N-CSR 1 topsmanagedriskncsr.htm N-CSR

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

form n-csr

certified shareholder report of registered management
investment companies

Investment Company Act file number 811-21853

 

Northern Lights Variable Fund Trust

(Exact name of registrant as specified in charter)

 

225 Pictoria Drive, Suite 450, Cincinnati, OH 45246

(Address of principal executive offices) (Zip code)

 

The Corporation Trust Company

1209 Orange Street, Wilmington, DE 19801

(Name and address of agent for service)

 

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

 

Date of fiscal year end: 12/31

 

Date of reporting period: 12/31/20

 

Item 1. Reports to Stockholders.

 

 

(TOPS LOGO)

 

 

 

 

 

Annual Report

 

 

December 31, 2020

 

 

TOPS® Managed Risk Balanced ETF Portfolio

TOPS® Managed Risk Growth ETF Portfolio

TOPS® Managed Risk Moderate Growth ETF Portfolio

 

 

 

 

 

Each a series of the Northern Lights Variable Trust

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Distributed by Northern Lights Distributors, LLC

 

Member FINRA

 

 

A Message from the TOPS® Portfolio Management Team

 

End of Year 2020 Market Commentary

 

“The New Normal”

 

Market returns were strong for 2020, but the path to those gains was quite different from every prior year experienced by any investor alive today. The year began with a high probability of a continuation of the “old normal”, but that was derailed by the COVID-19 pandemic. Governments around the globe instituted an unprecedented economic shutdown, causing the steepest and quickest plunge into recession ever recorded.

 

Fortunately, markets recovered quickly from the initial steep decline at the pandemic’s beginning. Trillions of dollars of financial aid (the CARES Act), trillions of dollars of liquidity provided by the Federal Reserve and the easing of the lockdowns helped spark the quick market recovery. While US Gross Domestic Product (GDP) is expected to shrink roughly -4% for the full year, the Q3 bounce from the depths of the recession was sharp and the economic recovery appeared to be carrying positive momentum through year end.

 

While it seems like much longer than 12 months ago, the “old normal” was chugging along to start the year calmly. In January 2020, the impeachment proceedings concluded as expected, and the political focus shifted to the Democratic presidential primaries. However, COVID fear gripped the markets in February-March 2020 and the incredibly steep plummet in prices ended the record-long 11- year S&P 500 Bull Market. No one knew what the impetus would be to kill the long running bull market, but worldwide pandemic was not on too many people’s short list of probable causes. A reminder that markets are never certain, and it is important to carry out a disciplined investment strategy.

 

Along with the financial stimulus measures mentioned earlier, during the recovery markets were further sparked by the eventual nomination of Joe Biden (rather than a candidate from the progressive arm of the Democratic party), the economic rebound and the amazingly rapid development of COVID vaccines and treatments.

 

Despite the pandemic’s horrific human costs in terms of lives and livelihoods, the stock market looked through to the economic recovery, gained new heights as the year ended and finished with above-average annual returns. Bond markets were very strong in the spring and although returns flattened out after that, solid full year returns were achieved. As a result, the TOPS portfolios earned a wide range of positive returns for Q4, more than offsetting earlier COVID related losses. The more aggressive TOPS portfolios (higher equity allocations) were aided by the resurgence of diversified market leadership during the fourth quarter, as we discuss below.

 

We continue to note all TOPS portfolio returns for the trailing three-year, five-year and ten-year timeframes remain well into positive territory.

 

After discussing Q4 and full year 2020 financial market results, we will compare three perspectives of “Normal” scenarios:

 

●The Old Normal (pre COVID-19)

 

●The Abnormal (2020)

 

●The New Normal (post COVID-19)

1

 

Fourth Quarter and Calendar Year Market Review

 

Most stock market indexes retreated in October and then advanced sharply to new highs in November and December. Perhaps a trend change is underway, as both the S&P MidCap and S&P SmallCap indexes rose in October, despite downward overall market pressure, and continued to dramatically outperform the large cap S&P 500 through year end. Overall, the quarter was very strong, as nearly all the equity indexes representing an ETF in the TOPS portfolios recorded double-digit percentage gains.

 

The Q4 story was one of strength from asset classes which diversify portfolio risk, led by S&P SmallCap’s spectacular +31.3% and S&P MidCap’s +24.4%. U.S. Dollar weakness helped international equities, with MSCI Emerging Markets +19.7% and MSCI EAFE (developed international) +16.0%. S&P GSSI NA Natural Resources is another diversifier that was strong in Q4 at +18.9%. Of course, we were happy to see our largest allocation – the S&P 500 – recording another sharp gain of +12.1% for Q4. Another possible harbinger of trend change saw S&P Value +14.5% beat S&P Growth +10.7%.

 

For the full year, large cap domestic growth once again dominated as S&P 500 Growth shot up +33.5%, pushing the S&P 500 to +18.4%. S&P 500 Value lagged far behind at +1.4%. MSCI Emerging Markets was the strongest of the diversifiers at +18.3% and S&P MidCap +13.7% and S&P SmallCap +11.3% also contributed to TOPS portfolio performance. The Q4 rallies in Natural Resources and REITS were not enough to allow those sectors to record positive full year returns.

 

Most bond market sectors had positive returns for Q4, although significantly less dynamic than stocks. The various Barclays US Treasury indexes were basically flat. More economically sensitive diversifying asset classes performed better, led by JP Morgan Emerging Markets Bond Index at +9.7%, Solactive USD High Yield Corporates at +5.9%, and iBoxx USD Liquid Investment Grade Index +3.5%.

 

Full year bond market returns were above average, as reflected by Barclays US Aggregate Bond +7.5% and Barclays US TIPS +11.0%. As with equities, the diversifiers were not quite as strong, except iBoxx USD Liquid Investment Grade Index +11.3%. Most of the bond indexes underlying TOPS portfolio holdings reported total returns in the mid-single-digits.

 

The Old Normal (pre COVID)

 

A year ago, the Old Normal looked likely to continue into 2020. We define the Old Normal as slow but steady GDP growth, low unemployment, low inflation, low interest rates, low bond yields, the Fed on the sidelines, moderate earnings (EPS) growth, relatively high stock valuations, US large cap leadership, and politics/election year volatility.

 

The Old Normal resulted in the longest run of low inflation, uninterrupted US GDP growth in history. The multi-decade bond bull market (i.e., lower bond yields) looked like it would never end. The growth of the economy, along with low inflation, abetted EPS growth. Low interest rates across the yield curve made equities more valuable, so the record-long equities bull market was the final product of the Old Normal.

 

The Abnormal (2020)

 

The introductory paragraphs for this Commentary clearly describe the sudden end of the Old Normal. Many measures of economic data, sentiment surveys, politics and financial market returns make a strong case for 2020 as the most volatile year in modern history. Although it turned into a good year for the TOPS portfolios, we can only hope that 2020 remains The Abnormal, rather than the prototype of a New Normal.

 

It is important to note, however, that the abnormal 2020 provided a great example of the dynamic nature of the TOPS Portfolios. As investors asked us throughout the year, “how are things going”, we were pleased to be able to say, “the investments are doing what they are supposed to in this type of environment.” We did not see any of the underlying TOPS positions experience fundamental breakdowns or severe disappointments, as we did see with some other managers in the marketplace.

2

 

The New Normal (post COVID)

 

While we are fairly certain the developing New Normal will not exactly duplicate the Old Normal, we recognize the slow growth economic pattern could return (at least after the initial COVID recovery phase is over). Aging demographics for the developed world will likely continue to lead to a glut of savings seeking safe havens. Two factors to watch closely are globalization and digitization. If supply chain safety is more highly valued, reshoring could lead to more demand for domestic labor and shift the balance of power toward workers from corporations, thus lowering profit margins. However, this might be offset by digitization of working, education and life in general, thus reducing the need for workplace, educational and retail real estate, among other things.

 

Many people worry a New Normal will include resurgent inflation. We believe one reason the massive monetary and fiscal stimulus policies and packages have not caused sizable inflation thus far is that the economy was basically shut down. The savings rate shot up to 33% and the stimulus dollars were stuck in the financial system. Inflation may pick up when those savings are spent to satisfy pent-up demand as economies fully reopen. Some would argue that Q3-Q4 asset price gains represent inflation, but that might also be explained by the expected recovery of the real economy.

 

An additional obvious inflation risk is that the Fed has clearly stated it would like to see higher inflation and history suggests they will have a very difficult time in controlling inflation if it begins to rise. Combined with a Congress that lacks discipline, the risk of excessive monetary and fiscal stimulus cannot be understated. On the other hand, globalization and aging populations could be structurally deflationary.

 

In short, the Old Normal seems unlikely to return. The COVID-19 pandemic is not even over yet, and virus mutations or failure to achieve herd immunity could lead to spikes in deaths and fresh economic closing restrictions. If the worst-case virus scenario plays out, the resultant disruption to businesses and consumers would eventually have to apply negative pressure on financial markets.

 

For now, the market has broadened into diversifying areas, such as smaller stocks, value, international and natural resources. The strong Q4 advance was clearly led by the areas that had been lagging large cap domestic growth stocks. If we see consistently better economic data in 2021, it may justify a continuation of this rotation into the former laggards. Will that become the New Normal?

 

While we cannot predict the exact shape of the New Normal, we can rely upon the capabilities and experience of both the TOPS portfolio team and the experts we consult. TOPS portfolios are structured to participate if the financial markets continue to rise and are diversified to reduce risk should the New Normal lead to continued stock market volatility.

 

Summary of the Milliman Managed Risk Strategy™ (MMRS)

 

U.S. equity markets exhibited strength out of the gate in January 2020 largely due to dovish policy guidance from the Fed and the first phase of a trade deal with China. As the month wore on, however, uncertainty surrounding both the U.S. Senate impeachment trial and the coronavirus gave investors pause, resulting in the S&P 500 Index giving up the gains it made in the first half of the month. Amid this uncertainty, equity market volatility experienced a meaningful increase, albeit from an exceptionally low level. A corresponding flight to quality pushed bond prices higher, helping to mitigate portfolio volatility by offsetting the decline in stocks. Ultimately, the increase in equity volatility wasn’t enough to trigger a deallocation in any of the TOPS Managed Risk Portfolios. All three portfolios finished the month at their maximum respective equity allocations.

3

 

After falling approximately 3% during the second half of January, the S&P 500 Index got off to a strong start in February. By Wednesday, February 19, it had climbed 5% to a new all-time high. Three days later, on February 22, democratic socialist presidential candidate Bernie Sanders won the Nevada caucuses by a wide margin and appeared to be gaining momentum as the Democratic Party front-runner. That same weekend, both Italy and Iran reported sharp increases in the number of new cases of coronavirus. When markets opened again on Monday, February 24, the S&P 500 Index finished the day 3.4% lower, its largest single day decline since February 2018. It continued to fall every day for the rest of the month, notching its largest weekly decline since October 2008. Volatility spiked over the same period; the CBOE Volatility Index (VIX) climbed from 14.4 on February 19, to 40 on February 28. In response to the increase in volatility, the TOPS Managed Risk Growth, Moderate and Balanced Portfolios reduced their equity allocations by 32, 15, and 6 percentage points, respectively, from their levels at the beginning of February.

 

On February 20, the day after reaching its all-time high, the S&P 500 Index embarked on the fastest and steepest drawdown in its 92-year track record, falling 34% in a mere 24 trading days. Over its entire history, the SPX has experienced six other drawdowns that exceeded 30%. By way of comparison, none was deeper than 7% by the 24th trading day; five of the six, however, ultimately finished more than 45% lower. The index’s volatility peaked in mid-March when, over the course of seven consecutive trading days (March 9–17), it experienced an average daily change of 7.7%, a level exceeded only in 1929 at the onset of the Great Depression. Not surprisingly, the VIX touched a new all-time high closing level of 82.7 on March 16, 2020.

 

As market volatility increased in March, TOPS Managed Risk Portfolios continued with the deallocations begun in February. The Growth, Moderate and Balanced Portfolios began the month having already reduced their equity allocations by 33, 16, and 7 percentage points, respectively. By mid-March, they were further deallocated by a respective 40, 43, and 42 percentage points. As of the end of the month, with the VIX still above 50, the equity allocations were 16% for the Growth Portfolio, 10% for the Moderate Portfolio, and 6% for the Balanced Portfolio.

 

Since touching a new all-time high of 82.7 on March 16, the VIX moved gradually lower, finishing April at 34.2. To put that into context, the VIX’s average in 2019 was 15.4; year-to-date through April the average was 33.8. From a broader historical perspective, the average intraday trading range of the S&P 500 Index in 2020 has been an astounding 2.4%, more than double the 1.0% average for the previous 10 calendar years. Notwithstanding the sharp move lower from its peak, volatility is still exceptionally high relative to historical averages and may well be expected to remain so as the market continues to absorb and price in the far-reaching implications of the coronavirus pandemic. As volatility edged lower in April, TOPS Managed Risk Portfolios began to gradually increase their equity allocations from historically low levels, with the Growth, Moderate, and Balanced Portfolios finishing the month at 42.1%, 35.1%, and 29.4%, respectively.

 

Equity market volatility ended May lower than it began, but the path lower was not without some bumps along the way, and its finishing level was still above average. The VIX went from 37.2 at the start of the month to 27.5 by month-end. By way of context, its average for this May was 30.9, double its average of 15.4 for all of 2019. Consistent with declining market volatility, TOPS Managed Risk Portfolios all increased their equity exposure as the month wore on. Equity exposure went from 42.1% to 54.3% for the Growth Portfolio, from 35.1% to 47.1% for the Moderate Portfolio, and from 29.4% to 38.5% for the Balanced Portfolio.

4

 

After climbing in early June, the MSCI All Country World Index experienced a rapid 5.29% decline and experienced heightened volatility, as a sharp increase in coronavirus cases refocused investors’ concerns about the ongoing economic reopening process. After touching a three-month low of 24.5 on June 5, 2020, the VIX shot up above 40 by June 11, 2020, and remained above 30 for the rest of the month. In response to this higher volatility, TOPS Managed Risk Growth, Moderate, and Balanced Portfolios each finished the month with equity allocations that were reduced by 8.3, 6.2, and 4.4 percentage points, respectively, from their levels at the end of May.

 

Rising more than 5% in July, the global equity market notched its fourth consecutive month of positive returns. From the end of March through the end of July, the MSCI All Country World Index has now climbed 25%. In spite of these strong returns, however, the index is still 2.4% below where it started the year and 5% below its all-time high, illustrating the severity of the first quarter downturn and how challenging it can be for investor portfolios to fully recover. As equities moved higher in July, volatility trended lower, resulting in TOPS Managed Risk Portfolios steadily increasing their equity exposure as the month wore on. By the end of the month, the Growth, Moderate and Balanced Portfolios had increased their equity exposure by 24, 21, and 15 percentage points, respectively, further enabling them to participate in the ongoing rally in equities.

 

The global equity market as measured by the MSCI All Country World Index finished August higher, marking its fifth consecutive monthly gain. In doing so, it surpassed its all-time high, reached in February, and pushed the index to its highest forward PE ratio since 2002. As the market moved higher, realized volatility trended lower, reaching its lowest level since early February.

 

In the United States, the second half of August saw a growing divergence between realized and implied volatility, with the S&P 500 realized volatility declining as the VIX pushed higher, perhaps signaling expectations of higher volatility in the weeks and months ahead. Amid rising stock prices, the yield curve steepened, resulting in the first monthly loss for the Barclays U.S. Aggregate Bond Index since March. TOPS Managed Risk Balanced Portfolio began the month at its maximum equity allocation and remained there for the entirety of the month. In response to declining equity market volatility, the TOPS Managed Risk Growth and Moderate portfolios increased their equity exposure by 15 and 3 percentage points, respectively, bringing each to its maximum respective equity allocation.

 

The global equity market notched its first monthly loss in September after five consecutive months of positive returns. Having been on a downward trend since the middle of June, equity market volatility reversed course and drifted higher in September as negotiations over additional fiscal stimulus began to break down and the U.S. Federal Reserve’s (Fed) commitment to extraordinary monetary policy came into question. This higher volatility triggered a reduction in the equity allocations in each of TOPS Managed Risk Portfolios. As they headed into October (historically the most volatile calendar month of the year), the Growth, Moderate and Balanced Portfolios reduced their net equity exposure by 29, 15, and 10 percentage points, respectively, from their respective levels at the end of August.

