Form N-CSR NORTHERN LIGHTS FUND For: Sep 30

December 8, 2021 11:00 AM EST

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

form n-csr

certified shareholder report of registered management
investment companies

Investment Company Act file number 811-22655

 

Northern Lights Fund Trust III

(Exact name of registrant as specified in charter)

 

225 Pictoria Drive, Ste 450, Cincinatti, Ohio 45246

(Address of principal executive offices) (Zip code)

 

The Corporation Trust Company

1209 Orange Street Wilmington, DE 19801

(Name and address of agent for service)

 

Registrant's telephone number, including area code: 631-470-2688

 

Date of fiscal year end: 9/30

 

Date of reporting period: 9/30/21

 

Item 1. Reports to Stockholders.

 

     
     
     
     
     
     
     
     
     
  (COVERED BRIDGE LOGO)  
     
     
     
     
     
     
     
     
     
     
  Annual Report  
  September 30, 2021  
     
     
     
     
     
     
     
     
     
     
     
     
     
     
  Investor Information: 1-855-525-2151  
     
     
     
     
     
This report and the financial statements contained herein are submitted for the general information of shareholders and are not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. Nothing herein contained is to be considered an offer of sale or solicitation of an offer to buy shares of The Covered Bridge Fund. Such offering is made only by prospectus, which includes details as to offering price and other material information.
     
Distributed by Northern Lights Distributors, LLC  
Member FINRA  
   
   
   
   

 

 

(COVERED BRIDGE LOGO)

 

The Covered Bridge Fund
Annual Shareholder Letter (Unaudited)
09/30/2021

 

Dear Fellow Shareholders,

 

The 12-month period ended September 30, 2021 saw tremendous economic recovery and dramatic appreciation in the U.S. Equity markets. For this period, The Covered Bridge Fund (TCBIX) was up 36.23%. The Fund outperformed the S&P 500 which was up a remarkable 30.00%. As mentioned in last year’s shareholder letter, we expected a turnaround in dividend and value equity strategies compared to growth stocks and our disciplined approach paid off in significant fashion.

 

The Fund owns large capitalization dividend paying stocks which had underperformed the S&P 500 since the inception of the Fund, however, this trend finally reversed itself this fiscal year. Last fall, Pfizer was the first company to release an effective Covid-19 vaccine and we saw a shift in equity markets. Throughout the economic shutdown, performance was led by companies catering to remote work/learning and other goods and services that thrived in an environment where social gathering was essentially prohibited. Once a successful vaccine was released, the “reopening” trade began.

 

The 12-month period ended September 30, 2021 was a reversal from the previous year in terms of leading sector performance. With the reopening of economies around the world, there was a surge in demand for oil and gas reflecting a remarkable 82.9% total return in the S&P Energy sector. The year prior, the space was down 45.24%. Throughout this period, the Fund maintained overweight positions in Chevron Corporation (2.5%), BP plc (1.6%) and Marathon Petroleum Corporation (1.8%), allowing the Fund to participate in the Energy sector recovery. We believe these investments will continue to perform well as the price of oil stays elevated and the global economic recovery continues.

 

The second-best performing sector (also the second-worst performing sector in the previous year) was the S&P Financial sector returning an impressive 59% over the 12-month period ended September 30, 2021. Asset managers saw a rebound in performance and banks were able to increase their profit margins due to a steepening yield curve. Our best performing investments in this sector were Invesco (0%) and JPMorgan Chase & Company (2.8%). We believe a more favorable interest rate environment going forward will provide attractive returns in this space.

 

The Utility sector was the worst performing area of the S&P last year returning 11.06%. This sector was hindered by higher input prices and a slight increase in the interest rates. Duke Energy (2.0%) Dominion Energy, Inc (1.98%) and Xcel Energy, Inc (1.2%) were among our Utility holdings in this area. We will continue to favor this sector of the market due to the attractive and consistent dividend yields these companies provide.

 

The Covered Bridge Fund | 651-424-0043 | info@thecoveredbridgefund.com

1

 

(COVERED BRIDGE LOGO)

 

We remain very encouraged by the opportunity that lies ahead. Volatility has returned to the U.S. Equity Market in a big way and should remain elevated for the foreseeable future. This may allow the Fund to generate much greater income from option premiums going forward, and in fact, the Fund continues to receive more premium income than it has in the past. Interest rates around the world remain at very low levels which is causing investors to look for alternative sources of income beyond traditional fixed income securities and the Fund is designed specifically to meet this need.

 

The Fund will stick to its discipline of buying what we believe to be good large capitalization companies that pay above average dividends and overwriting approximately half of each position.

 

Thank you for being a Covered Bridge Fund shareholder.

 

Sincerely,

 

John Schonberg, CFA &

Michael Dashner, CFA

 

  3M YTD
Return
1Y 3Y 5Y Since
Inception
10/1/2013
TCBIX -1.80% 14.65% 36.23% 6.65% 7.98% 7.30%
TCBAX -1.85% 14.44% 35.96% 6.37% 7.70% 7.02%
TCBAX With Load -7.04% 8.46% 28.78% 4.47% 6.54% 6.30%
BXM Index 1.35% 12.61% 21.10% 4.15% 6.95% 7.06%
Russell 1000 Value
Index
-0.78% 16.14% 35.01% 10.07% 10.94% 10.37%
S&P Index 0.58% 15.92% 30.00% 15.99% 16.90% 14.60%

Maximum Sales Charge of 5.25%

 

The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Past performance is no guarantee of future results.

 

There is no assurance that the fund will achieve its investment objectives. The investment return and principal value of an investment will fluctuate so that investor’s shares, when redeemed, may be worth more or less than their original cost. The Fund’s investment adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, at least until January 31, 2022, the Fund’s gross total annual operating expenses would be 1.80% for Class A and 1.55% for Class I. The net annual fund operating expenses are 1.71% and 1.46% of the Fund’s average daily net assets for its Class A and Class I shares, subject to possible recoupment from the Fund in future years. Please review the fund’s prospectus for more information regarding the fund’s fees and

 

The Covered Bridge Fund | 651-424-0043 | info@thecoveredbridgefund.com

2

 

(COVERED BRIDGE LOGO)

 

expenses. For performance information current to the most recent month-end, please call 855-525-2151. Maximum Sales Charge of 5.25%.

 

Investors cannot directly invest in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. There is no assurance that the Fund will achieve its investment objectives.

 

Mutual funds involve risk including the possible loss of principal. Investors should carefully consider the investment objectives, risks, charges, and expenses of the Covered Bridge Fund. This and other important information about the Fund is contained in the prospectus, which can be obtained at www.THECOVEREDBRIDGEFUND.com or by calling +1-855-525-2151. The prospectus should be read carefully before investing.

 

Important Definitions: The Russell 1000 Index: a subset of the Russell 3000 Index, represents the 1000 top companies by market capitalization in the United States. The BXM: tracks the performance of a hypothetical covered call strategy on the S&P 500 Index. The S&P 500 Index: is an unmanaged composite of 500 large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks. The referenced indices are shown for general market comparisons and are not meant to represent the Fund.

 

The Covered Bridge Fund is distributed by Northern Lights Distributors, LLC member FINRA/SIPC. Stonebridge Capital Advisors, LLC is not affiliated with Northern Lights Distributors, LLC. 6692-NLD-11012021

 

The Covered Bridge Fund | 651-424-0043 | info@thecoveredbridgefund.com

3

 

The Covered Bridge Fund
Portfolio Review (Unaudited)
September 30, 2021
 

Composition of the change in value of a $10,000 investment for Class A

 

(LINE GRAPH)

 

Composition of the change in value of a $100,000 investment for Class I

 

(LINE GRAPH)

4

 

The Covered Bridge Fund
Portfolio Review (Unaudited) (Continued)
September 30, 2021
 

The Fund’s performance figures* for the periods ended September 30, 2021, compared to its benchmark:

 

      Annualized
  One Year   Five Years Since Inception *
The Covered Bridge Fund:        
Class A without Load 35.96%   7.70% 7.02%
Class A with load 28.78%   6.54% 6.30%
Class I 36.23%   7.98% 7.30%
S&P 500 Total Return Index ** 30.00%   16.90% 14.60%
         
 
*The Fund’s inception date was October 1, 2013.

 

**The S&P 500 Total Return Index is an unmanaged market capitalization-weighted index which is comprised of 500 of the largest U.S. domiciled companies and includes the reinvestment of all dividends. Investors cannot invest directly in an index or benchmark.

 

The performance data quoted is historical. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate. An investor’s shares, when redeemed, may be worth more or less than the original cost. Total return is calculated assuming reinvestment of all dividends and distributions. Total returns would have been lower had the adviser not waived its fees and reimbursed a portion of the Fund’s expenses. Returns for periods greater than one year are annualized. The Fund’s investment adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, at least until January 31, 2022, to ensure that the net annual Fund operating expenses (excluding acquired fund fees and expenses and certain other non-operating expenses) will not exceed 1.65% and 1.40%, respectively for Class A and Class I Shares, subject to possible recoupment from the Fund in future years. The Fund’s total gross annual operating expenses, per its prospectus dated February 1, 2021 including underlying funds, are 1.80% for Class A Shares and 1.55% for Class I Shares. Class A shares are subject to a maximum sales charge imposed on purchases of 5.25%. Class A and Class I shares are subject to a redemption fee of 1.00% of the amount redeemed if held less than 90 days. The above performance figures do not reflect the deduction of taxes that a shareholder would have to pay on Fund distributions or the redemption of the Fund shares. For performance information current to the most recent month-end, please call 1-855-525-2151.

 

5

 

The Covered Bridge Fund
Portfolio Review (Unaudited) (Continued)
September 30, 2021
 

Portfolio Composition as of September 30, 2021

 

Breakdown by Sector   Breakdown by Country 
   Percent of Net      Percent of Net 
   Assets      Assets 
Common Stock   92.8%  Common Stock   92.8%
Consumer Staples   17.6%  United States   78.8%
Health Care   16.0%  Canada   5.2%
Technology   13.1%  Britain   3.9%
Financial   8.6%  Bermuda   2.1%
Energy   6.8%  Belgium   1.6%
Utilities   6.6%  Ireland   1.2%
Industrials   5.8%  Options Purchased   2.1%
Communications   5.6%  Short-term Investment   0.5%
Materials   5.2%  Call Options Written   (0.8)%
Consumer Discretionary   4.5%  Other Assets Less Liabilities   5.4%
Real Estate   3.0%  Net Assets   100.0%
Options Purchased   2.1%        
Short-term Investment   0.5%        
Call Options Written   (0.8)%        
Other Assets Less Liabilities   5.4%        
Net Assets   100.0%        

 

See accompanying notes to financial statements.

