Item 1. Report to Stockholders.
(a) The registrant’s annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:
| Fund (Class) | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| FPA Queens Road Small Cap Value Fund (Advisor Class/QRSAX) |
$ |
| AVERAGE ANNUAL TOTAL RETURN | 1 Year | Since Inception1 |
| 1 | |
| Fund net assets | $ |
| Total number of portfolio holdings | |
| Total advisory fee paid/(reimbursed) | $ |
| Portfolio turnover rate as of the end of the reporting period | |
| TD SYNNEX Corp. | |
| InterDigital, Inc. | |
| Fabrinet | |
| Sprouts Farmers Market, Inc. | |
| PVH Corp. | |
| ServisFirst Bancshares, Inc. | |
| RLI Corp. | |
| Oshkosh Corp. | |
| Axos Financial, Inc. | |
| Enstar Group Ltd. |
| Fund (Class) | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| FPA Queens Road Small Cap Value Fund (Institutional Class/QRSIX) |
$ |
| AVERAGE ANNUAL TOTAL RETURN | 1 Year | Since Inception1 |
| Russell 3000 Index | 27.58% | 11.68% |
| Russell 2000® Value Index | 21.76% | 9.39% |
| 1 | |
| Fund net assets | $ |
| Total number of portfolio holdings | |
| Total advisory fee paid/(reimbursed) | $ |
| Portfolio turnover rate as of the end of the reporting period | |
| TD SYNNEX Corp. | |
| InterDigital, Inc. | |
| Fabrinet | |
| Sprouts Farmers Market, Inc. | |
| PVH Corp. | |
| ServisFirst Bancshares, Inc. | |
| RLI Corp. | |
| Oshkosh Corp. | |
| Axos Financial, Inc. | |
| Enstar Group Ltd. |
| Fund (Class) | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| FPA Queens Road Small Cap Value Fund (Investor Class/QRSVX) |
$ |
| AVERAGE ANNUAL TOTAL RETURN | 1 Year | 5 Years | 10 Years |
| Russell 3000 Index | 27.58% | ||
| Russell 2000® Value Index | 21.76% |
| Fund net assets | $ |
| Total number of portfolio holdings | |
| Total advisory fee paid/(reimbursed) | $ |
| Portfolio turnover rate as of the end of the reporting period | |
| TD SYNNEX Corp. | |
| InterDigital, Inc. | |
| Fabrinet | |
| Sprouts Farmers Market, Inc. | |
| PVH Corp. | |
| ServisFirst Bancshares, Inc. | |
| RLI Corp. | |
| Oshkosh Corp. | |
| Axos Financial, Inc. | |
| Enstar Group Ltd. |
| Fund (Class) | Costs of a $10,000 investment | Costs paid as a percentage of a $10,000 investment |
| FPA Queens Road Value Fund (QRVLX) |
$ |
| AVERAGE ANNUAL TOTAL RETURN | 1 Year | 5 Years | 10 Years |
| Fund net assets | $ |
| Total number of portfolio holdings | |
| Total advisory fee paid/(reimbursed) | $( |
| Portfolio turnover rate as of the end of the reporting period | |
| Trane Technologies PLC | |
| Eaton Corp. PLC | |
| American Express Co. | |
| Ameriprise Financial, Inc. | |
| Elevance Health, Inc. | |
| General Dynamics Corp. | |
| Oracle Corp. | |
| Pfizer, Inc. | |
| Centene Corp. | |
| Hershey Co. |
(b) Not applicable.
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant's principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
The registrant undertakes to provide to any person without charge, upon request, a copy of its code of ethics by mail when they call the registrant at 1-800-982-4372.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Registrant has determined that Sandra Brown, who is a member of the Registrant’s Audit Committee and Board of Trustees, is an “audit committee financial expert” and is “independent” as those terms are defined in this Item.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. "Audit services" refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. "Audit-related services" refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. "Tax services" refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no "other services" provided by the principal accountant. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
| FPA Queens Road Funds |
FYE 5/31/2024 |
FYE 5/31/2023 | |
| (a) | Audit Fees | $25,000 | $61,600 |
| (b) | Audit-Related Fees | N/A | N/A |
| (c) | Tax Fees | $5,000 | $13,230 |
| (d) | All Other Fees | N/A | $2,198 |
(e)(1) The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.
(e)(2) The percentage of fees billed by Tait, Weller, & Weller LLP applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:
| FPA Queens Road Funds |
FYE 5/31/2024 |
FYE 5/31/2023 |
| Audit-Related Fees | 0% | 0% |
| Tax Fees | 0% | 0% |
| All Other Fees | 0% | 0% |
| (f) | All of the principal accountant's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal accountant. |
The following table indicates the non-audit fees billed or expected to be billed by the registrant's accountant for services to the registrant and to the registrant's investment advisor (and any other controlling entity, etc.—not sub-advisor) for the last two years. The audit committee of the Board of Trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment advisor is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant's independence.
| FPA Queens Road Funds |
FYE 5/31/2024 |
FYE 5/31/2023 | |
| (g) | Registrant Non-Audit Related Fees | N/A | $97,152 |
| (h) | Registrant’s Investment Advisor | N/A | N/A |
| (i) | Not applicable. |
| (j) | Not applicable. |
Item 5. Audit Committee of Listed Registrants.
| (a) | Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934). |
| (b) | Not applicable. |
Item 6. Investments.
| (a) | Schedule of Investments is included as part of the report to shareholders filed under Item 7 of this Form. |
| (b) | Not Applicable. |
FPA Queens Road Small Cap Value Fund
(Investor Class: QRSVX)
(Institutional Class: QRSIX)
(Advisor Class: QRSAX)
ANNUAL FINANCIALS AND OTHER INFORMATION
MAY 31, 2024
FPA Queens Road Small Cap Value Fund
A series of Investment Managers Series Trust III
Table of Contents
Please note the Financials and Other Information only contains Items 7-11 required in Form N-CSR. All other required items will be filed with the SEC.
| Item 7. Financial Statements and Financial Highlights | |
| Schedule of Investments | 1 |
| Statement of Assets and Liabilities | 4 |
| Statement of Operations | 5 |
| Statements of Changes in Net Assets | 6 |
| Financial Highlights | |
| Investor Class | 7 |
| Institutional Class | 8 |
| Advisor Class | 9 |
| Notes to Financial Statements | 10 |
| Report of Independent Registered Public Accounting Firm | 18 |
| Supplemental Information | 19 |
This report and the financial statements contained herein are provided for the general information of the shareholders of the FPA Queens Road Small Cap Value Fund (the “Fund”). This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective shareholder report and prospectus.
www.fpa.com
Item 7. Financial Statements and Financial Highlights for Open-End Management Investment Companies.
FPA Queens Road Small Cap Value Fund
SCHEDULE OF INVESTMENTS
As of May 31, 2024
|
Number |
Value | |||||||
| COMMON STOCKS — 89.7% | ||||||||
| AEROSPACE & DEFENSE — 0.7% | ||||||||
| 93,372 | Ducommun, Inc.* | $ | 5,432,383 | |||||
| APPAREL & TEXTILE PRODUCTS — 6.8% | ||||||||
| 6,597 | Deckers Outdoor Corp.* | 7,216,590 | ||||||
| 597,920 | Levi Strauss & Co. | 14,356,059 | ||||||
| 231,226 | PVH Corp. | 27,749,433 | ||||||
| 49,322,082 | ||||||||
| ASSET MANAGEMENT — 1.0% | ||||||||
| 185,915 | Brookfield Asset Management, Inc. - Class A | 7,295,305 | ||||||
| BANKING — 6.0% | ||||||||
| 373,282 | Axos Financial, Inc.* | 20,108,701 | ||||||
| 384,754 | ServisFirst Bancshares, Inc. | 23,777,797 | ||||||
| 43,886,498 | ||||||||
| CHEMICALS — 1.2% | ||||||||
| 1,218,658 | Arcadium Lithium PLC* | 5,398,655 | ||||||
| 181,233 | Mativ Holdings, Inc. | 3,256,757 | ||||||
| 8,655,412 | ||||||||
| COMMERCIAL SUPPORT SERVICES — 0.3% | ||||||||
| 12,712 | UniFirst Corp. | 2,016,123 | ||||||
| CONSTRUCTION MATERIALS — 2.1% | ||||||||
| 40,921 | Knife River Corp.* | 2,893,524 | ||||||
| 501,962 | MDU Resources Group, Inc. | 12,669,521 | ||||||
| 15,563,045 | ||||||||
| CONSUMER SERVICES — 1.9% | ||||||||
| 297,054 | Aaron's Company, Inc. | 2,519,018 | ||||||
| 337,083 | Upbound Group, Inc. | 11,063,064 | ||||||
| 13,582,082 | ||||||||
| CONTAINERS & PACKAGING — 1.1% | ||||||||
| 272,999 | Graphic Packaging Holding Co. | 7,731,332 | ||||||
| ELECTRICAL EQUIPMENT — 0.3% | ||||||||
| 9,442 | Littelfuse, Inc. | 2,422,817 | ||||||
| FOOD — 2.3% | ||||||||
| 254,666 | Darling Ingredients, Inc.* | 10,288,506 | ||||||
| 174,987 | TreeHouse Foods, Inc.* | 6,353,778 | ||||||
| 16,642,284 | ||||||||
| GAS & WATER UTILITIES — 4.3% | ||||||||
| 321,890 | New Jersey Resources Corp. | 13,989,339 | ||||||
| 682,135 | UGI Corp. | 17,367,157 | ||||||
| 31,356,496 | ||||||||
| INDUSTRIAL INTERMEDIATE PRODUCTS — 0.4% | ||||||||
| 102,635 | L B Foster Co. - Class A* | 2,815,278 | ||||||
| 1 |
FPA Queens Road Small Cap Value Fund
SCHEDULE OF INVESTMENTS - Continued
As of May 31, 2024
| Number of Shares |
Value | |||||||
| COMMON STOCKS (Continued) | ||||||||
| INDUSTRIAL SUPPORT SERVICES — 2.9% | ||||||||
| 193,539 | MSC Industrial Direct Co., Inc. - Class A | $ | 16,625,000 | |||||
| 55,401 | VSE Corp. | 4,535,126 | ||||||
| 21,160,126 | ||||||||
| INSURANCE — 10.0% | ||||||||
| 514,304 | CNO Financial Group, Inc. | 14,755,382 | ||||||
| 62,211 | Enstar Group Ltd.* | 19,480,752 | ||||||
| 440,798 | Horace Mann Educators Corp. | 15,062,068 | ||||||
| 160,450 | RLI Corp. | 23,422,491 | ||||||
| 72,720,693 | ||||||||
| INTERNET MEDIA & SERVICES — 2.6% | ||||||||
| 386,082 | IAC, Inc.* | 19,223,023 | ||||||
| MACHINERY — 8.2% | ||||||||
| 14,871 | AGCO Corp. | 1,596,105 | ||||||
| 56,255 | CSW Industrials, Inc. | 14,303,396 | ||||||
| 81,171 | Graco, Inc. | 6,554,558 | ||||||
| 152,024 | John Bean Technologies Corp. | 14,522,853 | ||||||
| 195,640 | Oshkosh Corp. | 22,250,137 | ||||||
| 59,227,049 | ||||||||
| PUBLISHING & BROADCASTING — 1.8% | ||||||||
| 350,990 | Scholastic Corp. | 12,733,917 | ||||||
| REIT — 0.7% | ||||||||
| 262,407 | Equity Commonwealth* | 5,067,079 | ||||||
| RETAIL - CONSUMER STAPLES — 3.9% | ||||||||
| 353,810 | Sprouts Farmers Market, Inc.* | 27,943,914 | ||||||
| SEMICONDUCTORS — 4.6% | ||||||||
| 36,153 | Qorvo, Inc.* | 3,557,094 | ||||||
| 132,326 | Synaptics, Inc.* | 12,400,270 | ||||||
| 733,461 | Vishay Intertechnology, Inc. | 17,331,683 | ||||||
| 33,289,047 | ||||||||
| SOFTWARE — 1.6% | ||||||||
| 189,995 | Concentrix Corp. | 11,652,393 | ||||||
| SPECIALTY FINANCE — 2.5% | ||||||||
| 850,202 | MGIC Investment Corp. | 17,854,242 | ||||||
| TECHNOLOGY HARDWARE — 16.9% | ||||||||
| 139,675 | Arrow Electronics, Inc.* | 18,340,724 | ||||||
| 132,415 | Fabrinet* | 31,717,365 | ||||||
| 284,626 | InterDigital, Inc. | 32,410,363 | ||||||
| 304,061 | TD SYNNEX Corp. | 39,783,341 | ||||||
| 122,251,793 | ||||||||
| 2 |
FPA Queens Road Small Cap Value Fund
SCHEDULE OF INVESTMENTS - Continued
As of May 31, 2024
| Number of Shares |
Value | |||||||
| COMMON STOCKS (Continued) | ||||||||
| TECHNOLOGY SERVICES — 3.7% | ||||||||
| 304,386 | CSG Systems International, Inc. | $ | 13,134,256 | |||||
| 99,470 | Science Applications International Corp. | 13,393,635 | ||||||
| 26,527,891 | ||||||||
| WHOLESALE - DISCRETIONARY — 1.9% | ||||||||
| 447,328 | G-III Apparel Group Ltd.* | 13,446,680 | ||||||
| TOTAL COMMON STOCKS | ||||||||
| (Cost $475,416,921) | 649,818,984 | |||||||
| PREFERRED STOCKS — 0.0% | ||||||||
| INDUSTRIALS — 0.0% | ||||||||
| 6,085 | WESCO International, Inc., 10.625%(a),(b) | 162,105 | ||||||
| TOTAL PREFERRED STOCKS | ||||||||
| (Cost $161,253) | 162,105 | |||||||
| SHORT-TERM INVESTMENTS — 10.3% | ||||||||
| MONEY MARKET INVESTMENTS — 10.3% | ||||||||
| 74,839,736 | Morgan Stanley Institutional Liquidity Treasury Portfolio - Institutional Class, 5.08%(c) | 74,839,736 | ||||||
| TOTAL SHORT-TERM INVESTMENTS | ||||||||
| (Cost $74,839,736) | 74,839,736 | |||||||
| TOTAL INVESTMENTS — 100.0% | ||||||||
| (Cost $550,417,910) | 724,820,825 | |||||||
| Other Assets in Excess of Liabilities — 0.0% | 118,838 | |||||||
| TOTAL NET ASSETS — 100.0% | $ | 724,939,663 | ||||||
| PLC – Public Limited Company |
| REIT – Real Estate Investment Trust |
| * | Non-income producing security. |
| (a) | Perpetual security. Maturity date is not applicable. |
| (b) | Variable or floating rate security. |
| (c) | The rate is the annualized seven-day yield at period end. |
See accompanying Notes to Financial Statements.
