We could not find any results for:
Make sure your spelling is correct or try broadening your search.
Name | Symbol | Market | Type |
---|---|---|---|
Cp High Yield Trend Etf | AMEX:HYTR | AMEX | Exchange Traded Fund |
Price Change | % Change | Price | High Price | Low Price | Open Price | Traded | Last Trade | |
---|---|---|---|---|---|---|---|---|
0.06 | 0.28% | 21.47 | 21.47 | 21.455 | 21.46 | 206 | 18:04:59 |
united
states
securities and exchange commission
washington, d.c. 20549
form n-csr
certified shareholder report of registered management
investment companies
Investment Company Act file number 811-22655
Northern Lights Fund Trust III
(Exact name of registrant as specified in charter)
225 Pictoria Dr, Ste 450 Cincinnati, Ohio 45246
(Address of principal executive offices) (Zip code)
Eric Kane
4221 North 203rd Street, Suite 100 Elkhorn, Nebraska 68022-3474
(Name and address of agent for service)
Registrant's telephone number, including area code: 631-470-2600
Date of fiscal year end: 9/30
Date of reporting period: 3/31/20
Item 1. Reports to Stockholders.
Semi-Annual Report
March 31, 2020
RESQ Dynamic Allocation Fund
RQEAX
RQECX
RQEIX
RESQ Strategic Income Fund
RQIAX
RQICX
RQIIX
1-877-940-2526
www.RESQFunds.com
Distributed by Northern Lights Distributors, LLC
Member FINRA
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds website www.RESQFunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by following the instructions included with paper Fund documents that have been mailed to you.
Dear Shareholder,
The team at ResQ hopes that you and your family are safe and sound. We are humbled by the catastrophe that the COVID-19 virus has unleashed on our health and economic well-being. We understand that different parts of the country have been hit much harder than others and although Arizona has been lightly touched, our thoughts and prayers go out to everyone affected, particularly those to the east. The country was caught flat footed and under prepared. We do remain hopeful of a therapeutic or vaccine soon and believe this country is strong enough to recover over the next few quarters.
The first quarter of 2020 was certainly unchartered territory. The year started with most economic indicators in good place and ended the quarter with an economic shutdown and 22 million Americans out of work. Unemployment claims have soared, presently over 30 million and the prospects have weakened that employers would hire all their workers back. It will be depressing to see the hangover and collateral damage inflicted to the economy. As the country begins to reopen, the states may tread lightly with an abundance of caution. American lives will still remain the most important reopening consideration. In our view, Mid-summer looks to be a realistic target for a full reopening.
Past flus have typically dropped markets 10-15% and this originally looked no different. The stock market does not handle uncertainty very well and no one knows how this all plays out. Companies are hesitant to provide guidance and earnings estimates are uncertain as the economy remains closed.
For the 10/1/19-3/31/20 period, the ResQ Dynamic Allocation Fund (-11.23%, Class I) performed slightly better but in line with its two benchmarks, the MSCI World Index (-14.30%) and the S&P 500 (-12.31%). The Funds lower standard deviation contributed to the outperformance.
For the 10/1/19-3/31/20 period, the ResQ Strategic Income Fund (-1.18%, Class I) performed in line with the Dow Jones Conservative Portfolio Index (-1.96%) and underperformed the Bloomberg Barclays US Aggregate Bond Index (+3.33%). Underperformance compared to the Aggregate Bond Index is to be expected as the Aggregate Bond had a larger allocation to Treasuries in a falling interest rate environment.
Portfolio management will take it one day at a time from here. The models will remain fluid and open to developing trends. A higher moving market will allow the Funds to continue the de-risking protocol of an uncertain future. If the market breaks higher, moves will begin to be made back towards a bull market portfolio.
The stock market is forward looking. A continued move higher might imply a therapeutic or vaccine is close and the economy recovering smartly into year-end.
In the reverse scenario, we have a solid strategy in place and feel very confident in our tracking of bear markets. Our investment team has tremendous experience in trading bear markets of the past. We have been through three economic recessions actively trading retail money and we have navigated the declines well in the past.
We strive to provide our shareholders with value. Thank you for your support.
The Team at ResQ Funds
1
MSCI World Index - The MSCI World is a market cap weighted stock market index of 1,655 stocks from companies throughout the world. Investors cannot invest directly in an index.
S&P 500 Index - The Standard & Poors 500 is an American stock market index based on the market capitalizations of 500 large companies with common stock listed on the NYSE or NASDAQ. Investors cannot invest directly in an index.
Dow Jones Conservative Portfolio Index - The Dow Jones Conservative Portfolio Index is a member of the Relative Risk Index Series and designed to measure a total portfolio of stocks, bonds, and cash. The Dow Jones Conservative Portfolio Index risk level is set to 20% of the Dow Jones Global Stock CMAC Indexs downside risk. Investors cannot invest directly in an index.
Bloomberg Barclays Aggregate Bond Index - The Bloomberg Barclays Aggregate Bond Index represents the US investment-grade, taxable bond market. Investors cannot invest directly in an index.
2183-NLD-5/7/2020
2
RESQ Dynamic Allocation Fund |
PORTFOLIO REVIEW (Unaudited) |
March 31, 2020 |
The Funds performance figures* for the periods ended March 31, 2020, as compared to its benchmark:
Annualized | Annualized | Annualized | |||
Six Months | One Year | Five Year | Since Inception (a) | Since Inception (b) | |
RESQ Dynamic Allocation Fund - Class A | (11.41)% | (9.20)% | (4.95)% | (2.60)% | N/A |
RESQ Dynamic Allocation Fund - Class A with Load | (16.50)% | (14.45)% | (6.07)% | (3.52)% | N/A |
RESQ Dynamic Allocation Fund - Class C | (11.68)% | (9.83)% | N/A | N/A | (3.83)% |
RESQ Dynamic Allocation Fund - Class I | (11.23)% | (8.86)% | (4.56)% | (2.19)% | N/A |
MSCI World Index (c) | (14.30)% | (10.39)% | 3.25% | 4.10% | 4.57% |
S&P 500 Total Return Index (d) | (12.31)% | (6.98)% | 6.73% | 7.95% | 8.14% |
* | The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. Performance figures for periods greater than 1 year are annualized. The total operating expenses as stated in the fee table to the Funds prospectus dated February 1, 2020 are 2.79%, 3.39% and 2.39% for the Class A, C and I Shares, respectively. Class A shares are subject to a maximum sales charge of 5.75% of the original purchase price imposed on purchases. Redemptions of any share class made within 30 days of purchase may be assessed a redemption fee of 2.00%. For performance information current to the most recent month-end, please call 1-877-940-2526. |
(a) | Inception date is December 20, 2013. |
(b) | Inception date is October 17, 2014 |
(c) | The MSCI World Index captures large and mid cap representation across 23 Developed Markets (DM) countries. With 1,650 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. Investors may not invest in the Index directly. Unlike the Funds returns, the Index does not reflect any fees or expenses. |
(d) | The S&P 500 Total Return Index is an unmanaged free-float capitalization-weighted index which measures the performance of 500 large-cap common stocks actively traded in the United States. Index returns assume reinvestment of dividends. Investors may not invest in the Index directly. Unlike the Funds returns, the Index does not reflect any fees or expenses. |
Portfolio Composition as of March 31, 2020
Holdings by Asset Type | % of Net Assets | |||
Exchange Traded Funds - Equity Funds | 77.5 | % | ||
Other Assets In Excess of Liabilities | 22.5 | % | ||
100.0 | % |
Please refer to the Portfolio of Investments in this shareholder report for a detailed listing of the Funds holdings.
3
RESQ Strategic Income Fund |
PORTFOLIO REVIEW (Unaudited) |
March 31, 2020 |
The Funds performance figures* for the periods ended March 31, 2020, as compared to its benchmark:
Annualized | Annualized | Annualized | |||
Six Months | One Year | Five Year | Since Inception (a) | Since Inception (b) | |
RESQ Strategic Income Fund - Class A | (1.38)% | 4.51% | (2.57)% | (0.93)% | N/A |
RESQ Strategic Income Fund - Class A with Load | (6.03)% | (0.47)% | (3.52)% | (1.70)% | N/A |
RESQ Strategic Income Fund - Class C | (1.71)% | 3.86% | (3.17)% | N/A | (2.52)% |
RESQ Strategic Income Fund - Class I | (1.18)% | 5.12% | (2.12)% | (0.51)% | N/A |
Bloomberg Barclays U.S. Aggregate Bond Index (c) | 3.33% | 8.93% | 3.36% | 3.83% | 3.44% |
* | The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. Performance figures for periods greater than 1 year are annualized. The total operating expenses as stated in the fee table to the Funds prospectus dated February 1, 2020 are 2.80%, 3.40% and 2.40% for the Class A, C and I Shares, respectively. Class A shares are subject to a maximum sales charge of 4.75% of the original purchase price imposed on purchases. Redemptions of any share class made within 30 days of purchase may be assessed a redemption fee of 2.00%. For performance information current to the most recent month-end, please call 1-877-940-2526. |
(a) | Inception date is December 20, 2013. |
(b) | Inception date is October 17, 2014. |
(c) | The Bloomberg Barclays U.S. Aggregate Bond Index is an unmanaged index comprised of U.S. investment grade, fixed rate bond market securities, including government, government agency, corporate and mortgage-backed securities between one and ten years. Index returns assume reinvestment of dividends. Investors may not invest in the Index directly. Unlike the Funds returns, the Index does not reflect any fees or expenses. |
Portfolio Composition as of March 31, 2020
Holdings by Asset Type | % of Net Assets | |||
Exchange Traded Funds - Debt Funds | 64.5 | % | ||
Exchange Traded Funds - Equity Funds | 17.8 | % | ||
Exchange Traded Fund - Asset Allocation Fund | 4.4 | % | ||
Exchange Traded Funds - Commodity Funds | 2.3 | % | ||
Other Assets In Excess of Liabilities | 11.0 | % | ||
100.0 | % |
Please refer to the Portfolio of Investments in this shareholder report for a detailed listing of the Funds holdings.
