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 811-22920
The Advisors’ Inner Circle Fund III
(Exact name of registrant as specified in charter)
________
SEI Investments
One Freedom Valley Drive
Oaks, PA 19456
(Address of principal executive offices) (Zip code)
SEI Investments
One Freedom Valley Drive
Oaks, PA 19456
(Name and address of agent for service)
Registrant’s telephone number, including area code: (877) 446-3863
Date of fiscal year end: September 30, 2022
Date of reporting period: September 30, 2022
Item 1. Reports to Stockholders.
A copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Act”) (17 CFR § 270.30e-1), is attached hereto.
The Advisors’ Inner Circle Fund III
Rayliant Quantamental China Equity ETF
Rayliant Quantamental Emerging Market Equity ETF
Rayliant Quantitative Developed Market Equity ETF
ANNUAL REPORT
SEPTEMBER 30, 2022
Investment Adviser:
Rayliant Asset Management
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
TABLE OF CONTENTS
Letter to Shareholders | 1 |
Schedules of Investments | 16 |
Statements of Assets and Liabilities | 33 |
Statements of Operations | 35 |
Statements of Changes in Net Assets | 37 |
Financial Highlights | 40 |
Notes to Financial Statements | 43 |
Report of Independent Registered Public Accounting Firm | 63 |
Disclosure of Fund Expenses | 65 |
Trustees and Officers of the Advisors’ Inner Circle Fund III | 68 |
Approval of Investment Advisory Agreement | 76 |
Notice to Shareholders | 80 |
The Funds file their complete schedules of investments with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT. The Funds’ Form N-PORT reports are available on the SEC’s website at http://www.sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to fund securities, as well as information relating to how the Funds voted proxies relating to fund securities during the most recent 12-month period ended June 30, is available (i) without charge, upon request, by calling 1- 866-392-2626; and (ii) on the SEC’s website at http://www.sec.gov.
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
Letter to Shareholders
Dear Shareholders,
We are pleased to provide the second annual report for the Rayliant Quantamental China Equity Fund, covering the period October 1, 2021 to September 30, 2022.
Anyone reading 2022 financial news knows this has been a volatile year to invest in any asset class. The macroeconomic shocks of the Russia-Ukraine war, slowing growth, high inflation and rising interest rates have proven too much for equities markets. Unfortunately, Chinese equities have been no exception. However, with respect to the Fund, it is notable that offshore China equities1 declined more sharply than A-shares, which are listed in mainland China.
Headline-grabbing hurdles in China—some of the government’s own making—drove this decline. China’s dogged zero-Covid policy and increased regulatory oversight didn’t help an economy already coping with rising food, energy and materials prices. And the challenges facing China’s economy only mounted throughout the third quarter. One can understanding why the country’s National Bureau of Statistics abruptly delayed a report on GDP growth and other key economic indicators a day before their scheduled release. Indeed, entering Q4, the government’s 5.5% target for full-year GDP growth seems unlikely, with economists polled by Bloomberg forecasting a weaker 3.3% expansion. With a global recession looking likely, a 3.3% expansion may still sound encouraging to foreign investors. But the conditions that weighed on China’s growth this year are still stifling the usual exuberance of domestic stock traders.
Amidst this lackluster news, state-owned enterprises (“SOEs”) were a relative bright spot among onshore China stocks for the period, finding themselves in line for a much bigger share of China’s growing fiscal stimulus. Indeed, much of the nearly US$150 billion in new policy support announced in Q3 was directed toward infrastructure spending, which tends to benefit larger state-owned firms. Outperformance by SOEs is typical in years featuring a National Congress, and by the end of Q3, investors were looking ahead to China’s 20th National Congress of the Chinese Communist Party—the once-every-five-years meeting of policymakers to appoint a new government and set an agenda for the next half-decade, which kicked off on October 16th—widely expected to be a major driving force behind Chinese stocks through the end of 2022.
As we approach the end of Q4, we are encouraged by the recent meeting between President Biden and President Xi at the G20 Conference, which may signal a period of relative calm and de-escalation between the two countries. This will be good for equities markets in both countries, as China remains the world’s factory and the US still needs cheap goods to drive its own economic engine. And like the US, China has proven effective in navigating its macroeconomic challenges over a long time horizon. We believe this
1
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
is reflected in forward-looking price-to-earnings ratios for Chinese A-shares, as falling Chinese interest rates and improving sentiment present an encouraging backdrop for 2023.
Against 2022’s challenging backdrop, the Fund’s strategy did what it was designed to do: (1) identify and invest in high-quality companies2 and (2) exploit mispricings that arise from the behavioral bias of investors in China’s retail-dominated market. Indeed, the very events that prompted anxiety on the part of those tracking Chinese equities throughout 2022 created opportunity for the Fund. For example, fear-based selling of offshore-listed Chinese equities inevitably spilled into China’s mainland market, resulting in attractive valuations for A-shares in the tech sector. Bargains included domestic chip makers who will benefit from state support as policymakers push semiconductor self-sufficiency in the nation’s ongoing technological competition with the United States.
The benchmark CSI 300 Index, which tracks onshore Chinese equities, is off by –27.23% fiscal year ending September 30, 2022. The Fund has underperformed this drop, falling -27.93%. The Fund’s experience underscores the opportunity offered by Chinese stocks—not just as a source of growth and diversification for global investors, but also as a market in which stock pickers with a systematic approach, built on an understanding of investor behavior and informed by local fundamental insights, can continue to add value3.
Since the Fund’s inception, although allocation decisions have added modestly to outperformance, the greatest driver of the Fund’s gains over the benchmark has been strong stock selection, with picks among Industrials, Consumer Staples, and Materials sectors adding the most value, consistent with the most attractive opportunities in China often arising in what individual investors would likely regard as ‘boring’ segments of the market. At the factor level, exposure to stocks with favorable sentiment and quality growth provided the greatest contribution to outperformance through October. By contrast, signals related to quality struggled, particularly in the third quarter, when we observed the highest-quality firms by our models actually underperforming their low-quality counterparts. Of course, this has only made those high-quality stocks better bargains and, to the extent fundamentals prevail in the long run—which investment theory, our experience, and our data suggests they will—this ultimately positions the portfolio well to capture behavioral mispricings in the days to come.
Along those lines, looking ahead, we expect positions established during 2022 dislocations to outperform next year as markets have time to process China’s ongoing story. We believe 2022’s market shocks, while frustrating in the short run, create mispricings that ultimately reward investors in high-quality firms whose valuations are misunderstood by domestic retail traders and foreign fund managers who lack local
2
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
knowledge. We thank you for your allocation to the Fund and look forward to continuing as your trusted partner in China equity investing.
1 Offshore equities include those Chinese companies listed in Hong Kong (“H-Shares) and those equities listed as ADRs in the United States.
2 We consider companes to be “high-quality” if they have solid fundamentals and strong growth at reasonable valuations.
3 Note: Diversification does not ensure a profit or guarantee against a loss. The performance data quoted here represent past performance, and are not indicative of future results. The CSI 300 benchmark is a capitalization-weighted index designed to track the performance of the largest 300 stocks traded on the Shanghai and Shenzhen Stock Exchanges, represented here by the China AMC CSI 300 Index ETF (510330.SH). Indices are unmanaged, it is not possible to invest directly in an index, and index performance returns do not reflect any management fees, transaction costs or expenses.
Sincerely,
Jason Hsu, PhD | Phillip Wool, PhD |
Chairman & CIO | Managing Director |
Rayliant Global Advisors | Head of Investment Solutions Rayliant Global Advisors |
Mark Schlarbaum
Managing Director
Head of Trading & Capital Markets
Rayliant Global Advisors
Definition of the Comparative Indices
CSI 300 Index is a capitalization-weighted index designed to track the performance of the largest 300 stocks traded on the Shanghai and Shenzhen Stock Exchanges.
The MSCI China All Shares Index captures large and mid-cap representation across China A-shares, B-shares, H-shares, Redchips, P-chips and foreign listings (e.g. ADRs). The index aims to reflect the opportunity set of China share classes listed in Hong Kong, Shanghai, Shenzhen and outside of China. It is based on the concept of the integrated MSCI China equity universe with China A-shares included.
Comparison of Change in the Value of a $10,000 Investment in the Rayliant Quantamental China Equity ETF versus the CSI 300 Index (USD) (TR) and MSCI China All Shares Index (Net) (USD).
AVERAGE ANNUAL TOTAL RETURN FOR THE YEAR ENDED SEPTEMBER 30, 2022 | ||||||||
One Year Return | Annualized to Inception Date* | |||||||
Rayliant Quantamental China Equity ETF | -27.93% | -17.24% | ||||||
CSI 300 Index (USD) (TR) | -27.23% | -17.69% | ||||||
MSCI China All Shares Index (Net) (USD) | -31.75% | -24.21% |
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
* The Rayliant Quantamental China Equity ETF commenced operations on December 30, 2020.
Fee waivers were in effect during the period; if they had not been in effect, performance would have been lower.
The performance data quoted herein represents past performance and the return and value of an investment in the Fund will fluctuate so that, when redeemed, may be worth less than its original cost.
The Fund’s performance assumes the reinvestment of dividends and capital gains. Index returns assume reinvestment of dividends and, unlike a fund’s returns, do not reflect any fees or expenses. If such fees and expenses were included in the index returns, the performance would have been lower.
Please note that one cannot invest directly in an unmanaged index.
There are no assurances that the Fund will meet its stated objectives.
The Fund’s holdings and allocations are subject to change because it is actively managed and should not be considered recommendations to buy individual securities.
Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
See definition of comparative index on page 3.
5
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF SEPTEMBER 30, 2022 |
Letter to Shareholders
Dear Shareholders,
We are pleased to provide the first annual report for the Rayliant Quantamental Emerging Market Equity Fund, covering the period from December 15, 2021 to September 30, 2022.
Anyone reading 2022 financial news knows this has been a volatile year to invest in any asset class. The macroeconomic shocks of the Russia-Ukraine war, slowing growth, high inflation and rising interest rates have proven too much for equities markets. Unfortunately, emerging markets equities have been no exception.
Growth in emerging markets in 2022 has been constrained by deteriorating global economic conditions. The downward pressure has come from multiple directions, including a stronger US dollar, higher inflation, and tighter monetary policies. Investors have been rightfully wary of these trends. Emerging Markets funds across the world also experienced an almost total write-down of their Russia exposure as a result of sanctions stemming from the conflict in Ukraine. As a result, the benchmark MSCI EM Index, which tracks large and mid-cap emerging market equities, is off by -25.98% for the period ended September 30, 2022.
Over the same period, the Fund’s NAV fell just -20.97%, outperforming the MSCI EM Index by 5.01%, with significant outperformance in Indonesia, India, UAE and Cyprus. European emerging markets were among the biggest losers due to unexpected conflict between Russia and Ukraine and the worsening energy crisis. The weakening outlook for global demand also hit commodity prices hard, delivering a blow to net resource exporters; South Korea and Taiwan suffered similar as trade expectations softened. Turkey, by contrast, experienced impressive growth over the last ten months on the back of larger-than-expected rate cuts.
Against 2022’s challenging backdrop, the Fund’s strategy did what it was designed to do: (1) identify and invest in high-quality companies1 and (2) exploit mispricings that arise from the behavioral bias of investors in China’s retail-dominated market. Indeed, the very events that prompted anxiety on the part of those tracking emerging markets equities throughout 2022 created opportunity for the Fund. For example, although the energy crisis put pressure on European countries, it created investing opportunities in the sector for high-quality companies with depressed valuations. And with the election of a new British prime minister, uncertainty and persistent fear across Europe has been somewhat relieved. At the same time, with President Xi re-elected for a third term in China, we expect a meaningful rally in the China A-shares market with expected loosening of the COVID policies over the next year—a rally which may already be underway.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF SEPTEMBER 30, 2022 |
Since inception, the Fund has invested in a diversified portfolio2 of emerging market stocks with broad sector exposure. As of September 30, 2022, the portfolio was 4.5x cheaper than the benchmark on a price-to-earnings basis, a modest 0.1x less expensive on price-to-book ratio, and offered a higher dividend yield of 7.46% compared to 3.78% for the benchmark. On average, the largest sector overweights during the third quarter were Industrials, Energy, and Health Care; the largest underweights were to Financials, Consumer Discretionary, and Communication Services. On average, the largest region overweights during the third quarter were to the UAE and China3; the largest underweights were once again to Saudi Arabia, South Korea, and India. At the region level, the biggest boost to relative performance came from China, South Africa, and the UAE; Brazil, Russia, and Saudi Arabia were the greatest detractors; at the sector level, Consumer Discretionary, Energy, and Industrials provided the most alpha, while Financials and Materials stocks created the greatest drag on performance.
At the factor level, exposure to stocks with favorable sentiment and quality growth provided the greatest contribution to outperformance through October. By contrast, signals related to quality struggled, particularly when we observe the highest-quality firms by our models actually underperforming their low-quality counterparts. Of course, this has only made those high-quality stocks better bargains and, to the extent fundamentals prevail in the long run—which investment theory, our experience, and our data suggests they will—this ultimately positions the portfolio well to capture behavioral mispricings in the days to come.
Looking ahead, we expect emerging market stocks—including a meaningful exposure to onshore China within EM—will continue to represent an important source of growth and diversification for global investors. We further believe 2022’s market shocks, while frustrating in the short run, create mispricings that ultimately reward investors in high-quality firms whose valuations are misunderstood by domestic retail traders and foreign fund managers who lack local knowledge. We thank you for your allocation to the Fund and look forward to continuing as your trusted partner in emerging markets equity investing.
1 We consider companies to be “high-quality” if they have solid fundamentals and strong growth at reasonable valuations.
2 Note: Diversification does not ensure a profit or guarantee against a loss. The performance data quoted here represent past performance, and are not indicative of future results. The CSI 300 benchmark is a capitalization-weighted index designed to track the performance of the largest 300 stocks traded on the Shanghai and Shenzhen Stock Exchanges, represented here by the China AMC CSI 300 Index ETF (510330.SH). Indices are unmanaged, it is not possible to invest directly in an index, and index performance returns do not reflect any management fees, transaction costs or expenses.
3 The Fund also held an overweight to Russia prior to the conflict in Ukraine. That overweight persists given the ongoing restrictions and limitations regarding the trading of Russian securities.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF SEPTEMBER 30, 2022 |
Sincerely,
Jason Hsu, PhD | Phillip Wool, PhD |
Chairman & CIO | Managing Director |
Rayliant Global Advisors | Head of Investment Solutions Rayliant Global Advisors |
Mark Schlarbaum
Managing Director
Head of Trading & Capital Markets
Rayliant Global Advisors
Definition of the Comparative Index
The MSCI Emerging Markets Index captures large and mid cap representation across 24 Emerging Markets (EM) countries. With 1,387 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. EM countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates.
Comparison of Change in the Value of a $10,000 Investment in the Rayliant Quantamental Emerging Market Equity ETF versus the MSCI Emerging Markets Index (Net) (USD).
TOTAL RETURN | ||||
Cumulative Inception to Date* | ||||
Rayliant Quantamental Emerging Market Equity ETF | -20.97% | |||
MSCI Emerging Markets Index (Net) (USD) | -25.98% |
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF SEPTEMBER 30, 2022 |
* The Rayliant Quantamental Emerging Market Equity ETF commenced operations on December 15, 2021.
Fee waivers were in effect during the period; if they had not been in effect, performance would have been lower.
The performance data quoted herein represents past performance and the return and value of an investment in the Fund will fluctuate so that, when redeemed, may be worth less than its original cost.
The Fund’s performance assumes the reinvestment of dividends and capital gains. Index returns assume reinvestment of dividends and, unlike a fund’s returns, do not reflect any fees or expenses. If such fees and expenses were included in the index returns, the performance would have been lower.
Please note that one cannot invest directly in an unmanaged index.
There are no assurances that the Fund will meet its stated objectives.
The Fund’s holdings and allocations are subject to change because it is actively managed and should not be considered recommendations to buy individual securities.
Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
9
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF SEPTEMBER 30, 2022 |
See definition of comparative index on page 8.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF SEPTEMBER 30, 2022 |
Letter to Shareholders
Dear Shareholders,
We are pleased to provide the first annual report for the Rayliant Quantitative Developed Equity Fund, covering the period December 15, 2021 to September 30, 2022.
Anyone reading 2022 financial news knows this has been a volatile year to invest in any asset class. The macroeconomic shocks of the Russia-Ukraine war, slowing growth, high inflation and rising interest rates have proven too much for equities markets. Unfortunately, not even developed markets have escaped the downturn.
Even before Russia invaded Ukraine, fears of monetary tightening were weighing on equities—especially growth stocks, which are most sensitive to interest rates. Then the West’s response to Russia’s attack stoked fear that global growth may take a more acute hit. At the same time, the shock to commodity prices and supply chains complicated the Fed’s work, making it difficult to engineer a ‘soft landing’ for the economy. Unsurprisingly, all this has manifested in the market.
European shares in the Euro Stoxx 50 Index slipped –1.9% in Q1, driven largely by their exposure to Russian energy. (Prior to the invasion, Russian oil, gas, and coal accounted for 35%, 55%, and 50% of German imports, respectively.) Meanwhile, UK stocks tracked by the FTSE All Share Index posted a modest gain of 0.5% for the quarter, driven by low valuations and the market’s sector composition: underweight tech, and heavy on energy, mining, and financials. This mix outperformed in a climate of geopolitical stress and rising rates. Japanese stocks in the Nikkei 225 Index, which had relatively little exposure to Russia-Ukraine, declined –2.5% for the quarter, with value meaningfully outperforming growth.
Sadly, the challenges that began in Q1 have persisted. In Q2, equities were red across the board, falling as unabated inflation eventually prompted the Fed—fighting what chair Jerome Powell called an “unconditional” battle against rising prices—and other central banks to overshoot and send the global economy into a recession. Headline CPI in the US dipped slightly in April, from 8.5% to 8.3%, before posting progressive increases to 8.6% and then 9.1%, respectively in the follow months. This last figure marked the worst year-over-year jump in prices in over four decades. Equities follows suit, with the S&P 500 Index down –16.1% for the quarter. UK equities, whose sector composition is naturally somewhat defensive, suffered less, with the FTSE All Share Index declining–5%, while European shares in the Euro Stoxx 50 Index fell –5.7%. Japanese stocks in the Nikkei 225 index slid –5% in Q2, as Fed policy pushed the yen to its lowest level against the dollar in two decades.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF SEPTEMBER 30, 2022 |
Investors eventually gathered at Jackson Hole, Wyoming in August, hoping for good news from the Fed. They were disappointed. At the meeting, Fed Chair Jerome Powell reaffirmed the bank’s commitment to keeping rates high in its battle against inflation, predicting that hawkish policy required to tame rising prices would “bring pain to households and businesses.” But markets are forward looking, and investors had already been feeling the pain all year.