| 3 |
FPA Queens Road Small Cap Value Fund
STATEMENT OF ASSETS AND LIABILITIES
As of May 31, 2024
| Assets: | ||||
| Investments, at value (cost $550,417,910) | $ | 724,820,825 | ||
| Receivables: | ||||
| Fund shares sold | 140,614 | |||
| Dividends and interest | 604,952 | |||
| Prepaid expenses | 16,555 | |||
| Total assets | 725,582,946 | |||
| Liabilities: | ||||
| Payables: | ||||
| Fund shares redeemed | 76,939 | |||
| Advisory fees | 398,716 | |||
| Shareholder servicing fees | 47,897 | |||
| Fund services fees | 37,834 | |||
| Registration fees | 27,175 | |||
| Shareholder reporting fees | 26,524 | |||
| Legal fees | 10,774 | |||
| Auditing fees | 10,651 | |||
| Chief Compliance Officer fees | 1,872 | |||
| Trustees' deferred compensation (Note 3) | 1,829 | |||
| Trustees' fees and expenses | 1,104 | |||
| Accrued other expenses | 1,968 | |||
| Total liabilities | 643,283 | |||
| Net Assets | $ | 724,939,663 | ||
| Components of Net Assets: | ||||
| Capital Stock (no par value with an unlimited number of shares authorized) | $ | 520,409,045 | ||
| Total distributable earnings (accumulated deficit) | 204,530,618 | |||
| Net Assets | $ | 724,939,663 | ||
| Maximum Offering Price per Share: | ||||
| Investor Class Shares: | ||||
| Net assets applicable to shares outstanding | $ | 82,800,772 | ||
| Shares of beneficial interest issued and outstanding | 2,156,502 | |||
| Redemption price per share | $ | 38.40 | ||
| Institutional Class Shares: | ||||
| Net assets applicable to shares outstanding | $ | 600,743,188 | ||
| Shares of beneficial interest issued and outstanding | 15,656,341 | |||
| Redemption price per share | $ | 38.37 | ||
| Advisor Class Shares: | ||||
| Net assets applicable to shares outstanding | $ | 41,395,703 | ||
| Shares of beneficial interest issued and outstanding | 1,080,502 | |||
| Redemption price per share | $ | 38.31 |
See accompanying Notes to Financial Statements.
| 4 |
FPA Queens Road Small Cap Value Fund
STATEMENT OF OPERATIONS
For the Year Ended May 31, 2024
| Investment income: | ||||
| Dividends (net of foreign withholding taxes of $10,597) | $ | 7,782,735 | ||
| Interest | 3,409,358 | |||
| Total investment income | 11,192,093 | |||
| Expenses: | ||||
| Advisory fees | 4,196,098 | |||
| Shareholder servicing fees - Investor Class | 180,235 | |||
| Shareholder servicing fees - Institutional Class | 191,216 | |||
| Shareholder servicing fees - Advisor Class | 69,673 | |||
| Fund services fees | 259,758 | |||
| Registration fees | 124,630 | |||
| Shareholder reporting fees | 82,409 | |||
| Trustees' fees and expenses | 42,926 | |||
| Auditing fees | 26,958 | |||
| Miscellaneous | 13,156 | |||
| Legal fees | 12,691 | |||
| Chief Compliance Officer fees | 12,258 | |||
| Insurance fees | 11,837 | |||
| Total expenses | 5,223,845 | |||
| Net investment income (loss) | 5,968,248 | |||
| Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 37,167,137 | |||
| Total realized gain (loss) | 37,167,137 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 82,999,731 | |||
| Net change in unrealized appreciation (depreciation) | 82,999,731 | |||
| Net realized and unrealized gain (loss) | 120,166,868 | |||
| Net Increase (Decrease) in Net Assets from Operations | $ | 126,135,116 |
See accompanying Notes to Financial Statements.
| 5 |
FPA Queens Road Small Cap Value Fund
STATEMENTS OF CHANGES IN NET ASSETS
|
For the |
For the |
|||||||
| Increase (Decrease) in Net Assets from: | ||||||||
| Operations: | ||||||||
| Net investment income (loss) | $ | 5,968,248 | $ | 5,432,079 | ||||
| Total realized gain (loss) on investments | 37,167,137 | 3,757,854 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 82,999,731 | (26,702,622 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 126,135,116 | (17,512,689 | ) | |||||
| Distributions to Shareholders: | ||||||||
| Distributions: | ||||||||
| Investor Class | (2,073,842 | ) | (1,557,544 | ) | ||||
| Institutional Class | (15,149,770 | ) | (8,052,504 | ) | ||||
| Advisor Class | (1,349,927 | ) | (1,089,516 | ) | ||||
| Total distributions to shareholders | (18,573,539 | ) | (10,699,564 | ) | ||||
| Capital Transactions: | ||||||||
| Net proceeds from shares sold: | ||||||||
| Investor Class | 18,009,679 | 16,625,634 | ||||||
| Institutional Class | 192,213,646 | 48,824,693 | ||||||
| Advisor Class | 13,770,165 | 27,492,955 | ||||||
| Reinvestment of distributions: | ||||||||
| Investor Class | 2,067,197 | 1,554,936 | ||||||
| Institutional Class | 12,983,852 | 7,158,896 | ||||||
| Advisor Class | 1,333,233 | 1,070,683 | ||||||
| Cost of shares redeemed: | ||||||||
| Investor Class | (23,816,357 | ) | (23,164,064 | ) | ||||
| Institutional Class | (57,588,989 | ) | (42,946,511 | ) | ||||
| Advisor Class | (25,536,114 | ) | (22,364,382 | ) | ||||
| Net increase (decrease) in net assets from capital transactions | 133,436,312 | 14,252,840 | ||||||
| Total increase (decrease) in net assets | 240,997,889 | (13,959,413 | ) | |||||
| Net Assets: | ||||||||
| Beginning of period | 483,941,774 | 497,901,187 | ||||||
| End of period | $ | 724,939,663 | $ | 483,941,774 | ||||
| Capital Share Transactions: | ||||||||
| Shares sold: | ||||||||
| Investor Class | 506,711 | 506,018 | ||||||
| Institutional Class | 5,483,828 | 1,472,580 | ||||||
| Advisor Class | 388,226 | 834,047 | ||||||
| Shares reinvested: | ||||||||
| Investor Class | 55,931 | 48,395 | ||||||
| Institutional Class | 351,771 | 223,151 | ||||||
| Advisor Class | 36,160 | 33,407 | ||||||
| Shares redeemed: | ||||||||
| Investor Class | (673,274 | ) | (710,415 | ) | ||||
| Institutional Class | (1,632,497 | ) | (1,311,351 | ) | ||||
| Advisor Class | (701,696 | ) | (665,204 | ) | ||||
| Net increase (decrease) in capital share transactions | 3,815,160 | 430,628 | ||||||
See accompanying Notes to Financial Statements.
| 6 |
FPA Queens Road Small Cap Value Fund
FINANCIAL HIGHLIGHTS
Investor Class
Per share operating performance.
For a capital share outstanding throughout each period.
|
For the |
||||||||||||||||||||
|
2024 |
20231 |
20221 |
20211 |
20202 |
||||||||||||||||
| Net asset value, beginning of period | $ | 32.12 | $ | 34.03 | $ | 35.52 | $ | 23.22 | $ | 23.61 | ||||||||||
| Income from Investment Operations: | ||||||||||||||||||||
| Net investment income3 | 0.27 | 0.31 | 0.07 | 0.06 | 0.03 | |||||||||||||||
| Net realized and unrealized gain (loss) | 6.96 | (1.54 | ) | (0.95 | ) | 12.34 | 0.55 | |||||||||||||
| Total from investment operations | 7.23 | (1.23 | ) | (0.88 | ) | 12.40 | 0.58 | |||||||||||||
| Less Distributions: | ||||||||||||||||||||
| From net investment income | (0.44 | ) | - | - | (0.09 | ) | (0.01 | ) | ||||||||||||
| From net realized gain | (0.51 | ) | (0.68 | ) | (0.61 | ) | (0.01 | ) | (0.96 | ) | ||||||||||
| Total distributions | (0.95 | ) | (0.68 | ) | (0.61 | ) | (0.10 | ) | (0.97 | ) | ||||||||||
| Net asset value, end of period | $ | 38.40 | $ | 32.12 | $ | 34.03 | $ | 35.52 | $ | 23.22 | ||||||||||
| Total return4 | 22.62 | % | (3.63 | )% | (2.52 | )% | 53.51 | % | 1.89 | % | ||||||||||
| Ratios and Supplemental Data: | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 82,801 | $ | 72,820 | $ | 82,461 | $ | 193,922 | $ | 127,037 | ||||||||||
| Ratio of expenses to average net assets: | ||||||||||||||||||||
| Before fees waived and expenses absorbed | 0.98 | % | 1.00 | % | 1.00 | % | 1.11 | % | 1.18 | % | ||||||||||
| After fees waived and expenses absorbed | 0.98 | % | 1.00 | % | 1.00 | % | 1.09 | %5 | 1.18 | % | ||||||||||
| Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
| Before fees waived and expenses absorbed | 0.77 | % | 0.95 | % | 0.21 | % | 0.22 | % | 0.10 | % | ||||||||||
| After fees waived and expenses absorbed | 0.77 | % | 0.95 | % | 0.21 | % | 0.20 | % | 0.10 | % | ||||||||||
| Portfolio turnover rate | 19 | % | 13 | % | 10 | % | 15 | % | 24 | % | ||||||||||
| 1 | Audits performed for the fiscal years indicated by the Fund's previous auditor, Ernst & Young LLP. |
| 2 | Audits performed for the fiscal years indicated by the Fund's previous auditor, Cohen & Company, Ltd. |
| 3 | Based on average shares outstanding for the period. |
| 4 | Return is based on net asset value per share, adjusted for reinvestment of distributions, and does not reflect deduction of the sales charge. |
| 5 | Effective November 1, 2020, the Advisor contractually agreed to limit the annual fund operating expenses to 1.04%. Prior to November 1, 2020, the Fund had a unitary fee structure that limited annual operating expenses to 1.18%. |
See accompanying Notes to Financial Statements.
| 7 |
FPA Queens Road Small Cap Value Fund
FINANCIAL HIGHLIGHTS
Institutional Class
Per share operating performance.
For a capital share outstanding throughout each period.
|
For the |
For the May 31, |
|||||||||||||||
| 2024 | 20231 | 20221 | 20211,2 | |||||||||||||
| Net asset value, beginning of period | $ | 32.10 | $ | 33.99 | $ | 35.52 | $ | 28.16 | ||||||||
| Income from Investment Operations: | ||||||||||||||||
| Net investment income (loss)3 | 0.34 | 0.37 | 0.13 | 0.02 | ||||||||||||
| Net realized and unrealized gain (loss) | 6.95 | (1.54 | ) | (0.94 | ) | 7.44 | ||||||||||
| Total from investment operations | 7.29 | (1.17 | ) | (0.81 | ) | 7.46 | ||||||||||
| Less Distributions: | ||||||||||||||||
| From net investment income | (0.51 | ) | (0.04 | ) | (0.11 | ) | (0.09 | ) | ||||||||
| From net realized gain | (0.51 | ) | (0.68 | ) | (0.61 | ) | (0.01 | ) | ||||||||
| Total distributions | (1.02 | ) | (0.72 | ) | (0.72 | ) | (0.10 | ) | ||||||||
| Redemption fee proceeds | - | - | - | - | ||||||||||||
| Net asset value, end of period | $ | 38.37 | $ | 32.10 | $ | 33.99 | $ | 35.52 | ||||||||
| Total return4 | 22.82 | % | (3.44 | )% | (2.34 | )% | 26.59 | %5 | ||||||||
| Ratios and Supplemental Data: | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 600,743 | $ | 367,607 | $ | 376,221 | $ | 301,941 | ||||||||
| Ratio of expenses to average net assets: | ||||||||||||||||
| Before fees waived and expenses absorbed | 0.79 | % | 0.81 | % | 0.83 | % | 0.91 | %6 | ||||||||
| After fees waived and expenses absorbed | 0.79 | % | 0.81 | % | 0.83 | % | 0.89 | %6 | ||||||||
| Ratio of net investment income (loss) to average net assets: | ||||||||||||||||
| Before fees waived and expenses absorbed | 0.97 | % | 1.14 | % | 0.38 | % | 0.08 | %6 | ||||||||
| After fees waived and expenses absorbed | 0.97 | % | 1.14 | % | 0.38 | % | 0.10 | %6 | ||||||||
| Portfolio turnover rate | 19 | % | 13 | % | 10 | % | 15 | %5 | ||||||||
| 1 | Audits performed for the fiscal years indicated by the Fund's previous auditor, Ernst & Young LLP. |
| 2 | The Institutional Class commenced operations on December 1, 2020. The data shown reflects operations for the period December 1, 2020 to May 31, 2021. |
| 3 | Based on average shares outstanding for the period. |
| 4 | Return is based on net asset value per share, adjusted for reinvestment of distributions, and does not reflect deduction of the sales charge. |
| 5 | Not annualized. |
| 6 | Annualized. |
See accompanying Notes to Financial Statements.
| 8 |
FPA Queens Road Small Cap Value Fund
FINANCIAL HIGHLIGHTS
Advisor Class
Per share operating performance.