6

 

The Covered Bridge Fund
PORTFOLIO OF INVESTMENTS
September 30, 2021

 

Shares      Fair Value 
     COMMON STOCKS — 92.8%     
     AEROSPACE & DEFENSE - 3.1%     
 9,000   Huntington Ingalls Industries, Inc.  $1,737,540 
 18,000   Raytheon Technologies Corporation ^   1,547,280 
         3,284,820 
     BANKING - 8.6%     
 26,000   Bank of America Corporation ^   1,103,700 
 30,000   Citigroup, Inc. ^   2,105,400 
 18,000   JPMorgan Chase & Company (c)^   2,946,420 
 25,000   Regions Financial Corporation ^   532,750 
 20,000   Truist Financial Corporation ^   1,173,000 
 20,000   US Bancorp ^   1,188,800 
         9,050,070 
     BEVERAGES - 4.1%     
 30,000   Anheuser-Busch InBev S.A./NV ADR ^   1,691,400 
 50,000   Coca-Cola Company (The) (c)^   2,623,500 
         4,314,900 
     BIOTECH & PHARMA - 13.6%     
 10,000   AbbVie, Inc. ^   1,078,700 
 42,000   Bristol-Myers Squibb Company ^   2,485,140 
 50,000   Gilead Sciences, Inc. (c)^   3,492,500 
 65,000   GlaxoSmithKline plc ADR ^   2,483,650 
 3,000   Johnson & Johnson ^   484,500 
 36,700   Merck & Company, Inc. ^   2,756,537 
 35,000   Pfizer, Inc. (c)^   1,505,350 
         14,286,377 
     DIVERSIFIED INDUSTRIALS - 1.7%     
 10,000   3M Company ^   1,754,200 
           
     ELECTRIC UTILITIES - 6.6%     
 60,000   CenterPoint Energy, Inc. (c)^   1,476,000 
 28,000   Dominion Energy, Inc. ^   2,044,560 
 22,000   Duke Energy Corporation (c)^   2,146,980 
 20,000   Xcel Energy, Inc. ^   1,250,000 
         6,917,540 

 

See accompanying notes to financial statements.

7

 

The Covered Bridge Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2021

 

Shares      Fair Value 
     COMMON STOCKS — 92.8% (Continued)     
     FOOD - 5.8%     
 60,000   Conagra Brands, Inc. ^  $2,032,200 
 50,000   Kraft Heinz Company (The) ^   1,841,000 
 28,000   Tyson Foods, Inc., Class A ^   2,210,320 
         6,083,520 
     HEALTH CARE FACILITIES & SERVICES - 1.2%     
 15,000   CVS Health Corporation (c)^   1,272,900 
           
     HEALTH CARE REIT - 1.0%     
 30,000   Healthpeak Properties, Inc. ^   1,004,400 
           
     HOME & OFFICE PRODUCTS - 3.0%     
 40,000   Leggett & Platt, Inc. ^   1,793,600 
 60,000   Newell Brands, Inc. ^   1,328,400 
         3,122,000 
     HOUSEHOLD PRODUCTS - 1.0%     
 7,500   Procter & Gamble Company (The) ^   1,048,500 
           
     LEISURE PRODUCTS - 1.5%     
 18,000   Hasbro, Inc. (c)^   1,605,960 
           
     MEDICAL EQUIPMENT & DEVICES - 1.2%     
 10,000   Medtronic plc ^   1,253,500 
           
     METALS & MINING - 5.2%     
 120,000   Barrick Gold Corporation ^   2,166,000 
 80,000   Kirkland Lake Gold Ltd. (c)   3,327,200 
         5,493,200 
     OIL & GAS PRODUCERS - 6.8%     
 60,000   BP plc ADR ^   1,639,800 
 25,600   Chevron Corporation   2,597,120 
 30,500   Marathon Petroleum Corporation ^   1,885,205 
 15,000   Valero Energy Corporation ^   1,058,550 
         7,180,675 

See accompanying notes to financial statements.

8

 

The Covered Bridge Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2021

 

Shares      Fair Value 
     COMMON STOCKS — 92.8% (Continued)     
     RETAIL - CONSUMER STAPLES - 2.1%     
 16,000   Walmart, Inc. ^  $2,230,080 
           
     SEMICONDUCTORS - 7.0%     
 80,000   Intel Corporation (c)^   4,262,400 
 24,000   QUALCOMM, Inc. ^   3,095,520 
         7,357,920 
     TECHNOLOGY HARDWARE - 2.3%     
 45,000   Cisco Systems, Inc. (c)^   2,449,350 
           
     TECHNOLOGY SERVICES - 3.8%     
 29,000   International Business Machines Corporation (c)^   4,028,970 
           
     TELECOMMUNICATIONS - 5.6%     
 80,000   AT&T, Inc.   2,160,800 
 70,000   Verizon Communications, Inc. (c)^   3,780,700 
         5,941,500 
     TIMBER REIT - 2.0%     
 60,000   Weyerhaeuser Company (c)^   2,134,200 
           
     TOBACCO & CANNABIS - 1.0%     
 22,000   Altria Group, Inc. ^   1,001,440 
           
     TRANSPORTATION & LOGISTICS - 1.0%     
 6,000   United Parcel Service, Inc., Class B ^   1,092,600 
           
     WHOLESALE - CONSUMER STAPLES - 3.6%     
 27,000   Archer-Daniels-Midland Company ^   1,620,270 
 27,000   Bunge Ltd. (c)^   2,195,640 
         3,815,910 
           
     TOTAL COMMON STOCKS (Cost $101,121,228)   97,724,532 
           

See accompanying notes to financial statements.

9

 

The Covered Bridge Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2021

 

Contracts(b)      Expiration Date  Exercise Price   Notional Value   Fair Value 
     EQUITY OPTIONS PURCHASED* - 2.1%    
     CALL OPTIONS PURCHASED - 1.1%    
 1,500   AT&T, Inc.  January 2022  $28   $4,051,500   $82,500 
 250   Chevron Corporation  January 2022   100    2,536,250    165,000 
 150   Clorox Company  January 2022   170    2,484,150    100,350 
 300   Exxon Mobil Corporation  January 2022   58    1,764,600    127,200 
 800   General Electric Company  January 2022   13    8,242,400    72,000 
 1,500   Nokia OYJ  January 2022   4    817,500    228,000 
 300   Tyson Foods, Inc.  January 2022   73    2,368,200    250,500 
 400   Wells Fargo & Company  January 2022   45    1,856,400    172,000 
     TOTAL CALL OPTIONS PURCHASED (Cost - $940,205)  1,197,550 
                        
     PUT OPTIONS PURCHASED - 1.0%                  
 1,000   SPDR S&P 500 ETF Trust  January 2022  $400   $42,914,000    1,090,000 
     TOTAL PUT OPTIONS PURCHASED (Cost - $725,377)    
                        
     TOTAL EQUITY OPTIONS PURCHASED (Cost - $1,665,582)  2,287,550 
                        
Shares                            
     SHORT-TERM INVESTMENT — 0.5%    
     MONEY MARKET FUND - 0.5%    
 523,831   JPMorgan US Treasury Plus Money Market Fund, Class L, 0.01% (a)  523,831 
     TOTAL SHORT-TERM INVESTMENT (Cost $523,831)    
                               
     TOTAL INVESTMENTS - 95.4% (Cost $103,310,641) $100,535,913 
     CALL OPTIONS WRITTEN - (0.8)% (Proceeds - $999,925)  (826,260)
     OTHER ASSETS IN EXCESS OF LIABILITIES- 5.4%  5,651,120 
     NET ASSETS - 100.0% $105,360,773 
                               
Contracts(b)      Expiration Date  Exercise Price   Notional Value   Fair Value 
     WRITTEN EQUITY OPTIONS* - (0.8)%    
     CALL OPTIONS WRITTEN- (0.8)%    
 50   3M Company  November 2021  $185   $877,100   $15,300 
 50   AbbVie, Inc.  October 2021   110    539,350    5,450 
 110   Altria Group, Inc.  October 2021   50    500,720    770 
 150   Anheuser-Busch InBev S.A./NV  October 2021   58    845,700    11,100 
 135   Archer-Daniels-Midland Company  October 2021   61    810,135    11,475 
 130   Bank of America Corporation  November 2021   41    551,850    36,660 
 400   Barrick Gold Corporation  October 2021   18    722,000    19,600 
 300   BP plc  November 2021   25    819,900    83,100 
 100   Bristol-Myers Squibb Company  October 2021   61    591,700    5,600 
 90   Bunge Ltd.  October 2021   80    731,880    23,850 
 300   CenterPoint Energy, Inc.  October 2021   25    738,000    15,000 
                        

See accompanying notes to financial statements.

10

 

The Covered Bridge Fund
PORTFOLIO OF INVESTMENTS (Continued)
September 30, 2021

 

Contracts(b)                   
(continued)      Expiration Date  Exercise Price   Notional Value   Fair Value 
     WRITTEN EQUITY OPTIONS* - (0.8)%
     CALL OPTIONS WRITTEN- (0.8)% (Continued)    
 225   Cisco Systems, Inc./Delaware  October 2021  $58   $1,224,675   $2,700 
 60   Citigroup, Inc.  October 2021   70    421,080    12,480 
 200   Coca-Cola Company (The)  October 2021   55    1,049,400    2,000 
 200   Conagra Brands, Inc.  October 2021   34    677,400    19,000 
 75   CVS Health Corporation  October 2021   85    636,450    12,225 
 140   Dominion Energy, Inc.  October 2021   75    1,022,280    7,000 
 50   Duke Energy Corporation  October 2021   100    487,950    3,550 
 250   Gilead Sciences, Inc.  October 2021   73    1,746,250    13,250 
 100   GlaxoSmithKline plc  October 2021   39    382,100    4,000 
 90   Hasbro, Inc.  October 2021   98    802,980    3,600 
 150   Healthpeak Properties, Inc.  October 2021   35    502,200    2,250 
 200   Intel Corporation  October 2021   55    1,065,600    8,400 
 100   International Business Machines Corporation  November 2021   135    1,389,300    74,300 
 30   Johnson & Johnson  October 2021   165    484,500    3,240 
 90   JPMorgan Chase & Company  November 2021   170    1,473,210    29,610 
 200   Kraft Heinz Company (The)  October 2021   36    736,400    31,400 
 100   Leggett & Platt, Inc.  October 2021   45    448,400    11,000 
 100   Marathon Petroleum Corporation  November 2021   58    618,100    63,000 
 50   Medtronic plc  October 2021   128    626,750    7,850 
 150   Merck & Company, Inc.  October 2021   73    1,126,650    54,750 
 200   Newell Brands, Inc.  October 2021   24    442,800    2,000 
 175   Pfizer, Inc.  October 2021   44    752,675    8,050 
 40   Procter & Gamble Company (The)  October 2021   145    559,200    1,480 
 80   QUALCOMM, Inc.  October 2021   135    1,031,840    5,360 
 90   Raytheon Technologies Corporation  October 2021   85    773,640    21,330 
 250   Regions Financial Corporation  November 2021   20    532,750    47,500 
 100   Truist Financial Corporation  November 2021   55    586,500    53,000 
 100   Tyson Foods, Inc.  October 2021   78    789,400    27,500 
 30   United Parcel Service, Inc.  October 2021   190    546,300    2,580 
 100   US Bancorp  November 2021   63    594,400    12,400 
 75   Valero Energy Corporation  October 2021   71    529,275    15,600 
 100   Verizon Communications, Inc.  October 2021   54    540,100    4,700 
 50   Walmart, Inc.  October 2021   144    696,900    3,050 
 200   Weyerhaeuser Company  October 2021   36    711,400    19,000 
 100   Xcel Energy, Inc.  November 2021   65    625,000    9,200 
     TOTAL CALL OPTIONS WRITTEN (Proceeds - $999,925)   826,260 
                        
     TOTAL WRITTEN EQUITY OPTIONS (Proceeds - $999,925)  $826,260 

 

ADR - American Depositary Receipt
   
ETF - Exchange-Traded Fund
   
Ltd - Limited Company
   
OYJ - Julkinen osakeyhtio
   
plc - Public Limited Company
   
REIT - Real Estate Investment Trust
   
SPDR - Standard & Poor’s Depositary Receipt
   
*Non income producing security.

