UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

FORM N-CSR

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number
811-08544
Investment Managers Series Trust III
(Exact name of registrant as specified in charter)

235 West Galena Street
Milwaukee, Wisconsin 53212
(Address of Principal Executive Offices, including Zip Code)
Diane J. Drake
Mutual Fund Administration, LLC
2220 E. Route 66, Suite 226
Glendora, California 91740
(Name and Address of Agent for Service)
COPIES TO:
Laurie Anne Dee
Morgan, Lewis & Bockius LLP
600 Anton Boulevard, Suite 1800
Costa Mesa, California 92626
Registrant's telephone number, including area code:
(626) 385-5777
Date of fiscal year end:
December 31
Date of reporting period:
June 30, 2024

Item 1. Report to Stockholders.

 

(a) The registrant’s semi-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:

 

FPA Crescent Fund
Institutional Class/FPACX
TSR Fund Logo - Cover
SEMI-ANNUAL SHAREHOLDER REPORT | June 30, 2024
This semi-annual shareholder report contains important information about the FPA Crescent Fund (“Fund”) for the period of January 1, 2024 to June 30, 2024. You can find additional information about the Fund at https://fpa.com/funds/overview/crescent. You can also request this information by contacting us at (800) 638-3060.
Fund Expenses
(Based on a hypothetical $10,000 investment)
Fund (Class) Costs of a $10,000 investment Costs paid as a percentage
of a $10,000 investment
FPA Crescent Fund
(Institutional Class/FPACX)
$55 1.05%
Management’s Discussion of Fund Performance
SUMMARY OF RESULTS
The FPA Crescent Fund – Institutional Class (“Fund” or “Crescent”) gained 8.76% in the trailing six months 2024 and 16.37% in the trailing twelve months on a net basis, which includes reinvestment of all distributions. The MSCI ACWI Index and the S&P 500 Index returns for the six-month period were 11.30% and 15.29%; 19.38% and 24.56% for the trailing-twelve month period, respectively. The Fund is managed according to FPA’s Contrarian Value Strategy, which seeks to invest in companies that currently appear out of favor or undervalued but have a favorable outlook for growth, in the portfolio manager’s estimation, over 5-10 years. The portfolio managers conduct deep research into the underlying financial condition and prospects of individual companies, and only select those whose securities are offered at a “substantial discount” to the portfolio managers’ estimation of the company’s worth or intrinsic value.
TOP PERFORMANCE CONTRIBUTORS*
Holcim, a building material (largely concrete, cement, and aggregates) company has performed well over the past year. In addition to strong operating performance, management has taken several steps to return value to shareholders and improve awareness of the company's underlying business strength, including repurchasing shares, increasing the dividend, and announcing plans to separate the company's North American business.
Citigroup's shares have appreciated (along with other bank stocks) from a profoundly depressed level of less than 50% of tangible book value to a modestly depressed level of 70%. We expect the company to deliver significantly improved results and sizable capital returns over the next few years.
TOP PERFORMANCE DETRACTORS*
Charter has faced challenging operating conditions that have led to its share price weakness. Competitors have been overbuilding with fiber assets and fixed wireless has proven to be meaningful. There has been concern regarding the sustainability of business derived from subsidized customers. And, the company's near-term capital spending budget has exceeded expectations. Compounding matters, its relatively high leverage ratio adds volatility to its stock price. We look forward to the company demonstrating the competitive strength of its converged (fixed and wireless) connectivity offering, ramping down capital spending, and reaccelerating share repurchases.
CarMax is the largest independent used vehicle dealer in the US. With 245 locations and 30 years of operating experience, CarMax has built a strong brand focused on providing the best user experience for buying a used car. CarMax uses the data from its millions of vehicles purchased and sold to understand the right price to buy, recondition, and sell used vehicles, and as a result, has consistently generated an industry-leading gross profit per unit (GPU) for decades. We believe each part of CarMax’s sales proposition would be difficult for smaller independent peers to replicate, let alone the entire customer value proposition. Even Carvana, CarMax’s best-known peer, lacks:
    1. The option to shop in-store or test-drive the vehicle for 24 hours before purchase.
    2. CarMax’s range of finance providers.
    3. CarMax’s 10-day money back guarantee (Carvana has a shorter 7-day money-back guarantee).
While a recent downturn in used vehicle sales due to the impact of higher inflation and interest rates on monthly vehicle payments has hurt CarMax’s recent volumes and market share, we believe it continues to improve the customer experience, which we think will result in increased vehicle sales volumes and market share gains within its existing store base that should drive higher profits per vehicle and improve the company’s returns on invested capital. As of year-end 2023, CarMax has ~4% of the fragmented used vehicle market, and while we don’t know exactly how big the company can ultimately grow, a good long-term yardstick is CarMax’s oldest stores, which have 10%+ market share (which is still growing).
*The information provided does not reflect all positions purchased, sold or recommended during the trailing twelve months (“TTM”). It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities or sectors listed. As of 6/30/2024, the positions sizes for the securities mentioned as a percentage of net assets was: Holcim (3.3%), Citigroup (2.7%), Charter (1.1%), and CarMax (1.1%). The company data and statistics referenced in the Contributors and Detractors sections, including competitor data, are sourced from company press releases, investor presentations, financial disclosures, SEC filings, or company websites, unless otherwise noted. Past performance is no guarantee, nor is it indicative, of future results.
Indices are unmanaged and do not reflect any commissions, transaction costs, or fees and expenses which would be incurred by an investor purchasing the underlying securities and which would reduce the performance in an actual account. You cannot invest directly in an index. The MSCI ACWI USD Index is an unmanaged free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The S&P 500 Index includes a representative sample of 500 hundred companies in leading industries of the U.S. economy. The Index focuses on the large-cap segment of the market, with over 80% coverage of U.S. equities, but is also considered a proxy for the total market.
Fund Performance
The following graph and chart compare the initial and subsequent account values at the end of each of the most recently completed 10 fiscal years of the Fund, or for the life of the Fund, if shorter. It assumes a $10,000 initial investment at the beginning of the first fiscal year in an appropriate, broad-based securities market index for the same period.
GROWTH OF $10,000
Fund Performance - Growth of 10K
AVERAGE ANNUAL TOTAL RETURN 6 Months 1 Year 5 Years 10 Years
FPA Crescent Fund (Institutional Class/FPACX) 8.76% 16.37% 9.96% 7.50%
MSCI All Country World Index 11.30% 19.38% 10.76% 8.43%
60%/40% S&P 500 Index/Bloomberg Barclays US Aggregate Bond Index 8.70% 15.42% 9.01% 8.38%
S&P 500 Index 15.29% 24.56% 15.05% 12.86%
Consumer Price Index (US) CPI 1.36% 3.03% 4.15% 2.79%
Keep in mind that the Fund’s past performance is not a good predictor of how the Fund will perform in the future.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Visit https://fpa.com/funds/overview/crescent for the most recent performance information.
Key Fund Statistics
The following table outlines key fund statistics that you should pay attention to.
Fund net assets $10,379,527,285%
Total number of portfolio holdings $164%
Total advisory fee paid/(reimbursed) $45,408,257%
Portfolio turnover rate as of the end of the reporting period $4%
Graphical Representation of Holdings
The tables below show the investment makeup of the Fund, representing percentage of the total net assets of the Fund. The Top Ten Holdings and Sector Allocation exclude short-term holdings, if any. The Top Ten Holdings table may not reflect the total exposure to an issuer. The Sector Allocation chart represents Common Stocks of the Fund.
Top Ten Holdings
Alphabet, Inc. - Class A 3.6%
Holcim AG 3.3%
Analog Devices, Inc. 3.1%
Meta Platforms, Inc. - Class A 3.0%
Citigroup, Inc. 2.7%
Comcast Corp. - Class A 2.7%
TE Connectivity Ltd. 2.7%
International Flavors & Fragrances, Inc. 2.4%
Alphabet, Inc. - Class C 2.4%
Jefferies Financial Group, Inc. 2.3%
Asset Allocation
Graphical Representation - Allocation 1 Chart
Sector Allocation
Graphical Representation - Allocation 2 Chart
Changes in and Disagreements with Accountants
There were no changes in or disagreements with the Fund's accountants during the reporting period.
Availability of Additional Information
You can find additional information about the Fund such as the prospectus, financial information, fund holdings and proxy voting information at https://fpa.com/funds/overview/crescent. You can also request this information by contacting us at (800) 638-3060.
Householding
In order to reduce expenses, we will deliver a single copy of prospectuses, proxies, financial reports and other communications to shareholders with the same residential address, provided they have the same last name, or we reasonably believe them to be members of the same family. Unless we are notified otherwise, we will continue to send recipients only one copy of these materials for as long as they remain a shareholder of the Fund. If you would like to receive individual mailings, please call (800) 638-3060 and we will begin sending you separate copies of these materials within 30 days after receiving your request.
UMB Distribution Services, LLC serves as the Fund's distributor.
FPA Crescent Fund
Investor Class/FPFRX
TSR Fund Logo - Cover
SEMI-ANNUAL SHAREHOLDER REPORT | June 30, 2024
This semi-annual shareholder report contains important information about the FPA Crescent Fund (“Fund”) for the period of April 30, 2024 (commencement of operations) to June 30, 2024. You can find additional information about the Fund at https://fpa.com/funds/overview/crescent. You can also request this information by contacting us at (800) 638-3060.
Fund Expenses
(Based on a hypothetical $10,000 investment)
Fund (Class) Costs of a $10,000 investment Costs paid as a percentage
of a $10,000 investment
FPA Crescent Fund
(Investor Class/FPFRX)1
$20 1.15%
1
The Investor Class commenced operations on April 30, 2024.  If the Investor Class had been operational for the entire semi-annual period of January 1, 2024 to June 30, 2024, expenses would have been higher.
Management’s Discussion of Fund Performance
SUMMARY OF RESULTS
The FPA Crescent Fund – Investor Class (“Fund” or “Crescent”) gained 8.71%1 in the trailing six months 2024 and 16.26%1 in the trailing twelve months on a net basis, which includes reinvestment of all distributions. The MSCI ACWI Index and the S&P 500 Index returns for the six-month period were 11.30% and 15.29%; 19.38% and 24.56% for the trailing-twelve month period, respectively. The Fund is managed according to FPA’s Contrarian Value Strategy, which seeks to invest in companies that currently appear out of favor or undervalued but have a favorable outlook for growth, in the portfolio manager’s estimation, over 5-10 years. The portfolio managers conduct deep research into the underlying financial condition and prospects of individual companies, and only select those whose securities are offered at a “substantial discount” to the portfolio managers’ estimation of the company’s worth or intrinsic value.
TOP PERFORMANCE CONTRIBUTORS*
Holcim, a building material (largely concrete, cement, and aggregates) company has performed well over the past year. In addition to strong operating performance, management has taken several steps to return value to shareholders and improve awareness of the company's underlying business strength, including repurchasing shares, increasing the dividend, and announcing plans to separate the company's North American business.
Citigroup's shares have appreciated (along with other bank stocks) from a profoundly depressed level of less than 50% of tangible book value to a modestly depressed level of 70%. We expect the company to deliver significantly improved results and sizable capital returns over the next few years.
TOP PERFORMANCE DETRACTORS*
Charter has faced challenging operating conditions that have led to its share price weakness. Competitors have been overbuilding with fiber assets and fixed wireless has proven to be meaningful. There has been concern regarding the sustainability of business derived from subsidized customers. And, the company's near-term capital spending budget has exceeded expectations. Compounding matters, its relatively high leverage ratio adds volatility to its stock price. We look forward to the company demonstrating the competitive strength of its converged (fixed and wireless) connectivity offering, ramping down capital spending, and reaccelerating share repurchases.
CarMax is the largest independent used vehicle dealer in the US. With 245 locations and 30 years of operating experience, CarMax has built a strong brand focused on providing the best user experience for buying a used car. CarMax uses the data from its millions of vehicles purchased and sold to understand the right price to buy, recondition, and sell used vehicles, and as a result, has consistently generated an industry-leading gross profit per unit (GPU) for decades. We believe each part of CarMax’s sales proposition would be difficult for smaller independent peers to replicate, let alone the entire customer value proposition. Even Carvana, CarMax’s best-known peer, lacks:
    1. The option to shop in-store or test-drive the vehicle for 24 hours before purchase.
    2. CarMax’s range of finance providers.
    3. CarMax’s 10-day money back guarantee (Carvana has a shorter 7-day money-back guarantee).
While a recent downturn in used vehicle sales due to the impact of higher inflation and interest rates on monthly vehicle payments has hurt CarMax’s recent volumes and market share, we believe it continues to improve the customer experience, which we think will result in increased vehicle sales volumes and market share gains within its existing store base that should drive higher profits per vehicle and improve the company’s returns on invested capital. As of year-end 2023, CarMax has ~4% of the fragmented used vehicle market, and while we don’t know exactly how big the company can ultimately grow, a good long-term yardstick is CarMax’s oldest stores, which have 10%+ market share (which is still growing).
*The information provided does not reflect all positions purchased, sold or recommended during the trailing twelve months (“TTM”). It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities or sectors listed. As of 6/30/2024, the positions sizes for the securities mentioned as a percentage of net assets was: Holcim (3.3%), Citigroup (2.7%), Charter (1.1%), and CarMax (1.1%). The company data and statistics referenced in the Contributors and Detractors sections, including competitor data, are sourced from company press releases, investor presentations, financial disclosures, SEC filings, or company websites, unless otherwise noted. Past performance is no guarantee, nor is it indicative, of future results.
Indices are unmanaged and do not reflect any commissions, transaction costs, or fees and expenses which would be incurred by an investor purchasing the underlying securities and which would reduce the performance in an actual account. You cannot invest directly in an index. The MSCI ACWI USD Index is an unmanaged free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The S&P 500 Index includes a representative sample of 500 hundred companies in leading industries of the U.S. economy. The Index focuses on the large-cap segment of the market, with over 80% coverage of U.S. equities, but is also considered a proxy for the total market.
1Investor Class shares commenced operations on April 30, 2024. The performance figures for Investor Class shares include the performance for the Institutional shares for the periods prior to the inception date of Investor Class shares, adjusted for the difference in Institutional Class shares and Investor Class shares expenses. Investor Class shares impose higher expenses than Institutional Class shares. Since Investor Class shares have higher expenses and are therefore more expensive than Institutional Class shares, the returns for Investor Class shares will be lower than the returns shown for Institutional Class shares.”
Fund Performance
The following graph and chart compare the initial and subsequent account values at the end of each of the most recently completed 10 fiscal years of the Fund, or for the life of the Fund, if shorter. It assumes a $10,000 initial investment at the beginning of the first fiscal year in an appropriate, broad-based securities market index for the same period.
GROWTH OF $10,000
Fund Performance - Growth of 10K
AVERAGE ANNUAL TOTAL RETURN 6 Months 1 Year 5 Years 10 Years
FPA Crescent Fund (Investor Class/FPFRX)1 8.71% 16.26% 9.85% 7.40%
MSCI All Country World Index 11.30% 19.38% 10.76% 8.43%
60%/40% S&P 500 Index/Bloomberg Barclays US Aggregate Bond Index 8.70% 15.42% 9.01% 8.38%
S&P 500 Index 15.29% 24.56% 15.05% 12.86%
Consumer Price Index (US) CPI 1.36% 3.03% 4.15% 2.79%
1
Investor Class commenced operations on April 30, 2024.  The performance figures for Investor Class shares include the performance for the Institutional Class shares for the periods prior to the inception date of Investor Class shares, adjusted for the difference in Institutional Class shares and Investor Class shares expenses. Investor Class shares impose higher expenses than Institutional Class shares. Since Investor Class shares have higher expenses and are therefore more expensive than Institutional Class shares, the returns for Investor Class shares will be lower than the returns shown for Institutional Class shares.
Keep in mind that the Fund’s past performance is not a good predictor of how the Fund will perform in the future.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Visit https://fpa.com/funds/overview/crescent for the most recent performance information.
Key Fund Statistics
The following table outlines key fund statistics that you should pay attention to.
Fund net assets $10,379,527,285%
Total number of portfolio holdings $164%
Total advisory fee paid/(reimbursed) $45,408,257%
Portfolio turnover rate as of the end of the reporting period $4%
Graphical Representation of Holdings
The tables below show the investment makeup of the Fund, representing percentage of the total net assets of the Fund. The Top Ten Holdings and Sector Allocation exclude short-term holdings, if any. The Top Ten Holdings table may not reflect the total exposure to an issuer. The Sector Allocation chart represents Common Stocks of the Fund.
Top Ten Holdings
Alphabet, Inc. - Class A 3.6%
Holcim AG 3.3%
Analog Devices, Inc. 3.1%
Meta Platforms, Inc. - Class A 3.0%
Citigroup, Inc. 2.7%
Comcast Corp. - Class A 2.7%
TE Connectivity Ltd. 2.7%
International Flavors & Fragrances, Inc. 2.4%
Alphabet, Inc. - Class C 2.4%
Jefferies Financial Group, Inc. 2.3%
Asset Allocation
Graphical Representation - Allocation 1 Chart
Sector Allocation
Graphical Representation - Allocation 2 Chart
Changes in and Disagreements with Accountants
There were no changes in or disagreements with the Fund's accountants during the reporting period.
Availability of Additional Information
You can find additional information about the Fund such as the prospectus, financial information, fund holdings and proxy voting information at https://fpa.com/funds/overview/crescent. You can also request this information by contacting us at (800) 638-3060.
Householding
In order to reduce expenses, we will deliver a single copy of prospectuses, proxies, financial reports and other communications to shareholders with the same residential address, provided they have the same last name, or we reasonably believe them to be members of the same family. Unless we are notified otherwise, we will continue to send recipients only one copy of these materials for as long as they remain a shareholder of the Fund. If you would like to receive individual mailings, please call (800) 638-3060 and we will begin sending you separate copies of these materials within 30 days after receiving your request.
UMB Distribution Services, LLC serves as the Fund's distributor.
FPA Crescent Fund
Supra Institutional Class/FPCSX
TSR Fund Logo - Cover
SEMI-ANNUAL SHAREHOLDER REPORT | June 30, 2024
This semi-annual shareholder report contains important information about the FPA Crescent Fund (“Fund”) for the period of January 1, 2024 to June 30, 2024. You can find additional information about the Fund at https://fpa.com/funds/overview/crescent. You can also request this information by contacting us at (800) 638-3060.
Fund Expenses
(Based on a hypothetical $10,000 investment)
Fund (Class) Costs of a $10,000 investment Costs paid as a percentage
of a $10,000 investment
FPA Crescent Fund
(Supra Institutional Class/FPCSX)
$51 0.99%
Management’s Discussion of Fund Performance
SUMMARY OF RESULTS
The FPA Crescent Fund – Supra Institutional Class (“Fund” or “Crescent”) gained 8.81% in the trailing six months 2024 and 16.46% in the trailing twelve months on a net basis, which includes reinvestment of all distributions. The MSCI ACWI Index and the S&P 500 Index returns for the six-month period were 11.30% and 15.29%; 19.38% and 24.56% for the trailing-twelve month period, respectively. The Fund is managed according to FPA’s Contrarian Value Strategy, which seeks to invest in companies that currently appear out of favor or undervalued but have a favorable outlook for growth, in the portfolio manager’s estimation, over 5-10 years. The portfolio managers conduct deep research into the underlying financial condition and prospects of individual companies, and only select those whose securities are offered at a “substantial discount” to the portfolio managers’ estimation of the company’s worth or intrinsic value.
TOP PERFORMANCE CONTRIBUTORS*
Holcim, a building material (largely concrete, cement, and aggregates) company has performed well over the past year. In addition to strong operating performance, management has taken several steps to return value to shareholders and improve awareness of the company's underlying business strength, including repurchasing shares, increasing the dividend, and announcing plans to separate the company's North American business.
Citigroup's shares have appreciated (along with other bank stocks) from a profoundly depressed level of less than 50% of tangible book value to a modestly depressed level of 70%. We expect the company to deliver significantly improved results and sizable capital returns over the next few years.
TOP PERFORMANCE DETRACTORS*
Charter has faced challenging operating conditions that have led to its share price weakness. Competitors have been overbuilding with fiber assets and fixed wireless has proven to be meaningful. There has been concern regarding the sustainability of business derived from subsidized customers. And, the company's near-term capital spending budget has exceeded expectations. Compounding matters, its relatively high leverage ratio adds volatility to its stock price. We look forward to the company demonstrating the competitive strength of its converged (fixed and wireless) connectivity offering, ramping down capital spending, and reaccelerating share repurchases.
CarMax is the largest independent used vehicle dealer in the US. With 245 locations and 30 years of operating experience, CarMax has built a strong brand focused on providing the best user experience for buying a used car. CarMax uses the data from its millions of vehicles purchased and sold to understand the right price to buy, recondition, and sell used vehicles, and as a result, has consistently generated an industry-leading gross profit per unit (GPU) for decades. We believe each part of CarMax’s sales proposition would be difficult for smaller independent peers to replicate, let alone the entire customer value proposition. Even Carvana, CarMax’s best-known peer, lacks:
    1. The option to shop in-store or test-drive the vehicle for 24 hours before purchase.
    2. CarMax’s range of finance providers.
    3. CarMax’s 10-day money back guarantee (Carvana has a shorter 7-day money-back guarantee).
While a recent downturn in used vehicle sales due to the impact of higher inflation and interest rates on monthly vehicle payments has hurt CarMax’s recent volumes and market share, we believe it continues to improve the customer experience, which we think will result in increased vehicle sales volumes and market share gains within its existing store base that should drive higher profits per vehicle and improve the company’s returns on invested capital. As of year-end 2023, CarMax has ~4% of the fragmented used vehicle market, and while we don’t know exactly how big the company can ultimately grow, a good long-term yardstick is CarMax’s oldest stores, which have 10%+ market share (which is still growing).
*The information provided does not reflect all positions purchased, sold or recommended during the trailing twelve months (“TTM”). It should not be assumed that recommendations made in the future will be profitable or will equal the performance of the securities or sectors listed. As of 6/30/2024, the positions sizes for the securities mentioned as a percentage of net assets was: Holcim (3.3%), Citigroup (2.7%), Charter (1.1%), and CarMax (1.1%). The company data and statistics referenced in the Contributors and Detractors sections, including competitor data, are sourced from company press releases, investor presentations, financial disclosures, SEC filings, or company websites, unless otherwise noted. Past performance is no guarantee, nor is it indicative, of future results.
Indices are unmanaged and do not reflect any commissions, transaction costs, or fees and expenses which would be incurred by an investor purchasing the underlying securities and which would reduce the performance in an actual account. You cannot invest directly in an index. The MSCI ACWI USD Index is an unmanaged free float-adjusted market capitalization weighted index that is designed to measure the equity market performance of developed and emerging markets. The S&P 500 Index includes a representative sample of 500 hundred companies in leading industries of the U.S. economy. The Index focuses on the large-cap segment of the market, with over 80% coverage of U.S. equities, but is also considered a proxy for the total market.
Fund Performance
The following graph and chart compare the initial and subsequent account values at the end of each of the most recently completed 10 fiscal years of the Fund, or for the life of the Fund, if shorter. It assumes a $100,000,000 initial investment at the beginning of the first fiscal year in an appropriate, broad-based securities market index for the same period.
GROWTH OF $100,000,000
Fund Performance - Growth of 10K
AVERAGE ANNUAL TOTAL RETURN 6 Months 1 Year Since
Inception1
FPA Crescent Fund (Supra Institutional Class/FPCSX) 8.81% 16.46% 12.68%
MSCI All Country World Index 11.30% 19.38% 11.02%
60%/40% S&P 500 Index/Bloomberg Barclays US Aggregate Bond Index 8.70% 15.42% 7.71%
S&P 500 Index 15.29% 24.56% 14.74%
Consumer Price Index (US) CPI 1.36% 3.03% 5.00%
1
Supra Institutional Class commenced operations on September 4, 2020.
Keep in mind that the Fund’s past performance is not a good predictor of how the Fund will perform in the future.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Visit https://fpa.com/funds/overview/crescent for the most recent performance information.
Key Fund Statistics
The following table outlines key fund statistics that you should pay attention to.
Fund net assets $10,379,527,285%
Total number of portfolio holdings $164%
Total advisory fee paid/(reimbursed) $45,408,257%
Portfolio turnover rate as of the end of the reporting period $4%
Graphical Representation of Holdings
The tables below show the investment makeup of the Fund, representing percentage of the total net assets of the Fund. The Top Ten Holdings and Sector Allocation exclude short-term holdings, if any. The Top Ten Holdings table may not reflect the total exposure to an issuer. The Sector Allocation chart represents Common Stocks of the Fund.
Top Ten Holdings
Alphabet, Inc. - Class A 3.6%
Holcim AG 3.3%
Analog Devices, Inc. 3.1%
Meta Platforms, Inc. - Class A 3.0%
Citigroup, Inc. 2.7%
Comcast Corp. - Class A 2.7%
TE Connectivity Ltd. 2.7%
International Flavors & Fragrances, Inc. 2.4%
Alphabet, Inc. - Class C 2.4%
Jefferies Financial Group, Inc. 2.3%
Asset Allocation
Graphical Representation - Allocation 1 Chart
Sector Allocation
Graphical Representation - Allocation 2 Chart
Changes in and Disagreements with Accountants
There were no changes in or disagreements with the Fund's accountants during the reporting period.
Availability of Additional Information
You can find additional information about the Fund such as the prospectus, financial information, fund holdings and proxy voting information at https://fpa.com/funds/overview/crescent. You can also request this information by contacting us at (800) 638-3060.
Householding
In order to reduce expenses, we will deliver a single copy of prospectuses, proxies, financial reports and other communications to shareholders with the same residential address, provided they have the same last name, or we reasonably believe them to be members of the same family. Unless we are notified otherwise, we will continue to send recipients only one copy of these materials for as long as they remain a shareholder of the Fund. If you would like to receive individual mailings, please call (800) 638-3060 and we will begin sending you separate copies of these materials within 30 days after receiving your request.
UMB Distribution Services, LLC serves as the Fund's distributor.
FPA Flexible Fixed Income Fund
Advisor Class/FFIAX
TSR Fund Logo - Cover
SEMI-ANNUAL SHAREHOLDER REPORT | June 30, 2024
This semi-annual shareholder report contains important information about the FPA Flexible Fixed Income Fund (“Fund”) for the period of January 1, 2024 to June 30, 2024. You can find additional information about the Fund at https://fpa.com/funds/overview/flexible-fixed-income. You can also request this information by contacting us at (800) 638-3060.
This report describes changes to the Fund that occurred during the reporting period.
Fund Expenses
(Based on a hypothetical $10,000 investment)
Fund (Class) Costs of a $10,000 investment Costs paid as a percentage
of a $10,000 investment
FPA Flexible Fixed Income Fund
(Advisor Class/FFIAX)
$30 0.60%
Management’s Discussion of Fund Performance
SUMMARY OF RESULTS
For the twelve-month period ending June 30, 2024, the FPA Flexible Fixed Income Fund’s Advisor Class (“Fund”) net return was 7.84%, which includes reinvestment of all distributions and for the six-month period, net return was 2.37%. 
What affected the Fund’s performance?
Most recently citing “modest further progress” toward its inflation objective, the Federal Reserve left the Fed Funds rate unchanged during the quarter.1 The Federal Reserve further explained that it is looking for “greater confidence that inflation is moving sustainably toward two percent” before reducing the Fed Funds rate.2 Treasury yields increased by 35-54 basis points across the yield curve during the first half of 2024 while, generally, debt market spreads did not change meaningfully, notwithstanding changes in spreads in certain segments of the market.3
We have been taking of advantage higher yields to buy longer-duration bonds, because we believe these bonds not only offer an attractive absolute long-term return but also improve the short-term return profile of the portfolio. During the second quarter, we bought fixed-rate, High Quality bonds including agency-guaranteed residential mortgage pools, non-agency residential mortgage-backed securities (RMBS), agency-guaranteed commercial mortgage-backed securities (CMBS), asset-backed securities (ABS) backed by equipment, ABS backed by prime quality auto loans, non-agency CMBS backed by single-family rental properties, and ABS backed by credit card receivables. These investments had a weighted average life of 6.4 years and a weighted average duration of 5.3 years. We also extended the duration of the Fund’s Treasury holdings.
We do not generally view Credit (investments rated BBB or lower) as attractively priced but we continue to search and will seek to opportunistically invest in Credit when we believe that the price adequately compensates for the risk of permanent impairment of capital and near-term mark-to-market risk.4 On an absolute basis, we still see an attractive opportunity to buy longer duration, High Quality bonds (rated single-A or higher) which we believe will enhance the Fund’s long-term returns and the Fund’s short-term upside versus downside return profile. 
Fund performance can be attributed to the following:5
The largest contributors to performance during the first half of 2024 were collateralized loan obligations (CLO) backed by corporate loans which benefited from coupon payments and higher prices due to lower spreads. The second largest contributors to performance were the corporate bond and loan holdings with the return due to a combination of coupon payments and price appreciation caused by a decrease in spreads. The third largest contributors to performance were asset-backed securities (ABS) backed by equipment due to coupon payments, partially offset by lower prices caused by an increase in risk-free rates.
The only detractor from performance was the Fund’s Treasury holdings due to a decrease in price caused by an increase in risk-free rates. While there were other individual bonds that detracted from performance, there were no other detractors at the sector level.
1 Federal Reserve Open Market Committee statement on 6/12/2024.
2 Federal Reserve Chairman Jerome Powell’s press conference on 6/12/2024.
3 Source: Bloomberg. Debt market is represented by the Bloomberg U.S. Aggregate Bond index. Basis Point (bps) is equal to one hundredth of one percent, or 0.01%. Credit Spread or Spread is the difference in yield between a U.S. Treasury bond and another debt security of the same maturity but different credit quality.
4 The ratings agencies that provide ratings are the Nationally Recognized Statistical Ratings Organizations (NRSROs): DBRS, Inc., Fitch Ratings, Inc., Kroll Bond Rating Agency, Inc., Moody’s Investors Service, Inc., and S&P Global Ratings. Credit ratings range from AAA (highest) to D (lowest). Bonds rated BBB or above are considered investment grade. Credit ratings of BB and below are lower-rated securities (junk bonds). High-yielding, non-investment grade bonds (junk bonds) involve higher risks than investment grade bonds. Bonds with credit ratings of CCC or below have higher default risk.
5 This information is not a recommendation for a specific security or sector and these securities/sectors may not be in the Fund at the time you receive this report. The information provided does not reflect all positions purchased, sold or recommended by FPA during the quarter. The portfolio holdings as of the most recent quarter-end may be obtained at fpa.com.
Past performance is no guarantee, nor is it indicative, of future results.
Fund Performance
The following graph and chart compare the initial and subsequent account values at the end of each of the most recently completed 10 fiscal years of the Fund, or for the life of the Fund, if shorter. It assumes a $10,000 initial investment at the beginning of the first fiscal year in an appropriate, broad-based securities market index for the same period.
GROWTH OF $10,000
Fund Performance - Growth of 10K
AVERAGE ANNUAL TOTAL RETURN 6 Months 1 Year Since
Inception1
FPA Flexible Fixed Income Fund (Advisor Class/FFIAX) 2.37% 7.84% 2.81%
Bloomberg US Universal Bond Index -0.28% 3.47% -2.17%
Consumer Price Index Seasonally Adjusted + 2% Wrap 2.41% 5.05% 7.51%
1
Advisor Class commenced operations on April 19, 2021.
Keep in mind that the Fund’s past performance is not a good predictor of how the Fund will perform in the future.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Visit https://fpa.com/funds/overview/flexible-fixed-income for the most recent performance information.
Key Fund Statistics
The following table outlines key fund statistics that you should pay attention to.
Fund net assets $1,149,171,922%
Total number of portfolio holdings $361%
Total advisory fee paid/(reimbursed) $2,356,759%
Portfolio turnover rate as of the end of the reporting period $25%
Graphical Representation of Holdings
The tables below show the investment makeup of the Fund, representing percentage of the total net assets of the Fund. The Top Ten Holdings and Sector Allocation exclude short-term holdings, if any. The Top Ten Holdings table may not reflect the total exposure to an issuer. Interest rate presented in the Top Ten Holdings are as of the reporting period end. The Sector Allocation chart represents Bonds & Debentures of the Fund.
Top Ten Holdings
U.S. Treasury Note, 4.125%, 3/31/2029 4.6%
U.S. Treasury Note, 4.250%, 2/28/2029 3.7%
U.S. Treasury Note, 4.000%, 1/31/2029 2.2%
Fannie Mae Pool, 1.000%, 3/1/2037 1.4%
U.S. Treasury Note, 4.625%, 9/30/2030 1.0%
Fannie Mae Pool, 1.500%, 8/1/2036 0.9%
Ford Credit Floorplan Master Owner Trust A, Series 2018-4, Class A, 4.060%, 11/15/2030 0.9%
Verizon Master Trust, Series 2024-2, Class A, 4.830%, 12/22/2031 0.9%
Midcap Financial Issuer Trust, 6.500%, 5/1/2028 0.9%
Fannie Mae Pool, 1.000%, 12/1/2036 0.9%
Asset Allocation
Graphical Representation - Allocation 1 Chart
Sector Allocation
Graphical Representation - Allocation 2 Chart
Material Fund Changes
Effective May 1, 2024, the Fund's Advisor Class the contractual expense limit was changed from 0.60% to 0.604%.
This is a summary of certain changes to the Fund since January 1, 2024. For more complete information, you may review the Fund's prospectus, which is dated April 30, 2024 at https://fpa.com/funds/overview/flexible-fixed-income.
Changes in and Disagreements with Accountants
There were no changes in or disagreements with the Fund's accountants during the reporting period.
Availability of Additional Information
You can find additional information about the Fund such as the prospectus, financial information, fund holdings and proxy voting information at https://fpa.com/funds/overview/flexible-fixed-income. You can also request this information by contacting us at (800) 638-3060.
Householding
In order to reduce expenses, we will deliver a single copy of prospectuses, proxies, financial reports and other communications to shareholders with the same residential address, provided they have the same last name, or we reasonably believe them to be members of the same family. Unless we are notified otherwise, we will continue to send recipients only one copy of these materials for as long as they remain a shareholder of the Fund. If you would like to receive individual mailings, please call (800) 638-3060 and we will begin sending you separate copies of these materials within 30 days after receiving your request.
UMB Distribution Services, LLC serves as the Fund's distributor.
FPA Flexible Fixed Income Fund
Institutional Class/FPFIX
TSR Fund Logo - Cover
SEMI-ANNUAL SHAREHOLDER REPORT | June 30, 2024
This semi-annual shareholder report contains important information about the FPA Flexible Fixed Income Fund (“Fund”) for the period of January 1, 2024 to June 30, 2024. You can find additional information about the Fund at https://fpa.com/funds/overview/flexible-fixed-income. You can also request this information by contacting us at (800) 638-3060.
This report describes changes to the Fund that occurred during the reporting period.
Fund Expenses
(Based on a hypothetical $10,000 investment)
Fund (Class) Costs of a $10,000 investment Costs paid as a percentage
of a $10,000 investment
FPA Flexible Fixed Income Fund
(Institutional Class/FPFIX)
$28 0.55%
Management’s Discussion of Fund Performance
SUMMARY OF RESULTS
For the twelve-month period ending June 30, 2024, the FPA Flexible Fixed Income Fund’s Institutional Class (“Fund”) net return was 7.87%, which includes reinvestment of all distributions and for the six-month period, net return was 2.39%. 
What affected the Fund’s performance?
Most recently citing “modest further progress” toward its inflation objective, the Federal Reserve left the Fed Funds rate unchanged during the quarter.1 The Federal Reserve further explained that it is looking for “greater confidence that inflation is moving sustainably toward two percent” before reducing the Fed Funds rate.2 Treasury yields increased by 35-54 basis points across the yield curve during the first half of 2024 while, generally, debt market spreads did not change meaningfully, notwithstanding changes in spreads in certain segments of the market.3
We have been taking of advantage higher yields to buy longer-duration bonds, because we believe these bonds not only offer an attractive absolute long-term return but also improve the short-term return profile of the portfolio. During the second quarter, we bought fixed-rate, High Quality bonds including agency-guaranteed residential mortgage pools, non-agency residential mortgage-backed securities (RMBS), agency-guaranteed commercial mortgage-backed securities (CMBS), asset-backed securities (ABS) backed by equipment, ABS backed by prime quality auto loans, non-agency CMBS backed by single-family rental properties, and ABS backed by credit card receivables. These investments had a weighted average life of 6.4 years and a weighted average duration of 5.3 years. We also extended the duration of the Fund’s Treasury holdings.
We do not generally view Credit (investments rated BBB or lower) as attractively priced but we continue to search and will seek to opportunistically invest in Credit when we believe that the price adequately compensates for the risk of permanent impairment of capital and near-term mark-to-market risk.4 On an absolute basis, we still see an attractive opportunity to buy longer duration, High Quality bonds (rated single-A or higher) which we believe will enhance the Fund’s long-term returns and the Fund’s short-term upside versus downside return profile. 
Fund performance can be attributed to the following:5
The largest contributors to performance during the first half of 2024 were collateralized loan obligations (CLO) backed by corporate loans which benefited from coupon payments and higher prices due to lower spreads. The second largest contributors to performance were the corporate bond and loan holdings with the return due to a combination of coupon payments and price appreciation caused by a decrease in spreads. The third largest contributors to performance were asset-backed securities (ABS) backed by equipment due to coupon payments, partially offset by lower prices caused by an increase in risk-free rates.
The only detractor from performance was the Fund’s Treasury holdings due to a decrease in price caused by an increase in risk-free rates. While there were other individual bonds that detracted from performance, there were no other detractors at the sector level.
1 Federal Reserve Open Market Committee statement on 6/12/2024.
2 Federal Reserve Chairman Jerome Powell’s press conference on 6/12/2024.
3 Source: Bloomberg. Debt market is represented by the Bloomberg U.S. Aggregate Bond index. Basis Point (bps) is equal to one hundredth of one percent, or 0.01%. Credit Spread or Spread is the difference in yield between a U.S. Treasury bond and another debt security of the same maturity but different credit quality.
4 The ratings agencies that provide ratings are the Nationally Recognized Statistical Ratings Organizations (NRSROs): DBRS, Inc., Fitch Ratings, Inc., Kroll Bond Rating Agency, Inc., Moody’s Investors Service, Inc., and S&P Global Ratings. Credit ratings range from AAA (highest) to D (lowest). Bonds rated BBB or above are considered investment grade. Credit ratings of BB and below are lower-rated securities (junk bonds). High-yielding, non-investment grade bonds (junk bonds) involve higher risks than investment grade bonds. Bonds with credit ratings of CCC or below have higher default risk.
5 This information is not a recommendation for a specific security or sector and these securities/sectors may not be in the Fund at the time you receive this report. The information provided does not reflect all positions purchased, sold or recommended by FPA during the quarter. The portfolio holdings as of the most recent quarter-end may be obtained at fpa.com.
Past performance is no guarantee, nor is it indicative, of future results.
Fund Performance
The following graph and chart compare the initial and subsequent account values at the end of each of the most recently completed 10 fiscal years of the Fund, or for the life of the Fund, if shorter. It assumes a $100,000 initial investment at the beginning of the first fiscal year in an appropriate, broad-based securities market index for the same period.
GROWTH OF $100,000
Fund Performance - Growth of 10K
AVERAGE ANNUAL TOTAL RETURN 6 Months 1 Year 5 Years Since
Inception1
FPA Flexible Fixed Income Fund (Institutional Class/FPFIX) 2.39% 7.87% 3.17% 3.37%
Bloomberg US Universal Bond Index -0.28% 3.47% 0.11% 1.26%
Consumer Price Index Seasonally Adjusted + 2% Wrap 2.41% 5.05% 6.25% 6.04%
1
Institutional Class commenced operations on December 31, 2018.
Keep in mind that the Fund’s past performance is not a good predictor of how the Fund will perform in the future.
The graph and table do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or redemption of Fund shares.
Visit https://fpa.com/funds/overview/flexible-fixed-income for the most recent performance information.
Key Fund Statistics
The following table outlines key fund statistics that you should pay attention to.
Fund net assets $1,149,171,922%
Total number of portfolio holdings $361%
Total advisory fee paid/(reimbursed) $2,356,759%
Portfolio turnover rate as of the end of the reporting period $25%
Graphical Representation of Holdings
The tables below show the investment makeup of the Fund, representing percentage of the total net assets of the Fund. The Top Ten Holdings and Sector Allocation exclude short-term holdings, if any. The Top Ten Holdings table may not reflect the total exposure to an issuer. Interest rate presented in the Top Ten Holdings are as of the reporting period end. The Sector Allocation chart represents Bonds & Debentures of the Fund.
Top Ten Holdings
U.S. Treasury Note, 4.125%, 3/31/2029 4.6%
U.S. Treasury Note, 4.250%, 2/28/2029 3.7%
U.S. Treasury Note, 4.000%, 1/31/2029 2.2%
Fannie Mae Pool, 1.000%, 3/1/2037 1.4%
U.S. Treasury Note, 4.625%, 9/30/2030 1.0%
Fannie Mae Pool, 1.500%, 8/1/2036 0.9%
Ford Credit Floorplan Master Owner Trust A, Series 2018-4, Class A, 4.060%, 11/15/2030 0.9%
Verizon Master Trust, Series 2024-2, Class A, 4.830%, 12/22/2031 0.9%
Midcap Financial Issuer Trust, 6.500%, 5/1/2028 0.9%
Fannie Mae Pool, 1.000%, 12/1/2036 0.9%
Asset Allocation
Graphical Representation - Allocation 1 Chart
Sector Allocation
Graphical Representation - Allocation 2 Chart
Material Fund Changes
Effective May 1, 2024, the Fund's Institutional Class the contractual expense limit was changed from 0.55% to 0.554%.
This is a summary of certain changes to the Fund since January 1, 2024. For more complete information, you may review the Fund's prospectus, which is dated April 30, 2024 at https://fpa.com/funds/overview/flexible-fixed-income.
Changes in and Disagreements with Accountants
There were no changes in or disagreements with the Fund's accountants during the reporting period.
Availability of Additional Information
You can find additional information about the Fund such as the prospectus, financial information, fund holdings and proxy voting information at https://fpa.com/funds/overview/flexible-fixed-income. You can also request this information by contacting us at (800) 638-3060.
Householding
In order to reduce expenses, we will deliver a single copy of prospectuses, proxies, financial reports and other communications to shareholders with the same residential address, provided they have the same last name, or we reasonably believe them to be members of the same family. Unless we are notified otherwise, we will continue to send recipients only one copy of these materials for as long as they remain a shareholder of the Fund. If you would like to receive individual mailings, please call (800) 638-3060 and we will begin sending you separate copies of these materials within 30 days after receiving your request.
UMB Distribution Services, LLC serves as the Fund's distributor.