 

After trending higher through most of September, equity market volatility abruptly reversed course at the start of October. For the first three weeks, volatility pushed lower before once again making a sharp reversal upward through the end of the month. The TOPS Managed Risk Portfolios made adjustments throughout the month in response to changing market volatility. At the outset of October, the Growth, Moderate and Balanced Portfolios all steadily increased their equity allocations in response to falling volatility. When volatility increased in the waning days of October, each portfolio reduced its equity allocation, leaving the Growth, Moderate and Balanced Portfolios with respective equity allocations of 58.1%, 52.7%, and 43.5% at month end.

5

 

After two consecutive months of negative returns, the global equity market as measured by the MSCI All Country World Index returned 12.3% in November, the highest calendar month return in its 33-year history. The broad U.S. equity market notched its largest monthly return since April, with the Russell 3000 Index climbing 12.2%. Outside the U.S., developed and emerging markets were both higher in local currency terms, and were buoyed further by a falling U.S. dollar. After declining in October, equity market volatility remained within a fairly narrow range for most of November and declined as the month waned to its close. Accordingly, the TOPS Managed Risk Growth, Moderate, and Balanced Portfolios gradually increased their equity exposure during much of November. At month end, each equity allocation was higher by 21, 12 and 6 percentage points, respectively.

 

The global equity market (as measured by the MSCI All Country World Index) climbed 4.7% in December, finishing 2020 with a total return of 16.8%. Whether measuring by geography, capitalization, or sector, virtually every market segment finished the month higher. Equity market volatility steadily declined during the month, ending the year nearly as low as it started, and at less than one-tenth of its 2020 peak in March. While many will remember 2020 for its extraordinary social and political circumstances, it is further distinguished by the massive swing experienced by equity markets. In addition to exhibiting the fastest drawdown on record (23 trading days), the S&P 500’s 34% max drawdown in 2020 ranks as the eighth largest calendar year drawdown in the index’s history. Its subsequent draw-up of 67% ranks as the fourth largest calendar year draw-up. Besides 1932, 2020 is the only other calendar year to have both its max drawdown and max draw-up in the index’s top 10.

 

The low equity market volatility at the end of November meant TOPS Managed Risk Growth, Moderate, and Balanced Portfolios all maintained their maximum respective equity allocations for the entirety of the month, enabling them to participate in December’s strong equity market growth.

 

The MSCI EAFE ® Index is a free float-adjusted market capitalization index that is designed to measure the equity market performance of developed markets, excluding the US & Canada. As of June 2007 the MSCI EAFE Index consisted of the following 21 developed market country indices: Australia, Austria, Belgium, Denmark, Finland, France, Germany, Greece, Hong Kong, Ireland, Italy, Japan, the Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, and the United Kingdom.

 

The MSCI Emerging Markets Index is a free float-adjusted, market capitalization-weighted index designed to measure the combined equity market performance of the materials sector of emerging markets countries. Component securities include those of chemical companies, construction materials companies, containers and packaging companies, metals and mining companies, and paper and forest products companies.

 

The S&P 500 Value Index represents the value companies of the S&P 500 Index.

 

The S&P Growth Index represents the growth companies of the S&P 500 Index.

 

The JP Morgan Emerging Markets Bond Index is a benchmark index that measures the bond performance of emerging countries and their respective corporate organizations.

 

The Solactive USD High Yield Corporate Index is a rules -based, market value weighted index engineered to mirror the performance of high yield rated corporate bonds issued in USD.

 

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

6

 

The S&P 500® Index is an unmanaged composite of 500 large capitalization companies. This index is widely used by professional investors as a performance benchmark for large-cap stocks.

 

The S&P MidCap 400® measures the mid-cap segment of the U.S. equity market. The index is designed to be an investable portfolio of companies that meet specific inclusion criteria to ensure that they are liquid and financially viable.

 

The S&P SmallCap 600® measures the small cap segment of the U.S. equity market. The index is designed to be an investable portfolio of companies that meet specific inclusion criteria to ensure that they are liquid and financially viable.

 

The Barclays Capital Aggregate Bond Index is weighted according to market capitalization, which means the securities represented in the index are weighted according to the market size of the bond category. Treasury securities, mortgage-backed securities (MBS) foreign bonds, government agency bonds and corporate bonds are some of the categories included in the index. The bonds represented are medium term with an average maturity of about 4.57 years. In all, the index represents about 8,200 fixed-income securities with a total value of approximately $15 trillion (about 43% of the total U.S. bond market).

 

The Barclays Capital U.S. Treasury Inflation Protected Securities (TIPS) Index includes all publicly issued, U.S. Treasury inflation-protected securities that have at least one year remaining to maturity, are rated investment grade, and have $250 million or more of outstanding face value.

 

You cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. Past Performance is no guarantee of future results. Past performance does not guarantee future results, and current performance may be lower or higher than the data quoted.

 

2109-NLD-1/27/2021

7

 

TOPS® Managed Risk Balanced ETF Portfolio
Portfolio Review (Unaudited)
December 31, 2020

 

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

 

  One Five Performance Since Performance Since Since
  Year Year Inception (6/9/11)** Inception (5/1/12)*** Inception (7/22/15)****
Managed Risk Balanced ETF Portfolio          
Class 1 6.17% 6.26% 4.76% N/A N/A
Class 2 5.90% 6.01% 4.51% N/A N/A
Class 3 5.66% 5.89% N/A 4.50% N/A
Class 4 5.46% 5.62% N/A 4.11% N/A
Investor Class 5.52% 5.69% N/A N/A 4.12%
S&P 500 Total Return Index ***** 18.40% 15.22% 14.17% 14.34% 13.40%

 

*The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Per the fee table in the most recent prospectuses, the Portfolio’s total annual operating expense ratios including acquired fund fees and expenses, for Class 1, Class 2, Class 3, Class 4, and Investor Class are 0.51%, 0.76%, 0.86%, 1.11%, and 1.01% respectively. For performance information current to the most recent month-end, please call 1-855-572-5945.

 

**Class 1 and Class 2’s inception date was June 9, 2011.

 

***Class 3 and Class 4’s inception date was May 1, 2012.

 

****Investor Class’s inception date was July 22, 2015.

 

*****The S&P 500 Total Return Index is an unmanaged market capitalization-weighted index of 500 of the largest capitalized U.S. domiciled companies. Index returns assume reinvestment of dividends. Investors may not invest in the index directly; unlike the Portfolio’s returns, the Index does not reflect any fees or expenses.

 

Comparison of the Change in Value of a $10,000 Investment

 

(LINE GRAPH)

 

Holdings by Asset Class as of December 31, 2020  % of Net Assets 
Equity Funds   45.1%
Debt Funds   43.1%
Other Assets and Liabilities - net/Short-Term Investments   11.8%
    100.0%

 

Please refer to the Portfolio of Investments in this annual report for a detailed listing of the Portfolio’s holdings.

8

 

TOPS® Managed Risk Growth ETF Portfolio
Portfolio Review (Unaudited)
December 31, 2020

 

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

 

  One Five Performance Since Performance Since Since
  Year Year Inception (4/26/11)** Inception (5/1/12)*** Inception (7/22/15)****
Managed Risk Growth ETF Portfolio          
Class 1 5.46% 7.17% 4.67% N/A N/A
Class 2 5.19% 6.90% 4.42% N/A N/A
Class 3 5.18% 6.80% N/A 4.92% N/A
Class 4 4.85% 6.53% N/A 4.78% N/A
Investor Class 4.92% 6.61% N/A N/A 4.23%
S&P 500 Total Return Index ***** 18.40% 15.22% 13.50% 14.34% 13.40%

 

*The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio shares. Per the fee table in the most recent prospectuses, the Portfolio’s total annual operating expense ratios including acquired fund fees and expenses, for Class 1, Class 2, Class 3, Class 4, and Investor Class are 0.50%, 0.75%, 0.85%, 1.10%, and 1.00% respectively. For performance information current to the most recent month-end, please call 1-855-572-5945.

 

**Class 1 and Class 2’s inception date was April 26, 2011.

 

***Class 3 and Class 4’s inception date was May 1, 2012.

 

****Investor Class’s inception date was July 22, 2015.

 

*****The S&P 500 Total Return Index is an unmanaged market capitalization-weighted index of 500 of the largest capitalized U.S. domiciled companies. Index returns assume reinvestment of dividends. Investors may not invest in the index directly; unlike the Portfolio’s returns, the Index does not reflect any fees or expenses.

 

Comparison of the Change in Value of a $10,000 Investment

 

(LINE GRAPH)

 

Holdings by Asset Class as of December 31, 2020  % of Net Assets 
Equity Funds   76.6%
Debt Funds   11.7%
Other Assets and Liabilities - net/Short-Term Investments   11.7%
    100.0%

 

 

Please refer to the Portfolio of Investments in this annual report for a detailed listing of the Portfolio’s holdings.

 

9

 

TOPS® Managed Risk Moderate Growth ETF Portfolio
Portfolio Review (Unaudited)
December 31, 2020

 

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

 

  One Five Performance Since Performance Since Since
  Year Year Inception (6/9/11)** Inception (5/1/12)*** Inception (7/22/15)****
Managed Risk Moderate Growth ETF Portfolio          
Class 1 6.20% 6.96% 5.27% N/A N/A
Class 2 5.91% 6.70% 5.03% N/A N/A
Class 3 5.90% 6.60% N/A 5.03% N/A
Class 4 5.53% 6.32% N/A 4.79% N/A
Investor Class 5.52% 6.34% N/A N/A 4.32%
S&P 500 Total Return Index ***** 18.40% 15.22% 14.17% 14.34% 13.40%

 

*The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Portfolio distributions or on the redemption of Portfolio share. Per the fee table in the most recent prospectuses, the Portfolio’s total annual operating expense ratios including acquired fund fees and expenses, for Class 1, Class 2, Class 3, Class 4, and Investor Class are 0.51%, 0.76%, 0.86%, 1.11%, and 1.01% respectively. For performance information current to the most recent month-end, please call 1-855-572-5945.

 

**Class 1 and Class 2’s inception date was June 9, 2011.

 

***Class 3 and Class 4’s inception date was May 1, 2012.

 

****Investor Class’s inception date was July 22, 2015.

 

*****The S&P 500 Total Return Index is an unmanaged market capitalization-weighted index of 500 of the largest capitalized U.S. domiciled companies. Index returns assume reinvestment of dividends. Investors may not invest in the index directly; unlike the Portfolio’s returns, the Index does not reflect any fees or expenses.

 

Comparison of the Change in Value of a $10,000 Investment

 

(LINE GRAPH)

 

Holdings by Asset Class as of December 31, 2020  % of Net Assets 
Equity Funds   58.7%
Debt Funds   29.6%
Other Assets and Liabilities - net/Short-Term Investments   11.7%
    100.0%

 

Please refer to the Portfolio of Investments in this annual report for a detailed listing of the Portfolio’s holdings.

10

 

TOPS® Managed Risk Balanced ETF Portfolio
PORTFOLIO OF INVESTMENTS
December 31, 2020

 

Shares      Fair Value 
         
     EXCHANGE TRADED FUNDS - 88.2%     
     DEBT FUNDS - 43.1%     
 246,810   iShares iBoxx $ Investment Grade Corporate Bond ETF +  $34,091,865 
 556,261   SPDR Bloomberg Barclays Investment Grade Floating Rate ETF   17,016,024 
 677,611   SPDR Portfolio Short Term Corporate Bond ETF   21,276,986 
 383,933   VanEck Vectors J.P. Morgan EM Local Currency Bond ETF   12,773,451 
 183,939   Vanguard Intermediate-Term Treasury ETF   12,769,045 
 157,317   Vanguard Mortgage-Backed Securities ETF   8,506,130 
 1,000,338   Vanguard Short-Term Inflation-Protected Securities ETF   51,117,272 
 413,967   Vanguard Short-Term Treasury ETF   25,500,367 
 72,688   Vanguard Total International Bond ETF +   4,255,882 
 340,597   Xtrackers USD High Yield Corporate Bond ETF   17,060,504 
         204,367,526 
     EQUITY FUNDS - 45.1%     
 392,679   FlexShares Global Upstream Natural Resources Index Fund   12,777,775 
 523,959   SPDR Portfolio S&P 400 Mid Cap ETF +   21,167,944 
 155,706   SPDR Portfolio S&P 500 Growth ETF   8,608,985 
 878,359   SPDR Portfolio S&P 500 Value ETF   30,206,766 
 474,284   SPDR Portfolio S&P 600 Small Cap ETF   16,979,367 
 721,962   Vanguard FTSE Developed Markets ETF   34,083,826 
 514,302   Vanguard FTSE Emerging Markets ETF   25,771,673 
 237,861   Vanguard Global ex-U.S. Real Estate ETF   12,918,231 
 152,046   Vanguard Real Estate ETF   12,913,267 
 112,074   Vanguard S&P 500 ETF   38,518,713 
         213,946,547 
     TOTAL EXCHANGE TRADED FUNDS (Cost - $350,549,304)   418,314,073 
           
     SHORT-TERM INVESTMENTS - 11.7%     
     INVESTMENT PURCHASED AS SECURITIES LENDING COLLATERAL - 0.3%     
 1,467,835   STIT - Government & Agency Portfolio, Institutional Class - 0.03% (a)   1,467,835 
           
     MONEY MARKET FUNDS - 11.4%     
 53,736,250   STIT - Government & Agency Portfolio, Institutional Class - 0.03% (a)   53,736,250 
           
     TOTAL SHORT-TERM INVESTMENTS (Cost - $55,204,085)   55,204,085 
           
     TOTAL INVESTMENTS - 99.9% (Cost - $405,753,389)  $473,518,158 
     OTHER ASSETS AND LIABILITIES - NET - 0.1%   533,229 
     TOTAL NET ASSETS - 100.0%  $474,051,387 

 

FUTURES CONTRACTS

 

              Unrealized 
Long Contracts   Description and Termination  Counterparty  Notional Value   Appreciation 
 205   5 Year US Treasury Note March 2021  Bank of America Merrill Lynch  $25,863,620   $59,245 
 45   MSCI EAFE Index Mini March 2021  Bank of America Merrill Lynch   4,794,300    108,225 
 70   MSCI Emerging Market Index March 2021  Bank of America Merrill Lynch   4,508,700    128,100 
 20   Russell 2000 Index E-Mini March 2021  Bank of America Merrill Lynch   1,974,800    54,800 
 50   S&P 500 Index E-Mini March 2021  Bank of America Merrill Lynch   9,372,000    219,500 
 14   S&P Midcap 400 Index E-Mini March 2021  Bank of America Merrill Lynch   3,224,900    85,680 
     NET UNREALIZED APPRECIATION ON FUTURES CONTRACTS   $655,550 

 

ETF - Exchange Traded Fund

 

S&P - Standard and Poor’s

 

SPDR - Standard & Poor’s Depositary Receipt

 

+All or a portion of this security is on loan. Total loaned securities had a value of $17,533,699 at December 31, 2020. The loaned securities were secured with cash collateral of $1,467,835 and non-cash collateral of $16,445,068. The non-cash collateral consists of short-term investments and long-term bonds and is held for benefit of the Portfolio at the Portfolio’s custodian. The Portfolio cannot pledge or resell the collateral.

 

(a)Variable rate security, the money market rate shown represents the rate at December 31, 2020.

 

See accompanying notes to financial statements.