 

^Security is subject to written call options.

 

(a)Rate disclosed is the seven day effective yield as of September 30, 2021.

 

(b)Each option contract allows the holder of the option to purchase or sell 100 shares of the underlying security.

 

(c)All or portion of the security is pledged as collateral for written options.

 

See accompanying notes to financial statements.

11

 

The Covered Bridge Fund
STATEMENT OF ASSETS AND LIABILITIES
September 30, 2021

 

Assets:     
Investments in Securities at Value (cost $103,310,641)  $100,535,913 
Cash   6,130,323 
Cash - Options Collateral Account   56,700 
Deposits with Broker for Options Written   964,152 
Receivable for Investments Sold   7,574,313 
Dividend and Interest Receivable   172,575 
Receivable for Fund Shares Sold   119,600 
Prepaid Expenses and Other Assets   16,804 
Total Assets   115,570,380 
      
Liabilities:     
Payable for Investments Purchased   9,204,468 
Options Written (premiums received $999,925)   826,260 
Payable for Fund Shares Redeemed   18,605 
Investment Advisory Fees Payable   80,334 
Payable to Related Parties   40,845 
Distribution (12b-1) Fees Payable   3,333 
Accrued Expenses and Other Liabilities   35,762 
Total Liabilities   10,209,607 
      
Net Assets  $105,360,773 
      
Class A Shares:     
Net Assets (Unlimited shares of no par value beneficial interest authorized; 1,630,760 shares of beneficial interest outstanding)  $16,008,904 
Net Asset Value and Redemption Price Per Share (a)
($16,008,904/1,630,760 shares of beneficial interest outstanding)
  $9.82 
Offering Price Per Share
($9.82/0.9475)
  $10.36 
      
Class I Shares:     
Net Assets (Unlimited shares of no par value interest authorized; 9,149,025 shares of beneficial interest outstanding)  $89,351,869 
Net Asset Value, Offering and Redemption Price Per Share (a)
($89,351,869/9,149,025 shares of beneficial interest outstanding)
  $9.77 
      
Composition of Net Assets:     
Paid-in-Capital  $107,263,265 
Accumulated Losses   (1,902,492)
Net Assets  $105,360,773 
      
(a)The Fund charges a fee of 1% on redemptions of shares held for less then 90 days.

 

See accompanying notes to financial statements.

12

 

The Covered Bridge Fund
STATEMENT OF OPERATIONS
For the Year Ended September 30, 2021

 

Investment Income:     
Dividend Income (Less $10,704 Foreign Taxes)  $2,871,586 
Interest Income   628 
Total Investment Income   2,872,214 
      
Expenses:     
Investment Advisory Fees   991,386 
Administration Fees   115,477 
Transfer Agent Fees   76,818 
Third Party Administrative Servicing Fees   61,226 
Fund Accounting Fees   48,966 
Distribution (12b-1) Fees - Class A   35,900 
Interest Expense   35,811 
Registration & Filing Fees   33,334 
Chief Compliance Officer Fees   21,999 
Legal Fees   16,596 
Custody Fees   15,054 
Audit Fees   14,995 
Trustees’ Fees   14,001 
Printing Expense   13,644 
Insurance Expense   3,000 
Miscellaneous Expenses   5,046 
Total Expenses   1,503,253 
Less: Fee Waived by Adviser   (42,633)
Net Expenses   1,460,620 
Net Investment Income   1,411,594 
      
Net Realized and Unrealized Gain (Loss) on Investments:     
Net Realized Gain on:     
Investments and Options Purchased   3,080,933 
Options Written   4,840,324 
Total Net Realized Gain   7,921,257 
      
Net Change in Unrealized Appreciation (Depreciation) on:     
Investments and Options Purchased   18,674,604 
Options Written   215,108 
Total Net Change in Unrealized Appreciation (Depreciation)   18,889,712 
      
Net Realized and Unrealized Gain on Investments   26,810,969 
      
Net Increase in Net Assets Resulting From Operations  $28,222,563 
      

See accompanying notes to financial statements.

13

 

The Covered Bridge Fund
STATEMENTS OF CHANGES IN NET ASSETS

 

   For the   For the 
   Year Ended     Year Ended 
   September 30, 2021   September 30, 2020 
         
Operations:          
Net Investment Income  $1,411,594   $1,493,255 
Net Realized Gain   7,921,257    949,085 
Net Change in Unrealized Appreciation(Depreciation)   18,889,712    (15,575,601)
Net Increase (Decrease) in Net Assets Resulting From Operations   28,222,563    (13,133,261)
           
Distributions to Shareholders From:          
Distributable Earnings          
Class A ($0.65 and $0.39, respectively)   (987,214)   (606,946)
Class I ($0.68 and $0.42, respectively)   (5,984,175)   (3,522,570)
Return of Capital          
Class A ($- and $0.11, respectively)       (159,032)
Class I ($- and $0.11, respectively)       (1,026,767)
Net Decrease in Net Assets From Distributions to Shareholders   (6,971,389)   (5,315,315)
           
Capital Share Transactions:          
Class A          
Proceeds from Shares Issued (215,149 and 89,580 shares, respectively)   2,224,169    796,637 
Distributions Reinvested (97,691 and 88,769 shares, respectively)   967,505    744,757 
Redemption Fee Proceeds   1,305    1,984 
Cost of Shares Redeemed (148,458 and 275,451 shares, respectively)   (1,389,616)   (2,309,417)
Total Class A   1,803,363    (766,039)
           
Class I          
Proceeds from Shares Issued (1,438,764 and 2,858,160 shares, respectively)   14,031,660    24,601,201 
Distributions Reinvested (467,588 and 441,328 shares, respectively)   4,602,378    3,689,345 
Redemption Fee Proceeds   7,215    11,540 
Cost of Shares Redeemed (1,962,309 and 1,856,451 shares, respectively)   (18,344,340)   (15,196,755)
Total Class I   296,913    13,105,331 
           
Net Increase in Net Assets from Capital Share Transactions   2,100,276    12,339,292 
           
Total Increase (Decrease) in Net Assets   23,351,450    (6,109,284)
           
Net Assets:          
Beginning of Year   82,009,323    88,118,607 
End of Year  $105,360,773   $82,009,323 
           

See accompanying notes to financial statements.

14

 

The Covered Bridge Fund - Class A
FINANCIAL HIGHLIGHTS
 

Per share data and ratios for a share of beneficial interest throughout each year presented.

 

   For the Year   For the Year   For the Year   For the Year   For the Year 
   Ended   Ended   Ended   Ended   Ended 
   September 30, 2021   September 30, 2020   September 30, 2019   September 30, 2018   September 30, 2017 
Net Asset Value, Beginning of Year  $7.71   $9.48   $10.60   $10.46   $10.11 
Increase (Decrease) From Operations:                         
Net investment income (1)   0.12    0.13    0.16    0.12    0.09 
Net realized and unrealized gain (loss) on Investments   2.64    (1.40)   0.03    0.75    0.96 
Total from operations   2.76    (1.27)   0.19    0.87    1.05 
                          
Less Distributions:                         
From net investment income   (0.11)   (0.09)   (0.16)   (0.10)   (0.08)
From net realized gain   (0.54)   (0.30)   (1.15)   (0.63)   (0.62)
From return of capital       (0.11)            
Total Distributions   (0.65)   (0.50)   (1.31)   (0.73)   (0.70)
                          
Paid in capital from redemption fees (1)   0.00 (3)   0.00 (3)   0.00 (3)   0.00 (3)   0.00 (3)
                          
Net Asset Value, End of Year  $9.82   $7.71   $9.48   $10.60   $10.46 
                          
Total Return (2)   35.96%   (13.71)%   2.58%   8.73%   10.72%
                          
Ratios/Supplemental Data                         
Net assets, end of year (in 000’s)  $16,009   $11,313   $14,822   $16,408   $13,421 
Ratio of expenses to average net assets:                         
before reimbursement (4)   1.73%   1.79%   1.79%   1.80%   2.10%
net of reimbursement   1.69%   1.70%   1.75%   1.73%   1.93%
Ratio of expenses to average net assets, excluding interest expense:                         
before reimbursement (4)   1.69%   1.74%   1.69%   1.72%   2.07%
net of reimbursement   1.65%   1.65%   1.65%   1.65%   1.90%
Ratio of net investment income to average net assets   1.20%   1.49%   1.72%   1.15%   0.91%
Portfolio turnover rate   232%   204%   159%   186%   222%
                          
 
(1)Per share amounts are calculated using the average shares method, which more appropriately presents the per share data for the year.

 

(2)Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains distributions, if any, and exclude the effect of sales loads and redemptions fees. Had the adviser not absorbed a portion of Fund expenses, total returns would have been lower.

 

(3)Amount is less than $.01 per share.

 

(4)Represents the ratio of expenses to average net assets absent fee waivers and/or expense reimbursements by the adviser.

 

See accompanying notes to financial statements.

15

 

The Covered Bridge Fund - Class I
FINANCIAL HIGHLIGHTS
 

Per share data and ratios for a share of beneficial interest throughout each year presented.

