0001580642-20-002948.txt : 20200810 0001580642-20-002948.hdr.sgml : 20200810 20200810124256 ACCESSION NUMBER: 0001580642-20-002948 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 9 CONFORMED PERIOD OF REPORT: 20200531 FILED AS OF DATE: 20200810 DATE AS OF CHANGE: 20200810 EFFECTIVENESS DATE: 20200810 FILER: COMPANY DATA: COMPANY CONFORMED NAME: Northern Lights Fund Trust IV CENTRAL INDEX KEY: 0001644419 IRS NUMBER: 000000000 STATE OF INCORPORATION: DE FISCAL YEAR END: 0916 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-23066 FILM NUMBER: 201088309 BUSINESS ADDRESS: STREET 1: 225 PICTORIA DRIVE STREET 2: SUITE 450 CITY: CINCINNATI STATE: OH ZIP: 45246 BUSINESS PHONE: 402-895-1600 MAIL ADDRESS: STREET 1: 17605 WRIGHT STREET STREET 2: SUITE 200 CITY: OMAHA STATE: NE ZIP: 68154-1150 0001644419 S000056066 Formula Folios Hedged Growth ETF C000176629 Formula Folios Hedged Growth ETF FFHG 0001644419 S000056067 FormulaFolios Tactical Income ETF C000176630 FormulaFolios Tactical Income ETF FFTI 0001644419 S000059209 FormulaFolios Smart Growth ETF C000194007 FormulaFolios Smart Growth ETF FFSG 0001644419 S000059210 FormulaFolios Tactical Growth ETF C000194008 FormulaFolios Tactical Growth ETF FFTG N-CSR 1 formulafolioncsr.htm N-CSR

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 811-23066

 

Northern Lights Fund Trust IV

(Exact name of registrant as specified in charter)

 

225 Pictoria Drive, Suite 450, Cincinnati, Ohio 45246

(Address of principal executive offices) (Zip code)

 

Jennifer Farrell, Gemini Fund Services, LLC.

80 Arkay Drive, Hauppauge, NY 11788

(Name and address of agent for service)

 

Registrant's telephone number, including area code: 631-470-2600

 

Date of fiscal year end: 5/31

 

Date of reporting period: 5/31/20

 

Item 1. Reports to Stockholders.

 

 
 
 
 
 
 
 
 
 
 
FormulaFolios Hedged Growth ETF (FFHG)
FormulaFolios Smart Growth ETF (FFSG)
FormulaFolios Tactical Growth ETF (FFTG)
FormulaFolios Tactical Income ETF (FFTI)
 
 
 
 
 
 
 
Annual Report
May 31, 2020
 
 
 
 
 
1-888-562-8880
www.formulafoliofunds.com
 
 
 
 
 
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 FormulaFolios ETFs. 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
 

 

 

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Funds’ shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Funds’ website www.formulafoliofunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
 
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Funds electronically or to continue receiving paper copies of shareholder reports, which are available free of charge, by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by following the instructions included with paper Fund documents that have been mailed to you.

 

 

FormulaFolio Investments (FFI) is a Registered Investment Advisor that offers a distinct approach compared to traditional asset management. FFI uses emotion-free, statistically significant quantitative algorithms to aid in the investment decision making process. Unlike many quantitative investment firms, however, FFI focuses on longer-term market trends and lower turnover rather than using a high-frequency trading approach. With the ever-changing investment landscape, it is more important than ever to prepare for and adapt to new economic regimes. This is why FFI focuses time and talents on developing smarter investment formulas. By removing investing prejudices with an algorithmic based approach, FFI believes investors can substantially increase the statistical probability of successful investment outcomes over time.
 

 

Dear FormulaFolios ETF Shareholder,

 

The fiscal year ended May 31, 2020, was mixed-to-negative year for most growth asset classes while positive for fixed-income asset classes.

 

Broad equity markets started the year mostly positive as global stocks moved higher, recovering from the volatility experienced in Q4 2018. However, volatility spiked higher in early 2020 due to the COVID-19 pandemic, causing major stock indices to reach official bear market territory (a bear market is considered a price decline of 20% or more).

 

Despite the fastest bear market in history as many parts of the economy shut down, markets recovered sharply to end the fiscal year in April and May.

 

Outside of commodities, which were a major laggard for the year, most growth asset classes finished modestly negative to modestly positive, with large-cap US stocks finishing in positive territory.

 

With high levels of volatility in equity markets, bonds finished the year higher as interest rates fell and investors flocked to safety. In general, longer duration US Treasury bonds fared better than higher-yielding corporate bonds.

 

While many asset classes were able to finish the year on a relatively strong note, there is still much uncertainty looking ahead into the upcoming year.

It is important to remember the future is largely independent of the past - nobody knows exactly what the future holds. This is why it is so imperative to stay committed to a smart investment strategy over the course of many periods.

 

The following pages of this annual report include information about your ETF, as well as a discussion regarding the global economic environment during the fiscal year ended May 31, 2020, and how recent prevailing economic factors affected ETF performance.

 

Please remember all securities markets fluctuate, as do ETF prices. Though it impossible to eliminate all market risk, we believe active investment management can help mitigate the downside risk of investing.

 

Sincerely,

 

(-s-Jason Wenk)

 

Jason Wenk

Founder

FormulaFolio Investments

 

This letter reflects FormulaFolio Investments analysis and opinions as of May 31, 2020. The information is not a complete analysis of every aspect of any market, country, industry, security or Fund.



1

 

Global Economic Year In Review

 

Global markets experienced mixed returns in the fiscal year ended May 31, 2020 as volatility and downside risk rattled equity markets in early 2020.

 

The year began with a mostly positive trend as stocks continued to rebound from the Q4 2018 correction. Overall, 2019 was a relatively smooth and positive year across the board.

 

However, in late February 2020, volatility returned to the markets, leading to the fastest bear market in history as major stock indices plummeted.

 

At its lowest point on March 23, the S&P 500 Index closed 33.92% below the recent all-time-high close from only 23 trading days earlier.

 

Accelerating the downward market trend, the COVID-19 pandemic caused many parts of the economy to shut down. Though some of the negative economic data did not appear until later, markets were pricing in a recession.

 

As it seemed there was no end in sight to the sell-off, markets abruptly turned higher on March 24, with the S&P 500 gaining 36.06% through the end of May and erasing the worst of the losses.

 

Helping fuel the partial rebound were a slew of government assistance coupled with significant monetary easing policies.

 

While the S&P 500 ended the year positive, performance was not equal among investment classes.

 

Small-cap US stocks underperformed large-cap US stocks during the year as the Russell 2000 Index lost 3.44% compared to a gain of 12.84% for the S&P 500 Index.

 

International stocks also performed more poorly during the fiscal year as returns lagged

behind their US counterparts. Developed international stocks as measured by the MSCI EAFE Index fell 2.81% while emerging market stocks as measured by the MSCI Emerging Markets Index lost 4.39%.

 

As global equities markets experienced mixed-to-negative results, oil markets suffered even more. Already struggling with global growth concerns creating a supply and demand imbalance, the global economic shutdown pushed prices even lower.

 

Crude oil fell from $53.50/bbl to $35.49/bbl – a 33.66% loss for the year. On April 20, oil prices even fell into negative territory for the first time ever as producers struggled to find storage.

 

Despite the negative trend in many riskier asset classes, safe-haven asset classes performed better as investors looked to mitigate downside risk.

 

Gold prices rose 30.93% for the year as the demand for safe-haven asset classes increased and lower interest rates supported prices.

 

Additionally, bond prices increased as the 10-year treasury yield fell from 2.14% to 0.65% during the year.

 

Treasury bonds fared better than higher-yielding corporate bonds as the Bloomberg Barclays US Treasury 7-10 Year Index gained 14.24% compared to a gain of only 1.44% for the Markit iBoxx Liquid High-Yield Index.

 

Overall, it was a year where investors favored safety over risk.

 

ETF Performance Summary

 

For the fiscal year ended May 31, 2020, the FormulaFolios ETFs experienced mixed performance relative to their primary benchmarks on a total return basis.



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FormulaFolios Tactical Growth (FFTG) had a cumulative total return of 8.69% for the fiscal year ended May 31, 2020. In comparison, the ETF’s primary benchmark, the Barclay Global Macro Index, posted a 3.48% cumulative total return over the same year. The Barclay Global Macro Index is a hedge fund index in which managers have the ability to carry long and short positions in any of the world’s major capital or derivative markets. The portfolios of these funds can include stocks, bonds, currencies, and commodities in the form of cash or derivatives instruments. Most funds invest globally in both developed and emerging markets.

 

Early in the year, FFTG maintained a steady allocation in US stocks, REITs, and gold. This somewhat higher exposure to riskier asset classes resulted in a larger positive return for the ETF compared to its benchmark through January 2020.

 

As markets deteriorated in February and March of 2020, FFTG shifted out of its REIT position and into bonds. This additional hedge against risk helped mitigate some of the extreme volatility experienced in riskier asset classes later in the year.

 

FormulaFolios Smart Growth (FFSG) had a cumulative total return of 0.48% for the fiscal year ended May 31, 2020. In comparison, the ETF’s primary benchmark, the Dow Jones Aggressive Portfolio Index, posted a 3.03% cumulative total return over the same year. The Dow Jones Aggressive Portfolio Index acts a broadly diversified buy-and-hold benchmark. This index aims to achieve 100% of the risk of an all-stock index based on the trailing 36-month semi-variance. The all-stock portfolio includes a blend of US and non-US stocks, with varying market capitalizations.

 

Throughout the year, the ETF maintained a constant allocation in US stocks, international stocks, and REITs. This consistent exposure to

broad global stocks resulted in a mostly flat return, while the holding in smaller-cap US stocks and international stocks caused a slight drag in total returns compared to the benchmark.

 

FormulaFolios Hedged Growth (FFHG) had a cumulative total return of -10.57% for the fiscal year ended May 31, 2020. In comparison, the ETF’s primary benchmark, the Barclay Hedged Equity Long/Short Index, posted a 0.59% cumulative total return over the same year. The Barclay Equity Long/Short Index is a hedge fund index in which managers have the ability to shift from value to growth, from small to medium to large capitalization stocks, and from a net long position to a net short position.

 

Early in the year, FFHG held a steadier allocation in US stocks. This somewhat higher exposure to riskier asset classes resulted in a larger positive return for the ETF compared to its benchmark through January 2020.

 

However, as markets deteriorated in February and March of 2020, FFHG shifted to a more defensive position, utilizing US Treasury bond ETFs and at times inverse ETFs. As markets rebounded, this defensive positioning resulting in the ETF lagging to end the year.

 

FormulaFolios Tactical Income (FFTI) had a cumulative total return of 1.43% for the fiscal year ended May 31, 2020. In comparison, the ETF’s primary benchmark, the Bloomberg Barclays US Aggregate Bond Index, which is a broad measure of total US bond market performance, posted a 9.42% cumulative total return over the same year.

 

A large amount of this slight underperformance can be attributed to the later part of the fiscal year as there was a shift to safety in the markets. In the first part of the year the ETF was heavily weighted toward high-yield bonds and underweighted in traditional bonds (such as Treasuries). At the time, high-yield bonds were experiencing positive momentum.



3

 

However, markets quickly turned, and high-yield bonds fell out of favor. While FFTI shifted more exposure toward Treasury bond ETFs to hedge further downside risk, the initial sell-off in high-yields created a drag on returns for the year.

 

Performance data represent past performance, which does not guarantee future results. Investment return and principal value will fluctuate, and you may have a gain or loss when you sell your shares. Current performance may differ from figures shown.

 

How Market Conditions Affected ETFs

 

The allocation exposure levels of the ETFs were the largest contributors to their performance.

 

Early in the year, US economic data was strong. Specifically, labor markets had experienced steady growth as the unemployment rate fell to 3.5% - its lowest level since 1969.

 

As the US economy remained relatively healthy, broad equity indices trended higher in 2019 and the very beginning of 2020. However,the sudden COVID-19 pandemic resulted in a global economic shutdown, bringing the expansion to a halt.

 

By the end of the year, the US unemployment rate reached 14.7% - the worst since the Great Depression era. While it is expected this will significantly decline through the remainder of 2020 as economies start to reopen, the abrupt economic shutdown resulted in stocks reaching bear market territory.

 

The ETFs were more risk-on in nature during most of the year as a strong market in 2019 and early 2020, coupled with solid fundamental data, gave little reason to hedge risk.

 

While this was favorable early on, it ultimately resulted in a drag on returns as broad equity

markets and riskier bond asset classes experienced sharp negative momentum later in the year.

 

Market capitalization exposure also played a factor in ETF performance. Small-cap stocks lagged large-cap stocks as the COVID-19 pandemic had a larger negative impact on smaller companies.

 

However, the higher exposure to gold helped negate some of the negative impact in FFTG, helping it experience smoother returns than the other ETFs.

 

Investment Strategies

 

At FormulaFolio Investments, we are committed to our distinct methods of asset management with the goal of achieving above-average risk adjusted returns over a long time horizon. We believe by using emotion-free, statistically significant quantitative algorithms to aid in the investment decision making process and help avoid typical investing biases, we can achieve this goal.

 

When selecting investments for the ETFs, our proprietary models use various screen and rank processes, composed of numerous technical, economic, sentiment, and market breadth indicators to analyze market conditions in order to determine the strength of broad growth and fixed-income markets.

 

By utilizing numerous market indicators, the models have the ability to react to major market movements while avoiding the numerous “false positive” signals experienced when using a single stand-alone indicator. This helps reduce overall portfolio turnover, while still allowing for adjustments when appropriate.

 

The ETFs will generally be 100% invested, but hold the ability to hedge risk if market conditions warrant. Generally, this includes increasing exposure to US Treasury bond ETFs as well as cash-like securities.



4

 

This gives the ETFs the ability to capture upward market movements while maintaining the ability to minimize drawdowns during unfavorable investment environments.

 

A Look Ahead for Next Year

 

The ETFs are still somewhat hedged against risk as of the end of the fiscal year ended May 31, 2020. This is consistent with our expectations of the model based on prevailing market conditions.

 

Despite the recent market recovery to end the year, global economies continue to appear weak, with large amounts of uncertainty outstanding. Stocks and riskier bonds have rallied to erase a large part of the losses, but this has been mostly backed by fiscal and monetary stimulus.