11

 

TOPS® Managed Risk Growth ETF Portfolio
PORTFOLIO OF INVESTMENTS
December 31, 2020

 

Shares      Fair Value 
         
     EXCHANGE TRADED FUNDS - 88.3%     
     DEBT FUNDS - 11.7%     
 103,554   iShares iBoxx $ Investment Grade Corporate Bond ETF  $14,303,914 
 429,455   VanEck Vectors J.P. Morgan EM Local Currency Bond ETF   14,287,968 
 132,073   Vanguard Mortgage-Backed Securities ETF   7,141,187 
 419,606   Vanguard Short-Term Inflation-Protected Securities ETF   21,441,867 
 231,526   Vanguard Short-Term Treasury ETF   14,262,002 
 428,596   Xtrackers USD High Yield Corporate Bond ETF   21,468,374 
         92,905,312 
     EQUITY FUNDS - 76.6%     
 878,480   FlexShares Global Upstream Natural Resources Index Fund   28,585,739 
 1,934,087   SPDR Portfolio S&P 400 Mid Cap ETF   78,137,115 
 520,616   SPDR Portfolio S&P 500 Growth ETF   28,784,859 
 1,052,690   SPDR Portfolio S&P 500 Value ETF   36,202,009 
 1,591,500   SPDR Portfolio S&P 600 Small Cap ETF   56,975,700 
 2,582,252   Vanguard FTSE Developed Markets ETF   121,908,117 
 1,301,750   Vanguard FTSE Emerging Markets ETF   65,230,692 
 399,086   Vanguard Global ex-U.S. Real Estate ETF   21,674,361 
 170,066   Vanguard Real Estate ETF   14,443,705 
 439,635   Vanguard S&P 500 ETF   151,098,153 
 152,949   WisdomTree Emerging Markets SmallCap Dividend Fund +   7,298,726 
         610,339,176 
     TOTAL EXCHANGE TRADED FUNDS (Cost - $523,091,839)   703,244,488 
           
     SHORT-TERM INVESTMENTS - 11.5%     
     INVESTMENT PURCHASED AS SECURITIES LENDING COLLATERAL - 0.4%     
 2,872,643   STIT - Government & Agency Portfolio, Institutional Class - 0.03% (a)   2,872,643 
           
     MONEY MARKET FUNDS - 11.1%     
 88,423,447   STIT - Government & Agency Portfolio, Institutional Class - 0.03% (a)   88,423,447 
           
     TOTAL SHORT-TERM INVESTMENTS (Cost - $91,296,090)   91,296,090 
           
     TOTAL INVESTMENTS - 99.8% (Cost - $614,387,929)  $794,540,578 
     OTHER ASSETS AND LIABILITIES - NET - 0.2%   1,797,952 
     TOTAL NET ASSETS - 100.0%  $796,338,530 

 

ETF - Exchange Traded Fund

 

S&P - Standard and Poor’s

 

SPDR - Standard & Poor’s Depositary Receipt

 

+All or a portion of this security is on loan. Total loaned securities had a value of $2,815,484 at December 31, 2020. The loaned securities were secured with cash collateral of $2,872,643.

 

(a)Variable rate security, the money market rate shown represents the rate at December 31, 2020.

 

FUTURES CONTRACTS

 

              Unrealized 
Long Contracts   Description and Termination  Counterparty  Notional Value   Appreciation 
 99   5 Year US Treasury Note March 2021  Bank of America Merrill Lynch  $12,490,236   $28,720 
 144   MSCI EAFE Index Mini March 2021  Bank of America Merrill Lynch   15,341,760    346,320 
 172   MSCI Emerging Market Index March 2021  Bank of America Merrill Lynch   11,078,520    314,760 
 67   Russell 2000 Index E-Mini March 2021  Bank of America Merrill Lynch   6,615,580    183,580 
 132   S&P 500 Index E-Mini March 2021  Bank of America Merrill Lynch   24,742,080    579,480 
 44   S&P Midcap 400 Index E-Mini March 2021  Bank of America Merrill Lynch   10,135,400    269,280 
     NET UNREALIZED APPRECIATION ON FUTURES CONTRACTS   $1,722,140 

 

See accompanying notes to financial statements.

12

 

TOPS® Managed Risk Moderate Growth ETF Portfolio
PORTFOLIO OF INVESTMENTS
December 31, 2020

 

Shares      Fair Value 
         
     EXCHANGE TRADED FUNDS - 88.3%     
     DEBT FUNDS - 29.6%     
 259,315   iShares iBoxx $ Investment Grade Corporate Bond ETF +  $35,819,181 
 2,048,625   SPDR Portfolio Short Term Corporate Bond ETF   64,326,825 
 430,169   VanEck Vectors J.P. Morgan EM Local Currency Bond ETF   14,311,723 
 103,045   Vanguard Intermediate-Term Treasury ETF   7,153,384 
 264,585   Vanguard Mortgage-Backed Securities ETF   14,306,111 
 840,605   Vanguard Short-Term Inflation-Protected Securities ETF +   42,954,915 
 231,910   Vanguard Short-Term Treasury ETF   14,285,656 
 121,431   Vanguard Total International Bond ETF   7,109,785 
 715,520   Xtrackers USD High Yield Corporate Bond ETF   35,840,397 
         236,107,977 
     EQUITY FUNDS - 58.7%     
 879,936   FlexShares Global Upstream Natural Resources Index Fund +   28,633,117 
 1,408,940   SPDR Portfolio S&P 400 Mid Cap ETF +   56,921,176 
 261,694   SPDR Portfolio S&P 500 Growth ETF +   14,469,061 
 632,677   SPDR Portfolio S&P 500 Value ETF   21,757,762 
 1,195,637   SPDR Portfolio S&P 600 Small Cap ETF +   42,803,805 
 1,829,091   Vanguard FTSE Developed Markets ETF   86,351,386 
 1,017,716   Vanguard FTSE Emerging Markets ETF   50,997,749 
 399,754   Vanguard Global ex-U.S. Real Estate ETF   21,710,640 
 170,352   Vanguard Real Estate ETF +   14,467,995 
 378,264   Vanguard S&P 500 ETF   130,005,554 
         468,118,245 
     TOTAL EXCHANGE TRADED FUNDS (Cost - $560,272,903)   704,226,222 
           
     SHORT-TERM INVESTMENTS - 12.1%     
     INVESTMENT PURCHASED AS SECURITIES LENDING COLLATERAL - 0.8%     
 6,301,842   STIT - Government & Agency Portfolio, Institutional Class - 0.03% (a)   6,301,842 
           
     MONEY MARKET FUNDS - 11.3%     
 89,843,913   STIT - Government & Agency Portfolio, Institutional Class - 0.03% (a)   89,843,913 
           
     TOTAL SHORT-TERM INVESTMENTS (Cost - $96,145,755)   96,145,755 
           
     TOTAL INVESTMENTS - 100.4% (Cost - $656,418,658)  $800,371,977 
     OTHER ASSETS AND LIABILITIES - NET - (0.4)%   (3,151,721)
     TOTAL NET ASSETS - 100.0%  $797,220,256 

 

ETF - Exchange Traded Fund

 

S&P - Standard and Poor’s

 

SPDR - Standard & Poor’s Depositary Receipt

 

+All or a portion of this security is on loan. Total loaned securities had a value of $42,208,748 at December 31, 2020. The loaned securities were secured with cash collateral of $6,301,842 and non-cash collateral of $36,814,697. The non-cash collateral consists of short-term investments and long-term bonds and is held for benefit of the Portfolio at the Portfolio’s custodian. The Portfolio cannot pledge or resell the collateral.

 

(a)Variable rate security, the money market rate shown represents the rate at December 31, 2020.

 

FUTURES CONTRACTS

 

              Unrealized 
Long Contracts   Description and Termination  Counterparty  Notional Value   Appreciation 
 230   5 Year US Treasury Note March 2021  Bank of America Merrill Lynch  $29,017,720   $66,704 
 108   MSCI EAFE Index Mini March 2021  Bank of America Merrill Lynch   11,506,320    259,740 
 140   MSCI Emerging Market Index March 2021  Bank of America Merrill Lynch   9,017,400    256,200 
 51   Russell 2000 Index E-Mini March 2021  Bank of America Merrill Lynch   5,035,740    139,740 
 102   S&P 500 Index E-Mini March 2021  Bank of America Merrill Lynch   19,118,880    447,780 
 35   S&P Midcap 400 Index E-Mini March 2021  Bank of America Merrill Lynch   8,062,250    214,200 
     NET UNREALIZED APPRECIATION ON FUTURES CONTRACTS   $1,384,364 

 

See accompanying notes to financial statements.

13

 

TOPS® Managed Risk ETF Portfolios
Statements of Assets and Liabilities
December 31, 2020

 

   Managed Risk   Managed Risk   Managed Risk 
   Balanced   Growth   Moderate Growth 
Assets:  ETF Portfolio   ETF Portfolio   ETF Portfolio 
Investments in securities, at cost  $405,753,389   $614,387,929   $656,418,658 
Investments in securities, at value (Securities on loan $17,533,699, $2,815,484 and $42,208,748, respectively)  $473,518,158   $794,540,578   $800,371,977 
Receivable for securities sold   590,795    796,372    429,256 
Receivable for Portfolio shares sold   101,996    18,947    2,637 
Interest and dividends receivable   50,359    56,729    56,838 
Unrealized appreciation on future contracts   655,550    1,722,140    1,384,364 
Deposits with Broker   1,280,295    3,822,897    2,883,031 
Total Assets   476,197,153    800,957,663    805,128,103 
Liabilities:               
Due to Custodian   251,587    525,973    232,153 
Collateral on securities loaned   1,467,835    2,872,643    6,301,842 
Payable for Portfolio shares redeemed   151,032    768,966    914,778 
Accrued investment advisory fees   120,190    200,918    199,855 
Accrued distribution (12b-1) fees   109,767    175,678    183,187 
Payable to related parties and administrative service fees   45,355    74,955    76,032 
Total Liabilities   2,145,766    4,619,133    7,907,847 
Net Assets  $474,051,387   $796,338,530   $797,220,256 
                
Components of Net Assets:               
Paid in capital  $415,885,021   $670,157,782   $679,185,049 
Accumulated earnings   58,166,366    126,180,748    118,035,207 
Net Assets  $474,051,387   $796,338,530   $797,220,256 
                

See accompanying notes to financial statements.

14

 

TOPS® Managed Risk ETF Portfolios
Statements of Assets and Liabilities (Continued)
December 31, 2020

 

   Managed Risk   Managed Risk   Managed Risk 
   Balanced   Growth   Moderate Growth 
   ETF Portfolio   ETF Portfolio   ETF Portfolio 
             
Class 1 Shares:               
Net assets  $148,095   $28,548,285   $1,115,510 
Total shares of beneficial interest outstanding at end of period ($0 par value, unlimited shares authorized)   12,490    2,415,451    90,729 
                
Net asset value, offering and redemption price per share (Net assets ÷ Total shares of beneficial interest outstanding)  $11.86   $11.82   $12.29 
                
Class 2 Shares:               
Net assets  $382,900,116   $613,432,352   $629,521,986 
Total shares of beneficial interest outstanding at end of period ($0 par value, unlimited shares authorized)   32,455,035    52,153,629    51,380,049 
                
Net asset value, offering and redemption price per share (Net assets ÷ Total shares of beneficial interest outstanding)  $11.80   $11.76   $12.25 
                
Class 3 Shares:               
Net assets  $82,899,205   $149,765,930   $159,925,521 
Total shares of beneficial interest outstanding at end of period ($0 par value, unlimited shares authorized)   6,993,007    12,792,790    13,100,001 
                
Net asset value, offering and redemption price per share (Net assets ÷ Total shares of beneficial interest outstanding)  $11.85   $11.71   $12.21 
                
Class 4 Shares:               
Net assets  $8,103,956   $4,591,948   $6,657,224 
Total shares of beneficial interest outstanding at end of period ($0 par value, unlimited shares authorized)   697,233    388,446    547,254 
                
Net asset value, offering and redemption price per share (Net assets ÷ Total shares of beneficial interest outstanding)  $11.62   $11.82   $12.16 
                
Investor Class Shares:               
Net assets  $15   $15   $15 
Total shares of beneficial interest outstanding at end of period ($0 par value, unlimited shares authorized)   1    1    1 
                
Net asset value, offering and redemption price per share (Net assets ÷ Total shares of beneficial interest outstanding)  $12.55 (a)  $12.34 (a)  $13.04 (a)

 

(a)NAV does not recalculate due to rounding of net assets.

 

See accompanying notes to financial statements.

15

 

TOPS® Managed Risk ETF Portfolios
Statements of Operations
For the Year Ended December 31, 2020

 

   Managed Risk   Managed Risk   Managed Risk 
   Balanced   Growth   Moderate Growth 
   ETF Portfolio   ETF Portfolio   ETF Portfolio 
Investment Income:               
Dividend income  $7,879,434   $13,001,786   $13,557,986 
Interest income   197,844    321,267    326,846 
Securities lending income - net   79,227    101,985    145,951 
Total Investment Income   8,156,505    13,425,038    14,030,783 
Expenses:               
Investment advisory fees   1,393,479    2,306,777    2,322,144 
Distribution fees (12b-1) - Class 2 Shares   934,001    1,475,451    1,525,191 
Distribution fees (12b-1) - Class 3 Shares   285,927    512,543    547,151 
Distribution fees (12b-1) - Class 4 Shares   54,375    27,589    39,580 
Related parties and administrative service fees   473,521    777,953    783,075 
Total Expenses   3,141,303    5,100,313    5,217,141 
Net Investment Income   5,015,202    8,324,725    8,813,642 
                
Realized and Unrealized Gain (Loss) on Investments and Futures Contracts:               
Net realized gain (loss) on:               
Investments   (581,171)   3,910,968    3,922,191 
Futures contracts   (12,454,054)   (54,542,212)   (35,114,963)
Total net realized loss   (13,035,225)   (50,631,244)   (31,192,772)
Net change in unrealized appreciation on:               
Investments   32,020,513    77,539,082    63,275,030 
Futures contracts   305,570    570,345    573,554 
Total unrealized appreciation   32,326,083    78,109,427    63,848,584 
Net Realized and Unrealized Gain on Investments and Futures Contracts   19,290,858    27,478,183    32,655,812 
Net Increase in Net Assets Resulting from Operations  $24,306,060   $35,802,908   $41,469,454 

 

See accompanying notes to financial statements.

16

 

TOPS® Managed Risk ETF Portfolios
Statements of Changes in Net Assets

 

   Managed Risk Balanced ETF Portfolio 
         
   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019 
Increase (Decrease) in Net Assets:          
From Operations:          
Net investment income  $5,015,202   $10,052,181 
Net realized gain (loss) on investments and futures contracts   (13,035,225)   9,792,754 
Net change in unrealized appreciation on investments and futures contracts   32,326,083    49,992,271 
Net increase in net assets resulting from operations   24,306,060    69,837,206 
From Distributions to Shareholders:          
Total Distributions Paid          
Class 1   (5,373)   (7,123)
Class 2   (13,352,114)   (20,569,746)
Class 3   (2,826,328)   (4,377,941)
Class 4   (288,954)   (484,345)
Investor   (0) (a)   (1)
Total distributions to shareholders   (16,472,769)   (25,439,156)
From Shares of Beneficial Interest:          
Proceeds from shares sold          
Class 2   18,413,961    21,735,779 
Class 3   5,363,937    7,319,807 
Class 4   82,374    20,438 
Reinvestment of distributions          
Class 1   5,373    7,123 
Class 2   13,352,114    20,569,746 
Class 3   2,826,327    4,377,941 
Class 4   288,954    484,345 
Investor Class   0 (a)   1 
Cost of shares redeemed          
Class 1   (240)   (134,884)
Class 2   (64,403,467)   (84,615,123)
Class 3   (15,413,079)   (16,447,783)
Class 4   (2,444,149)   (1,017,680)
Net decrease in net assets from share transactions of beneficial interest   (41,927,895)   (47,700,290)
Total Decrease In Net Assets   (34,094,604)   (3,302,240)
           
Net Assets:          
Beginning of year   508,145,991    511,448,231 
End of year  $474,051,387   $508,145,991 

 

(a)Represents less than $1.

 

See accompanying notes to financial statements.