Accordingly, the “bear rally” in US stocks that began at the end of the second quarter fizzled out shortly ahead of Powell’s Jackson Hole appearance, and equities sold off through the remainder of Q3, as it became increasingly clear that policymakers have accepted global recession, significant job loss, and falling asset values as a fair price to pay for keeping inflation in check, and that they see high interest rates over an extended period as the surest way to cool things down.
In light of everything above, it’s no surprise that from December 15, 2021 to September 30, 2022, the MSCI World Index was down -24.06%. The positive news is that, during this same period, RAYD was only down -18.47%. The Fund’s outperformance relative to its benchmark during this period was mostly a result of positive stock selection.
RAYD’s performance is an example of how our systematic approach creates an opportunity to identify compelling investments in the US and other developed stock markets around the world, achieving broad equity exposure, but with lower risk and enhanced returns relative to a traditional passive portfolio. During the first 10 months of the year, the Fund invested in a diversified portfolio1 of developed market stocks with broad sector exposure, selected with the objective of capturing mispricings through a focus on, among other things, companies with strong growth and quality fundamentals at a reasonable price, positive sentiment, and favorable risk characteristics.
Looking ahead, we expect positions established during 2022 dislocations to outperform as markets have time to process rising rates and the central banks’ effort to combat inflation and engineer a soft landing. Only time will tell whether such a landing is possible. But in the meantime, we believe 2022’s market shocks will create mispricings that ultimately reward investors. We thank you for your allocation to the Fund, and we look forward to continuing as your trusted partner in developed equity investing.
1 Note: Diversification does not ensure a profit or guarantee against a loss. The performance data quoted here represent past performance, and are not indicative of future results. The CSI 300 benchmark is a capitalization-weighted index designed to track the performance of the largest 300 stocks traded on the Shanghai and Shenzhen Stock Exchanges, represented here by the China AMC CSI 300 Index ETF (510330.SH). Indices are unmanaged, it is not possible to invest directly in an index, and index performance returns do not reflect any management fees, transaction costs or expenses.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF SEPTEMBER 30, 2022 |
Sincerely,
Jason Hsu, PhD | Phillip Wool, PhD |
Chairman & CIO | Managing Director |
Rayliant Global Advisors | Head of Investment Solutions Rayliant Global Advisors |
Mark Schlarbaum
Managing Director
Head of Trading & Capital Markets
Rayliant Global Advisors
Definition of the Comparative Index
The MSCI World Index captures large and mid cap representation across 23 Developed Markets (DM) countries. With 1,517 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country. DM countries include: Australia, Austria, Belgium, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the US.
Comparison of Change in the Value of a $10,000 Investment in the Rayliant Quantitative Developed Market Equity versus the MSCI World Index (Net) (USD).
TOTAL RETURN | ||||
Cumulative Inception to Date* | ||||
Rayliant Quantitative Developed Market Equity | -18.47% | |||
MSCI World Index (Net) (USD) | -24.06% |
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF SEPTEMBER 30, 2022 |
* The Rayliant Quantitative Developed Market Equity commenced operations on December 15, 2021.
Fee waivers were in effect during the period; if they had not been in effect, performance would have been lower.
The performance data quoted herein represents past performance and the return and value of an investment in the Fund will fluctuate so that, when redeemed, may be worth less than its original cost.
The Fund’s performance assumes the reinvestment of dividends and capital gains. Index returns assume reinvestment of dividends and, unlike a fund’s returns, do not reflect any fees or expenses. If such fees and expenses were included in the index returns, the performance would have been lower.
Please note that one cannot invest directly in an unmanaged index.
There are no assurances that the Fund will meet its stated objectives.
The Fund’s holdings and allocations are subject to change because it is actively managed and should not be considered recommendations to buy individual securities.
Returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
14
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF SEPTEMBER 30, 2022 |
See definition of comparative index on page 13.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
SECTOR WEIGHTINGS (Unaudited)†
† | Percentages are based on total investments. |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK — 99.9% | ||||||||
Shares | Value | |||||||
CHINA — 99.9% | ||||||||
Communication Services — 3.8% | ||||||||
37 Interactive Entertainment Network Technology Group, Cl A | 305,268 | $ | 745,919 | |||||
G-bits Network Technology Xiamen, Cl A | 7,200 | 250,980 | ||||||
Kingnet Network, Cl A * | 2,977,615 | 2,735,723 | ||||||
Three's Media Group Co, Cl A | 10,900 | 121,795 | ||||||
3,854,417 | ||||||||
Consumer Discretionary — 2.2% | ||||||||
AIMA Technology Group, Cl A | 134,381 | 941,533 | ||||||
Fuyao Glass Industry Group, Cl A | 30,000 | 150,691 | ||||||
Huizhou Desay Sv Automotive, Cl A | 54,618 | 1,056,866 | ||||||
Zhejiang Supor, Cl A | 19,200 | 124,236 | ||||||
2,273,326 | ||||||||
Consumer Staples — 16.0% | ||||||||
Anhui Gujing Distillery, Cl A | 103,625 | 3,952,900 | ||||||
Chongqing Fuling Zhacai Group, Cl A | 65,400 | 249,339 | ||||||
Henan Shuanghui Investment & Development, Cl A | 880,374 | 3,020,549 | ||||||
Jiangsu King's Luck Brewery JSC, Cl A | 120,700 | 776,771 | ||||||
Kweichow Moutai, Cl A | 13,550 | 3,558,962 | ||||||
Luzhou Laojiao, Cl A | 17,300 | 559,733 | ||||||
Sanquan Food, Cl A | 268,330 | 611,624 | ||||||
Tongwei, Cl A | 468,900 | 3,088,663 | ||||||
Yankershop Food, Cl A | 13,400 | 170,499 | ||||||
15,989,040 | ||||||||
Energy — 5.9% | ||||||||
China Petroleum & Chemical, Cl A | 330,800 | 199,060 | ||||||
Guanghui Energy, Cl A | 506,550 | 872,535 | ||||||
Offshore Oil Engineering, Cl A | 375,400 | 234,324 | ||||||
PetroChina, Cl A | 4,608,049 | 3,315,864 |
The accompanying notes are an integral part of the financial statements.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK (continued) | ||||||||
| Shares | Value | ||||||
CHINA (continued) | ||||||||
Energy (continued) | ||||||||
Shaanxi Coal Industry, Cl A | 396,700 | $ | 1,267,032 | |||||
5,888,815 | ||||||||
Financials — 19.3% | ||||||||
Bank of Chengdu, Cl A | 273,500 | 627,629 | ||||||
Bank of China, Cl A | 1,297,000 | 562,161 | ||||||
Bank of Communications, Cl A | 1,426,100 | 924,175 | ||||||
Bank of Hangzhou, Cl A | 358,240 | 716,063 | ||||||
Bank of Jiangsu, Cl A | 1,433,930 | 1,496,453 | ||||||
Bank of Nanjing, Cl A | 401,200 | 592,023 | ||||||
Bank of Suzhou, Cl A | 100,760 | 94,271 | ||||||
China CITIC Bank, Cl A | 394,000 | 252,013 | ||||||
China Merchants Bank, Cl A | 1,100,500 | 5,194,424 | ||||||
China Zheshang Bank, Cl A | 253,800 | 106,089 | ||||||
Huaxia Bank, Cl A | 486,700 | 343,393 | ||||||
Jiangsu Changshu Rural Commercial Bank, Cl A | 339,600 | 379,178 | ||||||
People's Insurance Group of China, Cl A | 320,400 | 225,161 | ||||||
Ping An Bank, Cl A | 633,800 | 1,052,607 | ||||||
Ping An Insurance Group of China, Cl A | 1,009,100 | 5,885,467 | ||||||
Postal Savings Bank of China, Cl A | 1,281,000 | 801,394 | ||||||
19,252,501 | ||||||||
Health Care — 12.0% | ||||||||
Asymchem Laboratories Tianjin, Cl A | 7,755 | 150,876 | ||||||
Beijing Wantai Biological Pharmacy Enterprise, Cl A | 113,222 | 1,816,850 | ||||||
Dian Diagnostics Group, Cl A | 452,824 | 1,843,271 | ||||||
Guangdong Hybribio Biotech, Cl A | 437,900 | 1,100,716 | ||||||
Guangzhou Kingmed Diagnostics Group, Cl A | 124,800 | 1,109,504 | ||||||
Jiangsu Bioperfectus Technologies, Cl A | 214,532 | 3,159,684 | ||||||
Jiangzhong Pharmaceutical, Cl A | 923,070 | 1,867,077 | ||||||
Porton Pharma Solutions, Cl A | 107,538 | 702,927 | ||||||
Shandong WIT Dyne Health, Cl A | 29,400 | 170,689 | ||||||
11,921,594 | ||||||||
Industrials — 16.9% | ||||||||
Beijing United Information Technology, Cl A | 80,443 | 1,218,185 | ||||||
China State Construction Engineering, Cl A | 3,906,880 | 2,822,276 | ||||||
Contemporary Amperex Technology, Cl A | 13,936 | 783,656 | ||||||
COSCO SHIPPING Holdings, Cl A | 396,317 | 612,613 | ||||||
Daqin Railway, Cl A | 1,966,300 | 1,867,242 | ||||||
Ginlong Technologies, Cl A * | 27,000 | 836,797 | ||||||
Sichuan Road & Bridge, Cl A | 563,290 | 807,505 | ||||||
TBEA, Cl A | 1,180,358 | 3,587,855 | ||||||
Tian Di Science & Technology, Cl A | 1,180,900 | 790,121 |
The accompanying notes are an integral part of the financial statements.
17
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK (continued) | ||||||||
| Shares | Value | ||||||
CHINA (continued) | ||||||||
Industrials (continued) | ||||||||
Wuxi Shangji Automation, Cl A | 88,600 | $ | 1,676,517 | |||||
Xiamen C & D, Cl A | 489,800 | 951,548 | ||||||
YTO Express Group, Cl A | 326,100 | 949,142 | ||||||
16,903,457 | ||||||||
Information Technology — 10.2% | ||||||||
Amlogic Shanghai, Cl A * | 45,400 | 413,871 | ||||||
China Zhenhua Group Science & Technology, Cl A | 19,700 | 320,488 | ||||||
Digital China Group, Cl A | 166,616 | 374,872 | ||||||
Glodon, Cl A | 67,872 | 434,413 | ||||||
Guangzhou Shiyuan Electronic Technology, Cl A | 352,350 | 2,950,604 | ||||||
Qingdao Gaoce Technology, Cl A | 159,400 | 1,823,816 | ||||||
Quectel Wireless Solutions, Cl A | 44,745 | 716,068 | ||||||
SG Micro, Cl A | 122,686 | 2,424,585 | ||||||
StarPower Semiconductor, Cl A | 8,009 | 363,987 | ||||||
Thunder Software Technology, Cl A | 20,051 | 296,948 | ||||||
Universal Scientific Industrial Shanghai, Cl A | 106,768 | 225,842 | ||||||
10,345,494 | ||||||||
Materials — 13.6% | ||||||||
Anhui Guangxin Agrochemical, Cl A | 299,524 | 1,082,700 | ||||||
Asia - Potash International Investment Guangzhou, Cl A * | 176,268 | 722,464 | ||||||
Jiangsu Yangnong Chemical, Cl A | 103,400 | 1,450,528 | ||||||
Suzhou TA&A Ultra Clean Technology, Cl A | 233,300 | 2,168,672 | ||||||
Tianqi Lithium, Cl A | 124,500 | 1,753,337 | ||||||
Tibet Mineral Development, Cl A * | 107,005 | 626,347 | ||||||
YongXing Special Materials Technology, Cl A | 200,386 | 3,491,011 | ||||||
Zangge Mining, Cl A | 491,100 | 1,963,256 | ||||||
Zhejiang Jiahua Energy Chemical Industry, Cl A | 266,200 | 340,911 | ||||||
13,599,226 | ||||||||
TOTAL COMMON STOCK | ||||||||
(Cost $112,945,410) | 100,027,870 | |||||||
TOTAL INVESTMENTS— 99.9% | ||||||||
(Cost $112,945,410) | $ | 100,027,870 | ||||||
| Percentages are based on Net Assets of $100,139,500. |
* | Non-income producing security. |
Cl — Class |
JSC — Joint Stock Company |
The accompanying notes are an integral part of the financial statements.
18
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
As of September 30, 2022, all of the Fund's investments were considered Level 1, in accordance with the authoritative guidance on fair value measurements and disclosure under U.S. generally accepted accounting principles. |
For more information on valuation inputs, see Note 2 — Significant Accounting Policies in the Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.
19
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF |
SECTOR WEIGHTINGS (Unaudited)†
† | Percentages are based on total investments. |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK — 94.4% | ||||||||
Shares | Value | |||||||
BRAZIL — 4.6% | ||||||||
Banco do Brasil | 18,900 | $ | 134,355 | |||||
BB Seguridade Participacoes | 76,200 | 374,319 | ||||||
CCR | 138,700 | 322,078 | ||||||
Petroleo Brasileiro | 4,300 | 26,457 | ||||||
857,209 | ||||||||
CHILE — 0.2% | ||||||||
Cia Sud Americana de Vapores | 661,706 | 46,074 | ||||||
CHINA — 33.2% | ||||||||
Agricultural Bank of China, Cl H | 238,000 | 71,249 | ||||||
Bank of China, Cl H | 335,000 | 109,677 | ||||||
Bank of Communications, Cl H | 233,000 | 122,883 | ||||||
Beijing Enterprises Holdings | 12,000 | 33,707 | ||||||
China Cinda Asset Management, Cl H | 435,000 | 48,211 | ||||||
China CITIC Bank, Cl H | 180,000 | 71,542 | ||||||
China Coal Energy, Cl H | 47,000 | 42,630 | ||||||
China Galaxy Securities, Cl H | 416,500 | 192,600 | ||||||
China National Building Material, Cl H | 100,000 | 76,562 | ||||||
China Overseas Property Holdings | 40,000 | 34,803 | ||||||
China Railway Group, Cl H | 113,000 | 55,421 | ||||||
China Shenhua Energy, Cl H | 47,500 | 141,897 | ||||||
China State Construction International Holdings | 38,000 | 38,485 | ||||||
China Taiping Insurance Holdings | 37,400 | 31,493 | ||||||
China Tower, Cl H | 3,870,000 | 414,120 | ||||||
CITIC | 129,000 | 121,607 | ||||||
COSCO SHIPPING Holdings, Cl H | 86,500 | 101,487 | ||||||
Daqo New Energy ADR * | 2,048 | 108,708 | ||||||
Dian Diagnostics Group, Cl A | 168,000 | 683,863 | ||||||
Kingboard Holdings | 20,500 | 57,975 |
The accompanying notes are an integral part of the financial statements.
20
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK (continued) | ||||||||
| Shares | Value | ||||||
CHINA (continued) | ||||||||
Kingnet Network, Cl A * | 712,600 | $ | 654,711 | |||||
Lenovo Group | 144,000 | 100,159 | ||||||
Nongfu Spring, Cl H | 86,400 | 501,346 | ||||||
People's Insurance Group of China, Cl H | 200,000 | 58,090 | ||||||
PICC Property & Casualty, Cl H | 460,000 | 477,000 | ||||||
Qingdao Gaoce Technology, Cl A | 24,791 | 283,653 | ||||||
Quectel Wireless Solutions, Cl A | 4,800 | 76,816 | ||||||
Sinopharm Group, Cl H | 191,600 | 384,181 | ||||||
SITC International Holdings | 253,000 | 467,975 | ||||||
Tencent Holdings | 3,300 | 111,991 | ||||||
TravelSky Technology, Cl H | 114,000 | 174,560 | ||||||
Yadea Group Holdings | 82,000 | 131,619 | ||||||
Yankuang Energy Group, Cl H | 14,000 | 50,918 | ||||||
YongXing Special Materials Technology, Cl A | 4,000 | 69,686 | ||||||
Yuexiu Property | 84,000 | 101,443 | ||||||
6,203,068 | ||||||||
COLOMBIA — 0.3% | ||||||||
Bancolombia | 7,210 | 48,810 | ||||||
CZECH REPUBLIC — 1.3% | ||||||||
CEZ | 7,020 | 240,699 | ||||||
GREECE — 1.1% | ||||||||
JUMBO | 11,533 | 154,222 | ||||||
OPAP | 4,657 | 56,025 | ||||||
210,247 | ||||||||
HONG KONG — 1.8% | ||||||||
Orient Overseas International | 19,500 | 341,565 | ||||||
HUNGARY — 0.4% | ||||||||
MOL Hungarian Oil & Gas | 14,319 | 79,774 | ||||||
INDIA — 11.8% | ||||||||
ABB India | 3,509 | 133,215 | ||||||
Adani Green Energy * | 1,295 | 35,989 | ||||||
Coal India | 54,618 | 142,501 | ||||||
Hindustan Aeronautics | 28,000 | 807,066 | ||||||
ITC | 11,491 | 46,924 | ||||||
Page Industries | 702 | 437,211 | ||||||
Tata Elxsi | 933 | 98,132 | ||||||
Tube Investments of India | 4,382 | 147,825 | ||||||
Varun Beverages | 24,099 | 309,327 |
The accompanying notes are an integral part of the financial statements.
21
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK (continued) | ||||||||
| Shares | Value | ||||||
INDIA (continued) | ||||||||
WNS Holdings ADR * | 547 | $ | 44,766 | |||||
2,202,956 | ||||||||
INDONESIA — 4.4% | ||||||||
Adaro Energy Indonesia | 855,200 | 222,400 | ||||||
Astra International | 341,500 | 148,576 | ||||||
Sumber Alfaria Trijaya | 396,200 | 62,185 | ||||||
Unilever Indonesia | 274,800 | 87,163 | ||||||
United Tractors | 137,000 | 295,322 | ||||||
815,646 | ||||||||
MALAYSIA — 0.4% | ||||||||
AMMB Holdings | 41,300 | 34,736 | ||||||
Nestle Malaysia | 1,700 | 47,843 | ||||||
82,579 | ||||||||
MEXICO — 2.6% | ||||||||
Alpek, Cl A | 134,200 | 174,996 | ||||||
Prologis Property Mexico ‡ | 122,400 | 310,329 | ||||||
485,325 | ||||||||
POLAND — 1.4% | ||||||||
Polskie Gornictwo Naftowe i Gazownictwo | 266,981 | 263,684 | ||||||
RUSSIA — 0.0% | ||||||||
Gazprom Neft PJSC (A) | 111,970 | – | ||||||
Novolipetsk Steel PJSC (A) | 98,630 | – | ||||||
PhosAgro PJSC GDR Reg. S (A) | 22,787 | – | ||||||
PhosAgro PJSC GDR (A) | 146 | – | ||||||
Severstal PAO (A) | 11,625 | – | ||||||
– | ||||||||
SOUTH AFRICA — 3.5% | ||||||||
Thungela Resources | 35,266 | 653,812 | ||||||
SOUTH KOREA — 6.1% | ||||||||
DB Insurance | 5,442 | 209,966 | ||||||
E-MART | 512 | 30,025 | ||||||
Hyundai Glovis | 391 | 44,410 | ||||||
KT | 14,307 | 362,000 | ||||||
LG | 1,357 | 70,188 | ||||||
LG Innotek | 1,599 | 305,673 | ||||||
Samsung Electronics | 1,311 | 48,657 | ||||||
SK Hynix | 1,097 | 63,718 | ||||||
1,134,637 | ||||||||
The accompanying notes are an integral part of the financial statements.