For a capital share outstanding throughout each period.
|
For the |
For the May 31, |
|||||||||||||||
| 2024 | 20231 | 20221 |
20211,2 |
|||||||||||||
| Net asset value, beginning of period | $ | 32.05 | $ | 33.94 | $ | 35.52 | $ | 28.16 | ||||||||
| Income from Investment Operations: | ||||||||||||||||
| Net investment income (loss) 3 | 0.30 | 0.34 | 0.10 | 0.02 | ||||||||||||
| Net realized and unrealized gain (loss) | 6.94 | (1.54 | ) | (0.95 | ) | 7.44 | ||||||||||
| Total from investment operations | 7.24 | (1.20 | ) | (0.85 | ) | 7.46 | ||||||||||
| Less Distributions: | ||||||||||||||||
| From net investment income | (0.47 | ) | (0.01 | ) | (0.12 | ) | (0.09 | ) | ||||||||
| From net realized gain | (0.51 | ) | (0.68 | ) | (0.61 | ) | (0.01 | ) | ||||||||
| Total distributions | (0.98 | ) | (0.69 | ) | (0.73 | ) | (0.10 | ) | ||||||||
| Net asset value, end of period | $ | 38.31 | $ | 32.05 | $ | 33.94 | $ | 35.52 | ||||||||
| Total return4 | 22.69 | % | (3.56 | )% | (2.46 | )% | 26.58 | %5 | ||||||||
| Ratios and Supplemental Data: | ||||||||||||||||
| Net assets, end of period (in thousands) | $ | 41,396 | $ | 43,514 | $ | 39,219 | $ | 724 | ||||||||
| Ratio of expenses to average net assets: | ||||||||||||||||
| Before fees waived and expenses absorbed | 0.90 | % | 0.93 | % | 0.93 | % | 0.90 | %6 | ||||||||
| After fees waived and expenses absorbed | 0.90 | % | 0.93 | % | 0.93 | % | 0.90 | %6 | ||||||||
| Ratio of net investment income to average net assets: | ||||||||||||||||
| Before fees waived and expenses absorbed | 0.85 | % | 1.04 | % | 0.28 | % | 0.10 | %6 | ||||||||
| After fees waived and expenses absorbed | 0.85 | % | 1.04 | % | 0.28 | % | 0.10 | %6 | ||||||||
| Portfolio turnover rate | 19 | % | 13 | % | 10 | % | 15 | %5 | ||||||||
| 1 | Audits performed for the fiscal years indicated by the Fund's previous auditor, Ernst & Young LLP. |
| 2 | The Advisor Class commenced operations on December 1, 2020. The data shown reflects operations for the period December 1, 2020 to May 31, 2021. |
| 3 | Based on average shares outstanding for the period. |
| 4 | Return is based on net asset value per share, adjusted for reinvestment of distributions, and does not reflect deduction of the sales charge. |
| 5 | Not annualized. |
| 6 | Annualized. |
See accompanying Notes to Financial Statements.
| 9 |
FPA Queens Road Small Cap Value Fund
NOTES TO FINANCIAL STATEMENTS
May 31, 2024
Note 1 – Organization
FPA Queens Road Small Cap Value Fund (the “Fund”) is a diversified series of Investment Managers Series Trust III, (formerly, FPA Funds Trust), (the “Trust”) which is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund’s primary investment objective is to seek long-term capital growth. First Pacific Advisors, LP (the “Adviser”) has served as the Fund’s investment adviser since November 1, 2020.
On July 28, 2023, the Fund acquired the assets and assumed the liabilities of FPA Queens Road Small Cap Value Fund, a series of Bragg Capital Trust, (the “Predecessor Fund”) in a tax-free reorganization pursuant to the Agreement and Plan of Reorganization (the “Plan of Reorganization”). The Plan of Reorganization was approved by the Trust’s Board and by the Predecessor Fund’s Board on May 8, 2023. The tax-free reorganization was accomplished on July 28, 2023. As a result of the reorganization, the Fund assumed the performance and accounting history of the Predecessor Fund. Financial information included for the dates prior to the reorganization is that of the Predecessor Fund.
The reorganization was accomplished by the following tax-free exchange in which each shareholder of the Fund received the same aggregate share net asset value as noted below:
| Shares Issued | Net Assets | |||||||
| Investor Class | 2,273,407 | $ | 80,361,287 | |||||
| Institutional Class | 11,451,635 | $ | 404,622,337 | |||||
| Advisor Class | 1,384,548 | $ | 48,836,652 | |||||
The net unrealized appreciation of investments transferred was $138,240,430 as of the date of the acquisition.
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services— Investment Companies”.
Note 2 – Accounting Policies
The following is a summary of the significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.
(a) Valuation of Investments
The Fund values equity securities at the last reported sale price on the principal exchange or in the principal over the counter (“OTC”) market in which such securities are traded, as of the close of regular trading on the NYSE on the day the securities are being valued or, if the last-quoted sales price is not readily available, the securities will be valued at the last bid or the mean between the last available bid and ask price. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”). Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Debt securities are valued by utilizing a price supplied by independent pricing service providers. The independent pricing service providers may use various valuation methodologies including matrix pricing and other analytical pricing models as well as market transactions and dealer quotations. These models generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings and general market conditions. If a price is not readily available for a portfolio security, the security will be valued at fair value (the amount which the Fund might reasonably expect to receive for the security upon its current sale). The Board of Trustees has designated the Advisor as the Fund’s valuation designee (the “Valuation Designee”) to make all fair value determinations with respect to the Fund’s portfolio investments, subject to the Board’s oversight. As the Valuation Designee, the Advisor has adopted and implemented policies and procedures to be followed when the Fund must utilize fair value pricing.
| 10 |
FPA Queens Road Small Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
(b) Investment Transactions, Investment Income and Expenses
Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis. Dividend income is recorded net of applicable withholding taxes on the ex-dividend date and interest income is recorded on an accrual basis. Withholding taxes on foreign dividends, if applicable, are paid (a portion of which may be reclaimable) or provided for in accordance with the applicable country’s tax rules and rates and are disclosed in the Statement of Operations. Withholding tax reclaims are filed in certain countries to recover a portion of the amounts previously withheld. The Fund records a reclaim receivable based on a number of factors, including a jurisdiction’s legal obligation to pay reclaims as well as payment history and market convention. Discounts on debt securities are accreted or amortized to interest income over the lives of the respective securities using the effective interest method. Premiums for callable debt securities are amortized to the earliest call date, if the call price was less than the purchase price. If the call price was not at par and the security was not called, the security is amortized to the next call price and date. Expenses incurred by the Trust with respect to more than one fund are allocated in proportion to the net assets of each fund except where allocation of direct expenses to each fund or an alternative allocation method can be more appropriately made.
(c) Federal Income Taxes
The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their net investment income and any net realized gains to their shareholders. Therefore, no provision is made for federal income or excise taxes. Due to the timing of dividend distributions and the differences in accounting for income and realized gains and losses for financial statement and federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains and losses are recorded by the Fund.
Accounting for Uncertainty in Income Taxes (the “Income Tax Statement”) requires an evaluation of tax positions taken (or expected to be taken) in the course of preparing a Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations.
The Income Tax Statement requires management of the Fund to analyze tax positions taken in the prior three open tax years, if any, and tax positions expected to be taken in the Fund’s current tax year, as defined by the IRS statute of limitations for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of May 31, 2024, and during the prior three open tax years, the Fund did not have a liability for any unrecognized tax benefits. The Fund has no examinations in progress and is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
(d) Distributions to Shareholders
The Fund will make distributions of net investment income annually and net capital gains, if any, at least annually. Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from GAAP.
| 11 |
FPA Queens Road Small Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
The character of distributions made during the year from net investment income or net realized gains may differ from the characterization for federal income tax purposes due to differences in the recognition of income, expense and gain (loss) items for financial statement and tax purposes.
(e) Illiquid Securities
Pursuant to Rule 22e-4 under the 1940 Act, the Fund has adopted a Liquidity Risk Management Program (“LRMP”) that requires, among other things, that the Fund limits its illiquid investments that are assets to no more than 15% of net assets. An illiquid investment is any security which may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. If the Adviser, at any time determines that the value of illiquid securities held by the Fund exceeds 15% of its net asset value, the Adviser will take such steps as it considers appropriate to reduce them as soon as reasonably practicable in accordance with the Fund’s written LRMP.
(f) Use of Estimates
The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Note 3 – Investment Advisory and Other Agreements
The Trust, on behalf of the Fund, entered into an Investment Advisory Agreement (the “Agreement”) with the Adviser. Under the terms of the Agreement, the Fund pays a monthly investment advisory fee to the Adviser at the annual rate of 0.75% of the Fund’s average daily net assets up to $50 million and 0.65% of the Fund’s average daily net assets in excess of $50 million. The Adviser engages Bragg Financial Advisors, Inc. (the “Sub-Adviser”) to manage the Fund and pays the Sub-Adviser from its advisory fees.
The Adviser has contractually agreed to waive its fees and/or pay for operating expenses of the Fund to ensure that total annual fund operating expenses (excluding any interests, taxes, brokerage fees and commissions payable by the Fund in connection with the purchase or sale of portfolio securities, fees and expenses of other funds in which the Fund invests, and extraordinary expenses, including litigation expenses not incurred in the Fund's ordinary course of business) do not exceed 1.04%, 0.89% and 0.99% for Investor Class, Institutional Class, and Advisor Class shares, respectively. These fee waivers and expense reimbursements are subject to possible recoupment by the Advisor from the Fund in future years (within three years from the date when the amount is waived or reimbursed) if such recoupment can be achieved within the lesser of the foregoing expense limits or the then-current expense limit. This agreement is in effect until July 27, 2024, and it may be terminated before that date only by the Trust’s Board of Trustees. For the year ended May 31, 2024, the Adviser did not waive or reimburse expenses of the Fund. As of May 31, 2024, there are no expenses subject to recapture.
UMB Fund Services, Inc. (“UMBFS”) serves as the Fund’s fund accountant, transfer agent and co-administrator; and Mutual Fund Administration, LLC (“MFAC”) serves as the Fund’s other co-administrator. UMB Bank, n.a., an affiliate of UMBFS, serves as the Fund’s custodian. The Fund’s allocated fees incurred for fund accounting, fund administration, transfer agency and custody services for the period from July 29, 2023 through May 31, 2024, were $248,468. The inclusion of such fees are reported on the Statement of Operations.
Prior to July 29, 2023, State Street Bank and Trust Company served as the Predecessor Fund’s fund accountant, administrator and custodian. The Predecessor Fund’s allocated fees incurred for fund accounting, fund administration and custody services for the period from June 1, 2023 to July 28, 2023, was $11,290. The inclusion of such fees are reported on the Statement of Operations.
| 12 |
FPA Queens Road Small Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
UMB Distribution Services, LLC (“UMB Distribution Services”), a wholly owned subsidiary of UMBFS, serves as the Fund’s distributor. The Adviser paid the fees for the Fund’s distribution-related services.
Certain trustees and officers of the Trust are employees of UMBFS, MFAC or Adviser. The Fund does not compensate trustees and officers affiliated with the Fund’s Adviser or co-administrators. For the period from July 29, 2023 through May 31, 2024, the Fund’s allocated fees incurred to Trustees of the Trust who are not “interested persons” of the Trust, as that term is defined in the 1940 Act (collectively, the “Independent Trustees”) were $26,842. The inclusion of such fees are reported on the Statement of Operations.
Prior to July 29, 2023, the Predecessor Fund’s allocated fees incurred for Independent Trustees services for the period from June 1, 2023 to July 28, 2023, was $16,084. The inclusion of such fees are reported on the Statement of Operations.
On December 26, 2023, the Fund's Board of Trustees approved to adopt a Deferred Compensation Plan (the “Plan”) for the Independent Trustees that enables Trustees to elect to receive payment in cash or the option to defer some or all of their fees. If a trustee elects to defer payment, the Plan provides for the creation of a deferred payment account. A Trustee’s deferred fees are deemed to be invested in designated mutual funds available under the Plan. The Fund's liability for these amounts is adjusted for market value changes in the invested fund and remains a liability to the Fund until distributed in accordance with the Plan. The Trustees Deferred compensation liability under the Plan constitutes a general unsecured obligation of the Fund and is disclosed in the Statement of Assets and Liabilities. Contributions made under the plan and the change in unrealized appreciation/depreciation and income are included in the Trustees' fees and expenses in the Statement of Operations.
Dziura Compliance Consulting, LLC provides Chief Compliance Officer (“CCO”) services to the Trust. The Fund’s allocated fees incurred for CCO services for the period from July 29, 2023 through May 31, 2024, were $8,952. The inclusion of such fees are reported on the Statement of Operations.
Prior to July 29, 2023, Ms. Karen Richards served as the Predecessor Fund’s CCO. The Predecessor Fund’s allocated fees incurred for CCO services for the period from June 1, 2023 to July 28, 2023, was $3,306. The inclusion of such fees are reported on the Statement of Operations.
Note 4 – ReFlow Liquidity Program
The Fund may participate in the ReFlow liquidity program, which is designed to provide an alternative liquidity source for mutual funds experiencing net redemptions of their shares. Pursuant to the program, ReFlow Fund, LLC (“ReFlow”) provides participating mutual funds with a source of cash to meet net shareholder redemptions by standing ready each business day to purchase fund shares up to the value of the net shares redeemed by other shareholders that are to settle the next business day. Following purchases of fund shares, ReFlow then generally redeems those shares when the fund experiences net sales, at the end of a maximum holding period determined by ReFlow (currently 8 days) or at other times at ReFlow’s discretion. While ReFlow holds fund shares, it will have the same rights and privileges with respect to those shares as any other shareholder.