 

 

 

(b) Not applicable.

 

Item 2. Code of Ethics.

 

Not applicable.

 

Item 3. Audit Committee Financial Expert.

 

Not applicable.

 

Item 4. Principal Accountant Fees and Services.

 

Not applicable.

 

Item 5. Audit Committee of Listed Registrants.

 

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.

 

 

Item 7. Financial Statements and Financial Highlights for Open-End Management Investment Companies.

 

 

 

 

FPA Crescent Fund

(Institutional Class: FPACX)

(Investor Class: FPFRX)

(Supra Institutional Class: FPCSX)

 

SEMI-ANNUAL FINANCIALS AND OTHER INFORMATION

JUNE 30, 2024

 

 

FPA Crescent Fund

A series of Investment Managers Series Trust III

 

Table of Contents

  

Item 7. Financial Statements and Financial Highlights  
Schedule of Investments 1
Statement of Assets and Liabilities 10
Statement of Operations 11
Statements of Changes in Net Assets 12
Financial Highlights 13
Notes to Financial Statements 16

 

This report and the financial statements contained herein are provided for the general information of the shareholders of the FPA Crescent 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 Crescent Fund

SCHEDULE OF INVESTMENTS

As of June 30, 2024 (Unaudited)

 

 

Principal
Amount
        Value  
      BONDS & DEBENTURES — 5.3%      
        COMMERCIAL MORTGAGE-BACKED SECURITIES — 0.1%        
        AGENCY — 0.1%        
        Eleven Madison Mortgage Trust        
$ 12,681,000     Series 2015-11MD, Class A, 3.673%, 9/10/2035(a),(b)   $ 12,115,459  
        TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES        
        (Cost $11,328,615)     12,115,459  
        CONVERTIBLE BONDS — 1.8%        
        Delivery Hero AG        
  2,600,000     1.000%, 4/30/2026     2,513,555  
  86,200,000     1.000%, 1/23/2027     76,357,064  
  1,600,000     1.500%, 1/15/2028     1,319,539  
  4,300,000     3.250%, 2/21/2030     4,006,342  
        Wayfair, Inc.        
  84,672,000     0.625%, 10/1/2025     78,746,061  
  4,278,000     1.000%, 8/15/2026     3,848,994  
        Zillow Group, Inc.        
  1,703,000     2.750%, 5/15/2025     1,716,440  
  12,336,000     1.375%, 9/1/2026     14,872,417  
        TOTAL CONVERTIBLE BONDS        
        (Cost $176,608,356)     183,380,412  
        CORPORATE BANK DEBT — 0.9%        
        CB&I STS Delaware LLC        
        13.096% (3-Month Term SOFR+776.2 basis points),        
  41,356,147     12/31/2026(b),(c),(d),(e),(f),(g)     41,769,708  
        Cornerstone OnDemand, Inc.        
  2,525,781     9.343% (1-Month Term SOFR+375 basis points), 10/16/2028(b),(d),(g)     2,374,234  
        Farfetch U.S. Holdings, Inc.        
  21,182,895     11.575% (3-Month Term SOFR+625 basis points), 10/20/2027(b),(d),(g)     19,647,135  
        Lealand Finance Company B.V. Senior Exit LC        
  (26,423,879 )   3.500%, 6/30/2027(b),(c),(d),(e),(g),(h),(i)     (14,112,245 )
        Lealand Reficar LC Term Loan        
  2,484,394     12.798% (3-Month Term SOFR+750 basis points), 6/30/2027(b),(c),(d),(e),(g),(h),(i)     2,065,454  
        McDermott LC        
  31,488,530     9.593%, 6/30/2027(b),(c),(d),(e),(g),(h)     16,374,036  
        McDermott Tanks Escrow LC        
  7,265,394     6.346% (3-Month Term SOFR+101.2 basis points), 12/31/2026(b),(c),(d),(e),(g)     3,778,005  
        McDermott Technology Americas, Inc.        
  1,074,221     8.458% (1-Month Term SOFR+300 basis points), 6/30/2027(b),(c),(d),(g)     590,821  
  38,775,902     9.457% (1-Month Term SOFR+400 basis points), 12/31/2027(b),(c),(d),(f),(g)     17,061,397  
        Vision Solutions, Inc.        
  2,525,553     11.750% (3-Month Term SOFR+400 basis points), 4/24/2028(b),(d),(g)     2,484,513  
        TOTAL CORPORATE BANK DEBT        
        (Cost $144,966,055)     92,033,058  

1 

 

FPA Crescent Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

 

Principal
Amount
        Value  
      CORPORATE BONDS — 0.3%      
        ENERGY — 0.0%        
        Gulfport Energy Corp.        
$ 637,767     8.000%, 5/17/2026   $ 641,976  
        FINANCIALS — 0.3%        
        Charles Schwab Corp.        
  18,976,000     4.000% (USD 5 Year Tsy+316.8 basis points)(b),(j)     17,595,358  
  2,588,000     5.000% (3-Month USD Libor+257.5 basis points)(b),(j)     2,351,845  
        Vornado Realty LP        
  8,815,000     3.500%, 1/15/2025     8,682,775  
  8,623,000     2.150%, 6/1/2026     7,914,448  
              36,544,426  
        TOTAL CORPORATE BONDS        
        (Cost $33,647,812)     37,186,402  
        U.S. TREASURY NOTES & BONDS — 2.2%        
        U.S. Treasury Note        
  231,000,000     5.000%, 8/31/2025     230,783,784  
        TOTAL U.S. TREASURY NOTES & BONDS        
        (Cost $231,394,400)     230,783,784  
        TOTAL BONDS & DEBENTURES        
        (Cost $597,945,238)     555,499,115  

 

Number
of Shares
           
        CLOSED-END FUNDS — 0.1%        
  4,756,180     Altegrity, Inc.(e),(g)     11,081,900  
        TOTAL CLOSED-END FUNDS        
        (Cost $0)     11,081,900  
        COMMON STOCKS — 62.1%        
        AEROSPACE & DEFENSE — 2.1%        
  796,571     Howmet Aerospace, Inc.     61,837,807  
  724,451     Safran S.A.     153,144,814  
              214,982,621  
        APPAREL & TEXTILE PRODUCTS — 0.9%        
  606,475     Cie Financiere Richemont S.A. - Class A     94,666,799  
        ASSET MANAGEMENT — 1.3%        
  273,088     Groupe Bruxelles Lambert N.V.     19,491,663  
  408,466     LPL Financial Holdings, Inc.     114,084,554  
  457,176     Pershing Square Tontine Holdings Ltd.(e),(g)     -  
              133,576,217  
        BANKING — 4.7%        
  4,452,588     Citigroup, Inc.     282,561,234  
  3,496,861     Wells Fargo & Co.     207,678,575  
              490,239,809  

2 

 

FPA Crescent Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

 

Number
of Shares
        Value  
        COMMON STOCKS (Continued)        
        BEVERAGES — 2.7%        
  2,137,538     Heineken Holding N.V.   $ 168,590,355  
  4,857,064     JDE Peet’s N.V.     96,745,974  
  2,186,351     Swire Pacific Ltd. - Class A     19,318,260  
              284,654,589  
        BIOTECH & PHARMA — 0.4%        
  152,000     Bio-Rad Laboratories, Inc.*     41,512,720  
        CABLE & SATELLITE — 3.8%        
  393,387     Charter Communications, Inc. - Class A*     117,606,978  
  7,087,694     Comcast Corp. - Class A     277,554,097  
              395,161,075  
        CHEMICALS — 2.4%        
  2,596,396     International Flavors & Fragrances, Inc.     247,202,863  
        COMMERCIAL SUPPORT SERVICES — 0.1%        
  228,457     Eurofins Scientific S.E.     11,388,599  
  2,654     Rentokil Initial PLC     15,472  
              11,404,071  
        CONSTRUCTION MATERIALS — 3.3%        
  3,902,547     Holcim AG*     345,821,694  
        E-COMMERCE DISCRETIONARY — 2.2%        
  1,810,103     Alibaba Group Holding Ltd.     16,341,481  
  1,075,603     Amazon.com, Inc.*     207,860,280  
              224,201,761  
        ELECTRIC UTILITIES — 0.9%        
  2,241,472     FirstEnergy Corp.     85,781,133  
  720,710     PG&E Corp.     12,583,597  
              98,364,730  
        ELECTRICAL EQUIPMENT — 2.7%        
  1,833,926     TE Connectivity Ltd.     275,877,488  
        ENGINEERING & CONSTRUCTION — 0.9%        
  56,585,375     McDermott International, Ltd.*,(c),(e),(g)     16,409,759  
  694,573     Samsung C&T Corp.     71,652,282  
              88,062,041  
        ENTERTAINMENT CONTENT — 0.6%        
  33,130     Epic Games, Inc.(e),(g)     8,812,580  
  2,861,357     Nexon Co., Ltd.     52,909,050  
              61,721,630  
        FOOD — 0.2%        
  1,628,225     Herbalife Ltd.*     16,917,258  
        HEALTH CARE FACILITIES & SVCS — 0.7%        
  233,915     ICON PLC*     73,325,334  