22
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK (continued) | ||||||||
| Shares | Value | ||||||
TAIWAN — 13.0% | ||||||||
Lotes | 35,000 | $ | 842,231 | |||||
Novatek Microelectronics | 48,000 | 331,097 | ||||||
Realtek Semiconductor | 11,000 | 93,546 | ||||||
Silicon Motion Technology ADR | 7,136 | 465,196 | ||||||
SinoPac Financial Holdings | 890 | 485 | ||||||
Taiwan Business Bank | 664,000 | 263,517 | ||||||
Taiwan Semiconductor Manufacturing | 33,000 | 438,628 | ||||||
2,434,700 | ||||||||
THAILAND — 1.2% | ||||||||
Bumrungrad Hospital | 25,700 | 154,663 | ||||||
Krung Thai Bank | 140,300 | 62,116 | ||||||
216,779 | ||||||||
TURKEY — 0.4% | ||||||||
Haci Omer Sabanci Holding | 22,895 | 31,838 | ||||||
Turkiye Petrol Rafinerileri * | 2,423 | 37,851 | ||||||
69,689 | ||||||||
UNITED ARAB EMIRATES — 6.0% | ||||||||
Fertiglobe | 135,961 | 212,101 | ||||||
Ghitha Holding PJSC * | 3,074 | 61,512 | ||||||
International Holding PJSC * | 8,841 | 856,889 | ||||||
1,130,502 | ||||||||
UNITED STATES — 0.7% | ||||||||
JBS | 18,300 | 85,396 | ||||||
Parade Technologies | 2,000 | 37,292 | ||||||
122,688 | ||||||||
TOTAL COMMON STOCK | ||||||||
(Cost $20,399,696) | 17,640,443 | |||||||
PREFERRED STOCK — 4.6% | ||||||||
BRAZIL — 0.9% | ||||||||
Cia Energetica de Minas Gerais (B) | 50,600 | 100,941 | ||||||
Gerdau (B) | 16,500 | 74,556 | ||||||
175,497 | ||||||||
CHILE — 3.3% | ||||||||
Sociedad Quimica y Minera de Chile (B) | 6,535 | 614,659 | ||||||
The accompanying notes are an integral part of the financial statements.
23
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF |
SCHEDULE OF INVESTMENTS | ||||||||
PREFERRED STOCK (continued) | ||||||||
| Shares | Value | ||||||
COLOMBIA — 0.4% | ||||||||
Bancolombia (B) | 13,128 | $ | 80,071 | |||||
TOTAL PREFERRED STOCK | ||||||||
(Cost $846,337) | 870,227 | |||||||
TOTAL INVESTMENTS— 99.0% | ||||||||
(Cost $21,246,033) | $ | 18,510,670 | ||||||
| Percentages are based on Net Assets of $18,695,541. |
* | Non-income producing security. |
‡ | Real Estate Investment Trust. |
(A) | Level 3 security in accordance with fair value hierarchy. |
(B) | There is currently no rate available. |
ADR — American Depositary Receipt |
Cl — Class |
GDR — Global Depositary Receipt |
PJSC — Public Joint Stock Company |
The accompanying notes are an integral part of the financial statements.
24
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF |
The following is a summary of the inputs used as of September 30, 2022 when valuing the Fund’s investments:
Investments in Securities | Level 1 | Level 2 | Level 3† | Total | ||||||||||||
Common Stock | ||||||||||||||||
Brazil | $ | 857,209 | $ | — | $ | — | $ | 857,209 | ||||||||
Chile | 46,074 | — | — | 46,074 | ||||||||||||
China | 6,203,068 | — | — | 6,203,068 | ||||||||||||
Colombia | 48,810 | — | — | 48,810 | ||||||||||||
Czech Republic | 240,699 | — | — | 240,699 | ||||||||||||
Greece | 210,247 | — | — | 210,247 | ||||||||||||
Hong Kong | 341,565 | — | — | 341,565 | ||||||||||||
Hungary | 79,774 | — | — | 79,774 | ||||||||||||
India | 2,202,956 | — | — | 2,202,956 | ||||||||||||
Indonesia | 815,646 | — | — | 815,646 | ||||||||||||
Malaysia | 82,579 | — | — | 82,579 | ||||||||||||
Mexico | 485,325 | — | — | 485,325 | ||||||||||||
Poland | 263,684 | — | — | 263,684 | ||||||||||||
Russia‡ | — | — | — | ^ | — | |||||||||||
South Africa | 653,812 | — | — | 653,812 | ||||||||||||
South Korea | 1,134,637 | — | — | 1,134,637 | ||||||||||||
Taiwan | 2,434,700 | — | — | 2,434,700 | ||||||||||||
Thailand | 216,779 | — | — | 216,779 | ||||||||||||
Turkey | 69,689 | — | — | 69,689 | ||||||||||||
United Arab Emirates | 1,130,502 | — | — | 1,130,502 | ||||||||||||
United States | 122,688 | — | — | 122,688 | ||||||||||||
Total Common Stock | 17,640,443 | — | — | 17,640,443 | ||||||||||||
Preferred Stock | ||||||||||||||||
Brazil | 175,497 | — | — | 175,497 | ||||||||||||
Chile | 614,659 | — | — | 614,659 | ||||||||||||
Colombia | 80,071 | — | — | 80,071 | ||||||||||||
Total Preferred Stock | 870,227 | — | — | 870,227 | ||||||||||||
Total Investments in Securities | $ | 18,510,670 | $ | — | $ | — | $ | 18,510,670 |
† A reconciliation of Level 3 investments and disclosures of significant unobservable inputs are presented when the Portfolio has a significant amount of Level 3 investments at the beginning and/or end of the period in relation to net assets. Management has concluded that Level 3 investments are not material in relation to net assets.
‡ For the period ended September 30, 2022, there were no significant changes into/out of Level 3. The transfer into Level 3 investments for the Fund were immaterial, although the unrealized appreciation/(depreciation) on these investments was $(1,352,976). These securities were impacted by the invasion of Ukraine and sanctions on market conditions in Russia. From the start of the conflict in Ukraine until September 30, 2022, Russian-held investments were deemed to be worthless due to sanctions and inaccessibility of the market.
The accompanying notes are an integral part of the financial statements.
25
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF |
^ Includes Securities in which the fair value is $0 or has been rounded to $0.
For more information on valuation inputs, see Note 2 — Significant Accounting Policies in the Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.
26
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF |
SECTOR WEIGHTINGS (Unaudited)†
† | Percentages are based on total investments. |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK — 98.3% | ||||||||
Shares | Value | |||||||
AUSTRALIA — 3.3% | ||||||||
AGL Energy | 129,459 | $ | 569,332 | |||||
APA Group | 15,545 | 95,849 | ||||||
Capricorn Metals * | 49,177 | 94,855 | ||||||
Computershare | 6,796 | 108,188 | ||||||
Endeavour Group | 16,636 | 74,873 | ||||||
Rio Tinto | 5,065 | 304,129 | ||||||
Tabcorp Holdings | 172,214 | 103,528 | ||||||
Woolworths Group | 14,979 | 326,964 | ||||||
1,677,718 | ||||||||
AUSTRIA — 0.4% | ||||||||
Strabag | 5,059 | 191,304 | ||||||
CANADA — 3.7% | ||||||||
Algoma Steel Group | 22,295 | 143,580 | ||||||
Andlauer Healthcare Group | 3,204 | 110,877 | ||||||
CF Industries Holdings | 2,646 | 254,677 | ||||||
CGI, Cl A * | 2,652 | 200,707 | ||||||
Dollarama | 3,448 | 198,993 | ||||||
Interfor * | 4,976 | 87,566 | ||||||
International Petroleum * | 88,343 | 710,883 | ||||||
Loblaw | 2,039 | 162,313 | ||||||
1,869,596 | ||||||||
DENMARK — 1.5% | ||||||||
AP Moller - Maersk, Cl A | 31 | 55,058 | ||||||
AP Moller - Maersk, Cl B | 65 | 118,740 | ||||||
D/S NORDEN | 5,898 | 249,755 | ||||||
Novo Nordisk, Cl B | 3,400 | 341,079 | ||||||
764,632 | ||||||||
The accompanying notes are an integral part of the financial statements.
27
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK (continued) | ||||||||
| Shares | Value | ||||||
FRANCE — 0.7% | ||||||||
TotalEnergies | 7,616 | $ | 360,181 | |||||
GERMANY — 4.3% | ||||||||
ADVA Optical Networking * | 10,102 | 187,043 | ||||||
Hapag-Lloyd | 2,035 | 348,280 | ||||||
Merck KGaA | 1,598 | 261,123 | ||||||
PNE | 62,209 | 1,078,695 | ||||||
RWE | 8,393 | 310,718 | ||||||
2,185,859 | ||||||||
HONG KONG — 0.2% | ||||||||
Kerry Properties | 65,900 | 125,086 | ||||||
INDONESIA — 1.4% | ||||||||
First Pacific | 2,338,628 | 712,024 | ||||||
ISAREL — 0.3% | ||||||||
Check Point Software Technologies * | 1,285 | 143,946 | ||||||
ITALY — 1.7% | ||||||||
Atlantia | 6,885 | 152,503 | ||||||
Sanlorenzo | 5,413 | 174,729 | ||||||
Saras * | 579,964 | 554,527 | ||||||
881,759 | ||||||||
JAPAN — 4.6% | ||||||||
Bandai Namco Holdings | 1,464 | 95,409 | ||||||
Central Glass | 8,284 | 190,295 | ||||||
Inpex | 12,600 | 118,301 | ||||||
Japan Display * | 276,620 | 87,910 | ||||||
Japan Petroleum Exploration | 17,528 | 419,597 | ||||||
Kissei Pharmaceutical | 21,620 | 384,319 | ||||||
Nippon Telegraph & Telephone | 15,439 | 416,627 | ||||||
Ono Pharmaceutical | 4,420 | 103,244 | ||||||
Sankyo | 7,344 | 222,484 | ||||||
Sumitomo | 14,126 | 175,910 | ||||||
Toho Holdings | 10,300 | 137,907 | ||||||
2,352,003 | ||||||||
NETHERLANDS — 0.7% | ||||||||
Adyen * | 44 | 56,114 | ||||||
Aegon | 22,729 | 91,337 | ||||||
ASML Holding | 187 | 79,434 | ||||||
NN Group | 3,606 | 141,199 | ||||||
368,084 | ||||||||
The accompanying notes are an integral part of the financial statements.
28
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK (continued) | ||||||||
| Shares | Value | ||||||
NIGERIA — 0.3% | ||||||||
Airtel Africa | 96,577 | $ | 139,289 | |||||
NORWAY — 0.2% | ||||||||
Grieg Seafood | 18,438 | 124,530 | ||||||
SWEDEN — 0.8% | ||||||||
HMS Networks | 3,250 | 88,326 | ||||||
Scandic Hotels Group | 56,387 | 162,594 | ||||||
Swedish Match | 14,027 | 139,038 | ||||||
389,958 | ||||||||
SWITZERLAND — 2.7% | ||||||||
Kuehne + Nagel International | 790 | 162,133 | ||||||
Mobilezone Holding | 6,846 | 103,638 | ||||||
u-blox Holding | 6,402 | 784,436 | ||||||
Valora Holding | 1,293 | 341,560 | ||||||
1,391,767 | ||||||||
UNITED KINGDOM — 2.3% | ||||||||
Centrica | 181,144 | 143,246 | ||||||
Drax Group | 22,002 | 147,487 | ||||||
Firstgroup | 268,341 | 315,124 | ||||||
Go-Ahead Group * | 6,550 | 113,039 | ||||||
Renewi | 27,648 | 174,378 | ||||||
Telecom Plus | 14,082 | 271,322 | ||||||
1,164,596 | ||||||||
UNITED STATES — 69.2% | ||||||||
AbbVie | 10,193 | 1,368,003 | ||||||
Alleghany * | 162 | 135,978 | ||||||
Amazon.com * | 1,569 | 177,297 | ||||||
American International Group | 4,847 | 230,136 | ||||||
AmerisourceBergen, Cl A | 1,165 | 157,659 | ||||||
Amgen | 2,739 | 617,371 | ||||||
Amphastar Pharmaceuticals * | 8,229 | 231,235 | ||||||
Aon, Cl A | 2,684 | 718,963 | ||||||
Apple | 20,569 | 2,842,636 | ||||||
Arista Networks * | 3,065 | 346,008 | ||||||
Arthur J Gallagher | 1,109 | 189,883 | ||||||
Autodesk * | 2,714 | 506,975 | ||||||
Automatic Data Processing | 3,126 | 707,070 | ||||||
AutoZone * | 231 | 494,786 | ||||||
Axcelis Technologies * | 1,863 | 112,823 | ||||||
Blucora * | 5,361 | 103,682 | ||||||
Box, Cl A * | 8,131 | 198,315 |
The accompanying notes are an integral part of the financial statements.
29
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK (continued) | ||||||||
| Shares | Value | ||||||
UNITED STATES (continued) | ||||||||
Bristol-Myers Squibb | 1,413 | $ | 100,450 | |||||
Broadcom | 2,679 | 1,189,503 | ||||||
Cadence Design Systems * | 3,416 | 558,277 | ||||||
Cardinal Health | 3,404 | 226,979 | ||||||
Carlisle | 672 | 188,435 | ||||||
Centene * | 7,333 | 570,581 | ||||||
CH Robinson Worldwide | 1,210 | 116,535 | ||||||
Clearfield * | 1,793 | 187,619 | ||||||
ConocoPhillips | 1,113 | 113,904 | ||||||
Costco Wholesale | 2,162 | 1,021,048 | ||||||
Coterra Energy | 7,550 | 197,206 | ||||||
Dillard's, Cl A | 560 | 152,746 | ||||||
Dollar Tree * | 2,830 | 385,163 | ||||||
Electronic Arts | 3,479 | 402,555 | ||||||
Elevance Health | 1,612 | 732,235 | ||||||
Eli Lilly | 1,121 | 362,475 | ||||||
EQT | 4,329 | 176,407 | ||||||
Everest Re Group | 518 | 135,944 | ||||||
Expeditors International of Washington | 2,320 | 204,879 | ||||||
FactSet Research Systems | 374 | 149,641 | ||||||
Fair Isaac * | 372 | 153,268 | ||||||
GoDaddy, Cl A * | 2,002 | 141,902 | ||||||
Group 1 Automotive | 538 | 76,864 | ||||||
Humana | 562 | 272,677 | ||||||
Ingles Markets, Cl A | 5,721 | 453,160 | ||||||
Intercontinental Exchange | 4,702 | 424,826 | ||||||
International Money Express * | 37,078 | 845,008 | ||||||
iTeos Therapeutics * | 10,600 | 201,930 | ||||||
Jack Henry & Associates | 731 | 133,239 | ||||||
KLA | 882 | 266,920 | ||||||
Live Nation Entertainment * | 2,376 | 180,671 | ||||||
Loews | 2,634 | 131,279 | ||||||
LPL Financial Holdings | 1,029 | 224,816 | ||||||
Marathon Petroleum | 5,221 | 518,602 | ||||||
Marcus & Millichap | 26,438 | 866,638 | ||||||
Mastercard, Cl A | 584 | 166,055 | ||||||
McKesson | 235 | 79,869 | ||||||
Mettler-Toledo International * | 276 | 299,217 | ||||||
Microsoft | 5,822 | 1,355,944 | ||||||
Molina Healthcare * | 746 | 246,061 | ||||||
MongoDB, Cl A * | 852 | 169,173 | ||||||
Mueller Industries | 4,622 | 274,732 |
The accompanying notes are an integral part of the financial statements.
30
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK (continued) | ||||||||
| Shares | Value | ||||||
UNITED STATES (continued) | ||||||||
Murphy USA | 4,134 | $ | 1,136,478 | |||||
NRG Energy | 3,115 | 119,211 | ||||||
O'Reilly Automotive * | 276 | 194,125 | ||||||
Otis Worldwide | 5,411 | 345,222 | ||||||
Palo Alto Networks * | 3,309 | 541,981 | ||||||
Paychex | 2,931 | 328,887 | ||||||
PepsiCo | 1,110 | 181,219 | ||||||
Pfizer | 15,844 | 693,333 | ||||||
Pilgrim's Pride * | 5,660 | 130,293 | ||||||
Procter & Gamble | 3,510 | 443,137 | ||||||
QIAGEN * | 2,827 | 116,699 | ||||||
QUALCOMM | 2,140 | 241,777 | ||||||
Robert Half International | 1,532 | 117,198 | ||||||
Sealed Air | 1,877 | 83,545 | ||||||
Steel Dynamics | 2,370 | 168,151 | ||||||
Stellantis | 33,055 | 397,397 | ||||||
Syndax Pharmaceuticals * | 11,411 | 274,206 | ||||||
Synopsys * | 1,892 | 578,025 | ||||||
Sysco | 4,000 | 282,840 | ||||||
Tesla * | 1,878 | 498,139 | ||||||
Texas Pacific Land | 72 | 127,961 | ||||||
Travelers | 3,017 | 462,204 | ||||||
Tyson Foods, Cl A | 4,102 | 270,445 | ||||||
UGI | 2,767 | 89,457 | ||||||
UnitedHealth Group | 1,407 | 710,591 | ||||||
Valero Energy | 1,097 | 117,214 | ||||||
Veeva Systems, Cl A * | 1,301 | 214,509 | ||||||
VeriSign * | 1,225 | 212,782 | ||||||
Verisk Analytics, Cl A | 1,475 | 251,532 | ||||||
Vertex Pharmaceuticals * | 3,176 | 919,579 | ||||||
Vistra | 5,072 | 106,512 | ||||||
VMware, Cl A | 2,609 | 277,754 | ||||||
W R Berkley | 2,680 | 173,074 | ||||||
WW Grainger | 568 | 277,860 | ||||||
The accompanying notes are an integral part of the financial statements.
31
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF |
SCHEDULE OF INVESTMENTS | ||||||||
COMMON STOCK (continued) | ||||||||
| Shares | Value | ||||||
UNITED STATES (continued) | ||||||||
Yum! Brands | 3,433 | $ | 365,065 | |||||
35,242,655 | ||||||||
TOTAL COMMON STOCK | ||||||||
(Cost $55,662,735) | 50,084,987 | |||||||
TOTAL INVESTMENTS— 98.3% | ||||||||
(Cost $55,662,735) | $ | 50,084,987 | ||||||
| Percentages are based on Net Assets of $50,947,093. |
* | Non-income producing security. |
Cl — Class |
As of September 30, 2022, all of the Fund's investments were considered Level 1, in accordance with the authoritative guidance on fair value measurements and disclosure under U.S. generally accepted accounting principles. |
For more information on valuation inputs, see Note 2 — Significant Accounting Policies in the Notes to Financial Statements.