For use of the ReFlow service, a fund pays a fee to ReFlow each time it purchases fund shares, calculated by applying to the purchase amount a fee rate determined through an automated daily auction among participating mutual funds. The current minimum fee rate is 0.14% of the value of the fund shares purchased by ReFlow, although the fund may submit a bid at a higher fee rate if it determines that doing so is in the best interest of fund shareholders. This fee is allocated among a fund’s share classes based on relative net assets. ReFlow’s purchases of fund shares through the liquidity program are made on an investment-blind basis without regard to the fund’s objective, policies, or anticipated performance. In accordance with federal securities laws, ReFlow is prohibited from acquiring more than 3% of the outstanding voting securities of a fund. ReFlow will purchase shares of the Fund at net asset value and will not be subject to any investment minimum applicable to such shares. ReFlow will periodically redeem its entire share position in the Fund and request that such redemption be met in kind in accordance with the Fund’s redemption in-kind policies described under “Other Shareholder Services” below. The Fund’s Board of Trustees has approved the Fund’s use of the ReFlow program. During the year ended May 31, 2024, the Fund did not participate in the ReFlow liquidity program.
| 13 |
FPA Queens Road Small Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
Note 5 – Federal Income Taxes
At May 31, 2024, gross unrealized appreciation/(depreciation) of investments, based on cost for federal income tax purposes were as follows:
| Cost of investments | $ | 551,498,130 | ||
| Gross unrealized appreciation | $ | 204,748,075 | ||
| Gross unrealized depreciation | (31,425,380 | ) | ||
| Net unrealized appreciation/(depreciation) | $ | 173,322,695 |
The difference between cost amounts for financial statement and federal income tax purposes is due primarily to timing differences in recognizing certain gains and losses in security transactions.
As of May 31, 2024, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed ordinary income | $ | 2,127,207 | ||
| Undistributed long-term capital gains | 29,082,545 | |||
| Tax accumulated earnings | 31,209,752 | |||
| Accumulated capital and other losses | - | |||
| Unrealized appreciation/(depreciation) on investments |
173,322,695 |
|||
| Unrealized deferred compensation | (1,829) | |||
| Total accumulated earnings/(deficit) | $ | 204,530,618 |
The tax character of distributions paid during the fiscal years ended May 31, 2024 and May 31, 2023, were as follows:
| 2024 | 2023 | |||||||
| Distributions paid from: | ||||||||
| Ordinary income | $ | 9,621,391 | $ | 500,019 | ||||
| Net long-term capital gains | 8,952,148 | 10,199,545 | ||||||
| Total distributions paid | $ | 18,573,539 | $ | 10,699,564 | ||||
During the tax year ended May 31, 2024, the Fund utilized $0 of short-term and $0 of long-term non-expiring capital loss carryforwards, respectively.
U.S. GAAP requires that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended May 31, 2024, permanent difference in book and tax accounting have been reclassified to paid-in capital and total distributable earnings/(losses) as follows:
| 14 |
FPA Queens Road Small Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
| Increase (Decrease) | ||||||
| Paid-In Capital |
Total Distributable Earnings (Loss) |
|||||
| $ | 1,715,292 | $ | (1,715,292 | ) | ||
Note 6 – Investment Transactions
For the year ended May 31, 2024, purchases and sales of investments, excluding short-term investments, were $201,884,660 and $105,790,373, respectively.
Note 7 – Shareholder Servicing Plan
On April 16, 2024, the Board of Trustees (the “Board”) approved a Shareholder Service Plan. Pursuant to the Shareholder Service Plan adopted by the Board, on behalf of the Fund, the Fund may pay a fee at an annual rate of up to 0.25%, 0.10%, and 0.15% of its average daily net assets attributable to Investor Class, Institutional Class, and Advisor Class shares of the Fund, respectively. The adoption of the Shareholder Service Plan does not constitute a change to the current fees being paid by Fund shareholders. The Fund does not pay these service fees on shares purchased directly. In addition, the Adviser may, at its own expense, pay financial representatives and/or shareholder servicing agents for these services. The inclusion of such fees are reported on the Statement of Operations.
Note 8 – Indemnifications
In the normal course of business, the Fund enters into contracts that contain a variety of representations which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund expects the risk of loss to be remote.
Note 9 – Fair Value Measurements and Disclosure
Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. It also provides guidance on determining when there has been a significant decrease in the volume and level of activity for an asset or a liability, when a transaction is not orderly, and how that information must be incorporated into a fair value measurement.
Under Fair Value Measurements and Disclosures, various inputs are used in determining the value of the Fund’s investments. These inputs are summarized into three broad Levels as described below:
| · | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. |
| · | Level 2 – Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| 15 |
FPA Queens Road Small Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
| · | Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different Levels of the fair value hierarchy. In such cases, for disclosure purposes, the Level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest Level input that is significant to the fair value measurement in its entirety.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the inputs used, as of May 31, 2024, in valuing the Fund’s assets carried at fair value:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Common Stocks* | $ | 649,818,894 | $ | - | $ | - | $ | 649,818,894 | ||||||||
| Preferred Stocks* | 162,105 | - | - | 162,105 | ||||||||||||
| Short-Term Investments | 74,839,736 | - | - | 74,839,736 | ||||||||||||
| Total | $ | 724,820,825 | $ | - | $ | - | $ | 724,820,825 | ||||||||
| * | All sub-categories within Common Stocks and Preferred Stocks represent Level 1 investments. See Schedule of Investments for industry categories. |
Transfers of investments between different levels of the fair value hierarchy are recorded at fair value as of the end of the reporting period. There were no transfers into or out of Level 3 during the year ended May 31, 2024.
The Fund did not hold any Level 2 or Level 3 securities at period end.
The Fund did not hold derivatives as of May 31, 2024.
Note 10 – Market Disruption and Geopolitical Risks
Certain local, regional or global events such as war, acts of terrorism, the spread of infectious illnesses and/or other public health issues, financial institution instability or other events may have a significant impact on a security or instrument. These types of events and other like them are collectively referred to as “Market Disruptions and Geopolitical Risks” and they may have adverse impacts on the worldwide economy, as well as the economies of individual countries, the financial health of individual companies and the market in general in significant and unforeseen ways. Some of the impacts noted in recent times include but are not limited to embargos, political actions, supply chain disruptions, bank failures, restrictions to investment and/or monetary movement including the forced selling of securities or the inability to participate impacted markets. The duration of these events could adversely affect the Fund’s performance, the performance of the securities in which the Fund invests and may lead to losses on your investment. The ultimate impact of “Market Disruptions and Geopolitical Risks” on the financial performance of the Fund’s investments is not reasonably estimable at this time. Management is actively monitoring these events.
| 16 |
FPA Queens Road Small Cap Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
Note 11 – New Accounting Pronouncements
Effective January 24, 2023, the Securities and Exchange Commission (the “SEC”) adopted rule and form amendments to require mutual funds and exchange-traded funds (“ETFs”) to transmit concise and visually engaging streamlined annual and semiannual reports to shareholders that highlight key information deemed important for retail investors to assess and monitor their fund investments. Certain information, including financial statements, will no longer appear in the funds’ streamlined shareholder reports but must be available online, delivered free of charge upon request, and filed on a semiannual basis on Form N-CSR. The rule and form amendments have a compliance date of July 24, 2024. The Funds have adopted procedures in accordance with the SEC’s rules and form amendments.
Note 12 – Events Subsequent to the Fiscal Period End
The Fund has adopted financial reporting rules regarding subsequent events which require an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. Management has evaluated the Fund’s related events and transactions that occurred through the date of issuance of the Fund’s financial statements.
There were no events or transactions that occurred during this period that materially impacted the amounts or disclosures in the Fund’s financial statements.
| 17 |
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees
and the Shareholders of the FPA Queens Road Small Cap Value Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of the FPA Queens Road Small Cap Value Fund (the “Fund”), a series of Investment Managers Series Trust III, including the schedule of investments, as of May 31, 2024, the related statement of operations, the statement of changes in net assets, and financial highlights for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of May 31, 2024, the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The statement of changes in net assets for the year ended May 31, 2023, and the financial highlights for each of the three years in the period ended May 31, 2023, were audited by other auditors, whose report dated July 26, 2023 expressed unqualified opinions on those financial highlights. The financial highlights for the year ended May 31, 2020, were audited by other auditors, whose report dated July 30, 2020 expressed unqualified opinions on those financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the auditor of the Fund since 2023.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit 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 audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2024 by correspondence with the custodian. We believe that our audit provides a reasonable basis for our opinion.
 | |
| TAIT, WELLER & BAKER LLP |
Philadelphia, Pennsylvania
July 29, 2024
| 18 |
FPA Queens Road Small Cap Value Fund
SUPPLEMENTAL INFORMATION (Unaudited)
Corporate Dividends Received Deduction
For the year ended May 31, 2024, the FPA Queens Road Small Cap Value Fund had 100% of dividends paid from net investment income qualified for the 70% dividends received deduction available to corporate shareholders.
Qualified Dividend Income
For the year ended May 31, 2024, the FPA Queens Road Small Cap Value Fund had 100% of dividends paid from net investment income, designated as qualified dividend income.
Long-Term Capital Gains Designation
Pursuant to IRC 852 (b)(3) of the Internal Revenue Code the FPA Queens Road Small Cap Value Fund hereby designates $8,952,148 as long-term capital gains distributed during the year ended May 31, 2024.
| 19 |
FPA Queens Road Value Fund
ANNUAL FINANCIALS AND OTHER INFORMATION
MAY 31, 2024
FPA Queens Road Value Fund
A series of Investment Managers Series Trust III
Table of Contents
Please note the Financials and Other Information only contains Items 7-11 required in Form N-CSR. All other required items will be filed with the SEC.
| Item 7. Financial Statements and Financial Highlights | |
| Schedule of Investments | 1 |
| Statement of Assets and Liabilities | 3 |
| Statement of Operations | 4 |
| Statements of Changes in Net Assets | 5 |
| Financial Highlights | 6 |
| Notes to Financial Statements | 7 |
| Report of Independent Registered Public Accounting Firm | 15 |
| Supplemental Information | 16 |
This report and the financial statements contained herein are provided for the general information of the shareholders of the FPA Queens Road Value Fund (the “Fund”). This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective shareholder report and prospectus.
www.fpa.com
FPA Queens Road Value Fund
SCHEDULE OF INVESTMENTS
As of May 31, 2024
| Number of Shares |
Value | |||||||
| COMMON STOCKS — 93.5% | ||||||||
| AEROSPACE & DEFENSE — 6.6% | ||||||||
| 8,000 | General Dynamics Corp. | $ | 2,398,160 | |||||
| 6,600 | RTX Corp. | 711,546 | ||||||
| 3,109,706 | ||||||||
| ASSET MANAGEMENT — 7.5% | ||||||||
| 6,000 | Ameriprise Financial, Inc. | 2,619,660 | ||||||
| 7,900 | T. Rowe Price Group, Inc. | 930,857 | ||||||
| 3,550,517 | ||||||||
| BANKING — 3.8% | ||||||||
| 9,000 | JPMorgan Chase & Co. | 1,823,670 | ||||||
| BIOTECH & PHARMA — 8.2% | ||||||||
| 13,820 | Merck & Co., Inc. | 1,734,963 | ||||||
| 76,000 | Pfizer, Inc. | 2,178,160 | ||||||
| 3,913,123 | ||||||||
| DIVERSIFIED INDUSTRIALS — 7.8% | ||||||||
| 3,600 | 3M Co. | 360,504 | ||||||
| 10,000 | Eaton Corp. PLC | 3,328,500 | ||||||
| 3,689,004 | ||||||||
| ELECTRICAL EQUIPMENT — 7.9% | ||||||||
| 3,400 | Allegion PLC | 414,188 | ||||||
| 10,200 | Trane Technologies PLC | 3,340,092 | ||||||
| 3,754,280 | ||||||||
| ENTERTAINMENT CONTENT — 1.1% | ||||||||
| 5,151 | Walt Disney Co. | 535,240 | ||||||
| FOOD — 5.5% | ||||||||
| 10,000 | Hershey Co. | 1,978,300 | ||||||
| 9,000 | Mondelez International, Inc. - Class A | 616,770 | ||||||
| 2,595,070 | ||||||||
| HEALTH CARE FACILITIES & SVCS — 9.6% | ||||||||
| 30,000 | Centene Corp.* | 2,147,700 | ||||||
| 4,500 | Elevance Health, Inc. | 2,423,160 | ||||||
| 4,570,860 | ||||||||
| INSTITUTIONAL FINANCIAL SVCS — 1.8% | ||||||||
| 14,500 | Bank of New York Mellon Corp. | 864,345 | ||||||
| INSURANCE — 6.5% | ||||||||
| 3 | Berkshire Hathaway, Inc. - Class A* | 1,882,200 | ||||||
| 10,000 | Prudential Financial, Inc. | 1,203,500 | ||||||
| 3,085,700 | ||||||||
| LEISURE FACILITIES & SERVICES — 2.3% | ||||||||
| 4,225 | McDonald's Corp. | 1,093,810 | ||||||
| 1 |
FPA Queens Road Value Fund
SCHEDULE OF INVESTMENTS - Continued
As of May 31, 2024
|
Number |
Value |
|||||||
| COMMON STOCKS (Continued) | ||||||||
| MACHINERY — 1.8% | ||||||||
| 9,000 | Ingersoll Rand, Inc. | $ | 837,450 | |||||
| MEDICAL EQUIPMENT & DEVICES — 3.5% | ||||||||
| 6,300 | Danaher Corp. | 1,617,840 | ||||||
| 900 | Solventum Corp.* | 53,406 | ||||||
| 1,671,246 | ||||||||
| SEMICONDUCTORS — 1.7% | ||||||||
| 26,000 | Intel Corp. | 802,100 | ||||||
| SOFTWARE — 5.0% | ||||||||
| 20,395 | Oracle Corp. | 2,390,090 | ||||||
| SPECIALTY FINANCE — 5.6% | ||||||||
| 11,000 | American Express Co. | 2,640,000 | ||||||
| TECHNOLOGY HARDWARE — 2.0% | ||||||||
| 20,700 | Cisco Systems, Inc. | 962,550 | ||||||
| TECHNOLOGY SERVICES — 3.8% | ||||||||
| 12,000 | Fiserv, Inc.* | 1,797,120 | ||||||
| TRANSPORTATION & LOGISTICS — 1.5% | ||||||||
| 3,000 | Union Pacific Corp. | 698,460 | ||||||
| TOTAL COMMON STOCKS | ||||||||
| (Cost $16,111,348) | 44,384,341 | |||||||
| SHORT-TERM INVESTMENTS — 6.3% | ||||||||
| MONEY MARKET INVESTMENTS — 6.3% | ||||||||
| 2,987,266 | Morgan Stanley Institutional Liquidity Treasury Portfolio - Institutional Class, 5.08%(a) | 2,987,266 | ||||||
| TOTAL SHORT-TERM INVESTMENTS | ||||||||
| (Cost $2,987,266) | 2,987,266 | |||||||
| TOTAL INVESTMENTS — 99.8% | ||||||||
| (Cost $19,098,614) | 47,371,607 | |||||||
| Other Assets in Excess of Liabilities — 0.2% | 95,986 | |||||||
| TOTAL NET ASSETS — 100.0% | $ | 47,467,593 | ||||||
| PLC – Public Limited Company |
| * | Non-income producing security. |
| (a) | The rate is the annualized seven-day yield at period end. |
See accompanying Notes to Financial Statements.