3 

 

FPA Crescent Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

 

Number
of Shares
        Value  
        COMMON STOCKS (Continued)        
        INDUSTRIAL SUPPORT SERVICES — 1.3%        
  699,096     Ferguson PLC   $ 135,379,940  
        INSTITUTIONAL FINANCIAL SVCS — 2.3%        
  4,697,583     Jefferies Financial Group, Inc.     233,751,730  
        INSURANCE — 1.5%        
  540,107     Aon PLC - Class A     158,564,613  
        INTERNET MEDIA & SERVICES — 11.3%        
  2,056,031     Alphabet, Inc. - Class A     374,506,047  
  1,340,310     Alphabet, Inc. - Class C     245,839,660  
  551,839     Delivery Hero S.E.*     13,089,777  
  646,495     Just Eat Takeaway.com N.V.*     7,778,295  
  629,810     Meta Platforms, Inc. - Class A     317,562,798  
  58,893     Netflix, Inc.*     39,745,708  
  2,882,508     Prosus N.V.*     102,668,897  
  951,959     Uber Technologies, Inc.*     69,188,380  
              1,170,379,562  
        LEISURE FACILITIES & SERVICES — 1.6%        
  1,533,842     Entain PLC     12,214,896  
  402,415     Marriott International, Inc. - Class A     97,291,875  
  308,095     Vail Resorts, Inc.     55,497,152  
              165,003,923  
        METALS & MINING — 1.4%        
  25,011,010     Glencore PLC*     142,617,452  
  55,123     Metals Acquisition Corp. - Class A*     754,634  
              143,372,086  
        OIL & GAS PRODUCERS — 1.6%        
  420,528     Gulfport Energy Corp.*     63,499,728  
  5,262,897     Kinder Morgan, Inc.     104,573,763  
              168,073,491  
        OTHER COMMON STOCK — 0.2%        
      Other Common Stock(k)     25,028,700  
        REIT — 1.0%        
  4,120,722     Douglas Emmett, Inc.     54,846,810  
  1,668,698     Vornado Realty Trust     43,870,070  
              98,716,880  
        RETAIL - DISCRETIONARY — 1.1%        
  1,521,148     CarMax, Inc.*     111,560,994  
        SEMICONDUCTORS — 5.3%        
  1,420,350     Analog Devices, Inc.     324,209,091  
  56,193     Broadcom, Inc.     90,219,547  

4 

 

FPA Crescent Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

 

Number
of Shares
        Value  
        COMMON STOCKS (Continued)        
        SEMICONDUCTORS (Continued)        
  512,600     NXP Semiconductors N.V.   $ 137,935,534  
              552,364,172  
        TECHNOLOGY HARDWARE — 2.2%        
  418,505     Dell Technologies, Inc. - Class C     57,716,025  
  1,942,412     NCR Atleos Corp.*     52,483,972  
  2,751,836     NCR Voyix Corp.*     33,985,175  
  1,626,680     Nintendo Co., Ltd.     86,505,526  
              230,690,698  
        TECHNOLOGY SERVICES — 0.8%        
  1,430,916     LG Corp.     83,786,291  
        TRANSPORTATION EQUIPMENT — 0.6%        
  422,836     Westinghouse Air Brake Technologies Corp.     66,829,230  
        TOTAL COMMON STOCKS        
        (Cost $3,704,487,661)     6,441,195,010  
        LIMITED PARTNERSHIPS — 2.6%        
  150,000     Footpath Ventures SPV IV LP(g),(l)     12,451,569  
  2,073,734     FPS Group Ltd.(c),(e),(g)     219,391,056  
  107,799     FPS Shelby Holdco I LLC(c),(e),(g)     8,876,467  
  958,312     GACP II LP(g),(l)     2,755,180  
  1,146,250     Sound Holding FP(c),(e),(g)     22,692,387  
  120,000     U.S. Farming Realty Trust II LP(c),(e),(g)     2,982,096  
        TOTAL LIMITED PARTNERSHIPS        
        (Cost $159,402,891)     269,148,755  
        PREFERRED STOCKS — 0.1%        
        ENERGY — 0.0%        
  1,345     Gulfport Energy Corp., 10.000%, (e)     1,256,051  
                 
        INDUSTRIALS — 0.1%        
  26,288     McDermott International, Ltd., 8.000%, (c),(e),(g)     4,854,471  
        TOTAL PREFERRED STOCKS        
        (Cost $2,473,080)     6,110,522  
        WARRANTS (SPAC) — 0.0%        
  18,063     American Oncology Network, Inc., Expiration Date: March 31, 2028*     542  
  160,436     Atlantic Coastal Acquisition Corp. II, Expiration Date: June 2, 2028*     9,626  
  266,952     BigBear.ai Holdings, Inc., Expiration Date: December 31, 2028*     42,045  
  173,528     Brand Engagement Network, Inc., Expiration Date: December 31, 2027*     5,588  
  1,007,550     BurTech Acquisition Corp., Expiration Date: December 18, 2026*     251,888  
  123,284     Churchill Capital Corp. VII, Expiration Date: February 29, 2028*     43,149  
  167,442     ECARX Holdings, Inc., Expiration Date: December 21, 2027*     5,760  
  414,327     Electriq Power Holdings, Inc., Expiration Date: January 25, 2028*     83  
  64,614     Global Partner Acquisition Corp. II, Expiration Date: December 30, 2027*,(e)     -  

5 

 

FPA Crescent Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

 

Number
of Shares
        Value  
        WARRANTS (SPAC) (Continued)        
  344,044     Golden Arrow Merger Corp., Expiration Date: July 31, 2027*   $ 51,951  
  98,835     Heliogen, Inc., Expiration Date: March 31, 2028*     692  
  316,054     MariaDB PLC, Expiration Date: December 16, 2027*     32,870  
  216,065     NioCorp Developments Ltd., Expiration Date: March 17, 2028*     50,127  
  91,791     Northern Star Investment Corp. III, Expiration Date: February 24, 2028*,(e)     9  
  70,911     Northern Star Investment Corp. IV, Expiration Date: December 31, 2027*,(e)     7  
  193,976     Plum Acquisition Corp. I, Expiration Date: December 31, 2028*     16,488  
  13,439     Plum Acquisition Corp. III, Expiration Date: March 31, 2028*     876  
  23,455     PowerUp Acquisition Corp., Expiration Date: February 18, 2027*     645  
  10,692     Prenetics Global Ltd., Expiration Date: December 31, 2026*     149  
  77,074     Ross Acquisition Corp. II, Expiration Date: February 12, 2026*,(e)     6,952  
  516,072     Sable Offshore Corp., Expiration Date: December 31, 2028*     2,203,627  
  178,581     Slam Corp., Expiration Date: December 31, 2027*     44,645  
  27,467     Swvl Holdings Corp., Expiration Date: March 31, 2027*     387  
        TOTAL WARRANTS (SPAC)        
        (Cost $1,423,348)     2,768,106  
        SHORT-TERM INVESTMENTS — 29.5%        
        MONEY MARKET INVESTMENTS — 0.0%        
  2,585,003     Morgan Stanley Institutional Liquidity Treasury Portfolio - Institutional Class,5.06%(m)     2,585,003  

 

Principal
Amount
           
      COMMERCIAL PAPER — 9.7%      
$ 10,000,000     Cisco Systems, Inc., 5.32%, 7/29/2024     9,958,622  
  70,000,000     Cisco Systems, Inc., 5.32%, 8/5/2024     69,637,944  
  67,873,000     Johnson & Johnson Co., 5.23%, 7/1/2024     67,873,000  
  21,800,000     Johnson & Johnson Co., 5.15%, 7/12/2024     21,765,695  
  57,000,000     Johnson & Johnson Co., 5.30%, 8/1/2024     56,739,858  
  125,000,000     Johnson & Johnson Co., 5.27%, 10/10/2024     123,151,840  
  40,000,000     Kenvue, Inc., 5.33%, 7/23/2024     39,869,711  
  25,500,000     Microsoft Corp., 5.28%, 7/8/2024     25,473,820  
  73,000,000     Microsoft Corp., 5.28%, 7/9/2024     72,914,347  
  69,000,000     Nestle Capital, 5.31%, 7/15/2024     68,857,515  
  60,000,000     Nestle Capital, 5.33%, 7/22/2024     59,813,450  
  52,000,000     PepsiCo., Inc., 5.30%, 10/3/2024     51,280,378  
  50,000,000     Pfizer, Inc., 5.32%, 10/2/2024     49,312,834  
  17,000,000     Roche Holdings, Inc., 5.30%, 7/19/2024     16,954,950  
  50,000,000     Roche Holdings, Inc., 5.30%, 7/30/2024     49,786,528  
  125,000,000     Walmart Stores, Inc., 5.29%, 7/5/2024     124,926,528  
  100,000,000     Walmart Stores, Inc., 5.29%, 7/8/2024     99,897,139  
              1,008,214,159  
        TREASURY BILLS — 19.8%        
  40,000,000     U.S. Treasury Bill, 1.75%, 7/2/2024(n)     39,994,206  

 

6 

 

FPA Crescent Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

 

Principal
Amount
        Value  
        TREASURY BILLS (Continued)        
$ 16,000,000     U.S. Treasury Bill, 3.56%, 7/5/2024(n)   $ 15,990,650  
  80,000,000     U.S. Treasury Bill, 4.26%, 7/9/2024(n)     79,906,710  
  40,000,000     U.S. Treasury Bill, 4.43%, 7/11/2024(n)     39,941,839  
  67,000,000     U.S. Treasury Bill, 4.70%, 7/16/2024(n)     66,853,689  
  51,000,000     U.S. Treasury Bill, 4.77%, 7/18/2024(n)     50,873,587  
  51,000,000     U.S. Treasury Bill, 4.88%, 7/23/2024(n)     50,836,880  
  65,000,000     U.S. Treasury Bill, 4.92%, 7/25/2024(n)     64,773,094  
  85,000,000     U.S. Treasury Bill, 5.05%, 8/6/2024(n)     84,555,008  
  81,000,000     U.S. Treasury Bill, 5.07%, 8/8/2024(n)     80,552,194  
  81,000,000     U.S. Treasury Bill, 5.10%, 8/13/2024(n)     80,493,514  
  81,000,000     U.S. Treasury Bill, 5.13%, 8/15/2024(n)     80,468,842  
  50,000,000     U.S. Treasury Bill, 5.14%, 8/20/2024(n)     49,636,111  
  89,000,000     U.S. Treasury Bill, 5.16%, 8/22/2024(n)     88,326,060  
  51,000,000     U.S. Treasury Bill, 5.17%, 8/27/2024(n)     50,577,476  
  72,000,000     U.S. Treasury Bill, 5.19%, 8/29/2024(n)     71,378,669  
  90,000,000     U.S. Treasury Bill, 5.19%, 9/3/2024(n)     89,158,653  
  136,000,000     U.S. Treasury Bill, 5.00%, 9/5/2024(n)     134,698,466  
  69,000,000     U.S. Treasury Bill, 5.20%, 9/10/2024(n)     68,285,609  
  44,000,000     U.S. Treasury Bill, 5.22%, 9/12/2024(n)     43,532,980  
  63,000,000     U.S. Treasury Bill, 5.22%, 9/17/2024(n)     62,286,651  
  62,000,000     U.S. Treasury Bill, 5.21%, 9/19/2024(n)     61,280,905  
  70,000,000     U.S. Treasury Bill, 5.22%, 9/24/2024(n)     69,136,067  
  90,000,000     U.S. Treasury Bill, 5.19%, 9/26/2024(n)     88,864,353  
  83,000,000     U.S. Treasury Bill, 5.21%, 10/1/2024(n)     81,702,328  
  276,000,000     U.S. Treasury Bill, 5.12%, 10/3/2024(n)     272,256,364  
  83,000,000     U.S. Treasury Bill, 5.25%, 10/17/2024(n)     81,893,759  
              2,048,254,664  
        TOTAL SHORT-TERM INVESTMENTS        
        (Cost $3,059,217,813)     3,059,053,826  
                 
        TOTAL INVESTMENTS — 99.7%        
        (Cost $7,524,950,031)     10,344,857,234  
                 
        Other Assets in Excess of Liabilities — 0.3%     34,670,051  
        TOTAL NET ASSETS — 100.0%   $ 10,379,527,285  

 

Number
of Shares
           
        SECURITIES SOLD SHORT — (0.7)%        
        COMMON STOCKS — (0.2)%        
  (83,600 )   Sartorius AG     (19,606,340 )
        TOTAL COMMON STOCKS        
        (Proceeds $30,372,551)     (19,606,340 )

7 

 

FPA Crescent Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

 

Number
of Shares
        Value  
        EXCHANGE-TRADED FUNDS — (0.5)%        
  (98,879 )   SPDR S&P 500 ETF Trust   $ (53,811,929 )
        TOTAL EXCHANGE-TRADED FUNDS        
        (Proceeds $52,373,098)     (53,811,929 )
                 
        TOTAL SECURITIES SOLD SHORT        
        (Proceeds $82,745,649)   $ (73,418,269 )

 

ETF — Exchange-Traded Fund

LLC — Limited Liability Company

LP — Limited Partnership

PLC — Public Limited Company

REIT — Real Estate Investment Trust

 

* Non-income producing security.
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities are restricted and may be resold in transactions exempt from registration normally to qualified institutional buyers. The total value of these securities is $12,115,459, which represents 0.12% of Net Assets.
(b) Variable or floating rate security.
(c) Affiliated company.
(d) Bank loans generally pay interest at rates which are periodically determined by reference to a base lending rate plus a premium. All loans carry a variable rate of interest. These base lending rates are generally (i) the Prime Rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (“LIBOR”), (iii) the Certificate of Deposit rate, or (iv) Secured Overnight Financing Rate (“SOFR”). Bank Loans, while exempt from registration, under the Securities Act of 1933, contain certain restrictions on resale and cannot be sold publicly. Floating rate bank loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy.

(e) The value of these securities was determined using significant unobservable inputs. These are reported as Level 3 securities in the Fair Value Hierarchy.
(f) Payment-in-kind interest is generally paid by issuing additional par/shares of the security rather than paying cash.
(g) Restricted securities. These restricted securities constituted 3.88% of total net assets at June 30, 2024, most of which are considered liquid by the Adviser. These securities are not registered and may not be sold to the public. There are legal and/or contractual restrictions on resale. The Fund does not have the right to demand that such securities be registered. The values of these securities are determined by valuations provided by pricing services, brokers, dealers, market makers, or in good faith under policies adopted by authority of the Fund’s Board of Trustees.
(h) As of June 30, 2024, the Fund had entered into commitments to fund various delayed draw debt-related investments. Such commitments are subject to the satisfaction of certain conditions set forth in the documents governing those investments and there can be no assurance that such conditions will be satisfied. See Note 10 of the Notes to Financial Statements for further information on these commitments and contingencies.
(i) All or a portion of the loan is unfunded.
(j) Perpetual security. Maturity date is not applicable.
(k) As permitted by U.S. Securities and Exchange Commission regulations, “Other” Common Stocks include holdings in their first year of acquisition that have not previously been publicly disclosed.
(l) Investment valued using net asset value per share (or its equivalent) as a practical expedient.
(m) The rate is the annualized seven-day yield at period end.
(n) Treasury bill discount rate.

 

See accompanying Notes to Financial Statements.

8 

 

FPA Crescent Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

 

Total Return Swaps – Short

 

Receive   Pay    

Payment

Frequency

  Counterparty  

Expiration

Date

 

Notional

Amount

    Value    

Upfront

Premiums

Paid(Received)

   

Unrealized

Appreciation

(Depreciation)

 
Cresco Labs, Inc.     CDOR01M + 1.500%      Annual   Nomura Securities International, Inc.    7/31/2025   CAD   1,600,522     $ (121,687 )         $ (121,687 )
Green Thumb Industries, Inc.     OBFR + 1.500%     Annual   Nomura Securities International, Inc.   7/31/2025   $ 2,078,319       347,128             347,128  
Trulieve Cannabis Corp.     CDOR01M + 1.500%      Annual   Nomura Securities International, Inc.   7/31/2025   CAD 521,511       246,606             246,606  
Verano Holdings Corp.     CDOR01M + 1.500%     Annual   Nomura Securities International, Inc.    7/31/2025   CAD 1,619,914       367,662             367,662  
                                $ 839,709           $ 839,709  

 

See accompanying Notes to Financial Statements.

 

9 

 

FPA Crescent Fund

STATEMENT OF ASSETS AND LIABILITIES

As of June 30, 2024 (Unaudited)

 

 

Assets:      
Investments, at value (cost $7,203,435,963)   $ 10,002,123,822  
Investments in affiliates, at value (cost $321,514,068)     342,733,412  
Foreign currency, at value (cost $1,122,012)     1,121,491  
Cash     31,621  
Deposits held at broker     104,756,676  
Receivables:        
Unrealized appreciation on open swap contracts     961,396  
Investment securities sold     10,201,787  
Fund shares sold     2,792,455  
Dividends and interest     10,291,637  
Reclaims receivable     10,270,963  
Prepaid expenses     63,778  
Total assets     10,485,349,038  
         
Liabilities:        
Securities sold short, at value (proceeds $82,745,649)     73,418,269  
Payables:        
Investment securities purchased     19,136,532  
Fund shares redeemed     3,442,773  
Unrealized depreciation on open swap contracts     121,687  
Advisory fees     7,738,884  
Shareholder servicing fees (Note 8)     862,364  
Fund services fees     278,719  
Administrative service fees     424,645  
Dividends on securities sold short     173,931  
Legal fees     56,282  
Shareholder reporting fees     38,867  
Auditing fees     24,252  
Chief Compliance Officer fees     19,679  
Trustees’ deferred compensation (Note 3)     12,588  
Trustees’ fees and expenses     3,140  
Accrued other expenses     69,141  
Total liabilities     105,821,753  
Commitments and contingencies (Note 9)        
Net Assets   $ 10,379,527,285  
         
Components of Net Assets:        
Capital Stock (no par value with an unlimited number of shares authorized)   $ 7,159,433,822  
Total distributable earnings (accumulated deficit)     3,220,093,463  
Net Assets   $ 10,379,527,285  
         
Maximum Offering Price per Share:        
Investor Class Shares:        
Net assets applicable to shares outstanding   $ 9,017  
Shares of beneficial interest issued and outstanding     221  
Redemption price per share   $ 40.80  
Institutional Class Shares:        
Net assets applicable to shares outstanding   $ 6,860,233,587  
Shares of beneficial interest issued and outstanding     168,251,261  
Redemption price per share   $ 40.77  
Supra Institutional Class Shares:        
Net assets applicable to shares outstanding   $ 3,519,284,681  
Shares of beneficial interest issued and outstanding     86,264,077  
Redemption price per share   $ 40.80  

 

See accompanying Notes to Financial Statements.

10 

 

FPA Crescent Fund

STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2024 (Unaudited) 

 

 

Investment income:      
Interest   $ 92,333,836  
Dividends (net of foreign withholding taxes of $1,660,392)     50,244,282  
Dividends from affiliated issuers     14,925,000  
Interest from affiliated issuers     7,907,766  
Total investment income     165,410,884  
         
Expenses:        
Advisory fees     46,605,035  
Shareholder servicing fees - Investor Class (Note 8)     1  
Shareholder servicing fees - Institutional Class (Note 8)     1,705,117  
Shareholder servicing fees - Supra Institutional Class (Note 8)     825,189  
Fund services fees     767,945  
Administrative service fees – Institutional Class     2,393,400  
Administrative service fees – Supra Institutional Class     159,015  
Dividends on securities sold short     216,412  
Trustees’ fees and expenses     115,584  
Redemption liquidity service     109,135  
Shareholder reporting fees     96,543  
Insurance fees     95,435  
Miscellaneous     39,211  
Registration fees     38,690  
Legal fees     15,752  
Chief Compliance Officer fees     8,169  
Auditing fees     5,742  
Total expenses     53,196,375  
Advisory fees waived     (1,196,778 )
Net expenses     51,999,597  
Net investment income (loss)     113,411,287  
         
Realized and Unrealized Gain (Loss):        
Net realized gain (loss) on:        
Investments     222,873,313  
Investments in affiliated issuers     (695,124 )
In-kind redemptions     71,415,373  
Securities sold short     620,316  
Swap contracts     11,090,777  
Foreign currency transactions     (239,840 )
Total realized gain (loss)     305,064,815  
Net change in unrealized appreciation (depreciation) on:        
Investments     407,324,338  
Investments in affiliated issuers     21,043,377  
Securities sold short     9,327,380  
Swap contracts     (7,498,282 )
Foreign currency translations     (403,138 )
Net change in unrealized appreciation (depreciation)     429,793,675  
Net realized and unrealized gain (loss)     734,858,490  
         
Net Increase (Decrease) in Net Assets from Operations   $ 848,269,777  

 

See accompanying Notes to Financial Statements.

11 

 

FPA Crescent Fund

STATEMENTS OF CHANGES IN NET ASSETS

 

 

   

For the

Six Months Ended

June 30, 2024

(Unaudited)

   

For the

Year Ended

December 31, 2023

 
Increase (Decrease) in Net Assets from:                
Operations:                
Net investment income (loss)   $ 113,411,287     $ 177,766,426  
Total realized gain (loss) on investments, Investments in affiliated issuers - realized, purchased options contracts, securities sold short, Swap contracts - realized, Forward foreign currency contracts - realized and foreign currency transactions     305,064,815       615,944,348  
Net change in unrealized appreciation (depreciation) on investments, Investments in affiliated issuers - unrealized, purchased options contracts, securities sold short, Swap contracts - unrealized, Forward foreign currency contracts - unrealized and foreign currency translations     429,793,675       893,410,154  
Net increase (decrease) in net assets resulting from operations     848,269,777       1,687,120,928  
                 
Distributions to Shareholders:                
Distributions:                
Investor Class     (191 )1     -  
Institutional Class     (203,739,698 )     (258,315,563 )
Supra Institutional Class     (104,967,250 )     (97,960,009 )
Total distributions to shareholders     (308,707,139 )     (356,275,572 )
                 
Capital Transactions:                
Net proceeds from shares sold:                
Investor Class     8,931 1     -  
Institutional Class     389,586,192       775,927,534  
Supra Institutional Class     834,705,153       574,819,089  
                 
Reinvestment of distributions:                
Investor Class     191 1     -  
Institutional Class     169,766,380       218,121,504  
Supra Institutional Class     93,697,145       88,452,433  
Cost of shares redeemed:                
Institutional Class     (1,082,961,565 )     (1,260,797,159 )
Supra Institutional Class     (267,674,965 )     (585,048,552 )
Net increase (decrease) in net assets from capital transactions     137,127,462       (188,525,151 )
Total increase (decrease) in net assets     676,690,100       1,142,320,205  
                 
Net Assets:                
Beginning of period     9,702,837,185       8,560,516,980  
End of period   $ 10,379,527,285     $ 9,702,837,185  
Capital Share Transactions:                
Shares sold:     216 1     -  
Investor Class                
Institutional Class     9,732,916       21,181,241  
Supra Institutional Class     20,878,379       15,702,900  
Shares reinvested:                
Investor Class     5 1     -  
Institutional Class     4,179,379       5,730,291  
Supra Institutional Class     2,305,540       2,322,849  
Shares redeemed:                
Institutional Class     (27,091,706 )     (34,480,860 )
Supra Institutional Class     (6,607,358 )     (16,077,091 )
Net increase (decrease) in capital share transactions     3,397,371       (5,620,670 )

 

1 The Investor Class commenced operations on April 30, 2024. The data shown reflects operations for the period April 30, 2024 to June 30, 2024.

 

See accompanying Notes to Financial Statements.

12 

 

FPA Crescent Fund

FINANCIAL HIGHLIGHTS

Institutional Class

 

 

Per share operating performance.

For a capital share outstanding throughout each period.