The accompanying notes are an integral part of the financial statements.
32
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS |
STATEMENTS OF ASSETS AND LIABILIITES
Rayliant Quantamental China Equity ETF | Rayliant Quantamental Emerging Market Equity ETF | Rayliant Quantitative Developed Market Equity ETF | ||||||||||
Assets: | ||||||||||||
Investments, at Value (Cost $112,945,410, $21,246,033 and $55,662,735) | $ | 100,027,870 | $ | 18,510,670 | $ | 50,084,987 | ||||||
Foreign Currency, at Value (Cost $1,184,501, $1,171 and $3,914) | 1,184,524 | 1,166 | 532 | |||||||||
Cash | – | 198,771 | 242,419 | |||||||||
Receivable for Capital Shares Sold | 960,071 | – | – | |||||||||
Unrealized Gain on Forward Foreign Currency Contracts | 30 | 6 | – | |||||||||
Dividend and Interest Receivable | – | 101,784 | 92,501 | |||||||||
Reclaim Receivable | – | – | 772 | |||||||||
Receivable from Investment Adviser | – | 12,696 | – | |||||||||
Receivable for Investment Securities Sold | – | – | 629,900 | |||||||||
Total Assets | 102,172,495 | 18,825,093 | 51,051,111 | |||||||||
Liabilities: | ||||||||||||
Payable for Investment Securities Purchased | 1,171,799 | – | – | |||||||||
Due to Custodian | 711,576 | – | – | |||||||||
Custody Fees Payable | 39,567 | 14,749 | 3,749 | |||||||||
Payable to Investment Adviser | 31,989 | – | 18,853 | |||||||||
Audit Fees Payable | 26,380 | 26,380 | 26,380 | |||||||||
Payable to Administrator | 11,754 | 9,041 | 9,041 | |||||||||
Transfer Agent Fees Payable | 10,000 | 9,500 | 9,500 | |||||||||
Registration Fees Payable | 4,306 | 2,301 | 6,972 | |||||||||
Legal Fees Payable | 3,485 | 667 | 1,797 | |||||||||
Chief Compliance Officer Fees Payable | 2,120 | 406 | 1,093 | |||||||||
Payable to Trustees | 22 | 4 | 11 | |||||||||
Payable for Foreign Capital Gains Tax | – | 45,334 | – | |||||||||
Offering Cost Payable | – | 15,497 | 15,497 | |||||||||
Other Accrued Expenses and Other Payables | 19,997 | 5,673 | 11,125 | |||||||||
Total Liabilities | 2,032,995 | 129,552 | 104,018 | |||||||||
Net Assets | $ | 100,139,500 | $ | 18,695,541 | $ | 50,947,093 | ||||||
Net Assets Consist of: | ||||||||||||
Paid-in Capital | $ | 124,168,916 | $ | 25,283,404 | $ | 64,828,967 | ||||||
Total Accumulated Losses | (24,029,416 | ) | (6,587,863 | ) | (13,881,874 | ) |
The accompanying notes are an integral part of the financial statements.
33
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS |
STATEMENTS OF ASSETS AND LIABILIITES -(continued)
Rayliant Quantamental China Equity ETF | Rayliant Quantamental Emerging Market Equity ETF | Rayliant Quantitative Developed Market Equity ETF | ||||||||||
Net Assets | $ | 100,139,500 | $ | 18,695,541 | $ | 50,947,093 | ||||||
Outstanding Shares of beneficial interest | 5,625,000 | 950,000 | 2,500,000 | |||||||||
Net Asset Value, Offering and Redemption Price Per Share | $ | 17.80 | $ | 19.68 | $ | 20.38 |
The accompanying notes are an integral part of the financial statements.
34
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS FOR THE YEAR/PERIOD ENDED SEPTEMBER 30, 2022 |
Statements of Operations
Rayliant Quantamental China Equity ETF | Rayliant Quantamental Emerging Market Equity ETF | * | Rayliant Quantitative Developed Market Equity ETF | * | ||||||||
Investment Income: | ||||||||||||
Dividends | $ | 2,519,256 | $ | 1,316,106 | $ | 1,381,625 | ||||||
Less: Foreign Taxes Withheld | (251,716 | ) | (143,805 | ) | (130,992 | ) | ||||||
Total Investment Income | 2,267,540 | 1,172,301 | 1,250,633 | |||||||||
Expenses: | ||||||||||||
Investment Advisory Fees (Note 5) | 418,276 | 120,341 | 411,711 | |||||||||
Administration Fees (Note 4) | 127,867 | 88,296 | 88,637 | |||||||||
Trustees' Fees | 14,543 | 3,070 | 12,924 | |||||||||
Chief Compliance Officer Fees (Note 3) | 7,787 | 1,648 | 3,171 | |||||||||
Custodian Fees | 51,911 | 14,749 | 3,749 | |||||||||
Legal Fees | 41,580 | 9,527 | 23,840 | |||||||||
Printing Fees | 31,231 | 3,049 | 8,465 | |||||||||
Insurance Fees | 30,291 | 8,204 | 19,027 | |||||||||
Audit Fees | 25,850 | 26,380 | 26,380 | |||||||||
Registration and Filing Fees | 14,909 | 11,801 | 17,348 | |||||||||
Offering Costs (Note 2) | 12,978 | 38,785 | 38,785 | |||||||||
Transfer Agent Fees | 5,000 | 9,500 | 9,500 | |||||||||
Pricing Fees | 4,087 | 2,564 | 2,161 | |||||||||
Total Expenses | 786,310 | 337,914 | 665,698 | |||||||||
Less: | ||||||||||||
Waiver of Investment Advisory Fees | (228,587 | ) | (120,341 | ) | (158,971 | ) | ||||||
Waiver - Reimbursement from Adviser | – | (69,452 | ) | – | ||||||||
Net Expenses | 557,723 | 148,121 | 506,727 | |||||||||
Net Investment Income | 1,709,817 | 1,024,180 | 743,906 | |||||||||
Net Realized Loss on: | ||||||||||||
Investments | (10,465,175 | ) | (4,649,128 | ) | (8,702,108 | ) | ||||||
Capital Gains Tax | – | (52,272 | ) | – | ||||||||
Foreign Currency Transactions | (173,603 | ) | (119,875 | ) | (84,065 | ) | ||||||
Net Realized Loss | (10,638,778 | ) | (4,821,275 | ) | (8,786,173 | ) | ||||||
Net Change in Unrealized Appreciation (Depreciation) on: | ||||||||||||
Investments | (11,403,431 | ) | (2,735,363 | ) | (5,577,748 | ) | ||||||
Capital Gains Tax | – | (45,334 | ) | – | ||||||||
Foreign Currency Translation | 40 | (291 | ) | (3,698 | ) | |||||||
Net Change in Unrealized Depreciation | (11,403,391 | ) | (2,780,988 | ) | (5,581,446 | ) | ||||||
Net Realized and Unrealized Loss | (22,042,169 | ) | (7,602,263 | ) | (14,367,619 | ) |
The accompanying notes are an integral part of the financial statements.
35
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS FOR THE YEAR/PERIOD ENDED SEPTEMBER 30, 2022 |
Statements of Operations -(continued)
Rayliant Quantamental China Equity ETF | Rayliant Quantamental Emerging Market Equity ETF | * | Rayliant Quantitative Developed Market Equity ETF | * | ||||||||
Net Decrease in Net Assets Resulting from Operations | $ | (20,332,352 | ) | $ | (6,578,083 | ) | $ | (13,623,713 | ) |
* | Commenced operations on December 15, 2021. |
The accompanying notes are an integral part of the financial statements.
36
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
STATEMENTS OF CHANGES IN NET ASSETS
Year | Period | |||||||
Operations: | ||||||||
Net Investment Income | $ | 1,709,817 | $ | 325,631 | ||||
Net Realized Loss on Investments, and Foreign Currency Transactions | (10,638,778 | ) | (2,151,154 | ) | ||||
Net Change in Unrealized Depreciation on Investments, and Foreign Currency Transactions | (11,403,391 | ) | (1,514,096 | ) | ||||
Net Decrease in Net Assets Resulting From Operations | (20,332,352 | ) | (3,339,619 | ) | ||||
Distributions | (357,445 | ) | – | |||||
Capital Share Transactions: | ||||||||
Shares | ||||||||
Issued | 86,856,354 | 43,194,027 | ||||||
Redeemed | (5,881,465 | ) | – | |||||
Net Increase in Net Assets From Capital Share Transactions | 80,974,889 | 43,194,027 | ||||||
Total Increase in Net Assets | 60,285,092 | 39,854,408 | ||||||
Net Assets: | ||||||||
Beginning of Year | 39,854,408 | – | ||||||
End of Year | $ | 100,139,500 | $ | 39,854,408 | ||||
Shares Transactions: | ||||||||
Shares | ||||||||
Issued | 4,300,000 | 1,600,000 | ||||||
Redeemed | (275,000 | ) | – | |||||
Net Increase in Shares Outstanding From Share Transactions | 4,025,000 | 1,600,000 |
* | Commenced operations on December 30, 2020. |
The accompanying notes are an integral part of the financial statements.
37
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF SEPTEMBER 30, 2022 |
STATEMENTS OF CHANGES IN NET ASSETS
Year Ended September 30, 2022* | ||||
Operations: | ||||
Net Investment Income | $ | 1,024,180 | ||
Net Realized Loss on Investments and Foreign Currency Transactions | (4,821,275 | ) | ||
Net Change in Unrealized Depreciation on Investments and Foreign Currency Transactions | (2,780,988 | ) | ||
Net Decrease in Net Assets Resulting From Operations | (6,578,083 | ) | ||
Distributions | (9,780 | ) | ||
Capital Share Transactions: | ||||
Shares | ||||
Issued | 33,933,341 | |||
Redeemed | (8,649,937 | ) | ||
Net Increase in Net Assets From Capital Share Transactions | 25,283,404 | |||
Total Increase in Net Assets | 18,695,541 | |||
Net Assets: | ||||
Beginning of Year | – | |||
End of Year | $ | 18,695,541 | ||
Shares Transactions: | ||||
Shares | ||||
Issued | 1,350,000 | |||
Redeemed | (400,000 | ) | ||
Net Increase in Shares Outstanding From Share Transactions | 950,000 |
* | Commenced operations on December 15, 2021. |
The accompanying notes are an integral part of the financial statements.
38
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF SEPTEMBER 30, 2022 |
STATEMENTS OF CHANGES IN NET ASSETS
Period Ended September 30, 2022* | ||||
Operations: | ||||
Net Investment Income | $ | 743,906 | ||
Net Realized Loss on Investments, and Foreign Currency Transactions | (8,786,173 | ) | ||
Net Change in Unrealized Depreciation on Investments, and Foreign Currency Transactions | (5,581,446 | ) | ||
Net Decrease in Net Assets Resulting From Operations | (13,623,713 | ) | ||
Distributions | (12,688 | ) | ||
Capital Share Transactions: | ||||
Shares | ||||
Issued | 96,498,794 | |||
Redeemed | (31,915,300 | ) | ||
Net Increase in Net Assets From Capital Share Transactions | 64,583,494 | |||
Total Increase in Net Assets | 50,947,093 | |||
Net Assets: | ||||
Beginning of Period | – | |||
End of Period | $ | 50,947,093 | ||
Shares Transactions: | ||||
Shares | ||||
Issued | 3,950,000 | |||
Redeemed | (1,450,000 | ) | ||
Net Increase in Shares Outstanding From Share Transactions | 2,500,000 |
* | Commenced operations on December 15, 2021. |
The accompanying notes are an integral part of the financial statements.
39
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL CHINA EQUITY ETF SEPTEMBER 30, 2022 |
FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios
For a Share Outstanding
Throughout the Year/Period
Year | Period Ended | |||||||
Net Asset Value, Beginning of Year | $ | 24.91 | $ | 25.00 | ||||
Income (Loss) from Investment Operations: | ||||||||
Net Investment Income† | 0.52 | 0.39 | ||||||
Net Realized and Unrealized Loss | (7.42 | ) | (0.48 | ) | ||||
Total from Investment Operations | (6.90 | ) | (0.09 | ) | ||||
Dividends and Distributions: | ||||||||
Net Investment Income | (0.21 | ) | — | |||||
Net Asset Value, End of Year | $ | 17.80 | $ | 24.91 | ||||
Total Return‡ | (27.93 | )% | (0.36 | )% | ||||
Ratios and Supplemental Data | ||||||||
Net Assets, End of Year (Thousands) | $ | 100,140 | $ | 39,854 | ||||
Ratio of Expenses to Average Net Assets | 0.80 | % | 0.80 | %†† | ||||
Ratio of Expenses to Average Net Assets (Excluding Waivers and Reimbursements) | 1.13 | % | 2.43 | %†† | ||||
Ratio of Net Investment Loss to Average Net Assets | 2.45 | % | 1.97 | %†† | ||||
Portfolio Turnover Rate | 255 | % | 199§ | % |
* | Commenced operations on December 30, 2020. |
† | Per share calculations were performed using average shares for the period. |
†† | Annualized. |
‡ | Total return is for the period indicated and has not been annualized. Returns shown do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
§ | Portfolio turnover is for the period indicated and has not been annualized. |
| Amounts designated as “—” are either not applicable, $0 or have been rounded to $0. |
The accompanying notes are an integral part of the financial statements.
40
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTAMENTAL EMERGING MARKET EQUITY ETF SEPTEMBER 30, 2022 |
FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios
For a Share Outstanding
Throughout the Period
Period Ended September 30, 2022* | ||||
Net Asset Value, Beginning of Year | $ | 25.00 | ||
Income (Loss) from Investment Operations: | ||||
Net Investment Income† | 0.98 | |||
Net Realized and Unrealized Loss | (6.20 | ) | ||
Total from Investment Operations | (5.22 | ) | ||
Dividends and Distributions: | ||||
Net Investment Income | (0.10 | ) | ||
Net Asset Value, End of Year | $ | 19.68 | ||
Total Return‡ | (20.97 | )% | ||
Ratios and Supplemental Data | ||||
Net Assets, End of Year (Thousands) | $ | 18,696 | ||
Ratio of Expenses to Average Net Assets | 0.80 | %†† | ||
Ratio of Expenses to Average Net Assets (Excluding Waivers and Reimbursements) | 1.83 | %†† | ||
Ratio of Net Investment Loss to Average Net Assets | 5.53 | %†† | ||
Portfolio Turnover Rate§ | 295 | % |
* | Commenced operations on December 15, 2021. |
† | Per share calculations were performed using average shares for the period. |
†† | Annualized. |
‡ | Total return is for the period indicated and has not been annualized. Returns shown do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
§ | Portfolio turnover is for the period indicated and has not been annualized. |
| Amounts designated as “—” are either not applicable, $0 or have been rounded to $0. |
The accompanying notes are an integral part of the financial statements.
41
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT QUANTITATIVE DEVELOPED MARKET EQUITY ETF SEPTEMBER 30, 2022 |
FINANCIAL HIGHLIGHTS
Selected Per Share Data & Ratios
For a Share Outstanding
Throughout the Period
Period Ended September 30, 2022* | ||||
Net Asset Value, Beginning of Year | $ | 25.00 | ||
Income (Loss) from Investment Operations: | ||||
Net Investment Income† | 0.21 | |||
Net Realized and Unrealized Loss | (4.83 | ) | ||
Total from Investment Operations | (4.62 | ) | ||
Dividends and Distributions: | ||||
Net Investment Income | — | ^ | ||
Net Asset Value, End of Year | $ | 20.38 | ||
Total Return‡ | (18.47 | )% | ||
Ratios and Supplemental Data | ||||
Net Assets, End of Year (Thousands) | $ | 50,947 | ||
Ratio of Expenses to Average Net Assets | 0.80 | %†† | ||
Ratio of Expenses to Average Net Assets (Excluding Waivers and Reimbursements) | 1.05 | %†† | ||
Ratio of Net Investment Loss to Average Net Assets | 1.17 | %†† | ||
Portfolio Turnover Rate§ | 235 | % |
* | Commenced operations on December 15, 2021. |
† | Per share calculations were performed using average shares for the period. |
†† | Annualized. |
‡ | Total return is for the period indicated and has not been annualized. Returns shown do not reflect the deductions of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
^ | Amount represents less than $0.005 per share. |
§ | Portfolio turnover is for the period indicated and has not been annualized. |
| Amounts designated as “—” are either not applicable, $0 or have been rounded to $0. |
The accompanying notes are an integral part of the financial statements.
42
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
NOTES TO FINANCIAL STATEMENTS
1. Organization:
The Advisors’ Inner Circle Fund III (the “Trust”) is organized as a Delaware statutory trust under a Declaration of Trust dated December 4, 2013. The Trust is registered under the Investment Company Act of 1940, as amended, as an open-end management investment company with 65 funds. The financial statements herein are those of the Rayliant Quantamental China Equity ETF, the Rayliant Quantamental Emerging Market Equity ETF, and the Rayliant Quantitative Developed Market Equity ETF (the “Funds”). The investment objective of each of the Funds is to seek long-term capital appreciation. Each of the Funds is classified as a non-diversified investment company. Rayliant Asset Management serves as the investment adviser (the “Adviser”) to each of the Funds. The Adviser has registered with the National Futures Association as a “Commodity Pool Operator” under the Commodities Exchange Act with respect to each of the Funds. The Rayliant Quantamental China Equity ETF commenced operations on December 30, 2020; the Rayliant Quantamental Emerging Market Equity ETF and the Rayliant Quantitative Developed Market Equity ETF each commenced operations on December 15, 2021. The financial statements of the remaining funds of the Trust are presented separately. The assets of each fund are segregated, and a shareholder’s interest is limited to the funds in which shares are held.
2. Significant Accounting Policies:
The following are significant accounting policies, which are consistently followed in the preparation of the financial statements of the Funds. The Funds are each investment companies that apply the accounting and reporting guidance issued in Topic 946 by the U.S. Financial Accounting Standards Board (“FASB”).
Use of Estimates — The preparation of financial statements, in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates and such differences could be material.
Security Valuation — Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on an exchange or market (foreign or domestic) on which they are traded or, if there is no such reported sale on the valuation date, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ official closing
43
THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
price will be used. The prices for foreign securities are reported in local currency and converted to U.S. dollars using currency exchange rates. Prices for most securities held in the Funds are provided daily by recognized independent pricing agents. If a security price cannot be obtained from an independent, third-party pricing agent, the Funds seeks to obtain a bid price from at least one independent broker.
Securities for which market prices are not “readily available” are required to be fair valued under the 1940 Act.