| 2 |
FPA Queens Road Value Fund
STATEMENT OF ASSETS AND LIABILITIES
As of May 31, 2024
| Assets: | ||||
| Investments, at value (cost $19,098,614) | $ | 47,371,607 | ||
| Receivables: | ||||
| Fund shares sold | 100,000 | |||
| Dividends and interest | 99,877 | |||
| Prepaid expenses | 9,698 | |||
| Total assets | 47,581,182 | |||
| Liabilities: | ||||
| Payables: | ||||
| Advisory fees | 6,067 | |||
| Shareholder servicing fees | 18,231 | |||
| Fund services fees | 11,913 | |||
| Legal fees | 24,058 | |||
| Registration fees | 23,725 | |||
| Shareholder reporting fees | 15,871 | |||
| Auditing fees | 10,521 | |||
| Trustees' deferred compensation (Note 3) | 1,034 | |||
| Trustees' fees and expenses | 1,027 | |||
| Chief Compliance Officer fees | 917 | |||
| Accrued other expenses | 225 | |||
| Total liabilities | 113,589 | |||
| Net Assets | $ | 47,467,593 | ||
| Components of Net Assets: | ||||
| Capital Stock (no par value with an unlimited number of shares authorized) | $ | 17,734,375 | ||
| Total distributable earnings (accumulated deficit) | 29,733,218 | |||
| Net Assets | $ | 47,467,593 | ||
| Number of shares issued and outstanding | 1,545,574 | |||
| Net asset value per share | $ | 30.71 | ||
See accompanying Notes to Financial Statements.
| 3 |
FPA Queens Road Value Fund
STATEMENT OF OPERATIONS
For the Year Ended May 31, 2024
| Investment income: | ||||
| Dividends | $ | 692,809 | ||
| Interest | 72,320 | |||
| Total investment income | 765,129 | |||
| Expenses: | ||||
| Advisory fees | 349,533 | |||
| Shareholder servicing fees | 29,648 | |||
| Fund services fees | 63,214 | |||
| Registration fees | 47,568 | |||
| Shareholder reporting fees | 26,960 | |||
| Trustees' fees and expenses | 26,947 | |||
| Auditing fees | 21,119 | |||
| Chief Compliance Officer fees | 8,811 | |||
| Legal fees | 7,908 | |||
| Insurance fees | 7,306 | |||
| Miscellaneous | 4,187 | |||
| Total expenses | 593,201 | |||
| Advisory fees waived | (349,533 | ) | ||
| Other expenses absorbed | (4,513 | ) | ||
| Net expenses | 239,155 | |||
| Net investment income (loss) | 525,974 | |||
| Realized and Unrealized Gain (Loss): | ||||
| Net realized gain (loss) on: | ||||
| Investments | 1,892,159 | |||
| Total realized gain (loss) | 1,892,159 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Investments | 7,777,270 | |||
| Net change in unrealized appreciation (depreciation) | 7,777,270 | |||
| Net realized and unrealized gain (loss) | 9,669,429 | |||
| Net Increase (Decrease) in Net Assets from Operations | $ | 10,195,403 |
See accompanying Notes to Financial Statements.
| 4 |
FPA Queens Road Value Fund
STATEMENTS OF CHANGES IN NET ASSETS
| For the Year Ended May 31, 2024 |
For the Year Ended May 31, 2023 |
|||||||
| Increase (Decrease) in Net Assets from: | ||||||||
| Operations: | ||||||||
| Net investment income (loss) | $ | 525,974 | $ | 487,795 | ||||
| Total realized gain (loss) on investments | 1,892,159 | 110,157 | ||||||
| Net change in unrealized appreciation (depreciation) on investments | 7,777,270 | (372,912 | ) | |||||
| Net increase (decrease) in net assets resulting from operations | 10,195,403 | 225,040 | ||||||
| Distributions to Shareholders: | ||||||||
| Distributions | (1,035,489 | ) | (898,023 | ) | ||||
| Total distributions to shareholders | (1,035,489 | ) | (898,023 | ) | ||||
| Capital Transactions: | ||||||||
| Net proceeds from shares sold | 10,385,173 | 1,004,574 | ||||||
| Reinvestment of distributions | 1,031,594 | 888,790 | ||||||
| Cost of shares redeemed | (4,838,357 | ) | (3,826,471 | ) | ||||
| Net increase (decrease) in net assets from capital transactions | 6,578,410 | (1,933,107 | ) | |||||
| Total increase (decrease) in net assets | 15,738,324 | (2,606,090 | ) | |||||
| Net Assets: | ||||||||
| Beginning of period | 31,729,269 | 34,335,359 | ||||||
| End of period | $ | 47,467,593 | $ | 31,729,269 | ||||
| Capital Share Transactions: | ||||||||
| Shares sold | 351,663 | 42,795 | ||||||
| Shares reinvested | 38,363 | 37,328 | ||||||
| Shares redeemed | (173,992 | ) | (159,297 | ) | ||||
| Net increase (decrease) in capital share transactions | 216,034 | (79,174 | ) | |||||
See accompanying Notes to Financial Statements.
| 5 |
FPA Queens Road Value Fund
FINANCIAL HIGHLIGHTS
Per share operating performance.
For a capital share outstanding throughout each period.
|
For the |
||||||||||||||||||||
| 2024 | 20231 | 20221 | 20211 | 20202 | ||||||||||||||||
| Net asset value, beginning of period | $ | 23.86 | $ | 24.37 | $ | 29.21 | $ | 22.45 | $ | 22.67 | ||||||||||
| Income from Investment Operations: | ||||||||||||||||||||
| Net investment income3 | 0.39 | 0.36 | 0.32 | 0.39 | 0.43 | |||||||||||||||
| Net realized and unrealized gain (loss) | 7.26 | (0.20 | ) | (0.63 | ) | 7.99 | 0.20 | |||||||||||||
| Total from investment operations | 7.65 | 0.16 | (0.31 | ) | 8.38 | 0.63 | ||||||||||||||
| Less Distributions: | ||||||||||||||||||||
| From net investment income | (0.35 | ) | (0.36 | ) | (0.37 | ) | (0.48 | ) | (0.37 | ) | ||||||||||
| From net realized gains | (0.45 | ) | (0.31 | ) | (4.16 | ) | (1.14 | ) | (0.48 | ) | ||||||||||
| Total distributions | (0.80 | ) | (0.67 | ) | (4.53 | ) | (1.62 | ) | (0.85 | ) | ||||||||||
| Net asset value, end of period | $ | 30.71 | $ | 23.86 | $ | 24.37 | $ | 29.21 | $ | 22.45 | ||||||||||
| Total return4 | 32.53 | % | 0.65 | % | (2.19 | )% | 38.62 | % | 2.41 | % | ||||||||||
| Ratios and Supplemental Data: | ||||||||||||||||||||
| Net assets, end of period (in thousands) | $ | 47,468 | $ | 31,729 | $ | 34,335 | $ | 41,935 | $ | 34,580 | ||||||||||
| Ratio of expenses to average net assets: | ||||||||||||||||||||
| Before fees waived and expenses absorbed | 1.61 | % | 2.10 | % | 1.95 | % | 1.43 | % | 0.95 | % | ||||||||||
| After fees waived and expenses absorbed | 0.65 | % | 0.65 | % | 0.65 | % | 0.77 | %5 | 0.95 | % | ||||||||||
| Ratio of net investment income (loss) to average net assets: | ||||||||||||||||||||
| Before fees waived and expenses absorbed | 0.47 | % | 0.04 | % | (0.18 | )% | 0.89 | % | 1.84 | % | ||||||||||
| After fees waived and expenses absorbed | 1.43 | % | 1.49 | % | 1.12 | % | 1.55 | % | 1.84 | % | ||||||||||
| Portfolio turnover rate | 9 | % | 0 | % | 4 | % | 0 | % | 1 | % | ||||||||||
| 1 | Audits performed for the fiscal years indicated by the Fund’s previous auditor, Ernst & Young LLP. |
| 2 | Audits performed for the fiscal years indicated by the Fund’s previous auditor, Cohen & Company, Ltd. |
| 3 | Based on average shares outstanding for the period. |
| 4 | Total returns would have been higher/lower had expenses not been recovered/waived and absorbed by the Adviser. Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
| 5 | Effective November 1, 2020, the Advisor contractually agreed to limit the annual fund operating expenses to 0.65%. Prior to November 1, 2020, the Fund had a unitary fee structure that limited annual operating expenses to 0.95%. |
See accompanying Notes to Financial Statements.
| 6 |
FPA Queens Road Value Fund
NOTES TO FINANCIAL STATEMENTS
May 31, 2024
Note 1 – Organization
FPA Queens Road Value Fund (the “Fund”) is a diversified series of Investment Managers Series Trust III, (formerly FPA Funds Trust), (the “Trust”) which is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund’s primary investment objective is to seek long-term capital growth. First Pacific Advisors, LP (the “Adviser”) has served as the Fund’s investment adviser since November 1, 2020.
On July 28, 2023, the Fund acquired the assets and assumed the liabilities of FPA Queens Road Value Fund, a series of Bragg Capital Trust, (the “Predecessor Fund”) in a tax-free reorganization pursuant to the Agreement and Plan of Reorganization (the “Plan of Reorganization”). The Plan of Reorganization was approved by the Trust’s Board and by the Predecessor Fund’s Board on May 8, 2023. The tax-free reorganization was accomplished on July 28, 2023. As a result of the reorganization, the Fund assumed the performance and accounting history of the Predecessor Fund. Financial information included for the dates prior to the reorganization is that of the Predecessor Fund.
The reorganization was accomplished by the following tax-free exchange in which each shareholder of the Fund received the same aggregate share net asset value as noted below:
| Shares Issued | Net Assets | |||||
| 1,309,954 | $ | 34,362,082 | ||||
The net unrealized appreciation of investments transferred was $22,847,187 as of the date of the acquisition.
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services— Investment Companies”.
Note 2 – Accounting Policies
The following is a summary of the significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.
(a) Valuation of Investments
The Fund values equity securities at the last reported sale price on the principal exchange or in the principal over the counter (“OTC”) market in which such securities are traded, as of the close of regular trading on the NYSE on the day the securities are being valued or, if the last-quoted sales price is not readily available, the securities will be valued at the last bid or the mean between the last available bid and ask price. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”). Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Debt securities are valued by utilizing a price supplied by independent pricing service providers. The independent pricing service providers may use various valuation methodologies including matrix pricing and other analytical pricing models as well as market transactions and dealer quotations. These models generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings and general market conditions. If a price is not readily available for a portfolio security, the security will be valued at fair value (the amount which the Fund might reasonably expect to receive for the security upon its current sale). The Board of Trustees has designated the Advisor as the Fund’s valuation designee (the “Valuation Designee”) to make all fair value determinations with respect to the Fund’s portfolio investments, subject to the Board’s oversight. As the Valuation Designee, the Advisor has adopted and implemented policies and procedures to be followed when the Fund must utilize fair value pricing.
| 7 |
FPA Queens Road Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
(b) Investment Transactions, Investment Income and Expenses
Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis. Dividend income is recorded net of applicable withholding taxes on the ex-dividend date and interest income is recorded on an accrual basis. Withholding taxes on foreign dividends, if applicable, are paid (a portion of which may be reclaimable) or provided for in accordance with the applicable country’s tax rules and rates and are disclosed in the Statement of Operations. Withholding tax reclaims are filed in certain countries to recover a portion of the amounts previously withheld. The Fund records a reclaim receivable based on a number of factors, including a jurisdiction’s legal obligation to pay reclaims as well as payment history and market convention. Discounts on debt securities are accreted or amortized to interest income over the lives of the respective securities using the effective interest method. Premiums for callable debt securities are amortized to the earliest call date, if the call price was less than the purchase price. If the call price was not at par and the security was not called, the security is amortized to the next call price and date. Expenses incurred by the Trust with respect to more than one fund are allocated in proportion to the net assets of each fund except where allocation of direct expenses to each fund or an alternative allocation method can be more appropriately made.
