report noted that during the period covered by the report, there were no liquidity events that impacted the Fund or its ability to timely meet redemptions without dilution to existing shareholders. The Program Administrator’s report further noted that no material changes have been made to the Program during the period covered by the report.
There can be no assurance that the Program will achieve its objectives in the future. Please refer to the prospectus for more information regarding the Fund’s exposure to liquidity risk and other principal risks to which an investment in the Fund may be subject.
29
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
TRUSTEES AND OFFICERS OF THE ADVISORS’ INNER CIRCLE FUND III (Unaudited) |
Set forth below are the names, years of birth, positions with the Trust, length of time served, and the principal occupations for the last five years of each of the persons currently serving as Trustees and Officers of the Trust. Unless otherwise noted, the business address of each Trustee is SEI Investments Company, One Freedom Valley Drive, Oaks Pennsylvania 19456. Trustees who are deemed not to be “interested persons” of the Trust are referred to as “Independent Trustees.” Mr. Doran is a Trustee who may be an “interested” person
Name and
| Position with
| Principal Occupation in the Past Five Years
| ||
INTERESTED TRUSTEES2 3 | ||||
William M. Doran (Born: 1940) | Chairman of Board of Trustees (Since 2014) | Self-Employed Consultant since 2003. Partner at Morgan, Lewis & Bockius LLP (law firm) from 1976 to 2003. Counsel to the Trust, SEI Investments, SIMC, the Administrator and the Distributor. Secretary of SEI Investments since 1978.
| ||
INDEPENDENT TRUSTEES2 | ||||
Jon C. Hunt (Born: 1951) | Trustee and Lead Independent Trustee (since 2014) | Retired since 2013. Consultant to Management, Convergent Capital Management, LLC (“CCM”) from 2012 to 2013. Managing Director and Chief Operating Officer, CCM from 1998 to 2012.
| ||
Thomas P. Lemke (Born: 1954) | Trustee (Since 2014) | Retired since 2013. Executive Vice President and General Counsel, Legg Mason, Inc. from 2005 to 2013.
|
1. | Each Trustee shall hold office during the lifetime of this trust until the election and qualification of his or her successor, or until he or she sooner dies, resigns, or is removed in accordance with the Trust’s Declaration of Trust. |
2. | Trustees oversee 47 funds in The Advisors’ Inner Circle Fund III. |
30
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
of the Trust as that term is defined in the 1940 Act by virtue of their affiliation with the Trust’s Distributor. The Trust’s Statement of Additional Information (“SAI”) includes additional information about the Trustees and Officers. The SAI may be obtained without charge by calling 1-833-658-4739. The following chart lists Trustees and Officers as of July 31, 2021.
|
Other Directorships Held in the Past Five Years1
|
Current Directorships: Trustee of Gallery Trust, Schroder Series Trust, Schroder Global Series Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund, Delaware Wilshire Private Markets Tender Fund, SEI Daily Income Trust, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Asset Allocation Trust, SEI Tax Exempt Trust, Adviser Managed Trust, New Covenant Funds, SEI Insurance Products Trust and SEI Catholic Values Trust. Director of SEI Investments, SEI Investments (Europe), Limited, SEI Investments—Global Funds Services, Limited, SEI Investments Global, Limited, SEI Investments (Asia), Limited, SEI Global Nominee Ltd., SEI Investments – Unit Trust Management (UK) Limited and SEI Investments Co. Director of the Distributor.
Former Directorships: Trustee of O’Connor EQUUS (closed-end investment company) to 2016. Trustee of SEI Liquid Asset Trust to 2016. Trustee of Winton Series Trust to 2017. Trustee of The Advisors’ Inner Circle Fund, The Advisors’ Inner Circle Fund II, Bishop Street Funds, The KP Funds and Winton Diversified Opportunities Fund (closed-end investment company) to 2018.
|
Current Directorships: Trustee of City National Rochdale Funds, Gallery Trust, Schroder Series Trust, Schroder Global Series Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund and Delaware Wilshire Private Markets Tender Fund. Director of Chiron Capital Allocation Fund Ltd.
Former Directorships: Trustee of O’Connor EQUUS (closed-end investment company) to 2016. Member of Independent Committee of Nuveen Commodities Asset Management to 2016. Trustee of Winton Series Trust to 2017. Trustee of Winton Diversified Opportunities Fund (closed-end investment company) to 2018.
|
Current Directorships: Trustee of Gallery Trust, Schroder Series Trust, Schroder Global Series Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund, Delaware Wilshire Private Markets Tender Fund, JP Morgan Active Exchange-Traded Funds (33 Portfolios) and Symmetry Panoramic Trust (8 Portfolios). Director of Chiron Capital Allocation Fund Ltd.