In December 2020, the SEC adopted Rule 2a-5 under the 1940 Act, establishing requirements to determine fair value in good faith for purposes of the 1940 Act. The rule permits fund boards to designate a fund's investment adviser to perform fair-value determinations, subject to board oversight and certain other conditions. The rule also defines when market quotations are "readily available" for purposes of the 1940 Act and requires a fund to fair value a portfolio investment when a market quotation is not readily available. The SEC also adopted new Rule 31a-4 under the 1940 Act, which sets forth recordkeeping requirements associated with fair-value determinations. The compliance date for Rule 2a-5 and Rule 31a-4 was September 8, 2022.
Effective September 8, 2022, and pursuant to the requirements of Rule 2a-5, the Trust’s Board of Trustees designated the Adviser as the Board’s valuation designee to perform fair-value determinations for the Funds through a Fair Value Committee established by the Adviser and approved new Adviser Fair Value Procedures for the Funds. Prior to September 8, 2022, fair-value determinations were performed in accordance with the Trust’s Fair Value Procedures established by the Funds’ Board of Trustees and were implemented through a Fair Value Committee designated by the Board.
Some of the more common reasons that may necessitate that a security be valued using Fair Value Procedures include: the security’s trading has been halted or suspended; the security has been de-listed from a national exchange; the security’s primary trading market is temporarily closed at a time when under normal conditions it would be open; the security has not been traded for an extended period of time; the security’s primary pricing source is not able or willing to provide a price; or trading of the security is subject to local government imposed restrictions. When a security is valued in accordance with the Fair Value Procedures, the Committee will determine the value after taking into consideration relevant information reasonably available to the Committee.
For securities that principally trade on a foreign market or exchange, a significant gap in time can exist between the time of a particular security’s last trade and the time at which the Funds calculate its net asset value. The closing prices of such
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securities may no longer reflect their market value at the time the Funds calculate its net asset value if an event that could materially affect the value of those securities (a “Significant Event”) has occurred between the time of the security’s last close and the time that the Funds calculate net asset value. A Significant Event may relate to a single issuer or to an entire market sector. If the Adviser of the Funds become aware of a Significant Event that has occurred with respect to a security or group of securities after the closing of the exchange or market on which the security or securities principally trade, but before the time at which the Funds calculate its net asset value, it may request that a Committee meeting be called.
In accordance with U.S. GAAP, the Funds disclose fair value of its investments in a hierarchy that prioritizes the inputs to valuation techniques used to measure the fair value. The objective of a fair value measurement is to determine the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date (an exit price).
Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value hierarchy are described below:
● | Level 1 — Unadjusted quoted prices in active markets for identical, unrestricted assets or liabilities that the Funds have the ability to access at the measurement date; |
● | Level 2 — Other significant observable inputs (includes quoted prices for similar securities, interest rates, prepayment speeds, credit risk, referenced indices, quoted prices in inactive markets, adjusted quoted prices in active markets, adjusted quoted prices on foreign equity securities that were adjusted in accordance with pricing procedures approved by the Board, etc.); and |
● | Level 3 — Prices, inputs or exotic modeling techniques which are both significant to the fair value measurement and unobservable (supported by little or no market activity). |
Investments are classified within the level of the lowest significant input considered in determining fair value. Investments classified within Level 3 whose fair value measurement considers several inputs may include Level 1 or Level 2 inputs as components of the overall fair value measurement.
Federal Income Taxes — It is the Funds’ intention to continue to qualify as a regulated investment company for Federal income tax purposes by complying with the appropriate provisions of Subchapter M of the Internal Revenue Code of 1986,
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as amended. Accordingly, no provision for Federal income taxes has been made in the financial statements.
The Funds evaluate tax positions taken or expected to be taken in the course of preparing the Funds’ tax returns to determine whether it is “more-likely than-not” (i.e., greater than 50-percent) that each tax position will be sustained upon examination by a taxing authority based on the technical merits of the position. Tax positions not deemed to meet the more-likely-than-not threshold are recorded as a tax benefit or expense in the current year. The Funds did not record any tax provision in the current period. However, management’s conclusions regarding tax positions taken may be subject to review and adjustment at a later date based on factors including, but not limited to, examination by tax authorities (i.e., from commencement of operations, as applicable), on-going analysis of and changes to tax laws, regulations and interpretations thereof.
As of and during the year or period ended September 30, 2022, the Funds did not have a liability for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations. During the period, the Funds did not incur any interest or penalties.
Security Transactions and Investment Income — Security transactions are accounted for on the trade date. Costs used in determining realized gains and losses on the sale of investment securities are based on the specific identification method. Dividend income and expense are recorded on the ex-dividend date. Dividend income is recorded net of unrecoverable withholding tax. Interest income is recognized on the accrual basis from settlement date. Certain dividends and expenses from foreign securities will be recorded as soon as the Funds are informed of the dividend if such information is obtained subsequent to the ex-dividend date.
Foreign Currency Translation — The books and records of the Funds are maintained in U.S. dollars. Investment securities and other assets and liabilities denominated in a foreign currency are translated into U.S. dollars on the date of valuation. The Funds do not isolate that portion of realized or unrealized gains and losses resulting from changes in the foreign exchange rate from fluctuations arising from changes in the market prices of the securities. These gains and losses are included in net realized and unrealized gains and losses on investments on the Statement of Operations. Net realized and unrealized gains and losses on foreign currency transactions represent net foreign exchange gains or losses from foreign currency exchange contracts, disposition of foreign currencies, currency gains or losses realized between trade and settlement dates on securities transactions and the difference between the amount of the investment income and foreign withholding
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taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid.
Classes — Class specific expenses are borne by that class of shares. Income, realized and unrealized gains (losses), and non-class specific expenses are allocated to the respective class on basis of relative daily net assets.
Expenses — Most expenses of the Trust can be directly attributed to a particular fund. Expenses which cannot be directly attributed to a particular fund are apportioned among the funds of the Trust based on the number of funds and/or relative net assets.
Cash — Idle cash may be swept into various time deposit accounts and is classified as cash on the Statement of Assets and Liabilities. The Fund maintains cash in bank deposit accounts which, at times may exceed United States federally insured limits. Amounts invested are available on the same business day.
Dividends and Distributions to Shareholders — Any net realized capital gains are distributed annually. All distributions are recorded on ex-dividend date.
Offering Costs — For the year ended September 30, 2022, the Rayliant Quantamental China Equity ETF incurred $0 in deferred offering costs and expensed $12,978. During the period ended September 30, 2022, the Rayliant Quantamental Emerging Market Equity ETF and Rayliant Quantitative Developed Market Equity ETF commenced operations and had each incurred, or expect to incur, offering costs in the amount of $48,985, and each had expensed $38,785, which are being amortized to expense over a twelve month period. As of September 30, 2022, the Rayliant Quantamental China Equity ETF had $0 remaining to be amortized; the Rayliant Quantamental Emerging Market Equity ETF and Rayliant Quantitative Developed Market Equity ETF each had $10,200 remaining to be amortized.
Creation Units — The Funds issue and redeems Shares at NAV and only in large blocks of Shares (each block of Shares for the Funds are a Creation Unit of 25,000, 50,000 and 25,000 Shares for Rayliant Quantamental China Equity ETF, Rayliant Quantamental Emerging Market Equity ETF and Rayliant Quantitative Developed Market Equity ETF, respectively or multiples thereof). Except when aggregated in Creation Units, Shares are not redeemable securities of the Funds. Shares of Funds may only be purchased or redeemed by certain Authorized Participants. An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a Depository Trust Company (‘‘DTC’’) participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors will not qualify as Authorized Participants or have the resources to
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buy and sell whole Creation Units. Therefore, they will be unable to purchase or redeem the Shares directly from Funds. Rather, most retail investors will purchase Shares in the secondary market with the assistance of a broker and will be subject to customary brokerage commissions or fees when buying or selling Shares. If a Creation Unit is purchased or redeemed for cash, a higher transaction fee will be charged.
The following table discloses Creation Unit breakdown as of September 30, 2022:
Creation Unit Shares | Creation Transaction Fee | Value | Redemption Transaction Fee | |||||||||||||
Rayliant Quantamental China Equity ETF | 25,000 | $ | 1,000 | $ | 445,000 | $ | 1,000 | |||||||||
Rayliant Quantamental Emerging Market Equity ETF | 50,000 | $ | 2,500 | $ | 984,000 | $ | 2,500 | |||||||||
Rayliant Quantitative Developed Market Equity ETF | 25,000 | $ | 1,000 | $ | 509,500 | $ | 1,000 |
3. Transactions with Affiliates:
Certain officers of the Trust are also employees of SEI Investments Global Funds Services (the “Administrator”), a wholly owned subsidiary of SEI Investments Company, and/or SEI Investments Distribution Co. (the “Distributor”). Such officers are paid no fees by the Trust, other than the Chief Compliance Officer (“CCO”) as described below, for serving as officers of the Trust.
The services provided by the CCO and his staff are paid for by the Trust as incurred. The services include regulatory oversight of the Trust’s Advisors and service providers as required by SEC regulations. The CCO’s services and fees have been approved by and are reviewed by the Board.
4. Administration, Distribution, Custodian, and Transfer Agent Agreements:
The Funds and the Administrator are parties to an Administration Agreement under which the Administrator provides administration services to the Funds. For these services, the Administrator is paid an asset-based fee, which will vary depending on the number of share classes and the average daily net assets of the Funds. For the year or period ended September 30, 2022, for the Rayliant Quantamental China Equity ETF, the Rayliant Quantamental Emerging Market Equity ETF, and the Rayliant Quantitative Developed Market Equity ETF incurred $127,867, $88,296, and $88,637, respectively, for these services.
The Trust has adopted a Distribution Plan (the “Plan”) applicable to the Funds in accordance with the provisions of Rule 12b-1 under the 1940 Act, which regulates
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circumstances under which an investment company may directly or indirectly bear expenses relating to the distribution of its shares.
Under the Plan, the Distributor or financial intermediaries may receive up to 0.25% of the average daily net assets of each Fund as compensation for distribution and shareholder services. For the year or period ended September 30, 2022, the Funds did not incur any fees for these services.
Brown Brothers Harriman & Co. acts as custodian (the “Custodian”) for each of the Funds. The Custodian plays no role in determining the investment policies of any of the Funds or which securities are to be purchased or sold by the Funds.
Brown Brothers Harriman & Co. also serves as the transfer agent and dividend disbursing agent for each of the Funds under a transfer agency agreement with the Trust.
5. Investment Advisory Agreement:
Under the terms of an investment advisory agreement between the Trust, on behalf of the Funds, and the Adviser, the Adviser provides investment advisory services to Rayliant Quantamental China Equity ETF, Rayliant Quantamental Emerging Market Equity ETF and Rayliant Quantitative Developed Market Equity ETF at a fee calculated at an annual rate of 0.60%, 0.65% and 0.65%, respectively, of the Fund’s average daily net assets. The Adviser contractually has agreed to reduce fees and to reimburse expenses for each of the Funds to the extent necessary to keep total annual fund operating expenses after fee reductions and/or expense reimbursements (excluding any class specific expenses, dividend and interest expenses on securities sold short, interest, taxes, acquired fund fee expenses and non-routine expenses) from exceeding 0.80% with respect to the Fund’s’ average daily net assets until January 31, 2023 (the “Expense Limitation”). The Adviser may recover all or a portion of the Adviser’s fee reductions or expense reimbursements in regard to each of the Funds, up to the expense cap in place at the time the expenses were waived, within a three-year period from the year in which the Adviser reduced the Adviser’s fee or reimbursed expenses if the Fund’s total annual funds operating expenses are below the Expense Limitation. This agreement may be terminated by the Board for any reason at any time, or by the Adviser, upon ninety (90) days’ prior written notice to the Trust, effective as of the close of business on January 31, 2023.
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As of September 30, 2022, the following amounts of waivers/reimbursements are subject to recoupment:
Period | Subject to Repayment until September 30: | Rayliant Quantamental China Equity ETF | Rayliant Quantamental Emerging Market Equity ETF | Rayliant Quantitative Developed Market Equity ETF | ||||||||||||
2021 | 2024 | $ | 269,626 | $ | — | $ | — | |||||||||
2022 | 2025 | $ | 228,587 | $ | 189,793 | $ | 158,971 | |||||||||
$ | 498,213 | $ | 189,793 | $ | 158,971 |
6. Investment Transactions:
For the year ended September 30, 2022, the Rayliant Quantamental China Equity ETF made purchases of $257,512,068 and sales of $175,406,776 in investment securities other than long-term U.S. Government and short-term securities.
For the year or period ended September 30, 2022, the Rayliant Quantamental Emerging Market Equity ETF made purchases of $95,934,508 and sales of $70,040,567 in investment securities other than long-term U.S. Government and short-term securities.
For the year or period ended September 30, 2022, the Rayliant Quantitative Developed Market Equity ETF made purchases of $281,643,889 and sales of $217,274,017 in investment securities other than long-term U.S. Government and short-term securities. The purchase and sales balances include the effect of securities received or delivered from processing in-kind creations of $94,305,530 and redemptions of $31,520,100 respectively, and have been properly excluded from the calculation of portfolio turnover within the Fund’s financial highlights. Realized gains on in-kind redemptions were $245,473.
7. Federal Tax Information:
The amount and character of income and capital gain distributions to be paid, if any, are determined in accordance with Federal income tax regulations, which may differ from U.S. GAAP. As a result, net investment income (loss) and net realized gain/(loss) on investment transactions for a reporting period may differ significantly from distributions during the year. Book/tax differences may be temporary or permanent.
The permanent differences are primary attributed to different treatment for gains and losses on REIT adjustments, PFIC adjustments, India capital gains tax and foreign currency transactions.
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At September 30, 2022, the fund reclassifed the following permanent amount between capital paid-in and distributable earnings (accumulated losses), the reclassification is primarily related to In-Kind Redemptions:
Distributable Earnings (Accumulated Loss) | Paid-in Capital | |||||||
Rayliant Quantitative Developed Market Equity ETF | $ | (245,473 | ) | $ | 245,473 |
The tax character of dividends and distributions paid during the year or period ended September 30, 2022 are as follows:
Ordinary Income | Long-Term Capital Gain | Total | ||||||||||
Rayliant Quantamental China Equity ETF | $ | (357,445 | ) | $ | — | $ | (357,445 | ) | ||||
Rayliant Quantamental Emerging Market Equity ETF | (9,780 | ) | — | (9,780 | ) | |||||||
Rayliant Quantitative Developed Market Equity ETF | (12,688 | ) | — | (12,688 | ) |
As of September 30, 2022, the components of Distributable Earnings on a tax basis for the Funds were as follows:
Rayliant Quantamental China Equity ETF | Rayliant Quantamental Emerging Market Equity ETF | Rayliant Quantitative Developed Market Equity ETF | ||||||||||
Undistributed Ordinary Income | $ | 1,556,476 | $ | 871,026 | $ | 661,438 | ||||||
Post October Capital Losses Deferred – Short-Term | (9,434,893 | ) | – | – | ||||||||
Capital Loss Carryforwards - Short-Term | (1,456,302 | ) | (4,557,288 | ) | (8,920,494 | ) | ||||||
Unrealized Depreciation | (14,694,696 | ) | (2,901,599 | ) | (5,622,819 | ) | ||||||
Other Temporary Differences | (1 | ) | (2 | ) | 1 | |||||||
Total Accumulated Losses | $ | (24,029,416 | ) | $ | (6,587,863 | ) | $ | (13,881,874 | ) |
Post-October capital losses represent capital losses realized on investment transactions from November 1, 2021 through September 30, 2022, that, in accordance with Federal income tax regulations, the Funds may elect to defer and treat as having arisen in the following fiscal year.
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The fund has capital losses carried forward as follows:
Short-Term Loss | Long-Term Loss | Total | ||||||||||
Rayliant Quantamental China Equity ETF | $ | 1,456,302 | $ | — | $ | 1,456,302 | ||||||
Rayliant Quantamental Emerging Market Equity ETF | 4,557,288 | — | 4,557,288 | |||||||||
Rayliant Quantitative Developed Market Equity ETF | 8,920,494 | — | 8,920,494 |
For Federal income tax purposes, the difference between Federal tax cost and book cost primarily relates to wash sales and former PFIC MTM adjustments. The Federal tax cost and aggregate gross unrealized appreciation and depreciation for investments held by the Fund at September 30, 2022 were as follows:
Federal Tax Cost | Aggregate Gross Unrealized Appreciation | Aggregate Gross Unrealized Depreciation | Net Unrealized Depreciation | |||||||||||||
Rayliant Quantamental China Equity ETF | $ | 114,722,589 | $ | 1,706,255 | $ | (16,400,951 | ) | $ | (14,694,696 | ) | ||||||
Rayliant Quantamental Emerging Market Equity ETF | 21,366,644 | 1,257,503 | (4,159,102 | ) | (2,901,599 | ) | ||||||||||
Rayliant Quantitative Developed Market Equity ETF | 55,704,108 | 980,106 | (6,602,925 | ) | (5,622,819 | ) |
8. Concentration of Risks:
As with all ETFs, there is no guarantee that the Funds will achieve its investment objective. A Fund share is not a bank deposit and it is not insured or guaranteed by the FDIC or any government agency. Each Fund is subject to certain of the principal risks noted below. A more complete description of principal risks is included in each Fund’s prospectus under the heading “Principal Ricks”.
Risk of Investing in China - Since 1978, the Chinese government has been, and is expected to continue, reforming its economic policies, which has resulted in less direct central and local government control over the business and production activities of Chinese enterprises and companies. Notwithstanding the economic reforms instituted by the Chinese government and the Chinese Communist Party, actions of the Chinese central and local government authorities continue to have a substantial effect on economic conditions in China, which could affect the public and private sector companies in which the Fund invests. In the past, the Chinese government has from
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time to time taken actions that influence the prices at which certain goods may be sold, encourage companies to invest or concentrate in particular industries, induce mergers between companies in certain industries and induce private companies to publicly offer their securities to increase or continue the rate of economic growth, control the rate of inflation or otherwise regulate economic expansion. It may do so in the future as well. Such actions and a variety of other centrally planned or determined activities by the Chinese government could have a significant adverse effect on economic conditions in China, the economic prospects for, and the market prices and liquidity of, the securities of Chinese companies and the payments of dividends and interest by Chinese companies.
Risk of Investing in Russia - Russia's military invasion of Ukraine in February 2022, the resulting responses by the United States and other countries, and the potential for wider conflict have had, and could continue to have, severe adverse effects on regional and global economies and could further increase volatility and uncertainty in the financial markets. The United States and other countries have imposed broad-ranging economic sanctions on Russia and certain Russian individuals, banking entities and corporations as a response to its invasion of Ukraine.