 

While parts of the economy have been slowly reopening, it seems the recovery is unlikely to form a V shape pattern. Additionally, the presidential election in November 2020 could create additional uncertainty in an already murky outlook.

 

Because of this, our ETFs are remaining relatively cautious at the moment, waiting for a stronger confirmation the economy is on its way to a full recovery before increasing risk again.

 

Thank you for your continued investment in the FormulaFolios ETFs. As always, we are committed to working to achieve the most desirable risk adjusted returns over a full market cycle to continue bringing you value as a shareholder.

 

(-s-Jason Wenk)

 

The views and opinions expressed within this letter are those of ForumulaFolio Investments. These views and opinions are subject to change

at any time based on changes in the economy and financial markets. These views and opinions do not constitute investment advice or recommendations and investors should not act on the information discussed within this letter. The information provided is not a complete analysis of every market, country, industry, security, or the Fund. Statements of fact are from sources considered reliable, but FormulaFolio Investments makes no representation or warranty as to their completeness or accuracy. Although historical performance is no guarantee of future results, these insights may help you understand our investment management philosophy.



5

 

The referenced indices are shown for general market comparisons and are not meant to represent the Fund. Investors cannot directly invest in an index; unmanaged index returns do not reflect any fees, expenses or sales charges.

 

S&P 500 Index - The S&P 500 Index is a market capitalization weighted equity index and seeks to act as a benchmark for large-cap US stocks. This index measures the performance of 500 large publicly traded US stocks.

 

MSCI EAFE Index - The MSCI EAFE Index is designed to represent the performance of large and mid-cap securities across 21 developed markets, including countries in Europe, Australasia and the Far East, excluding the U.S. and Canada. The Index is available for a number of regions, market segments/sizes and covers approximately 85% of the free float-adjusted market capitalization in each of the 21 countries.

 

MSCI Emerging Markets Index - The MSCI Emerging Markets Index captures large and mid-cap representation across 24 Emerging Markets countries (such as Brazil, China, and India). With 846 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country

 

Russell 2000 Index – The Russell 2000 is a market capitalization weighted equity index and seeks to act as a benchmark for small-cap US stocks. This index measures the performance of the 2000 smallest publicly traded US stocks within the larger Russell 3000 Index (the Russell 3000 seeks to benchmark the entire US stock market)

 

Dow Jones Aggressive Portfolio Index - The Dow Jones Aggressive Portfolio Index acts as a broadly diversified buy-and-hold benchmark. This index aims to achieve 100% of the risk of an all-stock index based on the trailing 36-month semi-variance.

The all-stock portfolio includes a blend of US and non-US stocks, with varying market capitalizations.

 

Barclay Global Macro Index - Global Macro managers carry long and short positions in any of the world’s major capital or derivative markets. These positions reflect their views on overall market direction as influenced by major economic trends and/or events. The portfolios of these funds can include stocks, bonds, currencies, and commodities in the form of cash or derivatives instruments. Most funds invest globally in both developed and emerging markets.

 

Barclay Equity Long/Short Index - This directional strategy involves equity-oriented investing on both the long and short sides of the market. The objective is not to be market neutral. Managers have the ability to shift from value to growth, from small to medium to large capitalization stocks, and from a net long position to a net short position. Managers may use futures and options to hedge. The focus may be regional or sector specific.

 

Bloomberg Barclays US Aggregate Bond Index - The Bloomberg Barclays Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, mortgage backed securities, asset-backed securities, and commercial mortgage-backed securities; it represents the performance of the total US investment-grade bond market.

 

Bloomberg Barclays US Treasury 7-10 Year Index - The Bloomberg Barclays US Treasury 7-10 Year Bond Index is part of a series of indices intended to assess the US Treasury market. The Index is market value weighted and is designed to include US dollar denominated, fixed rate securities with minimum term to maturity



6

 

greater than or equal to seven years and less than ten years.

 

Markit iBoxx Liquid Investment-Grade Index - The Markit iBoxx Liquid Investment-Grade Index is designed to provide a balanced representation of the USD investment grade corporate market and to meet the investors demand for a USD denominated, highly liquid and representative investment grade corporate index. The Index has been designed to be a subset of the broader USD corporate bond market.

 

Markit iBoxx Liquid High-Yield Index The iBoxx Liquid High-Yield Index is designed to reflect the performance of USD denominated high yield corporate debt, offering broad coverage of the USD high yield liquid bond universe. The index is an integral part of the global iBoxx index family, which provides the marketplace with accurate and objective indices by which to assess the performance of bond markets and investments.

 

5848-NLD-6/29/2020



7

 

FormulaFolios Hedged Growth ETF
PORTFOLIO REVIEW (Unaudited)
May 31, 2020

 

Average Annual Total Return through March 31, 2020*, as compared to its benchmark:

 

  One Since
  Year Inception***
FormulaFolios Hedged Growth ETF - NAV (10.57)% (2.01)%
FormulaFolios Hedged Growth ETF - Market Price (10.76)% (2.05)%
Barclay Hedged Equity Long/Short Index** 0.59% 5.64%

 

(LINE GRAPH)

 

*The Fund’s past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. Returns are calculated using the traded net asset value or “NAV” on May 31, 2020. Performance data current to the most recent month end may be obtained by visiting www.FormulaFolioFunds.com or by calling 1-888-562-8880.

 

The Fund’s per share NAV is the value of one share of the Fund as calculated in accordance with the standard formula for valuing investment company shares. The NAV return is based on the NAV of the Fund and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively. The Fund’s total annual operating expenses are 1.24% per the most recent prospectus.

 

The Fund’s adviser has agreed to reduce its fees and/or absorb expenses of the Fund, until at least September 30, 2020, to ensure that total fund expenses after fee waiver and/or reimbursement (exclusive of any front-end or contingent deferred loads, taxes, brokerage fees and commissions, borrowing costs (such as interest and dividend expense on securities sold short), acquired fund fees and expenses, fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses), or extraordinary expenses such as litigation) will not exceed 0.95% of the Fund’s net assets.

 

**Barclay Hedged Equity Long/Short Index’s directional strategy involves equity-oriented investing on both the long and short sides of the market. The objective is not to be market neutral. Managers have the ability to shift from value to growth, from small to medium to large capitalization stocks, and from a net long position to a net short position. Managers may use futures and options to hedge. The focus may be regional or sector specific. Investors cannot invest directly in an index.

 

***As of the close of business on the day of commencement of trading on June 6, 2017.

 

The Fund’s top asset classes are as follows:

 

  Asset Class  % of Net Assets 
  Exchange Traded Funds-Equity Funds   84.2%
  Exchange Traded Funds-Debt Funds   13.1%
  Other Assets in Excess of Liabilities   2.7%
  Total   100.0%

 

Please refer to the Portfolio of Investments in this Annual Report for a detailed listing of the Fund’s holdings.

8

 

FormulaFolios Smart Growth ETF
PORTFOLIO REVIEW (Unaudited)
May 31, 2020

 

Average Annual Total Return through March 31, 2020*, as compared to its benchmark:

 

  One Since
  Year Inception***
FormulaFolios Smart Growth ETF - NAV 0.48% 1.03%
FormulaFolios Smart Growth ETF - Market Price 0.59% 1.09%
Dow Jones Aggressive Portfolio Index** 3.03% 6.69%

 

(LINE GRAPH)

 

*The Fund’s past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. Returns are calculated using the traded net asset value or “NAV” on May 31, 2020. Performance data current to the most recent month end may be obtained by visiting www.FormulaFolioFunds.com or by calling 1-888-562-8880.

 

The Fund’s per share NAV is the value of one share of the Fund as calculated in accordance with the standard formula for valuing investment company shares. The NAV return is based on the NAV of the Fund and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively. The Fund’s total annual operating expenses are 0.71% per the most recent prospectus.

 

The Fund’s adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, until at least September 30, 2020, to ensure that total annual fund operating expenses after fee waiver and/or reimbursement (exclusive of any front-end or contingent deferred loads, taxes, brokerage fees and commissions, borrowing costs (such as interest and dividend expense on securities sold short), acquired fund fees and expenses, fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses), or extraordinary expenses such as litigation) will not exceed 0.60% of the Fund’s net assets.

 

**Dow Jones Aggressive Portfolio Index is a benchmark designed for asset allocation strategists who are willing to take 100% of the risk of the global securities market. It is a total returns index formed by equally weighing nine equity style indexes with monthly rebalancing. The nine equity style Indexes Include: Dow Jones U.S. Large Cap Value, Dow Jones U.S. Large Cap Growth, Dow Jones U.S. Mid Cap Value, Dow Jones U.S. Small Cap Value, Dow Jones U.S. Mid Cap Growth, Dow Jones U.S. Small Cap Growth, Dow Jones Emerging Markets LN, Dow Jones Europe/Canada, and Dow Jones Asia/Pacific. Investors cannot invest directly in an index.

 

***As of the close of business on the day of commencement of trading on November 1, 2017.

 

The Fund’s top asset classes are as follows:

 

  Asset Class  % of Net Assets 
  Exchange Traded Funds-Equity Funds   99.5%
  Other Assets in Excess of Liabilities   0.5%
  Total   100.0%

 

Please refer to the Portfolio of Investments in this Annual Report for a detailed listing of the Fund’s holdings.

9

 

FormulaFolios Tactical Growth ETF
PORTFOLIO REVIEW (Unaudited)
May 31, 2020

 

Average Annual Total Return through March 31, 2020*, as compared to its benchmark:

 

  One Since
  Year Inception***
FormulaFolios Tactical Growth ETF - NAV 8.69% 2.32%
FormulaFolios Tactical Growth ETF - Market Price 8.65% 2.32%
Barclay Hedge Global Macro Index** 3.48% 2.84%

 

(LINE GRAPH)

 

*The Fund’s past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. Returns are calculated using the traded net asset value or “NAV” on May 31, 2020. Performance data current to the most recent month end may be obtained by visiting www.FormulaFolioFunds.com or by calling 1-888-562-8880.

 

The Fund’s per share NAV is the value of one share of the Fund as calculated in accordance with the standard formula for valuing investment company shares. The NAV return is based on the NAV of the Fund and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively. The Fund’s total annual operating expenses are 1.09% per the most recent prospectus.

 

The Fund’s adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, until at least September 30, 2020, to ensure that total annual fund operating expenses after fee waiver and/or reimbursement (exclusive of any front-end or contingent deferred loads, taxes, brokerage fees and commissions, borrowing costs (such as interest and dividend expense on securities sold short), acquired fund fees and expenses, fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses), or extraordinary expenses such as litigation) will not exceed 0.80% of the Fund’s net assets.

 

**Barclay Hedge Global Macro Index managers carry long and short positions in any of the world’s major capital or derivative markets. These positions reflect their views on overall market direction as influenced by major economic trends and or events. The portfolios of these funds can include stocks, bonds, currencies, and commodities in the form of cash or derivatives instruments. Most funds invest globally in both developed and emerging markets. Investors cannot invest directly in an index.

 

***As of the close of business on the day of commencement of trading on November 1, 2017.

 

The Fund’s top asset classes are as follows:

 

  Asset Class  % of Net Assets 
  Exchange Traded Funds-Equity Funds   50.5%
  Exchange Traded Fund-Debt Funds   29.4%
  Exchange Traded Fund-Commodity Fund   19.2%
  Other Assets in Excess of Liabilities   0.9%
  Total   100.0%

 

Please refer to the Portfolio of Investments in this Annual Report for a detailed listing of the Fund’s holdings.

10

 

FormulaFolios Tactical Income ETF
PORTFOLIO REVIEW (Unaudited)
May 31, 2020

 

Average Annual Total Return through March 31, 2020*, as compared to its benchmark:

 

  One Since
  Year Inception***
FormulaFolios Tactical Income ETF - NAV 1.43% 1.40%
FormulaFolios Tactical Income ETF - Market Price 1.17% 1.34%
Bloomberg Barclays US Aggregate Bond Index** 9.42% 16.00%

 

(LINE GRAPH)

 

*The Fund’s past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. Returns are calculated using the traded net asset value or “NAV” on May 31, 2020. Performance data current to the most recent month end may be obtained by visiting www.FormulaFolioFunds.com or by calling 1-888-562-8880.

 

The Fund’s per share NAV is the value of one share of the Fund as calculated in accordance with the standard formula for valuing investment company shares. The NAV return is based on the NAV of the Fund and the market return is based on the market price per share of the Fund. The price used to calculate market return (“Market Price”) is determined by using the midpoint between the highest bid and the lowest offer on the primary stock exchange on which shares of the Fund are listed for trading, as of the time that the Fund’s NAV is calculated. Market and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively. The Fund’s total annual operating expenses are 1.04% per the most recent prospectus.

 

**The Bloomberg Barclays US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency). Investors cannot invest directly in an index.

 

***As of the close of business on the day of commencement of trading on June 6, 2017.

 

The Fund’s top asset classes are as follows:

 

  Asset Class  % of Net Assets 
  Exchange Traded Funds-Fixed Income Funds   91.8%
  Other Assets in Excess of Liabilities   8.2%
  Total   100.0%

 

Please refer to the Portfolio of Investments in this Annual Report for a detailed listing of the Fund’s holdings.

11

 

FormulaFolios Hedged Growth ETF
PORTFOLIO OF INVESTMENTS
May 31, 2020

 

Shares      Fair Value 
     EXCHANGE TRADED FUNDS - 97.3%     
     DEBT FUNDS - 13.1%     
 11,639   iShares 7-10 Year Treasury Bond ETF  $1,419,260 
 32,089   Vanguard Short-Term Treasury ETF   1,997,861 
         3,417,121 
     EQUITY FUNDS - 84.2%     
 96,396   Consumer Staples Select Sector SPDR Fund   5,709,535 
 9,832   iShares Core S&P 500 ETF   3,000,530 
 17,400   iShares Core S&P Mid-Cap ETF   3,064,488 
 96,115   iShares Core S&P Small-Cap ETF   6,357,046 
 43,395   ProShares Ultra MidCap400   1,239,361 
 26,298   ProShares Ultra Russell2000   1,211,286 
 10,577   ProShares Ultra S&P 500 +   1,285,000 
         21,867,246 
           
     TOTAL EXCHANGE TRADED FUNDS (Cost - $24,154,901)   25,284,367 
           
     MONEY MARKET FUND - 2.2%     
 565,800   Fidelity Investments Money Market Government Portfolio - Institutional Class, 0.08 % * (a)     
     TOTAL MONEY MARKET FUND (Cost - $565,800)   565,800 
           
     TOTAL INVESTMENTS - 99.5% (Cost - $24,720,701)  $25,850,167 
     OTHER ASSETS IN EXCESS OF LIABILITIES- 0.5%   127,828 
     NET ASSETS - 100.0%  $25,977,995 

 

+ - All or a portion of this security is on loan. Total loaned securities had a value of $558,854 at May 31, 2020.
     