 

   For the Year   For the Year   For the Year   For the Year   For the Year 
   Ended   Ended   Ended   Ended   Ended 
   September 30, 2021   September 30, 2020   September 30, 2019   September 30, 2018   September 30, 2017 
Net Asset Value, Beginning of Year  $7.68   $9.44   $10.56   $10.44   $10.10 
Increase (Decrease) From Operations:                         
Net investment income (1)   0.14    0.15    0.19    0.15    0.12 
Net realized and unrealized gain (loss) on Investments   2.63    (1.38)   0.02    0.75    0.96 
Total from operations   2.77    (1.23)   0.21    0.90    1.08 
                          
Less Distributions:                         
From net investment income   (0.14)   (0.12)   (0.18)   (0.15)   (0.12)
From net realized gain   (0.54)   (0.30)   (1.15)   (0.63)   (0.62)
From return of capital       (0.11)            
Total Distributions   (0.68)   (0.53)   (1.33)   (0.78)   (0.74)
                          
Paid in capital from redemption fees (1)   0.00 (3)   0.00 (3)   0.00 (3)   0.00 (3)   0.00 (3)
                          
Net Asset Value, End of Year  $9.77   $7.68   $9.44   $10.56   $10.44 
                          
Total Return (2)   36.23%   (13.42)%   2.86%   8.99%   11.02%
                          
Ratios/Supplemental Data                         
Net assets, end of year (in 000’s)  $89,352   $70,696   $73,296   $62,058   $50,104 
Ratio of expenses to average net assets:                         
before reimbursement (4)   1.48%   1.54%   1.54%   1.55%   1.85%
net of reimbursement   1.44%   1.45%   1.50%   1.48%   1.68%
Ratio of expenses to average net assets, excluding interest expense:                         
before reimbursement (4)   1.44%   1.49%   1.44%   1.47%   1.82%
net of reimbursement   1.40%   1.40%   1.40%   1.40%   1.65%
Ratio of net investment income to average net assets   1.46%   1.74%   1.97%   1.40%   1.16%
Portfolio turnover rate   232%   204%   159%   186%   222%
                          
 
(1)Per share amounts are calculated using the average shares method, which more appropriately presents the per share data for the year.

 

(2)Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains distributions, if any, and exclude the effect of redemptions fees. Had the adviser not absorbed a portion of Fund expenses, total returns would have been lower.

 

(3)Amount is less than $.01 per share.

 

(4)Represents the ratio of expenses to average net assets absent fee waivers and/or expense reimbursements by the adviser.

 

See accompanying notes to financial statements.

16

 

The Covered Bridge Fund
NOTES TO FINANCIAL STATEMENTS
September 30, 2021

 

1.ORGANIZATION

 

The Covered Bridge Fund (the “Fund”) is a diversified series of shares of beneficial interest of Northern Lights Fund Trust III (the “Trust”), a Delaware statutory trust organized on December 5, 2011 and registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The investment objective of the Fund is to seek current income and realized gains from writing options with capital appreciation as a secondary objective. The Fund commenced operations on October 1, 2013.

 

The Fund currently offers Class A and Class I shares. Class A shares are offered at net asset value plus a maximum sales charge of 5.25%. Class I shares are offered at net asset value. The Fund charges a fee of 1% on redemptions of shares held for less than 90 days. Each class represents an interest in the same assets of the Fund and classes are identical except for differences in their sales charge structures and distribution charges. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its service and/or distribution plans. The Fund’s 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 Fund in preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of income and expenses for the year. Actual results could differ from those estimates. The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 “Financial Services Investment Companies” including FASB Accounting Standards Update (“ASU”) No. 2013-08.

 

Security Valuation – The Fund’s securities are valued at the last sale price on the exchange in which such securities are primarily traded, as of the close of business on the day the securities are being valued. In the absence of a sale on the primary exchange, a security shall be valued at the mean between the current bid and ask prices on the day of valuation. NASDAQ traded securities are valued using the NASDAQ Official Closing Price (“NOCP”). Exchange traded options are valued at the last sale price or in the absence of a sale, at the mean between the current bid and ask prices. Short-term debt obligations having 60 days or less remaining until maturity, at time of purchase, may be valued at amortized cost.

 

Securities for which current market quotations are not readily available or for which quotations are not deemed to be representative of market values are valued at fair value as determined in good faith by or under the direction of the Trust’s Board of Trustees (the “Board”) in accordance with the Trust’s Portfolio Securities Valuation Procedures (the “Procedures”). The Procedures consider the following factors, among others, to determine a security’s fair value: the nature and pricing history (if any) of the security; whether any dealer quotations for the security are available; and possible valuation methodologies that could be used to determine the fair value of the security.

 

The Fund 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 officers from each of the (i) Trust, (ii) administrator, and (iii) adviser. 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) adviser. The applicable investments are valued collectively via inputs from each of these groups. For example, fair value determinations are required for the following securities: (i) securities for which market quotations are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary lapse in the provision of a price by the regular pricing source), (ii) securities for which, in the judgment of the adviser, the prices or values available do not represent the fair value of the instrument. Factors which may cause the adviser to make such a judgment include, but are not limited to, the following: only a bid price or an 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

17

 

The Covered Bridge Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2021

 

thereof has occurred (a “significant event”) since the closing prices were established on the principal exchange on which they are traded, but prior to the Fund’s calculation of its net asset value. Specifically, interests in commodity pools or managed futures pools are valued on a daily basis by reference to the closing market prices of each futures contract or other asset held by a pool, as adjusted for pool expenses. Restricted or illiquid securities, such as private investments or non-traded securities are valued via inputs from the adviser based upon the current bid for the security from two or more independent dealers or other parties reasonably familiar with the facts and circumstances of the security (who should take into consideration all relevant factors as may be appropriate under the circumstances). If the adviser is unable to obtain a current bid from such independent dealers or other independent parties, the fair value 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 Fund’s holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.

 

The Fund utilizes 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 Fund has the ability to access.

 

Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument in an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.

 

Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

 

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.

 

The following tables summarize the inputs used as of September 30, 2021 for the Fund’s assets and liabilities measured at fair value: 

 

Assets *  Level 1   Level 2   Level 3   Total 
Common Stock  $97,724,532   $   $   $97,724,532 
Call Options Purchased   947,050    250,500        1,197,550 
Put Options Purchased   1,090,000            1,090,000 
Short-Term Investment   523,831            523,831 
Total  $100,285,413   $250,500   $   $100,535,913 
Liabilities                    
Call Options Written  $(822,660)  $(3,600)  $   $(826,260)
Total  $(822,660)  $(3,600)  $   $(826,260)

 

The Fund did not hold any Level 3 securities during the year ended September 30, 2021.

 

*Please refer to the Portfolio of Investments for Industry Classification.

18

 

The Covered Bridge Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2021

 

Foreign Currency Translations – The books and records of the Fund are maintained in US dollars. The market values of securities which are not traded in US currency are recorded in the financial statements after translation to US dollars based on the applicable exchange rates at the end of the period. The costs of such securities are translated at exchange rates prevailing when acquired. Related interest, dividends and withholding taxes are accrued at the rates of exchange prevailing on the respective dates of such transactions.

 

Net realized gains and losses on foreign currency transactions represent net gains and losses from currency realized between the trade and settlement dates on securities transactions and the difference between income accrued versus income received. The effect of changes in foreign currency exchange rates on investments in securities are included with the net realized and unrealized gain or loss on investment securities.

 

Option Transactions – The Fund is subject to equity price risk in the normal course of pursuing its investment objective and may purchase or sell options to help hedge against risk. When the Fund writes a call option, an amount equal to the premium received is included in the statement of assets and liabilities as a liability. The amount of the liability is subsequently marked-to-market to reflect the current market value of the option. If an option expires on its stipulated expiration date or if the Fund enters into a closing purchase transaction, a gain or loss is realized. If a written call option is exercised, a gain or loss is realized for the sale of the underlying security and the proceeds from the sale are increased by the premium originally received. As writer of an option, the Fund has no control over whether the option will be exercised and, as a result, retains the market risk of an unfavorable change in the price of the security underlying the written option.

 

The Fund may purchase put and call options. Put options are purchased to hedge against a decline in the value of securities held in the Fund’s portfolio. If such a decline occurs, the put options will permit the Fund to sell the securities underlying such options at the exercise price, or to close out the options at a profit. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security rises or declines sufficiently, the option may expire worthless to the Fund. In addition, in the event that the price of the security in connection with which an option was purchased moves in a direction favorable to the Fund, the benefits realized by the Fund as a result of such favorable movement will be reduced by the amount of the premium paid for the option and related transaction costs. Written and purchased options are non-income producing securities. With purchased options, there is minimal counterparty risk to the Fund since these options are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded options, guarantees against a possible default.

 

The notional value of the derivative instruments outstanding as of September 30, 2021 as disclosed in the Portfolio of Investments and the amounts realized and changes in unrealized gains and losses on derivative instruments during the period as disclosed within the Statement of Operations serve as indicators of the volume of derivative activity for the Fund.

 

Impact of Derivatives on the Statement of Assets and Liabilities and Statement of Operations – The following is a summary of the location of derivative investments on the Fund’s Statement of Assets and Liabilities as of September 30, 2021:

 

Derivative Investments     Location on the Statement of Assets and    
Type  Risk  Liabilities  Amount 
Options Purchased  Equity  Investments in Securities at Value  $2,287,550 
Options Written  Equity  Options Written   (826,260)

 

The following is a summary of the location of derivative investments in the Fund’s Statement of Operations for the year ended September 30, 2021:

 

Derivative          
Investments Type  Risk  Location of Gain/Loss on Derivative  Amount 
Options Purchased  Equity  Net Realized Gain on Investments and Options Purchased  $(4,513,975)
Options Written  Equity  Net Realized Gain on Options Written   4,840,324 
Options Purchased  Equity  Net Change in Unrealized Appreciation (Depreciation) on Investments and Options Purchased   1,156,459 
Options Written  Equity  Net Change in Unrealized Appreciation (Depreciation) on Options Written   215,108 

19

 

The Covered Bridge Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2021

 

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.

 

Withholding taxes on foreign dividends have been provided for in accordance with the Fund’s understanding of the applicable country’s tax rules and rates.

 

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.

 

Federal Income Taxes – The Fund complies with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and will distribute all of its taxable income, if any, to shareholders. Accordingly, no provision for federal income taxes is required in the financial statements. The Fund recognizes 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 Fund’s tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years ended September 30, 2018 – September 30, 2020, or expected to be taken in the Fund’s September 30, 2021 tax returns. The Fund identifies its major tax jurisdictions as U.S. federal, Ohio and foreign jurisdictions where the Fund makes significant investments. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

 

Dividends and Distributions to Shareholders – Dividends from net investment income, if any, are declared and paid quarterly, and distributions from net realized capital gains, if any, are declared and paid annually. Dividends and distributions to shareholders are recorded on the ex-dividend date. Dividends from net investment income and distributions from net realized gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These “book/tax” differences are considered either temporary (e.g. deferred losses) or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. Any such reclassifications will have no effect on net assets, results of operations, or net asset values per share of the Fund.

 

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 Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the risk of loss due to these warranties and indemnities appears to be remote.

 

3.CASH – CONCENTRATION IN UNINSURED ACCOUNT

 

For cash management purposes, the Fund may concentrate cash with the Fund’s custodian. As of September 30, 2021, the Fund held $6,187,023 in cash at U.S. Bank, N.A. and $964,152 in cash at Interactive Brokers.

 

4.INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES

 

Advisory Fees – Stonebridge Capital Advisors, LLC serves as the Fund’s investment adviser (the “Adviser”). Pursuant to an investment advisory agreement with the Trust on behalf of the Fund, the Adviser, under the oversight of the Board, directs the daily operations of the Fund and supervises the performance of administrative and professional services provided by others. As compensation for this service and the related expenses borne by the Adviser, the Fund pays the Adviser a management fee, computed and accrued daily and paid monthly, at an annual rate of 1.00% of the average daily net assets. For the year ended September 30, 2021, the Adviser earned management fees of $991,386.