The United States and other countries have also imposed economic sanctions on Belarus and may impose sanctions on other countries that provide military or economic support to Russia. These sanctions, as well as any other economic consequences related to the invasion, such as additional sanctions, boycotts or changes in consumer or purchaser preferences or cyberattacks on governments, companies or individuals, may further decrease the value and liquidity of certain Russian securities and securities of issuers in other countries that are subject to economic sanctions related to the invasion. To the extent that a Fund has exposure to Russian investments or investments in countries affected by the invasion, the Fund's ability to price, buy, sell, receive or deliver such investments may be impaired. In addition, any exposure that a Fund may have to counterparties in Russia or in countries affected by the invasion could negatively impact the Fund's investments. The extent and duration of military actions and the repercussions of such actions (including any retaliatory actions or countermeasures that may be taken by those subject to sanctions) are impossible to predict. These events have resulted in, and could continue to result in, significant market disruptions, including in certain industries or sectors such as the oil and natural gas markets, and may further strain global supply chains and negatively affect inflation and global growth. These and any related events could significantly impact a Fund's performance and the value of an investment in a Fund beyond any direct exposure a Fund may have to Russian issuers or issuers in other countries affected by the invasion.
Equity Market Risk - Because a Fund may invest in equity securities, the Fund is subject to the risk that stock prices will fall over short or extended periods of time. Historically, the equity markets have moved in cycles, and the value of the Fund’s securities may fluctuate drastically from day to day. Individual companies may report poor results or be
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negatively affected by industry and/or economic trends and developments. The prices of securities issued by such companies may suffer a decline in response. The market as a whole may not favor the types of investments a Fund makes. Many factors can adversely affect a security’s performance, including both general financial market conditions and factors related to a specific company, industry or geographic region. In addition, the impact of any epidemic, pandemic or natural disaster, or widespread fear that such events may occur, could negatively affect the global economy, as well as the economies of individual countries, the financial performance of individual companies and sectors, and the markets in general in significant and unforeseen ways. Any such impact could adversely affect the prices and liquidity of the securities and other instruments in which a Fund invests, which in turn could negatively impact the Fund’s performance and cause losses on your investment in the Fund. Recent examples include pandemic risks related to COVID-19 and aggressive measures taken worldwide in response by governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines of large populations, and by businesses, including changes to operations and reducing staff. The impact of the COVID-19 pandemic may be short-term or may last for an extended period of time, and in either case could result in a substantial economic downturn or recession. During a general economic downturn in the securities markets, multiple asset classes may be negatively affected. In the case of foreign stocks, these fluctuations will reflect international economic and political events, as well as changes in currency valuations relative to the U.S. dollar. These factors contribute to price volatility, which is a principal risk of investing in a Fund.
Stock Connect Investing Risk - Fund purchases of China A Shares through Stock Connect involve ownership rights that are exercised differently than those involved in U.S. securities markets. When the Fund buys a Shanghai Stock Exchange-listed or Shenzhen Stock Exchange-listed stock through Stock Connect, the Fund is purchasing a security registered under the name of the Hong Kong Securities Clearing Company Limited (“HKSCC”) that acts as a nominee holder for the beneficial owner of the Shanghai Stock Exchange-listed or Shenzhen Stock Exchange-listed stock. The Fund as the beneficial owner of the Shanghai Stock Exchange-listed or Shenzhen Stock Exchange-listed stock can exercise its rights through its nominee HKSCC. However, due to the indirect nature of holding its ownership interest through a nominee holder, the Fund might encounter difficulty in exercising or timely exercising its rights as the beneficial owner when trading through HKSCC under Stock Connect, and such difficulty may expose the Fund to risk of loss.
Foreign Securities Risk - Investments in securities of foreign companies (including direct investments as well as investments through certain depositary receipts) can be more volatile than investments in U.S. companies. Diplomatic, political, or economic developments, including nationalization or appropriation, could affect investments in foreign companies. Foreign securities markets generally have less trading volume and less liquidity than U.S. markets. In addition, the value of securities denominated
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in foreign currencies, and of dividends from such securities, can change significantly when foreign currencies strengthen or weaken relative to the U.S. dollar. Financial statements of foreign issuers are governed by different accounting, auditing, and financial reporting standards than the financial statements of U.S. issuers. Thus, there may be less information publicly available about foreign issuers than about most U.S. issuers. Some foreign governments levy withholding taxes against dividend and interest income. Although in some countries a portion of these taxes are recoverable, the non-recovered portion will reduce the income received from the securities comprising a Fund’s portfolio. Any spread of an infectious illness, public health threat or similar issue could reduce consumer demand or economic output, result in market closures, travel restrictions or quarantines, and generally have a significant impact on the economies of the affected country and other countries with which it does business, which in turn could adversely affect a Fund's investments in that country and other affected countries. Additionally, periodic U.S. Government restrictions on investments in issuers from certain foreign countries may result in a Fund having to sell such prohibited securities at inopportune times. Such prohibited securities may have less liquidity as a result of such U.S. Government designation and the market price of such prohibited securities may decline, which may cause the Fund to incur losses.
Foreign Currency Risk - As a result of a Fund's investments in securities or other investments denominated in, and/or receiving revenues in, foreign currencies, the Fund will be subject to currency risk. Currency risk is the risk that foreign currencies will decline in value relative to the U.S. dollar, in which case the dollar value of an investment in a Fund would be adversely affected. Currency exchange rates may fluctuate in response to, among other things, changes in interest rates, intervention (or failure to intervene) by U.S. or foreign governments, central banks or supranational entities, or by the imposition of currency controls or other political developments in the United States or abroad.
Large Capitalization Risk - If valuations of large capitalization companies appear to be greatly out of proportion to the valuations of small or medium capitalization companies, investors may migrate to the stocks of small and medium-sized companies. Additionally, larger, more established companies may be unable to respond quickly to new competitive challenges such as changes in technology and consumer tastes. Larger companies also may not be able to attain the high growth rates of successful smaller companies.
Small and Medium Capitalization Issuers Risk - Investing in equity securities of small and medium capitalization companies often involves greater risk than is customarily associated with investments in larger capitalization companies. This increased risk may be due to the greater business risks of smaller size companies, limited markets and financial resources, narrow product lines and the frequent lack of depth of management. Stock prices of smaller companies may be based in substantial part on future expectations rather than current achievements. The securities of smaller companies are often traded over-the-counter and, even if listed on a national securities
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exchange, may not be traded in volumes typical for that exchange. Consequently, the securities of smaller companies may be less liquid, may have limited market stability and may be subject to more severe, abrupt or erratic market movements than securities of larger, more established companies or the market averages in general. Further, smaller companies may have less publicly available information and, when available, it may be inaccurate or incomplete.
Emerging Market Company Risk - Investments in emerging market companies are considered speculative and subject to heightened risks in addition to the general risks of investing in foreign companies. Unlike more established markets, emerging markets may have governments that are less stable and economies that are less developed. Furthermore, future economic or political crises could lead to price controls, forced mergers, expropriation or confiscatory taxation, seizure, nationalization or creation of government monopolies.
Depositary Receipts Risk - American Depositary Receipts (“ADRs”) are typically trust receipts issued by a U.S. bank or trust company that evidence an indirect interest in underlying securities issued by a foreign entity. Global Depositary Receipts (“GDRs”), European Depositary Receipts (“EDRs”), and other types of depositary receipts (collectively, “Depositary Receipts”) are typically issued by non-U.S. banks or financial institutions to evidence an interest in underlying securities issued by either a U.S. or a non-U.S. entity. Investments in non-U.S. issuers through ADRs, GDRs, EDRs, and other types of Depositary Receipts generally involve risks applicable to other types of investments in non-U.S. issuers. Investments in Depositary Receipts may be less liquid and more volatile than the underlying securities in their primary trading market. If a Depositary Receipt is denominated in a different currency than its underlying securities, a Fund will be subject to the currency risk of both the investment in the Depositary Receipt and the underlying security. The values of Depositary Receipts may decline for a number of reasons relating to the issuers or sponsors of the Depositary Receipts, including, but not limited to, insolvency of the issuer or sponsor. Holders of Depositary Receipts may have limited or no rights to take action with respect to the underlying securities or to compel the issuer of the receipts to take action. The prices of Depositary Receipts may differ from the prices of securities upon which they are based. In addition, there is risk involved in investing in unsponsored depositary receipts, as there may be less information available about the underlying issuer than there is about an issuer of sponsored depositary receipts and the prices of unsponsored depositary receipts may be more volatile than those of sponsored depositary receipts.
Management Risk - Each Fund is subject to the risk that the Adviser’s judgments about the attractiveness, value, or potential appreciation of the Fund’s investments may prove to be incorrect. In addition, the prices of common stocks move up and down in response to corporate earnings and developments, economic and market conditions and anticipated events. Individual issuers may report poor results or be negatively
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affected by industry and/or economic trends and developments. A Fund’s investment success depends on the skill of the Adviser in evaluating, selecting and monitoring the portfolio assets. If the Adviser’s conclusions about growth rates or securities values are incorrect, the Fund may not perform as anticipated.
Quantitative Investing Risk - A quantitative investment style generally involves the use of computers to implement a systematic or rules-based approach to selecting investments based on specific measurable factors. Due to the significant role technology plays in such strategies, they carry the risk of unintended or unrecognized issues or flaws in the design, coding, implementation or maintenance of the computer programs or technology used in the development and implementation of the quantitative strategy. These issues or flaws, which can be difficult to identify, may result in the implementation of a portfolio that is different from that which was intended, and could negatively impact investment returns. Such risks should be viewed as an inherent element of investing in an investment strategy that relies heavily upon quantitative models and computerization.
ETF Risks - The Funds are ETFs and, as a result of this structure, they are exposed to the following risks:
Trading Risk - Although Fund shares are listed for trading on a listing exchange, there can be no assurance that an active trading market for such shares will develop or be maintained. Secondary market trading in a Fund’s shares may be halted by a listing exchange because of market conditions or for other reasons. In addition, trading in a Fund’s shares is subject to trading halts caused by extraordinary market volatility pursuant to “circuit breaker” rules. There can be no assurance that the requirements necessary to maintain the listing of a Fund’s shares will continue to be met or will remain unchanged.
Shares of a Fund may trade at, above or below their most recent NAV. The per share NAV of a Fund is calculated at the end of each business day and fluctuates with changes in the market value of a Fund’s holdings since the prior most recent calculation. The trading prices of a Fund’s shares will fluctuate continuously throughout trading hours based on market supply and demand. The trading prices of a Fund’s shares may deviate significantly from NAV during periods of market volatility. These factors, among others, may lead to a Fund’s shares trading at a premium or discount to NAV. However, given that shares can be created and redeemed only in Creation Units at NAV, the Adviser does not believe that large discounts or premiums to NAV will exist for extended periods of time. While the creation/redemption feature is designed to make it likely that a Fund’s shares normally will trade close to a Fund’s NAV, exchange prices are not expected to correlate exactly with a Fund’s NAV due to timing reasons as well as market supply and demand factors. In addition, disruptions to creations and redemptions or the existence of extreme volatility may result in trading prices that differ significantly from NAV. If a shareholder purchases
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
at a time when the market price of a Fund is at a premium to its NAV or sells at time when the market price is at a discount to the NAV, the shareholder may sustain losses.
Where all or a portion of a Fund’s underlying securities trade in a market that is closed when the market in which the Fund’s shares are listed and trading in that market is open, there may be changes between the last quote from its closed foreign market and the value of such security during the Fund’s domestic trading day. This in turn could lead to differences between the market price of the Fund’s shares and the underlying value of those shares.
Investors buying or selling shares of a Fund in the secondary market will pay brokerage commissions or other charges imposed by brokers as determined by that broker. Brokerage commissions are often a fixed amount and may be a significant proportional cost for investors seeking to buy or sell relatively small amounts of shares. In addition, secondary market investors will also incur the cost of the difference between the price that an investor is willing to pay for shares (the “bid” price) and the price at which an investor is willing to sell shares (the “ask” price). This difference in bid and ask prices is often referred to as the “spread” or “bid/ask spread.” The bid/ask spread varies over time for shares based on trading volume and market liquidity, and is generally lower if a Fund’s shares have more trading volume and market liquidity and higher if a Fund’s shares have little trading volume and market liquidity. Further, increased market volatility may cause increased bid/ask spreads. Due to the costs of buying or selling shares of a Fund, including bid/ask spreads, frequent trading of such shares may significantly reduce investment results and an investment in a Fund’s shares may not be advisable for investors who anticipate regularly making small investments.
Cash Transactions Risk - Like other ETFs, a Fund sells and redeems its shares only in large blocks called Creation Units and only to “Authorized Participants.” Unlike many other ETFs, however, a Fund expects to effect its creations and redemptions at least partially for cash, rather than in-kind securities. Thus, an investment in a Fund may be less tax-efficient than an investment in other ETFs as a Fund may recognize a capital gain that it could have avoided by making redemptions in-kind. As a result, a Fund may pay out higher capital gains distributions than ETFs that redeem in-kind. Further, paying redemption proceeds at least partially in cash rather than through in-kind delivery of portfolio securities may require a Fund to dispose of or sell portfolio investments to obtain the cash needed to distribute redemption proceeds at an inopportune time.
Limited Authorized Participants, Market Makers and Liquidity Providers Risk - Only an Authorized Participant may engage in creation or redemption transactions directly with a Fund. A Fund has a limited number of financial institutions that
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
may act as Authorized Participants. In addition, there may be a limited number of market makers and/or liquidity providers in the marketplace. To the extent either of the following events occur, Fund shares may trade at a material discount to NAV and possibly face delisting: (i) Authorized Participants exit the business or otherwise become unable to process creation and/or redemption orders and no other Authorized Participants step forward to perform these services, or (ii) market makers and/or liquidity providers exit the business or significantly reduce their business activities and no other entities step forward to perform their functions. An active trading market for shares of a Fund may not develop or be maintained, and, particularly during times of market stress, Authorized Participants or market makers may step away from their respective roles in making a market in shares of a Fund and in executing purchase or redemption orders. This could, in turn, lead to variances between the market price of a Fund’s shares and the value of its underlying securities.
Investments in Investment Companies Risk - A Fund may purchase shares of investment companies. When a Fund invests in an investment company, it will bear a pro rata portion of the investment company’s expenses in addition to directly bearing the expenses associated with its own operations. Such expenses may make owning shares of an investment company more costly than owning the underlying securities directly. In part because of these additional expenses, the performance of an investment company may differ from the performance a Fund would achieve if it invested directly in the underlying investments of the investment company. In addition, while the risks of owning shares of an investment company generally reflect the risks of owning the underlying investments of the investment company, a Fund may be subject to additional or different risks than if the Fund had invested directly in the underlying investments.
ETFs - ETFs are pooled investment vehicles whose shares are listed and traded on U.S. and non-U.S. stock exchanges. To the extent that a Fund invests in ETFs, the Fund will be subject to substantially the same risks as those associated with the direct ownership of the securities in which the ETF invests, and the value of the Fund’s investment will fluctuate in response to the performance of the ETF’s holdings. ETFs typically incur fees that are separate from those of the Fund. Accordingly, a Fund’s investments in ETFs will result in the layering of expenses such that shareholders will indirectly bear a proportionate share of the ETFs’ operating expenses, in addition to paying Fund expenses. Because the value of ETF shares depends on the demand in the market, shares may trade at a discount or premium to their NAV and the Adviser may not be able to liquidate the Fund’s holdings at the most optimal time, which could adversely affect the Fund’s performance.
Portfolio Turnover Risk - Due to each Fund’s investment strategy, the Fund may buy and sell securities frequently. This may result in higher transaction costs and additional capital gains tax liabilities, which may affect a Fund’s performance.
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Geographic Focus Risk - To the extent that it focuses its investments in a particular country or geographic region, a Fund may be more susceptible to economic, political, regulatory or other events or conditions affecting issuers and countries within that country or geographic region. As a result, a Fund may be subject to greater price volatility and risk of loss than a fund holding more geographically diverse investments.
Liquidity Risk - Liquidity risk exists when particular investments are difficult to purchase or sell. The market for certain investments may become illiquid due to specific adverse changes in the condition of a particular issuer or under adverse market or economic conditions independent of the issuer. A Fund’s investments in illiquid securities may reduce the returns of the Fund because it may be unable to sell the illiquid securities at an advantageous time or price. Further, transactions in illiquid securities may entail transaction costs that are higher than those for transactions in liquid securities.
Valuation Risk - The risk that a security may be difficult to value. A Fund may value certain securities at a price higher than the price at which they can be sold. This risk may be especially pronounced for investments that are illiquid or may become illiquid.
Sector Focus Risk - Because the Fund may, from time to time, be more heavily invested in particular sectors, the value of its shares may be especially sensitive to factors and economic risks that specifically affect those sectors. As a result, the Fund’s share price may fluctuate more widely than the value of shares of a mutual fund that invests in a broader range of sectors.
Financials Sector Risk - Performance of companies in the financials sector may be adversely impacted by many factors, including, among others, government regulations, economic conditions, credit rating downgrades, changes in interest rates, and decreased liquidity in credit markets. The impact of more stringent capital requirements, recent or future regulation of any individual financial company, or recent or future regulation of the financials sector as a whole cannot be predicted. In recent years, cyber attacks and technology malfunctions have become increasingly frequent in this sector and have caused significant losses to companies in this sector, which may negatively impact the Fund.
Consumer Discretionary Sector Risk - Companies in the consumer discretionary sector are subject to the performance of the overall international economy, interest rates, competition and consumer confidence. Success depends heavily on disposable household income and consumer spending. The impact of any epidemic, pandemic or natural disaster, or widespread fear that such events may occur, could negatively affect the overall international economy and, in turn, negatively affect companies in the consumer discretionary sector.
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Preferred Stock Risk - Preferred stocks in which the Fund may invest are sensitive to interest rate changes, and are also subject to equity risk, which is the risk that stock prices will fall over short or extended periods of time. The rights of preferred stocks on the distribution of a company’s assets in the event of a liquidation are generally subordinate to the rights associated with a company’s debt securities.
REIT Risk - REITs are susceptible to the risks associated with direct ownership of real estate, such as the following: declines in property values; increases in property taxes, operating expenses, interest rates or competition; overbuilding; zoning changes; and losses from casualty or condemnation.
Leverage Risk - The Fund's use of derivatives may result in the Fund's total investment exposure substantially exceeding the value of its portfolio securities and the Fund's investment returns depending substantially on the performance of securities that the Fund may not directly own. The use of leverage can amplify the effects of market volatility on the Fund's share price and may also cause the Fund to liquidate portfolio positions when it would not be advantageous to do so in order to satisfy its obligations. The Fund's use of leverage may result in a heightened risk of investment loss.
Non-Diversification Risk - The Fund is classified as “non-diversified,” which means it may invest a larger percentage of its assets in a smaller number of issuers than a diversified fund. To the extent that the Fund invests its assets in a smaller number of issuers, the Fund will be more susceptible to negative events affecting those issuers than a diversified fund. The Fund intends to satisfy the diversification requirements necessary to qualify as a regulated investment company (“RIC”) under the Internal Revenue Code of 1986, as amended (the “Code”).