* - Money Market Fund; Interest rate reflects seven-day effective yield on May 31, 2020.
     
ETF - Exchange Traded Fund
     
SPDR - Standard & Poor’s Depositary Receipts
     
S&P - Standard and Poor’s
     
(a)   Security was purchased with cash received as collateral for securities on loan at May 31, 2020. Total collateral had a value of $565,800 at May 31, 2020.
     

See accompanying notes to financial statements.

12

 

FormulaFolios Smart Growth ETF
PORTFOLIO OF INVESTMENTS
May 31, 2020

 

Shares      Fair Value 
     EXCHANGE TRADED FUNDS - 99.5%     
     EQUITY FUNDS - 99.5%     
 61,708   iShares Core MSCI EAFE ETF  $3,457,499 
 48,011   iShares Core MSCI Emerging Markets ETF   2,162,416 
 31,360   iShares Core S&P 500 ETF   9,570,445 
 25,624   iShares Core S&P Mid-Cap ETF   4,512,899 
 62,295   iShares Core S&P Small-Cap ETF +   4,120,191 
 33,548   iShares U.S. Real Estate ETF +   2,597,286 
           
     TOTAL EXCHANGE TRADED FUNDS (Cost - $28,610,189)   26,420,736 
           
     MONEY MARKET FUND - 12.2%     
 3,229,420   Fidelity Investments Money Market Government Portfolio - Institutional Class, 0.08 % * (a)     
     TOTAL MONEY MARKET FUND (Cost - $3,229,420)   3,229,420 
           
     TOTAL INVESTMENTS - 111.7% (Cost - $31,839,609)  $29,650,156 
     LIABILITIES IN EXCESS OF OTHER ASSETS - (11.7)%   (3,099,430)
     NET ASSETS - 100.0%  $26,550,726 

 

+ - All or a portion of this security is on loan. Total loaned securities had a value of $3,131,456 at May 31, 2020.
     
* - Money Market Fund; Interest rate reflects seven-day effective yield on May 31, 2020.
     
EAFE - Europe, Australasia, and Far East
     
ETF - Exchange Traded Fund
     
MSCI - Morgan Stanley Capital Investment
     
S&P - Standard and Poor’s
     
(a)   Security was purchased with cash received as collateral for securities on loan at May 31, 2020. Total collateral had a value of $3,229,420 at May 31, 2020.
     

See accompanying notes to financial statements.

13

 

FormulaFolios Tactical Growth ETF
PORTFOLIO OF INVESTMENTS
May 31, 2020

 

Shares      Fair Value 
     EXCHANGE TRADED FUNDS - 99.1%     
     COMMODITY FUNDS - 19.2%     
 125,758   Invesco DB Gold Fund +  $6,468,011 
           
     DEBT FUNDS - 29.4%     
 42,222   iShares Core U.S. Aggregate Bond ETF   4,967,418 
 56,488   Vanguard Total Bond Market ETF   4,966,425 
         9,933,843 
     EQUITY FUNDS - 50.5%     
 160,588   VanEck Vectors Gold Miners ETF   5,511,380 
 75,275   Vanguard Total Stock Market ETF +   11,570,520 
         17,081,900 
           
     TOTAL EXCHANGE TRADED FUNDS (Cost - $30,703,583)   33,483,754 
           
     MONEY MARKET FUND - 10.5%     
 3,558,440   Fidelity Investments Money Market Government Portfolio - Institutional Class, 0.08 % * (a)     
     TOTAL MONEY MARKET FUND (Cost - $3,558,440)   3,558,440 
           
     TOTAL INVESTMENTS - 109.6% (Cost - $34,262,023)  $37,042,194 
     LIABILITIES IN EXCESS OF OTHER ASSETS - (9.6)%   (3,233,155)
     NET ASSETS - 100.0%  $33,809,039 

 

+ - All or a portion of this security is on loan. Total loaned securities had a value of $3,499,503 at May 31, 2020.
     
* - Money Market Fund; Interest rate reflects seven-day effective yield on May 31, 2020.
     
ETF - Exchange Traded Fund
     
(a)   Security was purchased with cash received as collateral for securities on loan at May 31, 2020. Total collateral had a value of $3,558,440 at May 31, 2020.
     

See accompanying notes to financial statements.

14

 

FormulaFolios Tactical Income ETF
PORTFOLIO OF INVESTMENTS
May 31, 2020

 

Shares      Fair Value 
     EXCHANGE TRADED FUNDS - 91.8%     
     FIXED INCOME FUNDS - 91.8%     
 172,408   Invesco Fundamental High Yield Corporate Bond ETF +  $3,120,585 
 289,988   iShares 7-10 Year Treasury Bond ETF   35,361,137 
 246,961   iShares iBoxx $ Investment Grade Corporate Bond ETF   32,603,792 
 349,086   iShares iBoxx High Yield Corporate Bond ETF +   28,771,668 
 90,277   iShares Preferred & Income Securities ETF   3,172,334 
 283,794   SPDR Bloomberg Barclays High Yield Bond ETF   28,944,150 
 1,804,094   SPDR Portfolio Intermediate Term Treasury ETF +   59,895,921 
 43,715   VanEck Vectors High-Yield Municipal Index ETF +   2,525,853 
 371,522   Vanguard Intermediate-Term Corporate Bond ETF   34,763,313 
 847,889   Vanguard Intermediate-Term Treasury ETF   59,852,484 
           
     TOTAL EXCHANGE TRADED FUNDS (Cost - $274,089,474)   289,011,237 
           
     MONEY MARKET FUND - 6.5%     
 20,455,060   Fidelity Investments Money Market Government Portfolio - Institutional Class, 0.08 % * (a)     
     TOTAL MONEY MARKET FUND (Cost - $20,455,060)   20,455,060 
           
     TOTAL INVESTMENTS - 98.3% (Cost - $294,544,534)  $309,466,297 
     OTHER ASSETS IN EXCESS OF LIABILITIES - 1.7%   5,422,461 
     NET ASSETS - 100.0%  $314,888,758 

 

+ - All or a portion of this security is on loan. Total loaned securities had a value of $20,125,958 at May 31, 2020.
     
* - Money Market Fund; Interest rate reflects seven-day effective yield on May 31, 2020.
     
ETF - Exchange Traded Fund
     
SPDR - Standard & Poor’s Depositary Receipts
     
(a)   Security was purchased with cash received as collateral for securities on loan at May 31, 2020. Total collateral had a value of $20,455,060 at May 31, 2020.
     

See accompanying notes to financial statements.

15

 

FormulaFolios ETFs
STATEMENTS OF ASSETS AND LIABILITIES
May 31, 2020

 

   FormulaFolios   FormulaFolios   FormulaFolios   FormulaFolios 
   Hedged Growth   Smart Growth   Tactical Growth   Tactical Income 
   ETF   ETF   ETF   ETF 
ASSETS                    
Investment securities:                    
At cost  $24,720,701   $31,839,609   $34,262,023   $294,544,534 
At value *  $25,850,167   $29,650,156   $37,042,194   $309,466,297 
Cash and cash equivalents   517,496    160,765    363,311    26,118,463 
Receivable for Investments sold   215,903            1,166,763 
Receivable due from Adviser       2,343         
Prepaid expenses and other assets   4,318    3,135    3,213    3,427 
TOTAL ASSETS   26,587,884    29,816,399    37,408,718    336,754,950 
                     
LIABILITIES                    
Security lending collateral (Note 6)   565,800    3,229,420    3,558,440    20,455,060 
Investment advisory fees payable   6,119        5,412    153,928 
Payable for Fund shares redeemed               1,188,304 
Payable to related parties   5,691    8,400    8,396    24,356 
Accrued expenses and other liabilities   32,279    27,853    27,431    44,544 
TOTAL LIABILITIES   609,889    3,265,673    3,599,679    21,866,192 
NET ASSETS  $25,977,995   $26,550,726   $33,809,039   $314,888,758 
                     
Composition of Net Assets:                    
Paid in capital ($0 par value, unlimited shares authorized)  $34,636,952   $29,144,591   $36,464,567   $325,446,865 
Accumulated losses   (8,658,957)   (2,593,865)   (2,655,528)   (10,558,107)
NET ASSETS  $25,977,995   $26,550,726   $33,809,039   $314,888,758 
                     
Net Asset Value Per Share:                    
Shares:                    
Net Assets  $25,977,995   $26,550,726   $33,809,039   $314,888,758 
Shares of beneficial interest outstanding   1,150,000    1,075,000    1,325,000    13,250,000 
                     
Net asset value (Net Assets ÷ Shares Outstanding), offering and redemption price per share  $22.59   $24.70   $25.52   $23.77 
                     
Market Price  $22.56   $24.71   $25.52   $23.73 
                     
*Includes Securities Loaned $558,854; $3,131,456; $3,499,503; $20,125,958

 

See accompanying notes to financial statements.

16

 

FormulaFolios ETFs
STATEMENTS OF OPERATIONS
For the Year Ended May 31, 2020

 

   FormulaFolios   FormulaFolios   FormulaFolios   FormulaFolios 
   Hedged Growth   Smart Growth   Tactical Growth   Tactical Income 
   ETF   ETF   ETF   ETF 
INVESTMENT INCOME                    
Dividends - Unaffiliated  $1,047,341   $1,191,707   $903,765   $8,896,484 
Dividends - Affiliated           236,092     
Securities Lending   14,562    2,080    5,504    97,853 
TOTAL INVESTMENT INCOME   1,061,903    1,193,787    1,145,361    8,994,337 
                     
EXPENSES                    
Investment advisory fees   441,771    169,653    320,182    1,541,488 
Third Party administrative services fees   49,648    45,050    45,037    133,901 
Printing expenses   18,202    10,536    13,933    34,897 
Professional fees   16,250    16,250    16,250    16,250 
Custodian fees   15,668    12,997    14,942    18,459 
Legal fees   15,339    15,031    15,330    17,013 
Trustees fees and expenses   14,531    12,518    13,518    13,518 
Transfer agent fees   13,695    10,818    11,349    10,526 
Compliance officer fees   9,717    11,906    11,274    25,923 
Interest expense   7,471    379         
Insurance expense   3,398    2,635    2,616    12,068 
Other expenses   135    4,993    2,877    4 
TOTAL EXPENSES   605,825    312,766    467,308    1,824,047 
                     
Less: Fees waived and/or expenses reimbursed by the Adviser   (52,380)   (21,902)   (40,751)    
                     
NET EXPENSES   553,445    290,864    426,557    1,824,047 
NET INVESTMENT INCOME   508,458    902,923    718,804    7,170,290 
                     
REALIZED AND UNREALIZED GAIN (LOSS) FROM INVESTMENTS                    
Net realized loss from investments - Unaffiliated   (9,375,951)   (419,315)   (2,749,892)   (18,560,749)
Net realized gain from investments - Affiliated           740,893     
Net realized gain (loss) from in-kind redemptions   (1,210,105)   (5,256,188)   (2,455,825)   3,755,891 
Net change in unrealized appreciation (depreciation) on investments - Unaffiliated   3,141,004    (82,727)   827,727    12,236,571 
Net change in unrealized appreciation on investments - Affiliated           1,065,312     
NET REALIZED AND UNREALIZED LOSS FROM INVESTMENTS   (7,445,052)   (5,758,230)   (2,571,785)   (2,568,287)
                     
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS  $(6,936,594)  $(4,855,307)  $(1,852,981)  $4,602,003 
                     

See accompanying notes to financial statements.

17

 

FormulaFolios ETFs
STATEMENTS OF CHANGES IN NET ASSETS
FormulaFolios Hedged Growth ETF

 

   For the Year Ended   For the Year Ended 
   May 31, 2020   May 31, 2019 
FROM OPERATIONS          
Net investment income  $508,458   $291,865 
Net realized loss from investments   (9,375,951)   (174,871)
Net realized gain (loss) from in-kind redemptions   (1,210,105)   240,009 
Net change in unrealized appreciation (depreciation) on investments   3,141,004    (6,013,424)
Net decrease in net assets resulting from operations   (6,936,594)   (5,656,421)
           
DISTRIBUTIONS TO SHAREHOLDERS          
Total distributions paid   (876,745)   (1,499,930)
Total distributions to shareholders   (876,745)   (1,499,930)
           
FROM SHARES OF BENEFICIAL INTEREST          
Proceeds from shares sold   10,038,604    19,950,094 
Cost of shares redeemed   (41,518,352)   (10,585,644)
Net increase (decrease) in net assets from shares of beneficial interest   (31,479,748)   9,364,450 
           
TOTAL INCREASE (DECREASE) IN NET ASSETS   (39,293,087)   2,208,099 
           
NET ASSETS          
Beginning of Year   65,271,082    63,062,983 
End of Year  $25,977,995   $65,271,082 
           
SHARE ACTIVITY          
Shares Sold   400,000    700,000 
Shares Redeemed   (1,800,000)   (400,000)
Net increase (decrease) in shares of beneficial interest outstanding   (1,400,000)   300,000 
           

See accompanying notes to financial statements.