4
RESQ Dynamic Allocation Fund |
PORTFOLIO OF INVESTMENTS (Unaudited) |
March 31, 2020 |
Shares | Fair Value | |||||||
EXCHANGE TRADED FUNDS - 77.5% | ||||||||
EQUITY FUNDS - 77.5% | ||||||||
113,500 | Direxion Daily S&P 500 Bear 3X Shares | $ | 1,809,190 | |||||
103,400 | ETFMG Alternative Harvest ETF | 1,178,760 | ||||||
94,200 | iShares MSCI ACWI ex US ETF | 3,546,630 | ||||||
17,300 | iShares Nasdaq Biotechnology ETF | 1,863,902 | ||||||
75,500 | SPDR Portfolio S&P 1500 Composite Stock Market ETF | 2,374,475 | ||||||
15,200 | SPDR S&P 500 ETF Trust | 3,917,800 | ||||||
13,100 | Vanguard S&P 500 ETF | 3,102,342 | ||||||
31,300 | Vanguard Value ETF | 2,787,578 | ||||||
117,313 | Wisdomtree Trust-Wisdomtree US Multifactor Fund | 2,876,515 | ||||||
TOTAL EXCHANGE TRADED FUNDS (Cost - $28,136,875) | 23,457,192 | |||||||
TOTAL INVESTMENTS - 77.5% (Cost - $28,136,875) | $ | 23,457,192 | ||||||
OTHER ASSETS IN EXCESS OF LIABILITIES - 22.5% | 6,818,127 | |||||||
NET ASSETS - 100.0% | $ | 30,275,319 |
ACWI - All Country World Index
ETF - Exchange Traded Fund
MSCI - Morgan Stanley Capital International
SPDR - Standard & Poors Depositary Receipt
See accompanying notes to financial statements.
5
RESQ Strategic Income Fund |
PORTFOLIO OF INVESTMENTS (Unaudited) |
March 31, 2020 |
Shares | Fair Value | |||||||
EXCHANGE TRADED FUNDS - 89.0% | ||||||||
ASSET ALLOCATION FUND - 4.4% | ||||||||
28,600 | SPDR Bloomberg Barclays Convertible Securities ETF | $ | 1,368,796 | |||||
COMMODITY FUNDS - 2.3% | ||||||||
15,000 | iShares Silver Trust * | 195,750 | ||||||
3,500 | SPDR Gold Shares * | 518,175 | ||||||
713,925 | ||||||||
EQUITY FUNDS - 17.8% | ||||||||
23,000 | Vanguard Dividend Appreciation ETF | 2,377,970 | ||||||
19,900 | Vanguard Growth ETF | 3,118,131 | ||||||
5,496,101 | ||||||||
DEBT FUNDS - 64.5% | ||||||||
81,500 | Invesco Senior Loan ETF | 1,667,490 | ||||||
25,000 | iShares iBoxx High Yield Corporate Bond ETF | 1,926,750 | ||||||
23,050 | iShares MBS ETF | 2,545,642 | ||||||
46,175 | iShares National Muni Bond ETF | 5,218,237 | ||||||
40,000 | iShares Preferred & Income Securities ETF | 1,273,600 | ||||||
295,000 | ProShares UltraShort 20+ Year Treasury | 4,743,600 | ||||||
47,300 | Vanguard Mortgage-Backed Securities ETF | 2,577,850 | ||||||
19,953,169 | ||||||||
TOTAL EXCHANGE TRADED FUNDS (Cost - $28,420,877) | 27,531,991 | |||||||
TOTAL INVESTMENTS - 89.0% (Cost - $28,420,877) | $ | 27,531,991 | ||||||
OTHER ASSETS IN EXCESS OF LIABILITIES - 11.0% | 3,383,897 | |||||||
NET ASSETS - 100.0% | $ | 30,915,888 |
ETF - Exchange Traded Fund
MBS - Mortgage Backed Security
SPDR - Standard & Poors Depositary Receipt
* | Non-income producing security. |
See accompanying notes to financial statements.
6
RESQ Funds |
STATEMENTS OF ASSETS AND LIABILITIES (Unaudited) |
March 31, 2020 |
RESQ Dynamic | RESQ Strategic | |||||||
Allocation Fund | Income Fund | |||||||
ASSETS | ||||||||
Investment securities: | ||||||||
At cost | $ | 28,136,875 | $ | 28,420,877 | ||||
At value | $ | 23,457,192 | $ | 27,531,991 | ||||
Cash and cash equivalents | 6,816,244 | 5,295,252 | ||||||
Dividends and interest receivable | 30,815 | 10,538 | ||||||
Prepaid expenses and other assets | 36,880 | 39,949 | ||||||
TOTAL ASSETS | 30,341,131 | 32,877,730 | ||||||
LIABILITIES | ||||||||
Investment advisory fees payable | 26,764 | 26,181 | ||||||
Payable to related parties | 14,287 | 15,245 | ||||||
Distribution (12b-1) fees payable | 10,629 | 10,525 | ||||||
Payable for investments purchased | — | 1,896,564 | ||||||
Accrued expenses and other liabilities | 14,132 | 13,327 | ||||||
TOTAL LIABILITIES | 65,812 | 1,961,842 | ||||||
NET ASSETS | $ | 30,275,319 | $ | 30,915,888 | ||||
NET ASSETS CONSIST OF: | ||||||||
Paid in capital | $ | 39,055,085 | $ | 37,649,560 | ||||
Accumulated loss | (8,779,766 | ) | (6,733,672 | ) | ||||
NET ASSETS | $ | 30,275,319 | $ | 30,915,888 | ||||
NET ASSET VALUE PER SHARE: | ||||||||
Class A Shares: | ||||||||
Net Assets | $ | 29,993,326 | $ | 30,893,172 | ||||
Shares of Beneficial Interest Outstanding ($0 par value, unlimited shares authorized) | 3,757,160 | 3,531,176 | ||||||
Net Asset Value (Net Assets ÷ Shares Outstanding) and Redemption Price Per Share (a) | $ | 7.98 | $ | 8.75 | ||||
Maximum Offering Price Per Share (b) | $ | 8.47 | $ | 9.19 | ||||
Class C Shares: | ||||||||
Net Assets | $ | 35,191 | $ | 12,668 | ||||
Shares of Beneficial Interest Outstanding ($0 par value, unlimited shares authorized) | 4,557 | 1,473 | ||||||
Net Asset Value (Net Assets ÷ Shares Outstanding), Offering and Redemption Price Per Share (a) | $ | 7.72 | $ | 8.60 | ||||
Class I Shares: | ||||||||
Net Assets | $ | 246,802 | $ | 10,048 | ||||
Shares of Beneficial Interest Outstanding ($0 par value, unlimited shares authorized) | 30,181 | 1,141 | ||||||
Net Asset Value (Net Assets ÷ Shares Outstanding), Offering and Redemption Price Per Share (a) | $ | 8.18 | $ | 8.80 | (c) |
(a) | Redemptions made within 30 days of purchase may be assessed a redemption fee of 2.00%. |
(b) | There is a maximum front-end sales charge (load) of 5.75% and 4.75% imposed on purchases of Class A shares of the RESQ Dynamic Allocation Fund and RESQ Strategic Income Fund, respectively. |
(c) | Net assets divided by shares outstanding does not equal net asset value due to rounding. |
See accompanying notes to financial statements.
7
RESQ Funds |
STATEMENTS OF OPERATIONS (Unaudited) |
For the Six Months Ended March 31, 2020 |
See accompanying notes to financial statements.
8
RESQ Dynamic Allocation Fund |
STATEMENTS OF CHANGES IN NET ASSETS |
For the Six Months Ended | ||||||||
March 31, 2020 | For the Year Ended | |||||||
(Unaudited) | September 30, 2019 | |||||||
FROM OPERATIONS | ||||||||
Net investment income (loss) | $ | 38,842 | $ | (236,693 | ) | |||
Net realized gain (loss) on investments | 939,443 | (2,878,436 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (4,956,951 | ) | 90,410 | |||||
Net decrease in net assets resulting from operations | (3,978,666 | ) | (3,024,719 | ) | ||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
Total distributions paid | ||||||||
Class A | (44,835 | ) | — | |||||
Class C | (89 | ) | — | |||||
Class I | (765 | ) | — | |||||
Net decrease in net assets from distributions to shareholders | (45,689 | ) | — | |||||
FROM SHARES OF BENEFICIAL INTEREST | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 741,974 | 684,615 | ||||||
Class I | 14,550 | 48,404 | ||||||
Net asset value of shares issued in reinvestment of distributions: | ||||||||
Class A | 44,690 | — | ||||||
Class C | 89 | — | ||||||
Class I | 765 | — | ||||||
Payments for shares redeemed: | ||||||||
Class A | (3,559,834 | ) | (6,296,745 | ) | ||||
Class C | (11,156 | ) | (24,465 | ) | ||||
Class I | (10,956 | ) | (260,594 | ) | ||||
Net decrease in net assets from shares of beneficial interest | (2,779,878 | ) | (5,848,785 | ) | ||||
TOTAL DECREASE IN NET ASSETS | (6,804,233 | ) | (8,873,504 | ) | ||||
NET ASSETS | ||||||||
Beginning of Period | 37,079,552 | 45,953,056 | ||||||
End of Period | $ | 30,275,319 | $ | 37,079,552 | ||||
SHARE ACTIVITY | ||||||||
Class A: | ||||||||
Shares Sold | 84,260 | 75,414 | ||||||
Shares Reinvested | 5,066 | — | ||||||
Shares Redeemed | (405,227 | ) | (714,749 | ) | ||||
Net decrease in shares of beneficial interest outstanding | (315,901 | ) | (639,335 | ) | ||||
Class C: | ||||||||
Shares Reinvested | 10 | — | ||||||
Shares Redeemed | (1,274 | ) | (2,781 | ) | ||||
Net decrease in shares of beneficial interest outstanding | (1,264 | ) | (2,781 | ) | ||||
Class I: | ||||||||
Shares Sold | 1,564 | 5,333 | ||||||
Shares Reinvested | 85 | — | ||||||
Shares Redeemed | (1,144 | ) | (28,742 | ) | ||||
Net increase (decrease) in shares of beneficial interest outstanding | 505 | (23,409 | ) |
See accompanying notes to financial statements.