Former Directorships: Trustee of Munder Funds to 2014. Trustee of Victory Funds to 2015. Trustee of O’Connor EQUUS (closed-end investment company) to 2016. Trustee of Winton Series Trust and AXA Premier VIP Trust to 2017. Trustee of Winton Diversified Opportunities Fund (closed-end investment company) to 2018.
|
3. | Denotes Trustees who may be deemed to be “interested” persons of the Fund as that term is defined in the 1940 Act by virtue of their affiliation with the Distributor and/or its affiliates. |
4 Directorships of Companies required to report to the Securities and Exchange Commission under the Securities Exchange act of 1934 (i.e., “public companies”) or other investment companies under the 1940 act.
31
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
Name and Year of Birth
| Position with the Trust and Length of Time Served1
| Principal Occupation During the Past Five Years
| ||
INDEPENDENT TRUSTEES (continued)2
| ||||
Nichelle Maynard-Elliott (Born: 1968)
| Trustee (since 2021) | Independent Director since 2018. Executive Director, M&A at Praxair Inc. from 2011-2019. | ||
Jay C. Nadel (Born: 1958)
| Trustee (Since 2016)
| Self-Employed Consultant since 2004. Executive Vice President, Bank of New York Broker Dealer from 2002 to 2004. Partner/Managing Director, Weiss Peck & Greer/Robeco from 1986 to 2001.
| ||
Randall S. Yanker (Born: 1960)
| Trustee (Since 2014) | Co-Founder and Senior Partner, Alternative Asset Managers, L.P. since 2004. | ||
OFFICERS
| ||||
Michael Beattie (Born: 1965) | President (Since 2014) | Director of Client Service, SEI Investments Company, since 2004.
| ||
James Bernstein (Born: 1962) | Vice President (since 2017)
Secretary (since 2020) | Attorney, SEI Investments, since 2017.
Prior Positions: Self-employed consultant, 2017. Associate General Counsel & Vice President, Nationwide Funds Group and Nationwide Mutual Insurance Company, from 2002 to 2016. Assistant General Counsel & Vice President, Market Street Funds and Provident Mutual Insurance Company, from 1999 to 2002.
| ||
John Bourgeois (Born: 1973) | Assistant Treasurer (since 2017) | Fund Accounting Manager, SEI Investments, since 2000. |
1. | Each Trustee shall hold office during the lifetime of this trust until the election and qualification of his or her successor, or until he or she sooner dies, resigns, or is removed in accordance with the Trust’s Declaration of Trust. |
2. | Trustees oversee 47 funds in The Advisors’ Inner Circle Fund III. |
3. | Directorships of Companies required to report to the Securities and Exchange Commission under the Securities Exchange act of 1934 (i.e., “public companies”) or other investment companies under the 1940 act. |
32
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
Other Directorships Held in the Past Five Years3
|
|
Current Directorships: Trustee of Gallery Trust, Schroder Series Trust, Schroder Global Series Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund, Delaware Wilshire Private Markets Tender Fund. Director of Chiron Capital Allocation Fund Ltd. Director of Element Solutions Inc., Director of Xerox Holdings Corporation, and Director Nominee for Lucid Group, Inc.
|
Current Directorships: Chairman of the Board of Trustees of City National Rochdale Funds. Trustee of Gallery Trust, Schroder Series Trust, Schroder Global Series Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund and Delaware Wilshire Private Markets Tender Fund. Director of Chiron Capital Allocation Fund Ltd.
Former Directorships: Trustee of Winton Series Trust to 2017. Director of Lapolla Industries, Inc. to 2017. Trustee of Winton Diversified Opportunities Fund (closed-end investment company) to 2018.
|
Current Directorships: Trustee of Gallery Trust, Schroder Series Trust, Schroder Global Series Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund and Delaware Wilshire Private Markets Tender Fund. Independent Non-Executive Director of HFA Holdings Limited. Director of Chiron Capital Allocation Fund Ltd.