18

 

FormulaFolios ETFs
STATEMENTS OF CHANGES IN NET ASSETS
FormulaFolios Smart Growth ETF

 

   For the Year Ended   For the Year Ended 
   May 31, 2020   May 31, 2019 
FROM OPERATIONS          
Net investment income  $902,923   $530,385 
Net realized loss from investments   (419,315)    
Net realized loss from in-kind redemptions   (5,256,188)   (59,523)
Net change in unrealized depreciation on investments   (82,727)   (2,499,741)
Net decrease in net assets resulting from operations   (4,855,307)   (2,028,879)
           
DISTRIBUTIONS TO SHAREHOLDERS          
Total distributions paid   (888,020)   (569,513)
Total distributions to shareholders   (888,020)   (569,513)
           
FROM SHARES OF BENEFICIAL INTEREST          
Proceeds from shares sold   9,510,568    33,245,105 
Cost of shares redeemed   (27,809,541)   (2,887,416)
Net increase (decrease) in net assets from shares of beneficial interest   (18,298,973)   30,357,689 
           
TOTAL INCREASE (DECREASE) IN NET ASSETS   (24,042,300)   27,759,297 
           
NET ASSETS          
Beginning of Year   50,593,026    22,833,729 
End of Year  $26,550,726   $50,593,026 
           
SHARE ACTIVITY          
Shares Sold   375,000    1,275,000 
Shares Redeemed   (1,325,000)   (125,000)
Net increase (decrease) in shares of beneficial interest outstanding   (950,000)   1,150,000 
           

See accompanying notes to financial statements.

19

 

FormulaFolios ETFs
STATEMENTS OF CHANGES IN NET ASSETS
FormulaFolios Tactical Growth ETF

 

   For the Year Ended   For the Year Ended 
   May 31, 2020   May 31, 2019 
FROM OPERATIONS          
Net investment income  $718,804   $662,705 
Net realized loss from investments - Unaffiliated   (2,749,892)   (3,172,677)
Net realized gain from investments - Affiliated   740,893     
Net realized gain (loss) from in-kind redemptions   (2,455,825)   222,165 
Net change in unrealized appreciation on investments - Unaffiliated   827,727    619,318 
Net change in unrealized appreciation on investments - Affiliated   1,065,312     
Net decrease in net assets resulting from operations   (1,852,981)   (1,668,489)
           
DISTRIBUTIONS TO SHAREHOLDERS          
Return of capital   (151,592)    
Distributions paid   (620,696)   (737,930)
Total distributions to shareholders   (772,288)   (737,930)
           
FROM SHARES OF BENEFICIAL INTEREST          
Proceeds from shares sold   19,377,915    29,439,182 
Cost of shares redeemed   (32,875,563)   (7,921,366)
Net increase (decrease) in net assets from shares of beneficial interest   (13,497,648)   21,517,816 
           
TOTAL INCREASE (DECREASE) IN NET ASSETS   (16,122,917)   19,111,397 
           
NET ASSETS          
Beginning of Year   49,931,956    30,820,559 
End of Year  $33,809,039   $49,931,956 
           
SHARE ACTIVITY          
Shares Sold   750,000    1,200,000 
Shares Redeemed   (1,525,000)   (325,000)
Net increase (decrease) in shares of beneficial interest outstanding   (775,000)   875,000 
           

See accompanying notes to financial statements.

20

 

FormulaFolios ETFs
STATEMENTS OF CHANGES IN NET ASSETS
FormulaFolios Tactical Income ETF

 

   For the Year Ended   For the Year Ended 
   May 31, 2020   May 31, 2019 
FROM OPERATIONS          
Net investment income  $7,170,290   $6,509,904 
Net realized loss from investments   (18,560,749)   (5,271,781)
Net realized gain (loss) from in-kind redemptions   3,755,891    (267,009)
Net change in unrealized appreciation on investments   12,236,571    6,702,711 
Net increase in net assets resulting from operations   4,602,003    7,673,825 
           
DISTRIBUTIONS TO SHAREHOLDERS          
Return of capital   (78,510)    
Distributions paid   (7,170,290)   (6,554,520)
Total distributions to shareholders   (7,248,800)   (6,554,520)
           
FROM SHARES OF BENEFICIAL INTEREST          
Proceeds from shares sold   181,173,448    78,534,808 
Cost of shares redeemed   (95,272,337)   (19,758,954)
Net increase in net assets from shares of beneficial interest   85,901,111    58,775,854 
           
TOTAL INCREASE IN NET ASSETS   83,254,314    59,895,159 
           
NET ASSETS          
Beginning of Year   231,634,444    171,739,285 
End of Year  $314,888,758   $231,634,444 
           
SHARE ACTIVITY          
Shares Sold   7,700,000    3,300,000 
Shares Redeemed   (4,050,000)   (850,000)
Net increase in shares of beneficial interest outstanding   3,650,000    2,450,000 
           

See accompanying notes to financial statements.

21

 

FormulaFolios ETFs
FINANCIAL HIGHLIGHTS
 
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout the Periods Presented

 

   FormulaFolios Hedged Growth ETF 
             
   For the Year Ended   For the Year Ended   For the Period Ended 
   May 31, 2020   May 31, 2019   May 31, 2018 (1)
                
Net asset value, beginning of period  $25.60   $28.03   $25.00 
Activity from investment operations:               
Net investment income (2)   0.23    0.12    0.12 
Net realized and unrealized gain (loss) on investments   (2.88)   (1.98)   3.06 
Total from investment operations   (2.65)   (1.86)   3.18 
Less distributions from:               
Net investment income   (0.20)   (0.13)   (0.15)
Net realized gains   (0.16)   (0.44)    
Total distributions   (0.36)   (0.57)   (0.15)
Net asset value, end of period  $22.59   $25.60   $28.03 
Market price, end of period  $22.56   $25.62   $28.04 
Total return (3)   (10.57)%   (6.66)%   13.03% (7)
Net assets, at end of period (000s)  $25,978   $65,271   $63,063 
Ratio of gross expenses to average net assets (5)   1.05%   1.03%   1.06% (8)
Ratio of net expenses to average net assets (5)   0.96% (9)   0.98% (9)   0.95% (8)
Ratio of net investment income to average net assets(4)   0.88%   0.43%   0.44% (8)
Portfolio Turnover Rate (6)   398%   666%   138% (7)
                
(1)The FormulaFolios Hedged Growth ETF commenced operations on June 6, 2017.

 

(2)Per share amounts calculated using the average shares method.

 

(3)Total returns are historical in nature and assume changes in share price, reinvestment of all dividends and distributions, if any.

 

(4)Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests.

 

(5)Does not include the Fund’s share of the expenses of the underlying investment companies in which the Fund invests.

 

(6)Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. (See Note 5)

 

(7)Not Annualized

 

(8)Annualized

 

(9)Ratio includes 0.01% and 0.03% for the years ended May 31, 2020 and May 31, 2019 attributed to interest expense and fees.

 

See accompanying notes to financial statements.

22

 

FormulaFolios ETFs
FINANCIAL HIGHLIGHTS
 
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout the Periods Presented

 

   FormulaFolios Smart Growth ETF 
     
   For the Year Ended   For the Year Ended   For the Period Ended 
   May 31, 2020   May 31, 2019   May 31, 2018 (1)
                
Net asset value, beginning of period  $24.98   $26.10   $25.00 
Activity from investment operations:               
Net investment income (2)   0.49    0.35    0.12 
Net realized and unrealized gain (loss) on investments   (0.34)   (1.10)   1.17 
Total from investment operations   0.15    (0.75)   1.29 
Less distributions from:               
Net investment income   (0.43)   (0.37)   (0.19)
Total distributions   (0.43)   (0.37)   (0.19)
Net asset value, end of period  $24.70   $24.98   $26.10 
Market price, end of period  $24.71   $24.96   $26.09 
Total return (3)   0.48%   (2.83)%   5.21% (7)
Net assets, at end of period (000s)  $26,551   $50,593   $22,834 
Ratio of gross expenses to average net assets (5)   0.65%   0.61%   1.67% (8)
Ratio of net expenses to average net assets (5)   0.60%   0.60%   0.60% (8)
Ratio of net investment income to average net assets(4)   1.87%   1.35%   0.81% (8)
Portfolio Turnover Rate (6)   0%   0%   0% (7)
                
(1)The FormulaFolios Smart Growth ETF commenced operations on November 1, 2017.

 

(2)Per share amounts calculated using the average shares method.

 

(3)Total returns are historical in nature and assume changes in share price, reinvestment of all dividends and distributions, if any.

 

(4)Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests.

 

(5)Does not include the Fund’s share of the expenses of the underlying investment companies in which the Fund invests.

 

(6)Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. (See Note 5)

 

(7)Not Annualized

 

(8)Annualized

 

See accompanying notes to financial statements.

23

 

FormulaFolios ETFs
FINANCIAL HIGHLIGHTS
 
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout the Periods Presented

 

   FormulaFolios Tactical Growth ETF 
     
   For the Year Ended   For the Year Ended   For the Period Ended 
   May 31, 2020   May 31, 2019   May 31, 2018 (1)
                
Net asset value, beginning of period  $23.78   $25.16   $25.00 
Activity from investment operations:               
Net investment income (2)   0.35    0.37    0.12 
Net realized and unrealized gain (loss) on investments   1.72    (1.34)   0.25 
Total from investment operations   2.07    (0.97)   0.37 
Less distributions from:               
Net investment income   (0.25)   (0.41)   (0.21)
Net return of capital   (0.08)        
Total distributions   (0.33)   (0.41)   (0.21)
Net asset value, end of period  $25.52   $23.78   $25.16 
Market price, end of period  $25.52   $23.79   $25.16 
Total return (3)   8.69%   (3.81)%   1.35% (7)
Net assets, at end of period (000s)  $33,809   $49,932   $30,821 
Ratio of gross expenses to average net assets (5)   0.88%   0.87%   1.13% (8)
Ratio of net expenses to average net assets (5)   0.80%   0.80%   0.80% (8)
Ratio of net investment income to average net assets(4)   1.35%   1.56%   0.82% (8)
Portfolio Turnover Rate (6)   14%   92%   56% (7)
                
(1)The FormulaFolios Tactical Growth ETF commenced operations on November 1, 2017.

 

(2)Per share amounts calculated using the average shares method.

 

(3)Total returns are historical in nature and assume changes in share price, reinvestment of all dividends and distributions, if any.

 

(4)Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests.

 

(5)Does not include the Fund’s share of the expenses of the underlying investment companies in which the Fund invests.

 

(6)Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. (See Note 5)

 

(7)Not Annualized

 

(8)Annualized

 

See accompanying notes to financial statements.

24

 

FormulaFolios ETFs
FINANCIAL HIGHLIGHTS
 
Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout the Periods Presented

 

   FormulaFolios Tactical Income ETF 
             
   For the Year Ended   For the Year Ended   For the Period Ended 
   May 31, 2020   May 31, 2019   May 31, 2018 (1)
                
Net asset value, beginning of period  $24.13   $24.02   $25.00 
Activity from investment operations:               
Net investment income (2)   0.68    0.77    0.77 
Net realized and unrealized gain (loss) on investments   (0.32)   0.11    (1.00)
Total from investment operations   0.36    0.88    (0.23)
Less distributions from:               
Net investment income   (0.71)   (0.77)   (0.75)
Net return of capital   (0.01)        
Total distributions   (0.72)   (0.77)   (0.75)
Net asset value, end of period  $23.77   $24.13   $24.02 
Market price, end of period  $23.73   $24.15   $24.06 
Total return (3)   1.43%   3.77%   (1.02)% (7)
Net assets, at end of period (000s)  $314,889   $231,634   $171,739 
Ratio of gross expenses to average net assets (5)   0.71%   0.74%   0.75% (8)
Ratio of net expenses to average net assets (5)   0.71%   0.74%   0.75% (8)
Ratio of net investment income to average net assets(4)   2.79%   3.24%   3.19% (8)
Portfolio Turnover Rate (6)   78%   135%   48% (7)
                
(1)The FormulaFolios Tactical Income ETF commenced operations on June 6, 2017.

 

(2)Per share amounts calculated using the average shares method.

 

(3)Total returns are historical in nature and assume changes in share price, reinvestment of all dividends and distributions, if any.

 

(4)Recognition of net investment income by the Fund is affected by the timing of the declaration of dividends by the underlying investment companies in which the Fund invests.

 

(5)Does not include the Fund’s share of the expenses of the underlying investment companies in which the Fund invests.

 

(6)Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. (See Note 5)

 

(7)Not Annualized

 

(8)Annualized

 

See accompanying notes to financial statements.

25

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS
May 31, 2020

 

1.ORGANIZATION

 

The FormulaFolios Hedged Growth ETF (“Hedged Growth ETF”), the FormulaFolios Smart Growth ETF (“Smart Growth ETF”), the FormulaFolios Tactical Growth ETF (“Tactical Growth ETF”), and the FormulaFolios Tactical Income ETF (“Tactical Income ETF”), formerly known as FormulaFolios Income ETF, (each a “Fund” and collectively the “Funds”) are each a diversified series of Northern Lights Fund Trust IV (the “Trust”), a statutory trust organized under the laws of the State of Delaware on June 2, 2015, 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 Hedged Growth ETF and Smart Growth ETF is to seek to provide capital growth. The Tactical Growth ETF seeks long-term total return. The Tactical Income ETF seeks to provide income. The Hedged Growth ETF and Tactical Income ETF commenced operations on June 5, 2017. The Smart Growth ETF and Tactical Growth ETF commenced operations on October 31, 2017.

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

The following is a summary of significant accounting policies followed by the Funds in preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Funds are investment companies and accordingly follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 “Financial Services – Investment Companies.”

 

Securities Valuation – Securities listed on an exchange are valued at the last reported sale price at the close of the regular trading session of the exchange on the business day the value is being determined, or in the case of securities listed on NASDAQ at the NASDAQ Official Closing Price. In the absence of a sale, such securities shall be valued at the mean between the current bid and ask prices on the day of valuation.

 

Valuation of Underlying Funds – The Funds may invest in portfolios of open-end or closed-end investment companies (the “investment companies”). Investment companies are valued at their respective net asset values as reported by such investment companies. Mutual funds value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value to the methods established by the board of directors of the open-end funds. Exchange-traded funds (“ETFs”) are valued at the last reported price or official closing price. The shares of many closed-end investment companies and ETFs, after their initial public offering, frequently trade at a price per share, which is different than the net asset value per share. The difference represents a market premium or market discount of such shares. There

26

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

can be no assurances that the market discount or market premium on shares of any closed-end investment company or ETF purchased by the Funds will not change.

 

The Funds may hold securities, such as private investments, interests in commodity pools, other non-traded securities or temporarily illiquid securities, for which market quotations are not readily available or are determined to be unreliable. These securities will be valued using the “fair value” procedures approved by the Board of Trustees (“the Board”). The Board has delegated execution of these procedures to a fair value committee composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) 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.