9
RESQ Strategic Income Fund |
STATEMENTS OF CHANGES IN NET ASSETS |
For the Six Months Ended | ||||||||
March 31, 2020 | For the Year Ended | |||||||
(Unaudited) | September 30, 2019 | |||||||
FROM OPERATIONS | ||||||||
Net investment income | $ | 56,671 | $ | 18,461 | ||||
Net realized gain (loss) on investments | 517,993 | (954,949 | ) | |||||
Net change in unrealized appreciation (depreciation) on investments | (1,054,321 | ) | 338,604 | |||||
Net decrease in net assets resulting from operations | (479,657 | ) | (597,884 | ) | ||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
Total distributions paid | ||||||||
Class A | (63,876 | ) | (42,704 | ) | ||||
Class I | (51 | ) | (293 | ) | ||||
Net decrease in net assets from distributions to shareholders | (63,927 | ) | (42,997 | ) | ||||
FROM SHARES OF BENEFICIAL INTEREST | ||||||||
Proceeds from shares sold: | ||||||||
Class A | 650,022 | 646,332 | ||||||
Class I | 1,897 | 9,500 | ||||||
Net asset value of shares issued in reinvestment of distributions: | ||||||||
Class A | 63,626 | 42,532 | ||||||
Class I | 51 | 212 | ||||||
Payments for shares redeemed: | ||||||||
Class A | (3,293,152 | ) | (5,153,691 | ) | ||||
Class I | (18 | ) | (116,197 | ) | ||||
Net decrease in net assets from shares of beneficial interest | (2,577,574 | ) | (4,571,312 | ) | ||||
TOTAL DECREASE IN NET ASSETS | (3,121,158 | ) | (5,212,193 | ) | ||||
NET ASSETS | ||||||||
Beginning of Period | 34,037,046 | 39,249,239 | ||||||
End of Period | $ | 30,915,888 | $ | 34,037,046 | ||||
SHARE ACTIVITY | ||||||||
Class A: | ||||||||
Shares Sold | 73,674 | 77,452 | ||||||
Shares Reinvested | 7,234 | 4,998 | ||||||
Shares Redeemed | (376,792 | ) | (610,631 | ) | ||||
Net decrease in shares of beneficial interest outstanding | (295,884 | ) | (528,181 | ) | ||||
Class I: | ||||||||
Shares Sold | 212 | 1,105 | ||||||
Shares Reinvested | 6 | 25 | ||||||
Shares Redeemed | (2 | ) | (13,504 | ) | ||||
Net increase (decrease) in shares of beneficial interest outstanding | 216 | (12,374 | ) |
See accompanying notes to financial statements.
10
RESQ Dynamic Allocation Fund |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Period
Class A | ||||||||||||||||||||||||
For the | ||||||||||||||||||||||||
Six Months Ended | For the | For the | For the | For the | For the | |||||||||||||||||||
March 31, 2020 | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
(Unaudited) | September 30, 2019 | September 30, 2018 | September 30, 2017 | September 30, 2016 | September 30, 2015 | |||||||||||||||||||
Net asset value, beginning of period | $ | 9.02 | $ | 9.62 | $ | 9.07 | $ | 8.42 | $ | 8.66 | $ | 10.41 | ||||||||||||
Activity from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) (1) | 0.01 | (0.05 | ) | (0.06 | ) | (0.07 | ) | (0.12 | ) | (0.04 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | (1.04 | ) | (0.55 | ) | 0.61 | 0.72 | (0.12 | ) (2) | (1.10 | ) | ||||||||||||||
Total from investment operations | (1.03 | ) | (0.60 | ) | 0.55 | 0.65 | (0.24 | ) | (1.14 | ) | ||||||||||||||
Paid-in-capital from redemption fees (1) | — | — | 0.00 | (3) | 0.00 | (3) | 0.00 | (3) | 0.00 | (3) | ||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.01 | ) | — | — | — | — | — | |||||||||||||||||
Net realized gains | — | — | — | — | — | (0.61 | ) | |||||||||||||||||
Total distributions | (0.01 | ) | — | — | — | — | (0.61 | ) | ||||||||||||||||
Net asset value, end of period | $ | 7.98 | $ | 9.02 | $ | 9.62 | $ | 9.07 | $ | 8.42 | $ | 8.66 | ||||||||||||
Total return (4) | (11.41 | )% (5) | (6.24 | )% | 6.06 | % | 7.72 | % | (2.77 | )% | (11.79 | )% | ||||||||||||
Net assets, at end of period (000s) | $ | 29,993 | $ | 36,754 | $ | 45,351 | $ | 42,246 | $ | 41,222 | $ | 42,137 | ||||||||||||
Ratio of gross expenses to average net assets (6) | 2.54 | % (7) | 2.49 | % | 2.42 | % | 2.42 | % | 2.52 | % | 2.60 | % | ||||||||||||
Ratio of net expenses to average net assets (6) | 2.20 | % (7) | 2.20 | % | 2.25 | % | 2.35 | % | 2.35 | % | 2.35 | % | ||||||||||||
Ratio of net investment loss before waiver to average net assets (8) | (0.13 | )% (7) | (0.89 | )% | (0.76 | )% | (0.89 | )% | (1.61 | )% | (0.60 | )% | ||||||||||||
Ratio of net investment Income (loss) to average net assets (8) | 0.21 | % (7) | (0.60 | )% | (0.59 | )% | (0.82 | )% | (1.44 | )% | (0.35 | )% | ||||||||||||
Portfolio Turnover Rate | 306 | % (5) | 861 | % | 448 | % | 1060 | % | 907 | % | 683 | % |
(1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(2) | Realized and unrealized gains and losses per share in this caption are balancing amounts necessary to reconcile the change in net asset value per share for the period, and may not reconcile with the aggregate gains and losses in the Statement of Operations due to share transactions for the period. |
(3) | Amount is less than $0.01. |
(4) | Total return assumes reinvestment of all dividends and distributions, if any. |
(5) | Not annualized. |
(6) | Does not include the expenses of other investment companies in which the Fund invests. |
(7) | Annualized. |
(8) | Recognition of net investment loss by the Fund is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests. |
See accompanying notes to financial statements.
11
RESQ Dynamic Allocation Fund |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Period
Class C | ||||||||||||||||||||||||
For the | ||||||||||||||||||||||||
Six Months Ended | For the | For the | For the | For the | For the | |||||||||||||||||||
March 31, 2020 | Year Ended | Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||||||||
(Unaudited) | September 30, 2019 | September 30, 2018 | September 30, 2017 | September 30, 2016 | September 30, 2015 (1) | |||||||||||||||||||
Net asset value, beginning of period | $ | 8.76 | $ | 9.40 | $ | 8.92 | $ | 8.33 | $ | 8.63 | $ | 10.15 | ||||||||||||
Activity from investment operations: | ||||||||||||||||||||||||
Net investment loss (2) | (0.02 | ) | (0.11 | ) | (0.15 | ) | (0.12 | ) | (0.17 | ) | (0.09 | ) | ||||||||||||
Net realized and unrealized gain (loss) on investments | (1.00 | ) | (0.53 | ) | 0.63 | 0.71 | (0.13 | ) (3) | (0.82 | ) | ||||||||||||||
Total from investment operations | (1.02 | ) | (0.64 | ) | 0.48 | 0.59 | (0.30 | ) | (0.91 | ) | ||||||||||||||
Paid-in-capital from redemption fees (2) | — | — | — | 0.00 | (4) | 0.00 | (4) | 0.00 | (4) | |||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.02 | ) | — | — | — | — | — | |||||||||||||||||
Net realized gains | — | — | — | — | — | (0.61 | ) | |||||||||||||||||
Total distributions | (0.02 | ) | — | — | — | — | (0.61 | ) | ||||||||||||||||
Net asset value, end of period | $ | 7.72 | $ | 8.76 | $ | 9.40 | $ | 8.92 | $ | 8.33 | $ | 8.63 | ||||||||||||
Total return (5) | (11.68 | )% (6) | (6.81 | )% | 5.38 | % | 7.08 | % | (3.48 | )% | (9.84 | )% (6) | ||||||||||||
Net assets, at end of period (000s) | $ | 35 | $ | 51 | $ | 81 | $ | 400 | $ | 672 | $ | 1,728 | ||||||||||||
Ratio of gross expenses to average net assets (7) | 3.14 | % (8) | 3.09 | % | 3.02 | % | 3.02 | % | 3.12 | % | 3.20 | % (8) | ||||||||||||
Ratio of net expenses to average net assets (7) | 2.80 | % (8) | 2.80 | % | 2.85 | % | 2.95 | % | 2.95 | % | 2.95 | % (8) | ||||||||||||
Ratio of net investment loss before waiver to average net assets (9) | (0.73 | )% (8) | (1.50 | )% | (1.82 | )% | (1.42 | )% | (2.19 | )% | (1.19 | )% (8) | ||||||||||||
Ratio of net investment loss to average net assets (9) | (0.39 | )% (8) | (1.21 | )% | (1.65 | )% | (1.35 | )% | (2.03 | )% | (0.94 | )% (8) | ||||||||||||
Portfolio Turnover Rate | 306 | % (6) | 861 | % | 448 | % | 1060 | % | 907 | % | 683 | % (6) |
(1) | The RESQ Dynamic Allocation Fund Class C shares commenced operations on October 17, 2014. |
(2) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(3) | Realized and unrealized gains and losses per share in this caption are balancing amounts necessary to reconcile the change in net asset value per share for the period, and may not reconcile with the aggregate gains and losses in the Statement of Operations due to share transactions for the period. |
(4) | Amount is less than $0.01. |
(5) | Total return assumes reinvestment of all dividends and distributions, if any. |
(6) | Not annualized. |
(7) | Does not include the expenses of other investment companies in which the Fund invests. |
(8) | Annualized. |
(9) | Recognition of net investment loss by the Fund is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests. |
See accompanying notes to financial statements.