 

   

For the

Six Months

Ended

June 30, 2024

   

For the

Year Ended

December 31,

 
    (Unaudited)     2023     20221     20211     20201     20191  
Net asset value, beginning of period   $ 38.63     $ 33.34     $ 37.01     $ 35.97     $ 33.83     $ 29.53  
Income from Investment Operations:                                                
Net investment income (loss)2     0.45       0.70       0.17       - 3     0.18       0.62  
Net realized and unrealized gain (loss)     2.93       6.03       (3.58 )     5.34       3.69       5.25  
Total from investment operations     3.38       6.73       (3.41 )     5.34       3.87       5.87  
                                                 
Less Distributions:                                                
From net investment income     (0.55 )     (0.05 )     (0.02 )     (0.29 )     (0.11 )     (0.80 )
From net realized gain     (0.69 )     (1.39 )     (0.24 )     (4.01 )     (1.62 )     (0.77 )
Total distributions     (1.24 )     (1.44 )     (0.26 )     (4.30 )     (1.73 )     (1.57 )
                                                 
Redemption fee proceeds3     -       -       -       -       -       -  
Net asset value, end of period   $ 40.77     $ 38.63     $ 33.34     $ 37.01     $ 35.97     $ 33.83  
                                                 
 Total return4     8.76 %5     20.27 %     (9.20 )%     15.17 %     12.11 %     20.02 %
                                                 
Ratios and Supplemental Data:                                                
Net assets, end of period (in thousands)   $ 6,860,234     $ 7,009,178     $ 6,301,530     $ 8,394,402     $ 8,903,455     $ 14,009,883  
                                                 
Ratio of expenses to average net assets:                                                
Before fees waived and expenses absorbed     1.07 %6,7     1.08 %     1.09 %8     1.17 %9     1.15 %9     1.23 %9
After fees waived and expenses absorbed     1.05 %6,7     1.05 %     1.06 %8     1.14 %9     1.13 %9     1.23 %9
Ratio of net investment income (loss) to average net assets:                                                
 Before fees waived and expenses absorbed     2.22 %6,7     1.89 %     0.46 %     (0.03 )%     0.54 %     1.90 %
After fees waived and expenses absorbed     2.24 %6,7     1.92 %     0.50 %     0.01 %     0.56 %     1.90 %
                                                 
Portfolio turnover rate     4 %5     14 %     20 %     20 %     29 %     23 %

 

1 Audits performed for the fiscal years indicated by the Fund’s previous auditor, Ernst & Young LLP.
2 Based on average shares outstanding for the period.
3 Amount represents less than $0.01 per share.
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.
7 Includes short sale dividend expense that rounds to less than 0.01% of average net assets.
8 For the year ended December 31, 2022, the expense ratio includes short sale dividend expense that rounds to less than 0.01% of average net assets.
9 For the years ended December 31, 2021, December 31, 2020 and December 31, 2019, the expense ratio includes short sale dividend expense equal to 0.09%, 0.07% and 0.16% of average net assets, respectively.

 

See accompanying Notes to Financial Statements. 

 

13 

 

 

FPA Crescent Fund

FINANCIAL HIGHLIGHTS

Investor Class

 

 

Per share operating performance.

For a capital share outstanding throughout each period.

 

   

For the

Period Ended

June 30,

20241

(Unaudited)

 
Net asset value, beginning of period   $ 40.13  
Income from Investment Operations:        
Net investment income2     0.04  
Net realized and unrealized gain     1.87  
Total from investment operations     1.91  
         
Less Distributions:        
From net investment income     (0.55 )
From net realized gain     (0.69 )
Total distributions     (1.24 )
Net asset value, end of period   $ 40.80  
         
Total return3     8.71 %4
         
Ratios and Supplemental Data:        
Net assets, end of period (in thousands)   $ 9  
         
Ratio of expenses to average net assets:        
Before fees waived and expenses absorbed     1.30 %5,6
After fees waived and expenses absorbed     1.15 %5,6
Ratio of net investment income (loss) to average net assets:        
Before fees waived and expenses absorbed     0.39 %5,6
After fees waived and expenses absorbed     0.54 %5,6
         
Portfolio turnover rate     4 %4

 

  1 The Investor Class commenced operations on April 30, 2024. The data shown reflects operations for the period April 30, 2024 to June 30, 2024.
  2 Based on average shares outstanding for the period.
  3 Return is based on net asset value per share, adjusted for reinvestment of distributions, and does not reflect deduction of the sales charge.
  4 Not annualized.
  5 Annualized.
  6 Includes short sale dividend expense that rounds to less than 0.01% of average net assets.

 

See accompanying Notes to Financial Statements.

  

14 

 

FPA Crescent Fund

FINANCIAL HIGHLIGHTS

Supra Institutional Class

 

 

Per share operating performance.

For a capital share outstanding throughout each period.

 

   

For the

Six Months

Ended

June 30, 2024

 

For the

Year Ended

December 31,

For the

Period Ended

December 31,

      (Unaudited)       2023       20221       20211       20201,2  
Net asset value, beginning of period   $ 38.65     $ 33.35     $ 37.01     $ 35.98     $ 31.96  
Income from Investment Operations:                                        
Net investment income (loss)3     0.46       0.72       0.22       0.02       0.01  
Net realized and unrealized gain (loss)     2.94       6.03       (3.61 )     5.33       4.81  
Total from investment operations     3.40       6.75       (3.39 )     5.35       4.82  
                                         
Less Distributions:                                        
From net investment income     (0.56 )     (0.06 )     (0.03 )     (0.31 )     -  
From net realized gain     (0.69 )     (1.39 )     (0.24 )     (4.01 )     (0.80 )
Total distributions     (1.25 )     (1.45 )     (0.27 )     (4.32 )     (0.80 )
                                         
Redemption fee proceeds4     -       -       -       -       -  
Net asset value, end of period   $ 40.80     $ 38.65     $ 33.35     $ 37.01     $ 35.98  
                                         
Total return5     8.81 %6     20.33 %     (9.14 )%     15.24 %     15.08 %
                                         
Ratios and Supplemental Data:                                        
Net assets, end of period (in thousands)   $ 3,519,285     $ 2,693,659     $ 2,258,987     $ 1,890,554     $ 1,179,180  
                                         
Ratio of expenses to average net assets:                                        
Before fees waived and expenses absorbed     1.01 %7,8     1.02 %     1.03 %9     1.12 %10     1.14 %7,10
After fees waived and expenses absorbed     0.99 %7,8     0.99 %     1.00 %9     1.09 %10     1.11 %7,10
Ratio of net investment income (loss) to average net assets:                                        
Before fees waived and expenses absorbed     2.28 %7,8     1.95 %     0.61 %     0.02 %     0.07 %7
After fees waived and expenses absorbed     2.30 %7,8     1.98 %     0.64 %     0.06 %     0.10 %7
                                         
Portfolio turnover rate     4 %6     14 %     20 %     20 %     29 %

 

1 Audits performed for the fiscal years indicated by the Fund’s previous auditor, Ernst & Young LLP.
2 The Supra Institutional Class commenced operations on September 4, 2020. The data shown reflects operations for the period September 4, 2020 to December 31, 2020.
3 Based on average shares outstanding for the period.
4 Amount represents less than $0.01 per share.
5 Return is based on net asset value per share, adjusted for reinvestment of distributions, and does not reflect deduction of the sales charge.
6 Not annualized.
7 Annualized.
8 Includes short sale dividend expense that rounds to less than 0.01% of average net assets.
9 For the year ended December 31, 2022, the expense ratio includes short sale dividend expense that rounds to less than 0.01% of average net assets.
10 For the years ended December 31, 2021 and December 31, 2020, the expense ratio includes short sale dividend expense equal to 0.10% and 0.13% of average net assets, respectively.

 

See accompanying Notes to Financial Statements.

15 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS

June 30, 2024 (Unaudited)

 

 

Note 1 – Organization

FPA Crescent Fund (the “Fund”), is a diversified series of Investment Managers Series Trust III (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 investment objective is to seek to generate equity-like returns over the long-term, take less risk than the market and avoid permanent impairment of capital. First Pacific Advisors, LP (the “Adviser”), has served as the Fund’s investment adviser since March 1, 1996.

 

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 Directors has designated the Adviser 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 Adviser has adopted and implemented policies and procedures to be followed when the Fund must utilize fair value pricing.

 

(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. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares relative net assets, except for distribution and service fees which are unique to each class of shares relative net assets. 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.

16 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

(c) Mortgage-Backed Securities

The Fund may invest in mortgage-backed securities (“MBS”), representing direct or indirect interests in pools of underlying residential or commercial mortgage loans that are secured by real property. These securities provide investors with payments consisting of both principal and interest as the mortgages in the underlying mortgage pools are paid.

 

The timely payment of principal and interest (but not the market value) on MBS issued or guaranteed by Ginnie Mae (formally known as the Government National Mortgage Association or GNMA) is backed by Ginnie Mae and the full faith and credit of the US government. Obligations issued by Fannie Mae (formally known as the Federal National Mortgage Association or FNMA) and Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation or FHLMC) are historically supported only by the credit of the issuer, but currently are guaranteed by the US government in connection with such agencies being placed temporarily into conservatorship by the US government. Some MBS are sponsored or issued by private entities. Payments of principal and interest (but not the market value) of such private MBS may be supported by pools of residential or commercial mortgage loans or other MBS that are guaranteed, directly or indirectly, by the US government or one of its agencies or instrumentalities, or they may be issued without any government guarantee of the underlying mortgage assets but may contain some form of non-government credit enhancement.

 

Collateralized mortgage obligations (“CMO”) are a type of MBS. A CMO is a debt security that may be collateralized by whole mortgage loans or mortgage pass-through securities. The mortgage loans or mortgage pass-through securities are divided into classes or tranches with each class having its own characteristics. Investors typically receive payments out of the interest and principal on the underlying mortgages. The portions of these payments that investors receive, as well as the priority of their rights to receive payments, are determined by the specific terms of the CMO class.

 

The yield characteristics of MBS differ from those of traditional debt securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans or other obligations generally may be prepaid at any time. Prepayments on a pool of mortgage loans are influenced by a variety of economic, geographic, social and other factors. Generally, prepayments on fixed-rate mortgage loans will increase during a period of falling interest rates and decrease during a period of rising interest rates. Certain classes of CMOs and other MBS are structured in a manner that makes them extremely sensitive to changes in prepayment rates.

 

(d) Asset-Backed Securities

Asset-backed securities include pools of mortgages, loans, receivables or other assets. Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities, and, in certain cases, supported by letters of credit, surety bonds, or other credit enhancements. The value of asset-backed securities may also be affected by the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or the financial institution(s) providing the credit support. In addition, asset-backed securities are not backed by any governmental agency.

 

Collateralized Debt Obligations (“CDOs”) include Collateralized Bond Obligations (“CBOs”), Collateralized Loan Obligations (“CLOs”) and other similarly structured securities. CBOs and CLOs are types of asset backed securities. A CBO is a trust which is backed by a diversified pool of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a Fund invests. CDOs carry additional risks including, but not limited to, (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments, (ii) the collateral may decline in value or default, (iii) a Fund may invest in CDOs that are subordinate to other classes, and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.

17 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

(e) Stripped Mortgage-Backed Interest Only (“I/O”) and Principal Only (“P/O”) Securities

Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. In certain cases, one class will receive all of the interest payments on the underlying mortgages (the I/O class), while the other class will receive all of the principal payments (the P/O class). The Fund currently has investments in I/O securities. The yield to maturity on I/Os is sensitive to the rate of principal repayments (including prepayments) on the related underlying mortgage assets, and principal payments may have a material effect on yield-to-maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may not fully recoup its initial investment in I/Os.

 

(f) Credit Risk

Debt securities are subject to credit risk, meaning that the issuer of the debt security may default or fail to make timely payments of principal or interest. The values of any of the Fund’s investments may also decline in response to events affecting the issuer or its credit rating. The lower rated debt securities in which the Fund may invest are considered speculative and are generally subject to greater volatility and risk of loss than investment grade securities, particularly in deteriorating economic conditions. The Fund invests a significant portion of its assets in securities of issuers that hold mortgage-and asset-backed securities and direct investments in securities backed by commercial and residential mortgage loans and other financial assets. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults. Continuing shifts in the market’s perception of credit quality on securities backed by commercial and residential mortgage loans and other financial assets may result in increased volatility of market price and periods of illiquidity that can negatively impact the valuation of certain securities held by the Fund.

 

(g) Special Purpose Acquisition Companies

The Fund may invest in stock, warrants, and other securities of special purpose acquisition companies (“SPACs”) or similar special purpose entities that pool funds to seek potential acquisition opportunities. Because SPACs and similar entities are in essence blank check companies without operating history or ongoing business other than seeking acquisitions, the value of their securities is particularly dependent on the ability of the entity’s management to identify and complete a profitable acquisition. An investment in a SPAC is subject to a variety of risks, including that (i) a portion of the monies raised by the SPAC for the purpose of effecting an acquisition or merger may be expended prior to the transaction for payment of taxes and other purposes; (ii) prior to any acquisition or merger, a SPAC’s assets are typically invested in government securities, money market funds and similar investments whose returns or yields may be significantly lower than those of the Fund’s other investments; (iii) the Fund generally will not receive significant income from its investments in SPACs (both prior to and after any acquisition or merger) and, therefore, the Fund’s investments in SPACs will not significantly contribute to the Fund’s distributions to shareholders; (iv) an attractive acquisition or merger target may not be identified at all, in which case the SPAC will be required to return any remaining monies to shareholders; (v) if an acquisition or merger target is identified, the Fund may elect not to participate in the proposed transaction or the Fund may be required to divest its interests in the SPAC due to regulatory or other considerations, in which case the warrants or other rights with respect to the SPAC held by the Fund may expire worthless or may be repurchased or retired by the SPAC at an unfavorable price; (vi) any proposed merger or acquisition may be unable to obtain the requisite approval, if any, of SPAC shareholders; (vii) under any circumstances in which the Fund receives a refund of all or a portion of its original investment (which typically represents a pro rata share of the proceeds of the SPAC’s assets, less any applicable taxes), the returns on that investment may be negligible, and the Fund may be subject to opportunity costs to the extent that alternative investments would have produced higher returns; (viii) to the extent an acquisition or merger is announced or completed, shareholders who redeem their shares prior to that time may not reap any resulting benefits; (ix) the Fund may be delayed in receiving any redemption or liquidation proceeds from a SPAC to which it is entitled; (x) an acquisition or merger once effected may prove unsuccessful and an investment in the SPAC may lose value; (xi) an investment in a SPAC may be diluted by additional later offerings of interests in the SPAC or by other investors exercising existing rights to purchase shares of the SPAC; (xii) only a thinly traded market for shares of or interests in a SPAC may develop, or there may be no market at all, leaving the Fund unable to sell its interest in a SPAC or to sell its interest only at a price below what the Fund believes is the SPAC interest’s intrinsic value; and (xiii) the values of investments in SPACs may be highly volatile and may depreciate significantly over time. There were no Private Investment in Public Equity (“PIPE”) share purchase commitments for the SPACs the Fund invested in as of June 30, 2024.

18 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

(h) Currency Translation

Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.

 

Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at year-end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.

 

(i) 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.

 

(j) 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.

 

(k) 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.

19 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

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 June 30, 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.

 

(l) 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.

 

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.

 

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 0.93% plus class-specific administrative service fee of 0.07%, 0.07% and 0.01% of the Fund’s average daily net assets for the Institutional Class, Investor Class and Supra Institutional Class, respectively.

 

The Adviser has contractually agreed to reimburse operating expenses in excess of 0.05%, 0.15% and 0.05% of the average daily net assets of the Institutional Class, Investor Class and Supra Institutional Class, respectively, excluding management fees, administrative service fees, short sale dividend expenses and interest expenses on cash deposits relating to short sales, brokerage fees and commissions, redemption liquidity service expense, interest, taxes, 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, through April 30, 2025. The Adviser has also contractually agreed to reimburse the Fund for redemption liquidity service expenses in excess of 0.0044% of the daily average net assets of the Fund through April 30, 2025. These agreements may only be terminated earlier by the Fund’s Board of Trustees (the “Board”) or upon termination of the Advisory Agreement. For the period ended June 30, 2024, the Adviser waived a portion of its advisory fees totaling $1,196,778.

 

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 ended June 30, 2024, were $767,945. Such fees are reported as fund Service fees on the Statement of Operations.

20 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

UMB Distribution Services, LLC (“UMB Distribution Services”), a wholly owned subsidiary of UMBFS, serves as the Fund’s distributor (the “Distributor”). The Distributor does not receive compensation from the Fund for its distribution services. 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 ended June 30, 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 $115,584. Such fees are reported on the Statement of Operations.

 

The Fund’s Board of Trustees has adopted 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 ended June 30, 2024, were $8,169. Such fees are reported on the Statement of Operations.

 

Note 4 –Redemption Liquidity Service Fees

The Fund may participate in the ReFlow Fund, LLC (“ReFlow”) liquidity program, which is designed to provide an alternative liquidity source on days when redemptions of Fund shares exceed purchases. Under the program, ReFlow is available to provide cash to the Fund to meet all, or a portion, of daily net shareowner redemptions. 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. For use of the ReFlow service, the 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 “Dutch auction” among other participating mutual funds seeking liquidity that day. 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 shareowners. In accordance with federal securities laws, ReFlow is prohibited from acquiring more than 3% of the outstanding voting securities of a Fund. 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 in-kind redemption policies. There is no assurance that ReFlow will have sufficient funds available to meet the Funds’ liquidity needs on a particular day. During the period ended June 30, 2024 the fees associated with ReFlow are disclosed in the Statement of Operations within redemption liquidity service fees.

 

Note 5 – Securities Sold Short

The Fund maintains cash deposits and segregates marketable securities in amounts equal to the current fair value of the securities sold short or the fair value of the securities at the time they were sold short, whichever is greater. The Fund considers cash deposits held in connection with securities sold short to be restricted cash. The restriction will lapse when the related short positions are terminated. Possible losses from short sales may be unlimited, whereas losses from purchases cannot exceed the total amount invested. The dividends on securities sold short are reflected as short sale dividend expense.

21 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

Note 6 – Federal Income Taxes

At June 30, 2024, gross unrealized appreciation/(depreciation) of investments, based on cost for federal income tax purposes were as follows:

 

Cost of investments   $ 7,474,832,676  
         
Gross unrealized appreciation   $ 3,217,381,725  
Gross unrealized depreciation     (420,775,436 )
         
Net unrealized appreciation/(depreciation)   $ 2,796,606,289  

 

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.

 

Note 7 – Investment Transactions

For the period ended June 30, 2024, purchases and sales of investments, excluding short-term investments, were $293,831,756 and $623,649,931, respectively.

 

Note 8 – 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 0.10%, 0.25%, and 0.10% of its average daily net assets attributable to the Institutional Class, Investor Class and Supra Institutional 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. Such fees are reported on the Statement of Operations.

 

Note 9 – 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 10 – Commitments and Contingencies

The Fund may enter into unfunded loan commitments. Unfunded loan commitments may be partially or wholly unfunded. During the contractual period, the Fund is obliged to provide funding to the borrower upon demand. Unfunded loan commitments are fair valued in accordance with the valuation policy described in Note 2(a) and unrealized appreciation or depreciation, if any, is recorded on the Statement of Assets and Liabilities. As of June 30, 2024, the total unfunded amount was less than one percent of the Fund’s net assets.

 

As of June 30, 2024, the Fund had the following unfunded loan commitments outstanding:

 

Loan   Principal     Cost     Value    

Unrealized

Appreciation/

(Depreciation)

   

Unfunded

Commitment

 
Lealand Finance Company B.V. Senior Exit LC   $ 26,423,879     $ (11,975,721 )   $ (14,112,245 )   $ (2,136,524 )   $ (371,828 )
Lealand Reficar LC Term Loan     2,484,394       2,934,992       2,065,454       (869,538 )     450,598  

22 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

Note 11 – 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.

 

  · 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 June 30, 2024, in valuing the Fund’s assets carried at fair value:

23 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

Investments   Level 1     Level 2     Level 3    

NAV as

Practical

Expedient

    Total  
Commercial Mortgage-Backed Securities                                        
Agency   $ -     $ 12,115,459     $ -     $ -     $ 12,115,459  
Convertible Bonds     -       183,380,412       -       -       183,380,412  
Corporate Bank Debt     -       42,158,100       49,874,958       -       92,033,058  
Corporate Bonds                                        
Energy     -       641,976       -       -       641,976  
Financials     -       36,544,426       -       -       36,544,426  
U.S. Treasury Notes & Bonds     -       230,783,784       -       -       230,783,784  
Closed-End Funds     -       -       11,081,900       -       11,081,900  
Common Stocks                                        
Aerospace & Defense     214,982,621       -       -       -       214,982,621  
Apparel & Textile Products     94,666,799       -       -       -       94,666,799  
Asset Management     133,576,217       -       -       -       133,576,217  
Banking     490,239,809       -       -       -       490,239,809  
Beverages     284,654,589       -       -       -       284,654,589  
Biotech & Pharma     41,512,720       -       -       -       41,512,720  
Cable & Satellite     395,161,075       -       -       -       395,161,075  
Chemicals     247,202,863       -       -       -       247,202,863  
Commercial Support Services     11,404,071       -       -       -       11,404,071  
Construction Materials     345,821,694       -       -       -       345,821,694  
E-Commerce Discretionary     224,201,761       -       -       -       224,201,761  
Electric Utilities     98,364,730       -       -       -       98,364,730  
Electrical Equipment     275,877,488       -       -       -       275,877,488  
Engineering & Construction     71,652,282       -       16,409,759       -       88,062,041  
Entertainment Content     52,909,050       -       8,812,580       -       61,721,630  

Food   16,917,258     -     -     -     16,917,258  
Health Care Facilities & Svcs     73,325,334       -       -       -       73,325,334  
Industrial Support Services     135,379,940       -       -       -       135,379,940  
Institutional Financial Svcs     233,751,730       -       -       -       233,751,730  
Insurance     158,564,613       -       -       -       158,564,613  
Internet Media & Services     1,170,379,562       -       -       -       1,170,379,562  
Leisure Facilities & Services     165,003,923       -       -       -       165,003,923  
Metals & Mining     143,372,086       -       -       -       143,372,086  
Oil & Gas Producers     168,073,491       -       -       -       168,073,491  
Other Common Stock     25,028,700       -       -       -       25,028,700  
Reit     98,716,880       -       -       -       98,716,880  
Retail - Discretionary     111,560,994       -       -       -       111,560,994  
Semiconductors     552,364,172       -       -       -       552,364,172  
Technology Hardware     230,690,698       -       -       -       230,690,698  
Technology Services     83,786,291       -       -       -       83,786,291  
Transportation Equipment     66,829,230       -       -       -       66,829,230  
Limited Partnerships     -       -       253,942,006       15,206,749       269,148,755  
Preferred Stocks                                        
Energy     -       -       1,256,051       -       1,256,051  
Industrials     -       -       4,854,471       -       4,854,471  
Warrants (SPAC)     2,761,138       -       6,968       -       2,768,106  
Short-Term Investments     2,585,003       3,056,468,823       -       -       3,059,053,826  
    $ 6,421,318,812     $ 3,562,092,980     $ 346,238,693     $ 15,206,749     $ 10,344,857,234  
                                         
Securities Sold Short                                        
Common Stock     (19,606,340 )     -       -       -       (19,606,340 )
Exchange-Traded Funds     (53,811,929 )     -       -       -       (53,811,929 )
    $ (73,418,269 )   $ -     $ -     $ -     $ (73,418,269 )
                                         
Total Return Swaps   $ -     $ 839,709     $ -     $ -     $ 839,709  

 

* Investments valued using net asset value per share (or its equivalent) as a practical expedient are excluded from the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the Schedule of Investments.

 

The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining value:

 

Investments  

Beginning

balance

   

Transfers

into/(out)

of Level 3

during the

period

   

Total

realized

gain/(loss)

   

Total change

in net

unrealized

appreciation/

(depreciation)

   

Accretion of

Discount

(Amortization

of Premium)

and Return of Capital

   

Net

purchases

    Net sales    

Ending Value

at June 30,

2024

 
Corporate Bank Debt   $ 42,420,738     $ -     $ (695,124 )   $ 2,329,102     $ (553,792 )   $ 9,359,724     $ (2,985,690 )   $ 49,874,958  
Closed-End Funds     11,081,900       -       -       -       -       -       -       11,081,900  
Common Stocks     8,812,580       16,409,759       -       -       -       -       -       25,222,339  
Limited Partnerships     275,884,843       -       -       1,248,212       (23,191,049 )     -       -       253,942,006  
Preferred Stocks     4,102,159       -       -       2,008,399       (36 )     -       -       6,110,522  
Warrants (SPAC)     8,670       6,968       (14,944 )     6,274       -       -       -       6,968  
    $ 342,310,890     $ 16,416,727     $ (710,068 )   $ 5,591,987     $ (23,744,877 )   $ 9,359,724     $ (2,985,690 )   $ 346,238,693  

 

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 transfers of $16,416,727 out of Level 1 into Level 3. Transfers into Level 3 were due to change in valuation technique from vendor priced to a pricing model based on last executed trade.

 

The following table presents additional quantitative information about valuation methodologies and inputs used for investments that are measured at fair value and categorized within Level 3 as of June 30, 2024.

24 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

Asset Class  

Fair Value June 30,

2024

   

Valuation

Methodologies

 

Unobservable

Input

 

Valuation

Weighted

Average of

Input

   

Input

Range/Value

   

Impact to

Valuation

From an

Increase in

Input (a)

Corporate Bank Debt   $ 49,874,958     Pricing Model (b)   Quotes/Prices     $101 - $52     $ 92.92     Increase
Closed End Funds     11,081,900     Pricing Model (c)   Last Reported Trade   $ 2.33     $ 2.33     Increase
Common Stocks- Long     8,812,580     Most Recent Capitalization (Funding) (d)   Market Discount     25%     2 x   Decrease
Limited Partnerships     250,959,910     Market Approach (e)   Shipping Broker Valuations     25% - 11%       21 %   Decrease
      2,982,096     Discounted NAV (f)   Market Discount     10%     20 %   Decrease
Preferred Stock     6,110,522     Pricing Model (g)   Quotes/Prices     $933.87 - $184.67     $ 308.02     Increase
      16,409,759     Pricing Model (h)   Last Reported Price   $ 0.29     $ 0.00     Increase
      -     Pricing Model (i)   Corporate Action   $0.00     $ 0.00     Increase
Warrants     6,968     Pricing Model (j)   Corporate Action     $0.09 - $0.00     $ 0.03     Increase

 

(a) This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect.
(b) The Pricing Model technique for Level 3 securities involves recently quoted funding prices of the security.
(c) The Pricing Model technique for Level 3 securities involves the last reported trade in the security.
(d) The fair value of the investment is based on capital funding terms and discounted on market trends. If the financial condition of the underlying assets were to deteriorate, or if the market comparables were to fall, the value of the investment could be lower.
(e) The Discounted Cash Flow valuation technique involves estimating the value of an asset based on discounting a future stream of estimated cash flows using a discount rate determined by the Advisor.
(f) The NAV provided by the general partner has been discounted for the possible impact from various exit strategies under consideration by the general partner.
(g) The Pricing Model technique for Level 3 securities involves correlating the fair value of the preferred stock to the parent company’s common stock.
(h) The Pricing Model technique for Level 3 securities involves the last provided vendor price of the security.
(i) The Pricing Model technique for Level 3 securities involves the issuance of non-tradable rights with no set exercise date.
(j) The Pricing Model technique for Level 3 securities involves the projected value of warrants that are pending cancellation.