17

 

TOPS® Managed Risk ETF Portfolios
Statements of Changes in Net Assets (Continued)

 

   Managed Risk Balanced ETF Portfolio 
         
   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019 
SHARE ACTIVITY          
Class 1          
Shares Reinvested   493    641 
Shares Redeemed   (21)   (11,569)
Net increase (decrease) in shares of beneficial interest outstanding   472    (10,928)
           
Class 2          
Shares Sold   1,644,551    1,929,638 
Shares Reinvested   1,231,745    1,858,152 
Shares Redeemed   (5,776,639)   (7,471,680)
Net decrease in shares of beneficial interest outstanding   (2,900,343)   (3,683,890)
           
Class 3          
Shares Sold   477,923    643,584 
Shares Reinvested   259,296    393,346 
Shares Redeemed   (1,375,384)   (1,443,779)
Net decrease in shares of beneficial interest outstanding   (638,165)   (406,849)
           
Class 4          
Shares Sold   7,314    3,732 
Shares Reinvested   27,030    63,341 
Shares Redeemed   (219,263)   (99,075)
Net decrease in shares of beneficial interest outstanding   (184,919)   (32,002)
           
Investor          
Shares Reinvested   0 (b)   0 (b)
Net increase in shares of beneficial interest outstanding   0 (b)   0 (b)

 

(b)Represents less than one share

 

See accompanying notes to financial statements.

18

 

TOPS® Managed Risk ETF Portfolios
Statements of Changes in Net Assets (Continued)

 

   Managed Risk Growth ETF Portfolio 
         
   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019 
Increase (Decrease) in Net Assets:          
From Operations:          
Net investment income  $8,324,725   $16,024,079 
Net realized gain (loss) on investments and futures contracts   (50,631,244)   7,194,212 
Net change in unrealized appreciation on investments and futures contracts   78,109,427    109,536,792 
Net increase in net assets resulting from operations   35,802,908    132,755,083 
From Distributions to Shareholders:          
Total Distributions Paid          
Class 1   (664,474)   (2,456,604)
Class 2   (12,388,765)   (53,648,507)
Class 3   (2,920,953)   (13,496,053)
Class 4   (81,363)   (395,312)
Investor   (0) (a)   (1)
Total distributions to shareholders   (16,055,555)   (69,996,477)
From Shares of Beneficial Interest:          
Proceeds from shares sold          
Class 1   378,023    — 
Class 2   21,981,934    19,961,431 
Class 3   3,432,665    3,309,135 
Class 4   46,660    22,400 
Reinvestment of distributions          
Class 1   664,474    2,456,604 
Class 2   12,388,764    53,648,507 
Class 3   2,920,953    13,496,053 
Class 4   81,363    395,312 
Investor Class   0 (a)   1 
Cost of shares redeemed          
Class 1   (3,076,272)   (1,682,610)
Class 2   (88,113,133)   (110,354,204)
Class 3   (23,343,893)   (25,637,689)
Class 4   (725,805)   (540,876)
Net decrease in net assets from share transactions of beneficial interest   (73,364,267)   (44,925,936)
Total Increase (Decrease) In Net Assets   (53,616,914)   17,832,670 
           
Net Assets:          
Beginning of year   849,955,444    832,122,774 
End of year  $796,338,530   $849,955,444 

 

(a)Represents less than $1.

 

See accompanying notes to financial statements.

19

 

TOPS® Managed Risk ETF Portfolios
Statements of Changes in Net Assets (Continued)

 

   Managed Risk Growth ETF Portfolio 
         
   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019 
SHARE ACTIVITY          
Class 1          
Shares Sold   37,060    — 
Shares Reinvested   63,163    228,947 
Shares Redeemed   (281,167)   (149,781)
Net increase (decrease) in shares of beneficial interest outstanding   (180,944)   79,166 
           
Class 2          
Shares Sold   2,047,124    1,762,441 
Shares Reinvested   1,182,134    5,023,268 
Shares Redeemed   (8,133,456)   (9,738,007)
Net decrease in shares of beneficial interest outstanding   (4,904,198)   (2,952,298)
           
Class 3          
Shares Sold   327,579    293,104 
Shares Reinvested   280,053    1,269,619 
Shares Redeemed   (2,140,664)   (2,282,467)
Net decrease in shares of beneficial interest outstanding   (1,533,032)   (719,744)
           
Class 4          
Shares Sold   4,257    1,967 
Shares Reinvested   7,719    36,807 
Shares Redeemed   (65,893)   (48,443)
Net decrease in shares of beneficial interest outstanding   (53,917)   (9,669)
           
Investor          
Shares Reinvested   0 (b)   0 (b)
Net increase in shares of beneficial interest outstanding   0 (b)   0 (b)

 

(b)Represents less than one share

 

See accompanying notes to financial statements.

20

 

TOPS® Managed Risk ETF Portfolios
Statements of Changes in Net Assets (Continued)

 

   Managed Risk Moderate Growth ETF Portfolio 
         
   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019 
Increase (Decrease) in Net Assets:          
From Operations:          
Net investment income  $8,813,642   $17,186,741 
Net realized gain (loss) on investments and futures contracts   (31,192,772)   14,981,307 
Net change in unrealized appreciation on investments and futures contracts   63,848,584    97,722,623 
Net increase in net assets resulting from operations   41,469,454    129,890,671 
From Distributions to Shareholders:          
Total Distributions Paid          
Class 1   (35,918)   (71,524)
Class 2   (18,828,342)   (42,511,197)
Class 3   (4,700,770)   (10,980,103)
Class 4   (177,441)   (434,361)
Investor   (0) (a)   (1)
Total distributions to shareholders   (23,742,471)   (53,997,186)
From Shares of Beneficial Interest:          
Proceeds from shares sold          
Class 1   —    3,056 
Class 2   17,006,219    19,626,219 
Class 3   3,716,608    6,601,331 
Class 4   91,841    30,500 
Reinvestment of distributions          
Class 1   35,918    71,524 
Class 2   18,828,341    42,511,197 
Class 3   4,700,770    10,980,103 
Class 4   177,441    434,361 
Investor Class   0 (a)   1 
Cost of shares redeemed          
Class 1   (61,796)   (65,516)
Class 2   (93,665,734)   (127,222,217)
Class 3   (24,035,316)   (30,695,632)
Class 4   (1,207,469)   (539,637)
Net decrease in net assets from share transactions of beneficial interest   (74,413,177)   (78,264,710)
Total Decrease In Net Assets   (56,686,194)   (2,371,225)
           
Net Assets:          
Beginning of year   853,906,450    856,277,675 
End of year  $797,220,256   $853,906,450 

 

(a)Represents less than $1.

 

See accompanying notes to financial statements.

21

 

TOPS® Managed Risk ETF Portfolios
Statements of Changes in Net Assets (Continued)

 

   Managed Risk Moderate Growth ETF Portfolio 
         
   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019 
SHARE ACTIVITY          
Class 1          
Shares Sold   —    269 
Shares Reinvested   3,239    6,313 
Shares Redeemed   (5,499)   (5,695)
Net increase (decrease) in shares of beneficial interest outstanding   (2,260)   887 
           
Class 2          
Shares Sold   1,488,051    1,671,084 
Shares Reinvested   1,702,382    3,762,053 
Shares Redeemed   (8,168,258)   (10,857,018)
Net decrease in shares of beneficial interest outstanding   (4,977,825)   (5,423,881)
           
Class 3          
Shares Sold   326,437    562,151 
Shares Reinvested   426,567    975,142 
Shares Redeemed   (2,099,978)   (2,631,010)
Net decrease in shares of beneficial interest outstanding   (1,346,974)   (1,093,717)
           
Class 4          
Shares Sold   7,884    2,668 
Shares Reinvested   16,146    38,679 
Shares Redeemed   (105,402)   (46,246)
Net decrease in shares of beneficial interest outstanding   (81,372)   (4,899)
           
Investor          
Shares Reinvested   0 (b)   0 (b)
Net increase in shares of beneficial interest outstanding   0 (b)   0 (b)

 

(b)Represents less than one share

 

See accompanying notes to financial statements.

22

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Balanced ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 1 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.63   $10.70   $12.25   $11.26   $10.75 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.16    0.23    0.24    0.20    0.18 
Net realized and unrealized gain (loss) on investments and futures contracts   0.52    1.32    (0.92)   1.02    0.50 
Total income (loss) from investment operations   0.68    1.55    (0.68)   1.22    0.68 
Less distributions from:                         
Net investment income   (0.29)   (0.29)   (0.24)   (0.21)   (0.17)
Net realized gain   (0.16)   (0.33)   (0.63)   (0.02)   — 
Total distributions   (0.45)   (0.62)   (0.87)   (0.23)   (0.17)
Net asset value, end of year  $11.86   $11.63   $10.70   $12.25   $11.26 
Total return (c)   6.17%   14.81%   (5.81)%   10.90%   6.39%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $148   $140   $246   $411   $511 
Ratio of expenses to average net assets (d)   0.40%   0.40%   0.40%   0.40%   0.40%
Ratio of net investment income to average net assets (b)(d)   1.38%   2.04%   2.03%   1.74%   1.62%
Portfolio turnover rate   27%   36%   48%   30%   16%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

23

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Balanced ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 2 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.57   $10.64   $12.18   $11.20   $10.68 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.13    0.22    0.23    0.18    0.16 
Net realized and unrealized gain (loss) on investments and futures contracts   0.52    1.30    (0.93)   1.00    0.50 
Total income (loss) from investment operations   0.65    1.52    (0.70)   1.18    0.66 
Less distributions from:                         
Net investment income   (0.26)   (0.26)   (0.21)   (0.18)   (0.14)
Net realized gain   (0.16)   (0.33)   (0.63)   (0.02)   — 
Total distributions   (0.42)   (0.59)   (0.84)   (0.20)   (0.14)
Net asset value, end of year  $11.80   $11.57   $10.64   $12.18   $11.20 
Total return (c)   5.90%   14.55%   (6.04)%   10.58%   6.22%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $382,900   $409,218   $415,533   $512,670   $511,731 
Ratio of expenses to average net assets (d)   0.65%   0.65%   0.65%   0.65%   0.65%
Ratio of net investment income to average net assets (b)(d)   1.10%   1.97%   1.91%   1.57%   1.50%
Portfolio turnover rate   27%   36%   48%   30%   16%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

24

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Balanced ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 3 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.63   $10.69   $12.24   $11.25   $10.75 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.11    0.22    0.22    0.18    0.16 
Net realized and unrealized gain (loss) on investments and futures contracts   0.52    1.30    (0.94)   1.01    0.49 
Total income (loss) from investment operations   0.63    1.52    (0.72)   1.19    0.65 
Less distributions from:                         
Net investment income   (0.25)   (0.25)   (0.20)   (0.18)   (0.15)
Net realized gain   (0.16)   (0.33)   (0.63)   (0.02)   — 
Total distributions   (0.41)   (0.58)   (0.83)   (0.20)   (0.15)
Net asset value, end of year  $11.85   $11.63   $10.69   $12.24   $11.25 
Total return (c)   5.66%   14.48%   (6.15)%   10.58%   6.02%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $82,899   $88,729   $85,937   $96,698   $86,999 
Ratio of expenses to average net assets (d)   0.75%   0.75%   0.75%   0.75%   0.75%
Ratio of net investment income to average net assets (b)(d)   1.00%   1.90%   1.84%   1.49%   1.47%
Portfolio turnover rate   27%   36%   48%   30%   16%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

25

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Balanced ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 4 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.40   $10.49   $12.02   $11.05   $10.54 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.08    0.18    0.18    0.14    0.12 
Net realized and unrealized gain (loss) on investments and futures contracts   0.51    1.28    (0.92)   0.99    0.49 
Total income (loss) from investment operations   0.59    1.46    (0.74)   1.13    0.61 
Less distributions from:                         
Net investment income   (0.21)   (0.22)   (0.16)   (0.14)   (0.10)
Net realized gain   (0.16)   (0.33)   (0.63)   (0.02)   — 
Total distributions   (0.37)   (0.55)   (0.79)   (0.16)   (0.10)
Net asset value, end of year  $11.62   $11.40   $10.49   $12.02   $11.05 
Total return (c)   5.46%   14.17%   (6.41)%   10.24%   5.82%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $8,104   $10,059   $9,733   $11,531   $11,587 
Ratio of expenses to average net assets (d)   1.00%   1.00%   1.00%   1.00%   1.00%
Ratio of net investment income to average net assets (b)(d)   0.74%   1.64%   1.58%   1.21%   1.14%
Portfolio turnover rate   27%   36%   48%   30%   16%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

26

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Balanced ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Investor Class Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $12.32   $11.39   $12.17   $11.75   $11.09 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.09    0.31    0.20    0.18    0.16 
Net realized and unrealized gain (loss) on investments   0.56    1.21    (0.15)   0.44    0.50 
Total income (loss) from investment operations   0.65    1.52    0.05    0.62    0.66 
Less distributions from:                         
Net investment income   (0.26)   (0.26)   (0.20)   (0.18)   — 
Net realized gain   (0.16)   (0.33)   (0.63)   (0.02)   — 
Total distributions   (0.42)   (0.59)   (0.83)   (0.20)   — 
Net asset value, end of year (c)  $12.55   $12.32   $11.39   $12.17   $11.75 
Total return (d)   5.52%   13.64%   (5.67)%   9.81%   5.95%
Ratios and Supplemental Data:                         
Net assets, end of year (e)  $15   $14   $12   $12   $12 
Ratio of expenses to average net assets (f)   0.90%   0.90%   0.90%   0.90%   0.90%
Ratio of net investment income to average net assets (b)(f)   0.64%   1.54%   1.66%   1.32%   1.25%
Portfolio turnover rate   27%   36%   48%   30%   16%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)NAV does not recalculate due to rounding of net assets.

 

(d)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(e)Rounded net assets, not truncated.

 

(f)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

27

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Growth ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 1 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.49   $10.73   $12.66   $10.93   $10.53 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.15    0.25    0.24    0.21    0.19 
Net realized and unrealized gain (loss) on investments and futures contracts   0.44    1.54    (1.27)   1.74    0.42 
Total income (loss) from investment operations   0.59    1.79    (1.03)   1.95    0.61 
Less distributions from:                         
Net investment income   (0.26)   (0.26)   (0.23)   (0.22)   (0.21)
Net realized gain   —    (0.77)   (0.67)   —    — 
Total distributions   (0.26)   (1.03)   (0.90)   (0.22)   (0.21)
Net asset value, end of year  $11.82   $11.49   $10.73   $12.66   $10.93 
Total return (c)   5.46%   17.32%   (8.50)%   17.97%   5.87%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $28,548   $29,825   $26,999   $31,412   $28,004 
Ratio of expenses to average net assets (d)   0.40%   0.40%   0.40%   0.40%   0.40%
Ratio of net investment income to average net assets (b)(d)   1.34%   2.19%   1.96%   1.75%   1.74%
Portfolio turnover rate   37%   36%   50%   28%   12%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

28

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Growth ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 2 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.43   $10.67   $12.59   $10.87   $10.47 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.12    0.22    0.21    0.17    0.16 
Net realized and unrealized gain (loss) on investments and futures contracts   0.44    1.54    (1.27)   1.74    0.42 
Total income (loss) from investment operations   0.56    1.76    (1.06)   1.91    0.58 
Less distributions from:                         
Net investment income   (0.23)   (0.23)   (0.19)   (0.19)   (0.18)
Net realized gain   —    (0.77)   (0.67)   —    — 
Total distributions   (0.23)   (1.00)   (0.86)   (0.19)   (0.18)
Net asset value, end of year  $11.76   $11.43   $10.67   $12.59   $10.87 
Total return (c)   5.19%   17.08%   (8.72)%   17.66%   5.57%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $613,432   $652,103   $640,432   $770,385   $752,397 
Ratio of expenses to average net assets (d)   0.65%   0.65%   0.65%   0.65%   0.65%
Ratio of net investment income to average net assets (b)(d)   1.10%   1.91%   1.69%   1.46%   1.50%
Portfolio turnover rate   37%   36%   50%   28%   12%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