12
RESQ Dynamic Allocation Fund |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Period
Class I | ||||||||||||||||||||||||
For the | ||||||||||||||||||||||||
Six Months Ended | For the | For the | For the | For the | For the | |||||||||||||||||||
March 31, 2020 | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
(Unaudited) | September 30, 2019 | September 30, 2018 | September 30, 2017 | September 30, 2016 | September 30, 2015 | |||||||||||||||||||
Net asset value, beginning of period | $ | 9.24 | $ | 9.82 | $ | 9.21 | $ | 8.51 | $ | 8.72 | $ | 10.45 | ||||||||||||
Activity from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) (1) | 0.03 | (0.02 | ) | (0.03 | ) | (0.03 | ) | (0.09 | ) | 0.00 | (2) | |||||||||||||
Net realized and unrealized gain (loss) on investments | (1.06 | ) | (0.56 | ) | 0.64 | 0.73 | (0.12 | ) (3) | (1.12 | ) | ||||||||||||||
Total from investment operations | (1.03 | ) | (0.58 | ) | 0.61 | 0.70 | (0.21 | ) | (1.12 | ) | ||||||||||||||
Paid-in-capital from redemption fees (1) | — | — | 0.00 | (2) | — | 0.00 | (2) | 0.00 | (2) | |||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.03 | ) | — | — | — | — | — | |||||||||||||||||
Net realized gains | — | — | — | — | — | (0.61 | ) | |||||||||||||||||
Total distributions | (0.03 | ) | — | — | — | — | (0.61 | ) | ||||||||||||||||
Net asset value, end of period | $ | 8.18 | $ | 9.24 | $ | 9.82 | $ | 9.21 | $ | 8.51 | $ | 8.72 | ||||||||||||
Total return (4) | (11.23 | )% (5) | (5.91 | )% | 6.62 | % | 8.23 | % | (2.41 | )% | (11.54 | )% | ||||||||||||
Net assets, at end of period (000s) | $ | 247 | $ | 274 | $ | 521 | $ | 561 | $ | 3,004 | $ | 5,823 | ||||||||||||
Ratio of gross expenses to average net assets (6) | 2.14 | % (7) | 2.09 | % | 2.02 | % | 2.02 | % | 2.12 | % | 2.20 | % | ||||||||||||
Ratio of net expenses to average net assets (6) | 1.80 | % (7) | 1.80 | % | 1.85 | % | 1.95 | % | 1.95 | % | 1.95 | % | ||||||||||||
Ratio of net investment income (loss) before waiver to average net assets (8) | 0.26 | % (7) | (0.52 | )% | (0.46 | )% | (0.42 | )% | (1.24 | )% | (0.25 | )% | ||||||||||||
Ratio of net investment income (loss) to average net assets (8) | 0.60 | % (7) | (0.22 | )% | (0.29 | )% | (0.35 | )% | (1.06 | )% | 0.00 | % | ||||||||||||
Portfolio Turnover Rate | 306 | % (5) | 861 | % | 448 | % | 1060 | % | 907 | % | 683 | % |
(1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(2) | Amount is less than $0.01. |
(3) | Realized and unrealized gains and losses per share in this caption are balancing amounts necessary to reconcile the change in net asset value per share for the period, and may not reconcile with the aggregate gains and losses in the Statement of Operations due to share transactions for the period. |
(4) | Total return assumes reinvestment of all dividends and distributions, if any. |
(5) | Not annualized. |
(6) | Does not include the expenses of other investment companies in which the Fund invests. |
(7) | Annualized. |
(8) | Recognition of net investment income (loss) by the Fund is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests. |
See accompanying notes to financial statements.
13
RESQ Strategic Income Fund |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Period
Class A | ||||||||||||||||||||||||
For the | ||||||||||||||||||||||||
Six Months Ended | For the | For the | For the | For the | For the | |||||||||||||||||||
March 31, 2020 | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
(Unaudited) | September 30, 2019 | September 30, 2018 | September 30, 2017 | September 30, 2016 | September 30, 2015 | |||||||||||||||||||
Net asset value, beginning of period | $ | 8.89 | $ | 8.98 | $ | 9.63 | $ | 9.37 | $ | 9.60 | $ | 10.39 | ||||||||||||
Activity from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) (1) | 0.02 | 0.00 | (2) | 0.08 | 0.04 | (0.02 | ) | 0.11 | ||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.08 | ) | (0.65 | ) | 0.26 | (0.20 | ) | (0.39 | ) | |||||||||||||
Total from investment operations | (0.12 | ) | (0.08 | ) | (0.57 | ) | 0.30 | (0.22 | ) | (0.28 | ) | |||||||||||||
Paid-in-capital from redemption fees (1) | — | — | — | 0.00 | (2) | 0.00 | (2) | 0.00 | (2) | |||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.02 | ) | (0.01 | ) | (0.08 | ) | (0.01 | ) | — | (0.14 | ) | |||||||||||||
Net realized gains | — | — | — | — | — | (0.37 | ) | |||||||||||||||||
Return of capital | — | — | — | (0.03 | ) | (0.01 | ) | (0.00 | ) (2) | |||||||||||||||
Total distributions | (0.02 | ) | (0.01 | ) | (0.08 | ) | (0.04 | ) | (0.01 | ) | (0.51 | ) | ||||||||||||
Net asset value, end of period | $ | 8.75 | $ | 8.89 | $ | 8.98 | $ | 9.63 | $ | 9.37 | $ | 9.60 | ||||||||||||
Total return (3) | (1.38 | )% (4) | (0.88 | )% | (5.91 | )% | 3.21 | % | (2.32 | )% | (2.94 | )% | ||||||||||||
Net assets, at end of period (000s) | $ | 30,893 | $ | 34,016 | $ | 39,116 | $ | 42,134 | $ | 40,721 | $ | 42,740 | ||||||||||||
Ratio of gross expenses to average net assets (5) | 2.61 | % (6) | 2.57 | % | 2.47 | % | 2.43 | % | 2.52 | % | 2.62 | % | ||||||||||||
Ratio of net expenses to average net assets (5) | 2.20 | % (6) | 2.20 | % | 2.25 | % | 2.35 | % | 2.35 | % | 2.35 | % | ||||||||||||
Ratio of net investment income (loss) before waiver to average net assets (7) | (0.06 | )% (6) | (0.33 | )% | 0.59 | % | 0.33 | % | (0.39 | )% | 0.86 | % | ||||||||||||
Ratio of net investment income (loss) to average net assets (7) | 0.35 | % (6) | 0.05 | % | 0.81 | % | 0.41 | % | (0.23 | )% | 1.13 | % | ||||||||||||
Portfolio Turnover Rate | 270 | % (4) | 1504 | % | 738 | % | 935 | % | 1013 | % | 617 | % |
(1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(2) | Amount is less than $0.01. |
(3) | Total return assumes reinvestment of all dividends and distributions, if any. |
(4) | Not annualized. |
(5) | Does not include the expenses of other investment companies in which the Fund invests. |
(6) | Annualized. |
(7) | Recognition of net investment income (loss) by the Fund is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests. |
See accompanying notes to financial statements.