 

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 ask price is available; the spread between bid and ask prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; (iv) securities with respect to which an event that will affect the value thereof has occurred (a “significant event”) since the closing prices were established on the principal exchange on which they are traded, but prior to a Fund’s calculation of its net asset value. 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 a Fund’s holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.

27

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

The Funds utilize various methods to measure the fair value of all of its investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of input are:

 

Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities that the Funds have the ability to access.

 

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

 

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

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of 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 May 31, 2020 for the Funds’ assets measured at fair value:

 

FormulaFolios Hedged Growth ETF 
                 
Assets *  Level 1   Level 2   Level 3   Total 
Exchange Traded Funds  $25,284,367   $   $   $25,284,367 
Money Market Fund - Collateral for Securities on Loan   565,800            565,800 
Total  $25,850,167   $   $   $25,850,167 

28

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

FormulaFolios Smart Growth ETF 
                 
Assets *  Level 1   Level 2   Level 3   Total 
Exchange Traded Funds  $26,420,736   $   $   $26,420,736 
Money Market Fund - Collateral for Securities on Loan   3,229,420            3,229,420 
Total  $29,650,156   $   $   $29,650,156 
                     
FormulaFolios Tactical Growth ETF 
                 
Assets *  Level 1   Level 2   Level 3   Total 
Exchange Traded Funds  $33,483,754   $   $   $33,483,754 
Money Market Fund - Collateral for Securities on Loan   3,558,440            3,558,440 
Total  $37,042,194   $   $   $37,042,194 
                     
FormulaFolios Tactical Income ETF 
                 
Assets *  Level 1   Level 2   Level 3   Total 
Exchange Traded Funds  $289,011,237   $   $   $289,011,237 
Money Market Fund - Collateral for Securities on Loan   20,455,060            20,455,060 
Total  $309,466,297   $   $   $309,466,297 

 

The Funds did not hold any Level 3 securities during the year.

 

*See Portfolios of Investments for industry classification.

 

Exchange Traded Funds – The Funds may invest in ETFs. ETFs are a type of fund bought and sold on a securities exchange. An ETF trades like common stock. An index ETF represents a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities in which it invests, although the lack of liquidity on an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.

 

Security transactions and related income – Security transactions are accounted for on the trade date. Interest income is recognized on an accrual basis and includes amortization and accretion, which is recorded using the effective yield method. Dividend income is recorded on the ex-dividend date. Realized gains or losses from sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.

 

Distributions to shareholders – Dividends from net investment income, if any, are declared and paid quarterly for Hedged Growth ETF, Smart Growth ETF, and Tactical Growth ETF and monthly for Tactical Income ETF. Distributable net realized capital gains, if any, are declared and distributed annually. Dividends from net investment income and distributions from net realized gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These “book/tax” differences are considered either temporary (e.g., deferred losses) or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary differences do not require reclassification. Dividends and distributions to shareholders are recorded on the ex-dividend date.

29

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

Cash and Cash Equivalents – Idle cash may be swept into various overnight demand deposits and is classified as cash and cash equivalents on the Statements of Assets and Liabilities. The Funds maintain cash in bank deposit accounts which, at times, may exceed United States federally insured limits. Amounts swept overnight are available on the next business day.

 

Federal Income Taxes – The Funds comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of their taxable income to their shareholders. Therefore, no provision for federal income tax is required. The Funds recognize the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Funds’ tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions for the period ended May 31, 2018-2019, or expected to be taken in the Funds’ May 31, 2020 year-end tax returns. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statements of Operations. During the year, the Funds did not incur any interest or penalties. The Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

 

Expenses – Expenses of the Trust that are directly identifiable to a specific Fund are charged to that Fund. Expenses, which are not readily identifiable to a specific Fund, are allocated in such a manner as deemed equitable (as determined by the Board), taking into consideration the nature and type of expense and the relative sizes of the Funds in the Trust.

 

Indemnification – The Trust indemnifies its officers and Trustees for certain liabilities that may arise from the performance of their duties to the Trust. Additionally, in the normal course of business, the Funds enter into contracts that contain a variety of representations and warranties and which provide general indemnities. The Funds’ maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the risk of loss due to these warranties and indemnities appears to be remote.

 

Securities Lending Risk – The Fund may lend portfolio securities to institutions, such as banks and certain broker-dealers. The fund may experience a loss for delay in the recovery of its securities if the borrowing institution breaches its agreement with the Fund (see additional information at Note 8).

 

3.INVESTMENT TRANSACTIONS

 

For the year ended May 31, 2020, cost of purchases and proceeds from sales of portfolio securities (excluding in-kind transactions and short-term investments), amounted to:

 

Fund  Purchases   Sales 
FormulaFolios Hedged Growth ETF  $219,842,597   $225,632,863 
FormulaFolios Smart Growth ETF       1,001,061 
FormulaFolios Tactical Growth ETF   7,430,932    7,571,185 
FormulaFolios Tactical Income ETF   189,888,283    209,302,925 

30

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

For the year ended May 31, 2020, cost of purchases and proceeds from sales of portfolio securities for in-kind transactions, amounted to:

 

Fund  Purchases   Sales 
FormulaFolios Hedged Growth ETF  $9,785,686   $34,877,595 
FormulaFolios Smart Growth ETF   9,450,521    26,682,745 
FormulaFolios Tactical Growth ETF   19,261,435    32,536,834 
FormulaFolios Tactical Income ETF   176,076,089    92,766,749 

 

4.INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES

 

FormulaFolio Investments LLC serves as the Funds’ investment adviser (the “Adviser”) pursuant to an investment advisory agreement with the Trust (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Adviser, under the oversight of the Board, directs the daily operations of the Funds and supervises the performance of administrative and professional services provided by others. As compensation for its services and the related expenses borne by the Adviser, the Funds pay the Adviser a fee, computed and accrued daily and paid monthly, at an annual rate of 0.80%, 0.35%, 0.60%, and 0.60% of average daily net assets of Hedged Growth ETF, Smart Growth ETF, Tactical Growth ETF, and Tactical Income ETF, respectively. During the year ended May 31, 2020, the Adviser earned the following fees:

 

Fund  Advisory Fee 
Hedged Growth ETF  $441,771 
Smart Growth ETF   169,653 
Tactical Growth ETF   320,182 
Tactical Income ETF   1,541,488 

 

Pursuant to a written agreement (the “Waiver Agreement”), the Adviser has contractually agreed, until at least September 30, 2020, to ensure that total annual fund operating expenses after fee waiver and/or reimbursement (exclusive of any front-end or contingent deferred loads, taxes, brokerage fees and commissions, borrowing costs (such as interest and dividend expense on securities sold short), acquired fund fees and expenses, fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses), or extraordinary expenses such as litigation) will not exceed 0.95%, 0.60%, 0.80%, and 0.80% of average daily net assets of Hedged Growth ETF, Smart Growth ETF, Tactical Growth ETF, and Tactical Income ETF, respectively; subject to possible recoupment from the Funds in future years within the three years from the date the fees have been waived or reimbursed if such recoupment can be achieved within the lesser of the foregoing expense limits or the expense limits in place at the time of the recoupment. Fee waiver and reimbursement arrangements can decrease the Funds’ expenses and boost its performance. If the Adviser waives any fee or reimburses any expense pursuant to the Waiver Agreement, and the operating expenses attributable to the Funds are subsequently less than the Expense Limitation, the Adviser shall be entitled to reimbursement by the applicable Fund for such waived fees or reimbursed expenses provided that such reimbursement does not cause the expenses to exceed the Expense Limitation. If the Funds’ operating expenses subsequently exceed the Expense Limitation, the

31

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

reimbursements shall be suspended.

 

During the year ended May 31, 2020, the Adviser waived fees and/or reimbursed expenses, pursuant to the Waiver Agreement, in the amounts of:

 

   Fees waived 
   (reimbursed) by the 
Fund  Adviser 
Hedged Growth ETF  $52,380 
Smart Growth ETF   21,902 
Tactical Growth ETF   40,751 

 

The table below contains the amounts of fee waivers and expense reimbursements subject to recapture by the Adviser through May 31 of the year indicated.

 

Fund  2021   2022   2023 
Hedged Growth ETF  $52,260   $35,307   $52,380 
Smart Growth ETF   57,819    5,227    21,902 
Tactical Growth ETF   41,961    30,595    40,751 

 

Distributor – The distributor of the Funds is Northern Lights Distributors, LLC (the “Distributor” or “NLD”). The Board has adopted, on behalf of the Funds, the Trust’s Master Distribution and Shareholder Servicing Plan as amended (the “Plan”), pursuant to Rule 12b-1 under the 1940 Act, to pay for certain distribution activities and shareholder services related to Fund shares. Under the Plan, the Funds may pay 0.25% per year of the average daily net assets of Fund shares for such distribution and shareholder service activities. As of May 31, 2020 the Plan has not been activated. For the year ended May 31, 2020, the Funds did not incur any distribution fees.

 

The Distributor acts as the Funds’ principal underwriter in a continuous public offering of the Funds’ shares and is an affiliate of Gemini Fund Services, LLC. For the year ended May 31, 2020, there were no underwriting commissions.

 

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

 

Gemini Fund Services, LLC (“GFS”) – GFS, an affiliate of the Distributor, provides administration and fund accounting services to the Trust. Pursuant to separate servicing agreements with GFS, the Funds pay GFS customary fees for providing administration and fund accounting services to the Funds, which are included in administrative service fees in the Statements of Operations. Certain officers of the Trust are also officers of GFS, and are not paid any fees directly by the Funds for serving in such capacities.

 

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

32

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

customary fees from each Fund, which are included in compliance officer fees in the Statements of Operations.

 

Blu Giant, LLC (“Blu Giant”) – Blu Giant, an affiliate of GFS and the Distributor, provides EDGAR conversion and filing services as well as print management services for the Funds on an ad-hoc basis. For the provision of these services, Blu Giant receives customary fees from the Funds, which are included in printing expenses in the Statements of Operations.

 

Effective February 1, 2019, NorthStar Financial Services Group, LLC, the parent company of GFS and its affiliated companies including NLD, NLCS and Blu Giant (collectively, the “Gemini Companies”), sold its interest in the Gemini Companies to a third party private equity firm that contemporaneously acquired Ultimus Fund Solutions, LLC (an independent mutual fund administration firm) and its affiliates (collectively, the “Ultimus Companies”). As a result of these separate transactions, the Gemini Companies and the Ultimus Companies are now indirectly owned through a common parent entity, The Ultimus Group, LLC.

 

5.CAPITAL SHARE TRANSACTIONS

 

Shares are not individually redeemable and may be redeemed by the Funds at NAV only in large blocks known as “Creation Units.” Shares are created and redeemed by the Funds only in Creation Unit size aggregations of 25,000 for Smart Growth ETF and Tactical Growth ETF. Shares are created and redeemed by the Funds only in Creation Unit size aggregations of 50,000 shares for Hedged Growth ETF and Tactical Income ETF. Only Authorized Participants or transactions done through an Authorized Participant are permitted to purchase or redeem Creation Units from the Funds. An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per share of the Fund on the transaction date.

 

Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the Authorized Participant or as a result of other market circumstances. In addition, the Funds may impose transaction fees on purchases and redemptions of Fund shares to cover the custodial and other costs incurred by the Funds in effecting trades. A fixed fee payable to the Custodian may be imposed on each creation and redemption transaction regardless of the number of Creation Units involved in the transaction (“Fixed Fee”). Purchases and redemptions of Creation Units for cash or involving cash-in-lieu are required to pay an additional variable charge to compensate the Funds and its ongoing shareholders for brokerage and market impact expenses relating to Creation Unit transactions (“Variable Charge,” and together with the Fixed Fee, the “Transaction Fees”). Transactions in capital shares for the Funds are disclosed in the Statements of Changes in Net Assets. For the year ended May 31, 2020, Hedged Growth ETF received $4,750 in fixed fees and $0 in variable fees, Smart Growth ETF received $7,250 in fixed fees and $0 in variable fees, Tactical Growth ETF received $8,500 in fixed fees and $0 in variable fees and Tactical Income ETF received $17,750 and $0 in variable fees, respectively.

33

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

The Transaction Fees for the Funds are listed in the table below:

 

  Fee for in-Kind and Cash     Maximum Additional Variable  
  Purchases     Charge for Cash Purchases*  
  $250     2.00%*  

 

*The maximum Transaction Fee may be up to 2.00% of the amount invested.

 

6.SECURITIES LENDING

 

Under an agreement (the “Securities Lending Agreement”) with the Securities Finance Trust Company (“SFTC”), the Funds can lend their portfolio securities to brokers, dealers and other financial institutions approved by the Board to earn additional income. For each securities loan, the borrower shall transfer collateral in an amount determined by applying the margin to the market value of the loaned available securities (102% for same currency and 105% for cross currency). Collateral is invested in highly liquid, short-term instruments such as money market funds in accordance with the Funds’ security lending procedures. The Funds continue to receive interest or dividends on the securities loaned. The Funds have the right under the Securities Lending Agency Agreement to recover the securities from the borrower on demand; if the borrower fails to deliver the securities on a timely basis, the Funds could experience delays or losses on recovery. Additionally, the Funds are subject to the risk of loss from investments made with the cash received as collateral. The Funds manage credit exposure arising from these lending transactions by, in appropriate circumstances, entering into master netting agreements and collateral agreements with third party borrowers that provide in the event of default (such as bankruptcy or a borrower’s failure to pay or perform), the right to net a third-party borrower’s rights and obligations under such agreement and liquidate and set off collateral against the net amount owed by the counterparty.