New Fund Risk - Because the Fund is new, investors in the Fund bear the risk that the Fund may not be successful in implementing its investment strategy, may not employ a successful investment strategy, or may fail to attract sufficient assets under management to realize economies of scale, any of which could result in the Fund being liquidated at any time without shareholder approval and at a time that may not be favorable for all shareholders. Such liquidation could have negative tax consequences for shareholders and will cause shareholders to incur expenses of liquidation.
9. Other:
At September 30, 2022, the records of the trust reflected the following with respect to the number of Authorized Participants and the percentage of shares outstanding held by the Authorized Participants:
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
Authorized Participants | % Ownership | |||||||
Rayliant Quantamental China Equity ETF | 6 | 100.0% | ||||||
Rayliant Quantamental Emerging Market Equity ETF | 3 | 100.0% | ||||||
Rayliant Quantitative Developed Market Equity ETF | 2 | 100.0% |
Fund’s total shares outstanding were held in the form of Creation Units. However, the individual shares comprising such Creation Units are listed and traded on the Exchange and have been purchased and sold by persons other than Authorized Participants.
10. Subsequent Events:
On September 7, 2021, Brown Brothers Harriman & Co. (“BBH”), the Funds’ custodian, announced that it had entered into an agreement with State Street Bank and Trust Company (“State Street”) to sell BBH’s Investor Services business to State Street (the “Transaction”). The Transaction is subject to certain closing conditions, including regulatory and customary approvals, and it is expected to be consummated in the first quarter of 2023 or it may be delayed until a later date (the “Closing Date”). In addition, there is an increasing potential that the Transaction may be cancelled altogether. Assuming the Transaction is consummated, it is expected that State Street will replace BBH as the Funds’ custodian effective as of the Closing Date.
The Funds have evaluated the need for additional disclosures (other than what is disclosed in the preceding paragraph) and/or adjustments resulting from subsequent events through the date the financial statements were issued. Based on this evaluation, no additional disclosures and/or adjustments were required to the financial statements as of September 30, 2022.
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THE ADVISORS INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of The Advisors’ Inner Circle Fund III and
Shareholders of Rayliant Quantamental China Equity ETF, Rayliant Quantamental
Emerging Market Equity ETF and Rayliant Quantitative Developed Market Equity ETF
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Rayliant Quantamental China Equity ETF, Rayliant Quantamental Emerging Market Equity ETF and Rayliant Quantitative Developed Market Equity ETF (collectively referred to as the “Funds”) (three of the series constituting The Advisors’ Inner Circle Fund III (the “Trust”)), including the schedules of investments, as of September 30, 2022, and the related statements of operations, and changes in net assets, and the financial highlights for each of the periods indicated in the table below and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of each of the Funds (three of the series constituting The Advisors’ Inner Circle Fund III) at September 30, 2022, and the results of their operations, changes in net assets and financial highlights for each of the periods indicated in the table below, in conformity with U.S. generally accepted accounting principles.
Individual fund constituting The Advisors’ Inner Circle Fund III | Statement of operations | Statements of changes in net assets | Financial highlights |
Rayliant Quantamental China Equity ETF | For the year ended September 30, 2022 | For the year ended September 30, 2022 and the period from December 30, 2020 (commencement of operations) through September 30, 2021 | |
Rayliant Quantamental Emerging Market Equity ETF | For the period from December 15, 2021 (commencement of operations) through September 30, 2022 | ||
Rayliant Quantitative Developed Market Equity ETF | For the period from December 15, 2021 (commencement of operations) through September 30, 2022 |
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THE ADVISORS INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
Basis for Opinion
These financial statements are the responsibility of the Trust’s management. Our responsibility is to express an opinion on each of the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) ("PCAOB") and are required to be independent with respect to the Trust in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Trust is not required to have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2022, by correspondence with the custodians and brokers; when replies were not received from brokers, we performed other auditing procedures. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
We have served as the auditor of one or more Rayliant Asset Management companies since 2021.
Philadelphia, Pennsylvania
November 28, 2022
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
DISCLOSURE OF FUND EXPENSES (Unaudited)
All mutual funds have operating expenses. As a shareholder of a mutual fund, your investment is affected by these ongoing costs, which include (among others) costs for Fund management, administrative services, and shareholder reports like this one. It is important for you to understand the impact of these costs on your investment returns.
Operating expenses such as these are deducted from the mutual fund’s gross income and directly reduce your final investment return. These expenses are expressed as a percentage of the mutual fund’s average net assets; this percentage is known as the mutual fund’s expense ratio.
The following examples use the expense ratio and are intended to help you understand the ongoing costs (in dollars) of investing in your Fund and to compare these costs with those of other mutual funds. The examples are based on an investment of $1,000 made at the beginning of the period shown and held for the entire period from April 1, 2022 to September 30, 2022.
The table on the next page illustrates your Fund’s costs in two ways:
● Actual Fund Return. This section helps you to estimate the actual expenses after fee waivers that your Fund incurred over the period. The “Expenses Paid During Period” column shows the actual dollar expense cost incurred by a $1,000 investment in the Fund, and the “Ending Account Value” number is derived from deducting that expense cost from the Fund’s gross investment return.
You can use this information, together with the actual amount you invested in the Fund, to estimate the expenses you paid over that period. Simply divide your ending starting account value by $1,000 to arrive at a ratio (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply that ratio by the number shown for your Fund under “Expenses Paid During Period.”
● Hypothetical 5% Return. This section helps you compare your Fund’s costs with those of other mutual funds. It assumes that the Fund had an annual 5% return before expenses during the year, but that the expense ratio (Column 3) for the period is unchanged. This example is useful in making comparisons because the Securities and Exchange Commission requires all mutual funds to make this 5% calculation. You can assess your Fund’s comparative cost by comparing the hypothetical result for your Fund in the “Expenses Paid During Period” column with those that appear in the same charts in the shareholder reports for other mutual funds.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
DISCLOSURE OF FUND EXPENSES (Unaudited) (Continued)
Note: Because the return is set at 5% for comparison purposes — NOT your Fund’s actual return — the account values shown may not apply to your specific investment
Beginning Account Value 4/01/22 | Ending Account Value 9/30/22 | Annualized Expense Ratios | Expenses Paid During Period* | |||||||||||||
Rayliant Quantamental China Equity ETF | ||||||||||||||||
Actual Fund Return | $ | 1,000.00 | $ | 789.00 | 0.80 | % | $ | 3.59 | ||||||||
Hypothetical 5% Return | 1,000.00 | 1,021.06 | 0.80 | 4.05 | ||||||||||||
Rayliant Quantamental Emerging Market Equity ETF | ||||||||||||||||
Actual Fund Return | $ | 1,000.00 | $ | 847.90 | 0.80 | % | $ | 3.71 | ||||||||
Hypothetical 5% Return | 1,000.00 | 1,021.06 | 0.80 | 4.05 | ||||||||||||
Rayliant Quantitative Developed Market Equity ETF | ||||||||||||||||
Actual Fund Return | $ | 1,000.00 | $ | 837.30 | 0.80 | % | $ | 3.68 | ||||||||
Hypothetical 5% Return | 1,000.00 | 1,021.06 | 0.80 | 4.05 | ||||||||||||
* | Expenses are equal to the Fund’s annualized expense ratio (including dividend and interest expense on short sales), multiplied by the average account value over the period, multiplied by 183/365 (to reflect the one-half year period). |
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NOTES
THE ADVISORS INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
TRUSTEES AND OFFICERS OF THE ADVISORS’ INNER CIRCLE FUND III (Unaudited)
Set forth below are the names, years of birth, positions with the Trust, length of term of office, and the principal occupations for the last five years of each of the persons currently serving as Trustees and Officers of the Trust. Unless otherwise noted, the business address of each Trustee is SEI Investments Company, One Freedom Valley Drive, Oaks Pennsylvania 19456. Trustees who are deemed not to be “interested persons” of the Trust are referred to as “Independent Trustees.” Mr. Doran is a Trustee who may be deemed to be “interested” person of the Trust as that term is defined in the 1940 Act by virtue of their affiliation with the Trust’s Distributor. The Trust’s Statement of Additional Information (“SAI”) includes additional information about the Trustees and Officers. The SAI may be obtained without charge by calling 1-844-523-8637. The following chart lists Trustees and Officers as of December 31, 2020
Name and Year of Birth | Position with Trust and Length of Time Served1 | Principal Occupations in the Past Five Years |
INTERESTED TRUSTEES3,4 | ||
William M. Doran | Chairman of the | Self-Employed Consultant since 2003. Partner at Morgan, Lewis & Bockius LLP (law firm) from 1976 to 2003. Counsel to the Trust, SEI Investments, SIMC, the Administrator and the Distributor. Secretary of SEI Investments since 1978. |
INDEPENDENT TRUSTEES3 | ||
Jon C. Hunt | Trustee and Lead Independent Trustee | Retired since 2013. Consultant to Management, Convergent Capital Management, LLC (“CCM”) from 2012 to 2013. Managing Director and Chief Operating Officer, CCM from 1998 to 2012. |
Thomas P. Lemke | Trustee | Retired since 2013. Executive Vice President and General Counsel, Legg Mason, Inc. from 2005 to 2013. |
Nichelle Maynard-Elliott | Trustee | Independent Director since 2018. Executive Director, M&A at Praxair Inc. from 2011-2019. |
1 | Each Trustee shall hold office during the lifetime of this Trust until the election and qualification of his or her successor, or until he or she sooner dies, resigns, or is removed in accordance with the Trust’s Declaration of Trust. |
2 | Directorships of Companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies under the 1940 Act. |
3 | Trustees oversee 65 funds in The Advisors’ Inner Circle Fund III. |
4 | Denotes Trustees who may be deemed to be “interested” persons of the Fund as that term is defined in the 1940 Act by virtue of their affiliation with the Distributor and/or its affiliates. |
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TRUSTEES AND OFFICERS OF THE ADVISORS’ INNER CIRCLE FUND III (Unaudited)
Other Directorships |
Current Directorships: Trustee of Gallery Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund, Delaware Wilshire Private Markets Tender Fund, SEI Daily Income Trust, SEI Institutional International Trust, SEI Institutional Investments Trust, SEI Institutional Managed Trust, SEI Asset Allocation Trust, SEI Tax Exempt Trust, Adviser Managed Trust, New Covenant Funds, SEI Insurance Products Trust and SEI Catholic Values Trust. Director of SEI Investments, SEI Investments (Europe), Limited, SEI Investments—Global Funds Services, Limited, SEI Investments Global, Limited, SEI Investments (Asia), Limited, SEI Global Nominee Ltd., SEI Investments – Unit Trust Management (UK) Limited and SEI Investments Co. Director of the Distributor. |
Current Directorships: Trustee of City National Rochdale Funds, Gallery Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund and Delaware Wilshire Private Markets Tender Fund. Director of Chiron Capital Allocation Fund Ltd. |
Current Directorships: Trustee of Gallery Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund, Delaware Wilshire Private Markets Tender Fund, J.P. Morgan Active Exchange-Traded Funds (171 Portfolios) and Symmetry Panoramic Trust (16 Portfolios). Director of Chiron Capital Allocation Fund Ltd. |
Current Directorships: Trustee of Gallery Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund, Delaware Wilshire Private Markets Tender Fund. Director of Chiron Capital Allocation Fund Ltd. Director of Element Solutions Inc., Director of Xerox Holdings Corporation, and Director of Lucid Group, Inc. |
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THE ADVISORS INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
TRUSTEES AND OFFICERS OF THE ADVISORS’ INNER CIRCLE FUND III (Unaudited)
Name and | Position with Trust and Length of Time Served1 | Principal Occupations in the Past Five Years |
INDEPENDENT TRUSTEES (continued)3 | ||
Jay C. Nadel | Trustee | Self-Employed Consultant since 2004. Executive Vice President, Bank of New York Broker Dealer from 2002 to 2004. Partner/Managing Director, Weiss Peck & Greer/Robeco from 1986 to 2001. |
Randall S. Yanker | Trustee | Co-Founder and Senior Partner, Alternative Asset Managers, L.P. since 2004. |
OFFICERS | ||
Michael Beattie | President | Director of Client Service, SEI Investments, since 2004. |
James Bernstein | Vice President (since 2017) | Attorney, SEI Investments, since 2017. |
John Bourgeois | Assistant Treasurer | Fund Accounting Manager, SEI Investments, since 2000. |
1 | Each Trustee shall hold office during the lifetime of this Trust until the election and qualification of his or her successor, or until he or she sooner dies, resigns, or is removed in accordance with the Trust’s Declaration of Trust. |
2 | Directorships of Companies required to report to the Securities and Exchange Commission under the Securities Exchange Act of 1934 (i.e., “public companies”) or other investment companies under the 1940 Act. |
3 | Trustees oversee 47 funds in The Advisors’ Inner Circle Fund III. |
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TRUSTEES AND OFFICERS OF THE ADVISORS’ INNER CIRCLE FUND III (Unaudited)
Other Directorships |
Current Directorships: Chairman of the Board of Trustees of City National Rochdale Funds. Trustee of Gallery Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund and Delaware Wilshire Private Markets Tender Fund. Director of Chiron Capital Allocation Fund Ltd. |
Current Directorships: Trustee of Gallery Trust, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Fund and Delaware Wilshire Private Markets Tender Fund. Independent Non-Executive Director of HFA Holdings Limited. Director of Chiron Capital Allocation Fund Ltd. |
None. |
None. |
None. |
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TRUSTEES AND OFFICERS OF THE ADVISORS’ INNER CIRCLE FUND III (Unaudited)
Name and Year of Birth | Position(s) with Trust and Length of Time Served | Principal Occupation in the Past Five Years |
OFFICERS (continued) | ||
Eric C. Griffith | Vice President and | Counsel at SEI Investments since 2019. Vice President and Assistant General Counsel, JPMorgan Chase & Co., from 2012 to 2018. |
Matthew M. Maher | Vice President and | Counsel at SEI Investments since 2018. Attorney, Blank Rome LLP, from 2015 to 2018. Assistant Counsel & Vice President, Bank of New York Mellon, from 2013 to 2014. Attorney, Dilworth Paxson LLP, from 2006 to 2013. |
Andrew Metzger | Treasurer, Controller and | Director of Fund Accounting, SEI Investments, since 2020. Senior Director, Embark, from 2019 to 2020. Senior Manager, PricewaterhouseCoopers LLP, from 2002 to 2019. |
Robert Morrow | Vice President | Account Manager, SEI Investments, since 2007. |
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TRUSTEES AND OFFICERS OF THE ADVISORS’ INNER CIRCLE FUND III (Unaudited)
Other Directorships |
None. |
None. |
None. |
None. |
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TRUSTEES AND OFFICERS OF THE ADVISORS’ INNER CIRCLE FUND III (Unaudited)
Name and Year of Birth | Position(s) with Trust and Length of Time Served | Principal Occupation in the Past Five Years |
OFFICERS (continued) | ||
Stephen F. Panner | Chief Compliance Officer | Chief Compliance Officer of SEI Asset Allocation Trust, SEI Daily Income Trust, SEI Institutional Investments Trust, SEI Institutional International Trust, SEI Institutional Managed Trust, SEI Tax Exempt Trust, Adviser Managed Trust, New Covenant Funds, SEI Catholic Values Trust, SEI Exchange Traded Funds, SEI Structured Credit Fund LP, The Advisors’ Inner Circle Fund, The Advisors’ Inner Circle Fund II, The Advisors’ Inner Circle Fund III, Bishop Street Funds, Frost Family of Funds, Gallery Trust, Delaware Wilshire Private Markets Fund, Delaware Wilshire Private Markets Master Fund, Delaware Wilshire Private Markets Tender Fund and Catholic Responsible Investments Funds since September 2022. Fund Compliance Officer of SEI Investments Company from February 2011 to September 2022. Fund Accounting Director and CFO and Controller for the SEI Funds from July 2005 to February 2011. |
Alexander F. Smith | Vice President and | Counsel at SEI Investments since 2020. Associate Counsel & Manager, Vanguard, 2012 to 2020. Attorney, Stradley Ronon Stevens & Young, LLP, 2008 to 2012. |
Bridget E. Sudall | Privacy Officer | Senior Associate and AML Officer, Morgan Stanley Alternative Investment Partners, from 2011 to 2015. Investor Services Team Lead, Morgan Stanley Alternative Investment Partners, from 2007 to 2011. |
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THE ADVISORS INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
TRUSTEES AND OFFICERS OF THE ADVISORS’ INNER CIRCLE FUND III (Unaudited)
Other Directorships |
None. |
None. |
None. |
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APPROVAL OF INVESTMENT ADVISORY AGREEMENT
Rayliant Quantamental China Equity ETF
Rayliant Quantamental Emerging Market Equity ETF
Rayliant Quantitative Developed Market Equity ETF
Pursuant to Section 15 of the Investment Company Act of 1940 (the “1940 Act”), the Funds’ advisory agreement (the “Agreement”) must be renewed at least annually after its initial two-year term: (i) by the vote of the Board of Trustees (the “Board” or the “Trustees”) of The Advisors’ Inner Circle Fund III (the “Trust”) or by a vote of a majority of the shareholders of the Funds; and (ii) by the vote of a majority of the Trustees who are not parties to the Agreement or “interested persons” of any party thereto, as defined in the 1940 Act (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such renewal.
A Board meeting was held on June 22-23, 2022 to decide whether to renew the Agreement for an additional one-year term. In preparation for the meeting, the Trustees requested that the Adviser furnish information necessary to evaluate the terms of the Agreement. Prior to the meeting, the Independent Trustees of the Funds met to review and discuss the information provided and submitted a request for additional information to the Adviser, and information was provided in response to this request. The Trustees used this information, as well as other information that the Adviser and other service providers of the Funds presented or submitted to the Board at the meeting and other meetings held during the prior year, to help them decide whether to renew the Agreement for an additional year.
Specifically, the Board requested and received written materials from the Adviser and other service providers of the Funds regarding: (i) the nature, extent and quality of the Adviser’s services; (ii) the Adviser’s investment management personnel; (iii) the Adviser’s operations and financial condition; (iv) the Adviser’s brokerage practices (including any soft dollar arrangements) and investment strategies; (v) the Funds’ advisory fees paid to the Adviser and overall fees and operating expenses compared with peer groups of mutual funds; (vi) the level of the Adviser’s profitability from its relationship with the Funds, including both direct and indirect benefits accruing to the Adviser and its affiliates; (vii) the Adviser’s potential economies of scale; (viii) the Adviser’s compliance program, including a description of material compliance matters and material compliance violations; (ix) the Adviser’s policies on and compliance procedures for personal securities transactions; and (x) the Funds’ performance compared with peer groups of mutual funds and the Funds’ benchmark indices.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
Representatives from the Adviser, along with other Fund service providers, presented additional information and participated in question and answer sessions at the Board meeting to help the Trustees evaluate the Adviser’s services, fees and other aspects of the Agreement. The Independent Trustees received advice from independent counsel and met in executive sessions outside the presence of Fund management and the Adviser.