29

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Growth ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 3 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.37   $10.62   $12.54   $10.84   $10.44 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.11    0.20    0.19    0.16    0.15 
Net realized and unrealized gain (loss) on investments and futures contracts   0.45    1.53    (1.26)   1.72    0.42 
Total income (loss) from investment operations   0.56    1.73    (1.07)   1.88    0.57 
Less distributions from:                         
Net investment income   (0.22)   (0.21)   (0.18)   (0.18)   (0.17)
Net realized gain   —    (0.77)   (0.67)   —    — 
Total distributions   (0.22)   (0.98)   (0.85)   (0.18)   (0.17)
Net asset value, end of year  $11.71   $11.37   $10.62   $12.54   $10.84 
Total return (c)   5.18%   16.93%   (8.84)%   17.45%   5.51%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $149,766   $162,948   $159,859   $188,141   $168,368 
Ratio of expenses to average net assets (d)   0.75%   0.75%   0.75%   0.75%   0.75%
Ratio of net investment income to average net assets (b)(d)   0.99%   1.81%   1.60%   1.39%   1.44%
Portfolio turnover rate   37%   36%   50%   28%   12%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

30

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Growth ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 4 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.48   $10.69   $12.57   $10.85   $10.46 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.08    0.18    0.15    0.13    0.12 
Net realized and unrealized gain (loss) on investments and futures contracts   0.45    1.54    (1.25)   1.74    0.41 
Total income (loss) from investment operations   0.53    1.72    (1.10)   1.87    0.53 
Less distributions from:                         
Net investment income   (0.19)   (0.16)   (0.11)   (0.15)   (0.14)
Net realized gain   —    (0.77)   (0.67)   —    — 
Total distributions   (0.19)   (0.93)   (0.78)   (0.15)   (0.14)
Net asset value, end of year  $11.82   $11.48   $10.69   $12.57   $10.85 
Total return (c)   4.85%   16.64%   (9.09)%   17.33%   5.15%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $4,592   $5,079   $4,833   $11,182   $10,228 
Ratio of expenses to average net assets (d)   1.00%   1.00%   1.00%   1.00%   1.00%
Ratio of net investment income to average net assets (b)(d)   0.74%   1.58%   1.23%   1.14%   1.17%
Portfolio turnover rate   37%   36%   50%   28%   12%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

31

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Growth ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Investor Class Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $12.01   $11.25   $12.59   $11.26   $10.68 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.05    0.25    0.17    0.17    0.16 
Net realized and unrealized gain (loss) on investments   0.51    1.51    (0.65)   1.35    0.42 
Total income (loss) from investment operations   0.56    1.76    (0.48)   1.52    0.58 
Less distributions from:                         
Net investment income   (0.23)   (0.23)   (0.19)   (0.19)   — 
Net realized gain   —    (0.77)   (0.67)   —    — 
Total distributions   (0.23)   (1.00)   (0.86)   (0.19)   — 
Net asset value, end of year (c)  $12.34   $12.01   $11.25   $12.59   $11.26 
Total return (d)   4.92%   16.12%   (8.32)%   17.00%   5.43%
Ratios and Supplemental Data:                         
Net assets, end of year (e)  $15   $14   $12   $13   $11 
Ratio of expenses to average net assets (f)   0.90%   0.90%   0.90%   0.90%   0.90%
Ratio of net investment income to average net assets (b)(f)   0.64%   1.48%   1.44%   1.21%   1.25%
Portfolio turnover rate   37%   36%   50%   28%   12%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)NAV does not recalculate due to rounding of net assets.

 

(d)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(e)Rounded net assets, not truncated.

 

(f)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

32

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Moderate Growth ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 1 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.99   $11.02   $12.71   $11.34   $10.84 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.16    0.27    0.25    0.24    0.18 
Net realized and unrealized gain (loss) on investments and futures contracts   0.54    1.51    (1.10)   1.36    0.52 
Total income (loss) from investment operations   0.70    1.78    (0.85)   1.60    0.70 
Less distributions from:                         
Net investment income   (0.30)   (0.30)   (0.24)   (0.23)   (0.20)
Net realized gain   (0.10)   (0.51)   (0.60)   —    — 
Total distributions   (0.40)   (0.81)   (0.84)   (0.23)   (0.20)
Net asset value, end of year  $12.29   $11.99   $11.02   $12.71   $11.34 
Total return (c)   6.20%   16.59%   (7.00)%   14.18%   6.50%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $1,116   $1,115   $1,015   $2,389   $1,618 
Ratio of expenses to average net assets (d)   0.40%   0.40%   0.40%   0.40%   0.40%
Ratio of net investment income to average net assets (b)(d)   1.43%   2.31%   1.98%   1.97%   1.68%
Portfolio turnover rate   32%   35%   38%   30%   13%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

33

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Moderate Growth ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 2 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.95   $10.98   $12.66   $11.30   $10.79 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.13    0.24    0.24    0.19    0.17 
Net realized and unrealized gain (loss) on investments and futures contracts   0.54    1.50    (1.11)   1.37    0.51 
Total income (loss) from investment operations   0.67    1.74    (0.87)   1.56    0.68 
Less distributions from:                         
Net investment income   (0.27)   (0.26)   (0.21)   (0.20)   (0.17)
Net realized gain   (0.10)   (0.51)   (0.60)   —    — 
Total distributions   (0.37)   (0.77)   (0.81)   (0.20)   (0.17)
Net asset value, end of year  $12.25   $11.95   $10.98   $12.66   $11.30 
Total return (c)   5.91%   16.30%   (7.22)%   13.85%   6.31%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $629,522   $673,353   $678,295   $826,964   $815,029 
Ratio of expenses to average net assets (d)   0.65%   0.65%   0.65%   0.65%   0.65%
Ratio of net investment income to average net assets (b)(d)   1.16%   2.02%   1.86%   1.56%   1.59%
Portfolio turnover rate   32%   35%   38%   30%   13%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

34

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Moderate Growth ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 3 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.90   $10.94   $12.63   $11.27   $10.78 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.12    0.22    0.22    0.18    0.17 
Net realized and unrealized gain (loss) on investments and futures contracts   0.54    1.50    (1.11)   1.37    0.49 
Total income (loss) from investment operations   0.66    1.72    (0.89)   1.55    0.66 
Less distributions from:                         
Net investment income   (0.25)   (0.25)   (0.20)   (0.19)   (0.17)
Net realized gain   (0.10)   (0.51)   (0.60)   —    — 
Total distributions   (0.35)   (0.76)   (0.80)   (0.19)   (0.17)
Net asset value, end of year  $12.21   $11.90   $10.94   $12.63   $11.27 
Total return (c)   5.90%   16.16%   (7.38)%   13.83%   6.14%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $159,926   $171,983   $170,062   $191,249   $169,824 
Ratio of expenses to average net assets (d)   0.75%   0.75%   0.75%   0.75%   0.75%
Ratio of net investment income to average net assets (b)(d)   1.06%   1.92%   1.79%   1.48%   1.56%
Portfolio turnover rate   32%   35%   38%   30%   13%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

35

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Moderate Growth ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Class 4 Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $11.86   $10.90   $12.57   $11.21   $10.71 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.09    0.20    0.19    0.15    0.14 
Net realized and unrealized gain (loss) on investments and futures contracts   0.53    1.49    (1.10)   1.36    0.48 
Total income (loss) from investment operations   0.62    1.69    (0.91)   1.51    0.62 
Less distributions from:                         
Net investment income   (0.22)   (0.22)   (0.16)   (0.15)   (0.12)
Net realized gain   (0.10)   (0.51)   (0.60)   —    — 
Total distributions   (0.32)   (0.73)   (0.76)   (0.15)   (0.12)
Net asset value, end of year  $12.16   $11.86   $10.90   $12.57   $11.21 
Total return (c)   5.53%   15.88%   (7.61)%   13.53%   5.84%
Ratios and Supplemental Data:                         
Net assets, end of year (in 000’s)  $6,657   $7,455   $6,905   $8,532   $8,285 
Ratio of expenses to average net assets (d)   1.00%   1.00%   1.00%   1.00%   1.00%
Ratio of net investment income to average net assets (b)(d)   0.80%   1.70%   1.51%   1.22%   1.24%
Portfolio turnover rate   32%   35%   38%   30%   13%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(d)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

36

 

TOPS® Managed Risk ETF Portfolios
Financial Highlights
Managed Risk Moderate Growth ETF Portfolio
 
Selected data based on a share outstanding throughout each year indicated.

 

   Investor Class Shares 
                     
   Year Ended   Year Ended   Year Ended   Year Ended   Year Ended 
   December 31, 2020   December 31, 2019   December 31, 2018   December 31, 2017   December 31, 2016 
Net asset value, beginning of year  $12.74   $11.77   $12.67   $11.89   $11.21 
Income (loss) from investment operations:                         
Net investment income (a)(b)   0.09    0.32    0.20    0.19    0.17 
Net realized and unrealized gain (loss) on investments   0.58    1.42    (0.29)   0.79    0.51 
Total income (loss) from investment operations   0.67    1.74    (0.09)   0.98    0.68 
Less distributions from:                         
Net investment income   (0.27)   (0.26)   (0.21)   (0.20)   — 
Net realized gain   (0.10)   (0.51)   (0.60)   —    — 
Total distributions   (0.37)   (0.77)   (0.81)   (0.20)   — 
Net asset value, end of year (c)  $13.04   $12.74   $11.77   $12.67   $11.89 
Total return (d)   5.52%   15.21%   (6.77)%   12.99%   6.07%
Ratios and Supplemental Data:                         
Net assets, end of year (e)  $15   $14   $13   $13   $12 
Ratio of expenses to average net assets (f)   0.90%   0.90%   0.90%   0.90%   0.90%
Ratio of net investment income to average net assets (b)(f)   0.70%   1.60%   1.61%   1.31%   1.34%
Portfolio turnover rate   32%   35%   38%   30%   13%
                          
(a)Net investment income has been calculated using the average shares method, which more appropriately presents the per share data for the period.

 

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

 

(c)NAV does not recalculate due to rounding of net assets.

 

(d)Total returns are historical and assume changes in share price and reinvestment of dividends and capital gains distributions, if any.

 

(e)Rounded net assets, not truncated.

 

(f)Does not include the expenses of the underlying investment companies in which the Portfolio invests.

 

See accompanying notes to financial statements.

37

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS
December 31, 2020
 
1.ORGANIZATION

 

The TOPS® Managed Risk ETF Portfolios (each a “Portfolio”, collectively the “Portfolios”) are comprised of three different actively managed portfolios. Each Portfolio is a diversified series of shares of beneficial interest of Northern Lights Variable Trust (the “Trust”), a statutory trust organized on November 2, 2005 under the laws of the State of Delaware and registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Portfolios are intended to be funding vehicles for variable annuity contracts and flexible premium variable life insurance policies offered by the separate accounts of various insurance companies. The assets of each Portfolio are segregated and a shareholder’s interest is limited to the Portfolio in which shares are held. Each Portfolio pays its own expenses. The investment objective of each Portfolio is as follows:

 

Portfolio  Primary Objective
    
Managed Risk Balanced ETF Portfolio  Income and capital appreciation with less volatility than the fixed income and equity markets as a whole.
    
Managed Risk Growth ETF Portfolio  Capital appreciation with less volatility than the equity markets as a whole.
    
Managed Risk Moderate Growth ETF Portfolio  Capital appreciation with less volatility than the equity markets as a whole.

 

The Portfolios currently offer five classes of shares: Class 1 Shares, Class 2 Shares, Class 3 Shares, Class 4 Shares, and Investor Class Shares. Each class of shares of the Portfolios has identical rights and privileges except with respect to arrangements pertaining to shareholder servicing or distribution, class-related expenses, voting rights on matters affecting a single class of shares, and the exchange privilege of each class of shares. The Portfolios’ share classes differ in the fees and expenses charged to shareholders. The Portfolios’ income, expenses (other than class specific distribution fees) and realized and unrealized gains and losses are allocated proportionately each day based upon the relative net assets of each class.

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

The following is a summary of significant accounting policies followed by the Portfolios in preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates. The Portfolios are investment companies and accordingly follow the Investment Company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 “Financial Services Investment Companies”, including Accounting Standards Update 2013-08.

 

Securities Valuation – Securities listed on an exchange are valued at the last reported sale price at the close of the regular trading session of the primary exchange on the business day the value is being determined, or in the case of securities listed on NASDAQ at the NASDAQ Official Closing Price (“NOCP”). In the absence of a sale, such securities shall be valued at the mean between the current bid and ask prices on the primary exchange on the day of valuation. The independent pricing service does not distinguish between smaller-sized bond positions known as “odd lots” and larger institutional-sized bond positions known as “round lots”. The Portfolios may fair value a particular bond if the advisor does not believe that the round lot value provided by the independent pricing service reflects fair value of the Portfolios’ holding. Short-term debt obligations having 60 days or less remaining until maturity, at time of purchase, may be valued at amortized cost. Futures and future options are valued at the final settled price or, in the absence of a settled price, at the last sale price on the day of valuation.

38

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2020
 

Valuation of Funds of Funds – The Portfolios may invest in portfolios of open-end investment companies. Open-end investment companies are valued at their respective net asset values as reported by such investment companies. Open-end investment companies value securities in their portfolios for which market quotations are readily available at their market values (generally the last reported sale price) and all other securities and assets at their fair value based on the methods established by the boards of directors of the open-end investment companies.

 

A Portfolio may hold securities, such as private investments, interests in commodity pools, other non-traded securities or temporarily illiquid securities, for which market quotations are not readily available or are determined to be unreliable. These securities will be valued using the “fair value” procedures approved by the Trust’s Board of Trustees (the “Board”). The Board has delegated execution of these procedures to a fair value committee composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) advisor and/or sub-advisor. The committee may also enlist third party consultants such as a valuation specialist at a public accounting firm, valuation consultant or financial officer of a security issuer on an as-needed basis to assist in determining a security-specific fair value. The Board reviews and ratifies the execution of this process and the resultant fair value prices at least quarterly to assure the process produces reliable results.

 

Fair Valuation Process – As noted above, the fair value committee is composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) advisor and/or sub-advisor. The applicable investments are valued collectively via inputs from each of these groups. For example, fair value determinations are required for the following securities: (i) securities for which market quotations are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary lapse in the provision of a price by the regular pricing source); (ii) securities for which, in the judgment of the advisor or sub-advisor, the prices or values available do not represent the fair value of the instrument.

 

Factors which may cause the advisor or sub-advisor to make such a judgment include, but are not limited to, the following: only a bid price or an ask price is available; the spread between bid and ask prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; (iv) securities with respect to which an event that will affect the value thereof has occurred (a “significant event”) since the closing prices were established on the principal exchange on which they are traded, but prior to a Portfolio’s calculation of its net asset value. Specifically, interests in commodity pools or managed futures pools are valued on a daily basis by reference to the closing market prices of each futures contract or other asset held by a pool, as adjusted for pool expenses.

 

Restricted or illiquid securities, such as private investments or non-traded securities are valued via inputs from the advisor or sub-advisor based upon the current bid for the security from two or more independent dealers or other parties reasonably familiar with the facts and circumstances of the security (who should take into consideration all relevant factors as may be appropriate under the circumstances). If the advisor or sub-advisor is unable to obtain a current bid from such independent dealers or other independent parties, the fair value committee shall determine the fair value of such security using the following factors: (i) the type of security; (ii) the cost at date of purchase; (iii) the size and nature of the Portfolio’s holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.

 

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

 

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

 

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

39

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2020
 

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

 

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

 

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

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following tables summarize the inputs used as of December 31, 2020 for each Portfolio’s investments measured at fair value:

 

Managed Risk Balanced ETF Portfolio 
                 
Assets*  Level 1   Level 2   Level 3   Total 
Exchange Traded Funds  $418,314,073   $—   $—   $418,314,073 
Short-Term Investments   55,204,085    —    —    55,204,085 
Derivatives                    
Futures Contracts **   655,550    —    —    655,550 
Total  $474,173,708   $—   $—   $474,173,708 
                     
Managed Risk Growth ETF Portfolio 
                 
Assets*  Level 1   Level 2   Level 3   Total 
Exchange Traded Funds  $703,244,488   $—   $—   $703,244,488 
Short-Term Investments   91,296,090    —    —    91,296,090 
Derivatives                    
Futures Contracts **   1,722,140    —    —    1,722,140 
Total  $796,262,718   $—   $—   $796,262,718 
                     
Managed Risk Moderate Growth ETF Portfolio 
                 
Assets*  Level 1   Level 2   Level 3   Total 
Exchange Traded Funds  $704,226,222   $—   $—   $704,226,222 
Short-Term Investments   96,145,755    —    —    96,145,755 
Derivatives                    
Futures Contracts **   1,384,364    —    —    1,384,364 
Total  $801,756,341   $—   $—   $801,756,341 

 

The Portfolios did not hold any Level 3 securities during the period ended December 31, 2020.