 

The following table breaks out the Funds’ securities lending transactions accounted for as secured borrowings with cash collateral of overnight and continuous maturities as of May 31, 2020:

 

FormulaFolios Hedged Growth ETF                    
   Overnight                 
   and       Between 30         
Securities Lending Transactions  Continuous   < 30 days   & 90 days   > 90 days   Total 
Fidelity Investments Money Market Government Portfolio - Institutional Class  $565,800   $   $   $   $565,800 
Total Borrowings  $565,800   $   $   $   $565,800 

34

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

FormulaFolios Smart Growth ETF                    
                     
   Overnight and       Between 30   > 90     
Securities Lending Transactions  Continuous   < 30 days   & 90 days   days   Total 
Fidelity Investments Money Market Government Portfolio - Institutional Class  $3,229,420   $   $   $   $3,229,420 
Total Borrowings  $3,229,420   $   $   $   $3,229,420 
                          
FormulaFolios Tactical Growth ETF                    
                     
   Overnight and       Between 30         
Securities Lending Transactions  Continuous   < 30 days   & 90 days   > 90 days   Total 
Fidelity Investments Money Market Government Portfolio - Institutional Class  $3,558,440   $   $   $   $3,558,440 
Total Borrowings  $3,558,440   $   $   $   $3,558,440 
                          
FormulaFolios Tactical Income ETF
                          
   Remaining Contractual Maturity of the Agreements as of May 31, 2020 
   Overnight and       Between 30         
Securities Lending Transactions  Continuous   < 30 days   & 90 days   > 90 days   Total 
Fidelity Investments Money Market Government Portfolio - Institutional Class  $20,455,060   $   $   $   $20,455,060 
Total Borrowings  $20,455,060   $   $   $   $20,455,060 

 

At May 31, 2020, the Funds had loaned securities and received cash collateral for the loan. This cash was invested in the Fidelity Investments Money Market Government Portfolio-Institutional Class (“Money Market Fund”) as shown in the Portfolio of Investments. The Funds receive compensation relating to the lending of the Fund’s securities as reflected in the Statements of Operations. The fair value of the securities loaned for the Hedged Growth ETF, Smart Growth ETF, Tactical Growth ETF and Tactical Income ETF totaled $558,854; $3,131,456; $3,499,503; $20,125,958 respectively at May 31, 2020. The securities loaned are noted in the Portfolio of Investments. The fair value of the “Collateral for Securities Loaned” on the Portfolio of Investments includes only cash collateral received and reinvested that totaled $565,800, $3,229,420, $3,558,440 and $20,455,060 respectively for each fund at May 31, 2020. These amounts are offset by a liability recorded as “Securities lending collateral” as shown on the Statements of Assets and Liabilities.

35

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

7.INVESTMENTS IN AFFILIATED COMPANIES

 

An affiliated company is a company in which a Fund has ownership of at least 5% of the voting securities. Invesco DB Gold Fund was an affiliate in Tactical Growth ETF at May 31, 2019 as noted in the Fund’s Portfolio of Investments. As of May 31, 2020, the below security is no longer affiliated. Transactions during the year are as follows:

 

                       Change in           Percent of
               Dividends       Unrealized           voting
   Fair Value-           Credited to   Realized Gain   Appreciation/   Fair Value-End of   Shares held at   securities
Description  Beginning of Year   Purchases   Sales Proceeds   Income   (Loss)   (Depreciation)   Year   End of Year   owned
Invesco DB Gold Fund  $9,699,974   $3,782,219   $8,820,387   $236,092   $740,893   $1,065,312   $6,468,011    125,758   4.19%
Total  $9,699,974   $3,782,219   $8,820,387   $236,092   $740,893   $1,065,312   $6,468,011    125,758   4.19%

 

8.UNDERLYING FUND RISK

 

Other investment companies including ETFs and closed-end funds (“Underlying Funds”) in which the Funds invest are subject to investment advisory and other expenses, which will be indirectly paid by the Funds. As a result, the cost of investing in the Funds will be higher than the cost of investing directly in the Underlying Funds and may be higher than other ETFs that invest directly in stocks and bonds. Each of the Underlying Funds is subject to its own specific risks, but the Adviser expects the principal investment risks of such Underlying Funds will be similar to the risks of investing in the corresponding Funds. Closed-end funds and ETFs may also trade at a discount or premium to their NAV and may trade at a larger discount or smaller premium subsequent to purchase by the Funds.

 

9.UNDERLYING INVESTMENT IN OTHER INVESTMENT COMPANIES

 

The Smart Growth ETF and Tactical Growth ETF currently seek to achieve their investment objective by investing a portion of their assets in the iShares Core S&P 500 ETF and Vanguard Total Stock Market ETF (the “Securities”). The Smart Growth ETF and Tactical Growth ETF may redeem the Securities at any time if the Adviser determines that it is in the best interest of the Smart Growth ETF and Tactical Growth ETF and its shareholders to do so.

 

The performance of the Smart Growth ETF and Tactical Growth ETF will be directly affected by the performance of the Securities. The annual report of the Securities, along with the report of the independent registered public accounting firm is included in the applicable Security’s N-CSRs available at www.sec.gov. As of May 31, 2020, the percentage of the Smart Growth ETF’s net assets invested in iShares Core S&P 500 ETF was 36.0%. The percentage of the Tactical Growth ETF’s net assets invested in Vanguard Total Stock Market ETF was 34.2%.

36

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

10.AGGREGATE UNREALIZED APPRECIATION AND DEPRECATION-TAX BASIS

 

The identified cost of investments in securities owned by each Fund for federal income tax purposes, and their respective gross unrealized appreciation and depreciation at May 31, 2020, were as follows:

 

       Gross   Gross   Net Unrealized 
   Tax   Unrealized   Unrealized   Appreciation/ 
   Cost   Appreciation   Depreciation   (Depreciation) 
Hedged Growth ETF  $26,122,165   $1,129,466   $(1,401,464)  $(271,998)
Smart Growth ETF   31,839,609    463,066    (2,652,519)   (2,189,453)
Tactical Growth ETF   35,591,957    2,780,171    (1,329,934)   1,450,237 
Tactical Income ETF   303,808,131    14,921,763    (9,263,597)   5,658,166 

 

11.DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL

 

The tax character of distributions for the fiscal year/period ended May 31, 2020 and May 31, 2019 was as follows:

 

   For the year ended May 31, 2020 
   Ordinary   Tax   Return of     
Fund  Income   Exempt   Capital   Total 
Hedged Growth ETF  $876,745   $   $   $876,745 
Smart Growth ETF   888,020            888,020 
Tactical Growth ETF   620,696        151,592    772,288 
Tactical Income ETF   6,786,442    383,848    78,510    7,248,800 
                     
   For the year ended May 31, 2019 
   Ordinary   Long-Term   Return of     
Fund  Income   Capital Gains   Capital   Total 
Hedged Growth ETF  $1,499,930   $   $   $1,499,930 
Smart Growth ETF   569,513            569,513 
Tactical Growth ETF   737,930            737,930 
Tactical Income ETF   6,554,520            6,554,520 

 

As of May 31, 2020, 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 
Fund  Income   Capital Gains   Late Year Loss   Forwards   Differences   (Depreciation)   Earnings/(Deficits) 
Hedged Growth ETF  $14,337   $   $(8,263,039)  $(138,257)  $   $(271,998)  $(8,658,957)
Smart Growth ETF   14,903        (419,315)           (2,189,453)   (2,593,865)
Tactical Growth ETF           (679,119)   (3,426,646)       1,450,237    (2,655,528)
Tactical Income ETF           (9,303,654)   (6,912,619)       5,658,166    (10,558,107)

37

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

The difference between book basis and tax basis undistributed accumulated net realized gain, and unrealized appreciation from investments is primarily attributable to tax adjustments related to partnerships and the tax deferral of losses on wash sales.

 

Late year losses incurred after December 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The Funds incurred and elected to defer such late year losses as follows:

 

   Late Year 
Fund  Losses 
Tactical Growth ETF  $16,123 

 

Capital losses incurred after October 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The following funds incurred and elected to defer such capital losses as follows:

 

   Post October 
Fund  Losses 
FormulaFolios Hedged Growth ETF  $8,263,039 
FormulaFolios Smart Growth ETF   419,315 
Tactical Growth ETF   662,996 
Tactical Income ETF   9,303,654 

 

At May 31, 2020, the Funds had capital loss carry forwards for federal income tax purposes available to offset future capital gains, as follows:

 

   Non-Expiring   Non-Expiring         
Fund  Short-Term   Long-Term   Total   CLCF Utilized 
FormulaFolios Hedged Growth ETF  $138,257   $   $138,257   $ 
Tactical Growth ETF   2,058,561    1,368,085    3,426,646     
Tactical Income ETF   4,217,782    2,694,837    6,912,619     

 

Permanent book and tax differences, primarily attributable to return of capital distributions, and adjustments related to Transfers in kind, resulted in reclassifications for the Funds for the fiscal year ended May 31, 2020 as follows:

 

   Paid     
   In   Accumulated 
Fund  Capital   Earnings (Losses) 
Hedged Growth ETF  $(1,764,074)  $1,764,074 
Smart Growth ETF   (5,256,188)   5,256,188 
Tactical Growth ETF   (2,392,195)   2,392,195 
Tactical Income ETF   3,548,479    (3,548,479)

38

 

FormulaFolios ETFs
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2020

 

12.SUBSEQUENT EVENTS

 

Subsequent events after the date of the Statements of Assets and Liabilities have been evaluated through the date the financial statements were issued.

 

Distributions: The Fund’s Board of Trustees declared the following distributions:

 

Fund  Dividend Per Share   Record Date  Ex-Date  Payable Date
Hedged Growth  $0.0083   6/16/2020  6/16/2020  6/19/2020
Tactical Growth  $0.0300   6/16/2020  6/16/2020  6/19/2020
Smart Growth  $0.0084   6/16/2020  6/16/2020  6/19/2020
Tactical Income  $0.0344   6/16/2020  6/16/2020  6/19/2020
Tactical Income  $0.0371   7/16/2020  7/15/2020  7/21/2020

 

On July 2, 2020, the Adviser sold all or a portion of their interest in the Adviser to AmeriLife Group, LLC (“AmeriLife”) and two executives of Brookstone Capital Management LLC (“BCM”), a majority-owned subsidiary of AmeriLife, Nadim “Dean” Zayed and Darryl Ronconi (the “Transaction”). As a result of the Transaction, AmeriLife owns over 50% of the voting interests of the Adviser and Mr. Zayed owns over 25% but less than 50%. Four of the Adviser’s original owners remain shareholders following the Transaction.

 

Management has determined that no events or transactions occurred requiring adjustment or disclosure in the financial statements other than the discussed above.

39

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Shareholders of FormulaFolios Hedged Growth ETF, FormulaFolios Smart Growth ETF, FormulaFolios Tactical Growth ETF, and FormulaFolios Tactical Income ETF and

Board of Trustees of Northern Lights Fund Trust IV

 

Opinion on the Financial Statements

 

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of FormulaFolios Hedged Growth ETF, FormulaFolios Smart Growth ETF, FormulaFolios Tactical Growth ETF and FormulaFolios Tactical Income ETF (the “Funds”), each a series of Northern Lights Fund Trust IV, as of May 31, 2020, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, including the related notes, and the financial highlights for each of the three periods in the period then ended (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds as of May 31, 2020, the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the three periods in the 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 Funds’ management. Our responsibility is to express an opinion on the Funds’ 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 Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2020, by correspondence with the custodian and brokers or by other appropriate auditing procedures where replies from brokers were not received. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

We have served as the auditor of one or more investment companies with a related advisor since 2015.

 

COHEN & COMPANY, LTD.

Cleveland, Ohio

July 27, 2020

40

 

FormulaFolios ETFs
EXPENSE EXAMPLES (Unaudited)
May 31, 2020

 

Example

 

All exchange traded funds have operating expenses. As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares; (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. A shareholder may incur brokerage commissions on their purchase and sales of Fund shares, which are not reflected in the examples below.

 

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2019 through May 31, 2020.

 

Actual Expenses

 

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

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid. 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.

 

                 Hypothetical  
           Actual  (5% return before expenses)  
     Net  Beginning  Ending  Expenses  Ending  Expenses  
     Expense  Account Value  Account Value  Paid During  Account Value  Paid During  
     Ratio  12/1/19  5/31/20  Period *  5/31/20  Period*  
                       
  FormulaFolios Hedged Growth ETF  0.95%  $1,000.00  $822.40  $4.33  $1,020.25  $4.80  
  FormulaFolios Smart Growth ETF  0.60%  $1,000.00  $900.90  $2.85  $1,022.00  $3.03  
  FormulaFolios Tactical Growth ETF  0.80%  $1,000.00  $963.30  $3.93  $1,021.00  $4.04  
  FormulaFolios Tactical Income ETF  0.71%  $1,000.00  $966.90  $3.49  $1,021.45  $3.59  

 

*Expense information for each Fund is presented on the basis of the full one-half year period to enable comparison to other funds. It is based on assuming the same net expense ratio and average account value over the period, but it is multiplied by 183/366 (to reflect the full half-year period).

 

For more information about current performance, holdings, or historical premiums/discounts, please visit the Funds’ website at www.formulafoliofunds.com.

41

 

FormulaFolios ETFs
SUPPLEMENTAL INFORMATION (Unaudited)
May 31, 2020

 

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 Gemini Fund Services, LLC, P.O. Box 541150, Omaha, Nebraska 68154.