14
RESQ Strategic Income Fund |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Period
Class C | ||||||||||||||||||||||||
For the | ||||||||||||||||||||||||
Six Months Ended | For the | For the | For the | For the | For the | |||||||||||||||||||
March 31, 2020 | Year Ended | Year Ended | Year Ended | Year Ended | Period Ended | |||||||||||||||||||
(Unaudited) | September 30, 2019 | September 30, 2018 | September 30, 2017 | September 30, 2016 | September 30, 2015 (1) | |||||||||||||||||||
Net asset value, beginning of period | $ | 8.75 | $ | 8.88 | $ | 9.52 | $ | 9.28 | $ | 9.57 | $ | 10.41 | ||||||||||||
Activity from investment operations: | ||||||||||||||||||||||||
Net investment income (loss) (2) | (0.01 | ) | (0.05 | ) | 0.01 | (0.02 | ) (3) | (0.08 | ) | (0.08 | ) | |||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.08 | ) | (0.62 | ) | 0.26 | (0.21 | ) | (0.26 | ) | |||||||||||||
Total from investment operations | (0.15 | ) | (0.13 | ) | (0.61 | ) | 0.24 | (0.29 | ) | (0.34 | ) | |||||||||||||
Paid-in-capital from redemption fees (2) | — | — | — | — | 0.00 | (4) | 0.00 | (4) | ||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | — | — | (0.03 | ) | — | — | (0.13 | ) | ||||||||||||||||
Net realized gains | — | — | — | — | — | (0.37 | ) | |||||||||||||||||
Return of capital | — | — | — | — | — | (0.00 | ) (4) | |||||||||||||||||
Total distributions | — | — | (0.03 | ) | — | — | (0.50 | ) | ||||||||||||||||
Net asset value, end of period | $ | 8.60 | $ | 8.75 | $ | 8.88 | $ | 9.52 | $ | 9.28 | $ | 9.57 | ||||||||||||
Total return (5) | (1.71 | )% (6) | (1.46 | )% | (6.41 | )% | 2.59 | % | (3.03 | )% | (3.52 | )% (6) | ||||||||||||
Net assets, at end of period (000s) | $ | 13 | $ | 13 | $ | 13 | $ | 70 | $ | 185 | $ | 1,122 | ||||||||||||
Ratio of gross expenses to average net assets (7) | 3.21 | % (8) | 3.17 | % | 3.07 | % | 3.03 | % | 3.12 | % | 3.22 | % (8) | ||||||||||||
Ratio of net expenses to average net assets (7) | 2.80 | % (8) | 2.80 | % | 2.85 | % | 2.95 | % | 2.95 | % | 2.95 | % (8) | ||||||||||||
Ratio of net investment loss before waiver to average net assets (9) | (0.66 | )% (8) | (0.92 | )% | (0.07 | )% | (0.31 | )% | (0.94 | )% | (1.05 | )% (8) | ||||||||||||
Ratio of net investment income (loss) to average net assets (9) | (0.25 | )% (8) | (0.55 | )% | 0.13 | % | (0.23 | )% | (0.78 | )% | (0.78 | )% (8) | ||||||||||||
Portfolio Turnover Rate | 270 | % (6) | 1504 | % | 738 | % | 935 | % | 1013 | % | 617 | % (6) |
(1) | The RESQ Strategic Income Funds Class C shares commenced operations on October 17, 2014. |
(2) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(3) | Realized and unrealized gains per share in this caption are balancing amounts necessary to reconcile the change in net asset value per share for the period, and may not reconcile with aggregate gains and losses in the Statement of Operations due to timing of share transactions during the year. |
(4) | Amount is less than $0.01. |
(5) | Total return assumes reinvestment of all dividends and distributions, if any. |
(6) | Not annualized. |
(7) | Does not include the expenses of other investment companies in which the Fund invests. |
(8) | Annualized. |
(9) | Recognition of net investment income (loss) by the Fund is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests. |
See accompanying notes to financial statements.
15
RESQ Strategic Income Fund |
FINANCIAL HIGHLIGHTS |
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Period
Class I | ||||||||||||||||||||||||
For the | ||||||||||||||||||||||||
Six Months Ended | For the | For the | For the | For the | For the | |||||||||||||||||||
March 31, 2020 | Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | |||||||||||||||||||
(Unaudited) | September 30, 2019 | September 30, 2018 | September 30, 2017 | September 30, 2016 | September 30, 2015 | |||||||||||||||||||
Net asset value, beginning of period | $ | 8.95 | $ | 9.01 | $ | 9.66 | $ | 9.39 | $ | 9.60 | $ | 10.38 | ||||||||||||
Activity from investment operations: | ||||||||||||||||||||||||
Net investment income (1) | 0.03 | 0.04 | 0.12 | 0.08 | 0.01 | 0.09 | ||||||||||||||||||
Net realized and unrealized gain (loss) on investments | (0.14 | ) | (0.06 | ) | (0.65 | ) | 0.27 | (0.20 | ) | (0.33 | ) | |||||||||||||
Total from investment operations | (0.11 | ) | (0.02 | ) | (0.53 | ) | 0.35 | (0.19 | ) | (0.24 | ) | |||||||||||||
Paid-in-capital from redemption fees (1) | — | — | — | — | 0.00 | (2) | 0.00 | (2) | ||||||||||||||||
Less distributions from: | ||||||||||||||||||||||||
Net investment income | (0.04 | ) | (0.04 | ) | (0.12 | ) | (0.02 | ) | — | (0.17 | ) | |||||||||||||
Net realized gains | — | — | — | — | — | (0.37 | ) | |||||||||||||||||
Return of capital | — | — | — | (0.06 | ) | (0.02 | ) | (0.00 | ) (2) | |||||||||||||||
Total distributions | (0.04 | ) | (0.04 | ) | (0.12 | ) | (0.08 | ) | (0.02 | ) | (0.54 | ) | ||||||||||||
Net asset value, end of period | $ | 8.80 | $ | 8.95 | $ | 9.01 | $ | 9.66 | $ | 9.39 | $ | 9.60 | ||||||||||||
Total return (3) | (1.18 | )% (4) | (0.23 | )% | (5.52 | )% | 3.71 | % | (1.98 | )% | (2.51 | )% | ||||||||||||
Net assets, at end of period (000s) | $ | 10 | $ | 8 | $ | 120 | $ | 156 | $ | 1,674 | $ | 3,429 | ||||||||||||
Ratio of gross expenses to average net assets (5) | 2.21 | % (6) | 2.17 | % | 2.07 | % | 2.03 | % | 2.12 | % | 2.22 | % | ||||||||||||
Ratio of net expenses to average net assets (5) | 1.80 | % (6) | 1.80 | % | 1.85 | % | 1.95 | % | 1.95 | % | 1.95 | % | ||||||||||||
Ratio of net investment income (loss) before waiver to average net assets (7) | 0.31 | % (6) | 0.04 | % | 1.01 | % | 0.78 | % | (0.01 | )% | 0.66 | % | ||||||||||||
Ratio of net investment income to average net assets (7) | 0.72 | % (6) | 0.41 | % | 1.24 | % | 0.86 | % | 0.16 | % | 0.93 | % | ||||||||||||
Portfolio Turnover Rate | 270 | % (4) | 1504 | % | 738 | % | 935 | % | 1013 | % | 617 | % |
(1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
(2) | Amount is less than $0.01. |
(3) | Total return assumes reinvestment of all dividends and distributions, if any. |
(4) | Not annualized. |
(5) | Does not include the expenses of other investment companies in which the Fund invests. |
(6) | Annualized. |
(7) | Recognition of net investment income (loss) by the Fund is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests. |
See accompanying notes to financial statements.
16
RESQ FUNDS |
NOTES TO FINANCIAL STATEMENTS (Unaudited) |
March 31, 2020 |
1. | ORGANIZATION |
The RESQ Dynamic Allocation Fund and the RESQ Strategic Income Fund (each a Fund and collectively the Funds), are each a diversified series of shares of beneficial interest of Northern Lights Fund Trust III (the Trust), a Delaware statutory trust organized under the laws of the state of Delaware on December 5, 2011. The Trust is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. The investment objective of the RESQ Dynamic Allocation Fund is to seek long term capital appreciation with capital preservation as a secondary objective. The investment objective of the RESQ Strategic Income Fund is to seek income with an emphasis on total return and capital preservation as a secondary objective.
Each Fund currently offers three classes of shares: Class A, Class C and Class I shares. Class A and Class I Shares of each Fund commenced operations on December 20, 2013. Class C shares of each Fund commenced operations on October 17, 2014. RESQ Dynamic Allocation Fund Class A shares are offered at net asset value plus a maximum sales charge of 5.75%. RESQ Strategic Income Fund Class A shares are offered at net asset value plus a maximum sales charge of 4.75%. Class C and Class I shares of the Funds are offered at net asset value. Each class represents an interest in the same assets of the applicable Fund and classes are identical except for differences in their distribution charges. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its service and/or distribution plans. Each Funds income, expenses (other than class specific distribution fees) and realized and unrealized gains and losses are allocated proportionately each day based upon the relative net assets of each class.
2. | SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of significant accounting policies followed by the Funds in preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Funds are investment companies and accordingly follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services – Investment Companies including FASB Accounting Standards Update (ASU) 2013-08.
Securities Valuation – Securities listed on an exchange are valued at the last reported sale price at the close of the regular trading session of the primary exchange on the business day the value is being determined, or in the case of securities listed on NASDAQ at the NASDAQ Official Closing Price (NOCP). In the absence of a sale, such securities shall be valued at the mean between the current bid and ask prices on the day of valuation. Futures and future options are valued at the final settled price or, in the absence of a settled price, at the last sale price on the day of valuation. Debt securities (other than short-term obligations) are valued each day by an independent pricing service approved by the Trusts Board of Trustees (the Board) based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type, indications as to values from dealers, and general market conditions or market quotations from a major market maker in the securities. Investments valued in currencies other than the U.S. dollar are converted to U.S. dollars using exchange rates obtained from pricing services. The independent pricing service does not distinguish between smaller-sized bond positions known as odd lots and larger institutional- sized bond positions known as round lots. The Fund may fair value a particular bond if the adviser does not believe that the round lot value provided by the independent pricing service reflects fair value of the Funds holding. Short-term debt obligations having 60 days or less remaining until maturity, at time of purchase, may be valued at amortized cost. Investments in open-end investment companies are valued at net asset value.