 

*Refer to the Portfolios of Investments for security classifications.

 

**Cumulative appreciation (depreciation) of futures contracts is reported in the above table.

40

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2020
 

Security Transactions and Related Income – Security transactions are accounted for on the trade date. Interest income is recognized on an accrual basis. Discounts are accreted and premiums are amortized on securities purchased over the lives of the respective securities. Dividend income is recorded on the ex-dividend date. Realized gains or losses from sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.

 

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

 

Federal Income Tax – It is each Portfolio’s policy to continue to qualify as a regulated investment company by complying with the provisions of the Internal Revenue Code that are applicable to regulated investment companies and to distribute substantially all of its taxable income and net realized gains to shareholders. Therefore, no federal income tax provision is required.

 

Each Portfolio will recognize the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Portfolios’ tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years ended or expected to be taken in the Portfolios’ December 31, 2020 year-end tax return. Each Portfolio identified its major tax jurisdictions as U.S. federal, Ohio and foreign jurisdictions where the Portfolio makes significant investments. The Portfolios are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.

 

Futures Contracts – The Portfolios are subject to equity price risk in the normal course of pursuing their investment objectives. The Portfolios may purchase or sell futures contracts to hedge against market risk and to reduce return volatility. Initial margin deposits required upon entering into futures contracts are satisfied by the segregation of specific securities or cash as collateral for the account of the broker (each Portfolio’s agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by “marking to market” on a daily basis to reflect the market value of the contracts at the end of each day’s trading. Variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. When the contracts are closed, a Portfolio recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Portfolio’s basis in the contract. If a Portfolio were unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Portfolio would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. Each Portfolio segregates liquid securities having a value at least equal to the amount of the current obligation under any open futures contract. Risks may exceed amounts recognized in the Statements of Assets and Liabilities. With futures, there is minimal counterparty credit risk to a Portfolio since futures are exchange - traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.

41

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2020
 

The following is a summary of the location of derivative investments on the Portfolios’ Statements of Asset and Liabilities as of December 31, 2020:

 

Managed Risk Balanced ETF Portfolio 
  
   Statement of Assets and Liabilities  Unrealized Appreciation 
Contract Type/Primary Risk Exposure  Location  (Depreciation) 
Equity Risk  Unrealized appreciation on future contracts  $596,305 
Interest Risk  Unrealized appreciation on future contracts   59,245 
Total     $655,550 
         
Managed Risk Growth ETF Portfolio 
  
   Statement of Assets and Liabilities  Unrealized Appreciation 
Contract Type/Primary Risk Exposure  Location  (Depreciation) 
Equity Risk  Unrealized appreciation on future contracts  $1,693,420 
Interest Risk  Unrealized appreciation on future contracts   28,720 
Total     $1,722,140 
         
Managed Risk Moderate Growth ETF Portfolio 
  
   Statement of Assets and Liabilities  Unrealized Appreciation 
Contract Type/Primary Risk Exposure  Location  (Depreciation) 
Equity Risk  Unrealized appreciation on future contracts  $1,317,660 
Interest Risk  Unrealized appreciation on future contracts   66,704 
Total     $1,384,364 

42

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2020
 

The following is a summary of the location of derivative investments on the Portfolios’ Statements of Operations for the year ended December 31, 2020:

 

Managed Risk Balanced ETF Portfolio 
  
         Realized and Unrealized 
      Location of Gain (Loss) on Derivatives  Gain (Loss) on Derivatives 
Derivative Investment Type  Primary Risk Exposure  recognized in income  recognized in income 
Futures Contracts  Equity Risk  Net realized loss on futures transactions  $(13,794,884)
Futures Contracts  Interest Risk  Net realized gain on futures transactions   1,340,830 
Total        $(12,454,054)
            
Futures Contracts  Equity Risk  Net change in unrealized appreciation on futures contracts  $144,645 
Futures Contracts  Interest Risk  Net change in unrealized appreciation on futures contracts   160,925 
Total        $305,570 
            
Managed Risk Growth ETF Portfolio 
  
         Realized and Unrealized 
      Location of Gain (Loss) on Derivatives  Gain (Loss) on Derivatives 
Derivative Investment Type  Primary Risk Exposure  recognized in income  recognized in income 
Futures Contracts  Equity Risk  Net realized loss on futures transactions  $(55,224,493)
Futures Contracts  Interest Risk  Net realized gain on futures transactions   682,281 
Total        $(54,542,212)
            
Futures Contracts  Equity Risk  Net change in unrealized appreciation on futures contracts  $490,875 
Futures Contracts  Interest Risk  Net change in unrealized appreciation on futures contracts   79,470 
Total        $570,345 
            
Managed Risk Moderate Growth ETF Portfolio 
  
         Realized and Unrealized 
      Location of Gain (Loss) on Derivatives  Gain (Loss) on Derivatives 
Derivative Investment Type  Primary Risk Exposure  recognized in income  recognized in income 
Futures Contracts  Equity Risk  Net realized loss on futures transactions  $(36,718,525)
Futures Contracts  Interest Risk  Net realized gain on futures transactions   1,603,562 
Total        $(35,114,963)
            
Futures Contracts  Equity Risk  Net change in unrealized appreciation on futures contracts  $386,975 
Futures Contracts  Interest Risk  Net change in unrealized appreciation on futures contracts   186,579 
Total        $573,554 

 

The notional value of the derivative instruments outstanding as of December 31, 2020 as disclosed in the Portfolios of Investments and the amounts of realized and changes in unrealized gains and losses on derivative instruments during the period as disclosed above and within the Statements of Operations serve as indicators of the volume of derivative activity for each Portfolio.

43

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2020
 

Exchange Traded Funds – The Portfolios may invest in exchange traded funds (“ETFs”). ETFs are a type of index fund bought and sold on a securities exchange. An ETF trades like common stock and typically represents a fixed portfolio of securities. A Portfolio may purchase an ETF to gain exposure to a portion of the U.S. or a foreign market. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although the lack of liquidity on an ETF could result in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.

 

Expenses – Expenses of the Trust that are directly identifiable to a specific portfolio are charged to that portfolio. Expenses, which are not readily identifiable to a specific portfolio, are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expense and the relative sizes of the portfolios in the Trust.

 

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

 

Security Loans – The Portfolios have entered into a securities lending arrangement with The Bank of New York Mellon (the “Borrower”). Under the terms of the agreement, the Portfolios are authorized to loan securities to the Borrower. In exchange, the Portfolios receive cash and securities as collateral in the amount of at least 102% of the value of the securities loaned. The cash collateral is invested in short-term instruments as noted in the Portfolios of Investments. Securities received as collateral are U.S. government securities; securities received as collateral, if any, are not recognized as portfolio assets. Although risk is mitigated by the collateral, the Portfolios could experience a delay in recovering their securities and possible loss of income or value if the Borrower fails to return them.

 

Gain or loss in the fair value of securities loaned that may occur during the term of the loan will be for the account of each Portfolio. Each Portfolio has the right under the securities lending agreement to recover the securities from the Borrower on demand. If the fair value of the collateral falls below 102% plus accrued interest of the loaned securities, the lender’s agent shall request additional collateral from the Borrower to bring the collateralization back to 102%. Under the terms of the securities lending agreement, each Portfolio is indemnified for such losses by the security lending agreement. Should the Borrower fail financially, the Portfolios have the right to repurchase the securities using the collateral in the open market.

44

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2020
 

The following table is a summary of the Portfolios’ securities loaned and related collateral which are subject to a netting agreement as of December 31, 2020:

 

               Gross Amounts Not Offset in the Statement of Assets & 
               Liabilities * 
           Net Amounts of             
       Gross Amounts   Assets             
       Offset in the   Presented in the             
   Gross Amounts   Statements of   Statements of   Financial   Pledged     
   of Recognized   Assets &   Assets &   Instruments   Collateral   Net Amount of 
Assets:  Assets   Liabilities   Liabilities   Pledged   Received   Assets 
                         
Managed Risk Balanced ETF Portfolio                
Description:                              
Securities Loaned  $17,533,699   $—   $17,533,699   $16,445,068   $17,533,699   $— 
Total  $17,533,699   $—   $17,533,699   $16,445,068   $17,533,699   $— 
                               
Managed Risk Growth ETF Portfolio                
Description:                              
Securities Loaned  $2,815,484   $—   $2,815,484   $—   $2,815,484   $— 
Total  $2,815,484   $—   $2,815,484   $—   $2,815,484   $— 
                               
Managed Risk Moderate Growth ETF Portfolio                
Description:                              
Securities Loaned  $42,208,748   $—   $42,208,748   $36,814,697   $42,208,748   $— 
Total  $42,208,748   $—   $42,208,748   $36,814,697   $42,208,748   $— 

 

*The amount is limited to the derivative asset balance and accordingly, does not include excess collateral pledged.

 

The following table breaks out the holdings received as collateral as of December 31, 2020:

 

Securities Lending Transactions     
Overnight and Continuous     
Managed Risk Balanced ETF Portfolio     
STIT - Government & Agency Portfolio, Institutional Class  $1,467,835 
      
Managed Risk Growth ETF Portfolio     
STIT - Government & Agency Portfolio, Institutional Class  $2,872,643 
      
Managed Risk Moderate Growth ETF Portfolio     
STIT - Government & Agency Portfolio, Institutional Class  $6,301,842 

 

The fair value of the securities loaned for the Managed Risk Balanced ETF Portfolio, Managed Risk Growth ETF Portfolio and Managed Risk Moderate Growth ETF Portfolio totaled $17,533,699, $2,815,484 and $42,208,748 at December 31, 2020, respectively. The securities loaned are noted in the Portfolios of Investments. The fair value of the “Investments purchased for securities lending collateral” on the Portfolio of Investments includes only cash collateral received and reinvested that totaled $1,467,835, $2,872,643 and $6,301,842 for the Managed Risk Balanced ETF Portfolio, Managed Risk Growth ETF Portfolio and Managed Risk Moderate Growth ETF Portfolio at December 31, 2020, respectively. This amount is offset by a liability recorded as “Collateral on securities loaned.” At December 31, 2020, the Managed Risk Balanced ETF Portfolio and Managed Risk Moderate Growth ETF Portfolio received non-cash collateral of $16,445,068 and $36,814,697, respectively. The non-cash collateral consists of short-term investments and long-term bonds and is held for benefit of a Portfolio at the Portfolio’s custodian. A Portfolio cannot pledge or resell the collateral.

45

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2020
 
3.INVESTMENT TRANSACTIONS

 

For the year ended December 31, 2020, cost of purchases and proceeds from sales of portfolio securities, other than short-term investments and government securities, were as follows:

 

Portfolio  Purchases    Sales 
Managed Risk Balanced ETF Portfolio  $109,193,587   $169,518,795 
Managed Risk Growth ETF Portfolio   253,373,352    381,146,135 
Managed Risk Moderate Growth ETF Portfolio   219,275,778    335,250,758 

 

4.INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES

 

ValMark Advisers, Inc. serves as the Portfolios’ investment advisor (the “Advisor”). The Advisor has engaged Milliman Financial Risk Management, LLC as the Portfolios’ Sub-Advisor (the “Sub-Advisor”). Pursuant to an advisory agreement with the Trust, the Advisor, under the oversight of the Board, directs the daily operations of the Portfolios and supervises the performance of administrative and professional services provided by others. As compensation for its services and the related expenses borne by the Advisor, the Portfolios pay the Advisor a management fee, computed on average daily net assets and accrued daily and paid monthly, at an annual rate of 0.30% of each Portfolio’s average daily net assets. Pursuant to a sub-advisory agreement between the Advisor and Sub -Advisor, on behalf of the Portfolios, the Advisor, not the Portfolios, pays the Sub-Advisor a fee, which is computed and accrued daily and paid monthly. For the year ended December 31, 2020, the Portfolios paid the following in advisory fees.

 

Portfolio  Advisory Fees 
Managed Risk Balanced ETF Portfolio  $1,393,479 
Managed Risk Growth ETF Portfolio   2,306,777 
Managed Risk Moderate Growth ETF Portfolio   2,322,144 
      

The Trust, with respect to the Portfolios, has adopted the Trust’s Master Distribution and Shareholder Servicing Plan (“12b-1 Plan” or “Plan”) for each of Class 2 shares, Class 3 shares, Class 4 shares, and Investor Class shares. The fee is calculated at an annual rate of 0.25%, 0.35%, 0.60%, and 0.50% of the average daily net assets attributable to each Portfolio’s Class 2 shares, Class 3 shares, Class 4 shares, and Investor Class shares, respectively, and is paid to Northern Lights Distributors, LLC (the “Distributor”) to provide compensation for ongoing shareholder servicing and distribution related activities and/or maintenance of each Portfolio’s shareholder accounts, not otherwise required to be provided by the Advisor. For the year ended December 31, 2020, the Portfolios paid the following in distribution fees under the Plan.

 

Portfolio  Distribution Fees 
Managed Risk Balanced ETF Portfolio  $1,274,303 
Managed Risk Growth ETF Portfolio   2,015,583 
Managed Risk Moderate Growth ETF Portfolio   2,111,922 
      

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

 

Gemini Fund Services, LLC (“GFS”), an affiliate of the Distributor, provides administration, fund accounting, and transfer agent services to the Trust. Pursuant to the terms of an administrative servicing agreement with GFS, each Portfolio pays to GFS a monthly fee for all operating expenses of the Portfolio, which is calculated by each Portfolio on its average daily net assets. Operating expenses include but are not limited to Fund Accounting, Fund Administration, Transfer Agency, Legal Fees, Audit Fees, Compliance Services, Shareholder Reporting Expense, Trustees fees and Custody Fees. All operating expenses are paid by GFS from the administrative service fees.

 

For the year ended December 31, 2020, the Trustees received fees in the amount $13,125 on behalf of each Portfolio.

46

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2020
 

The approved entities may be affiliates of GFS and the Distributor. Certain Officers of the Trust are also Officers of GFS, and are not paid any fees directly by the Portfolios for serving in such capacities.

 

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

 

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

 

5.CONTROL OWNERSHIP

 

The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Portfolio creates presumption of the control of the Portfolio, under section 2(a)(9) of the 1940 Act. As of December 31, 2020, ownership percentages of the holders of the voting securities of each Portfolio that may be deemed to control the Portfolio was as follows:

 

Managed Risk Balanced ETF Portfolio   
    
Ohio National Life Insurance Company  83%
    
Managed Risk Growth ETF Portfolio   
    
Ohio National Life Insurance Company  68%
    
Managed Risk Moderate Growth ETF Portfolio   
    
Ohio National Life Insurance Company  81%

 

The Trust has no knowledge as to whether all or any portion of the shares owned of record are also owned beneficially.