At the Board meeting, the Trustees, including all of the Independent Trustees, based on their evaluation of the information provided by the Adviser and other service providers of the Funds, renewed the Agreement. In considering the renewal of the Agreement, the Board considered various factors that they determined were relevant, including: (i) the nature, extent and quality of the services provided by the Adviser; (ii) the investment performance of the Funds and the Adviser; (iii) the costs of the services provided and profits realized by the Adviser from its relationship with the Funds, including both direct and indirect benefits accruing to the Adviser and its affiliates; (iv) the extent to which economies of scale are being realized by the Adviser; and (v) whether fee levels reflect such economies of scale for the benefit of Fund investors, as discussed in further detail below.
Nature, Extent and Quality of Services Provided by the Adviser
In considering the nature, extent and quality of the services provided by the Adviser, the Board reviewed the portfolio management services provided by the Adviser to the Funds, including the quality and continuity of the Adviser’s portfolio management personnel, the resources of the Adviser, and the Adviser’s compliance history and compliance program. The Trustees reviewed the terms of the Agreement. The Trustees also reviewed the Adviser’s investment and risk management approaches for the Funds. The most recent investment adviser registration form (“Form ADV”) for the Adviser was available to the Board, as was the response of the Adviser to a detailed series of questions which included, among other things, information about the investment advisory services provided by the Adviser to the Funds.
The Trustees also considered other services provided to the Funds by the Adviser such as selecting broker-dealers for executing portfolio transactions, monitoring adherence to the Funds’ investment restrictions, and monitoring compliance with various Fund policies and procedures and with applicable securities laws and regulations. Based on the factors above, as well as those discussed below, the Board concluded, within the context of its full deliberations, that the nature, extent and quality of the services provided to the Funds by the Adviser were sufficient to support renewal of the Agreement.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
Investment Performance of the Funds and the Adviser
The Board was provided with regular reports regarding the Funds’ performance over various time periods. The Trustees also reviewed reports prepared by the Funds’ administrator comparing the Funds’ performance to their benchmark indices and peer groups of mutual funds as classified by Lipper, an independent provider of investment company data, over various periods of time. Representatives from the Adviser provided information regarding and led discussions of factors impacting the performance of the Funds, outlining current market conditions and explaining their expectations and strategies for the future. The Trustees determined that the Funds’ performance was satisfactory, or, where the Funds’ performance was materially below their benchmarks and/or peer groups, the Trustees were satisfied by the reasons for the underperformance and/or the steps taken by the Adviser in an effort to improve the performance of the Funds. Based on this information, the Board concluded, within the context of its full deliberations, that the investment results that the Adviser had been able to achieve for the Funds were sufficient to support renewal of the Agreement.
Costs of Advisory Services, Profitability and Economies of Scale
In considering the advisory fee payable by the Funds to the Adviser, the Trustees reviewed, among other things, a report of the advisory fee paid to the Adviser. The Trustees also reviewed reports prepared by the Funds’ administrator comparing the Funds’ net and gross expense ratios and advisory fee to those paid by peer groups of mutual funds as classified by Lipper. The Board concluded, within the context of its full deliberations, that the advisory fees were reasonable in light of the nature and quality of the services rendered by the Adviser.
The Trustees reviewed the costs of services provided by and the profits realized by the Adviser from its relationship with the Funds, including both direct benefits and indirect benefits, such as research and brokerage services received under soft dollar arrangements, accruing to the Adviser and its affiliates. The Trustees considered how the Adviser’s profitability was affected by factors such as its organizational structure and method for allocating expenses. The Trustees concluded that the profit margins of the Adviser with respect to the management of the Funds were not unreasonable. The Board also considered the Adviser’s commitment to managing the Funds and its willingness to continue its expense limitation and fee waiver arrangements with the Funds.
The Trustees considered the Adviser’s views relating to economies of scale in connection with the Funds as Fund assets grow and the extent to which the benefits of any such economies of scale are shared with the Funds and Fund shareholders. The Board considered the existence of any economies of scale and whether those were passed
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
along to the Funds’ shareholders through a graduated advisory fee schedule or other means, including fee waivers. The Trustees recognized that economies of scale are difficult to identify and quantify and are rarely identifiable on a fund-by-fund basis. Based on this evaluation, the Board concluded that the advisory fees were reasonable in light of the information that was provided to the Trustees by the Adviser with respect to economies of scale.
Renewal of the Agreement
Based on the Board’s deliberations and its evaluation of the information described above and other factors and information it believed relevant in the exercise of its reasonable business judgment, the Board, including all of the Independent Trustees, with the assistance of Fund counsel and Independent Trustees’ counsel, unanimously concluded that the terms of the Agreement, including the fees payable thereunder, were fair and reasonable and agreed to renew the Agreement for another year. In its deliberations, the Board did not identify any absence of information as material to its decision, or any particular factor (or conclusion with respect thereto) or single piece of information that was all-important, controlling or determinative of its decision, but considered all of the factors together, and each Trustee may have attributed different weights to the various factors (and conclusions with respect thereto) and information.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
NOTICE TO SHAREHOLDERS (Unaudited)
For shareholders that do not have a September 30, 2022 tax year end, this notice is for informational purposes only. For shareholders with a September 30, 2022 tax year end, please consult your tax advisor as to the pertinence of this notice. For the fiscal period ended September 30, 2022, the Funds are designating the following items with regard to distributions paid during the period.
Return of Capital | Long-Term Capital Gain Distributions | Ordinary Income Distributions | Total Distributions | Qualifying for Corporate Dividends Received Deduction (1) | Qualifying Dividend Income (2) | U.S. Government Interest (3) | Interest Related Dividends (4) | Short-Term Capital Gain Dividends (5) | FTC | |||||||||||||||||||||||||||
Rayliant Quantamental China Equity ETF | ||||||||||||||||||||||||||||||||||||
0.00% | 0.00% | 100.00% | 100.00% | 0.00% | 96.29% | 0.00% | 0.07% | 0.00% | 41.15% | |||||||||||||||||||||||||||
Rayliant Quantamental Emerging Market Equity ETF | ||||||||||||||||||||||||||||||||||||
0.00% | 0.00% | 100.00% | 100.00% | 0.00% | 41.86% | 0.00% | 0.29% | 0.00% | 95.12% | |||||||||||||||||||||||||||
Rayliant Quantitative Developed Market Equity ETF | ||||||||||||||||||||||||||||||||||||
0.00% | 0.00% | 100.00% | 100.00% | 61.67% | 100.00% | 0.00% | 0.11% | 0.00% | 0.00% |
1. | Qualifying dividends represent dividends which qualify for the corporate dividends received deduction and is reflected as a percentage of ordinary Income distributions (the total of short-term capital gain and net investment income distributions). |
2. | The percentage in this column represents the amount of “Qualifying Dividend Income” as created by the Jobs and Growth Tax Relief Reconciliation Act of 2003 and is reflected as a percentage of ordinary income distributions (the total of short-term capital gain and net investment income distributions). It is the intention of each of the aforementioned funds to designate the maximum amount permitted by law. |
3. | “U.S. Government Interest” represents the amount of interest that was derived from direct U.S. Government obligations and distributed during the fiscal year. This amount is reflected as a percentage of ordinary income. Generally, interest from direct U.S. Government obligations is exempt from state income tax. However, for shareholders who are residents of California, Connecticut and New York, the statutory threshold requirements were not satisfied to permit exemption of these amounts from state income. |
4. | The percentage in this column represents the amount of “Interest Related Dividends” as created by the American Jobs Creation Act of 2004 and is reflected as a percentage of net investment income distributions that is exempt from U.S withholding tax when paid to foreign investors. |
5. | The percentage in this column represents the amount of “Short-Term Capital Gain Dividends” as created by the American Jobs Creation Act of 2004 and is reflected as a percentage of short-term capital gain distributions that is exempt from U.S withholding tax when paid to foreign investors. |
Rayliant Quantamental China Equity Fund intends to pass through a foreign tax credit to shareholders. For the fiscal period ended September 30, 2022, the total amount of foreign source income is $1,920,403. The total amount of foreign tax paid is $249,951. A shareholders allocable share of the foreign tax credit will be reported on Form 1099-DIV.
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THE ADVISORS’ INNER CIRCLE FUND III | RAYLIANT FUNDS SEPTEMBER 30, 2022 |
Rayliant Quantamental Emerging Markets Equity Fund intends to pass through a foreign tax credit to shareholders. For the fiscal period ended September 30, 2022, the total amount of foreign source income is $1,153,833. The total amount of foreign tax paid is $190,569. A shareholders allocable share of the foreign tax credit will be reported on Form 1099-DIV.
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Rayliant Funds
1299 Ocean Avenue, Suite 700
Santa Monica, CA 90401
1-866-898-1688
Investment Adviser:
Rayliant Asset Management
1299 Ocean Avenue, Suite 700
Santa Monica, CA 90401
Administrator:
SEI Investments Global Funds Services
One Freedom Valley Drive
Oaks, Pennsylvania 19456
Distributor:
SEI Investments Distribution Co.
One Freedom Valley Drive
Oaks, Pennsylvania 19456
Legal Counsel:
Morgan, Lewis & Bockius LLP
1701 Market Street
Philadelphia, Pennsylvania 19103
Independent Registered Public Accounting Firm:
Ernst & Young LLP
2005 Market Street, Suite 700
Philadelphia, Pennsylvania 19103
This information must be preceded or accompanied by a current prospectus for the Fund described.
RAY-AR-001-0200
Item 2. Code of Ethics.
The Registrant (also referred to as the “Trust”) has adopted a code of ethics that applies to the Registrant’s principal executive officer, principal financial officer, controller or principal accounting officer, and any person who performs a similar function. There have been no amendments to or waivers granted to this code of ethics during the period covered by this report.
Item 3. Audit Committee Financial Expert.
(a)(1) The Registrant’s board of trustees has determined that the Registrant has at least one audit committee financial expert serving on the audit committee.
(a) (2) The Registrant’s audit committee financial experts are Thomas P. Lemke and Jay Nadel, and each of Messrs. Lemke and Nadel is considered to be “independent” as that term is defined in Form N-CSR Item 3 (a)(2).
Item 4. Principal Accountant Fees and Services.
Fees billed by PricewaterhouseCoopers LLP (“PwC”) related to The Advisors’ Inner Circle Fund III (the aforementioned “Trust”).
PwC billed the Trust aggregate fees for services rendered to the Trust for the last two fiscal years as follows:
FYE September 30, 2022 | FYE September 30, 2021 | |||||||||||||||||||||
All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | |||||||||||||||||
(a) | Audit Fees(1) | $ | 682,615 | None | None | $ | 730,515 | None | $ | 11,990 | ||||||||||||
(b) | Audit-Related Fees | None
| None | None | $ | 4,000 | None | None | ||||||||||||||
(c) | Tax Fees | $ | 88,500 | (4) | None | $ | 57,000 | (2) | None | None | $ | 90,000 | (2) | |||||||||
(d) | All Other Fees | None | None | None | None | None | $ | 1,473 |
Fees billed by Ernst & Young LLP (“E&Y”) relate to the Trust.
E&Y billed the Trust aggregate fees for services rendered to the Trust for the last two fiscal years as follows:
FYE September 30, 2022 | FYE September 30, 2021 | |||||||||||||||||||||
All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | |||||||||||||||||
(a) | Audit Fees(1) | $ | 133,360 | None | None | $ | 48,940 | None | None | |||||||||||||
(b) | Audit-Related Fees | None | None | None | None | None | None | |||||||||||||||
(c) | Tax Fees | $ | 6,650 | (3) | None | None | $ | 2,660 | (3) | None | None | |||||||||||
(d) | All Other Fees | None | None | None | None | None | None |
Fees billed by Deloitte & Touche LLP (“D&T”) relate to the Trust.
D&T billed the Trust aggregate fees for services rendered to the Trust for the last two fiscal years as follows
FYE September 30, 2022 | FYE September 30, 2021 | |||||||||||||||||||||
All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | All fees and services to the Trust that were pre-approved | All fees and services to service affiliates that were pre-approved | All other fees and services to service affiliates that did not require pre-approval | |||||||||||||||||
(a) | Audit Fees(1) | $ | 60,000 | None | None | $ | 60,000 | None | None | |||||||||||||
(b) | Audit-Related Fees | None | None | None | None | None | None | |||||||||||||||
(c) | Tax Fees | None | None | None | None | None | None | |||||||||||||||
(d) | All Other Fees | None | None | None | None | None | None |
Notes:
(1) | Audit fees include amounts related to the audit of the Trust’s annual financial statements and services normally provided by the accountant in connection with statutory and regulatory filings. |
(2) | Tax return preparation fees for affiliates of the Funds. |
(3) | Tax Fees for UK Reporting Fund Status. |
(4) | Fees in connection with international withholding tax analysis. |
(e)(1) The Trust’s Audit Committee has adopted and the Board of Trustees has ratified an Audit and Non-Audit Services Pre-Approval Policy (the “Policy”), which sets forth the procedures and the conditions pursuant to which services proposed to be performed by the independent auditor of the Funds may be pre-approved.
The Policy provides that all requests or applications for proposed services to be provided by the independent auditor must be submitted to the Registrant’s Chief Financial Officer (“CFO”) and must include a detailed description of the services proposed to be rendered. The CFO will determine whether such services: (1) require specific pre-approval; (2) are included within the list of services that have received the general pre-approval of the Audit Committee pursuant to the Policy; or (3) have been previously pre-approved in connection with the independent auditor’s annual engagement letter for the applicable year or otherwise. In any instance where services require pre-approval, the Audit Committee will consider whether such services are consistent with SEC’s rules and whether the provision of such services would impair the auditor’s independence.
Requests or applications to provide services that require specific pre-approval by the Audit Committee will be submitted to the Audit Committee by the CFO. The Audit Committee will be informed by the CFO on a quarterly basis of all services rendered by the independent auditor. The Audit Committee has delegated specific pre-approval authority to either the Audit Committee Chair or financial expert; provided, that the estimated fee for any such proposed pre-approved service does not exceed $100,000 and any pre-approval decisions are reported to the Audit Committee at its next regularly-scheduled meeting.
Services that have received the general pre-approval of the Audit Committee are identified and described in the Policy. In addition, the Policy sets forth a maximum fee per engagement with respect to each identified service that has received general pre-approval.
All services to be provided by the independent auditor shall be provided pursuant to a signed written engagement letter with the Registrant, the investment adviser, or applicable control affiliate (except that matters as to which an engagement letter would be impractical because of timing issues or because the matter is small may not be the subject of an engagement letter) that sets forth both the services to be provided by the independent auditor and the total fees to be paid to the independent auditor for those services.
In addition, the Audit Committee has determined to take additional measures on an annual basis to meet the Audit Committee’s responsibility to oversee the work of the independent auditor and to assure the auditor's independence from the Registrant, such as (a) reviewing a formal written statement from the independent auditor delineating all relationships between the independent auditor and the Registrant, and (b) discussing with the independent auditor the independent auditor’s methods and procedures for ensuring independence.
(e)(2) | Percentage of fees billed applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows (PwC): |
FYE September 30, 2022 | FYE September 30, 2021 | |||||||
Audit-Related Fees | None | None | ||||||
Tax Fees | None | None | ||||||
All Other Fees | None | None |
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows (E&Y):
FYE September 30, 2022 | FYE September 30, 2021 | |||||||
Audit-Related Fees | None | None | ||||||
Tax Fees | None | None | ||||||
All Other Fees | None | None |
(e)(2) Percentage of fees billed applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows (D&T):
FYE September 30, 2022 | FYE September 30, 2021 | |||||||
Audit-Related Fees | None | None | ||||||
Tax Fees | None | None | ||||||
All Other Fees | None | None |
(f) Not applicable.
(g) The aggregate non-audit fees and services billed by PwC for services rendered to the Registrant, and rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant for the last two fiscal-years-ended September 30th were $57,000 and $91,473 for 2022 and 2021, respectively.
(g) The aggregate non-audit fees and services billed by E&Y for services rendered to the Registrant, and rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant for the last two fiscal-years-ended September 30th were $6,650 and $2,660 for 2022 and 2021, respectively.
(g) The aggregate non-audit fees and services billed by D&T for services rendered to the Registrant, and rendered to the Registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the Registrant for the last two fiscal-years-ended September 30th were $0 and $0 for 2022 and 2021, respectively.
(h) During the past fiscal year, all non-audit services provided by the Registrant’s principal accountant to either the Registrant’s investment adviser or to any entity controlling, controlled by, or under common control with the Registrant’s investment adviser that provides ongoing services to the Registrant were pre-approved by the Audit Committee of Registrant’s Board of Trustees. Included in the Audit Committee’s pre-approval of these non-audit service were the review and consideration as to whether the provision of these non-audit services is compatible with maintaining the principal accountant’s independence.
(i) Not Applicable. The Registrant has not retained, for the preparation of the audit report on the financial statements included in the Form N-CSR, a registered public accounting firm that has a branch or office that is located in a foreign jurisdiction and that the Public Company Accounting Oversight Board (the “PCAOB”) has determined that the PCAOB is unable to inspect or investigate completely because of a position taken by an authority in the foreign jurisdiction.
(j) Not Applicable. The Registrant is not a “foreign issuer,” as defined in 17 CFR 240.3b-4.
Item 5. Audit Committee of Listed Registrants.
Not applicable to open-end management investment companies.
Item 6. Schedule of Investments.
Schedule of Investments is included as part of the Report to Shareholders filed under Item 1 of this form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end management investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end management investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Company and Affiliated Purchasers.
Not applicable to open-end management investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no changes to the procedures by which shareholders may recommend nominees to the Registrant’s Board of Trustees during the period covered by this report.
Item 11. Controls and Procedures.
(a) The Registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the Registrant's disclosure controls and procedures, as defined in Rule 30a-3(c) under the Act (17 CFR §270.30a-3(c)), as of a date within 90 days of the filing date of the report, are effective based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act (17 CFR §270.30a-3(b)) and Rule 13a-15(b) or Rule 15d-15(b) under the Exchange Act (17 CFR §240.13a-15(b) or §240.15d-15(b)).
(b) There has been no change in the Registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act (17CFR §270.3a-3(d)) 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 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable to open-end management investment companies.
Item 13. Exhibits.
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) | The Advisors’ Inner Circle Fund III | |
By (Signature and Title) | /s/ Michael Beattie | |
Michael Beattie, President |
Date: December 9, 2022
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/ Michael Beattie | |
Michael Beattie, President |
Date: December 9, 2022
By (Signature and Title) | /s/ Andrew Metzger | |
Andrew Metzger, | ||
Treasurer, Controller, and CFO |
Date: December 9, 2022