(c) Federal Income Taxes
The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of their net investment income and any net realized gains to their shareholders. Therefore, no provision is made for federal income or excise taxes. Due to the timing of dividend distributions and the differences in accounting for income and realized gains and losses for financial statement and federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains and losses are recorded by the Fund.
Accounting for Uncertainty in Income Taxes (the “Income Tax Statement”) requires an evaluation of tax positions taken (or expected to be taken) in the course of preparing a Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations.
The Income Tax Statement requires management of the Fund to analyze tax positions taken in the prior three open tax years, if any, and tax positions expected to be taken in the Fund’s current tax year, as defined by the IRS statute of limitations for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of May 31, 2024, and during the prior three open tax years, the Fund did not have a liability for any unrecognized tax benefits. The Fund has no examinations in progress and is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
(d) Distributions to Shareholders
The Fund will make distributions of net investment income and net capital gains, if any, at least annually. Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from GAAP.
| 8 |
FPA Queens Road Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
The character of distributions made during the year from net investment income or net realized gains may differ from the characterization for federal income tax purposes due to differences in the recognition of income, expense and gain (loss) items for financial statement and tax purposes.
(e) Illiquid Securities
Pursuant to Rule 22e-4 under the 1940 Act, the Fund has adopted a Liquidity Risk Management Program (“LRMP”) that requires, among other things, that the Fund limits its illiquid investments that are assets to no more than 15% of net assets. An illiquid investment is any security which may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. If the Adviser, at any time determines that the value of illiquid securities held by the Fund exceeds 15% of its net asset value, the Adviser will take such steps as it considers appropriate to reduce them as soon as reasonably practicable in accordance with the Fund’s written LRMP.
(f) Use of Estimates
The presentation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of income and expenses during the reporting period. Actual results could differ from those estimates.
Note 3 – Investment Advisory and Other Agreements
The Trust, on behalf of the Fund, entered into an Investment Advisory Agreement (the “Agreement”) with the Adviser. Under the terms of the Agreement, the Fund pays a monthly investment advisory fee to the Adviser at the annual rate of 0.95% of the Fund’s average daily net assets. The Adviser engages Bragg Financial Advisors, Inc. (the “Sub-Adviser”) to manage the Fund and pays the Sub-Adviser from its advisory fees.
The Adviser has contractually agreed to waive its fees and/or pay for operating expenses of the Fund to ensure that total annual fund operating expenses (excluding any interest, taxes, brokerage fees and commissions payable by the Fund in connection with the purchase or sale of portfolio securities, fees and expenses of other funds in which the Fund invests, and extraordinary expenses, including litigation expenses not incurred in the Fund’s ordinary course of business) do not exceed 0.65% of the average daily net assets. This agreement is in effect until July 27, 2024, and it may be terminated before that date only by the Trust’s Board of Trustees. For the year ended May 31, 2024, the Adviser waived advisory fees and reimbursed expenses totaling $354,046.
These expense reimbursements are subject to possible recoupment by the Adviser from the Fund in future years (within the three years from the date when the amount is waived or reimbursed) if such recoupment can be achieved within the lesser of the foregoing expense limits or the then-current expense limits. Similarly, the Adviser is permitted to seek reimbursement from the Fund, subject to certain limitations, of fees waived or payments made by the Adviser to the Predecessor Fund prior to the Predecessor Fund's reorganization on July 28, 2023 for a period ending three years after the date of the waiver or payment. The potential recoverable amount is noted as “Commitments and contingencies” as reported on the Statement of Assets and Liabilities. As of May 31, 2024, the Adviser may seek recoupment for previously waived or reimbursed expenses, subject to the limitations noted above, no later than the dates as outlined below:
| May 31, 2025 | $ | 511,891 | ||
| May 31, 2026 | 474,577 | |||
| May 31, 2027 | 354,046 | |||
| Total | $ | 1,340,514 |
| 9 |
FPA Queens Road Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
UMB Fund Services, Inc. (“UMBFS”) serves as the Fund’s fund accountant, transfer agent and co-administrator; and Mutual Fund Administration, LLC (“MFAC”) serves as the Fund’s other co-administrator. UMB Bank, n.a., an affiliate of UMBFS, serves as the Fund’s custodian. The Fund’s allocated fees incurred for fund accounting, fund administration, transfer agency and custody services for the period from July 29, 2023 through May 31, 2024, were $58,887. The inclusion of such fees are reported on the Statement of Operations.
Prior to July 29, 2023, State Street Bank and Trust Company served as the Predecessor Fund’s fund accountant, administrator and custodian. The Predecessor Fund’s allocated fees incurred for fund accounting, fund administration and custody services for the period from June 1, 2023 to July 28, 2023, was $4,327. The inclusion of such fees are reported on the Statement of Operations.
UMB Distribution Services, LLC (“UMB Distribution Services”), a wholly owned subsidiary of UMBFS, serves as the Fund’s distributor. The Adviser paid the fees for the Fund’s distribution-related services.
Certain trustees and officers of the Trust are employees of UMBFS, MFAC or Adviser. The Fund does not compensate trustees and officers affiliated with the Fund’s Adviser or co-administrators. For the period from July 29, 2023 through May 31, 2024, the Fund’s allocated fees incurred to Trustees of the Trust who are not “interested persons” of the Trust, as that term is defined in the 1940 Act (collectively, the “Independent Trustees”) were $15,894. The inclusion of such fees are reported on the Statement of Operations.
Prior to July 29, 2023, the Predecessor Fund’s allocated fees incurred for Independent Trustees services for the period from June 1, 2023 to July 28, 2023, was $11,053. The inclusion of such fees are reported on the Statement of Operations.
On December 26, 2023, the Fund's Board of Trustees approved to adopt a Deferred Compensation Plan (the “Plan”) for the Independent Trustees that enables Trustees to elect to receive payment in cash or the option to defer some or all of their fees. If a trustee elects to defer payment, the Plan provides for the creation of a deferred payment account. A Trustee’s deferred fees are deemed to be invested in designated mutual funds available under the Plan. The Fund's liability for these amounts is adjusted for market value changes in the invested fund and remains a liability to the Fund until distributed in accordance with the Plan. The Trustees Deferred compensation liability under the Plan constitutes a general unsecured obligation of the Fund and is disclosed in the Statement of Assets and Liabilities. Contributions made under the plan and the change in unrealized appreciation/depreciation and income are included in the Trustees' fees and expenses in the Statement of Operations.
Dziura Compliance Consulting, LLC provides Chief Compliance Officer (“CCO”) services to the Trust. The Fund’s allocated fees incurred for CCO services for the period from July 29, 2023 through May 31, 2024, were $6,338. The inclusion of such fees are reported on the Statement of Operations.
Prior to July 29, 2023, Ms. Karen Richards served as the Predecessor Fund’s CCO services to the Trust. The Predecessor Fund’s allocated fees incurred for CCO services for the period from June 1, 2023 to July 28, 2023, was $2,473. The inclusion of such fees are reported on the Statement of Operations.
Note 4 – ReFlow Liquidity Program
The Fund may participate in the ReFlow liquidity program, which is designed to provide an alternative liquidity source for mutual funds experiencing net redemptions of their shares. Pursuant to the program, ReFlow Fund, LLC (“ReFlow”) provides participating mutual funds with a source of cash to meet net shareholder redemptions by standing ready each business day to purchase fund shares up to the value of the net shares redeemed by other shareholders that are to settle the next business day. Following purchases of fund shares, ReFlow then generally redeems those shares when the fund experiences net sales, at the end of a maximum holding period determined by ReFlow (currently 8 days) or at other times at ReFlow’s discretion. While ReFlow holds fund shares, it will have the same rights and privileges with respect to those shares as any other shareholder.
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FPA Queens Road Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
For use of the ReFlow service, a fund pays a fee to ReFlow each time it purchases fund shares, calculated by applying to the purchase amount a fee rate determined through an automated daily auction among participating mutual funds. The current minimum fee rate is 0.14% of the value of the fund shares purchased by ReFlow, although the fund may submit a bid at a higher fee rate if it determines that doing so is in the best interest of fund shareholders. This fee is allocated among a fund’s share classes based on relative net assets. ReFlow’s purchases of fund shares through the liquidity program are made on an investment-blind basis without regard to the fund’s objective, policies, or anticipated performance. In accordance with federal securities laws, ReFlow is prohibited from acquiring more than 3% of the outstanding voting securities of a fund. ReFlow will purchase shares of the Fund at net asset value and will not be subject to any investment minimum applicable to such shares. ReFlow will periodically redeem its entire share position in the Fund and request that such redemption be met in kind in accordance with the Fund’s redemption in-kind policies described under “Other Shareholder Services” below. The Fund’s Board of Trustees has approved the Fund’s use of the ReFlow program. During the year ended May 31, 2024, the Fund did not participate in the ReFlow liquidity program.
Note 5 – Federal Income Taxes
At May 31, 2024, gross unrealized appreciation/(depreciation) of investments, based on cost for federal income tax purposes were as follows:
| Cost of investments | $ | 19,106,848 | ||
| Gross unrealized appreciation | $ | 28,397,357 | ||
| Gross unrealized depreciation | (132,598 | ) | ||
| Net unrealized appreciation/(depreciation) | $ | 28,264,759 |
The difference between cost amounts for financial statement and federal income tax purposes is due primarily to timing differences in recognizing certain gains and losses in security transactions.
As of May 31, 2024, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed ordinary income | $ | 269,462 | ||
| Undistributed long-term capital gains | 1,200,031 | |||
| Tax accumulated earnings | 1,469,493 | |||
| Accumulated capital and other losses | - | |||
| Unrealized appreciation/(depreciation) on investments | 28,264,759 | |||
| Unrealized deferred compensation | (1,034 | ) | ||
| Total accumulated earnings/(deficit) | $ | 29,733,218 |
The tax character of distributions paid during the fiscal years ended May 31, 2024 and May 31, 2023, were as follows:
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FPA Queens Road Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
| 2024 | 2023 | |||||||
| Distributions paid from: | ||||||||
| Ordinary income | $ | 458,814 | $ | 480,665 | ||||
| Net long-term capital gains | 576,675 | 417,358 | ||||||
| Total distributions paid | $ | 1,035,489 | $ | 898,023 | ||||
During the tax year ended May 31, 2024, the Fund utilized $0 of short-term and $0 of long-term non-expiring capital loss carryforwards, respectively.
U.S. GAAP requires that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the year ended May 31, 2024, permanent difference in book and tax accounting have been reclassified to paid-in capital and total distributable earnings/(losses) as follows:
| Increase (Decrease) | ||||||
| Paid-In Capital |
Total Distributable Earnings (Loss) |
|||||
| $ | 115,453 | $ | (115,453 | ) | ||
Note 6 – Investment Transactions
For the year ended May 31, 2024, purchases and sales of investments, excluding short-term investments, were $6,257,585 and $3,238,460, respectively.
Note 7 – Shareholder Servicing Plan
On April 16, 2024, the Board of Trustees of the Trust (the “Board”) approved a Shareholder Service Plan. Pursuant to the Shareholder Service Plan adopted by the Board, on behalf of the Fund, the Fund may pay a fee at an annual rate of up to 0.25% of its average daily net assets attributable to shares of the Fund. The adoption of the Shareholder Service Plan does not constitute a change to the current fees being paid by Fund shareholders. The Fund does not pay these service fees on shares purchased directly. In addition, the Adviser may, at its own expense, pay financial representatives and/or shareholder servicing agents for these services. The inclusion of such fees are reported on the Statement of Operations.
Note 8 – Indemnifications
In the normal course of business, the Fund enters into contracts that contain a variety of representations which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, the Fund expects the risk of loss to be remote.
Note 9 – Fair Value Measurements and Disclosure
Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. It also provides guidance on determining when there has been a significant decrease in the volume and level of activity for an asset or a liability, when a transaction is not orderly, and how that information must be incorporated into a fair value measurement.
Under Fair Value Measurements and Disclosures, various inputs are used in determining the value of the Fund’s investments. These inputs are summarized into three broad Levels as described below:
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FPA Queens Road Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
| · | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. |
| · | Level 2 – Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
| · | Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different Levels of the fair value hierarchy. In such cases, for disclosure purposes, the Level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest Level input that is significant to the fair value measurement in its entirety.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the inputs used, as of May 31, 2024, in valuing the Fund’s assets carried at fair value:
| Level 1 | Level 2 | Level 3 | Total | |||||||||||||
| Common Stocks* | $ | 44,384,341 | $ | - | $ | - | $ | 44,384,341 | ||||||||
| Short-Term Investments | 2,987,266 | - | - | 2,987,266 | ||||||||||||
| Total | $ | 47,371,607 | $ | - | $ | - | $ | 47,371,607 | ||||||||
| * | All sub-categories within Common Stocks represent Level 1 investments. See Schedule of Investments for industry categories. |
Transfers of investments between different levels of the fair value hierarchy are recorded at fair value as of the end of the reporting period. There were no significant transfers into or out of Level 3 during the year ended May 31, 2024.
The Fund did not hold any Level 2 or Level 3 securities at period end.
The Fund did not hold derivatives as of May 31, 2024.
Note 10 – Market Disruption and Geopolitical Risks
Certain local, regional or global events such as war, acts of terrorism, the spread of infectious illnesses and/or other public health issues, financial institution instability or other events may have a significant impact on a security or instrument. These types of events and other like them are collectively referred to as “Market Disruptions and Geopolitical Risks” and they may have adverse impacts on the worldwide economy, as well as the economies of individual countries, the financial health of individual companies and the market in general in significant and unforeseen ways. Some of the impacts noted in recent times include but are not limited to embargos, political actions, supply chain disruptions, bank failures, restrictions to investment and/or monetary movement including the forced selling of securities or the inability to participate impacted markets. The duration of these events could adversely affect the Fund’s performance, the performance of the securities in which the Fund invests and may lead to losses on your investment. The ultimate impact of “Market Disruptions and Geopolitical Risks” on the financial performance of the Fund’s investments is not reasonably estimable at this time. Management is actively monitoring these events.