 

6.DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL

 

Represents aggregate cost for federal tax purposes for the TOPS Portfolios as of December 31, 2020 and differs from market value by net unrealized appreciation/depreciation which consisted of:

 

                 
      Gross Unrealized   Gross Unrealized   Total Unrealized 
Fund  Aggregate Cost   Appreciation   Depreciation   Appreciation 
Managed Risk Balanced ETF Portfolio  $411,487,243   $69,370,874   $(7,339,959)  $62,030,915 
Managed Risk Growth ETF Portfolio   627,556,062    182,487,936    (15,503,420)   166,984,516 
Managed Risk Moderate Growth ETF Portfolio   667,053,132    146,106,011    (12,787,166)   133,318,845 

47

 

TOPS® Managed Risk ETF Portfolios
NOTES TO FINANCIAL STATEMENTS (Continued)
December 31, 2020
 

The tax character of the Portfolios distributions paid for the years ended December 31, 2020 and December 31, 2019 was as follows:

 

For the year ended December 31, 2020:
 
   Ordinary   Long-Term     
   Income   Capital Gains   Total 
Managed Risk Balanced ETF Portfolio  $10,728,002   $5,744,767   $16,472,769 
Managed Risk Growth ETF Portfolio   16,055,555    —    16,055,555 
Managed Risk Moderate Growth ETF Portfolio   17,197,505    6,544,966    23,742,471 
                
For the year ended December 31, 2019:
 
   Ordinary   Long-Term     
   Income   Capital Gains   Total 
Managed Risk Balanced ETF Portfolio  $13,828,110   $11,611,046   $25,439,156 
Managed Risk Growth ETF Portfolio   27,926,021    42,070,456    69,996,477 
Managed Risk Moderate Growth ETF Portfolio   27,820,537    26,176,649    53,997,186 

 

As of December 31, 2020, the components of accumulated earnings/(deficit) on a tax basis were as follows:

  

   Undistributed   Undistributed   Post October Loss   Capital Loss   Other   Unrealized   Total 
   Ordinary   Long-Term   and   Carry   Book/Tax   Appreciation/   Accumulated 
   Income   Capital Gains   Late Year Loss   Forwards   Differences   (Depreciation)   Earnings/(Deficits) 
Managed Risk Balanced ETF Portfolio  $5,012,447   $—   $—   $(8,876,996)  $—   $62,030,915   $58,166,366 
Managed Risk Growth ETF Portfolio   8,324,689    —    —    (49,128,457)   —    166,984,516    126,180,748 
Managed Risk Moderate Growth
ETF Portfolio		   8,814,834    —    —    (24,098,472)   —    133,318,845    118,035,207 
                                    

The difference between book basis and tax basis accumulated net realized gains/ losses, and unrealized appreciation/ depreciation from investments is primarily attributable to the tax deferral of losses on wash sales and the mark-to-market treatment of Section 1256 futures contracts.

 

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

 

   Non-Expiring         
Portfolio  Short-Term   Long-Term   Total   CLCF Utilized 
Managed Risk Balanced ETF Portfolio  $2,087,331   $6,789,665   $8,876,996   $— 
Managed Risk Growth ETF Portfolio   13,036,865    36,091,592    49,128,457    — 
Managed Risk Moderate Growth ETF Portfolio   1,698,836    22,399,636    24,098,472    — 

 

7.SUBSEQUENT EVENTS

 

Subsequent events after the date of the Statements of Assets and Liabilities have been evaluated through the date the financial statements were issued. Management has determined that no events or transactions occurred requiring adjustment or disclosure in the financial statements.

48

 

(DELOITTE LOGO)

Deloitte & Touche LLP

 

695 Town Center Drive
Suite 1000
Costa Mesa, CA 92626
USA

   
  Tel:  714 436 7100
Fax: 714 436 7200
   

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the shareholders and Board of Trustees of Northern Lights Variable Trust

 

Opinion on the Financial Statements and Financial Highlights

 

We have audited the accompanying statements of assets and liabilities, including the portfolios of investments, of TOPS Managed Risk Balanced ETF Portfolio, TOPS Managed Risk Growth ETF Portfolio, and TOPS Managed Risk Moderate Growth ETF Portfolio, each a portfolio constituting the Northern Lights Variable Trust (the “Portfolios”), as of December 31, 2020, the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, the financial highlights for each of the three years in the period then ended, and the related notes. In our opinion, the financial statements and financial highlights present fairly, in all material respects, the financial position of the Portfolios as of December 31, 2020, and the results of their operations for the year then ended, the changes in their net assets for each of the two years in the period then ended, and the financial highlights for each of the three years in the period then ended in conformity with accounting principles generally accepted in the United States of America. The financial highlights for each of the two years in the period ended December 31, 2017 were audited by other auditors whose report, dated February 16, 2018, expressed an unqualified opinion on those statements.

 

Basis for Opinion

 

These financial statements and financial highlights are the responsibility of the Portfolios’ management. Our responsibility is to express an opinion on the Portfolios’ financial statements and financial highlights 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 Portfolios 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 and financial highlights are free of material misstatement, whether due to error or fraud. The Portfolios are not required to have, nor were we engaged to perform, an audit of their 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 Portfolios’ 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 and financial highlights, 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 and financial highlights. 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 and financial highlights. Our procedures included confirmation of securities owned as of December 31, 2020, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.

 

(-s- Deloitle & Touche)

 

Costa Mesa, California

 

February 19, 2021

 

We have served as the auditor of one or more TOPS Portfolios investment companies since 2019.

49

 

TOPS Aggressive, TOPS Balanced, TOPS Conservative, TOPS Growth, and TOPS Moderate (“TOPS Non-Risk Managed Portfolios”) and TOPS Risk Balanced, TOPS Risk Growth, TOPS Risk ETF, and TOPS Risk Flex (“TOPS Risk Managed Portfolios”)

 

ValMark Advisors, Inc. - Adviser to the Tops Portfolios *

 

In connection with the regular meeting held on November 17-18, 2020 of the Board of Trustees (the “Trustees” or the “Board”) of the Northern Lights Variable Trust (the “Trust”), including a majority of the Trustees who are not “interested persons,” as that term is defined in the Investment Company Act of 1940, as amended, discussed the re-approval of an investment advisory agreement (the “Advisory Agreement”) between ValMark Advisers, Inc (the “Adviser”) and the Trust, with respect to the TOPS Portfolios (the “Fund” or “Funds”). In considering the re-approval of the Advisory Agreement, the Board received materials specifically relating to the Advisory Agreement.

 

The Trustees were assisted by independent legal counsel throughout the Advisory Agreement review process. The Trustees relied upon the advice of independent legal counsel and their own business judgment in determining the material factors to be considered in evaluating the Advisory Agreement and the weight to be given to each such factor. The conclusions reached by the Trustees were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the Advisory Agreement.

 

Nature, Extent and Quality of Services.

 

The Trustees noted that ValMark had approximately $5.6 billion in assets under management providing a full array of financial planning, consulting, investment advisory and risk management services to insurance companies and investment companies. The Trustees reviewed the background information of the key investment professionals servicing the Portfolios and noted their satisfaction with the team’s educational background and the investment team’s financial industry experience. The Trustees reviewed ValMark’s investment process, including its research and due-diligence process, with respect to each Portfolio. The Trustees reviewed the Adviser’s process for overseeing the Sub-Adviser in executing trades for all of the TOPS Portfolios and applying its customized risk overlay strategy to the TOPS Risk Managed Portfolios. The Trustees noted that the Adviser expressed its satisfaction with the Sub-Adviser. The Trustees noted that ValMark had a robust operation with dedicated professionals providing research, compliance, operations, and sub-adviser oversight. After further discussion, the Trustees agreed that Valark had the resources necessary to continue to provide quality service to each of the TOPS Portfolios for the benefit of its shareholders.

 

Performance.

 

TOPS Aggressive. The Trustees noted the Portfolio’s objective of providing capital appreciation and observed that the Portfolio had approximately $25 million in assets at the period ended July 31, 2020. The Trustees acknowledged that the Portfolio underperformed the Morningstar category and peer group median as well as the benchmark for the one-year, three-year and since inception periods. The Trustees noted that the Adviser attributed underperformance to the Portfolio’s higher exposure to value equities and lower exposure to growth equities. The Trustees discussed the Portfolio’s performance relative to the Morningstar category and noted that the Portfolio ranked in the 2nd quartile for the five-year period. After further discussion, the Trustees concluded that the adviser was managing the Portfolio in accordance with its stated objective.

 

TOPS Balanced. The Trustees noted the Portfolio’s objective of providing income and capital appreciation. The Trustees noted that the Portfolio received a three-star Morningstar rating and had approximately $33 million in assets at the period ended July 31, 2020. The Trustees noted that the Portfolio underperformed its peer group median and Morningstar category median over all periods. The Trustees noted that the Portfolio’s holdings of international and value stocks contributed to its underperformance. The Trustees acknowledged that the Portfolio performed as designed and disclosed in its prospectus.

50

 

TOPS Conservative. The Trustees noted the Portfolio’s objective of preservation of capital and moderate income and moderate capital appreciation and its investment strategy. The Trustees noted that the Portfolio had received a three-star Morningstar rating and had approximately $16 million in assets at the period ended July 31, 2020. The Trustees discussed the Portfolio’s performance compared to similar accounts managed by the Adviser. The Trustees acknowledged that the Portfolio underperformed its peer group, Morningstar category and benchmark average for the one-year, three-year, five-year, and since inception periods. The Trustees discussed the Adviser’s rationale for the Portfolio’s relative underperformance being caused in part by the Portfolio’s approach to shorten duration given the low interest rate environment. They concluded that the Portfolio was accomplishing its objective and that the Adviser was implementing the strategy as expected.

 

TOPS Growth. The Trustees reviewed the Portfolio’s objective and strategy noting it had received a three-star Morningstar rating. The Trustees considered the Portfolio’s performance compared to similar accounts managed by the Adviser. The Trustees noted that the Portfolio underperformed its Morningstar category and peer group medians for the one- year period and three-year periods. They further noted that the Portfolio outperformed its Morningstar category and peer group medians for the five-year and since inception periods. The Trustees considered the Portfolio’s underperformance over the one-year and three -year periods, noting that the Portfolio held international and value stocks, while the markets favored growth stocks. The Trustees agreed that the Portfolio had consistent positive performance.

 

TOPS Moderate. The Trustees reviewed the Portfolio’s investment objective and strategy. The Trustees noted that the Portfolio underperformed its benchmark, Morningstar category and peer group medians for the one-year, three-year and since inception periods. The Trustees considered the Portfolio’s performance compared to similar accounts managed by the Adviser. They commented that the performance of the Portfolio’s risk metrics were the result of the portfolio’s holdings of international, small and mid-capitalization companies, and value stocks. They acknowledged that despite the Portfolio’s underperformance, the Portfolio generated capital appreciation in line with its objective.

 

TOPS Risk Balanced. The Trustees reviewed the Portfolio’s objective, noting that the Portfolio sought to provide income and capital appreciation with less volatility than fixed income and equity markets as a whole. They further noted that the Portfolio received a two-star Morningstar rating. The Trustees noted that the Portfolio’s sub-adviser employed a hedging strategy designed to decrease the Portfolio’s volatility however, the hedging strategy negatively impacted the Portfolio’s rate of return. The Trustees acknowledged that the Portfolio performed as designed and could be suitable for risk adverse shareholders.

 

TOPS Risk Flex. The Trustees reviewed the Portfolio’s objective, noting that the Portfolio seeks income and capital appreciation with less volatility than fixed income and equity markets as a whole. They further noted that the Portfolio received a two-star Morningstar rating. The Trustees noted that the Portfolio underperformed its Morningstar category, peer group, and benchmark for all periods. They considered the Portfolio’s Sharpe and Sortino ratios, noting that both ratios were generally in the bottom quartile when compared to the Portfolio’s Morningstar category and peer group. They commented that the Portfolio’s one-year-standard deviation was in the second quartile, an improvement from the previous year’s ranking due to the Portfolio’s reduction in equity exposure as a result of the pandemic. The Trustees concluded that despite underperformance, the Portfolio operated in-line with its objective.

 

TOPS Risk Growth. The Trustees considered the Portfolio’s objective, noting that the Portfolio seeks to provide capital appreciation with less volatility than equity markets. They acknowledged that the Portfolio received a two-star Morningstar rating. The Trustees considered the Portfolio’s performance, noting that it underperformed its Morningstar category, peer group, and benchmark for all periods. They acknowledged that the Portfolio’s hedging strategy contributed to the Portfolio’s underperformance, noting that the hedging strategy was designed for sustained declining markets. The Trustees considered the Portfolio’s risk metrics and acknowledged that the Portfolio’s Sharpe and Sortino ratios were consistently in the bottom quartile, and Standard Deviation in the top quartile, when compared to the Portfolio’s Morningstar category for all periods. The Trustees agreed that despite the Portfolio’s current performance, the Portfolio was designed for risk adverse shareholder’s and could provide value during periods of sustained declining markets.

51

 

TOPS Risk ETF. The Trustees acknowledged the Portfolio’s objective, noting that the Portfolio seeks to provide capital appreciation with lower volatility than equity markets. They further noted that the Portfolio received a two-star Morningstar rating. The Trustees noted that the hedging strategy performed as expected, noting that it lowered the Portfolio’s standard deviation. The Trustees considered the impact of the Portfolio’s hedging strategy on the Portfolio’s risk metrics and acknowledged that it resulted in 4th quartile Sharpe and Sortino ratios for all periods presented. The Trustees considered the Advisers explanation for the Portfolio’s performance and agreed that the Portfolio performed as designed.

 

Fees and Expenses.

 

TOPS Non-Risk Managed Portfolios. The Trustees reviewed the advisory fee charged to each of the TOPS Non-Risk Managed Portfolios, noting that the Adviser charged 0.10% for advisory services to each Portfolio. They compared the net expense ratio and advisory fee of each to its respective Morningstar category and peer group. They considered the fees by paid by the Adviser to the sub-adviser for execution services. The Trustees concluded that the advisory fee for each of the TOPS Non-Risk Managed Portfolios was not unreasonable.

 

TOPS Risk Managed Portfolios. The Trustees reviewed the advisory fee charged to each of the TOPS Risk Managed Portfolios, noting that the Adviser charged 0.30% for the advisory services rendered to each Portfolio. They compared the net expense ratio and advisory fee of each TOPS Risk Managed Portfolio to its respective Morningstar category and peer group, acknowledging that each Portfolio had a higher net expense ratio but that the advisory fee and net expenses were more in line with the peer groups, and the advisory fee was competitive. The Trustees concluded that the advisory fee for each of the TOPS Risk Managed Portfolios was not unreasonable.

 

Profitability.

 

TOPS Non-Risk Managed Portfolios. The Trustees reviewed the profitability analysis provided by the Adviser in connection with the services provided to each Portfolio. They acknowledged that the Adviser indicated that it suffered a loss in connection with its relationship with each Portfolio. After further discussion, the Trustees concluded that excessive profitability was not a concern at this time for any TOPS Non-Risk Managed Portfolio.

 

TOPS Risk Managed Portfolios. The Trustees reviewed the profitability analysis provided by the Adviser in connection with the services provided to each Portfolio. They noted that the Adviser indicated that it received a profit in connection with its relationship to TOPS Risk Balanced, TOPS Risk Growth, and TOPS Risk ETF. They further noted that the Adviser indicated that it suffered a loss in connection with its relationship with TOPS Risk Flex and TOPS Moderate. The Trustees noted that the amount of profits for each applicable Portfolio was reasonable in terms of actual dollars and percentage of revenue. After further discussion, the Trustees concluded that the Adviser was not realizing an excessive profit from each of the advisory fees paid for the services provided to any of the TOPS Risk Managed Portfolios.

 

Economies of Scale.

 

The Trustees considered whether economies of scale had been realized in connection with the Adviser’s advisory services provided to each of the TOPS Portfolios. They reviewed the Adviser’s assertion that it would begin to benefit from economies of scale once each of the TOPS Portfolios assets increased to a certain level. They noted that based on each TOPS Portfolio’s current asset size, the absence of breakpoints was acceptable at this time.

 

Conclusion.

 

Having requested and received such information from the Adviser as the Trustees believed to be reasonably necessary to evaluate the terms of the advisory agreement, and as assisted by the advice of independent counsel, the Trustees concluded that each advisory fee paid by each of the TOPS Portfolios to the Adviser was not unreasonable, and that renewal of the agreement with ValMark was in the best interests of the shareholders of each TOPS Portfolio.

 

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

52

 

Milliman Financial Risk Management, LLC - Sub-Adviser to the TOPS Portfolios*

 

In connection with the regular meeting held on November 17-18, 2020 of the Board, including a majority of the Trustees who are not “interested persons,” as that term is defined in the Investment Company Act of 1940, as amended, discussed the approval of a sub-advisory agreement (the “Sub-Advisory Agreement”) between Milliman Financial Risk Management (the “Sub-Adviser”) and ValMark Advisers, Inc. (“Adviser”), with respect to the TOPS Risk Managed Portfolios. In considering the approval of the Sub-Advisory Agreement, the Board received materials specifically relating to the Sub-Advisory Agreement.