Valuation of Fund of Funds – The Funds may invest in portfolios of open-end or closed-end investment companies (the underlying funds). Underlying open-end investment companies are valued at their respective net asset values as reported by such investment companies. The underlying funds value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods established by the boards of the underlying funds. The shares of many closed-end investment companies, after their initial public offering, frequently trade at a price per share, which is different than the net asset value per share. The difference represents a market premium or market discount of such shares. There can
17
RESQ FUNDS |
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued) |
March 31, 2020 |
be no assurances that the market discount or market premium on shares of any closed-end investment company purchased by a Fund will not change.
The Funds may hold securities, such as private investments, interests in commodity pools, other non-traded securities or temporarily illiquid securities, for which market quotations are not readily available or are determined to be unreliable. These securities will be valued using the fair value procedures approved by the Board. The Board has delegated execution of these procedures to a fair value committee composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) advisor. The committee may also enlist third party consultants such as a valuation specialist at a public accounting firm, valuation consultant or financial officer of a security issuer on an as-needed basis to assist in determining a security-specific fair value. The Board reviews and ratifies the execution of this process and the resultant fair value prices at least quarterly to assure the process produces reliable results.
Fair Valuation Process – As noted above, the fair value committee is composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) advisor. The applicable investments are valued collectively via inputs from each of these groups. For example, fair value determinations are required for the following securities: (i) securities for which market quotations are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary lapse in the provision of a price by the regular pricing source), (ii) securities for which, in the judgment of the advisor, the prices or values available do not represent the fair value of the instrument. Factors which may cause the advisor to make such a judgment include, but are not limited to, the following: only a bid price or an asked price is available; the spread between bid and asked prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; (iv) securities with respect to which an event that will affect the value thereof has occurred (a significant event) since the closing prices were established on the principal exchange on which they are traded, but prior to each Funds calculation of its net asset value. Specifically, interests in commodity pools or managed futures pools are valued on a daily basis by reference to the closing market prices of each futures contract or other asset held by a pool, as adjusted for pool expenses. Restricted or illiquid securities, such as private placements or non-traded securities are valued via inputs from the advisor based upon the current bid for the security from two or more independent dealers or other parties reasonably familiar with the facts and circumstances of the security (who should take into consideration all relevant factors as may be appropriate under the circumstances). If the advisor is unable to obtain a current bid from such independent dealers or other independent parties, the fair value committee shall determine the fair value of such security using the following factors: (i) the type of security; (ii) the cost at date of purchase; (iii) the size and nature of the Funds holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.
The Funds utilize various methods to measure the fair value of all of its investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of input are:
Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities that the Funds have the ability to access.
Level 2 – Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing each Funds own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or
18
RESQ FUNDS |
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued) |
March 31, 2020 |
inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following tables summarize the inputs used as of March 31, 2020 for each Funds investments measured at fair value:
The Funds did not hold any Level 3 securities during the period.
* | Please refer to the Portfolio of Investments for classification by asset type. |
Security Transactions and Investment Income – Investment security transactions are accounted for on a trade date basis. Cost is determined and gains and losses are based upon the specific identification method for both financial statement and federal income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Purchase discounts and premiums on securities are accreted and amortized over the life of the respective securities using the effective interest method.
Distributions to Shareholders – Distributions from net investment income, if any, are declared and paid at least annually and are recorded on the ex-dividend date. The Funds will declare and pay net realized capital gains, if any, annually. The character of income and gains to be distributed is determined in accordance with federal income tax regulations, which may differ from GAAP. These book/tax differences are considered either temporary (i.e., deferred losses, capital loss carry forwards) or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require classification.
Federal Income Taxes – It is each Funds policy to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Therefore, no provision for federal income tax is required. The Funds recognize the tax benefits of uncertain tax positions only where the position is more likely than not to be sustained assuming examination by tax authorities. Management has analyzed the Funds tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years 2017-2019, or expected to be taken in the Funds 2020 tax returns. Each Fund identifies its major tax jurisdictions as U.S. federal, Ohio and foreign jurisdictions where the Fund makes significant investments. Neither Fund is aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
Exchange Traded Funds – The Funds may invest in exchange traded funds (ETFs). ETFs are a type of fund bought and sold on a securities exchange. An ETF trades like common stock and may be actively managed or represent a fixed portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities in which they invest, although the lack of liquidity on an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Exchange Traded Notes – The Funds may invest in exchange traded notes (ETNs). ETNs are a type of debt security that is linked to the performance of underlying securities. The risks of owning ETNs generally reflect the risks of owning
19
RESQ FUNDS |
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued) |
March 31, 2020 |
the underlying securities they are designed to track. In addition, ETNs are subject to credit risk generally to the same extent as debt securities.
Expenses – Expenses of the Trust that are directly identifiable to a specific fund are charged to that fund. Expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expense and the relative sizes of the funds in the Trust.
Indemnification – The Trust indemnifies its officers and Trustees for certain liabilities that may arise from the performance of their duties to the Trust. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnities. The Funds maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss due to these warranties and indemnities to be remote.
Cash and Cash Equivalents – Cash and cash equivalents include cash and overnight investments in interest-bearing demand deposits with a financial institution with original maturities of three months or less. The Funds maintain deposits with a high quality financial institution in an amount that is in excess of federally insured limits.
3. | INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES |
RESQ Investment Partners, LLC (the Advisor), serves as investment advisor to the Funds. Subject to the oversight of the Board, the Advisor is responsible for the management of each Funds investment portfolio. Pursuant to an investment advisory agreement with the Trust, on behalf of each Fund, the Advisor directs the daily operations of each Fund and supervises the performance of administrative and professional services provided by others. As compensation for its services and the related expenses borne by the Advisor, each Fund pays the Advisor a fee, computed and accrued daily and paid monthly at an annual rate of 1.45% of each of the RESQ Dynamic Allocation Funds and RESQ Strategic Income Funds average daily net assets. For the six months ended March 31, 2020, the Advisor earned advisory fees of $261,654 and $237,386 for the RESQ Dynamic Allocation Fund and RESQ Strategic Income Fund, respectively.
Pursuant to a written contract (the Waiver Agreement), the Advisor has agreed to waive a portion of its advisory fee and has agreed to reimburse the Funds for other expenses until at least January 31, 2021 to the extent necessary so that the total operating expenses incurred by a Fund exclusive of any front-end or contingent deferred loads, brokerage fees and commissions, acquired fund fees and expenses, borrowing costs (such as interest and dividend expense on securities sold short), taxes and extraordinary expenses, such as litigation expenses (which may include indemnification of Fund officers and Trustees, contractual indemnification of Fund service providers (other than the Advisor)) do not exceed 2.20%, 2.80% and 1.80% of the daily average net assets attributable to each Funds Class A, Class C and Class I shares, respectively (the Expense Limitation). During the six months ended March 31, 2020, the Advisor waived fees/reimbursed expenses pursuant to the Waiver Agreement in the amount of $62,097 and $67,252 for the RESQ Dynamic Allocation Fund and the RESQ Strategic Income Fund, respectively.
If the Advisor waives any fee or reimburses any expense pursuant to the Waiver Agreement, and a Funds operating expenses are subsequently less than the expense limitation, the Advisor shall be entitled to reimbursement by the Fund for such waived fees or reimbursed expenses provided that such reimbursement does not cause the Funds expenses to exceed the expense limitation then in effect or in effect at time of waiver. If Fund operating expenses subsequently exceed the expense limitation, the reimbursements shall be suspended. The Advisor may seek reimbursement only for expenses waived or paid by it during the three years prior to such reimbursement; provided, however, that such expenses may only be reimbursed to the extent they were waived or paid after the date of the Waiver Agreement (or any similar agreement). The Board may terminate this expense reimbursement arrangement at any time upon 60 days written notice to the Advisor. As of September 30, 2019, the total amount of expense reimbursement subject to recapture for the RESQ Dynamic Allocation Fund is $223,263, of which $30,118 will expire on September 30, 2020, $78,399 will expire on September 30, 2021, and $114,746 will expire on September 30, 2022. As of September 30, 2019, the total amount of expense reimbursement subject to recapture for the RESQ Strategic Income Fund is $252,993, of which $33,409 will expire on September 30, 2020, $91,491 will expire on September 30, 2021 and $128,093 will expire on September 30, 2022.
20
RESQ FUNDS |
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued) |
March 31, 2020 |
Distributor – The distributor of the Funds is Northern Lights Distributors, LLC (NLD or the Distributor). The Board has adopted, on behalf of the Funds, the Trusts Master Distribution and Shareholder Servicing Plans for Class A and Class C shares, as amended (the Plans), pursuant to Rule 12b-1 under the 1940 Act, to pay for certain distribution activities and shareholder services related to Class A and Class C shares. Under the Plans, the Funds may each pay 0.40% per year of the average daily net assets of Class A shares and 1.00% per year of the average daily net assets of Class C shares for such distribution and shareholder service activities. For the six months ended March 31, 2020, RESQ Dynamic Allocation Fund incurred distribution fees of $71,531 and $209 for Class A and Class C shares, respectively. For the six months ended March 31, 2020, the RESQ Strategic Income Fund incurred distribution fees of $65,441 and $64 for Class A and Class C shares, respectively.