 

The Adviser has contractually agreed to waive all or part of its management fees and/or make payments to limit Fund expenses (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

20

 

The Covered Bridge Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2021

 

the Adviser) at least until January 31, 2022, so that the total annual operating expenses of the Fund do not exceed 1.65% and 1.40% of the average daily net assets for its Class A and Class I shares, respectively. Contractual waivers and expense payments may be recouped by the Adviser from the Fund, to the extent that overall expenses fall below the lesser of the expense limitation then in place or in place at time of waiver, within three years of when the amounts were waived. During the year ended September 30, 2021, the Adviser waived fees of $42,633 pursuant to its contractual agreement.

 

As of September 30, 2021, the following amounts are subject to recapture by the Adviser by September 30 of the following years:

 

2022   2023   2024   Total 
$38,799   $77,832   $42,633   $159,264 

 

Distributor – The distributor of the Fund is Northern Lights Distributors, LLC (“NLD” or the “Distributor”). The Trust, with respect to the Fund, has adopted the Trust’s Master Distribution and Shareholder Servicing Plan for the Fund’s Class A shares (the “Plan”) pursuant to Rule 12b-1 under the 1940 Act, to pay for certain distribution activities and shareholder services. The Plan provides a monthly service and/or distribution fee that is calculated by the Fund at an annual rate of 0.25% of the average daily net assets of Class A shares. For the year ended September 30, 2021, pursuant to the Plan, the Fund paid $35,900. No such fees are payable with respect to Class I shares.

 

The Distributor acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s Class A shares. For the year ended September 30, 2021, the Distributor received $88,061 in underwriting commissions for sales of Class A shares, of which $14,291 was retained by the principal underwriter or other affiliated broker-dealers.

 

In addition, certain affiliates of the Distributor provide services to the Fund as follows:

 

Ultimus Fund Solutions, LLC (“UFS”) – UFS, an affiliate of the Distributor, provides administration, fund accounting, and transfer agent services to the Trust. Pursuant to separate servicing agreements with UFS, the Fund pays UFS customary fees for providing administration, fund accounting and transfer agency services to the Fund. Certain officers of the Trust are also officers of UFS, and are not paid any fees directly by the Fund for serving in such capacities.

 

Northern Lights Compliance Services, LLC (“NLCS”) – NLCS, an affiliate of UFS and the Distributor, provides a Chief Compliance Officer to the Trust, as well as related compliance services, pursuant to a consulting agreement between NLCS and the Trust. Under the terms of such agreement, NLCS receives customary fees from the Fund.

 

Blu Giant, LLC (“Blu Giant”) – Blu Giant, an affiliate of UFS and the Distributor, provides EDGAR conversion and filing services as well as print management services for the Fund on an ad-hoc basis. For the provision of these services, Blu Giant receives customary fees from the Fund.

 

5.INVESTMENT TRANSACTIONS

 

The cost of purchases and proceeds from the sale of securities, other than short-term securities, for the year ended September 30, 2021, amounted to $211,980,250 and $210,407,266, respectively.

 

6.REDEMPTION FEES

 

The Fund may assess a short-term redemption fee of 1.00% of the total redemption amount if a shareholder sells their shares after holding them for less than 90 days. The Fund received redemption fees of $8,520, for the year ended September 30, 2021.

21

 

The Covered Bridge Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2021

 

7.AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION – TAX BASIS

 

The identified cost of investments in securities owned by the Fund for federal income tax purposes and its respective gross unrealized appreciation and depreciation at September 30, 2021, were as follows:

 

    Gross Unrealized   Gross Unrealized   Net Unrealized 
Tax Cost   Appreciation   (Depreciation)   (Depreciation) 
$102,464,093   $2,389,303   $(5,143,743)  $(2,754,440)

 

8.DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL

 

The tax character of distributions paid during the fiscal years ended September 30, 2021 and September 30, 2020 were as follows:

 

   Fiscal Year Ended   Fiscal Year Ended 
   September 30, 2021   September 30, 2020 
Ordinary Income  $6,971,389   $3,711,547 
Long-Term Capital Gain       417,969 
Return of Capital       1,185,799 
   $6,971,389   $5,315,315 

 

As of September 30, 2021, the components of accumulated earnings/ (deficit) 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   Gains   Late Year Loss   Forwards   Differences   (Depreciation)   Earnings/(Deficits) 
$1,015,788   $   $   $   $(163,873)  $(2,754,407)  $(1,902,492)

 

The difference between book basis and tax basis accumulated net realized losses and unrealized depreciation from investments is primarily attributable to the tax deferral of losses on wash sales. In addition, the amount listed under other book/tax differences is primarily attributable to the tax deferral of losses on straddles.

 

9.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 September 30, 2021, Charles Schwab & Co, Inc. and Stifel Nicolaus & Co, Inc. accounts holding shares for the benefit of others in nominee name, held approximately 26% and 59%, respectively, of the voting securities of the Fund’s Class A shares and Charles Schwab & Co, Inc. and Pershing LLC, accounts holding shares for the benefit of others in nominee name, held approximately 47% and 34%, respectively, of the voting securities of the Fund’s Class I shares. The Fund has no knowledge as to whether any beneficial owner included in these nominee accounts holds more than 25% of the voting shares of either class.

 

10.NEW ACCOUNTING PRONOUNCEMENT

 

In October 2020, the Securities and Exchange Commission (“SEC”) adopted new regulations governing the use of derivative by registered investment companies (“Rule 18f-4”). Rule 18f-4 will impose limits on the amount of derivatives a Fund can enter into, eliminate the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, and require funds whose use of derivatives is greater than a limited specified amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager. Funds will be required to comply with Rule 18f-4 by August 19,2022. It is not currently clear what impact, if any, Rule 18f-4 will have on the availability, liquidity or performance of derivatives. Management is currently evaluating the potential impact of Rule 18f-4 on the Funds. When fully implemented, Rule 18f-4 may require changes in how a Fund uses derivatives, adversely affect the Fund’s performance and increase costs related to the Funds’ use of derivatives.

22

 

The Covered Bridge Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
September 30, 2021

 

11.SUBSEQUENT EVENTS

 

Subsequent events after the date of the Statement 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

 

(BBDLOGO) 

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Trustees of Northern Lights Fund Trust III
and the Shareholders of The Covered Bridge Fund

 

Opinion on the Financial Statements

 

We have audited the accompanying statement of assets and liabilities of The Covered Bridge Fund, a series of shares of beneficial interest in Northern Lights Fund Trust III (the “Fund”), including the portfolio of investments, as of September 30, 2021, and the related statement of operations for the year then ended, the statements of changes in net assets for each of the years in the two-year period then ended and the financial highlights for each of the years in the five-year period then ended, 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 as of September 30, 2021, and the results of its operations for the year then ended, the changes in its net assets for each of the years in the two-year period then ended and its financial highlights for each of the years in the five-year period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Fund’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 Fund in accordance with the U.S. federal securities law and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its 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 Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

24

 

Our audits included performing procedures to assess the risk 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 September 30, 2021 by correspondence with the custodian and brokers. 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.

 

(BBDLLPSIGNATURE) 

BBD, LLP

 

We have served as the auditor of one or more of the Funds in the Northern Lights Fund Trust III since 2013.

 

Philadelphia, Pennsylvania

November 22, 2021

25

 

The Covered Bridge Fund

DISCLOSURE OF FUND EXPENSES (Unaudited)

September 30, 2021

 

As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as sales charges and redemption fees; and (2) ongoing costs, including management fees; distribution and/or shareholder servicing fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.

 

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period beginning April 1, 2021 through September 30, 2021.

 

Actual Expenses

 

The “Actual” lines in the table below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes

 

The “Hypothetical” lines in the table below provide information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or redemption fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

   Beginning  Ending Account  Expenses Paid
   Account Value  Value  During Period
   (4/1/21)  (9/30/21)  (4/1/21 to 9/30/21)*
Actual         
Class A  $1,000.00  $1,013.30  $8.52
Class I  $1,000.00  $1,014.60  $7.26
Hypothetical         
(5% return before expenses)         
Class A  $1,000.00  $1,016.60  $8.53
Class I  $1,000.00  $1,017.86  $7.27

 

*Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratios of 1.69% and 1.44% for Class A and Class I, respectively, multiplied by the number of days in the period (183) divided by the number of days in the fiscal year (365).

26

 

The Covered Bridge Fund

SUPPLEMENTAL INFORMATION (Unaudited)

September 30, 2021

 

Renewal of Advisory Agreement – The Covered Bridge Fund*

 

In connection with a meeting held on August 25-26, 2021, the Board, including a majority of the Trustees who are not “interested persons,” as that term is defined in the 1940 Act, discussed the renewal of the investment advisory agreement (the “Advisory Agreement”) between the Adviser and the Trust, with respect to The Covered Bridge Fund (“Covered Bridge”). In considering the renewal of the Advisory Agreement, the Board received materials specifically relating to Covered Bridge 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 Board’s conclusions were based on an evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching conclusions with respect to the Advisory Agreement.

 

Nature, Extent and Quality of Services. The Board recognized that the Adviser was founded in 1997 and had over $1.6 billion in assets under management. The Board discussed that the Adviser provided customized investment management services to private wealth and institutional clients. The Board reviewed that the Adviser’s investment process selected large cap equity securities using several screens based on fundamental data that focused on above average dividends, dividend payout ratios, cash flow, ratio analysis and qualitative factors. The Board commented that the Adviser conducted economic forecasting and macro analysis to target industries and sectors it believed were best positioned to strengthen throughout the period. The Board noted that the Adviser purchased index put options to help mitigate downside risk. The Board observed that the Adviser monitored compliance with Covered Bridge’s investment limitations with pre-trade checks performed by the portfolio managers and the Adviser’s chief compliance officer. The Board acknowledged that the Adviser selected and approved broker-dealers based on best execution and that it reported no material compliance or litigation issues since the investment advisory agreement was last renewed. The Board recognized that the Adviser had an experienced team of research analysts and option strategists executing the investment process and supporting Covered Bridge. The Board concluded that it could expect the Adviser to continue providing satisfactory service to Covered Bridge and its shareholders.

 

Performance. The Board discussed that Covered Bridge’s performance over the 1-year period was its best year since inception and had outperformed its peer group and Morningstar category while slightly trailing its benchmark. The Board observed that Covered Bridge underperformed its peer group and Morningstar category over the 3-year period but outperformed its peer group and Morningstar category over the 5-year period. The Board recognized that Covered Bridge tended to perform well in volatile markets like the past year due to increased income derived from option premium. The Board noted that the Adviser’s managed Covered Bridge effectively during the market volatility brought on by the pandemic. The Board expressed its satisfaction with Covered Bridge’s performance and concluded that it could expect the Adviser to continue delivering reasonable returns for the benefit of Covered Bridge and its shareholders.