 

Note 12 – Derivatives and Hedging Disclosures

Derivatives and Hedging requires enhanced disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effects on the Fund’s financial position, performance and cash flows.

 

The effects of these derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations are presented in the tables below. The fair values of derivative instruments as of June 30, 2024 by risk category are as follows:

 

    Asset Derivatives     Liability Derivatives  
Derivatives not designated as hedging instruments   Statements of Assets
and Liabilities
  Value     Statements of Assets
and Liabilities
  Value  
Equity contracts   Unrealized appreciation on open swap contracts   $ 961,396     Unrealized depreciation on open swap contracts   $ 121,687  

25 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

The effects of derivative instruments on the Statement of Operations for the period ended June 30, 2024, are as follows:

 

  Derivatives not designated as hedging instruments  
    Equity Contracts     Total  
Realized Gain (Loss) on Derivatives                
Swap contracts   $ 12,306,823     $ 12,306,823  

 

    Equity Contracts     Total  
Net Change in Unrealized Appreciation/Depreciation on Derivatives                
Swap contracts   $ (7,498,282 )   $ (7,498,282 )

 

The notional amount is included on the Schedule of Investments. The quarterly average volumes of derivative instruments as of June 30, 2024 are as follows:

 

Derivatives not designated as hedging instruments              
Equity contracts   Swap contracts   Notional amount   $ 28,327,576  

 

Note 13 - Disclosures about Offsetting Assets and Liabilities

Disclosures about Offsetting Assets and Liabilities requires an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance requires retrospective application for all comparative periods presented.

 

A Fund mitigates credit risk with respect to OTC derivative counterparties through credit support annexes included with International Swaps and Derivatives Association Master Agreements or other Master Netting Agreements which are the standard contracts governing most derivative transactions between the Fund and each of its counterparties. These agreements allow the Fund and each counterparty to offset certain derivative financial instruments’ payables and/or receivables against each other and/or with collateral, which is generally held by the Fund’s custodian. The amount of collateral moved to/from applicable counterparties is based upon minimum transfer amounts specified in the agreement. To the extent amounts due to the Fund from its counterparties are not fully collateralized contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance.

 

The Crescent Fund’s Statement of Assets and Liabilities presents financial instruments on a gross basis, therefore there are no net amounts and no offset amounts within the Statement of Assets and Liabilities to present below. Gross amounts of the financial instruments, amounts related to financial instruments/cash collateral not offset in the Statement of Assets and Liabilities and net amounts are presented below:

26 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

               

Amounts Not Offset in

Statements of Assets and

Liabilities

     

Description

  Counterparty    

Gross Amounts

Recognized in

the Statements

of Assets and

Liabilities

   

Financial

Instruments

 

Cash

Collateral

    Net Amount  
Unrealized appreciation on open swap contracts     Nomura     $ 839,709   $ -   $ -     $ 839,709  

 

Note 14 – Investments in Affiliated Issuers

An affiliated issuer is an entity in which the Fund has ownership of a least 5% of the voting securities. Issuers that are affiliates of the Fund at period-end are noted in the Fund’s Schedule of Investments. Additional security purchases and the reduction of certain securities shares outstanding of existing portfolio holdings that were not considered affiliated in prior years may result in the Fund owning in excess of 5% of the outstanding shares at period-end. The table below reflects transactions during the period with entities that are affiliates as of June 30, 2024 and may include acquisitions of new investments, prior year holdings that became affiliated during the period and prior period affiliated holdings that are no longer affiliated as of period-end:

 

Security Description  

Shares Held as  

of December 31,  

2023

   

Beginning Value

December 31,

2023

   

Purchases

at Cost

   

Proceeds

from Sales

   

Net Realized Gain  

(Loss) on Sales

Affiliated Investment

 
CB&I STS Delaware LLC 13.096% (3-Month Term SOFR+776.2 basis points), 6/30/2027     38,703,999     $ 37,929,919     $ 2,652,147     $ -     $ -  
FPS Group Ltd.     2,073,734       240,622,105       -       -       -  
FPS Shelby Holdco I LLC     107,799       8,876,468       -       -       -  
Lealand Finance Company B.V. Senior Exit LC 3.500%, 6/30/2027     19,148,815       (9,868,366 )     -       (1,738,788 )     (695,123 )
Lealand Reficar LC Term Loan
12.798% (3-Month Term SOFR+750 basis points), 6/30/2027
    -       -       2,484,393       -       -  
McDermott International, Ltd.     56,585,375       5,092,684       -       -       -  
McDermott International, Ltd., 8.000%     26,288       2,987,331       -       -       -  
McDermott LC 9.593%, 6/30/2027     21,452,975       10,726,488       4,223,182       (1,246,902 )     (1 )
McDermott Tanks Escrow LC 6.346% (3-Month Term SOFR+101.2 basis points), 12/31/2026     7,265,394       3,632,697       -       -       -  
McDermott Technology Americas, Inc., 8.458% (1-Month Term SOFR+300 basis points), 6/30/2027     1,074,221       708,986       -       -       -  
McDermott Technology Americas, Inc., 9.457% (1-Month Term SOFR+400 basis points), 12/31/2027     35,242,982       13,744,763       1,719,395       -       -  
Sound Holding FP     1,146,250       23,393,851       -       -       -  
U.S. Farming Realty Trust II LP     120,000       2,992,419       -       -       -  
Total           $ 340,839,345     $ 11,079,117     $ (2,985,690 )   $ (695,124 )

27 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

Security Description - Continued  

Accretion of

Discount

(Amortization of
Premium) and

Return of Capital

   

Change in

Unrealized

Appreciation

(Depreciation)

   

Transfer In

(Out)

   

Ending Value

June 30,

2024

   

Shares as of

June 30,

2024

   

Income from

Affiliated

Investments

 
CB&I STS Delaware LLC 13.096% (3-Month Term SOFR+776.2 basis points), 6/30/2027   $ -     $ 1,187,642     $ -     $ 41,769,708       41,356,147     $ 2,629,520  
FPS Group Ltd.     (21,231,044 )     (5 )     -       219,391,056       2,073,734       14,925,000  
FPS Shelby Holdco I LLC     (1,960,000 )     1,959,999       -       8,876,467       107,799       -  
Lealand Finance Company B.V. Senior Exit LC 3.500%, 6/30/2027     (1,004,384 )     (805,584 )     -       (14,112,245 )     (26,423,879 )     356,867  
Lealand Reficar LC Term Loan 12.798% (3-Month Term SOFR+750 basis points), 6/30/2027     450,599       (869,538 )     -       2,065,454       2,484,394       82,139  
McDermott International, Ltd.     -       11,317,075       -       16,409,759       56,585,375       -  
McDermott International, Ltd., 8.000%     -       1,867,140       -       4,854,471       26,288       -  
McDermott LC 9.593%, 6/30/2027     (6 )     2,671,275       -       16,374,036       31,488,530       1,577,939  
McDermott Tanks Escrow LC 6.346% (3-Month Term SOFR+101.2 basis points), 12/31/2026     -       145,308       -       3,778,005       7,265,394       379,810  
McDermott Technology Americas, Inc., 8.458% (1-Month Term SOFR+300 basis points), 6/30/2027     -       (118,165 )     -       590,821       1,074,221       45,866  
McDermott Technology Americas, Inc., 9.457% (1-Month Term SOFR+400 basis points), 12/31/2027     (2,802,778 )     4,400,017       -       17,061,397       38,775,902       2,835,625  
Sound Holding FP     -       (701,464 )     -       22,692,387       1,146,250       -  
U.S. Farming Realty Trust II LP     -       (10,323 )     -       2,982,096       120,000       -  
Total   $ (26,547,613 )   $ 21,043,377     $ -     $ 342,733,412             $ 22,832,766  

 

Note 15 – Restricted Securities

Restricted securities include securities that have not been registered under the Securities Act of 1933, as amended, and securities that are subject to restrictions on resale. The Fund may invest in restricted securities that are consistent with the Fund’s investment objective and investment strategies. Investments in restricted securities are valued at net asset value as a practical expedient for fair value, or fair value as determined in good faith in accordance with procedures adopted by the Board. It is possible that the estimated value may differ significantly from the amount that might ultimately be realized in the near term, and the difference could be material.

28 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

As of June 30, 2024, the Fund invested in the following restricted securities:

 

Restricted Security   Initial Acquisition Date   Cost     Fair Value    

Fair Value as a %

of Net Assets

 
Altegrity, Inc.   9/1/2021   $ -     $ 11,081,900       0.11 %
CB&I STS Delaware LLC, 13.096% (3-Month Term SOFR +776.2 basis points), 12/31/2026   9/5/2023     41,356,147       41,769,708       0.40 %
Cornerstone OnDemand, Inc., 9.343% (1-Month Term SOFR +375 basis points), 10/16/2028   12/7/2022     2,297,158       2,374,234       0.02 %
Epic Games, Inc.   6/25/2020     19,049,750       8,812,580       0.08 %
Farfetch U.S. Holdings, Inc., 11.575% (3-Month Term SOFR +625 basis points), 10/20/2027   9/28/2022     19,422,418       19,647,135       0.19 %
Footpath Ventures SPV IV LP   9/24/2021     15,659,550       12,451,569       0.12 %
FPS Group Ltd.   10/17/2018     132,669,406       219,391,056       2.11 %
FPS Shelby Holdco I LLC   2/4/2020     11,073,935       8,876,467       0.09 %
GACP II LP   1/12/2018     -       2,755,180       0.03 %
Lealand Finance Company B.V. Senior Exit LC, 6/30/2027   11/12/2019     (11,975,721 )     (14,112,245 )     -0.14 %
Lealand Reficar LC Term Loan, 12.798%, (3-Month Term SOFR +750 basis points), 6/30/2027   4/5/2024     2,934,992       2,065,454       0.02 %
McDermott International, Ltd.   12/31/2020     55,498,910       16,409,759       0.16 %
McDermott International, Ltd., 8.000%   7/1/2020     1,201,538       4,854,471       0.05 %
McDermott LC, 9.593%, 6/30/2027   12/31/2020     31,488,563       16,374,036       0.16 %
McDermott Tanks Escrow LC, 6.346%, 12/31/2026   12/31/2020     7,265,350       3,778,005       0.04 %
McDermott Technology Americas, Inc., 8.458% (1-Month Term SOFR +300 basis points), 6/30/2027   7/1/2020     1,074,193       590,821       0.01 %
McDermott Technology Americas, Inc., 9.457% (1-Month Term SOFR +400 basis points), 12/31/2027   7/1/2020     48,926,758       17,061,397       0.16 %
Pershing Square Tontine Holdings Ltd.   7/26/2022     -       -       0.00 %
Sound Holding FP   10/7/2013     -       22,692,387       0.22 %
U.S. Farming Realty Trust II LP   12/24/2012     -       2,982,096       0.03 %
Vision Solutions, Inc., 11.750% (3-Month Term SOFR +400 basis points), 4/24/2028   12/7/2022     2,176,197       2,484,513       0.02 %
        $ 380,119,144     $ 402,340,523       3.88 %

 

29 

 

FPA Crescent Fund

NOTES TO FINANCIAL STATEMENTS - Continued

June 30, 2024 (Unaudited)

 

 

Note 16 – Market Disruption and Geopolitical Risks

Certain local, regional or global events such as war, acts of terrorism, the spread of infectious illness 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 Funds’ performance, the performance of the securities in which the Funds invest and may lead to losses on your investment. The ultimate impact of “Market Disruptions and Geopolitical Risks” on the financial performance of the Funds’ investments is not reasonably estimable at this time. Management is actively monitoring these events.

 

Note 17 – 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 Fund has adopted procedures in accordance with the SEC’s rules and form amendments.

 

Note 18 – 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.

30 

 

 

 

FPA Flexible Fixed Income Fund

(Institutional Class: FPFIX)

(Advisor Class: FFIAX)

 

SEMI-ANNUAL FINANCIALS AND OTHER INFORMATION

JUNE 30, 2024

 

 

 

FPA Flexible Fixed Income Fund

A series of Investment Managers Series Trust III

 

Table of Contents

  

Item 7. Financial Statements and Financial Highlights  
Schedule of Investments 1
Statement of Assets and Liabilities 17
Statement of Operations 18
Statements of Changes in Net Assets 19
Financial Highlights 20
Notes to Financial Statements 22

 

This report and the financial statements contained herein are provided for the general information of the shareholders of the FPA Flexible Fixed Income 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 Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
       

BONDS & DEBENTURES — 92.4%

ASSET-BACKED SECURITIES — 36.3%

       
      AUTO — 5.8%        
      Ally Auto Receivables Trust        
$ 931,000     Series 2023-1, Class A4, 5.270%, 11/15/2028   $ 929,400  
        BMW Vehicle Owner Trust        
  701,000     Series 2023-A, Class A4, 5.250%, 11/26/2029     701,425  
        CarMax Auto Owner Trust        
  61,000     Series 2020-3, Class C, 1.690%, 4/15/2026     60,901  
  2,027,000     Series 2023-2, Class A4, 5.010%, 11/15/2028     2,015,801  
  904,000     Series 2023-1, Class A4, 4.650%, 1/16/2029     892,139  
  2,146,000     Series 2023-3, Class A4, 5.260%, 2/15/2029     2,147,201  
        Ford Credit Auto Owner Trust        
  1,343,000     Series 2023-A, Class A4, 4.560%, 12/15/2028     1,323,729  
  734,000     Series 2023-B, Class A4, 5.060%, 2/15/2029     728,558  
        Ford Credit Floorplan Master Owner Trust A        
  6,057,000    

Series 2024-2, Class A, 5.240%, 4/15/2031(a)

    6,111,042  
        GM Financial Consumer Automobile Receivables Trust        
  1,424,000     Series 2023-3, Class A4, 5.340%, 12/18/2028     1,426,991  
        GM Financial Revolving Receivables Trust        
  3,383,000     Series 2021-1, Class A, 1.170%, 6/12/2034(a)     3,088,375  
  5,133,000     Series 2023-1, Class A, 5.120%, 4/11/2035(a)     5,130,507  
  1,403,000     Series 2023-2, Class A, 5.770%, 8/11/2036(a)     1,438,323  
  8,349,000     Series 2024-1, Class A, 4.980%, 12/11/2036(a)     8,307,490  
        Hyundai Auto Receivables Trust        
  1,112,000     Series 2023-B, Class A4, 5.310%, 8/15/2029     1,116,615  
        Mercedes-Benz Auto Receivables Trust        
  816,000     Series 2023-1, Class A4, 4.310%, 4/16/2029     800,626  
  1,038,000     Series 2024-1, Class A4, 4.790%, 7/15/2031     1,030,531  
        Nissan Auto Receivables Owner Trust        
  1,485,000     Series 2023-A, Class A4, 4.850%, 6/17/2030     1,466,259  
        Porsche Financial Auto Securitization Trust        
  1,721,000     Series 2023-1A, Class A4, 4.720%, 6/23/2031(a)     1,703,290  
  919,000    

SFS Auto Receivables Securitization Trust

Series 2023-1A, Class A4, 5.470%, 12/20/2029(a)

    923,010  
        Toyota Auto Loan Extended Note Trust        
  5,017,000     Series 2022-1A, Class A, 3.820%, 4/25/2035(a)     4,852,910  
  4,553,000     Series 2023-1A, Class A, 4.930%, 6/25/2036(a)     4,549,661  
  4,545,000     Series 2024-1A, Class A, 5.160%, 11/25/2036(a)     4,570,363  
        Toyota Auto Receivables Owner Trust        
  1,343,000     Series 2023-A, Class A4, 4.420%, 8/15/2028     1,318,337  
  1,973,000     Series 2023-B, Class A4, 4.660%, 9/15/2028     1,954,133  
  2,714,000     Series 2023-C, Class A4, 5.010%, 2/15/2029     2,702,508  
        Volkswagen Auto Loan Enhanced Trust        
  1,181,000     Series 2023-1, Class A4, 5.010%, 1/22/2030     1,160,699  
        World Omni Auto Receivables Trust        

1 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
       

BONDS & DEBENTURES (Continued)

ASSET-BACKED SECURITIES (Continued)

       
      AUTO (Continued)        
$ 300,000     Series 2021-B, Class B, 1.040%, 6/15/2027   $ 285,925  
  1,251,000     Series 2023-A, Class A4, 4.660%, 5/15/2029     1,232,391  
  2,055,000     Series 2023-B, Class A4, 4.680%, 5/15/2029     2,021,429  
  1,107,000     Series 2023-C, Class A4, 5.030%, 11/15/2029     1,102,225  
              67,092,794  
        COLLATERALIZED LOAN OBLIGATION — 7.6%        
        ABPCI Direct Lending Fund LLC        
  3,062,000     Series 2017-1A, Class ER, 13.186% (3-Month Term SOFR+786.161 basis points), 4/20/2032(a),(b)     3,061,660  
  2,944,000     Series 2016-1A, Class E2, 14.316% (3-Month Term SOFR+899.161 basis points), 7/20/2033(a),(b)     2,945,519  
        ABPCI Direct Lending Fund LP        
  665,127     Series 2020-10A, Class A1A, 7.536% (3-Month Term SOFR+221.161 basis points), 1/20/2032(a),(b)     665,309  
  2,000,000     Series 2022-11A, Class E, 15.025% (3-Month Term SOFR+970 basis points), 10/27/2034(a),(b)     2,010,670  
        Barings Middle Market Ltd.        
  1,460,000     Series 2021-IA, Class D, 14.236% (3-Month Term SOFR+891.161 basis points), 7/20/2033(a),(b)     1,460,678  
        BlackRock Maroon Bells LLC        
  5,193,750     Series 2022-1A, Class E, 14.829% (3-Month Term SOFR+950 basis points), 10/15/2034(a),(b)     5,216,140  
        Cerberus Loan Funding LLC        
  901,000     Series 2023-1A, Class A, 7.729% (3-Month Term SOFR+240 basis points), 3/22/2035(a),(b)     908,560  
  5,057,000     Series 2023-2A, Class A1, 7.879% (3-Month Term SOFR+255 basis points), 7/15/2035(a),(b)     5,212,154  
  5,734,000     Series 2023-4A, Class A, 7.754% (3-Month Term SOFR+242.5 basis points), 10/15/2035(a),(b)     5,902,046  
        Cerberus Loan Funding LP        
  2,236,000     Series 2020-1A, Class D, 10.890% (3-Month Term SOFR+556.161 basis points), 10/15/2031(a),(b)     2,237,476  
  3,600,000     Series 2022-3A, Class C, 10.579% (3-Month Term SOFR+525 basis points), 1/20/2033(a),(b)     3,626,388  
        Fortress Credit Opportunities Ltd.        
  5,645,000     Series 2017-9A, Class A1TR, 7.140% (3-Month Term SOFR+181.161 basis points), 10/15/2033(a),(b)     5,644,887  
  8,814,000     Series 2017-9A, Class ER, 13.650% (3-Month Term SOFR+832.161 basis points), 10/15/2033(a),(b)     8,814,379  
        Golub Capital Partners Ltd.        
  1,993,000     Series 2018-38A, Class C, 8.386% (3-Month Term SOFR+306.161 basis points), 7/20/2030(a),(b)     1,993,500  

2 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
      BONDS & DEBENTURES (Continued)      
      ASSET-BACKED SECURITIES (Continued)      
      COLLATERALIZED LOAN OBLIGATION (Continued)      
$ 1,429,000     Series 2019-45A, Class B1, 8.136% (3-Month Term SOFR+281.161 basis points), 10/20/2031(a),(b)   $ 1,429,760  
  4,361,000     Series 2023-67A, Class A1, 7.823% (3-Month Term SOFR+250 basis points), 5/9/2036(a),(b)     4,391,335  
  4,000,000     Series 2023-67A, Class D, 11.823% (3-Month Term SOFR+650 basis points), 5/9/2036(a),(b)     4,097,460  
  5,388,000     Series 2019-46A, Class A1R, 7.127% (3-Month Term SOFR+181 basis points), 4/20/2037(a),(b)     5,393,189  
        Ivy Hill Middle Market Credit Fund Ltd.        
  3,766,000     Series 18A, Class E, 13.336% (3-Month Term SOFR+801.161 basis points), 4/22/2033(a),(b)     3,765,691  
  1,086,000     Series 12A, Class DR, 13.756% (3-Month Term SOFR+843.161 basis points), 7/20/2033(a),(b)     1,086,168  
  6,250,000     Series 9A, Class ERR, 13.547% (3-Month Term SOFR+822 basis points), 4/23/2034(a),(b)     6,250,138  
  5,120,000     Series 20A, Class E, 15.325% (3-Month Term SOFR+1,000 basis points), 4/20/2035(a),(b)     5,199,606  
  411,639    

Lake Shore MM LLC Series 2019-2A, Class A2R, 2.525%, 10/17/2031(a)

    392,808  
        Parliament Ltd.        
  2,646,000     Series 2021-2A, Class D, 9.287% (3-Month Term SOFR+396.161 basis points), 8/20/2032(a),(b)     2,645,685  
        TCP Waterman LLC        
  2,429,000     Series 2017-1A, Class ER, 13.747% (3-Month Term SOFR+842.161 basis points), 8/20/2033(a),(b)     2,430,246  
              86,781,452  
                 
        CREDIT CARD — 2.5%        
        American Express Credit Account Master Trust        
  8,994,000     Series 2023-4, Class A, 5.150%, 9/15/2030     9,092,333  
  6,191,000     Series 2024-2, Class A, 5.240%, 4/15/2031     6,309,883  
        Chase Issuance Trust        
  4,798,000     Series 2023-A2, Class A, 5.080%, 9/15/2030     4,839,863  
  8,883,000     Series 2024-A2, Class A, 4.630%, 1/15/2031     8,756,318  
              28,998,397  
                 
        EQUIPMENT — 10.4%        
        Avis Budget Rental Car Funding AESOP LLC        
  1,059,000     Series 2023-1A, Class A, 5.250%, 4/20/2029(a)     1,049,974  
  3,527,000     Series 2023-4A, Class A, 5.490%, 6/20/2029(a)     3,527,848  
  4,981,000     Series 2023-6A, Class A, 5.810%, 12/20/2029(a)     5,038,353  
  3,599,000     Series 2023-8A, Class A, 6.020%, 2/20/2030(a)     3,674,133  
  1,728,000     Series 2024-1A, Class A, 5.360%, 6/20/2030(a)     1,732,782  

3 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
       

BONDS & DEBENTURES (Continued)

ASSET-BACKED SECURITIES (Continued)

EQUIPMENT (Continued)

       
$ 7,423,000     Series 2024-3A, Class A, 5.230%, 12/20/2030(a)   $ 7,347,531  
        CNH Equipment Trust        
  581,000     Series 2022-B, Class A4, 3.910%, 3/15/2028     564,289  
  644,000     Series 2023-A, Class A4, 4.770%, 10/15/2030     636,359  
  1,805,000     Series 2023-B, Class A4, 5.460%, 3/17/2031     1,826,184  
  2,476,590    

Coinstar Funding LLC Series 2017-1A, Class A2, 5.216%, 4/25/2047(a)

    2,181,326  
        Enterprise Fleet Financing LLC        
  2,419,000     Series 2022-2, Class A3, 4.790%, 5/21/2029(a)     2,395,797  
  760,000     Series 2022-3, Class A3, 4.290%, 7/20/2029(a)     744,461  
  2,522,000     Series 2023-1, Class A3, 5.420%, 10/22/2029(a)     2,525,408  
  1,601,000     Series 2022-4, Class A3, 5.650%, 10/22/2029(a)     1,608,990  
  3,800,000     Series 2023-2, Class A3, 5.500%, 4/22/2030(a)     3,826,359  
  3,748,000     Series 2023-3, Class A3, 6.410%, 6/20/2030(a)     3,878,852  
        Ford Credit Floorplan Master Owner Trust A        
  10,771,000     Series 2018-4, Class A, 4.060%, 11/15/2030     10,344,660  
        GMF Floorplan Owner Revolving Trust        
  2,130,000     Series 2023-2, Class A, 5.340%, 6/15/2030(a)     2,133,198  
  3,737,000     Series 2024-2A, Class A, 5.060%, 3/15/2031(a)     3,736,692  
  1,675,000     GreatAmerica Leasing Receivables Funding LLC Series 2023-1, Class A4, 5.060%, 3/15/2030(a)     1,661,595  
        Hertz Vehicle Financing LLC        
  3,499,000     Series 2021-2A, Class A, 1.680%, 12/27/2027(a)     3,193,730  
  3,489,000     Series 2022-2A, Class A, 2.330%, 6/26/2028(a)     3,200,009  
  6,142,000     Series 2022-5A, Class A, 3.890%, 9/25/2028(a)     5,820,371  
  3,379,000     Series 2023-4A, Class A, 6.150%, 3/25/2030(a)     3,437,712  
        John Deere Owner Trust        
  1,372,000     Series 2023-A, Class A4, 5.010%, 12/17/2029     1,356,635  
  1,203,000     Series 2023-B, Class A4, 5.110%, 5/15/2030     1,189,244  
  1,664,000     Series 2023-C, Class A4, 5.390%, 8/15/2030     1,671,724  
        Kubota Credit Owner Trust        
  1,359,000     Series 2023-2A, Class A4, 5.230%, 6/15/2028(a)     1,343,766  
  876,000     Series 2023-1A, Class A4, 5.070%, 2/15/2029(a)     866,617  
  1,028,000    