Former Directorships: Trustee of O’Connor EQUUS (closed-end investment company) to 2016. Trustee of Winton Series Trust to 2017. Trustee of Winton Diversified Opportunities Fund (closed-end investment company) to 2018.
|
|
None.
|
None.
|
None. |
33
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
Name and Year of Birth
| Position with Trust and Length of
| Principal Occupation During the Past Five Years
| ||
OFFICERS (continued) | ||||
Russell Emery (Born: 1962) | Chief Compliance Officer (since 2014) | Chief Compliance Officer of SEI Structured Credit Fund, LP since 2007. Chief Compliance Officer of The Advisors’ Inner Circle Fund, The Advisors’ Inner Circle Fund II, Bishop Street Funds, The KP Funds, Frost Family of Funds, Catholic Responsible Investments Funds, The Advisors’ Inner Circle Fund III, Gallery Trust, Schroder Series Trust, Schroder Global Series Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund, Delaware Wilshire Private Markets Tender Fund, SEI Institutional Managed Trust, SEI Asset Allocation Trust, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Daily Income Trust, SEI Tax Exempt Trust, Adviser Managed Trust, New Covenant Funds, SEI Insurance Products Trust and SEI Catholic Values Trust. Chief Compliance Officer of O’Connor EQUUS (closed-end investment company) to 2016. Chief Compliance Officer of SEI Liquid Asset Trust to 2016. Chief Compliance Officer of Winton Series Trust to 2017. Chief Compliance Officer of Winton Diversified Opportunities Fund (closed-end investment company) to 2018. | ||
Eric C. Griffith (Born: 1969) | Vice President and Assistant Secretary (since 2020) | Counsel at SEI Investments since 2019. Vice President and Assistant General Counsel, JPMorgan Chase & Co., from 2012 to 2018. | ||
Matthew M. Maher (Born: 1975) | Vice President and Assistant Secretary (since 2018) | Counsel at SEI Investments since 2018. Attorney, Blank Rome LLP, from 2015 to 2018. Assistant Counsel & Vice President, Bank of New York Mellon, from 2013 to 2014. Attorney, Dilworth Paxson LLP, from 2006 to 2013. | ||
Andrew Metzger (Born: 1980) | Treasurer, Controller and Chief Financial Officer (since 2021) | Director of Fund Accounting, SEI Investments, since 2020. Senior Director, Embark, from 2019 to 2020. Senior Manager, PricewaterhouseCoopers LLP, from 2002 to 2019. | ||
Robert Morrow (Born: 1968) | Vice President (since 2017) | Account Manager, SEI Investments, since 2007. | ||
Alexander F. Smith (Born: 1977) | Vice President and Assistant Secretary (since 2020) | Counsel at SEI Investments since 2020. Associate Counsel & Manager, Vanguard, 2012 to 2020. Attorney, Stradley Ronon Stevens & Young, LLP, 2008 to 2012.
|
34
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
Other Directorships Held in the Past Five Years
|
None.
|
None.
|
None.
|
None.
|
None.
|
None.
|
35
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
Name and Year of Birth
| Position with Trust and Length of
| Principal Occupation During the Past Five Years
| ||
OFFICERS (continued)
| ||||
Bridget E. Sudall (Born: 1980) | Privacy Officer
Anti-Money Laundering Officer (since 2015) | Senior Associate and AML Officer, Morgan Stanley Alternative Investment Partners, from 2011 to 2015. Investor Services Team Lead, Morgan Stanley Alternative Investment Partners, from 2007 to 2011. |
36
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
Other Directorships Held in the Past Five Years
|
|
None
|
37
THE ADVISORS’ INNER CIRCLE FUND III | KBI GLOBAL INVESTORS | |||
AQUARIUS FUND | ||||
JULY 31, 2021 |
For shareholders that do not have a July 31, 2021 tax year end, this notice is for informational purposes only. For shareholders with a July 31, 2021 tax year end, please consult your tax advisor as to the pertinence of this notice. For the fiscal year ended July 31, 2021, the Fund is designating the following items with regard to distributions paid during the period:
Long Term | Ordinary Income Distributions | Total Distributions | Dividends Qualifying for Corporate Dividend Received Deduction(1) | Qualifying Dividend Income(2) | U.S. Government Interest(3) | Interest Related Dividends(4) | Qualified Short- Term Capital Gain(5) | |||||||
50.57% | 49.43% | 100.00% | 7.71% | 47.37% | 0.00% | 0.00% | 100.00% |
(1) Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and are reflected as a percentage of ordinary income distributions (the total of short term capital gain and net investment income distributions).
(2) The percentage in this column represents the amount of “Qualifying Dividend Income” as created by the Jobs and Growth Tax Relief Reconciliation Act of 2003 and is reflected as a percentage of ordinary income distributions (the total of short term capital gain and net investment income distributions). It is the intention of the Fund to designate the maximum amount permitted by law.
(3) “U.S. Government Interest” represents the amount of interest that was derived from direct U.S. Government obligations and distributed during the fiscal year. This amount is reflected as a percentage of ordinary income.
(4) The percentage in this column represents the amount of “Interest Related Dividend” and is reflected as a percentage of ordinary income distributions. Interest related dividends are exempted from U.S. withholding tax when paid to foreign investors.