The Distributor acts as the Funds principal underwriter in a continuous public offering of the Funds shares. During the six months ended March 31, 2020, the Distributor did not receive any underwriting commissions for sales of RESQ Dynamic Allocation Funds Class A shares. During the six months ended March 31, 2020, the Distributor did not receive any underwriting commissions for sales of RESQ Strategic Income Funds Class A shares.
In addition, certain affiliates of the Distributor provide services to the Funds as follows:
Gemini Fund Services, LLC (GFS) – GFS, an affiliate of the Distributor, provides administration, fund accounting, and transfer agent services to the Fund. Pursuant to a separate servicing agreement with GFS, the Funds pay GFS customary fees for providing administration, fund accounting and transfer agency services to the Funds. Certain officers of the Trust are also officers of GFS, and are not paid any fees directly by the Funds for serving in such capacities.
Northern Lights Compliance Services, LLC (NLCS) – NLCS, an affiliate of GFS and the Distributor, provides a Chief Compliance Officer to the Funds, as well as related compliance services, pursuant to a consulting agreement between NLCS and the Funds. Under the terms of such agreement, NLCS receives customary fees from the Funds. An officer of the Funds are also an officer of NLCS, and are not paid any fees directly by the Funds for serving in such capacity.
Blu Giant, LLC (Blu Giant) – Blu Giant, an affiliate of GFS and the Distributor, provides EDGAR conversion and filing services as well as print management services for the Funds on an ad-hoc basis. For the provision of these services, Blu Giant receives customary fees from the Funds.
Effective February 1, 2019, NorthStar Financial Services Group, LLC, the parent company of GFS and its affiliated companies including NLD, NLCS and Blu Giant (collectively, the Gemini Companies), sold its interest in the Gemini Companies to a third party private equity firm that contemporaneously acquired Ultimus Fund Solutions, LLC (an independent mutual fund administration firm) and its affiliates (collectively, the Ultimus Companies). As a result of these separate transactions, the Gemini Companies and the Ultimus Companies are now indirectly owned through a common parent entity, The Ultimus Group, LLC.
4. | REDEMPTION FEES |
Each Fund may assess a short-term redemption fee of 2.00% of the total redemption amount if a shareholder sells his shares after holding them for less than 30 days. The redemption fee is paid directly to the applicable Fund. For the six months ended March 31, 2020, the RESQ Dynamic Allocation Fund and RESQ Strategic Income Fund did not assess any redemption fees.
5. | INVESTMENT TRANSACTIONS |
For the six months ended March 31, 2020, cost of purchases and proceeds from sales of portfolio securities, other than short-term investments, amounted to $ 98,933,514 and $104,036,353, respectively, for the RESQ Dynamic Allocation Fund, and $80,731,343 and $82,909,411, respectively, for the RESQ Strategic Income Fund.
21
RESQ FUNDS |
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued) |
March 31, 2020 |
6. | AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION – TAX BASIS |
The identified cost of investments in securities owned by each Fund for federal income tax purposes, and its respective gross unrealized appreciation and depreciation at March 31, 2020, were as follows:
Gross | Gross | Net Unrealized | ||||||||||||||
Tax | Unrealized | Unrealized | Appreciation | |||||||||||||
Fund | Cost | Appreciation | Depreciation | (Depreciation) | ||||||||||||
RESQ Dynamic Allocation Fund | $ | 28,254,378 | $ | — | $ | (4,797,186 | ) | $ | (4,797,186 | ) | ||||||
RESQ Strategic Income Fund | 28,808,016 | 418,291 | (1,694,316 | ) | (1,276,025 | ) |
7. | DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL |
The tax character of distributions paid during the fiscal years ended September 30, 2019 and September 30, 2018 was as follows:
For fiscal year ended | Ordinary | Long-Term | Return of | |||||||||||||
9/30/2019 | Income | Capital Gains | Capital | Total | ||||||||||||
RESQ Dynamic Allocation Fund | $ | — | $ | — | $ | — | $ | — | ||||||||
RESQ Strategic Income Fund | 42,997 | — | — | 42,997 | ||||||||||||
For fiscal year ended | Ordinary | Long-Term | Return of | |||||||||||||
9/30/2018 | Income | Capital Gains | Capital | Total | ||||||||||||
RESQ Dynamic Allocation Fund | $ | — | $ | — | $ | — | $ | — | ||||||||
RESQ Strategic Income Fund | 354,856 | — | 9,037 | 363,893 |
As of September 30, 2019, the components of accumulated earnings/(loss) on a tax basis were as follows:
Undistributed | Undistributed | Post October Loss | Capital Loss | Other | Unrealized | Total | ||||||||||||||||||||||
Ordinary | Long-Term | and | Carry | Book/Tax | Appreciation/ | Accumulated | ||||||||||||||||||||||
Income | Capital Gains | Late Year Loss | Forwards | Differences | (Depreciation) | Earnings/(Loss) | ||||||||||||||||||||||
RESQ Dynamic Allocation Fund | $ | — | $ | — | $ | (4,053,851 | ) | $ | (861,325 | ) | $ | — | $ | 159,765 | $ | (4,755,411 | ) | |||||||||||
RESQ Strategic Income Fund | 597 | — | (45,151 | ) | (5,923,830 | ) | — | (221,704 | ) | (6,190,088 | ) | |||||||||||||||||
The difference between book basis and tax basis accumulated net realized loss and unrealized appreciation/(depreciation) is primarily attributable to the tax deferral of losses on wash sales and adjustments for partnerships.
Late year losses incurred after December 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The RESQ Dynamic Allocation Fund incurred and elected to defer such capital losses of $ 102,432.
Capital losses incurred after October 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. Funds incurred and elected to defer such capital losses as follows:
Post October | ||||
Losses | ||||
RESQ Dynamic Allocation Fund | $ | 3,951,419 | ||
RESQ Strategic Income Fund | 45,151 |
22
RESQ FUNDS |
NOTES TO FINANCIAL STATEMENTS (Unaudited)(Continued) |
March 31, 2020 |
At September 30, 2019, the Funds had capital loss carry forwards for federal income tax purposes available to offset future capital gains as follows:
Non-Expiring | Non-Expiring | Capital Loss Carry | ||||||||||||||
Short-Term | Long-Term | Total | Forwards Utilized | |||||||||||||
RESQ Dynamic Allocation Fund | $ | 834,065 | $ | 27,260 | $ | 861,325 | $ | 1,113,883 | ||||||||
RESQ Strategic Income Fund | 5,919,928 | 3,902 | 5,923,830 | — |
Permanent book and tax differences, primarily attributable to the reclass of net operating losses and tax adjustment related to a tax return update, resulted in reclassifications for the fiscal year ended September 30, 2019 as follows:
Paid | ||||||||
In | Accumulated | |||||||
Capital | Loss | |||||||
RESQ Dynamic Allocation Fund | $ | (395,513 | ) | $ | 395,513 | |||
RESQ Strategic Income Fund | (25,133 | ) | 25,133 | |||||
8. | CONTROL OWNERSHIP |
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates presumption of control of the fund, under Section 2(a)(9) of the 1940 Act. As of March 31, 2020, the shareholders listed below held more than 25% of a Fund and may be deemed to control that Fund.
Shareholder | Fund | Percent | ||
Charles Schwab & Co. | RESQ Dynamic Allocation Fund | 55.01% | ||
NFS LLC | RESQ Dynamic Allocation Fund | 44.70% | ||
Charles Schwab & Co. | RESQ Strategic Income Fund | 54.97% | ||
NFS LLC | RESQ Strategic Income Fund | 44.84% |
9. | SUBSEQUENT EVENTS |
Subsequent events after the date of the Statements of Assets and Liabilities have been evaluated through the date the financial statements were issued. Management has determined that no events or transactions occurred requiring adjustment or disclosure in the financial statements.
23
RESQ Funds |
EXPENSE EXAMPLES (Unaudited) |
March 31, 2020 |
As a shareholder of a Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases and redemption fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees, and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from October 1, 2019 through March 31, 2020.
Actual Expenses
The Actual columns in the tables below provide information about actual account values and actual expenses. You may use the information below; together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled Expenses Paid During Period to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The Hypothetical columns in the tables below provide information about hypothetical account values and hypothetical expenses based on each Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the tables are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads). Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
(a) | Expenses are equal to the average account value over the period, multiplied by each Funds annualized expense ratio, multiplied by the number of days in the period (183) divided by the number of days in the fiscal year (366). |
24
RESQ FUNDS |
SUPPLEMENTAL INFORMATION (Unaudited) |
March 31, 2020 |
Renewal of Advisory Agreement – RESQ Dynamic Allocation Fund and RESQ Strategic Income Fund*
In connection with a meeting held on November 19-20, 2019, the Board, including a majority of the Trustees who are not interested persons, as that term is defined in the Investment Company Act of 1940, as amended, discussed the renewal of the investment advisory agreement (the Advisory Agreement) between the Advisor and the Trust, with respect to the RESQ Dynamic Allocation Fund (RESQ DA) and RESQ Strategic Income Fund (RESQ SI). In considering the renewal of the Advisory Agreement, the Board received materials specifically relating to RESQ DA and RESQ SI and the Advisory Agreement.
The Board relied upon the advice of independent legal counsel and its own business judgment in determining the material factors to be considered in evaluating the Advisory Agreement and the weight to be given to each such factor. The Boards conclusions were based on an evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching conclusions with respect to the Advisory Agreement.