 

Independent Trustees

 

Name and Year
of Birth
Position/Term
of Office *
Principal Occupation During the Past
Five Years
Number of
Funds in
Fund
Complex **
Overseen by
Trustee
Other Directorships held
by Trustee During the Past
Five Years
Joseph Breslin
Year of Birth: 1953
Independent Trustee and Chairman of the Board since 2015 President and Consultant, Adviser Counsel, Inc. (formerly J.E. Breslin & Co.) (management consulting firm to investment advisers), (since 2009); Senior Counsel, White Oak Global Advisors, LLC. (since 2016). 4 Northern Lights Fund Trust IV (for series not affiliated with the Fund since 2015); Director, Kinetics Mutual Funds, Inc. (since 2000); Trustee, Kinetics Portfolios Trust (since 2000); Trustee, Forethought Variable Insurance Trust (since 2013); Trustee, BlueArc Multi- Strategy Fund (2014-2017); Hatteras Trust (2004-2016)
Thomas Sarkany
Year of Birth: 1946
Independent Trustee since 2015 Founder and President, TTS Consultants, LLC (financial services) (since 2010). 4 Northern Lights Fund Trust IV (for series not affiliated with the Fund since 2015); Arrow Investments Trust (since 2014), Arrow ETF Trust (since 2012), Trustee, Northern Lights Fund Trust II (since 2011); Director, Aquila Distributors (since 1981)
Charles Ranson
Year of Birth: 1947
Independent Trustee since 2015 Principal, Ranson & Associates (strategic analysis and planning, including risk assessment and capital formation for entrepreneurial ventures) (since 2003). 4 Northern Lights Fund Trust IV (for series not affiliated with the Fund since 2015); Advisors Preferred Trust (since November 2012)

 

5/31/20 – NLFT IV_v1

42

 

FormulaFolios ETFs
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
May 31, 2020

 

Officers

 

Name and Year of
Birth
Position/Term
of Office *
Principal Occupation During the Past
Five Years
Number of
Funds in Fund
Complex **
Overseen by
Trustee
Other Directorships held by
Trustee During the Past
Five Years
Wendy Wang
Year of Birth: 1970
President since 2015 Senior Vice President, Director of Tax and Compliance Administration, Gemini Fund Services, LLC (since 2012). N/A N/A
Sam Singh
Year of Birth: 1976
Treasurer since 2015 Vice President, Gemini Fund Services, LLC (since 2015); Assistant Vice President, Gemini Fund Services, LLC (2011-2014). N/A N/A
Jennifer Farrell
Year of Birth: 1969
Secretary since 2017 Manager, Legal Administration, Gemini Fund Services, LLC (since 2018); Senior Paralegal, Gemini Fund Services, LLC (since 2015); Legal Trainer, Gemini Fund Services, LLC (2013-2015); Senior Paralegal, Gemini Fund Services, LLC (2006-2012). N/A N/A
James Ash
Year of Birth: 1976
Chief Compliance Officer since 2019 Senior Compliance Officer, Northern Lights Compliance, LLC (since 2019); Senior Vice President, National Sales Gemini Fund Services, LLC (2017-2019); Senior Vice President and Director of Legal Administration, Gemini Fund Services, LLC (2012-2017). N/A N/A

 

*The term of office for each Trustee and officer listed above will continue indefinitely until the individual resigns or is removed.

 

**As of May 31, 2020, the Trust was comprised of [18] [other] active portfolios managed by unaffiliated investment advisers. The term “Fund Complex” applies only to [the Fund and the 4 managed by the same investment adviser]. The Funds do not hold themselves out as related to any other series within the Trust for investment purposes, nor do they share the same investment adviser with any other series.

 

The Fund’s SAI includes additional information about the Trustees and is available free of charge, upon request, by calling toll-free at 1-888-562-8880.

 

5/31/20 – NLFT IV_v1

43

 

Formulafolios ETFs
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
May 31, 2020
 

Approval of the Investment Advisor Agreement Renewal—FormulaFolios Investments, LLC

 

In connection with the Meetings of the Board of Trustees (the “Board”) of Northern Lights Fund Trust IV (the “Trust”), held on April 13, 2020 – April 14, 2020, the Board, including a majority of the Trustees who are not “interested persons” (the “Independent Trustees”) as that term is defined in the Investment Company Act of 1940, as amended (the “1940 Act”), discussed the renewal of an investment advisory agreement (the “FFI Advisory Agreement”) between Formula Folios Investments, LLC (“FFI”) and the Trust, with respect to the FormulaFolios Tactical Income ETF (“FF Tactical Income”), FormulaFolios Hedged Growth ETF (“FF Hedged”), FormulaFolios Smart Growth ETF (“FF Smart Growth”) and FormulaFolios Tactical Growth ETF (“FF Tactical Growth”)(each a “Fund” and together, the “Funds”). In considering the renewal of the FFI Advisory Agreement, the Board received materials specifically relating to the FFI Advisory Agreement.

 

The Board reviewed and discussed the 15(c) materials that were provided in advance of the Meeting and deliberated on the approval of the FFI Advisory Agreement. The Board relied upon the advice of independent legal counsel and their own business judgment in determining the material factors to be considered in evaluating the FFI Advisory Agreement and the weight to be given to each factor considered. The conclusions reached by the Board were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the renewal of the FFI Advisory Agreement.

 

Nature, Extent and Quality of Services. The Board noted that FFI was founded in 2012 and had approximately $3.5 billion (see above) in assets under management. The Board reviewed the background information of the key investment personnel responsible for servicing the Funds, and took into consideration the investment team’s financial industry experience. The Board noted the continued time, research and analysis of market data put into constructing the proprietary investment models for each ETF and ongoing monitoring of the strategies. The Board noted FFI’s technology and system upgrades improved operational efficiency. They considered the portfolio management and compliance oversight performed by the portfolio management team and noted there were no changes to key personnel. They further acknowledged that the FFI reported no material compliance issues since its previous advisory contract approval. After further discussion, the Board concluded that FFI will continue to provide a high level of service consistent with the Board’s expectations.

 

Performance. The Board reviewed the performance of each Fund as compared to its Broadridge peer group, Morningstar category and benchmark for the one year and since inception periods:

 

FF Hedged. The Board considered the Fund’s performance over the one year and since inception periods. The Board noted it underperformed its Morningstar category median and its Broadridge peer group median for the one-year period. The Board noted that the Fund underperformed its Broadridge peer group median and its performance was in line with its Morningstar category median for the period since inception. The Board also noted that the Fund outperformed its benchmark for both periods. It was also noted that the Broadridge peer group included peers outside of the Fund’s native long-short equity category as well as non fund-of-funds due to the limited number of comparable funds in that space. The Board concluded the Fund’s performance was satisfactory.

44

 

Formulafolios ETFs
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
May 31, 2020
 

FF Smart Growth. The Board considered the Fund’s performance over the one year and since inception periods and noted it underperformed its Morningstar category median and was in-line with its Broadridge peer group median for the one-year period. The Board noted for the period since inception the Fund’s performance was in-line with its Broadridge peer group median and slightly underperformed its Morningstar category median. The Board also noted that the Fund underperformed its benchmark for both periods. The Board acknowledged that the Broadridge peer group consisted of funds outside the Fund’s Morningstar category due to the limited number of comparable funds. The Board concluded the Fund’s performance was satisfactory.

 

FF Tactical Growth. The Board considered the Fund’s performance over the one year and since inception periods and noted the Fund outperformed its Broadridge peer group median and Morningstar category median for both periods. The Board also noted that the Fund outperformed its benchmark for both periods. The Board concluded the Fund’s performance was satisfactory.

 

FF Tactical Income. The Board considered the Fund’s performance over the one year and since inception periods and noted it outperformed its Morningstar category median, its Broadridge peer group median, and its benchmark for the one-year period. The Board noted that the Fund was in line with its index but underperformed the Morningstar category median and its Broadridge peer group median for the since inception period. The Board noted the adviser’s methodical strategy had the potential to provide shareholders with positive performance in the future. The Board concluded the Fund’s performance was satisfactory.

 

Fees and Expenses.

 

FF Hedged: The Board noted the Fund’s advisory fee of 0.80% was in-line with the Broadridge peer group average and Morningstar category median but well below the category high of 0.97%. They further noted that the Fund’s net expense ratio was higher than its assigned Morningstar category median and category average but within the category ranges. The Board noted that several of the funds in the peer group were passively managed which were typically lower cost funds. The Board considered that the adviser had an expense limitation in place with respect to the Fund. The Board concluded that the Fund’s advisory fee was not unreasonable.

 

FF Smart Growth: The Board evaluated the Fund’s advisory fee, noting that the advisory fee of 0.35% was lower than the Broadridge peer group average and median and the Morningstar category average and median. The Board further noted that the Fund’s net expense ratio of 0.60% was in line with the Morningstar category median and lower than the Broadridge peer group median and average and the Morningstar category average. The Board considered that FFI had an expense limitation in place with respect to the Fund. The Board concluded that the Fund’s advisory fee was not unreasonable.

 

FF Tactical Growth: The Board evaluated the Fund’s advisory fee, noting that the advisory fee of 0.60% was lower than the Morningstar category average, in-line with the Morningstar category median and higher than the Broadridge peer group average and median. The Board discussed the Fund’s net expense ratio and noted that it was higher than the Broadridge peer group average, median and higher than the Morningstar category average and median. The Board considered that FFI had an expense limitation in place with respect to the Fund. The Board concluded that the Fund’s advisory fee was not unreasonable.

45

 

Formulafolios ETFs
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
May 31, 2020
 

FF Tactical Income: The Board evaluated the Fund’s advisory fee, noting that the advisory fee of 0.60% was higher than the Morningstar category average and median. They noted that the Fund’s advisory fee was higher than the Broadridge peer group median and lower than its average. The Board discussed the Fund’s net expense ratio and noted that it was higher than its Broadridge peer group average and median. They further noted that the Fund’s net expense ratio was in-line with its assigned Morningstar category median and higher than its average. The Board considered that FFI had an expense limitation in place with respect to the Fund. The Board concluded that the Fund’s advisory fee was not unreasonable.

 

Profitability. The Board reviewed FFI’s profitability analysis and the selected financial information in connection with the advisory services it provides to each of the Funds. After review and discussion, the Board concluded that based on the services provided by FFI and the current assets of the Funds, that the profitability of FFI’s relationship with each Fund was not excessive.

 

Economies of Scale. The Board noted that given the current net assets of each Fund, economies of scale had not yet been reached for any Fund. The Board noted that consideration of economies of scale would be revisited as a Fund’s assets grow over time.

 

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

 

Approval of Interim Investment Advisor Agreement and New Investment Advisor Agreement– Formula Folios Investments, LLC

 

At a Meeting of the Board on April 27, 2020, the Board, including all of the Independent Trustees, met to consider the approval of an interim investment advisory agreement (the “Interim Advisory Agreement”) and a new investment advisory agreement (the “New Advisory Agreement”) between the Trust, on behalf of the Funds, and FFI.

 

In advance of the April 27, 2020 meeting, the Board requested and received materials to assist them in considering the Interim Advisory Agreement and New Advisory Agreement. The materials provided contained information with respect to the factors enumerated below, including the Interim Advisory Agreement and New Advisory Agreement, a memorandum prepared by the Independent Trustees’ independent legal counsel discussing in detail the Board’s fiduciary obligations and the factors they should assess in considering the approval of the Interim Advisory Agreement and New Advisory Agreement and comparative information relating to the advisory fee and other expenses of the Funds. The materials also included materials relating to FFI (including a memorandum from FFI describing a change of control of FFI (the “Transaction”), FFI’s Form ADV, select financial information of the FFI, bibliographic information regarding FFI’s key management, and investment advisory personnel, and comparative fee, expense and performance information relating to the Funds) and other pertinent information. The Board also engaged in conversations directly with Messrs. Jason Crump, Darryl Ronconi and Dean Zayed at the April 27, 2020 meeting discussing, among other things,

46

 

Formulafolios ETFs
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
May 31, 2020
 

the terms, conditions, and expected timing of the Transaction and the reasons that FFI and AmeriLife Group, LLC (“AmeriLife”) were undergoing the Transaction. Based on their evaluation of the information provided by FFI, in conjunction with information provided by the Funds’ other service providers, the Board, by a unanimous vote (including a separate vote of the Independent Trustees), approved the Interim Advisory Agreement and New Advisory Agreement with respect to the Funds. The Independent Trustees were advised by counsel that is experienced in 1940 Act matters and that is independent of fund management and met with such counsel separately from fund management.

 

In considering the approval of the Interim Advisory Agreement and New Advisory Agreement and reaching their conclusions, the Board reviewed and analyzed various factors that they determined were relevant, including the factors enumerated below. The Board relied upon the advice of independent legal counsel and their own business judgment in determining the material factors to be considered in evaluating the Interim Advisory Agreement and New Advisory Agreement and the weight to be given to each such factor. The conclusions reached by the Board were based on a comprehensive evaluation of all of the information provided, both in written and verbal form, and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the Interim Advisory Agreement and New Advisory Agreement. The following summarizes the Board’s review process and the information on which their conclusions were based:

 

Nature, Extent and Quality of Services. As to the nature, extent, and quality of the services provided by the Adviser to the Funds, the Board first discussed the Transaction and its impact on FFI, including its key personnel. The Board also noted that it met with representatives of FFI and renewed the Advisory Agreement at its meeting on April 13-14, 2020 (the “Former Advisory Agreement”). The Board then reviewed materials provided by FFI related to the Transaction as well as the Interim Advisory Agreement and New Advisory Agreement to be entered into with the Trust. The Board also reviewed other materials provided by the FFI, updated as necessary from the April 13-14, 2020 meeting where it renewed the Former Advisory Agreement, including a description of the manner in which investment decisions will be made and executed and a review of the professional personnel that would perform services for each of the Funds, including the individuals that would be primarily responsible for monitoring and executing the investment process. The Board then discussed the extent of FFI’s research capabilities, the quality of its compliance infrastructure and the experience of its fund management personnel. The Board considered FFI’s specific responsibilities in all aspects of the day-to-day management of each of the Funds. The Board also noted FFI’s steady growth, increased personnel and commitment to the proprietary money management algorithms it uses to manage the Funds. The Board noted that none of FFI’s personnel responsible for servicing or managing the Funds would change, and that the investment process and day-to-day operations of the Funds are not expected to change. The Board was advised by the Trust’s CCO that FFI had adequate compliance policies and procedures which, in his opinion, were reasonably designed to protect FFI and the Funds from violations of the federal securities laws. Additionally, the Board received satisfactory responses from representatives of FFI with respect to a series of important questions, including questions related to any lawsuits or pending regulatory actions involving FFI, Brookstone Capital Management (“BCM”), AmeriLife and Messrs. Ronconi and Zayed that might materially

47

 

Formulafolios ETFs
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
May 31, 2020
 

impact the management of the Funds; whether the management of other accounts would conflict with its management of each of the Funds; and the procedures FFI has in place to fairly allocate trades among its respective clients. The Board considered that, under the terms of the Interim Advisory Agreement and New Advisory Agreement, FFI, subject to oversight by the Board, would continue to provide the Funds with investment advice and supervision and would continuously furnish an investment program for the Funds consistent with the respective investment objective and policies of each of the Funds. The Board reviewed the descriptions provided by FFI of its practices for monitoring compliance with each of the Fund’s respective investment limitations. The Board also noted FFI’s representation that the prospectus and statement of additional information for each of the Funds accurately describe and disclose the investment strategies of each of the Funds. The Board then reviewed the capitalization of FFI based on financial information and other materials provided by FFI and discussed the financial condition of BCM and AmeriLife. The Board concluded that FFI and its anticipated parent companies were sufficiently well-capitalized in order for FFI to meet its obligations to the Funds, noting the financial strength of its immediate and indirect parent companies. The Board also concluded that FFI had sufficient quality and depth of personnel, resources, investment methods and compliance policies and procedures necessary to perform its duties under the Interim Advisory Agreement and New Advisory Agreement and that the nature, overall quality and extent of the management services to be provided by FFI after the Transaction were satisfactory. The Board concluded that the nature, extent, and quality of the services provided to each of the Funds under the Former Advisory Agreement was satisfactory and reliable and they did not expect them to change under the Interim Advisory Agreement and New Advisory Agreement. The Board further noted that FFI will have access to the new distribution networks and investor relationships provided by BCM and AmeriLife, which offer the potential to increase each Fund’s assets. The Board additionally noted that FFI will have access to the greater financial resources of BCM and AmeriLife, which is expected to allow FFI to grow the research and investment management capabilities it provides to the Funds.