M&T Equipment Notes Series 2023-1A, Class A4, 5.750%, 7/15/2030(a)

    1,028,779  
        MMAF Equipment Finance LLC        
  2,626,000     Series 2023-A, Class A4, 5.500%, 12/13/2038(a)     2,646,096  
  736,000     Series 2020-A, Class A5, 1.560%, 10/9/2042(a)     658,561  
  1,849,000     Series 2024-A, Class A4, 5.100%, 7/13/2049(a)     1,845,689  
        Sunnova Hestia Issuer LLC        
  759,116     Series 2023-GRID1, Class 1A, 5.750%, 12/20/2050(a)     764,650  
  1,672,000     Series 2024-GRID1, Class 1A, 5.630%, 7/20/2051(a)     1,673,368  
        Verizon Master Trust        

4 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
       

BONDS & DEBENTURES (Continued)

ASSET-BACKED SECURITIES (Continued)

EQUIPMENT (Continued)

       
$ 2,555,000     Series 2022-4, Class B, 3.640%, 11/20/2028   $ 2,513,403  
  663,000     Series 2022-4, Class C, 3.890%, 11/20/2028     653,093  
  6,196,000     Series 2023-3, Class A, 4.730%, 4/21/2031(a)     6,135,945  
  8,097,000     Series 2023-6, Class A, 5.350%, 9/22/2031(a)     8,197,334  
  10,281,000     Series 2024-2, Class A, 4.830%, 12/22/2031(a)     10,227,173  
              118,858,690  
        OTHER — 10.0%        
        ABPCI Direct Lending Fund LLC        
  1,662,087     Series 2022-2A, Class A1, 7.425% (3-Month Term SOFR+210 basis points), 3/1/2032(a),(b)     1,650,688  
  6,944,936     Series 2022-2A, Class C, 8.236%, 3/1/2032(a)     6,457,624  
        ABPCI Direct Lending Fund Ltd.        
  1,062,418     Series 2020-1A, Class A, 3.199%, 12/20/2030(a)     1,047,120  
  2,708,173     Series 2020-1A, Class B, 4.935%, 12/20/2030(a)     2,640,098  
  8,058,000     American Tower Trust 1 5.490%, 3/15/2028(a)     8,081,674  
  750,413     Brazos Securitization LLC 5.014%, 9/1/2031(a)     740,542  
  290,617    

CARS-DB4 LP

Series 2020-1A, Class A1, 2.690%, 2/15/2050(a)

    284,019  
        Cleco Securitization LLC        
  1,607,713     4.016%, 3/1/2031     1,543,405  
        Cologix Data Centers US Issuer LLC        
  4,273,000     Series 2021-1A, Class A2, 3.300%, 12/26/2051(a)     3,936,299  
  3,235,000     Series 2021-1A, Class C, 5.990%, 12/26/2051(a)     2,902,596  
        Consumers 2023 Securitization Funding LLC        
  2,542,000     5.210%, 9/1/2031     2,557,887  
        DataBank Issuer        
  1,400,000     Series 2021-1A, Class A2, 2.060%, 2/27/2051(a)     1,297,489  
  1,500,000     Series 2021-1A, Class C, 4.430%, 2/27/2051(a)     1,369,218  
  512,000    

Diamond Infrastructure Funding LLC

Series 2021-1A, Class C, 3.475%, 4/15/2049(a)

    461,129  
  1,718,000    

Diamond Issuer LLC

Series 2021-1A, Class C, 3.787%, 11/20/2051(a)

    1,456,663  
        DTE Electric Securitization Funding II LLC        
  3,199,000     5.970%, 3/1/2033     3,302,967  
        Elm Trust        
  1,642,951     Series 2020-3A, Class A2, 2.954%, 8/20/2029(a)     1,580,639  
  281,355     Series 2020-3A, Class B, 4.481%, 8/20/2029(a)     267,158  
  127,968     Series 2020-4A, Class A2, 2.286%, 10/20/2029(a)     122,516  
  454,789     Series 2020-4A, Class B, 3.866%, 10/20/2029(a)     429,080  

5 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
       

BONDS & DEBENTURES (Continued)

ASSET-BACKED SECURITIES (Continued)

       
      OTHER (Continued)        
        FCI Funding LLC        
$ 40,982     Series 2021-1A, Class A, 1.130%, 4/15/2033(a)   $ 40,413  
        Golub Capital Partners Funding Ltd.        
  1,205,483     Series 2020-1A, Class A2, 3.208%, 1/22/2029(a)     1,181,132  
  829,389     Series 2020-1A, Class B, 4.496%, 1/22/2029(a)     800,098  
  3,337,982     Series 2021-1A, Class A2, 2.773%, 4/20/2029(a)     3,223,082  
  1,862,034     Series 2021-1A, Class B, 3.816%, 4/20/2029(a)     1,784,817  
  4,842,307     Series 2021-2A, Class A, 2.944%, 10/19/2029(a)     4,522,216  
  5,634,522     Series 2021-2A, Class B, 3.993%, 10/19/2029(a)     4,894,597  
        Hotwire Funding LLC        
  1,250,000     Series 2021-1, Class C, 4.459%, 11/20/2051(a)     1,124,094  
  1,385,000     Series 2023-1A, Class A2, 5.687%, 5/20/2053(a)     1,384,288  
  5,724,973     Kansas Gas Service Securitization I LLC 5.486%, 8/1/2032     5,803,707  
        MetroNet Infrastructure Issuer LLC        
  3,800,000     Series 2022-1A, Class A2, 6.350%, 10/20/2052(a)     3,827,753  
        Monroe Capital Funding Ltd.        
  2,462,766     Series 2021-1A, Class A2, 2.815%, 4/22/2031(a)     2,352,074  
  845,331     Series 2021-1A, Class B, 3.908%, 4/22/2031(a)     812,437  
        Monroe Capital Income Plus Funding LLC        
  3,700,000     Series 2022-1A, Class A, 4.050%, 4/30/2032(a)     3,466,049  
        Oklahoma Development Finance Authority        
  2,059,351     4.135%, 12/1/2033     1,992,303  
  774,250     4.285%, 2/1/2034     757,322  
  1,754,508     3.877%, 5/1/2037     1,650,042  
        PFS Financing Corp.        
  879,000     Series 2022-C, Class B, 4.390%, 5/15/2027(a)     867,246  
  5,205,000     Series 2022-D, Class A, 4.270%, 8/15/2027(a)     5,133,066  
  3,930,216     PG&E Recovery Funding LLC 5.045%, 7/15/2032     3,939,159  
  3,465,452     PG&E Wildfire Recovery Funding LLC 4.022%, 6/1/2031     3,373,463  
        SBA Tower Trust        
  1,380,000     1.631%, 11/15/2026(a)     1,250,517  
  1,767,000     2.328%, 1/15/2028(a)     1,583,463  
  1,049,000     6.599%, 1/15/2028(a)     1,073,017  
        SpringCastle America Funding LLC        
  870,547     Series 2020-AA, Class A, 1.970%, 9/25/2037(a)     804,482  
  770,212     Texas Natural Gas Securitization Finance Corp. 5.102%, 4/1/2035     773,810  
        TVEST LLC        
  32,324     Series 2020-A, Class A, 4.500%, 7/15/2032(a)     32,242  

6 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
        BONDS & DEBENTURES (Continued)        
        ASSET-BACKED SECURITIES (Continued)        
        OTHER (Continued)        
        Vantage Data Centers Issuer LLC        
$ 1,344,000     Series 2020-1A, Class A2, 1.645%, 9/15/2045(a)   $ 1,272,694  
        VCP RRL Ltd.        
  1,538,256     Series 2021-1A, Class A, 2.152%, 10/20/2031(a)     1,458,650  
  2,426,382     Series 2021-1A, Class B, 2.848%, 10/20/2031(a)     2,252,204  
  3,766,730     Series 2021-1A, Class C, 5.425%, 10/20/2031(a)     3,427,389  
  5,538,000     Virginia Power Fuel Securitization LLC 4.877%, 5/1/2031     5,525,551  
        WEPCo Environmental Trust Finance LLC        
  888,724     Series 2021-1, Class A, 1.578%, 12/15/2035     756,603  
              115,268,791  
        TOTAL ASSET-BACKED SECURITIES        
        (Cost $419,362,235)     417,000,124  
        COMMERCIAL MORTGAGE-BACKED SECURITIES — 16.7%        
        AGENCY — 10.8%        
        Federal Home Loan Mortgage Corp.        
  784,000     Series K068, Class A2, 3.244%, 8/25/2027     745,539  
  1,135,000     Series K072, Class A2, 3.444%, 12/25/2027     1,082,388  
  3,064,000     Series K073, Class A2, 3.350%, 1/25/2028     2,911,971  
  1,691,000     Series K076, Class A2, 3.900%, 4/25/2028     1,633,395  
  377,000     Series K077, Class A2, 3.850%, 5/25/2028(b)     363,344  
  3,220,000     Series K079, Class A2, 3.926%, 6/25/2028     3,109,415  
  2,683,000     Series K080, Class A2, 3.926%, 7/25/2028(b)     2,592,752  
  7,407,000     Series K081, Class A2, 3.900%, 8/25/2028(b)     7,141,356  
  5,016,000     Series K082, Class A2, 3.920%, 9/25/2028(b)     4,835,978  
  2,785,000     Series K083, Class A2, 4.050%, 9/25/2028(b)     2,712,772  
  7,311,000     Series K084, Class A2, 3.780%, 10/25/2028(b)     7,048,085  
  2,867,000     Series K085, Class A2, 4.060%, 10/25/2028(b)     2,792,521  
  3,232,000     Series K089, Class A2, 3.563%, 1/25/2029     3,061,423  
  509,000     Series K088, Class A2, 3.690%, 1/25/2029     485,530  
  5,136,000     Series K090, Class A2, 3.422%, 2/25/2029     4,847,424  
  2,866,000     Series K091, Class A2, 3.505%, 3/25/2029     2,704,924  
  269,000     Series K092, Class A2, 3.298%, 4/25/2029     251,168  
  560,000     Series K093, Class A2, 2.982%, 5/25/2029     517,282  
  9,192,000     Series K095, Class A2, 2.785%, 6/25/2029     8,397,866  
  8,032,000     Series K094, Class A2, 2.903%, 6/25/2029     7,392,122  
  4,234,000     Series K097, Class A2, 2.508%, 7/25/2029     3,825,346  
  10,423,000     Series K096, Class A2, 2.519%, 7/25/2029     9,417,466  
  1,402,000     Series K099, Class A2, 2.595%, 9/25/2029     1,266,577  
  4,314,000     Series K102, Class A2, 2.537%, 10/25/2029     3,871,965  
  6,001,000     Series K103, Class A2, 2.651%, 11/25/2029     5,428,888  
  614,000     Series K107, Class A2, 1.639%, 1/25/2030     524,736  

7 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
        COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued)        
      AGENCY (Continued)        
$ 150,000     Series K105, Class A2, 1.872%, 1/25/2030   $ 129,470  
  1,553,000     Series K106, Class A2, 2.069%, 1/25/2030     1,355,928  
  150,000     Series K104, Class A2, 2.253%, 1/25/2030     132,478  
  1,249,000     Series K108, Class A2, 1.517%, 3/25/2030     1,053,027  
  7,921,000     Series K751, Class A2, 4.412%, 3/25/2030     7,787,766  
  1,920,000     Series K109, Class A2, 1.558%, 4/25/2030     1,618,548  
  2,981,000     Series K151, Class A3, 3.511%, 4/25/2030     2,782,024  
  823,000     Series K114, Class A2, 1.366%, 6/25/2030     678,982  
  8,234,000     Series K117, Class A2, 1.406%, 8/25/2030     6,781,973  
  2,108,000     Series K120, Class A2, 1.500%, 10/25/2030     1,737,418  
  8,889,000     Series K754, Class A2, 4.940%, 11/25/2030(b)     8,921,653  
        Freddie Mac Multifamily Structured Pass-Through Certificates        
  1,000,000     Series K113, Class A2, 1.341%, 6/25/2030     826,652  
  1,808,000     Series K115, Class A2, 1.383%, 6/25/2030     1,494,461  
              124,262,613  
        AGENCY STRIPPED — 0.1%        
        Government National Mortgage Association        
  1,294,747     Series 2015-19, Class IO, 0.294%, 1/16/2057(b)     17,847  
  1,221,150     Series 2015-7, Class IO, 0.454%, 1/16/2057(b)     23,052  
  2,105,117     Series 2020-43, Class IO, 1.261%, 11/16/2061(b)     152,942  
  2,730,731     Series 2020-71, Class IO, 1.102%, 1/16/2062(b)     181,772  
  5,117,464     Series 2020-75, Class IO, 0.870%, 2/16/2062(b)     297,245  
  3,389,175     Series 2020-42, Class IO, 0.938%, 3/16/2062(b)     202,575  
              875,433  
        NON-AGENCY — 5.8%        
        A10 Bridge Asset Financing LLC        
  987,878     Series 2021-D, Class A1FX, 2.589%, 10/1/2038(a)     946,426  
        ACRES Commercial Realty Ltd.        
  651,122     Series 2021-FL2, Class A, 6.843% (1-Month Term SOFR+151.448 basis points), 1/15/2037(a),(b)     647,565  
  6,960,000     Arbor Multifamily Mortgage Securities Trust Series 2020-MF1, Class A5, 2.756%, 5/15/2053(a)     6,107,439  
        Arbor Realty Commercial Real Estate Notes Ltd.        
  3,148,000     Series 2021-FL4, Class A, 6.793% (1-Month Term SOFR+146.448 basis points), 11/15/2036(a),(b)     3,138,293  
  3,442,000     Series 2022-FL1, Class A, 6.783% (30-Day SOFR Average+145 basis points), 1/15/2037(a),(b)     3,427,336  
  2,522,665     Series 2022-FL2, Class A, 7.179% (1-Month Term SOFR+185 basis points), 5/15/2037(a),(b)     2,519,510  
        BBCMS Trust        
  634,899     Series 2015-SRCH, Class A1, 3.312%, 8/10/2035(a)     597,116  

8 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
        COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued)        
        NON-AGENCY (Continued)        
        BX Commercial Mortgage Trust        
$ 1,410,000     Series 2021-VOLT, Class E, 7.443% (1-Month Term SOFR+211.448 basis points), 9/15/2036(a),(b)   $ 1,377,389  
  2,319,000     Series 2021-VOLT, Class F, 7.843% (1-Month Term SOFR+251.448 basis points), 9/15/2036(a),(b)     2,288,342  
        BX Trust        
  5,125,000     Series 2019-OC11, Class A, 3.202%, 12/9/2041(a)     4,558,534  
        BXMT Ltd.        
  2,791,298     Series 2021-FL4, Class A, 6.493% (1-Month Term SOFR+116.448 basis points), 5/15/2038(a),(b)     2,651,637  
        Greystone CRE Notes Ltd.        
  3,000,000     Series 2021-FL3, Class A, 6.463% (1-Month Term SOFR+113.448 basis points), 7/15/2039(a),(b)     2,984,998  
        Hawaii Hotel Trust        
  1,384,000     Series 2019-MAUI, Class C, 7.276% (1-Month Term SOFR+194.701 basis points), 5/15/2038(a),(b)     1,376,213  
        HERA Commercial Mortgage Ltd.        
  2,041,037     Series 2021-FL1, Class A, 6.497% (1-Month Term SOFR+116.448 basis points), 2/18/2038(a),(b)     2,021,597  
        Independence Plaza Trust        
  819,000     Series 2018-INDP, Class A, 3.763%, 7/10/2035(a)     782,201  
        JPMBB Commercial Mortgage Securities Trust        
  519,825     Series 2015-C31, Class A3, 3.802%, 8/15/2048     506,224  
        KREF Ltd.        
  832,313     Series 2021-FL2, Class A, 6.513% (1-Month Term SOFR+118.448 basis points), 2/15/2039(a),(b)     815,654  
        Manhattan West Mortgage Trust        
  4,991,000     Series 2020-1MW, Class A, 2.130%, 9/10/2039(a)     4,439,565  
        MF1 Ltd.        
  207,879     Series 2020-FL4, Class A, 7.143% (1-Month Term SOFR+181.448 basis points), 11/15/2035(a),(b)     207,877  
  2,269,553     Series 2021-FL7, Class A, 6.527% (1-Month Term SOFR+119.448 basis points), 10/16/2036(a),(b)     2,256,795  
        Progress Residential Trust        
  4,815,000     Series 2024-SFR4, Class A, 3.100%, 7/9/2029(a)     4,341,685  
  1,423,155     Series 2021-SFR11, Class A, 2.283%, 1/17/2039(a)     1,245,537  
  1,262,304     Series 2021-SFR7, Class A, 1.692%, 8/17/2040(a)     1,098,047  
  1,191,000     Series 2023-SFR2, Class A, 4.500%, 10/17/2040(a)     1,152,981  
  725,507     Series 2021-SFR9, Class A, 2.013%, 11/17/2040(a)     636,636  
  4,396,267     Series 2021-SFR10, Class A, 2.393%, 12/17/2040(a)     3,890,916  
  2,117,000     Series 2024-SFR3, Class A, 3.000%, 6/17/2041(a)     1,900,196  
        SLG Office Trust        
  5,585,000     Series 2021-OVA, Class A, 2.585%, 7/15/2041(a)     4,556,209  

9 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
        COMMERCIAL MORTGAGE-BACKED SECURITIES (Continued)        
        NON-AGENCY (Continued)        
        STWD Ltd.        
$ 1,285,753     Series 2021-FL2, Class A, 6.647% (1-Month Term SOFR+131.448 basis points), 4/18/2038(a),(b)   $ 1,263,349  
        TRTX Issuer Ltd.        
  2,330,695    

Series 2022-FL5, Class A, 6.979% (1-Month Term SOFR+165 basis points),

2/15/2039(a),(b)

    2,314,633  
        VMC Finance LLC        
  654,795    

Series 2021-HT1, Class A, 7.097% (1-Month Term SOFR+176.448 basis

points), 1/18/2037(a),(b)

    641,687  
              66,692,587  
        TOTAL COMMERCIAL MORTGAGE-BACKED SECURITIES        
        (Cost $191,922,366)     191,830,633  
        CONVERTIBLE BONDS — 0.3%        
  3,400,000     Upwork, Inc. 0.250%, 8/15/2026     3,016,093  
        TOTAL CONVERTIBLE BONDS        
        (Cost $2,888,125)     3,016,093  
        CORPORATE BANK DEBT — 1.3%        
        Axiom Global, Inc.        
  3,023,917     10.194% (1-Month USD Libor+475 basis points), 10/1/2026(b),(c),(d)     2,925,640  
  89,489     Capstone Acquisition Holdings, Inc. 2020 Delayed Draw Term Loan 10.194% (1-Month Term SOFR+475 basis points), 11/12/2027(b),(c),(d),(e)     85,125  
        Capstone Acquisition Holdings, Inc. 2020 Term Loan        
  1,757,306     10.194% (1-Month Term SOFR+475 basis points), 11/12/2027(b),(c),(d),(e)     1,671,618  
        Farfetch U.S. Holdings, Inc.        
  2,992,740     11.575% (3-Month Term SOFR+625 basis points), 10/20/2027(b),(c),(d)     2,775,766  
        Frontier Communications Holdings LLC        
  1,090,372     9.207% (1-Month Term SOFR+375 basis points), 10/8/2027(b),(c),(d)     1,087,647  
        JC Penney Corp., Inc.        
  471,014     5.568% (3-Month USD Libor+425 basis points), 6/23/2025*,(b),(c),(d),(e),(f)     47  
        Lealand Finance Company B.V. Senior Exit LC        
  405,491     5.250%, 6/30/2027(b),(c),(d),(e),(g),(h)     (141,922 )
        McDermott Tanks Secured LC        
  218,452     10.346% (3-Month Term SOFR+0.000 basis points),12/31/2026(b),(c),(d),(e),(g),(h)     (21,845 )
        McDermott Technology Americas, Inc.        
  12,993     9.457% (1-Month Term SOFR+400 basis points), 12/31/2027(b),(c),(d),(i)     5,717  
        Polaris Newco, LLC Term Loan B        
  2,634,473     9.343% (1-Month Term SOFR+400 basis points), 6/5/2028(b),(c),(d)     2,632,128  
        WH Borrower LLC, Term Loan B        
  2,776,340     10.817% (1-Month Term SOFR+550 basis points), 2/16/2027(b),(c),(d)     2,706,931  

10 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
        CORPORATE BANK DEBT (Continued)        
$ 810,957    

Windstream Services LLC

11.694% (1-Month Term SOFR+625 basis points), 9/21/2027(b),(c),(d)

  $ 807,243  
        TOTAL CORPORATE BANK DEBT        
        (Cost $14,670,171)     14,534,095  
        CORPORATE BONDS — 6.4%        
        COMMUNICATIONS — 0.9%        
  2,633,000     CCO Holdings LLC / CCO Holdings Capital Corp. 6.375%, 9/1/2029(a)     2,487,369  
  1,119,000     Consolidated Communications, Inc. 6.500%, 10/1/2028(a)     954,776  
  2,000,000     DISH Network Corp. 11.750%, 11/15/2027(a)     1,958,400  
        Frontier Communications Holdings LLC        
  3,066,000     5.875%, 10/15/2027(a)     2,985,517  
  1,636,000     6.000%, 1/15/2030(a)     1,420,882  
              9,806,944  
        CONSUMER DISCRETIONARY — 1.1%        
  1,805,339    

Air Canada Pass-Through Trust

Series 2017-1, Class AA, 3.300%, 7/15/2031(a)

    1,646,018  
  1,834,000     Amazon.com, Inc. 1.650%, 5/12/2028     1,632,952  
  8,557,000     Cimpress PLC 7.000%, 6/15/2026     8,544,849  
  979,000     VT Topco, Inc. 8.500%, 8/15/2030(a)     1,027,950  
              12,851,769  
        FINANCIALS — 3.6%        
  3,644,000     Apollo Debt Solutions BDC Senior Notes 8.620%, 9/28/2028(d),(e)     3,644,000  
  4,700,000     Ares Capital Corp. 2.875%, 6/15/2028     4,157,424  
  4,500,000     Blackstone Private Credit Fund 4.000%, 1/15/2029     4,103,114  
        Blue Owl Credit Income Corp.        
  5,122,000     7.750%, 9/16/2027     5,256,078  
  5,727,000     7.950%, 6/13/2028     5,922,543  
  2,981,000     HPS Corporate Lending Fund 6.750%, 1/30/2029(a)     2,999,141  
  10,563,000     Midcap Financial Issuer Trust 6.500%, 5/1/2028(a)     9,955,627  
  4,032,000    

Oaktree Strategic Credit Fund 8.400%, 11/14/2028(a)

    4,254,265  

11 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
       

CORPORATE BONDS (Continued)

FINANCIALS (Continued)

       
$ 1,557,000     OCREDIT BDC Senior Notes 7.770%, 3/7/2029(d),(e)   $ 1,557,000  
              41,849,192  
        HEALTH CARE — 0.4%        
  4,410,000    

Heartland Dental LLC/Heartland Dental Finance Corp.