(5) The percentage of this column represents the amount of “Short-Term Capital Gain Dividends” and is reflected as a percentage of short term capital gain distributions that is exempted from U.S. withholding tax when paid to foreign investors.
The Fund intends to pass-through foreign tax credits to shareholders. For the fiscal year ended July 31, 2021, the amount of foreign source income was $4,567,994, and foreign tax credit was $67,248.
38
KBI Global Investors Aquarius Fund
P.O. Box 588
Portland, ME 04112
1- 833-658-4739
Investment Adviser:
KBI Global Investors (North America) Ltd.
3rd Floor, 2 Harbourmaster Place
IFSC
Dublin 1 Ireland
Administrator:
SEI Investments Global Funds Services
One Freedom Valley Drive
Oaks, PA 19456
Distributor:
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, PA 19456
Legal Counsel:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, PA 19103
Independent Registered Public Accounting Firm:
Ernst & Young LLP
One Commerce Square
2005 Market Street, Suite 700
Philadelphia, PA 19103
This information must be preceded or accompanied by a current prospectus for the Fund described.
KBI-AR-001-0100
Item 2. | Code of Ethics. |
The Registrant has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, controller or principal accounting officer, and any person who performs a similar function. There have been no amendments to or waivers granted to this code of ethics during the period covered by this report.
Item 3. | Audit Committee Financial Expert. |
(a)(1) The Registrant’s board of trustees has determined that the Registrant has at least one audit committee financial expert serving on the audit committee.
(a)(2) The Registrant’s audit committee financial experts are Thomas P. Lemke and Jay Nadel, and each of Messrs. Lemke and Nadel is considered to be “independent”, as that term is defined in Form N-CSR Item 3(a)(2).
Item 4. | Principal Accountant Fees and Services. |
Fees billed by PricewaterhouseCoopers LLP (“PwC”) relate to The Advisors’ Inner Circle Fund III (the “Trust”).
PwC billed the Trust aggregate fees for services rendered to the Trust for the last two fiscal years as follows:
FYE July 31, 2021 | FYE July 31, 2020 | |||||||||||||
All fees and services to | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | |||||||||
(a) | Audit Fees(1) | $730,515 | $0 | $11,990 | $581,815 | $0 | $607,218 | |||||||
(b) | Audit-Related Fees | $4,000 | $0 | $0 | $0 | $0 | $0 | |||||||
(c) | Tax Fees(2) | $0 | $0 | $90,000 | $0 | $0 | $335,050 | |||||||
(d) | All Other Fees | $0 | $0 | $1,473 | $0 | $0 | $15,941 |
Fees billed by Ernst & Young LLP (“E&Y”) relate to the Trust
E&Y billed the Trust aggregate fees for services rendered to the Trust for the last two fiscal years as follows:
FYE July 31, 2021 | FYE July 31, 2020 | |||||||||||||
All fees and | All fees and services to service affiliates that were pre-approved | All other fees did not | All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees did not | |||||||||
(a) | Audit Fees(1) | $23,330 | None | None | $23,330 | None | None | |||||||
(b) | Audit-Related Fees | None | None | None | None | None | None | |||||||
(c) | Tax Fees | None | None | None | None | None | None | |||||||
(d) | All Other Fees | None | None | None | None | None | None |
Fees billed by Deloitte & Touche LLP (“D&T”) relate to the Trust
D&T billed the Trust aggregate fees for services rendered to the Trust for the last two fiscal years as follows
2021 | 2020 | |||||||||||||
All fees and | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | |||||||||
(a) | Audit Fees(1) | $25,000 | None | None | None | None | None | |||||||
(b) | Audit-Related Fees | None | None | None | None | None | None | |||||||
(c) | Tax Fees | None | None | None | None | None | None | |||||||
(d) | All Other Fees | None | None | None | None | None | None |
Notes:
(1) | Audit fees include amounts related to the audit of the Trust’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. |
(2) | Tax return preparation fees for affiliates of the Funds. |
(e)(1) The Trust’s Audit Committee has adopted and the Board of Trustees has ratified an Audit and Non-Audit Services Pre-Approval Policy (the “Policy”), which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditor of the Funds may be pre-approved.
The Policy provides that all requests or applications for proposed services to be provided by the independent auditor must be submitted to the Registrant’s Chief Financial Officer (“CFO”) and must include a detailed description of the services proposed to be rendered. The CFO will determine whether such services:
(1) require specific pre-approval; (2) are included within the list of services that have received the general pre-approval of the Audit Committee pursuant to the Policy; or (3) have been previously pre-approved in connection with the independent auditor’s annual engagement letter for the applicable year or otherwise. In any instance where services require pre-approval, the Audit Committee will consider whether such services are consistent with SEC’s rules and whether the provision of such services would impair the auditor’s independence.