27

 

The Covered Bridge Fund

SUPPLEMENTAL INFORMATION (Unaudited) (Continued)

September 30, 2021

 

Fees and Expenses. The Board recognized that the Adviser’s 1.00% advisory fee was lower than its peer group average, although higher than its Morningstar category and average. The Board noted that Covered Bridge’s 1.40% net expense ratio was equal to the high of its Morningstar category but far below the high of its peer group. The Board commented that the Adviser believed its advisory fee was appropriate due to the complexity of Covered Bridge’s strategy and the additional work associated with it as compared to the other funds in its peer group and Morningstar Category. The Board noted that Covered Bridged used individual equity options on each position, which was labor intensive to manage, whereas many of its peers used index products for their option writing strategy. Given these considerations, the Board concluded that the Adviser’s advisory fee was not unreasonable.

 

Economies of Scale. The Board discussed Covered Bridge’s size and its prospects for growth, concluding that the Adviser had not yet achieved meaningful economies of scale that would justify the implementation of breakpoints or other means of sharing those economies with shareholders. It noted that the Adviser agreed that, as Covered Bridge grew and the Adviser achieved material economies of scale related to the services it provided, the Adviser would be willing to discuss implementing breakpoints. The Board noted that the Adviser agreed to discuss such breakpoints when Covered Bridge reached $500 million. The Board agreed to monitor and address the issue at the appropriate time.

 

Profitability. The Board reviewed the Adviser’s profitability analysis in connection with its management of Covered Bridge and acknowledged that the Adviser had earned a reasonable profit managing Covered Bridge. The Board concluded that the Adviser’s profitability was not excessive.

 

Conclusion. Having requested and received such information from the Adviser as the Board believed to be reasonably necessary to evaluate the terms of the Advisory Agreement and as assisted by the advice of independent counsel, the Board concluded that the advisory fee was not unreasonable and that renewal of the Advisory Agreement was in the best interests of Covered Bridge and its shareholders.

 

*Due to timing of the contract renewal schedule, these deliberations may or may not relate to the current performance results of Covered Bridge.

28

 

LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited)

 

The Fund has adopted and implemented a written liquidity risk management program as required by Rule 22e-4 (the “Liquidity Rule”) under the 1940 Act. The program is reasonably designed to assess and manage the Fund’s liquidity risk, taking into consideration, among other factors, the Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources.

 

During the fiscal year ended September 30, 2021, the Trust’s Liquidity Risk Management Program Committee (the “Committee”) reviewed the Fund’s investments and determined that the Fund held adequate levels of cash and highly liquid investments to meet shareholder redemption activities in accordance with applicable requirements. Accordingly, the Committee concluded that (i) the Fund’s liquidity risk management program is reasonably designed to prevent violations of the Liquidity Rule and (ii) the Fund’s liquidity risk management program has been effectively implemented.

29

 

The Covered Bridge Fund

SUPPLEMENTAL INFORMATION (Unaudited)

September 30, 2021

 

The Trustees and officers of the Trust, together with information as to their principal business occupations during the past five years and other information, are shown below. The business address of each Trustee and officer is 225 Pictoria Drive, Suite 450, Cincinnati, OH 45246. All correspondence to the Trustees and Officers should be directed to c/o Ultimus Fund Solutions, LLC, P.O. Box 541150, Omaha, NE 68154.

 

Independent Trustees
Name,
Address,
Year of
Birth
Position(s)
Held with
Registrant
Length of
Service and
Term
Principal Occupation(s)
During Past 5 Years
Number of
Funds
Overseen In
The Fund
Complex*
Other Directorships Held
During Past 5 Years**
Patricia Luscombe
1961
Trustee Since January 2015, Indefinite Managing Director of the Valuations and Opinions Group, Lincoln International LLC (since August 2007). 1 Northern Lights Fund Trust III (for series not affiliated with the Fund since 2015); Monetta Mutual Funds (since November 2015).
John V. Palancia
1954
Trustee, Chairman Trustee, since February 2012, Indefinite; Chairman of the Board since May 2014. Retired (since 2011); Formerly, Director of Global Futures Operations Control, Merrill Lynch, Pierce, Fenner & Smith, Inc. (1975-2011). 1 Northern Lights Fund Trust III (for series not affiliated with the Fund since 2012); Northern Lights Fund Trust (since 2011); Northern Lights Variable Trust (since 2011); Alternative Strategies Fund (since 2012).
Mark H. Taylor
1964
Trustee, Chairman of the Audit Committee Since February 2012, Indefinite Director, Lynn Pippenger School of Accountancy, Muma College of Business, University of South Florida (since August 2019); Chair, Department of Accountancy and Andrew D. Braden Professor of Accounting and Auditing, Weatherhead School of Management, Case Western Reserve University (2009- 2019); Vice President-Finance, American Accounting Association (2017-2020); President, Auditing Section of the American Accounting Association (2012-15); AICPA Auditing Standards Board Member (2009-2012). Former Academic Fellow, United States Securities and Exchange Commission (2005- 2006). 1 Northern Lights Fund Trust III (for series not affiliated with the Fund since 2012); Northern Lights Fund Trust (since 2007); Northern Lights Variable Trust (since 2007); Alternative Strategies Fund (since June 2010).
Jeffery D. Young
1956
Trustee Since January 2015, Indefinite Co-owner and Vice President, Latin America Agriculture Development Corp. (since May 2015); Formerly Asst. Vice President - Transportation Systems, Union Pacific Railroad Company (June 1976 to April 2014); President, Celeritas Rail Consulting (since June 2014). 1 Northern Lights Fund Trust III (for series not affiliated with the Fund since 2015).

 

*As of September 30, 2021, the Trust was comprised of 32 active portfolios managed by 16 unaffiliated investment advisers. The term “Fund Complex” applies only to the Fund. The Fund does not hold itself out as related to any other series within the Trust for investment purposes, nor [does it/ do they] share the same investment adviser with any other series.

 

**Only includes directorships held within the past 5 years in a company with a class of securities registered pursuant to Section 12 of the Securities Exchange Act of 1934 or subject to the requirements of Section 15(d) of the Securities Exchange Act of 1934, or any company registered as an investment company under the 1940 Act.

 

9/30/21-NLFT III-v3

30

 

The Covered Bridge Fund

SUPPLEMENTAL INFORMATION (Unaudited) (Continued)

September 30, 2021

 

Officers of the Trust

 

Name,
Address,
Year of
Birth
Position(s) Held with
Registrant
Length of
Service and
Term
Principal Occupation(s) During Past 5 Years
Richard Malinowski
1983
President Since August 2017, indefinite Senior Vice President and Senior Managing Counsel, Ultimus Fund Solutions, LLC, (since 2020); Senior Vice President Legal Administration, Gemini Fund Services, LLC (2017-2020); Vice President and Counsel (2016- 2017) and AVP and Staff Attorney (2012-2016).
Brian Curley
1970
Treasurer Since February 2013, indefinite Vice President, Ultimus Fund Solutions, LLC (since 2015), Assistant Vice President, Gemini Fund Services, LLC (2012-2014); Senior Controller of Fund Treasury, The Goldman Sachs Group, Inc. (2008-2012); Senior Associate of Fund Administration, Morgan Stanley (1999-2008).
Eric Kane
1981
Secretary Since November 2013, indefinite Vice President and Managing Counsel, Ultimus Fund Solutions, LLC (since 2020); Vice President and Counsel, Gemini Fund Services, LLC (2017-2020), Assistant Vice President, Gemini Fund Services, LLC (2014- 2017), Staff Attorney, Gemini Fund Services, LLC (2013-2014), Law Clerk, Gemini Fund Services, LLC (2009-2013), Legal Intern, NASDAQ OMX (2011), Hedge Fund Administrator, Gemini Fund Services, LLC (2008), Mutual Fund Accountant/Corporate Action Specialist, Gemini Fund Services, LLC (2006-2008).
William Kimme
1962
Chief Compliance Officer Since February 2012, indefinite Senior Compliance Officer of Northern Lights Compliance Services, LLC (since 2011); Due Diligence and Compliance Consultant, Mick & Associates (2009- 2011); Assistant Director, FINRA (2000-2009).

 

The Fund’s Statement of Additional Information includes additional information about the Trustees and is available free of charge, upon request, by calling toll-free at 1-855-525-2151.

 

9/30/21-NLFT III-v3

31

 

PRIVACY NOTICE

NORTHERN LIGHTS FUND TRUST III

 

Rev. February 2014

 

FACTS WHAT DOES NORTHERN LIGHTS FUND TRUST III DO WITH YOUR PERSONAL INFORMATION?

 

Why? Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do.

 

What?

The types of personal information we collect and share depend on the product or service you have with us. This information can include:

 

    Social Security number and income

 

    assets, account transfers and transaction history

 

    investment experience and risk tolerance

 

When you are no longer our customer, we continue to share your information as described in this notice.

 

How? All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Northern Lights Fund Trust III chooses to share and whether you can limit this sharing.

 

Reasons we can share your personal information Does Northern Lights
Fund Trust III share?
Can you limit this sharing?
For our everyday business purposes–
such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus
YES NO
For our marketing purposes–
to offer our products and services to you
NO We do not share
For joint marketing with other financial companies NO We do not share
For our affiliates’ everyday business purposes–information about your transactions and experiences NO We do not share
For our affiliates’ everyday business purposes–information about your creditworthiness NO We do not share
For our affiliates to market to you NO We do not share
For nonaffiliates to market to you NO We do not share

 

Questions? Call 1-888-339-4230

32

 

Page 2  

 

What we do

How does Northern Lights Fund Trust III protect my personal information?

To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.

 

Our service providers are held accountable for adhering to strict policies and procedures to prevent any misuse of your nonpublic personal information.

 

How does Northern Lights Fund Trust III collect my personal information?

We collect your personal information, for example, when you

 

   open an account or give us contact information

 

    provide account information or give us your income information

 

    make deposits or withdrawals from your account

 

We also collect your personal information from other companies.

 

Why can’t I limit all sharing?

Federal law gives you the right to limit only

 

    sharing for affiliates’ everyday business purposes—information about your creditworthiness

 

   affiliates from using your information to market to you

 

   sharing for nonaffiliates to market to you

 

State laws and individual companies may give you additional rights to limit sharing

 

 

Definitions
Affiliates

Companies related by common ownership or control. They can be financial and nonfinancial companies.

 

    Northern Lights Fund Trust III does not share with our affiliates.

 

Nonaffiliates

Companies not related by common ownership or control. They can be financial and nonfinancial companies.

 

      Northern Lights Fund Trust III does not share with nonaffiliates so they can market to you.

 

Joint marketing

A formal agreement between nonaffiliated financial companies that together market financial products or services to you.

 

  Northern Lights Fund Trust III doesn’t jointly market.

 

33

 

PROXY VOTING POLICY

 

Information regarding how the Fund 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 Fund uses to determine how to vote proxies is available without charge, upon request, by calling 1-855-525-2151 or by referring to the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

 

PORTFOLIO HOLDINGS

 

The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, within sixty days after the end of the period. Form N-PORT reports are available on the SEC’s website at http://www.sec.gov. The information on Form N-PORT is available without charge, upon request, by calling 1-855-525-2151.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT ADVISER
Stonebridge Capital Advisors, LLC
2550 University Avenue West, Suite 180 South
Saint Paul, Minnesota 55114
 
ADMINISTRATOR
Ultimus Fund Solutions, LLC
225 Pictoria Drive, Suite 450
Cincinnati, Ohio 45246
 
 
 
COVERB-AR21

 

 

(b) Not applicable.