10.331% (1-Month Term SOFR+500 basis points), 4/30/2028(a),(d)

    4,681,039  
        TECHNOLOGY — 0.4%        
  5,000,000     Hlend Senior Notes 8.170%, 3/15/2028(d),(e)     5,000,000  
        TOTAL CORPORATE BONDS        
        (Cost $72,554,487)     74,188,944  
        RESIDENTIAL MORTGAGE-BACKED SECURITIES — 19.9%        
        AGENCY COLLATERALIZED MORTGAGE OBLIGATION — 0.0%        
        Federal National Mortgage Association        
  63,223     Series 2012-144, Class PD, 3.500%, 4/25/2042     60,572  
  137,633     Freddie Mac REMICS
Series 4162, Class P, 3.000%, 2/15/2033
    131,118  
              191,690  
        AGENCY POOL ADJUSTABLE RATE — 1.7%        
        Fannie Mae Pool        
  340,144     1.726% (30-Day SOFR Average+211 basis points), 7/1/2051(b)     290,647  
  3,079,441     1.971% (30-Day SOFR Average+207.4 basis points), 8/1/2051(b)     2,674,686  
  237,323     1.609% (30-Day SOFR Average+209.5 basis points), 9/1/2051(b)     201,029  
  2,778,036     1.892% (30-Day SOFR Average+233 basis points), 4/1/2052(b)     2,377,654  
        Freddie Mac Non Gold Pool        
  1,038,396     1.684% (30-Day SOFR Average+213 basis points), 9/1/2051(b)     878,605  
  1,403,611     2.563% (30-Day SOFR Average+213 basis points), 3/1/2052(b)     1,231,082  
  959,830     2.545% (30-Day SOFR Average+214 basis points), 5/1/2052(b)     841,959  
  9,758,418     2.156% (30-Day SOFR Average+217.6 basis points), 7/1/2052(b)     8,423,693  
  1,253,434     3.365% (30-Day SOFR Average+221.5 basis points), 11/1/2052(b)     1,146,317  
  1,408,233     2.162% (30-Day SOFR Average+217.7 basis points), 5/1/2053(b)     1,215,870  
              19,281,542  
        AGENCY POOL FIXED RATE — 12.4%        
        Fannie Mae Pool        
  8,399,353     1.500%, 12/1/2035     7,229,254  
  1,044,052     1.500%, 3/1/2036     895,997  
  2,061,079     1.000%, 4/1/2036     1,718,070  
  674,558     1.500%, 4/1/2036     578,900  
  1,103,278     1.500%, 4/1/2036     946,824  
  12,110,675     1.500%, 8/1/2036     10,393,280  
  868,050     1.500%, 8/1/2036     743,055  

12 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
       

RESIDENTIAL MORTGAGE-BACKED SECURITIES (Continued)

AGENCY POOL FIXED RATE (Continued)

       
$ 1,492,697     1.500%, 9/1/2036   $ 1,277,755  
  3,685,391     1.500%, 10/1/2036     3,154,711  
  11,840,281     1.000%, 12/1/2036     9,794,825  
  19,528,833     1.000%, 3/1/2037     16,155,149  
  483,626     1.500%, 11/1/2040     394,050  
  767,818     2.000%, 11/1/2040     644,415  
  1,983,490     1.500%, 12/1/2040     1,616,114  
  642,233     1.500%, 2/1/2041     523,280  
  747,875     1.500%, 3/1/2041     607,252  
  1,781,529     2.500%, 5/1/2041     1,537,482  
  1,066,131     2.000%, 7/1/2041     888,453  
  7,068,015     1.500%, 10/1/2041     5,730,185  
  10,483,257     1.500%, 11/1/2041     8,498,992  
  2,533,218     2.000%, 8/1/2042     2,111,040  
  8,272,355     2.000%, 8/1/2042     6,875,614  
  3,651,243     3.500%, 4/1/2044     3,348,670  
  5,733,120     4.000%, 6/1/2045     5,442,602  
  1,242,890     4.000%, 7/1/2046     1,179,473  
  1,414,054     4.000%, 10/1/2046     1,341,631  
  777,104     4.000%, 10/1/2046     737,743  
  1,186,909     4.000%, 3/1/2048     1,125,343  
        Freddie Mac Pool        
  11,252,853     1.500%, 11/1/2035     9,730,952  
  1,989,753     1.500%, 6/1/2036     1,702,615  
  712,569     1.000%, 7/1/2036     592,019  
  3,563,588     1.500%, 8/1/2036     3,050,446  
  2,687,113     1.500%, 10/1/2036     2,300,180  
  794,591     1.500%, 11/1/2036     681,911  
  425,893     4.000%, 10/1/2040     404,596  
  391,565     4.000%, 11/1/2040     372,112  
  861,812     2.000%, 12/1/2040     723,302  
  569,173     1.500%, 2/1/2041     463,752  
  4,953,989     1.500%, 3/1/2041     4,022,493  
  1,306,252     1.500%, 5/1/2041     1,060,638  
  5,872,782     1.500%, 6/1/2041     4,768,526  
  1,572,206     1.500%, 10/1/2041     1,274,620  
  600,594     1.500%, 11/1/2041     487,665  
  1,238,634     1.500%, 11/1/2041     1,004,186  
  9,232,531     1.500%, 12/1/2041     7,470,576  
  744,331     1.500%, 1/1/2042     603,444  
  4,555,984     2.000%, 5/1/2042     3,796,698  

13 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
       

RESIDENTIAL MORTGAGE-BACKED SECURITIES (Continued)

AGENCY POOL FIXED RATE (Continued)

       
$ 3,063,818     2.000%, 8/1/2042   $ 2,553,211  
              142,554,101  
        AGENCY STRIPPED — 0.0%        
  60,463     Fannie Mae Interest Strip
Series 284, Class 1, 0.000%, 7/25/2027
    55,999  
                 
        NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATION — 5.8%        
        GS Mortgage-Backed Securities Trust        
  2,386,543     Series 2021-PJ6, Class A8, 2.500%, 11/25/2051(a),(b)     2,052,471  
  4,332,041     Series 2021-PJ7, Class A8, 2.500%, 1/25/2052(a),(b)     3,721,410  
  2,003,917     Series 2022-PJ2, Class A24, 3.000%, 6/25/2052(a),(b)     1,755,281  
  10,288,306     Series 2022-PJ5, Class A22, 2.500%, 10/25/2052(a),(b)     8,748,479  
        J.P. Morgan Mortgage Trust        
  745,822     Series 2021-6, Class A4, 2.500%, 10/25/2051(a),(b)     645,646  
  2,376,394     Series 2021-10, Class A4A, 2.000%, 12/25/2051(a),(b)     1,995,290  
  6,392,093     Series 2021-10, Class A4, 2.500%, 12/25/2051(a),(b)     5,507,536  
  8,028,855     Series 2021-11, Class A4, 2.500%, 1/25/2052(a),(b)     6,927,280  
  1,893,430     Series 2021-13, Class A4, 2.500%, 4/25/2052(a),(b)     1,635,221  
  486,844     Series 2021-15, Class A4, 2.500%, 6/25/2052(a),(b)     417,220  
  439,778     Series 2022-3, Class A4A, 2.500%, 8/25/2052(a),(b)     375,922  
  4,152,358     Series 2024-3, Class A4, 3.000%, 5/25/2054(a),(b)     3,632,903  
        PRET LLC        
  648,562     Series 2021-NPL6, Class A1, 2.487%, 7/25/2051(a),(j)     632,505  
  3,732,060     Series 2021-NPL5, Class A1, 2.487%, 10/25/2051(a),(j)     3,634,593  
        Pretium Mortgage Credit Partners LLC        
  1,340,133     Series 2021-NPL2, Class A1, 4.992%, 6/27/2060(a),(j)     1,314,082  
  3,058,147     Series 2021-NPL4, Class A1, 2.363%, 10/27/2060(a),(j)     2,967,795  
  1,129,494     Series 2024-RPL1, Class A1, 3.900%, 10/25/2063(a),(b)     1,049,745  
        PRPM LLC        
  1,880,619     Series 2021-9, Class A1, 2.363%, 10/25/2026(a),(j)     1,826,013  
  2,463,305     Series 2021-10, Class A1, 2.487%, 10/25/2026(a),(j)     2,394,573  
  1,930,698     Series 2021-11, Class A1, 2.487%, 11/25/2026(a),(j)     1,886,111  
        Towd Point Mortgage Trust        
  279,578     Series 2018-2, Class A1, 3.250%, 3/25/2058(a),(b)     270,215  
  4,434,089     Series 2019-4, Class A1, 2.900%, 10/25/2059(a),(b)     4,137,531  
  685,426     Series 2020-4, Class A1, 1.750%, 10/25/2060(a)     601,666  
  1,815,608     Series 2023-1, Class A1, 3.750%, 1/25/2063(a)     1,691,620  
        VCAT LLC        
  2,056,985     Series 2021-NPL1, Class A1, 5.289%, 12/26/2050(a),(j)     2,042,333  
  1,095,692     Series 2021-NPL2, Class A1, 5.115%, 3/27/2051(a),(j)     1,080,341  
        VOLT LLC        
  2,383,421     Series 2021-NPL3, Class A1, 5.239%, 2/27/2051(a),(j)     2,344,945  

14 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
       

RESIDENTIAL MORTGAGE-BACKED SECURITIES (Continued)

NON-AGENCY COLLATERALIZED MORTGAGE OBLIGATION (Continued)

       
$ 622,285     Series 2021-NPL4, Class A1, 5.240%, 3/27/2051(a),(j)   $ 609,557  
  599,648     Series 2021-NPL9, Class A1, 4.992%, 5/25/2051(a),(j)     587,852  
              66,486,136  
        TOTAL RESIDENTIAL MORTGAGE-BACKED SECURITIES        
        (Cost $228,364,674)     228,569,468  
        U.S. TREASURY NOTES & BONDS — 11.5%        
        U.S. Treasury Note        
  26,265,000     4.000%, 1/31/2029     25,852,789  
  42,690,000     4.250%, 2/28/2029     42,489,221  
  53,642,000     4.125%, 3/31/2029     53,082,884  
  10,896,000     4.625%, 9/30/2030     11,047,523  
        TOTAL U.S. TREASURY NOTES & BONDS        
        (Cost $132,232,073)     132,472,417  
        TOTAL BONDS & DEBENTURES        
        (Cost $1,061,994,131)     1,061,611,774  

 

Number
of Shares
           
        COMMON STOCKS — 0.2%        
        REAL ESTATE SERVICES — 0.1%        
  58,520     Copper Property CTL Pass Through Trust(d)     533,117  
        SOFTWARE — 0.0%        
  11,258     Windstream Holdings, Inc.(e)     146,354  
        TRANSPORTATION & LOGISTICS — 0.1%        
  75,292     PHI Group, Inc.(d),(e)     1,505,840  
        TOTAL COMMON STOCKS        
        (Cost $1,928,416)     2,185,311  
        SHORT-TERM INVESTMENTS — 7.1%        
        MONEY MARKET INVESTMENTS — 1.1%        
  12,405,456     Morgan Stanley Institutional Liquidity Treasury Portfolio - Institutional Class, 5.06%(k)     12,405,456  

15 

 

FPA Flexible Fixed Income Fund

SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024 (Unaudited)

 

Principal
Amount
        Value  
        TREASURY BILLS — 6.0%        
$ 69,562,000     U.S. Treasury Bill, 1.76%, 7/2/2024(l)   $ 69,551,972  
        TOTAL SHORT-TERM INVESTMENTS        
        (Cost $81,957,428)     81,957,428  
                 
        TOTAL INVESTMENTS — 99.7%        
        (Cost $1,145,879,975)     1,145,754,513  
        Other Assets in Excess of Liabilities — 0.3%     3,417,409  
        TOTAL NET ASSETS — 100.0%   $ 1,149,171,922  

 

BDC – Business Development Company

IO – Interest Only

LLC – Limited Liability Company

LP – Limited Partnership

PLC – Public Limited Company

US – United States

 

* Non-income producing security.
(a) Security exempt from registration under Rule 144A of the Securities Act of 1933. These securities are restricted and may be resold in transactions exempt from registration normally to qualified institutional buyers. The total value of these securities is $475,895,577, which represents 41.41% of Net Assets.
(b) Variable or floating rate security.
(c) Bank loans generally pay interest at rates which are periodically determined by reference to a base lending rate plus a premium. All loans carry a variable rate of interest. These base lending rates are generally (i) the Prime Rate offered by one or more major United States banks, (ii) the lending rate offered by one or more European banks such as the London Interbank Offered Rate (“LIBOR”), (iii) the Certificate of Deposit rate, or (iv) Secured Overnight Financing Rate (“SOFR”). Bank Loans, while exempt from registration, under the Securities Act of 1933, contain certain restrictions on resale and cannot be sold publicly. Floating rate bank loans often require prepayments from excess cash flow or permit the borrower to repay at its election. The degree to which borrowers repay, whether as a contractual requirement or at their election, cannot be predicted with accuracy.
(d) Restricted securities. These restricted securities constituted 2.74% of total net assets at June 30, 2024, most of which are considered liquid by the Adviser. These securities are not registered and may not be sold to the public. There are legal and/or contractual restrictions on resale. The Fund does not have the right to demand that such securities be registered. The values of these securities are determined by valuations provided by pricing services, brokers, dealers, market makers, or in good faith under policies adopted by authority of the Fund’s Board of Trustees.
(e) The value of these securities was determined using significant unobservable inputs and is reported as Level 3 securities in the Fair Value Hierarchy.
(f) Security is in default.
(g) As of June 30, 2024, the Fund had entered into commitments to fund various delayed draw debt-related investments. Such commitments are subject to the satisfaction of certain conditions set forth in the documents governing those investments and there can be no assurance that such conditions will be satisfied. See Note 8 of the Notes to Financial Statements for further information on these commitments and contingencies.
(h) All or a portion of the loan is unfunded.
(i) Payment-in-kind interest is generally paid by issuing additional par/shares of the security rather than paying cash.
(j) Step rate security.
(k) The rate is the annualized seven-day yield at period end.
(l) Treasury bill discount rate.

 

See accompanying Notes to Financial Statements.

16 

 

FPA Flexible Fixed Income Fund

STATEMENT OF ASSETS AND LIABILITIES

As of June 30, 2024 (Unaudited)

 

Assets:      
Investments, at value (cost $1,145,879,975)   $ 1,145,754,513  
Cash     2,647  
Receivables:        
Investment securities sold     1,528,439  
Fund shares sold     505,096  
Dividends and interest     7,472,793  
Due from Advisor     55,463  
Prepaid expenses     17,338  
Total assets     1,155,336,289  
         
Liabilities:        
Payables:        
Investment securities purchased     4,270,812  
Fund shares redeemed     1,292,144  
Advisory fees     472,628  
Shareholder servicing fees (Note 6)     62,867  
Fund services fees     43,095  
Legal fees     6,996  
Auditing fees     5,196  
Trustees’ deferred compensation (Note 3)     2,131  
Trustees’ fees and expenses     1,968  
Chief Compliance Officer fees     1,627  
Accrued other expenses     4,903  
Total liabilities     6,164,367  
Commitments and contingencies (Notes 3 and 8)        
Net Assets   $ 1,149,171,922  
         
Components of Net Assets:        
Capital Stock (no par value with an unlimited number of shares authorized)   $ 1,157,709,133  
Total distributable earnings (accumulated deficit)     (8,537,211 )
Net Assets   $ 1,149,171,922  
         
Maximum Offering Price per Share:        
Institutional Class Shares:        
Net assets applicable to shares outstanding   $ 1,090,380,700  
Shares of beneficial interest issued and outstanding     108,465,869  
Redemption price per share   $ 10.05  
         
Advisor Class Shares:        
Net assets applicable to shares outstanding   $ 58,791,222  
Shares of beneficial interest issued and outstanding     5,849,034  
Redemption price per share   $ 10.05  

 

See accompanying Notes to Financial Statements.

17 

 

FPA Flexible Fixed Income Fund

STATEMENT OF OPERATIONS

For the Six Months Ended June 30, 2024 (Unaudited)

 

Investment income:      
Interest   $ 30,534,220  
Dividends     51,121  
Total investment income     30,585,341  
         
Expenses:        
Advisory fees     2,671,358  
Shareholder servicing fees - Institutional Class (Note 6)     301,630  
Shareholder servicing fees - Advisor Class (Note 6)     30,424  
Fund services fees     177,288  
Registration fees     28,637  
Insurance fees     17,900  
Trustees’ fees and expenses     17,820  
Shareholder reporting fees     16,491  
Auditing fees     6,132  
Legal fees     3,116  
Chief Compliance Officer fees     2,518  
Miscellaneous     1,061  
Total expenses     3,274,375  
Advisory fees waived     (314,599 )
Net expenses     2,959,776  
Net investment income (loss)     27,625,565  
         
Realized and Unrealized Gain (Loss):        
Net realized gain (loss) on:        
Investments     (2,666,718 )
Total realized gain (loss)     (2,666,718 )
Net change in unrealized appreciation (depreciation) on:        
Investments     1,088,714  
Net change in unrealized appreciation (depreciation)     1,088,714  
Net realized and unrealized gain (loss)     (1,578,004 )
         
Net Increase (Decrease) in Net Assets from Operations   $ 26,047,561  

 

See accompanying Notes to Financial Statements.

18 

 

FPA Flexible Fixed Income Fund

STATEMENTS OF CHANGES IN NET ASSETS

 

 

   

For the

 Six Months Ended

June 30, 2024

(Unaudited)

   

For the

 Year Ended

December 31, 2023

 
Increase (Decrease) in Net Assets from:                
Operations:                
Net investment income (loss)   $ 27,625,565     $ 41,171,837  
Total realized gain (loss) on investments     (2,666,718 )     (7,223,180 )
Net change in unrealized appreciation (depreciation) on investments     1,088,714       36,963,828  
Net increase (decrease) in net assets resulting from operations     26,047,561       70,912,485  
                 
Distributions to Shareholders:                
Distributions:                
Institutional Class     (23,226,836 )     (38,390,291 )
Advisor Class     (1,273,461 )     (1,690,759 )
Total distributions to shareholders     (24,500,297 )     (40,081,050 )
                 
Capital Transactions:                
Net proceeds from shares sold:                
Institutional Class     267,495,283       412,773,234  
Advisor Class     16,345,492       60,510,395  
Reinvestment of distributions:                
Institutional Class     19,178,983       31,521,691  
Advisor Class     451,490       498,920  
Cost of shares redeemed:                
Institutional Class     (106,608,766 )     (249,382,045 )
Advisor Class     (6,982,771 )     (14,406,012 )
Net increase (decrease) in net assets from capital transactions     189,879,711       241,516,183  
                 
Total increase (decrease) in net assets     191,426,975       272,347,618  
                 
Net Assets:                
Beginning of period     957,744,947       685,397,329  
End of period   $ 1,149,171,922     $ 957,744,947  
Capital Share Transactions:                
Shares sold:                
Institutional Class     26,637,837       42,016,261  
Advisor Class     1,628,488       6,177,559  
Shares reinvested:                
Institutional Class     1,918,093       3,216,171  
Advisor Class     45,156       50,873  
Shares redeemed:                
Institutional Class     (10,627,401 )     (25,424,911 )
Advisor Class     (697,618 )     (1,467,314 )
Net increase (decrease) in capital share transactions     18,904,555       24,568,639  

 

See accompanying Notes to Financial Statements.

19 

 

FPA Flexible Fixed Income Fund

FINANCIAL HIGHLIGHTS

Institutional Class

 

Per share operating performance.

For a capital share outstanding throughout each period.

 

    For the
Six Months
Ended
June 30, 2024
    For the
Year Ended
December 31,
 
     

(Unaudited)

      2023       20221       20211       20201       20191  
Net asset value, beginning of period   $ 10.04     $ 9.68     $ 10.24     $ 10.29     $ 10.13     $ 10.00  
Income from Investment Operations:                                                
Net investment income (loss)2     0.26       0.50       0.29       0.20       0.27       0.28  
Net realized and unrealized gain (loss)     (0.02 )     0.34       (0.57 )     (0.02 )     0.20       0.10  
Total from investment operations     0.24       0.84       (0.28 )     0.18       0.47       0.38  
                                                 
Less Distributions:                                                
From net investment income     (0.23 )     (0.48 )     (0.28 )     (0.20 )     (0.27 )     (0.25 )
From net realized gain     -       -       -       (0.03 )     (0.04 )     -  
Total distributions     (0.23 )     (0.48 )     (0.28 )     (0.23 )     (0.31 )     (0.25 )
Net asset value, end of period   $ 10.05     $ 10.04     $ 9.68     $ 10.24     $ 10.29     $ 10.13  
                                                 
Total return3     2.39 %4     9.02 %     (2.82 )%     1.77 %     4.70 %     3.78 %
                                                 
Ratios and Supplemental Data:                                                
Net assets, end of period (in thousands)   $ 1,090,381     $ 908,830     $ 684,315     $ 666,786     $ 332,377     $ 140,089  
                                                 
Ratio of expenses to average net assets:                                                
Before fees waived and expenses absorbed     0.61 %5     0.63 %     0.67 %     0.71 %     0.77 %     1.01 %
After fees waived and expenses absorbed     0.55 %5,6     0.54 %7     0.51 %     0.49 %     0.39 %     0.39 %
Ratio of net investment income (loss) to average net assets:                                                
Before fees waived and expenses absorbed     5.11 %5     4.97 %     2.75 %     1.69 %     2.25 %     2.11 %
After fees waived and expenses absorbed     5.17 %5     5.06 %     2.91 %     1.91 %     2.63 %     2.74 %
                                                 
Portfolio turnover rate     25 %4     55 %     31 %     35 %     39 %     30 %

 

1 Audits performed for the fiscal years indicated by the Fund’s previous auditor, Ernst & Young LLP.
2 Based on average shares outstanding for the period.
3 Return is based on net asset value per share, adjusted for reinvestment of distributions, and does not reflect deduction of the sales charge.
4 Not annualized.
5 Annualized.
6 Effective May 1, 2024, the Adviser 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 taxes, leverage interest, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses (as determined in accordance with Form N-1A), expenses incurred in connection with any merger or reorganization, and extraordinary expenses such as litigation expenses) do not exceed 0.554% of the average daily net assets. Prior to May 1, 2024, the limit of the annual operating expenses was 0.55%.
7 Effective May 1, 2023, the Adviser 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 taxes, leverage interest, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses (as determined in accordance with Form N-1A), expenses incurred in connection with any merger or reorganization, and extraordinary expenses such as litigation expenses) do not exceed 0.55% of the average daily net assets. Prior to May 1, 2023, the limit of the annual operating expenses was 0.52%.

 

See accompanying Notes to Financial Statements.

20 

 

FPA Flexible Fixed Income Fund

FINANCIAL HIGHLIGHTS

Advisor Class

 

Per share operating performance.

For a capital share outstanding throughout each period.

 

    For the
Six Months
Ended
June 30, 2024
    For the
Year Ended
December 31,
    For the
Period Ended
December 31,
 
     

(Unaudited)

      2023       20221       20211,2  
Net asset value, beginning of period   $ 10.04     $ 9.68     $ 10.24     $ 10.32  
Income from Investment Operations:                                
Net investment income (loss) 3     0.26       0.49       0.34       0.13  
Net realized and unrealized gain (loss)     (0.02 )     0.34       (0.63 )     (0.05 )
Total from investment operations     0.24       0.83       (0.29 )     0.08  
                                 
Less Distributions:                                
From net investment income     (0.23 )     (0.47 )     (0.27 )     (0.13 )
From net realized gain     -       -       -       (0.03 )
Total distributions     (0.23 )     (0.47 )     (0.27 )     (0.16 )
Net asset value, end of period   $ 10.05     $ 10.04     $ 9.68     $ 10.24  
                                 
Total return4     2.37 %5     8.86 %     (2.79 )%     0.85 %
                                 
Ratios and Supplemental Data:                                
Net assets, end of period (in thousands)   $ 58,791     $ 48,915     $ 1,083     $ 32  
                                 
Ratio of expenses to average net assets:                                
Before fees waived and expenses absorbed     0.66 %6     0.68 %     0.70 %     3.06 %6
After fees waived and expenses absorbed     0.60 %6,7     0.59 %8     0.56 %     0.59 %6
Ratio of net investment income to average net assets:                                
Before fees waived and expenses absorbed     5.06 %6     4.93 %     3.32 %     (0.69 )%6
After fees waived and expenses absorbed     5.12 %6     5.02 %     3.45 %     1.79 %6
                                 
Portfolio turnover rate     25 %5     55 %     31 %     35 %6

 

1 Audits performed for the fiscal years indicated by the Fund’s previous auditor, Ernst & Young LLP.
2 The Advisor Class commenced operations on April 16, 2021. The data shown reflects operations for the period April 16, 2021 to December 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.
7 Effective May 1, 2024, the Adviser 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 taxes, leverage interest, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses (as determined in accordance with Form N-1A), expenses incurred in connection with any merger or reorganization, and extraordinary expenses such as litigation expenses) do not exceed 0.604% of the average daily net assets. Prior to May 1, 2024, the limit of the annual operating expenses was 0.60%.
8 Effective May 1, 2023, the Adviser 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 taxes, leverage interest, brokerage commissions, dividend and interest expenses on short sales, acquired fund fees and expenses (as determined in accordance with Form N-1A), expenses incurred in connection with any merger or reorganization, and extraordinary expenses such as litigation expenses) do not exceed 0.60% of the average daily net assets. Prior to May 1, 2023, the limit of the annual operating expenses was 0.57%.

 

See accompanying Notes to Financial Statements.

21 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS

June 30, 2024 (Unaudited)

 

Note 1 – Organization

FPA Flexible Fixed Income Fund (the “Fund”), is a diversified series of Investment Managers Series Trust III (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 total return, which includes income and capital appreciation, while considering capital preservation. First Pacific Advisors, LP (the “Adviser”) has served as the Fund’s investment adviser since December 31, 2018.

 

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 Adviser 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 Adviser has adopted and implemented policies and procedures to be followed when the Fund must utilize fair value pricing.

 

(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. Income and expenses of the Fund are allocated on a pro rata basis to each class of shares relative net assets, except for distribution and service fees which are unique to each class of shares relative net assets. 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.

22 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2024 (Unaudited)

 

(c) Mortgage-Backed Securities

The Fund may invest in mortgage-backed securities (“MBS”), representing direct or indirect interests in pools of underlying residential or commercial mortgage loans that are secured by real property. These securities provide investors with payments consisting of both principal and interest as the mortgages in the underlying mortgage pools are paid.

 

The timely payment of principal and interest (but not the market value) on MBS issued or guaranteed by Ginnie Mae (formally known as the Government National Mortgage Association or GNMA) is backed by Ginnie Mae and the full faith and credit of the US government. Obligations issued by Fannie Mae (formally known as the Federal National Mortgage Association or FNMA) and Freddie Mac (formally known as the Federal Home Loan Mortgage Corporation or FHLMC) are historically supported only by the credit of the issuer, but currently are guaranteed by the US government in connection with such agencies being placed temporarily into conservatorship by the US government. Some MBS are sponsored or issued by private entities. Payments of principal and interest (but not the market value) of such private MBS may be supported by pools of residential or commercial mortgage loans or other MBS that are guaranteed, directly or indirectly, by the US government or one of its agencies or instrumentalities, or they may be issued without any government guarantee of the underlying mortgage assets but may contain some form of non-government credit enhancement.

 

Collateralized mortgage obligations (“CMO”) are a type of MBS. A CMO is a debt security that may be collateralized by whole mortgage loans or mortgage pass-through securities. The mortgage loans or mortgage pass-through securities are divided into classes or tranches with each class having its own characteristics. Investors typically receive payments out of the interest and principal on the underlying mortgages. The portions of these payments that investors receive, as well as the priority of their rights to receive payments, are determined by the specific terms of the CMO class.