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FPA Queens Road Value Fund
NOTES TO FINANCIAL STATEMENTS - Continued
May 31, 2024
Note 11 – New Accounting Pronouncements
Effective January 24, 2023, the Securities and Exchange Commission (the “SEC”) adopted rule and form amendments to require mutual funds and exchange-traded funds (“ETFs”) to transmit concise and visually engaging streamlined annual and semiannual reports to shareholders that highlight key information deemed important for retail investors to assess and monitor their fund investments. Certain information, including financial statements, will no longer appear in the funds’ streamlined shareholder reports but must be available online, delivered free of charge upon request, and filed on a semiannual basis on Form N-CSR. The rule and form amendments have a compliance date of July 24, 2024. The Funds have adopted procedures in accordance with the SEC’s rules and form amendments.
Note 12 – Events Subsequent to the Fiscal Period End
The Fund has adopted financial reporting rules regarding subsequent events which require an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. Management has evaluated the Fund’s related events and transactions that occurred through the date of issuance of the Fund’s financial statements.
There were no events or transactions that occurred during this period that materially impacted the amounts or disclosures in the Fund’s financial statements.
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REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees
and the Shareholders of the FPA Queens Road Value Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of the FPA Queens Road Value Fund (the “Fund”), a series of Investment Managers Series Trust III, including the schedule of investments, as of May 31, 2024, the related statement of operations, the statement of changes in net assets, and financial highlights for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of May 31, 2024, the results of its operations, the changes in its net assets, and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The statement of changes in net assets for the year ended May 31, 2023, and the financial highlights for each of the three years in the period ended May 31, 2023, were audited by other auditors, whose report dated July 26, 2023 expressed unqualified opinions on those financial highlights. The financial highlights for the year ended May 31, 2020, were audited by other auditors, whose report dated July 30, 2020 expressed unqualified opinions on those financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. We have served as the auditor of the Fund since 2023.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit, we are required to obtain an understanding of internal control over financial reporting, but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audit 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 audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of securities owned as of May 31, 2024 by correspondence with the custodian. We believe that our audit provides a reasonable basis for our opinion.
 | |
| TAIT, WELLER & BAKER LLP |
Philadelphia, Pennsylvania
July 29, 2024
| 15 |
FPA Queens Road Value Fund
SUPPLEMENTAL INFORMATION (Unaudited)
Corporate Dividends Received Deduction
For the year ended May 31, 2024, the FPA Queens Road Value Fund had 100% of dividends paid from net investment income qualified for the 70% dividends received deduction available to corporate shareholders.
Qualified Dividend Income
For the year ended May 31, 2024, the FPA Queens Road Value Fund had 100% of dividends paid from net investment income, designated as qualified dividend income.
Long-Term Capital Gains Designation
Pursuant to IRC 852 (b)(3) of the Internal Revenue Code the FPA Queens Road Value Fund designates $576,675 as long-term capital gains distributed during the year ended May 31, 2024.
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Item 8. Changes in and Disagreements with Accountants for Open-End Management Investment Companies.
Not Applicable.
Item 9. Proxy Disclosures for Open-End Management Investment Companies.
Not Applicable.
Item 10. Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies.
This information is included in Item 7, as part of the financial statements.
Item 11. Statement Regarding Basis for Approval of Investment Advisory Contract.
FPA Queens Road Small Cap Value Fund
Board Consideration of Investment Advisory and Sub-Advisory Agreements (Unaudited)
At an in-person meeting held on April 16, 2024, the Board of Trustees (the “Board”) of Investment Managers Series Trust III (the “Trust”), including the trustees who are not “interested persons” of the Trust (the “Independent Trustees”) as defined in the Investment Company Act of 1940, as amended (the “1940 Act”), reviewed and unanimously approved the renewal of the investment advisory agreement (the “Advisory Agreement”) between the Trust and First Pacific Advisors, LP (the “Advisor”), and the sub-advisory agreement (the “Sub-Advisory Agreement”) among the Trust, the Advisor, and Bragg Financial Advisors, Inc. (the “Sub-Advisor”), with respect to the FPA Queens Road Small Cap Value Fund series of the Trust (the “Fund”) for additional one-year terms from when they otherwise would expire. The Advisory Agreement and the Sub-Advisory Agreement are referred to below as the “Fund Advisory Agreements.” In approving renewal of each Fund Advisory Agreement, the Board, including the Independent Trustees, determined that such renewal was in the best interests of the Fund and its shareholders.
Background
In advance of the meeting, the Board received information about the Fund and the Fund Advisory Agreements from the Advisor, the Sub-Advisor, and Mutual Fund Administration, LLC and UMB Fund Services, Inc., the Trust’s co-administrators, certain portions of which are discussed below. The materials, among other things, included information about the organization and financial condition of the Advisor and the Sub-Advisor; information regarding the background, experience, and compensation structure of relevant personnel providing services to the Fund; information about the Advisor’s and the Sub-Advisor’s compliance policies and procedures, disaster recovery and contingency planning, and policies with respect to portfolio execution and trading; information regarding the profitability of the Advisor’s overall relationship with the Fund; reports comparing the performance of the Fund with returns of the Russell 2000 Value Index and a group of comparable funds (the “Peer Group”) selected by Broadridge Financial Solutions, Inc. (“Broadridge”) from Morningstar, Inc.’s Small Value category (the “Fund Universe”) for the one-, three-, five-, and ten-year periods ended December 31, 2023; reports comparing the investment advisory fee and total expenses of the Fund with those of the Peer Group and Fund Universe; and the advisory and sub-advisory fees paid pursuant to the Advisory Agreement and Sub-Advisory Agreement, respectively. The Board also received a memorandum from legal counsel to the Trust and the Independent Trustees discussing the legal standards under the 1940 Act and other applicable law for their consideration of the proposed renewal of the Fund Advisory Agreements. In addition, the Board considered information reviewed by the Board during the year at other Board and Board committee meetings.
In renewing the Fund Advisory Agreements, the Independent Trustees met separately in an executive session prior to the meeting with the Board to consider the Fund Advisory Agreements, including the items discussed below, and were represented by their legal counsel with respect to the matters considered. The Board, including all of the Independent Trustees, then met and also considered a variety of factors for renewal of the Fund Advisory Agreements, including those discussed below. In their deliberations, the Board and the Independent Trustees did not identify any particular factor that was controlling, and each Trustee may have attributed different weights to the various factors.
FPA Queens Road Small Cap Value Fund
Board Consideration of Investment Advisory and Sub-Advisory Agreements (Unaudited)
First Pacific Advisors, LP
Nature, Extent, and Quality of Services
With respect to the performance results of the Fund, the meeting materials indicated that the Fund’s annualized total returns for the five- and ten-year periods were above the Peer Group and Fund Universe median returns and the Russell 2000 Value Index returns. The Fund’s total return for the one-year period was above the Russell 2000 Value Index return, but below the Peer Group and Fund Universe median returns by 0.04% and 0.22%, respectively. The Fund’s annualized total return for the three-year period was above the Russell 2000 Value Index return, but below the Peer Group and Fund Universe median returns by 0.36% and 1.19%, respectively. The Trustees observed that the Fund’s volatility of returns, as measured by its standard deviation, and its downside volatility, as measured by its Morningstar risk score, ranked it in the first quartile of the funds (which is the most favorable) in the Peer Group and Fund Universe for the one-, three-, five-, and ten-year periods.
The Board noted its familiarity with the Advisor and considered the overall quality of services provided by the Advisor to the Fund. In doing so, the Board considered the Advisor’s specific responsibilities in day-to-day management and oversight of the Fund, as well as the qualifications, experience, and responsibilities of the personnel involved in the activities of the Fund. The Board also considered the overall quality of the organization and operations of the Advisor, as well as its compliance structure. In addition, the Board considered the respective roles of the Advisor and the Sub-Advisor, noting that the Advisor provides overall supervision of the general investment management and investment operations of the Fund and oversees the Sub-Advisor with respect to the Fund’s operations, including monitoring the investment and trading activities of the Sub-Advisor, monitoring the Fund’s compliance with its investment policies, and providing general administrative services related to the Advisor’s overall supervision of the Fund; and that the Sub-Advisor’s responsibilities include day-to-day portfolio management. The Board and the Independent Trustees concluded that based on the various factors they had reviewed, the nature, overall quality, and extent of the management and oversight services provided by the Advisor to the Fund were satisfactory.
Advisory Fee and Expense Ratio
With respect to the advisory fee paid by the Fund, the meeting materials indicated that the annual investment advisory fee (gross of fee waivers) was lower than the Peer Group and Fund Universe medians. The Trustees considered that the Advisor does not manage any other accounts with the same objectives and policies as the Fund, and therefore they did not have a good basis for comparing the Fund’s advisory fee with those of other similar client accounts of the Advisor. The Trustees also considered that the Fund’s advisory fee was within the range of advisory fees paid by other series of the Trust managed by the Advisor. The annual total expenses paid by the Fund (net of fee waivers) for the Fund’s most recent fiscal year were lower than the Peer Group and Fund Universe medians.
The Board and the Independent Trustees concluded that based on the factors they had reviewed, the compensation payable to the Advisor under the Advisory Agreement was fair and reasonable in light of the nature and quality of the services the Advisor provides to the Fund.
FPA Queens Road Small Cap Value Fund
Board Consideration of Investment Advisory and Sub-Advisory Agreements (Unaudited)
Advisor Profitability and Costs
The Board and the Independent Trustees considered information provided by the Advisor regarding the Advisor’s costs in providing services to the Fund, the profitability of the Advisor and the benefits to the Advisor from its relationship to the Fund. They reviewed and considered the Advisor’s representations regarding its assumptions and methods of allocating certain costs, such as personnel costs, which constitute the Advisor’s largest operating cost, and overhead costs with respect to the provision of investment advisory services. The Independent Trustees discussed with the Advisor the general process through which individuals’ compensation is determined and then reviewed by the management committee of the Advisor, as well as the Advisor’s methods for determining that its compensation levels are set at appropriate levels to attract and retain the personnel necessary to provide high quality professional investment advice. The Board and the Independent Trustees recognized that the Advisor is entitled under the law to earn a reasonable level of profits for the services that it provides to the Fund. The Board observed, however, that the Advisor did not realize a profit with respect to the Fund.
Economies of Scale
The Board and the Independent Trustees considered, and discussed with the Advisor, whether there have been economies of scale with respect to the management of the Fund, whether the Fund has appropriately benefited from any economies of scale, and whether the advisory fee rate is reasonable in relation to the Fund’s asset levels and any economies of scale that may exist. The Board and the Independent Trustees considered the Advisor’s representation that its internal costs of providing investment management services to the Fund have increased in recent years as a result of a number of factors, including the ongoing and growing complexity of the Fund’s investments, as well as the Advisor’s investment in building a highly-seasoned trading, compliance, valuation, client service and operations staff to support the Advisor’s investment teams. The Trustees also noted the Advisor’s representation that it would continue making such investments in its personnel, systems, and facilities in an effort to maintain and increase the level and quality of services that it provides to the Fund. The Trustees also considered the Advisor’s willingness to close funds to new investors when it believes that a fund has limited capacity to grow or when it otherwise would be detrimental to fund shareholders.
The Board and the Independent Trustees noted that the advisory fee rate contained a breakpoint as the Fund’s assets increased. They considered that many registered funds have breakpoints in the advisory fee structure as a means by which to share in the benefits of potential economies of scale as a fund’s assets grow. They also considered that not all funds have breakpoints in their fee structures and that breakpoints are not the exclusive means of sharing potential economies of scale. The Board and the Independent Trustees considered the Advisor’s statement that it believes that additional breakpoints for the Fund are not warranted at this time given the ongoing investments the Advisor is making in its business for the benefit of the Fund, uncertainties regarding the direction of the economy, and uncertainties regarding future growth or contraction in the Fund’s assets, all of which could negatively impact the Advisor’s profitability. The Board and the Independent Trustees concluded that the Fund is benefitting from the ongoing investments made by the Advisor in its team of personnel serving the Fund and in the Advisor’s service infrastructure, and that in light of these investments, additional breakpoints in the Fund’s advisory fee structure were not warranted at current asset levels.
FPA Queens Road Small Cap Value Fund
Board Consideration of Investment Advisory and Sub-Advisory Agreements (Unaudited)
Benefits to the Advisor
The Board and the Independent Trustees considered other “fall out” benefits to the Advisor as a result of its relationship with the Fund, other than the advisory fee, including the beneficial effects from the review by the Trust’s Chief Compliance Officer of the Advisor’s compliance program, the intangible benefits of its association with the Fund generally, and any favorable publicity arising in connection with the Fund’s performance.
Bragg Financial Advisors, Inc.
Nature, Extent, and Quality of Services
The Board considered the overall quality of services provided by the Sub-Advisor to the Fund. In doing so, the Board considered the Sub-Advisor’s specific responsibilities in day-to-day portfolio management of the Fund, as well as the qualifications, experience, and responsibilities of the personnel involved in the activities of the Fund. The Board also considered the overall quality of the organization and operations of the Sub-Advisor, as well as its compliance structure. The Board’s observations regarding the performance of the Fund are described above. The Board and the Independent Trustees concluded that based on the various factors they had reviewed, the nature, overall quality, and extent of the management services provided by the Sub-Advisor to the Fund were satisfactory.