Nature, Extent & Quality of Services. The Board noted that the Advisor was founded in 2013 and had approximately $71 million in assets under management. The Board remarked that the Advisors key investment personnel responsible for the Funds had several years of financial industry experience. The Board observed the Advisor used multiple technical indicators to study the price movements of securities and create quantitative models that were updated on an ongoing basis to identify market trends. The Board acknowledged that the Advisor relied on its research and modeling process for risk management and contracted with multiple signal providers to confirm market trends and sector rotation. The Board recognized that the Advisor monitored compliance with the Funds investment limitations using a checklist system from pre-trade to post-trade operations and built each RESQ Funds investment limitations into the respective models algorithm to ensure each RESQ Fund remained within the applicable models parameters. The Board noted the Advisor monitored each trade for best execution and price and reviewed its broker dealers annually. The Board discussed that the Advisors active management style based on mathematical algorithms took the emotion out of trading and had benefitted capital preservation. The Board concluded it expected the Advisor to provide satisfactory service to each RESQ Fund and their respective shareholders.
Performance.
RESQ DA—The Board noted that RESQ DA had a one-star Morningstar rating and underperformed its peer group, Morningstar category, and the S&P 500 Total Return Index across all periods. The Board recognized that RESQ DA remained in a defensive position throughout periods of market volatility and missed the upside when markets recovered. The Board discussed that RESQ DA was in the top quartile for standard deviation over the 1-year and 3-year periods. Although past performance is not predictive of future results, the Board concluded that the Advisor had the potential to provide satisfactory returns.
RESQ SI—The Board noted that RESQ SI received a one-star rating from Morningstar and underperformed its peer group, Morningstar category and the Bloomberg Barclays US Aggregate Bond Total Return Index across all periods. The Board discussed the Advisors belief that RESQ SI was more akin to an alternative nontraditional bond product that was rarely invested in pure equities such that the benchmark did not provide the most apt comparison. The Board considered that bond-like investments in RESQ SI did not recover as quickly as its peer funds after the severe market decline during the fourth quarter of 2018. The Board remarked that, based on information the Advisor provided, RESQ SI was currently outperforming its Morningstar category and had low standard deviation. Although past performance is not predictive of future results, the Board concluded that the Advisor had the potential to provide satisfactory returns.
25
RESQ FUNDS |
SUPPLEMENTAL INFORMATION (Unaudited)(Continued) |
March 31, 2020 |
Fees and Expenses.
RESQ DA—The Board noted the Advisors advisory fee charged to RESQ DA was 1.45% and the highest fee in its Morningstar category and peer group. The Board further noted that the 1.80% net expense ratio for RESQ DA was the high of its Morningstar category and peer group. The Board recalled its discussion with the Advisor in which representatives of the Advisor explained the quality of its research, active management and risk monitoring for RESQ DA at current asset levels drove its higher than average fees and expenses. The Board noted the Advisor was willing to explore expense reductions in the future, and that it currently had an expense limitation in place that it intended to renew. The Board concluded that the Advisors advisory fee for RESQ DA was not unreasonable.
RESQ SI—The Board noted the Advisors 1.45% annual advisory fee charged to RESQ SI was the highest fee in its Morningstar category and peer group. The Board discussed RESQ SIs 1.80% net expense ratio was the high of the Morningstar category and tied with the highest of its peer group. The Board noted that RESQ SI was smaller than most funds in its peer group. The Board appreciated that the Advisor was open to exploring fee reductions at a later date. The Board concluded that the Advisors advisory fee for RESQ SI was not unreasonable.
Economies of Scale. The Board discussed the size of the Funds and their prospects for growth, concluding neither RESQ DA nor RESQ SI had achieved meaningful economies that would necessitate the establishment of breakpoints. The Board noted the Advisor was willing to discuss the implementation of breakpoints as the assets of the Funds grew and the Advisor achieved material economies of scale related to their operations. The Board agreed to monitor and revisit the issue at the appropriate time.
Profitability. The Board reviewed the Advisors profitability analysis in connection with its management of each RESQ Fund, and noted that the Advisor was managing each of the Funds at a loss. The Board concluded, therefore, that excessive profitability was not an issue for the Advisor.
Conclusion. Having requested and reviewed such information from the Advisor as the Board believed to be reasonably necessary to evaluate the terms of the Advisory Agreement, and as assisted by the advice of independent counsel, the Board concluded that the advisory fee for each of the Funds was not unreasonable, and renewal of the Advisory Agreement was in the best interests of each RESQ Fund and its shareholders.
* | Due to timing of the contract renewal schedule, these deliberations may or may not relate to the current performance results of the Funds. |
26
PRIVACY NOTICE
Rev. February 2014
FACTS | WHAT DOES NORTHERN LIGHTS FUND TRUST III DO WITH YOUR PERSONAL INFORMATION? | |||
Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. | |||
What? | The types of personal information we collect and share depend on the product or service you have with us. This information can include: | |||
■ | Social Security number | ■ | Purchase History | |
■ | Assets | ■ | Account Balances | |
■ | Retirement Assets | ■ | Account Transactions | |
■ | Transaction History | ■ | Wire Transfer Instructions | |
■ | Checking Account Information | |||
When you are no longer our customer, we continue to share your information as described in this notice. | ||||
How? | All financial companies need to share customers personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers personal information; the reasons Northern Lights Fund Trust III chooses to share; and whether you can limit this sharing. |
Reasons we can share your personal information |
Does
Northern
Lights Fund Trust III share? |
Can
you limit this
sharing? |
For our everyday business purposes – such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus |
Yes | No |
For our marketing purposes – to offer our products and services to you |
No | We dont share |
For joint marketing with other financial companies | No | We dont share |
For our affiliates everyday business purposes – information about your transactions and experiences |
No | We dont share |
For our affiliates everyday business purposes – information about your creditworthiness |
No | We dont share |
For nonaffiliates to market to you | No | We dont share |
Questions? | Call (402) 493-4603 | ||||
27
Who we are | |||||
Who is providing this notice?
|
Northern Lights Fund Trust III |
||||
What we do | |||||
How does Northern Lights Fund Trust III protect my personal information? |
To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
Our service providers are held accountable for adhering to strict policies and procedures to prevent any misuse of your nonpublic personal information. |
||||
How does Northern Lights Fund Trust III collect my personal information? |
We collect your personal information, for example, when you
■ Open an account
■ Provide account information
■ Give us your contact information
■ Make deposits or withdrawals from your account
■ Make a wire transfer
■ Tell us where to send the money
■ Tells us who receives the money
■ Show your government-issued ID
■ Show your drivers license
We also collect your personal information from other companies. |
||||
Why cant I limit all sharing? |
Federal law gives you the right to limit only ■ Sharing for affiliates everyday business purposes – information about your creditworthiness
■ Affiliates from using your information to market to you
■ Sharing for nonaffiliates to market to you
State laws and individual companies may give you additional rights to limit sharing. |
||||
Definitions | |||||
Affiliates |
Companies related by common ownership or control. They can be financial and nonfinancial companies.
■ Northern Lights Fund Trust III does not share with our affiliates. |
||||
Nonaffiliates |
Companies not related by common ownership or control. They can be financial and nonfinancial companies ■ Northern Lights Fund Trust III does not share with nonaffiliates so they can market to you. |
||||
Joint marketing |
A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
■ Northern Lights Fund Trust III doesnt jointly market. |
||||
28
PROXY VOTING POLICY
Information regarding how the Funds voted proxies relating to portfolio securities for the most recent twelve month period ended June 30 as well as a description of the policies and procedures that the Funds use to determine how to vote proxies is available without charge, upon request, by calling 1-877-940-2526 or by referring to the Securities and Exchange Commissions (SEC) website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Funds file their complete schedules of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Form N-PORT is available on the SECs website at http://www.sec.gov. The information on Form N-PORT is available without charge, upon request, by calling 1-877-940-2526.
INVESTMENT ADVISOR |
RESQ Investment Partners, LLC |
9260 E. Raintree Drive, Suite 100 |
Scottsdale, Arizona 85260 |
ADMINISTRATOR |
Gemini Fund Services, LLC |
4221 North 203rd Street, Suite 100 |
Elkhorn, Nebraska 68022 |
Item 2. Code of Ethics. Not applicable.
Item 3. Audit Committee Financial Expert. Not applicable.
Item 4. Principal Accountant Fees and Services. Not applicable.
Item 5. Audit Committee of Listed Companies. Not applicable to open-end investment companies.
Item 6. Schedule of Investments. Schedule of investments in securities of unaffiliated issuers is included under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders. None
Item 11. Controls and Procedures.
(a) Based on an evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of filing date of this Form N-CSR, the principal executive officer and principal financial officer of the Registrant have concluded that the disclosure controls and procedures of the Registrant are reasonably designed to ensure that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported by the filing date, including that information required to be disclosed is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no significant changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Disclosure of securities lending activities for closed-end management investment companies.
Not applicable to open-end investment companies.
Item 13. Exhibits.
(a)(1) Not applicable.
(a)(3) Not applicable for open-end investment companies.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Northern Lights Fund Trust III
By (Signature and Title)
/s/ Richard Malinowski
Richard Malinowski, Principal Executive Officer/President
Date 6/8/20
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)
/s/ Richard Malinowski
Richard Malinowski, Principal Executive Officer/President
Date 6/8/20
By (Signature and Title)
/s/ Brian Curley
Brian Curley, Principal Financial Officer/Treasurer
Date 6/8/20
1 Year Cp High Yield Trend Etf Chart |
1 Month Cp High Yield Trend Etf Chart |
It looks like you are not logged in. Click the button below to log in and keep track of your recent history.
Support: +44 (0) 203 8794 460 | support@advfn.com
By accessing the services available at ADVFN you are agreeing to be bound by ADVFN's Terms & Conditions