 

The yield characteristics of MBS differ from those of traditional debt securities. Among the major differences are that interest and principal payments are made more frequently, usually monthly, and that principal may be prepaid at any time because the underlying mortgage loans or other obligations generally may be prepaid at any time. Prepayments on a pool of mortgage loans are influenced by a variety of economic, geographic, social and other factors. Generally, prepayments on fixed-rate mortgage loans will increase during a period of falling interest rates and decrease during a period of rising interest rates. Certain classes of CMOs and other MBS are structured in a manner that makes them extremely sensitive to changes in prepayment rates.

 

(d) Asset-Backed Securities

Asset-backed securities include pools of mortgages, loans, receivables or other assets. Payment of principal and interest may be largely dependent upon the cash flows generated by the assets backing the securities, and, in certain cases, supported by letters of credit, surety bonds, or other credit enhancements. The value of asset-backed securities may also be affected by the creditworthiness of the servicing agent for the pool, the originator of the loans or receivables, or the financial institution(s) providing the credit support. In addition, asset-backed securities are not backed by any governmental agency.

23 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2024 (Unaudited)

 

Collateralized Debt Obligations (“CDOs”) include Collateralized Bond Obligations (“CBOs”), Collateralized Loan Obligations (“CLOs”) and other similarly structured securities. CBOs and CLOs are types of asset backed securities. A CBO is a trust which is backed by a diversified pool of high risk, below investment grade fixed income securities. A CLO is a trust typically collateralized by a pool of loans, which may include, among others, domestic and foreign senior secured loans, senior unsecured loans, and subordinate corporate loans, including loans that may be rated below investment grade or equivalent unrated loans. The risks of an investment in a CDO depend largely on the type of the collateral securities and the class of the CDO in which a Fund invests. CDOs carry additional risks including, but not limited to, (i) the possibility that distributions from collateral securities will not be adequate to make interest or other payments, (ii) the collateral may decline in value or default, (iii) a Fund may invest in CDOs that are subordinate to other classes, and (iv) the complex structure of the security may not be fully understood at the time of investment and may produce disputes with the issuer or unexpected investment results.

 

(e) Stripped Mortgage-Backed Interest Only (“I/O”) and Principal Only (“P/O”) Securities

Stripped mortgage-backed securities are usually structured with two classes that receive different proportions of the interest and principal distributions on a pool of mortgage assets. In certain cases, one class will receive all of the interest payments on the underlying mortgages (the I/O class), while the other class will receive all of the principal payments (the P/O class). The Fund currently has investments in I/O securities. The yield to maturity on I/Os is sensitive to the rate of principal repayments (including prepayments) on the related underlying mortgage assets, and principal payments may have a material effect on yield-to-maturity. If the underlying mortgage assets experience greater than anticipated prepayments of principal, a Fund may not fully recoup its initial investment in I/Os.

 

(f) Credit Risk

Debt securities are subject to credit risk, meaning that the issuer of the debt security may default or fail to make timely payments of principal or interest. The values of any of the Fund’s investments may also decline in response to events affecting the issuer or its credit rating. The lower rated debt securities in which the Fund may invest are considered speculative and are generally subject to greater volatility and risk of loss than investment grade securities, particularly in deteriorating economic conditions. The Fund invests a significant portion of its assets in securities of issuers that hold mortgage-and asset-backed securities and direct investments in securities backed by commercial and residential mortgage loans and other financial assets. The value and related income of these securities is sensitive to changes in economic conditions, including delinquencies and/or defaults. Continuing shifts in the market’s perception of credit quality on securities backed by commercial and residential mortgage loans and other financial assets may result in increased volatility of market price and periods of illiquidity that can negatively impact the valuation of certain securities held by the Fund.

 

(g) Currency Translation

Assets and liabilities denominated in foreign currencies are translated into U.S. dollars at the mean of the quoted bid and ask prices of such currencies against the U.S. dollar. Purchases and sales of portfolio securities are translated into U.S. dollars at the rates of exchange prevailing when such securities were acquired or sold. Income and expenses are translated into U.S. dollars at rates of exchange prevailing when accrued.

 

Net realized gain or loss on foreign currency transactions represents foreign exchange gains and losses from sales and maturities of foreign fixed income investments, holding of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign investment transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent amounts actually received or paid. Net unrealized currency gains and losses from valuing foreign currency denominated assets and liabilities at year-end exchange rates are reflected as a component of net unrealized appreciation or depreciation of foreign currency denominated assets and liabilities.

24 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2024 (Unaudited)

 

(h) 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.

 

(i) 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.

 

(j) 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 June 30, 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.

 

(k) Distributions to Shareholders

The Fund will make distributions of net investment income monthly 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.

25 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2024 (Unaudited)

 

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.

 

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 0.50% of the Fund’s average daily net assets. Effective May 1, 2024, 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 interest, taxes, brokerage fees and commissions payable by the Fund in connection with the purchase or sale of portfolio securities, redemption liquidity service expenses, and extraordinary expenses, including litigation expenses not incurred in the Fund’s ordinary course of business) do not exceed 0.604% and 0.554% of the Fund’s average daily net assets or the one-year period ending April 30, 2025. Prior to May 1, 2024, the limit of the annual operating expenses were 0.60% and 0.55% for the Advisor Class and Institutional Class, respectively.

 

For the six months ended June 30, 2024, the Adviser waived a portion of its advisory fees totaling $ 314,599 for the Fund. Beginning May 1, 2024, any expenses reimbursed to the Fund by the Adviser during any of the previous 36 months may be recouped by the Adviser, provided the Fund’s Total Annual Fund Operating Expenses do not exceed 0.64% of the average net assets of the Fund attributable to the Institutional Class and 0.74% of the average net assets of the Fund attributable to the Advisor Class for any subsequent calendar year, regardless of whether there is a then-effective higher expense limit. This agreement may only be terminated earlier by the Fund’s Board of Trustees or upon termination of the Advisory Agreement. The potential recoverable amount is noted as “Commitments and contingencies” as reported on the Statement of Assets and Liabilities. The Adviser may recapture all or a portion of this amount no later than dates stated below:

 

December 31, 2024   $ 1,079,162  
December 31, 2025     1,171,116  
December 31, 2026     774,947  
December 31, 2027     314,599  
Total   $ 3,339,824  

 

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 six months ended June 30, 2024, were $177,288. Such fees are reported as fund services fees 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 “Distributor”). The Distributor does not receive compensation from the Fund for its distribution services; The Adviser pays the Distributor a fee for its distribution-related services.

 

Certain trustees and officers of the Trust are employees of UMBFS, MFAC or the Adviser. The Fund does not compensate trustees and officers affiliated with the Fund’s Adviser or co-administrators. For the six months ended June 30, 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 $17,820. The inclusion of such fees are reported on the Statement of Operations.

26 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2024 (Unaudited)

 

The Fund’s Board of Trustees has adopted 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 six months ended June 30, 2024, were $2,518. Such fees are reported on the Statement of Operations.

 

Note 4 – Federal Income Taxes

At June 30, 2024, gross unrealized appreciation/(depreciation) of investments, based on cost for federal income tax purposes were as follows:

 

Cost of investments   $ 1,145,880,638  
         
Gross unrealized appreciation   $ 11,910,217  
Gross unrealized depreciation     (12,036,342 )
         
Net unrealized appreciation/(depreciation)   $ (126,125 )

 

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.

 

Note 5 – Investment Transactions

For the six months ended June 30, 2024, purchases and sales of investments, excluding short-term investments, were $417,077,999 and $249,071,581, respectively.

 

Note 6 – 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 0.10% and 0.15% of its average daily net assets attributable to 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. Such fees are reported on the Statement of Operations.

 

Note 7 – 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.

27 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2024 (Unaudited)

 

Note 8 – Commitments and Contingencies

The Fund may enter into unfunded loan commitments. Unfunded loan commitments may be partially or wholly unfunded. During the contractual period, the Fund is obliged to provide funding to the borrower upon demand. Unfunded loan commitments are fair valued in accordance with the valuation policy described in Note 2(a) and unrealized appreciation or depreciation, if any, is recorded on the Statement of Assets and Liabilities. As of June 30, 2024, the total unfunded amount was 0.05% of the Fund’s net assets.

 

As of June 30, 204, the Fund had the following unfunded loan commitments outstanding:

 

Loan   Principal     Cost     Value    

Unrealized

Appreciation/

(Depreciation)

   

Unfunded

Commitment

 
Lealand Finance Super Senior Exit LC   $ 405,491     $ (847 )   $ (141,922 )   $ (141,075 )   $ 405,491  
McDermott Tanks Secured LC   $ 218,452     $ (493 )   $ (21,845 )   $ (21,352 )     218,452  

 

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.

 

· 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.

28 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2024 (Unaudited)

 

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 June 30, 2024, in valuing the Fund’s assets carried at fair value:

 

Investments   Level 1     Level 2     Level 3     Total  
Asset-Backed Securities                                
Auto   $ -     $ 67,092,794     $ -     $ 67,092,794  
Collateralized Loan Obligation     -       86,781,452       -       86,781,452  
Credit Card     -       28,998,397       -       28,998,397  
Equipment     -       118,858,690       -       118,858,690  
Other     -       115,268,791       -       115,268,791  
Commercial Mortgage-Backed Securities                                
Agency     -       124,262,613       -       124,262,613  
Agency Stripped     -       875,433       -       875,433  
Non-Agency     -       66,692,587       -       66,692,587  
Convertible Bonds     -       3,016,093       -       3,016,093  
Corporate Bank Debt     -       12,941,072       1,593,023       14,534,095  
Corporate Bonds                                
Communications     -       9,806,944       -       9,806,944  
Consumer Discretionary     -       12,851,769       -       12,851,769  
Financials     -       36,648,192       5,201,000       41,849,192  
Health Care     -       4,681,039       -       4,681,039  
Technology     -       -       5,000,000       5,000,000  
Residential Mortgage-Backed Securities                                
Agency Collateralized Mortgage Obligation     -       191,690       -       191,690  
Agency Pool Adjustable Rate     -       19,281,542       -       19,281,542  
Agency Pool Fixed Rate     -       142,554,101       -       142,554,101  
Agency Stripped     -       55,999       -       55,999  
Non-Agency Collateralized Mortgage Obligation     -       66,486,136       -       66,486,136  
U.S. Treasury Notes & Bonds     -       132,472,417       -       132,472,417  
Common Stocks                                
Real Estate Services     -       533,117       -       533,117  
Software     -       -       146,354       146,354  
Transportation & Logistics     -       -       1,505,840       1,505,840  
Short-Term Investments     12,405,456       69,551,972       -       81,957,428  
    $ 12,405,456     $ 1,119,902,840     $ 13,446,217     $ 1,145,754,513  

29 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2024 (Unaudited)

 

The following is a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining value:

 

Investments  

Beginning

value

December

31, 2023

   

Transfers

In/(out) of

Level 3

during the

period

   

Total

Realized

gain/loss

   

Total

Change in

unrealized

appreciation/

depreciation

   

Amortization

of

Discount

(Amortization

of

Premium)

   

Net

Purchases

    Net Sales    

Ending

Value at

June 30,

2024

 
Asset-Backed Securities   $ 1,465,714     $ -     $ -     $ -     $ -     $ -     $ (1,465,714 )   $ -  
Common Stocks     1,612,791       -       -       39,403       -       -       -       1,652,194  
Corporate Bank Debt     1,598,534       47       51       3,846       110       -       (9,565 )     1,593,023  
Corporate Bonds     11,184,915       (2,557,887 )     -       16,972       -       1,557,000       -       10,201,000  
    $ 15,861,954     $ (2,557,840 )   $ 51     $ 60,221     $ 110     $ 1,557,000     $ (1,475,279 )   $ 13,446,217  

 

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 transfers of $47 out of Level 2 into Level 3. Transfers out of Level 3 were due to change in valuation technique from recent trade activity to vendor priced. Transfers into Level 3 were due to change in valuation technique from vendor priced to a pricing model based on last executed trade.

 

The following table presents additional quantitative information about valuation methodologies and inputs used for investments that are measured at fair value and categorized within Level 3 as of June 30, 2024.

 

Financial
Assets
  Fair Value at June
30, 2024
    Valuation
Technique(s)
  Unobservable
Inputs
  Price/
Range
    Weighted
Average Price
   

Impact to

Valuation From

an Increase in

Input(a)

Common Stocks   $ 1,505,840     Pricing Model (b)   Last Reported Trade   $ 20.00     $ 20.00     Increase
      146,354     Pricing Model (c)   Quotes/Prices
    $ 13.00     $ 13.00     Increase
Corporate Bank Debt     1,756,743     Third-Party Broker Quote (d)   Quotes/Prices
  $ 95.12     $ 95.12     Increase
      47     Pricing Model (e)   Corporate Action     0.01       0.01     Increase
      (163,767 )   Pricing Model (c)
  Quotes/Prices
    $90.00 - $52.00     $ 57.07     Increase
Corporate Bonds & Notes     10,201,000     Pricing Model (f)
  Cost
    $ 100.00     $ 100.00     Decrease

30 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2024 (Unaudited)

 

(a) This column represents the directional change in the fair value of the Level 3 investments that would result from an increase to the corresponding unobservable input. A decrease to the unobservable input would have the opposite effect.
(b) The Pricing Model technique for Level 3 securities involves the last reported trade in the security.
(c) The Pricing Model technique for Level 3 securities involves recently quoted funding prices of the security.
(d) The Third Party Broker Quote technique involves obtaining an independent third-party broker quote for the security.
(e) The Pricing Model technique for Level 3 securities involves the potential of likelihood of future bankruptcy distributions.
(f) The fair value of the investment is based on the initial purchase price or more recent capital activity. If the financial condition of the underlying assets were to deteriorate, or if the market comparables were to fall, the value of the investment could be lower.

 

Note 10 – Restricted Securities

Restricted securities include securities that have not been registered under the Securities Act of 1933, as amended, and securities that are subject to restrictions on resale. The Fund may invest in restricted securities that are consistent with the Fund’s investment objective and investment strategies. Investments in restricted securities are valued at net asset value as a practical expedient for fair value, or fair value as determined in good faith in accordance with procedures adopted by the Board. It is possible that the estimated value may differ significantly from the amount that might ultimately be realized in the near term, and the difference could be material.

 

As of June 30, 2024, the Fund invested in the following restricted securities:

 

Restricted Security  

Initial

Acquisition

Date

  Cost     Fair Value    

Fair Value as a

% of Net

Assets

 
Apollo Debt Solutions BDC Senior Notes, 8.620%, 9/28/2028   8/10/2023   $ 3,644,000     $ 3,644,000       0.32 %
Axiom Global, Inc., 10.194% (1-Month USD Libor+475basis points), 10/01/2026   11/18/2021     3,003,287       2,925,640       0.25 %
Capstone Acquisition Holdings, Inc. 2020 Delayed Draw Term Loan, 10.193% (1-Month Term SOFR +485 basis points),11/12/2027   11/12/2020     89,211       85,125       0.01 %
Capstone Acquisition Holdings, Inc. 2020 Term Loan, 10.193% (1-Month Term SOFR +485 basis points), 11/12/2027   11/12/2020     1,747,719       1,671,618       0.14 %
Copper Property CTL Pass Through Trust, 0.315%   1/17/2019     939,850       533,117       0.05 %
Farfetch U.S. Holdings, Inc.11.575%, (3-Month Term SOFR +625 basis points), 10/20/2027   9/28/2022     2,778,233       2,775,766       0.24 %
Frontier Communications Holdings LLC, 9.207% (1-Month Term SOFR +375 basis points), 10/08/2027   10/1/2020     1,082,790       1,087,647       0.09 %
Heartland Dental LLC/Heartland Dental Finance Corp., 10.331% (1-Month Term SOFR +500 basis points), 4/30/2028   5/5/2023     4,364,574       4,681,039       0.41 %
Hlend Senior Notes, 8.170%, 3/15/2028   2/16/2023     5,000,000       5,000,000       0.43 %
JC Penney Corp., Inc., 5.568% (3-Month USD Libor +425 basis points), 6/23/2025   2/3/2021     -       47       0.00 %
Lealand Finance Company B.V. Senior Exit LC, 5.250%, 6/30/2027   2/28/2020     (847 )     (141,922 )     -0.01 %
McDermott Tanks Secured LC, 10.406%, 12/31/2026   2/28/2020     (493 )     (21,845 )     0.00 %
McDermott Technology Americas, Inc., 9.457% (1-Month Term SOFR +400 basis points), 12/31/2027   3/25/2024     5,353       5,717       0.00 %
OCREDIT BDC Senior Notes, 7.770%, 3/07/2029   2/22/2024     1,557,000       1,557,000       0.14 %
PHI Group, Inc., 2.470%   8/19/2019     615,785       1,505,840       0.13 %
Polaris Newco, LLC Term Loan B, 9.343% (1-Month Term SOFR +400 basis points), 6/05/2028   6/3/2021     2,619,546       2,632,128       0.23 %
WH Borrower LLC, Term Loan B, 10.817% (1-Month Term SOFR +550 basis points), 2/16/2027   2/9/2022     2,607,006       2,706,931       0.24 %
Windstream Services LLC, 11.694% (1-Month Term SOFR +625 basis points), 9/21/2027   8/11/2020     738,366       807,243       0.07 %
        $ 30,791,380     $ 31,455,091       2.74 %

31 

 

FPA Flexible Fixed Income Fund

NOTES TO FINANCIAL STATEMENTS (Continued)

June 30, 2024 (Unaudited)

 

Note 11 – Market Disruption and Geopolitical Risks

Certain local, regional or global events such as war, acts of terrorism, the spread of infectious illness 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 Funds’ performance, the performance of the securities in which the Funds invest and may lead to losses on your investment. The ultimate impact of “Market Disruptions and Geopolitical Risks” on the financial performance of the Funds’ investments is not reasonably estimable at this time. Management is actively monitoring these events.

 

Note 12 – New Accounting Pronouncements

Effective January 24, 2023, 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. Other 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 Fund has adopted procedures in accordance with the SEC’s rules and form amendments.

 

Note 13 – 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.

32 

 

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 Crescent Fund

Board Consideration of Investment Advisory Agreement (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”) with respect to the FPA Crescent Fund series of the Trust (the “Fund”) for an additional one-year period from when it otherwise would expire. In approving renewal of the 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 Advisory Agreement from the Advisor and from 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 Advisor’s organization and financial condition; information regarding the background, experience, and compensation structure of relevant personnel providing services to the Fund; information about the 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 Index, the MSCI All Country World Index (the “MSCI Index”), a blended index consisting of 60% MSCI Index and 40% Bloomberg U.S. Aggregate Bond Index (the “60/40 Blended Index”), and a group of comparable funds (the “Peer Group”) selected by Broadridge Financial Solutions, Inc. (“Broadridge”) from Morningstar, Inc.’s Moderately Aggressive Allocation category (the “Fund Universe”) for the one-, three-, five-, and ten-year periods ended December 31, 2023; and reports comparing the investment advisory fee and total expenses of the Fund with those of the Peer Group and Fund Universe. 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 Advisory Agreement. In addition, the Board considered information reviewed by the Board during the year at other Board and Board committee meetings.

 

In renewing the Advisory Agreement, the Independent Trustees met separately in an executive session prior to the meeting with the Board to consider the Advisory Agreement, 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 Advisory Agreement, 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.

 

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 return for the three-year period was above the Peer Group and Fund Universe median returns, the MSCI Index return and the 60/40 Blended Index return, but below the S&P 500 Index return by 2.05%. The Fund’s annualized total return for the five-year period was above the Peer Group and Fund Universe median returns and the 60/40 Blended Index return, but below the MSCI Index return and the S&P 500 Index return by 0.62% and 4.59%, respectively. For the one-year period, the Fund’s total return was above the Peer Group and Fund Universe median returns and the 60/40 Blended Index return, but below the MSCI Index return by 1.93% and the S&P 500 Index return by 6.02%. The Fund’s annualized total return for the ten-year period was above the Peer Group median return and the 60/40 Blended Index return, but below the Fund Universe median return, the MSCI Index return, and the S&P 500 Index return by 0.21%, 0.80%, and 4.90%, respectively. The Board observed that the Fund’s performance ranked it in the first quartile of the funds (which is the most favorable) in the Peer Group for the one-, three-, five- and ten-year periods. The Board also 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 quartile of the funds (which is the most favorable) in the Peer Group and Fund Universe for the one-, three-, and five-year periods.

 

 

FPA Crescent Fund

Board Consideration of Investment Advisory Agreement (Unaudited) - Continued

 

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. 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 0.205% and 0.317%, respectively. The Board considered the Advisor’s assertion that an appropriate peer group for the Fund likely does not exist, and that the Fund’s investment objective, broad opportunity set, and the related skills required to effectively execute on the Fund’s investment objective and opportunity set are far greater than most other funds in the Peer Group. The Board considered that the advisory fee paid by the Fund was in the range of fees charged by the Advisor to manage institutional accounts and hedge funds and to sub-advise other mutual funds with similar objectives and policies as the Fund, and the Board considered the Advisor’s discussion of the differences between the services provided by the Advisor to the Fund and those provided by the Advisor to the sub-advised funds, institutional accounts and hedge funds. The Board also noted 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 above the Peer Group and Fund Universe medians by 0.25% and 0.27%, respectively. The Board considered that the annual total expenses of the Fund were likely higher than the Peer Group and Fund Universe medians because of the Fund’s higher advisory fee.

 

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 Crescent Fund

Board Consideration of Investment Advisory Agreement (Unaudited) - Continued

 

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 that the Advisor had waived a portion of its advisory fee with respect to the Fund. Recognizing the difficulty in evaluating an investment advisor’s profitability with respect to the funds it manages in the context of an advisor with multiple lines of business, and noting that other profitability methodologies might also be reasonable, the Board and the Independent Trustees concluded that the profit of the Advisor from its relationship with the Fund was reasonable.

 

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 Crescent Fund

Board Consideration of Investment Advisory Agreement (Unaudited) - Continued

 

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 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 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 Advisory Agreement was in the best interests of the Fund and its shareholders and, accordingly, approved the renewal of the Advisory Agreement.

 

 

FPA Flexible Fixed Income Fund

Board Consideration of Investment Advisory Agreement (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”) with respect to the FPA Flexible Fixed Income Fund series of the Trust (the “Fund”) for an additional one-year period from when it otherwise would expire. In approving renewal of the 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 Advisory Agreement from the Advisor and from 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 Advisor’s organization and financial condition; information regarding the background, experience, and compensation structure of relevant personnel providing services to the Fund; information about the 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 Bloomberg U.S. Universal Bond Index (the “Bloomberg Index”), the Consumer Price Index (“CPI”) + 200 basis points, and a group of comparable funds (the “Peer Group”) selected by Broadridge Financial Solutions, Inc. (“Broadridge”) from Morningstar, Inc.’s Nontraditional Bond category (the “Fund Universe”) for the one-, three-, and five-year periods ended December 31, 2023; and reports comparing the investment advisory fee and total expenses of the Fund with those of the Peer Group and Fund Universe. 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 Advisory Agreement. In addition, the Board considered information reviewed by the Board during the year at other Board and Board committee meetings.

 

In renewing the Advisory Agreement, the Independent Trustees met separately in an executive session prior to the meeting with the Board to consider the Advisory Agreement, 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 Advisory Agreement, 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.

 

Nature, Extent, and Quality of Services

With respect to the performance results of the Fund, the meeting materials indicated that the Fund’s total return for the one-year period was above the Peer Group and Fund Universe median returns, the Bloomberg Index return, and the CPI + 200 basis points. For the three-year period, the Fund’s annualized total return was above the Peer Group and Fund Universe median returns and the Bloomberg Index return, but below the CPI + 200 basis points by 3.69%. The Fund’s annualized total return for the five-year period was above the Fund Universe median return and the Bloomberg Index return, and was the same as the Peer Group median return, but was below the CPI + 200 basis points by 2.06%. The Trustees considered the Advisor’s assertion that the Fund’s underperformance relative to the CPI + 200 basis points over the three- and five-year periods was due to its unwillingness to take on uncompensated risk in low yield environments, coupled with unexpectedly high inflation over the past few years.

 

 

FPA Flexible Fixed Income Fund

Board Consideration of Investment Advisory Agreement (Unaudited) - Continued

 

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. 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 both the Peer Group and Fund Universe medians. The Trustees considered that the Fund’s advisory fee was the same as or higher than the fees that the Advisor charges to manage separate accounts for institutional investors with similar objectives and policies as the Fund. The Trustees observed, however, that management of mutual fund assets requires compliance with certain requirements under the 1940 Act that do not apply to the institutional separate accounts that the Advisor manages, and noted the differences between the services provided by the Advisor to the Fund and those provided to the institutional separate accounts. The Trustees also noted that the Fund’s advisory fee was among the lowest of the 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.

 

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 that the Advisor had waived a portion of its advisory fee with respect to the Fund. Recognizing the difficulty in evaluating an investment advisor’s profitability with respect to the funds it manages in the context of an advisor with multiple lines of business, and noting that other profitability methodologies might also be reasonable, the Board and the Independent Trustees concluded that the profit of the Advisor from its relationship with the Fund was reasonable.

 

 

FPA Flexible Fixed Income Fund

Board Consideration of Investment Advisory Agreement (Unaudited) - Continued

 

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.

 

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 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 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.

 

 

FPA Flexible Fixed Income Fund

Board Consideration of Investment Advisory Agreement (Unaudited) - Continued

 

Conclusion

Based on these and other factors, the Board and the Independent Trustees concluded that renewal of the Advisory Agreement was in the best interests of the Fund and its shareholders and, accordingly, approved the renewal of the 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) (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not Applicable.

 

(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 9/9/24  

 

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 9/9/24  
     
By (Signature and Title) /s/ Rita Dam  
  Rita Dam, Treasurer and Principal Financial Officer  
     
Date 9/9/24