Sub-Advisory Fee
The Board and the Independent Trustees considered information provided by the Sub-Advisor regarding the Fund’s sub-advisory fee. The Board and the Independent Trustees noted that the Fund’s sub-advisory fee was within the range of the advisory fees that the Sub-Advisor charges to manage separate accounts using similar strategies as the Fund, and lower than the sub-advisory fee that the Sub-Advisor charges with respect to the FPA Queens Road Value Fund, another series of the Trust. The Board observed that the Advisor pays the Sub-Advisor’s sub-advisory fee out of the Advisor’s advisory fee.
Benefits to the Sub-Advisor
The Board and the Independent Trustees considered other “fall out” benefits to the Sub-Advisor as a result of its relationship with the Fund, other than the sub-advisory fee, including research services provided to it by broker-dealers providing execution services to the Fund, the beneficial effects from the review by the Trust’s Chief Compliance Officer of the Sub-Advisor’s compliance program, the intangible benefits of its association with the Fund generally, and any favorable publicity arising in connection with the Fund’s performance.
Conclusion
Based on these and other factors, the Board and the Independent Trustees concluded that renewal of the Fund Advisory Agreements was in the best interests of the Fund and its shareholders and, accordingly, renewed each Fund Advisory Agreement.
FPA Queens Road Value Fund
Board Consideration of Investment Advisory and Sub-Advisory Agreements (Unaudited)
At an in-person meeting held on April 16, 2024, the Board of Trustees (the “Board”) of Investment Managers Series Trust III (the “Trust”), including the trustees who are not “interested persons” of the Trust (the “Independent Trustees”) as defined in the Investment Company Act of 1940, as amended (the “1940 Act”), reviewed and unanimously approved the renewal of the investment advisory agreement (the “Advisory Agreement”) between the Trust and First Pacific Advisors, LP (the “Advisor”), and the sub-advisory agreement (the “Sub-Advisory Agreement”) among the Trust, the Advisor, and Bragg Financial Advisors, Inc. (the “Sub-Advisor”), with respect to the FPA Queens Road Value Fund series of the Trust (the “Fund”) for additional one-year terms from when they otherwise would expire. The Advisory Agreement and the Sub-Advisory Agreement are referred to below as the “Fund Advisory Agreements.” In approving renewal of each Fund Advisory Agreement, the Board, including the Independent Trustees, determined that such renewal was in the best interests of the Fund and its shareholders.
Background
In advance of the meeting, the Board received information about the Fund and the Fund Advisory Agreements from the Advisor, the Sub-Advisor, and Mutual Fund Administration, LLC and UMB Fund Services, Inc., the Trust’s co-administrators, certain portions of which are discussed below. The materials, among other things, included information about the organization and financial condition of the Advisor and the Sub-Advisor; information regarding the background, experience, and compensation structure of relevant personnel providing services to the Fund; information about the Advisor’s and the Sub-Advisor’s compliance policies and procedures, disaster recovery and contingency planning, and policies with respect to portfolio execution and trading; information regarding the profitability of the Advisor’s overall relationship with the Fund; reports comparing the performance of the Fund with returns of the S&P 500 Value Index and a group of comparable funds (the “Peer Group”) selected by Broadridge Financial Solutions, Inc. (“Broadridge”) from Morningstar, Inc.’s Large Value category (the “Fund Universe”) for the one-, three-, five-, and ten-year periods ended December 31, 2023; reports comparing the investment advisory fee and total expenses of the Fund with those of the Peer Group and Fund Universe; and the advisory and sub-advisory fees paid pursuant to the Advisory Agreement and Sub-Advisory Agreement, respectively. The Board also received a memorandum from legal counsel to the Trust and the Independent Trustees discussing the legal standards under the 1940 Act and other applicable law for their consideration of the proposed renewal of the Fund Advisory Agreements. In addition, the Board considered information reviewed by the Board during the year at other Board and Board committee meetings.
In renewing the Fund Advisory Agreements, the Independent Trustees met separately in an executive session prior to the meeting with the Board to consider the Fund Advisory Agreements, including the items discussed below, and were represented by their legal counsel with respect to the matters considered. The Board, including all of the Independent Trustees, then met and also considered a variety of factors for renewal of the Fund Advisory Agreements, including those discussed below. In their deliberations, the Board and the Independent Trustees did not identify any particular factor that was controlling, and each Trustee may have attributed different weights to the various factors.
FPA Queens Road Value Fund
Board Consideration of Investment Advisory and Sub-Advisory Agreements (Unaudited)
First Pacific Advisors, LP
Nature, Extent, and Quality of Services
With respect to the performance results of the Fund, the meeting materials indicated that the Fund’s annualized total returns for the one-, three-, five-, and ten-year periods were above the Peer Group and the Fund Universe median returns, but below the S&P 500 Value Index returns by 6.17%, 2.54%, 1.78%, and 0.61%, respectively for those periods. The Trustees considered the Advisor’s assertion that the Fund is “benchmark agnostic” and that the Fund is not managed to track the performance of the S&P 500 Value Index. The Trustees observed that the Fund’s risk-adjusted returns, as measured by its Sharpe ratio, and its risk-adjusted returns relative to the benchmark, as measured by its information ratio, ranked it in the first or second quartile of the funds (which are the most favorable) in the Peer Group and Fund Universe for the one-, three-, five-, and ten-year periods.
The Board noted its familiarity with the Advisor and considered the overall quality of services provided by the Advisor to the Fund. In doing so, the Board considered the Advisor’s specific responsibilities in day-to-day management and oversight of the Fund, as well as the qualifications, experience, and responsibilities of the personnel involved in the activities of the Fund. The Board also considered the overall quality of the organization and operations of the Advisor, as well as its compliance structure. In addition, the Board considered the respective roles of the Advisor and the Sub-Advisor, noting that the Advisor provides overall supervision of the general investment management and investment operations of the Fund and oversees the Sub-Advisor with respect to the Fund’s operations, including monitoring the investment and trading activities of the Sub-Advisor, monitoring the Fund’s compliance with its investment policies, and providing general administrative services related to the Advisor’s overall supervision of the Fund; and that the Sub-Advisor’s responsibilities include day-to-day portfolio management. The Board and the Independent Trustees concluded that based on the various factors they had reviewed, the nature, overall quality, and extent of the management and oversight services provided by the Advisor to the Fund were satisfactory.
Advisory Fee and Expense Ratio
With respect to the advisory fee paid by the Fund, the meeting materials indicated that the annual investment advisory fee (gross of fee waivers) was above the Peer Group and Fund Universe medians by 0.225% and 0.32%, respectively. The Trustees observed that the Fund’s advisory fee was not in the highest quartile of funds in the Peer Group. The Trustees considered that the Advisor does not manage any other accounts with the same objectives and policies as the Fund, and therefore they did not have a good basis for comparing the Fund’s advisory fee with those of other similar client accounts of the Advisor. The Trustees also considered that the Fund’s advisory fee was within the range of advisory fees paid by other series of the Trust managed by the Advisor. The annual total expenses paid by the Fund (net of fee waivers) for the Fund’s most recent fiscal year were lower than the Peer Group and Fund Universe medians.
The Board and the Independent Trustees concluded that based on the factors they had reviewed, the compensation payable to the Advisor under the Advisory Agreement was fair and reasonable in light of the nature and quality of the services the Advisor provides to the Fund.
FPA Queens Road Value Fund
Board Consideration of Investment Advisory and Sub-Advisory Agreements (Unaudited)
Advisor Profitability and Costs
The Board and the Independent Trustees considered information provided by the Advisor regarding the Advisor’s costs in providing services to the Fund, the profitability of the Advisor and the benefits to the Advisor from its relationship to the Fund. They reviewed and considered the Advisor’s representations regarding its assumptions and methods of allocating certain costs, such as personnel costs, which constitute the Advisor’s largest operating cost, and overhead costs with respect to the provision of investment advisory services. The Independent Trustees discussed with the Advisor the general process through which individuals’ compensation is determined and then reviewed by the management committee of the Advisor, as well as the Advisor’s methods for determining that its compensation levels are set at appropriate levels to attract and retain the personnel necessary to provide high quality professional investment advice. The Board and the Independent Trustees recognized that the Advisor is entitled under the law to earn a reasonable level of profits for the services that it provides to the Fund. The Board observed, however, that the Advisor had waived its entire advisory fee and subsidized certain of the Fund’s operating expenses and did not realize a profit with respect to the Fund.
Economies of Scale
The Board and the Independent Trustees considered, and discussed with the Advisor, whether there have been economies of scale with respect to the management of the Fund, whether the Fund has appropriately benefited from any economies of scale, and whether the advisory fee rate is reasonable in relation to the Fund’s asset levels and any economies of scale that may exist. The Board and the Independent Trustees considered the Advisor’s representation that its internal costs of providing investment management services to the Fund have increased in recent years as a result of a number of factors, including the ongoing and growing complexity of the Fund’s investments, as well as the Advisor’s investment in building a highly-seasoned trading, compliance, valuation, client service and operations staff to support the Advisor’s investment teams. The Trustees also noted the Advisor’s representation that it would continue making such investments in its personnel, systems, and facilities in an effort to maintain and increase the level and quality of services that it provides to the Fund. The Trustees also considered the Advisor’s willingness to close funds to new investors when it believes that a fund has limited capacity to grow or when it otherwise would be detrimental to fund shareholders.
The Board and the Independent Trustees recognized that the advisory fee schedule for the Fund does not have breakpoints. They considered that many registered funds have breakpoints in the advisory fee structure as a means by which to share in the benefits of potential economies of scale as a fund’s assets grow. They also considered that not all funds have breakpoints in their fee structures and that breakpoints are not the exclusive means of sharing potential economies of scale. The Board and the Independent Trustees considered the Advisor’s statement that it believes that breakpoints are currently not warranted for the Fund given the ongoing investments the Advisor is making in its business for the benefit of the Fund, uncertainties regarding the direction of the economy, and uncertainties regarding future growth or contraction in the Fund’s assets, all of which could negatively impact the Advisor’s profitability. The Board and the Independent Trustees concluded that the Fund is benefitting from the ongoing investments made by the Advisor in its team of personnel serving the Fund and in the Advisor’s service infrastructure, and that in light of these investments, the addition of breakpoints to the Fund’s advisory fee structure was not warranted at current asset levels.
FPA Queens Road Value Fund
Board Consideration of Investment Advisory and Sub-Advisory Agreements (Unaudited)
Benefits to the Advisor
The Board and the Independent Trustees considered other “fall out” benefits to the Advisor as a result of its relationship with the Fund, other than the advisory fee, including the beneficial effects from the review by the Trust’s Chief Compliance Officer of the Advisor’s compliance program, the intangible benefits of its association with the Fund generally, and any favorable publicity arising in connection with the Fund’s performance.
Bragg Financial Advisors, Inc.
Nature, Extent, and Quality of Services
The Board considered the overall quality of services provided by the Sub-Advisor to the Fund. In doing so, the Board considered the Sub-Advisor’s specific responsibilities in day-to-day portfolio management of the Fund, as well as the qualifications, experience, and responsibilities of the personnel involved in the activities of the Fund. The Board also considered the overall quality of the organization and operations of the Sub-Advisor, as well as its compliance structure. The Board’s observations regarding the performance of the Fund are described above. The Board and the Independent Trustees concluded that based on the various factors they had reviewed, the nature, overall quality, and extent of the management services provided by the Sub-Advisor to the Fund were satisfactory.
Sub-Advisory Fee
The Board and the Independent Trustees considered information provided by the Sub-Advisor regarding the Fund’s sub-advisory fee. The Board and the Independent Trustees noted that the Fund’s sub-advisory fee was within the range of the advisory fees that the Sub-Advisor charges to manage separate accounts using similar strategies as the Fund, and within the range of the sub-advisory fee that the Sub-Advisor charges with respect to the FPA Queens Road Small Cap Value Fund, another series of the Trust. The Board observed that the Advisor pays the Sub-Advisor’s sub-advisory fee out of the Advisor’s advisory fee.
Benefits to the Sub-Advisor
The Board and the Independent Trustees considered other “fall out” benefits to the Sub-Advisor as a result of its relationship with the Fund, other than the sub-advisory fee, including research services provided to it by broker-dealers providing execution services to the Fund, the beneficial effects from the review by the Trust’s Chief Compliance Officer of the Sub-Advisor’s compliance program, the intangible benefits of its association with the Fund generally, and any favorable publicity arising in connection with the Fund’s performance.
Conclusion
Based on these and other factors, the Board and the Independent Trustees concluded that renewal of the Fund Advisory Agreements was in the best interests of the Fund and its shareholders and, accordingly, renewed each Fund Advisory Agreement.
Item 12. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 13. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 14. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 15. Submission of Matters to a Vote of Security Holders.
The registrant has not made any material changes to the procedures by which shareholders may recommend nominees to the registrant’s Board of Trustees.
Item 16. Controls and Procedures.
| (a) | The Registrant’s Principal Executive Officer and Principal Financial Officer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
| (b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 17. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 18. Recovery of Erroneously Awarded Compensation.
(a) Not Applicable.
(b) Not Applicable.
Item 19. Exhibits.
| (a) | (2) Any policy required by the listing standards adopted pursuant to Rule 10D-1 under the Exchange Act (17 CFR 240.10D-1) by the registered national securities exchange or registered national securities association upon which the registrant’s securities are listed. Instruction to paragraph (a)(2). Not Applicable. |
| (a) | (3) A separate certification for each principal executive and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)). Filed herewith. |
| (b) | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. 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) | Investment Managers Series Trust III | |
| By (Signature and Title) | /s/ Maureen Quill | |
| Maureen Quill, President and Principal Executive Officer | ||
| Date | 8/9/2024 |
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/ Maureen Quill | |
| Maureen Quill, President and Principal Executive Officer | ||
| Date | 8/9/2024 | |
| By (Signature and Title) | /s/ Rita Dam | |
| Rita Dam, Treasurer and Principal Financial Officer | ||
| Date | 8/9/2024 |