 

Item 2. Code of Ethics.

 

(a)       As of the end of the period covered by this report, the registrant has adopted a code of ethics that applies to the registrant's principal executive officer, principal financial officer, principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.

 

(b)        For purposes of this item, “code of ethics” means written standards that are reasonably designed to deter wrongdoing and to promote:

 

(1)Honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;
(2)Full, fair, accurate, timely, and understandable disclosure in reports and documents that a registrant files with, or submits to, the Commission and in other public communications made by the registrant;

(3)        Compliance with applicable governmental laws, rules, and regulations;

(4)The prompt internal reporting of violations of the code to an appropriate person or persons identified in the code; and

(5)        Accountability for adherence to the code.

 

(c)        Amendments: During the period covered by the report, there have not been any amendments to the provisions of the code of ethics.

 

(d)        Waivers: During the period covered by the report, the registrant has not granted any express or implicit waivers from the provisions of the code of ethics.

 

(e) The Code of Ethics is not posted on Registrant’ website.

 

(f) A copy of the Code of Ethics is attached as an exhibit.

 

 

Item 3. Audit Committee Financial Expert.

 

(a)(1)ii The Registrant’s board of trustees has determined that Mark H. Taylor is an audit committee financial expert, as defined in Item 3 of Form N-CSR.  Mr. Taylor is independent for purposes of this Item 3.

 

(a)(2) Not applicable.

 

(a)(3)   In this regard, no member of the audit committee was identified as having all of the required technical attributes identified in instruction 2 (b) to item 3 of Form N-CSR to qualify as an “audit committee financial expert,” whether through the type of specialized education or experience required by that instruction.   At this time, the board believes the experience provided by each member of the audit committee collectively offers the fund adequate oversight by its audit committee given the fund’s level of financial complexity.   The board will from time to time reexamine such belief.   

 

Item 4. Principal Accountant Fees and Services.

 

(a)Audit Fees

2021 – $13,500

2020 – $13,500

 

(b)Audit-Related Fees

2021 – None

2020 – None

 

(c)Tax Fees

2021 – $2,500

2020 – $2,500

Preparation of Federal & State income tax returns, assistance with calculation of required income, capital gain and excise distributions and preparation of Federal excise tax returns.

 

(d)All Other Fees

2021 - None

2020 - None

 

(e)(1) Audit Committee’s Pre-Approval Policies

 

The registrant’s Audit Committee is required to pre-approve all audit services and, when appropriate, any non-audit services (including audit-related, tax and all other services) to the registrant. The registrant’s Audit Committee also is required to pre-approve, when appropriate, any non-audit services (including audit-related, tax and all other services) to its adviser, or any entity controlling, controlled by or under common control with the adviser that provides ongoing services to the registrant, to the extent that the services may be determined to have an impact on the operations or financial reporting of the registrant. Services are reviewed on an engagement by engagement basis by the Audit Committee.

 

 

(2)Percentages of Services Approved by the Audit Committee
   2021  2020
Audit-Related Fees:   0.00%   0.00%
Tax Fees:   0.00%   0.00%
All Other Fees:   0.00%   0.00%

 

(f)During the audit of registrant's financial statements for the most recent fiscal year, less than 50 percent of the hours expended on the principal accountant's engagement were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.

 

(g)The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant:

 

2021 - $2,500

2020 - $2,500

 

(h)        The registrant's audit committee has considered whether the provision of non-audit services to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant, that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant's independence.

 

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.

 

Item 13. Exhibits.

 

(a)(1) Code of Ethics filed herewith.

 

(a)(2) Certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 (and Item 11(a)(2) of Form N-CSR) are filed herewith.

 

(a)(3) Not applicable for open-end investment companies.

 

(b)       Certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 (and Item 11(b) of Form N-CSR) are filed herewith.

 

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant) Northern Lights Fund Trust III

 

By (Signature and Title)

/s/ Richard Malinowski

Richard Malinowski, President/Principal Executive Officer

 

Date 12/3/21

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

By (Signature and Title)

/s/ Richard Malinowski

Richard Malinowski, President/Principal Executive Officer

 

Date 12/3/21

 

By (Signature and Title)

/s/ Brian Curley

Brian Curley, Treasurer/Principal Financial Officer

 

Date 12/3/21

CERTIFICATIONS

 

I, Richard Malinowski, certify that:

 

1.       I have reviewed this report on Form N-CSR of the Covered Bridge Fund (a series of Northern Lights Fund Trust III);

 

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

 

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

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

 

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

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

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

d)       disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

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

 

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

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

 

 

Date: 12/3/21                                                               /s/ Richard Malinowski

Richard Malinowski

President/Principal Executive Officer

 

 

 

 

I, Brian Curley, certify that:

 

1.       I have reviewed this report on Form N-CSR of the Covered Bridge Fund (a series of Northern Lights Fund Trust III);

 

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

 

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

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

 

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

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

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

d)       disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal half-year (the registrant’s second fiscal half-year in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

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

 

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

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

 

 

Date: 12/3/21                                                       /s/ Brian Curley

Brian Curley

Treasurer/Principal Financial Officer

 

certification

Richard Malinowski, President/Principal Executive Officer, and Brian Curley, Treasurer/Principal Financial Officer of Northern Lights Fund Trust III (the “Registrant”), each certify to the best of his knowledge that:

1.       The Registrant’s periodic report on Form N-CSR for the period ended September 30, 2021 (the “Form N-CSR”) fully complies with the requirements of Sections 15(d) of the Securities Exchange Act of 1934, as amended; and

2.       The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

President/Principal Executive Officer  Treasurer/Principal Financial Officer
Northern Lights Fund Trust III  Northern Lights Fund Trust III
    
    
/s/ Richard Malinowski  /s/ Brian Curley
Richard Malinowski  Brian Curley
Date: 12/3/21  Date: 12/3/21

 

 

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Northern Lights Fund Trust III and will be retained by Northern Lights Fund Trust III and furnished to the Securities and Exchange Commission (the “Commission”) or its staff upon request.

 

This certification is being furnished to the Commission solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Form N-CSR filed with the Commission.

 

aTTACHMENT 12.B

Northern Lights Fund Trust III

CODE OF ETHICS

 

Northern Lights Fund Trust III (the “Trust”) and each of its series (the “Funds”) has adopted this Code of Ethics (the “Code”) in order to set forth guidelines and procedures that promote ethical practices and conduct by all of its Access Persons and to ensure that all Access Persons comply with the federal securities laws. Although this Code contains a number of specific standards and policies, there are four key principles embodied throughout the Code.

 

The interests of the Funds must always be paramount

 

Access Persons have a legal, fiduciary duty to place the interests of the Funds ahead of their own. In any decision relating to their personal investments, Access Persons must scrupulously avoid serving their own interests ahead of those of Trust.

 

Access Persons may not take advantage of their relationship with the Funds

 

Access Persons should avoid any situation (unusual investment opportunities, perquisites and accepting gifts of more than token value from persons seeking to do business with the Funds) that might compromise, or call into question, the exercise of their fully independent judgment in the interests of the Funds.

 

All Personal Securities Transactions should avoid any actual, potential, or apparent conflicts of interest

 

Although all Personal Securities Transactions by Access Persons must be conducted in a manner consistent with this Code, the Code itself is based on the premise that Access Persons owe a fiduciary duty to the Funds, and should avoid any activity that creates an actual, potential, or apparent conflict of interest. This includes executing transactions through or for the benefit of a third party when the transaction is not in keeping with the general principles of this Code.

 

Access Persons must adhere to these general principles as well as comply with the specific provisions of this Code. Technical compliance with the Code and its procedures will not automatically prevent scrutiny of trades that show a pattern of abuse of an individual’s fiduciary duty to the Funds.

 

Access Persons must comply with all applicable laws

In both work-related and personal activities, Access Persons must comply with all applicable laws, including the federal securities laws.

 

Any violations of this Code should be reported promptly to the Chief Compliance Officer or his designee. Failure to do so will be deemed a violation of the Code.

 

DEFINITIONS

 
 

 

“Access Person” shall have the same meaning as set forth in Rule 17j-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) and shall include:

1.all officers and trustees (or persons occupying a similar status or performing a similar function) of the Funds;
2.all officers and trustees (or persons occupying a similar status or performing a similar function) of an Adviser with respect to its corresponding series of the Trust
3.any employee of the Trust or the Advisers (or of any company controlling or controlled by or under common control with the Trust or the Advisers) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of Covered Securities by the Funds, or whose functions relate to the making of any recommendations with respect to the purchase or sale; and
4.any other natural person controlling, controlled by or under common control with the Trust or the Advisers who obtains information concerning recommendations made to the Funds with regard to the purchase or sale of Covered Securities by the Funds.

 

“Beneficial Ownership” means in general and subject to the specific provisions of Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, having or sharing, directly or indirectly, through any contract arrangement, understanding, relationship, or otherwise, a direct or indirect “pecuniary interest” in the security.

 

“Chief Compliance Officer” means the Code of Ethics Compliance Officer of the Trust with respect to Trustees and officers of the Trust, or the CCO of the Advisers with respect to Advisers personnel.

 

“Code” means this Code of Ethics.

 

“Covered Security” means any Security, except (i) direct obligations of the U.S. Government, (ii) bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements, and (iii) shares issued by open-end mutual Funds, except funds services by Gemini, NLCS, or NLD.

 

Decision Making Access Person” means any Access Person who, in connection with his or her regular functions or duties, makes or participates in or obtains information regarding recommendations on the purchase or sale of a security by the Funds, or whose functions relate to the making of any recommendations with respect to such purchases or sales. Decision Makers typically are Adviser personnel.

 

“Funds” means series of the Trust.

 

“Immediate family” means an individual’s spouse, child, stepchild, grandchild, parent, stepparent, grandparent, siblings, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law and should include adoptive relationships. For purposes of determining whether an Access Person has an “indirect pecuniary interest” in securities, only ownership by “immediate family” members sharing the same household as the Access Person will be presumed to be an “indirect pecuniary interest” of the Access Person, absent special circumstances.

 

“Independent Trustees” means those Trustees of the Trust that would not be deemed an “interested person” of the Trust, as defined in Section 2(a)(19)(A) of the 1940 Act.

 

“Indirect Pecuniary Interest” includes, but is not limited to: (a) securities held by members of the person’s Immediate Family sharing the same household (which ownership interest may be rebutted); (b) a

 
 

general partner’s proportionate interest in Fund securities held by a general or limited partnership; (c) a person’s right to dividends that is separated or separable from the underlying securities (otherwise, a right to dividends alone will not constitute a pecuniary interest in securities); (d) a person’s interest in securities held by a Trust; (e) a person’s right to acquire securities through the exercise or conversion of any derivative security, whether or not presently exercisable; and (f) a performance-related fee, other than an asset based fee, received by any broker, dealer, bank, insurance company, investment company, investment manager, Trustee, or person or entity performing a similar function, with certain exceptions.