Requests or applications to provide services that require specific pre-approval by the Audit Committee will be submitted to the Audit Committee by the CFO. The Audit Committee will be informed by the CFO on a quarterly basis of all services rendered by the independent auditor. The Audit Committee has delegated specific pre-approval authority to either the Audit Committee Chair or financial expert, provided that the estimated fee for any such proposed pre-approved service does not exceed $100,000 and any pre-approval decisions are reported to the Audit Committee at its next regularly-scheduled meeting.
Services that have received the general pre-approval of the Audit Committee are identified and described in the Policy. In addition, the Policy sets forth a maximum fee per engagement with respect to each identified service that has received general pre-approval.
All services to be provided by the independent auditor shall be provided pursuant to a signed written engagement letter with the Registrant, the investment adviser, or applicable control affiliate (except that matters as to which an engagement letter would be impractical because of timing issues or because the matter is small may not be the subject of an engagement letter) that sets forth both the services to be provided by the independent auditor and the total fees to be paid to the independent auditor for those services.
In addition, the Audit Committee has determined to take additional measures on an annual basis to meet the Audit Committee’s responsibility to oversee the work of the independent auditor and to assure the auditor’s independence from the Registrant, such as (a) reviewing a formal written statement from the independent auditor delineating all relationships between the independent auditor and the Registrant, and (b) discussing with the independent auditor the independent auditor’s methods and procedures for ensuring independence.
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows (PwC):
2021 | 2020 | |||
Audit-Related Fees | 0% | 0% | ||
Tax Fees | 0% | 0% | ||
All Other Fees | 0% | 0% |
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows (E&Y):
2021 | 2020 | |||
Audit-Related Fees | None | None | ||
Tax Fees | None | None | ||
All Other Fees | None | None |
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows (D&T):
2021 | 2020 | |||
Audit-Related Fees | None | None | ||
Tax Fees | None | None | ||
All Other Fees | None | None |
(f) Not applicable.
(g) The aggregate non-audit fees and services billed by PwC 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 for the last two fiscal years ended July 31st were $91,473 and $350,991 for 2021 and 2020 respectively.
(g) The aggregate non-audit fees and services billed by E&Y 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 for the last two fiscal years ended July 31st were $0 and $0 for 2021 and 2020 respectively.
(g) The aggregate non-audit fees and services billed by D&T 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 for the last two fiscal-years-ended July 31st were $0 and $0 for 2021 and 2020, respectively.
(h) During the past fiscal year, all non-audit services provided by the Registrant’s principal accountant to either the Registrant’s investment adviser or to any entity controlling, controlled by, or under common control with the Registrant’s investment adviser that provides ongoing services to the Registrant were pre-approved by the Audit Committee of Registrant’s Board of Trustees. Included in the Audit Committee’s pre-approval of these non-audit service were the review and consideration as to whether the provision of these non-audit services is compatible with maintaining the principal accountant’s independence.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable to open-end management investment companies.
Item 6. | Schedule of Investments. |
Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable to open-end management investment companies.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable to open-end management investment companies.
Item 9. | Purchases of Equity Securities by Closed-End Management Company and Affiliated Purchasers. |
Not applicable to open-end management investment companies.
Item 10. | Submission of Matters to a Vote of Security Holders. |
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees during the period covered by this report.
Item 11. | Controls and Procedures. |
(a) The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant’s disclosure controls and procedures, as defined in Rule 30a-3(c) under the Act (17 CFR § 270.30a-3(c)), as of a date within 90 days of the filing date of the report, are effective based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR § 270.30a-3(b)) and Rule 13a-15(b) or Rule 15d-15(b) under the Exchange Act (17 CFR § 240.13a-15(b) or § 240.15d-15(b)).
(b) There has been no change in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17 CFR § 270.3a-3(d)) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Items 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable to open-end management investment companies.
Items 13. | Exhibits. |
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) | The Advisors’ Inner Circle Fund III | |||||
By (Signature and Title) | /s/ Michael Beattie | |||||
Michael Beattie, President |
Date: October 7, 2021
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/ Michael Beattie | |||||
Michael Beattie, President | ||||||
Date: October 7, 2021 | ||||||
By (Signature and Title) | /s/ Andrew Metzger | |||||
Andrew Metzger, | ||||||
Treasurer, Controller, and CFO |
Date: October 7, 2021