 

Performance. The Board discussed the reports prepared by Broadridge previously provided during the last renewal of the Former Advisory Agreement at the April 13-14, 2020 meeting of the Board and reviewed the performance of each of the Funds as compared to its peer group, Morningstar category and benchmark for the one year, three year and since inception periods ended December 31, 2019, and generally discussed the performance of the Funds since the Covid-19 outbreak. The Board reviewed the performance of each Fund as compared to its peer group, Broadridge category and benchmark for the one year and since inception periods:

 

FF Hedged: The Board considered the Fund’s performance over the one year and since inception periods and the Board noted it slightly underperformed its Broadridge peer group median. The Board noted that the Fund equaled its Broadridge peer group median for the period since inception. The Board concluded the Fund’s performance was satisfactory.

 

FF Smart Growth: The Board considered the Fund’s performance over the one year and since inception periods and noted it underperformed its Broadridge peer group median for the one-year and since inception periods. The Board concluded the Fund’s performance was satisfactory.

48

 

Formulafolios ETFs
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
May 31, 2020
 

FF Tactical Growth ETF: The Board considered the Fund’s performance over the one year and since inception periods and noted the Fund outperformed its Broadridge peer group median for both periods. The Board concluded the Fund’s performance was strong.

 

FF Tactical Income ETF: The Board considered the Fund’s performance over the one year and since inception periods and noted it outperformed its Broadridge peer group median for the one year period and underperformed its Broadridge peer group for the since inception period. The Board concluded the Fund’s performance was satisfactory.

 

The Board also noted that FFI did not intend to make adjustments to the strategy or investment process as a result of the Transaction and that FFI expected to continue to adhere to its algorithm. After further discussion, the Board concluded that performance was acceptable although the Board would continue to monitor each of the Funds’ relative performance.

 

Fees and Expenses. As to the costs of the services to be provided by FFI, the Board reviewed and discussed each of the Fund’s advisory fee and total operating expenses as compared to its peer group and Morningstar category as presented in the Broadridge Report.

 

FF Hedged: The Board noted the Fund’s advisory fee of 0.80% was equal to its Broadridge peer group median. They further noted that the Fund’s net expense ratio was equal to the Broadridge peer group median. The Board considered that the adviser had an expense limitation in place with respect to the Fund. The Board concluded that the Fund’s advisory fee was not unreasonable.

 

FF Smart Growth: The Board evaluated the Fund’s advisory fee, noting that the advisory fee of 0.35% was lower than the Broadridge peer group median. The Board further noted that the Fund’s net expense ratio of 0.61% was slightly lower than the Broadridge peer group median. The Board considered that the adviser had an expense limitation in place with respect to the Fund. The Board concluded that the Fund’s advisory fee was not unreasonable.

 

FF Tactical Growth ETF: The Board evaluated the Fund’s advisory fee, noting that the advisory fee of 0.60% was equal to the Broadridge peer group median. The Board discussed the Fund’s net expense ratio and noted that it was higher than the Broadridge peer group median. The Board considered that the adviser had an expense limitation in place with respect to the Fund. The Board concluded that the Fund’s advisory fee was not unreasonable.

 

FF Tactical Income ETF: The Board evaluated the Fund’s advisory fee, noting that the advisory fee of 0.60% was higher than the Broadridge peer group median. The Board discussed the Fund’s net expense ratio and noted that it was slightly lower than its Broadridge peer group median. The Board considered that the adviser had an expense limitation in place with respect to the Fund. The Board concluded that the Fund’s advisory fee was not unreasonable.

 

Profitability. The Board considered the level of profits that could be expected to accrue to FFI with respect to each of the Funds based on break even and profitability reports and analyses reviewed by the Board, the selected financial information of FFI provided by the FFI, and FFI’s representation that it did not expect any material changes to the firm’s profitability post-Transaction.

49

 

Formulafolios ETFs
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
May 31, 2020
 

After review and discussion, the Board concluded that based on the services provided by FFI, the current assets of each Fund and the projected growth of each Fund, profits from FFI’s relationship with the each of the Funds were not excessive.

 

Economies of Scale. As to the extent to which the Funds will realize economies of scale as they grow, and whether the fee levels reflect these economies of scale for the benefit of investors, the Board discussed the current size of each Fund and FFI’s expectations for growth of each of the Funds. After discussion, the Board concluded that significant economies of scale would likely not be achieved in the near term.

 

Conclusion. Having requested and received such information from FFI as the Board believed to be reasonably necessary to evaluate the terms of the Interim Advisory Agreement and New Advisory Agreement, and as assisted by the advice of independent counsel, the Board, including all of the Independent Trustees voting separately, determined with respect to each of the Funds separately that (a) the terms of the Interim Advisory Agreement and New Advisory Agreement are reasonable; (b) the investment advisory fees payable pursuant to the Interim Advisory Agreement and New Advisory Agreement are reasonable; and (c) the Interim Advisory Agreement and New Advisory Agreement is in the best interests of each of the Funds and its shareholders.

50

 

PRIVACY NOTICE

 

Northern Lights Fund Trust IV

 

Rev. August 2015

 

FACTS WHAT DOES NORTHERN LIGHTS FUND TRUST IV 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 depends on the product or service that you have with us. This information can include:

 

●         Social Security number and wire transfer instructions

 

●         account transactions and transaction history

 

●         investment experience and purchase history

 

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 IV chooses to share; and whether you can limit this sharing.

 

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

 

QUESTIONS?   Call 1-866-270-0300

51

 

PRIVACY NOTICE

 

Northern Lights Fund Trust IV

 

Page 2  

 

What we do:

 

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

We collect your personal information, for example, when you

●     open an account or deposit money

 

●     direct us to buy securities or direct us to sell your securities

 

●     seek advice about your investments

 

We also collect your personal information from others, such as credit bureaus, affiliates, or 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 IV has no affiliates.

Nonaffiliates

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

 

●     Northern Lights Fund Trust IV 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 IV does not jointly market.

52

 

PROXY VOTING POLICY

 

Information regarding how the Funds voted proxies relating to portfolio securities for the most recent twelve month period ended June 30 as well as a description of the policies and procedures that the Funds use to determine how to vote proxies is available without charge, upon request, by calling 1-855-907-3233 or by referring to the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

 

PORTFOLIO HOLDINGS

 

Each Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT. Form N-PORT is 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 1-855-733-3863.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT ADVISER
FormulaFolio Investments LLC
89 Ionia SW, Suite 600
Grand Rapids, MI 49503
 
ADMINISTRATOR
Gemini Fund Services, LLC
4221 North 203rd Street, Suite 100
Elkhorn, NE 68022-3474

 

 

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) The Registrant’s board of trustees has determined that Joseph Breslin is an audit committee financial expert, as defined in Item 3 of Form N-CSR.  Mr. Breslin is independent for purposes of this Item 3.

 

Item 4. Principal Accountant Fees and Services.

 

(a)Audit Fees

2019

FormulaFolios Hedged Growth ETF - $13,000

FormulaFolios Tactical Income ETF - $13,000

FormulaFolios Smart Growth ETF - $13,000

FormulaFolios Tactical Growth ETF - $14,000

 

2020

FormulaFolios Hedged Growth ETF - $13,500

FormulaFolios Tactical Income ETF - $13,500

FormulaFolios Smart Growth ETF - $13,500

FormulaFolios Tactical Growth ETF - $13,500

 

 

(b)Audit-Related Fees

2019 – None

 

2020 – None

 

(c)Tax Fees

2019

FormulaFolios Hedged Growth ETF - $3,000

FormulaFolios Tactical Income ETF - $3,000

FormulaFolios Smart Growth ETF - $3,000

FormulaFolios Tactical Growth ETF - $3,000

 

2020

FormulaFolios Hedged Growth ETF - $3,000

FormulaFolios Tactical Income ETF - $3,000

FormulaFolios Smart Growth ETF - $3,000

FormulaFolios Tactical Growth ETF - $3,000

 

 

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

2019 - 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

                                                    2019

Audit-Related Fees: 0.00%

Tax Fees:                   0.00%

All Other Fees:         0.00%

 

                                                    2020

Audit-Related Fees: 0.00%

Tax Fees:                   0.00%

All Other Fees:         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:

 

2019 - $0

 

2020 - $0

 

(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 to open-end investment companies.

 

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 IV

 

By (Signature and Title)

/s/ Wendy Wang

Wendy Wang, Principal Executive Officer/President

 

Date 8/7/20

 

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

 

By (Signature and Title)

/s/ Wendy Wang

Wendy Wang, Principal Executive Officer/President

 

 

Date 8/7/20

 

By (Signature and Title)

/s/ Sam Singh

Sam Singh, Principal Financial Officer/Treasurer

 

Date 8/7/20

EX-99.CERT 2 cert1.htm

CERTIFICATIONS

 

I, Wendy Wang, certify that:

 

1.       I have reviewed this report on Form N-CSR of the FormulaFolsio ETFs (a series of Northern Lights Fund Trust IV);

 

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: 8/7/20                                                                 /s/ Wendy Wang

Wendy Wang, Principal Executive Officer/President

I, Sam Singh, certify that:

 

1.       I have reviewed this report on Form N-CSR of the FormulaFolios ETFs (a series of Northern Lights Fund Trust IV);

 

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: 8/7/20                                                                  /s/ Sam Singh

Sam Singh, Principal Financial Officer/Treasurer

 

EX-99.906 CERT 3 cert2.htm

certification

Wendy Wang, Principal Executive Officer/President, and Sam Singh, Principal Financial Officer/Treasurer of Northern Lights Fund Trust IV (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 May 31, 2020 (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.

Principal Executive Officer/President  Principal Financial Officer/Treasurer
Northern Lights Fund Trust IV  Northern Lights Fund Trust IV
    
    
/s/ Wendy Wang  /s/ Sam Singh
Wendy Wang  Sam Singh
Date: 8/7/20  Date: 8/7/20

 

 

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Northern Lights Funds Trust IV and will be retained by Northern Lights Fund Trust IV 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.

 

EX-99.CODE ETH 4 coe.htm Blu Giant, LLC

Attachment 12.B – Trust Code of Ethics

 

Northern Lights Fund Trust IV

CODE OF ETHICS

 

I.Introduction

 

Northern Lights Fund Trust IV (the “Trust”) and each series thereof (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.

 

1.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.

 

2.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.

 

3.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.

 

4.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.

 

II.DEFINITIONS

 

1.“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:

 

a.all officers and trustees (or persons occupying a similar status or performing a similar function) of the Funds;
b.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
c.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
d.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.

 

2.“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.

 

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

 

4.“Code” means this Code of Ethics.

 

5.“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.

 

6.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.

 

7.“Funds” means series of the Trust.

 

 
 
8.“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.

 

9.“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.

 

10.“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.

 

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

 

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

 

13.“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 Trust 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.

 

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

 

15.“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-Trust 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.

 

16.“Advisers” means the Advisers to the Trust.

 

17.“Trust” mean Northern Lights Fund Trust IV.

 

III.PROHIBITED ACTIONS AND ACTIVITIES

 

1.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;

 

a.is being considered for purchase or sale by a Fund, or
b.is being purchased or sold by a Fund.

 

2.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;

 

3.No Access Person, with the exception of the Independent Trustees, 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;

 

4.Access Persons may not accept any fee, commission, gift, entertainment, or services, other than de minimus gifts or entertainment, from any single person or entity that does business with, on behalf of, or in hoping to do business with the Trust. An Access Person of the Trust who is also an Access Person of the Trust's principal underwriter or any of its affiliates which provide services to the Trust, or an Access Person of a Fund's investment Adviser or Sub-Adviser will be subject to the applicable gift and gratuities policies of the Trust's principal underwriter or an Access Person of a Fund's investment Adviser or Sub-Adviser as applicable;

 

5.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.

 

6.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.
 
 

 

7.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.

 

8.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.

 

IV.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:

 

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

 

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

 

3.Purchase of Securities made as part of automatic dividend reinvestment plans;

 

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

 

5.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.

 

V.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 Trust 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.

 

VI.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, and other activities covered by this Code, of all Access Persons pursuant to the procedures established under this Code. An Access Person of the 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.

 

1.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 Trust may be sent to the Advisers.

 

2.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.

 

3.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.

 

4.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:

 

a.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;
b.The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);
c.The price of the Covered Security at which the transaction was effected; and
d.The name of the broker, dealer, or bank with or through whom the transaction was effected.
e.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.

 

An Access Person of the Trust who is also an Access Person of the Trust's principal underwriter or any of its affiliates which provide services to the Trust or an Access Person of a Fund's investment Adviser or Sub-Adviser may submit reports required by this Section on forms prescribed by the Code of Ethics of such principal underwriter, investment Adviser, or Sub-Adviser, provided that such forms contain substantially the same information as called for in the forms required by this Section and comply with the requirements of Rule 17j-1(d)(1).

 

VII.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 Trust Board of Trustees.

 

Upon being informed of a violation of this Code, the Trust 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 shall issue a report on Personal Securities Transactions by Access Person. The report submitted to the board shall:

 

1.      Summarize existing procedures concerning Personal Securities investing and any changes in the procedures made during the prior year;

2.      Identify any violations of this Code and any significant remedial action taken during the prior year; and;

3.      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.

 

VIII.ACKNOWLEDGMENT

 

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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