 

“Pecuniary Interest” means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in securities.

 

“Personal Securities Transaction” means any transaction in a Covered Security in which an Access Person has a direct or indirect Pecuniary Interest.

 

“Purchase or Sale of a Security” includes the writing of an option to purchase or sell a Security. A Security shall be deemed “being considered for Purchase or Sale” for the Trusts when a recommendation to purchase or sell has been made and communicated by a Decision Making Access Person, and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation. These recommendations are placed on the “Restricted List” until they are no longer being considered for Purchase or Sale, or until the Security has been purchased or sold.

 

“Restricted List” means the list of securities maintained by the Chief Compliance Officer in which trading by Access Persons is generally prohibited.

 

“Security” means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-Trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-Trusts certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, an interest or instrument commonly known as “security”, or any certificate or interest or participation in temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase (including options) any of the foregoing.

 

“Advisers” means the Advisers to the Trust.

 

“Trusts” mean Northern Lights Fund Trust and the Northern Lights Variable Trust.

 

 

PROHIBITED ACTIONS AND ACTIVITIES

 

A.No Access Person shall purchase or sell directly or indirectly, any Covered Security in which he or she has, or by reason of such transaction acquires, any direct or indirect beneficial ownership and which he or she knows or should have known at the time of such purchase or sale;

 

(1)is being considered for purchase or sale by a Fund, or

 

(2)is being purchased or sold by a Fund.

 

B.Decision-Making Access Persons may not participate in any initial public offering of Covered Securities in any account over which they exercise Beneficial Ownership. All Access Persons must obtain prior written authorization from the Chief Compliance Officer or his designee prior to such participation;
 
 

 

C.No Access Person may purchase a Covered Security in which by reason of such transaction they acquire Beneficial Ownership in a private placement of a Security, without prior written authorization of the acquisition by the Chief Compliance Officer or his designee;

 

D.Access Persons may not accept any fee, commission, gift, or services, other than de minimus gifts, from any single person or entity that does business with or on behalf of the Trusts;

 

E.Decision-Making Access Persons may not serve on the board of directors of a publicly traded company without prior authorization from the Chief Compliance Officer or his designee based upon a determination that such service would be consistent with the interests of the Trust. If such service is authorized, procedures will then be put in place to isolate such Decision-Making Access Persons serving as directors of outside entities from those making investment decisions on behalf of the Trust.

 

Advanced notice should be given so that the Trust or Advisers may take such action concerning the conflict as deemed appropriate by the Chief Compliance Officer or his designee.

 

F.Decision-Making Access Persons may execute a Personal Securities Transaction involving a Covered Security without pre-authorization of the Chief Compliance Officer or such persons who may be designated by the Chief Compliance Officer from time to time, provided it is permitted by the Adviser’s Code of Ethics. The Chief Compliance Officer or his designee may restrict purchases of Covered Securities pursuant to the Adviser’s Code of Ethics.

 

G.It shall be a violation of this Code for any Access Person, in connection with the purchase or sale, directly or indirectly, of any Covered Security held or to be acquired by a Fund:
a.to employ any device, scheme or artifice to defraud the Trust;
b.to make to the Trust any untrue statement of a material fact or to omit to state to the Trust a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;
c.to engage in any act, practice or course of business that operates or would operate as a fraud or deceit upon the Trust; or
d.to engage in any manipulative practice with respect to the Trust.

 

 

EXEMPTED TRANSACTIONS

 

The provisions described above under the heading Prohibited Actions and Activities and the preclearance procedures under the heading Preclearance of Personal Securities Transactions do not apply to:

 

·Purchases or Sales of Securities effected in any account in which an Access Person has no Beneficial Ownership;

 

·Purchases or Sales of Securities which are non-volitional on the part the Access Person (for example, the receipt of stock dividends);

 

·Purchase of Securities made as part of automatic dividend reinvestment plans;

 

·Purchases of Securities made as part of an employee benefit plan involving the periodic purchase of company stock or mutual Funds; and
 
 

 

·Purchases of Securities effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its Securities, to the extent such rights were acquired from such issuer, and sale of such rights so acquired.

 

 

PRECLEARANCE OF PERSONAL SECURITIES TRANSACTIONS

 

All Decision-Making Access Persons wishing to engage in a Personal Securities Transaction involving, as defined in the Securities Act of 1933, an Initial Public Offering (IPO) or a Limited Offering, must obtain prior authorization of any such Personal Securities Transaction from the Chief Compliance Officer or such person or persons that the Chief Compliance Officer may from time to time designate to make such authorizations. Personal Securities Transactions by the Chief Compliance Officer involving an IPO or Limited Offering, shall require prior authorization from the President or Chief Executive Officer of the Trust (unless such person is also the Chief Compliance Officer) or their designee, who shall perform the review and approval functions relating to reports and trading by the Chief Compliance Officer. The Trust shall adopt the appropriate forms and procedures for implementing this Code of Ethics.

 

Any authorization so provided is effective until the close of business on the fifth trading day after the authorization is granted. In the event that an order for the Personal Securities Transaction involving an IPO or Limited Offering, is not placed within that time period, a new authorization must be obtained. If the order for the transaction is placed but not executed within that time period, no new authorization is required unless the person placing the order originally amends the order in any manner. Authorization for “good until canceled” orders is effective unless the order conflicts with a Trusts order.

 

If a Decision-Making Access Person wishing to effect a Personal Securities Transaction learns, while the order is pending, that the same Security is being considered for Purchase or Sale by a Fund, he or she should consult with the Chief Compliance Officer or his or her designee.

 

 

REPORTING AND MONITORING

 

The Chief Compliance Officer or such person or persons that the Chief Compliance Officer may from time to time designate shall monitor all personal trading activity of all Access Persons pursuant to the procedures established under this Code. An Access Person of either Trust who is also an access person of the Trust’s principal underwriter or their affiliates or an Access Person of a Fund’s Adviser or Sub-Adviser may submit reports required by this Section on forms prescribed by the Code of Ethics of such principal underwriter, Adviser, or Sub-Adviser provided that such forms comply with the requirements of Rule 17j-1(d)(1) of the 1940 Act.

 

Disclosure of Personal Brokerage Accounts

 

Within ten days of the commencement of employment or at the commencement of a relationship with the Trust, all Access Persons, except Independent Trustees, are required to submit to the Chief Compliance Officer or his designee a report stating the names and account numbers of all of their personal brokerage accounts, brokerage accounts of members of their Immediate Family, and any brokerage accounts which they control or in which they or an Immediate Family member has Beneficial Ownership. Such report must contain the date on which it is submitted and the information in the report must be current as of a

 
 

date no more than 45 days prior to that date. In addition, if a new brokerage account is opened during the course of the year, the Chief Compliance Officer or his designee must be notified immediately.

 

The information required by the above paragraph must be provided to the Chief Compliance Officer or his designee on an annual basis, and the report of such should be submitted with the annual holdings reports described below.

 

Each of these accounts is required to furnish duplicate confirmations and statements to the Chief Compliance Officer or his designee. These statements and confirms for each series of the Trusts may be sent to the Advisers.

 

Initial Holdings Report

Within ten days of becoming an Access Person (and with information that is current as of a date no more than 45 days prior to the date that the report was submitted), each Access Person, except Independent Trustees must submit a holdings report that must contain, at a minimum, the title and type of Security, and as applicable, the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each Covered Security in which the Access Person has any direct or indirect Beneficial Ownership. This report must state the date on which it is submitted.

 

Annual Holdings Reports

 

All Access Persons, except Independent Trustees, must supply the information that is required in the initial holdings report on an annual basis, and such information must be current as of a date no more than 45 days prior to the date that the report was submitted. Such reports must state the date on which they are submitted.

 

QUARTERLY TRANSACTION REPORTS

 

All Access Persons shall report to the Chief Compliance Officer or his designee the following information with respect to transactions in a Covered Security in which such person has, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership in the Covered Security:

 

·The date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and the principal amount of each Covered Security;
·The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
·The price of the Covered Security at which the transaction was effected; and
·The name of the broker, dealer, or bank with or through whom the transaction was effected.
·The date the Access Person Submits the Report.

 

Reports pursuant to this section of this Code shall be made no later than 30 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall include a certification that the reporting person has reported all Personal Securities Transactions required to be disclosed or reported pursuant to the requirements of this Code. Confirmations and Brokerage Statements sent directly to each Adviser’s address noted above is an acceptable form of a quarterly transaction report.

 

An Independent Trustee need only make a quarterly transaction report if he or she, at the time of the transaction, knew, or in the ordinary course of fulfilling his or her official duties as a Trustee, should have known that during the 15-day period immediately preceding or following the date of the transaction by

 
 

the Independent Trustee, the Covered Security was purchased or sold by a Fund or was considered for purchase or sale by a Fund.

 

 

ENFORCEMENTS AND PENALTIES

 

The Chief Compliance Officer or his designee shall review the transaction information supplied by Access Persons. If a transaction appears to be a violation of this Code, the transaction will be reported to the Trusts Board of Trustees.

 

Upon being informed of a violation of this Code, the Trusts Board of Trustees may impose sanctions as it deems appropriate, including but not limited to, a letter of censure or suspension, termination of the employment of the violator, or a request for disgorgement of any profits received from a securities transaction effected in violation of this Code. The Trust shall impose sanctions in accordance with the principle that no Access Person may profit at the expense of its clients. Any losses are the responsibility of the violator. Any profits realized on personal securities transactions in violation of the Code must be disgorged in a manner directed by the Board of Trustees.

 

At least annually, the Chief Compliance Officer a shall issue a report on Personal Securities Transactions by Access Person. The report submitted to the board shall:

 

·Summarize existing procedures concerning Personal Securities investing and any changes in the procedures made during the prior year;
·Identify any violations of this Code and any significant remedial action taken during the prior year; and;
·Identify any recommended changes in existing restrictions or procedures based upon the experience under the Code, evolving industry practices or developments in applicable laws and regulations.

 

 

Acknowledgement

 

The Trust must provide all Access Persons with a copy of this Code. Upon receipt of this Code, all Access Persons must do the following:

 

All new Access Persons must read the Code, complete all relevant forms supplied by the Chief Compliance Officer or his designee (including a written acknowledgement of their receipt of the Code), and schedule a meeting with the Chief Compliance Officer or his designee to discuss the provisions herein within two calendar weeks of employment.

 

Existing Access Persons who did not receive this Code upon hire, for whatever reason, must read the Code, complete all relevant forms supplied by the Chief Compliance Officer or his designee (including a written acknowledgement of their receipt of the Code), and schedule a meeting with the Chief Compliance Officer or his designee to discuss the provisions herein at the earliest possible time, but no later than the end of the current quarter.

 

All Access Persons must certify on an annual basis that they have read and understood the Code.

 

 



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