 

The Trustees were assisted by independent legal counsel throughout the Sub-Advisory Agreement review process. The Board relied upon the advice of independent legal counsel and their own business judgment in determining the material factors to be considered in evaluating the Sub-Advisory Agreement and the weight to be given to each such factor. The conclusions reached by the Trustees were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the Sub-Advisory Agreement.

 

Nature, Extent and Quality of Service.

 

The Trustees noted that that Sub-Adviser was founded in 1998 and managed approximately $53.3 billion in assets as of June 30, 2020. They acknowledged that the Sub-Adviser was a global leader in financial risk management to the retirement savings industry. They reviewed the backgrounds and experience of the key personnel responsible for servicing the Funds, noting the varied financial industry experience. The Trustees observed that the Sub-Adviser provided non-discretionary investment advisory trading services to execute trades for the TOPS Non-Risk Managed Portfolios. They also noted that the Sub-Adviser provided research and analysis, marketing and compliance services to implement the managed risk strategy and execute trades to hedge the TOPS Risk Managed Portfolios. They discussed the Sub-Adviser’s investment process, commenting that the firm reviewed the Portfolios to determine the proper hedge instruments to use. The Trustees also discussed the Sub-Adviser’s risk management program, acknowledging that the Sub-Adviser used a variety of risk management tools to monitor and manage TOPS Risk Managed Portfolios investment risk. The Trustees noted that the Sub-Adviser uses modeling software to monitor the portfolios and adhere to the applicable Portfolio’s investment limitations.

 

Performance.

 

The Trustees reviewed the performance of the TOPS Risk Managed Portfolios, particularly noting the impact of the Sub-Adviser’s hedging strategy. They acknowledged that the Sub -Adviser’s hedging strategy was designed to decrease the impact of volatility on each of the TOPS Risk Managed Portfolios. They noted that the hedging strategy negatively impacted each Portfolio’s performance, as expected. The Trustees concluded that overall, the Sub-Adviser’s performance was strong.

53

 

Fees and Expenses.

 

The Trustees reviewed the fee arrangement between the adviser and Sub-Adviser with respect to the TOPS Risk Managed Portfolios and the TOPS Non-Risk Managed Portfolios. They noted that the Sub- Adviser received a modest fixed fee for the execution services provided to the TOPS Non-Risk Managed Portfolios. They reviewed the fee split between the adviser and the Sub-Adviser with respect to the TOPS Managed Risk Portfolios, noting that the Sub-Adviser received 0.20% of each TOPS Managed Risk Portfolio’s average daily net assets from the adviser. They considered the fees the Sub-Adviser charged for the TOPS Risk Managed Portfolios compared to other accounts managed by the Sub-Adviser. After further discussion, the Trustees concluded that the sub-advisory fee charged with respect to each TOPS Portfolio was not unreasonable.

 

Profitability.

 

The Trustees reviewed the profitability analysis provided by the Sub-Adviser with respect to each of the TOPS Portfolios. They noted that the Sub-Adviser realized profits in terms of actual dollars and percentage of revenue in connection with its relationship with the TOPS Portfolios. They further noted that the Sub-Adviser indicated lower profits with regards to the TOPS Non-Risk Managed Portfolios due to economies of scale and existing fee arrangement. The Trustees concluded that excessive profitability was not a concern at this time.

 

Economies of Scale.

 

The Trustees considered whether economies of scale had been achieved by the Sub-Adviser with respect to the management of the TOPS Portfolios. The Trustees agreed that, with respect to the execution services provided to the TOPS Non-Risk Managed Portfolios, the fees were so modest that the Portfolios were already realizing certain economies. With respect to the TOPS Risk Managed Portfolios, the Trustees concluded that the current fee levels appeared to reflect the sharing of Sub-Adviser efficiencies.

 

Conclusion.

 

Having requested and received such information from the Sub-Adviser as the Trustees believed to be reasonably necessary to evaluate the terms of the sub-advisory agreement, and as assisted by the advice of independent counsel, the Trustees agreed that each sub-advisory fee was not unreasonable and renewal of the sub-advisory agreement with Milliman was in the best interest of each TOPS Portfolio and its respective shareholders.

 

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

54

 

TOPS® Managed Risk ETF Portfolios
EXPENSE EXAMPLES (Unaudited)
December 31, 2020
 

As a shareholder of the Portfolios, you incur ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Portfolio expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in a Portfolio and to compare these costs with the ongoing costs of investing in other mutual funds.

 

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

 

Actual Expenses

 

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

 

Hypothetical Example for Comparison Purposes

 

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

 

Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, or other expenses charged by your insurance contract or separate account. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.

 

               Hypothetical
         Actual  (5% return before
expenses)
             
   Portfolio’s   Beginning  Ending  Expenses  Ending  Expenses
   Annualized  Account  Account  Paid  Account  Paid
   Expense  Value  Value  During  Value  During
Class 1  Ratio  7-1-20  12-31-20  Period*  12-31-20  Period*
Managed Risk Balanced ETF Portfolio  0.40%  $1,000.00  $1,106.40  $2.12  $1,023.13  $2.03
Managed Risk Growth ETF Portfolio  0.40%  $1,000.00  $1,144.30  $2.16  $1,023.13  $2.03
Managed Risk Moderate Growth ETF Portfolio  0.40%  $1,000.00  $1,129.80  $2.14  $1,023.13  $2.03

55

 

TOPS® Managed Risk ETF Portfolios
EXPENSE EXAMPLES (Unaudited) (Continued)
December 31, 2020

 

               Hypothetical
         Actual  (5% return before
expenses)
                   
   Portfolio’s  Beginning  Ending  Expenses  Ending  Expenses
   Annualized  Account  Account  Paid  Account  Paid
   Expense  Value  Value  During  Value  During
Class 2  Ratio  7-1-20  12-31-20  Period*  12-31-20  Period*
Managed Risk Balanced ETF Portfolio  0.65%  $1,000.00  $1,104.80  $3.44  $1,021.87  $3.30
Managed Risk Growth ETF Portfolio  0.65%  $1,000.00  $1,142.90  $3.50  $1,021.87  $3.30
Managed Risk Moderate Growth ETF Portfolio  0.65%  $1,000.00  $1,028.00  $3.48  $1,021.87  $3.30
                   
               Hypothetical
         Actual  (5% return before
expenses)
                   
   Portfolio’s  Beginning  Ending  Expenses  Ending  Expenses
   Annualized  Account  Account  Paid  Account  Paid
   Expense  Value  Value  During  Value  During
Class 3  Ratio  7-1-20  12-31-20  Period *  12-31-20  Period*
Managed Risk Balanced ETF Portfolio  0.75%  $1,000.00  $1,104.10  $3.97  $1,021.37  $3.81
Managed Risk Growth ETF Portfolio  0.75%  $1,000.00  $1,142.20  $4.04  $1,021.37  $3.81
Managed Risk Moderate Growth ETF Portfolio  0.75%  $1,000.00  $1,028.20  $4.01  $1,021.37  $3.81
                   
               Hypothetical
         Actual  (5% return before
expenses)
                   
   Portfolio’s  Beginning  Ending  Expenses  Ending  Expenses
   Annualized  Account  Account  Paid  Account  Paid
   Expense  Value  Value  During  Value  During
Class 4  Ratio  7-1-20  12-31-20  Period *  12-31-20  Period*
Managed Risk Balanced ETF Portfolio  1.00%  $1,000.00  $1,103.00  $5.29  $1,020.11  $5.08
Managed Risk Growth ETF Portfolio  1.00%  $1,000.00  $1,140.90  $5.38  $1,020.11  $5.08
Managed Risk Moderate Growth ETF Portfolio  1.00%  $1,000.00  $1,126.50  $5.35  $1,020.11  $5.08

56

 

TOPS® Managed Risk ETF Portfolios
EXPENSE EXAMPLES (Unaudited) (Continued)
December 31, 2020

 

               Hypothetical
         Actual  (5% return before
expenses)
                   
   Portfolio’s   Beginning  Ending  Expenses  Ending  Expenses
   Annualized  Account  Account  Paid  Account  Paid
   Expense  Value  Value  During  Value  During
Investor Class  Ratio  7-1-20  12-31-20  Period*  12-31-20  Period*
Managed Risk Balanced ETF Portfolio  0.90%  $1,000.00  $1,097.90  $4.75  $1,020.61  $4.57
Managed Risk Growth ETF Portfolio  0.90%  $1,000.00  $1,135.30  $4.83  $1,020.61  $4.57
Managed Risk Moderate Growth ETF Portfolio  0.90%  $1,000.00  $1,119.40  $4.79  $1,020.61  $4.57

 

*Expenses are equal to the average account value over the period, multiplied by each Portfolio’s annualized expense ratio, multiplied by the number of days in the period (184) divided by the number of days in the fiscal year (366).

57

 

TOPS® Managed Risk ETF Portfolios
SUPPLEMENTAL INFORMATION (Unaudited)
December 31, 2020
 

LIQUIDITY RISK MANAGEMENT PROGRAM

 

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

 

During the fiscal year ended December 31, 2020, the Trust’s Liquidity Risk Management Program Committee (the “Committee”) reviewed the Portfolios’ investments and determined that the Portfolios held adequate levels of cash and highly liquid investments to meet shareholder redemption activities in accordance with applicable requirements. Accordingly, the Committee concluded that (i) the Portfolios’ liquidity risk management program is reasonably designed to prevent violations of the Liquidity Rule and (ii) the Portfolios’ liquidity risk management program has been effectively implemented.

58

 

TOPS® ETF Portfolios
SUPPLEMENTAL INFORMATION (Unaudited)
December 31, 2020

 

The Trustees and the executive officers of the Trust are listed below with their present positions with the Trust and principal occupations over at least the last five years. The business address of each Trustee and Officer is 225 Pictoria Drive, Suite 450, Cincinnati, OH 45246. All correspondence to the Trustees and Officers should be directed to c/o Gemini Fund Services, LLC, P.O. Box 541150, Omaha, Nebraska 68154.

 

Independent Trustees

 

Name, Address
and Year of
Birth		 Position/Term
of Office*		 Principal Occupation
During the Past Five
Years		 Number of
Portfolios
in Fund
Complex**
Overseen
by Trustee		 Other Directorships
held by Trustee During
the Past Five Years
Mark Garbin
Born in 1951 		Trustee Since 2013 Managing Principal, Coherent Capital Management LLC (since 2007). 9 Northern Lights Fund Trust (for series not affiliated with the Funds since 2013); Two Roads Shared Trust (since 2012); Forethought Variable Insurance Trust (since 2013); Northern Lights Variable Trust (since 2013); OHA Mortgage Strategies Fund (offshore), Ltd. (2014 -2017); and Altegris KKR Commitments Master Fund (since 2014); and Carlyle Tactical Private Credit Fund (since March 2018).
Mark D. Gersten
Born in 1950 		Trustee Since 2013 Independent Consultant (since 2012). 9 Northern Lights Fund Trust (for series not affiliated with the Funds since 2013); Northern Lights Variable Trust (since 2013); Two Roads Shared Trust (since 2012); Altegris KKR Commitments Master Fund (since 2014); previously, Ramius Archview Credit and Distressed Fund (2015-2017); and Schroder Global Series Trust (2012 to 2017).
Anthony J. Hertl
Born in 1950 		Trustee Since 2005; Chairman of the Board since 2013 Retired, previously held several positions in a major Wall Street firm including Capital Markets Controller, Director of Global Taxation, and CFO of the Specialty Finance Group. 9 Northern Lights Fund Trust (for series not affiliated with the Funds since 2005); Northern Lights Variable Trust (since 2006); Alternative Strategies Fund (since 2010); Satuit Capital Management Trust (2007-2019).
Gary W. Lanzen
Born in 1954 		Trustee Since 2005 Retired (since 2012). Formerly, Founder, President, and Chief Investment Officer, Orizon Investment Counsel, Inc. (2000-2012). 9 Northern Lights Fund Trust (for series not affiliated with the Funds since 2005) Northern Lights Variable Trust (since 2006); AdvisorOne Funds (since 2003); Alternative Strategies Fund (since 2010); and previously, CLA Strategic Allocation Fund (2014-2015).
John V. Palancia
Born in 1954 		Trustee Since 2011 Retired (since 2011). Formerly, Director of Futures Operations, Merrill Lynch, Pierce, Fenner & Smith Inc. (1975-2011). 9 Northern Lights Fund Trust (for series not affiliated with the Funds since 2011); Northern Lights Fund Trust III (since February 2012); Alternative Strategies Fund (since 2012) and Northern Lights Variable Trust (since 2011).
Mark H. Taylor
Born in 1964 		Trustee Since 2007; Chairman of the Audit Committee since 2013 Director, Lynn Pippenger School of Accountancy Muma College of Business, University of South Florida, Tampa FL (since 2019); Chair, Department of Accountancy and Andrew D. Braden Professor of Accounting and Auditing, Weatherhead School of Management, Case Western Reserve University (2009-2019); Vice President- Finance, American Accounting Association (2017-2020); President, Auditing Section of the American Accounting Association (2012-15). AICPA Auditing Standards Board Member (2009-2012). 9 Northern Lights Fund Trust (for series not affiliated with the Funds since 2007); Alternative Strategies Fund (since 2010); Northern Lights Fund Trust III (since 2012); and Northern Lights Variable Trust (since 2007).

 

12/31/20-NLVT-v2

59

 

TOPS® ETF Portfolios
SUPPLEMENTAL INFORMATION (Unaudited) (Continued)
December 31, 2020

 

Officers

 

Name, Address
and Year of
Birth		 Position/Term
of Office*		 Principal Occupation
During the Past Five
Years		 Number of
Portfolios in
Fund
Complex**
Overseen by
Trustee		 Other Directorships held
by Trustee During the
Past Five Years
Kevin E. Wolf
Born in 1969		 President Since June 2017 Vice President, The Ultimus Group, LLC and Executive Vice President, Gemini Fund Services, LLC (since 2019); President, Gemini Fund Services, LLC (2012-2019) Treasurer of the Trust (2006-June 2017); Director of Fund Administration, Gemini Fund Services, LLC (2006-2012); and Vice-President, Blu Giant, LLC, (2004-2013). N/A N/A
Richard Malinowski
Born in 1983 		Vice President Since March 2018 Senior Vice President (since 2017); Vice President and Counsel (2016-2017) and Assistant Vice President, Gemini Fund Services, LLC (2012-2016). N/A N/A
James Colantino
Born in 1969 		Treasurer Since June 2017 Assistant Treasurer of the Trust (2006-June 2017); Senior Vice President-Fund Administration, Gemini Fund Services, LLC (since 2012). N/A N/A
Stephanie Shearer
Born in 1979 		Secretary Since February 2017 Assistant Secretary of the Trust (2012-February 2017); Manager of Legal Administration, Gemini Fund Services, LLC (since 2018); Senior Paralegal, Gemini Fund Services, LLC (from 2013-2018); Paralegal, Gemini Fund Services, LLC (2010-2013). N/A N/A
Michael J. Nanosky
Born in 1966 		Chief Compliance Officer Since January 2021 Chief Compliance Officer, of the Trust (since January 2021); Vice President-Senior Compliance Officer, Ultimus Fund Solutions (since 2020); Vice President, Chief Compliance Officer for Williamsburg Investment Trust (2020-current); Senior Vice President-Chief Compliance Officer, PNC Funds (2014-2019). N/A N/A

 

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

 

**As of December 31, 2020, the Trust was comprised of 15 active portfolios managed by unaffiliated investment advisers. The term “Fund Complex” applies only to the Portfolios managed by the Adviser. The Portfolios do not hold themselves out as related to any other series within the Trust for investment purposes, nor do they share the same investment adviser with any other series.

 

The Portfolios’ Statement of Additional Information includes additional information about the Trustees and is available free of charge, upon request, by calling toll-free at 1-855-572-5945.

 

12/31/20-NLVT-v2

60

 

PRIVACY NOTICE

 

Northern Lights Variable Trust

Rev. February 2014

 

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

 

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

 

What?

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

 

●         Social Security number and wire transfer instructions

 

●         account transactions and transaction history

 

●         investment experience and purchase history

 

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

 

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

 

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

 

QUESTIONS?   Call 1-402-493-4603

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PRIVACY NOTICE

 

Northern Lights Variable Trust

 

Page 2  

 

What we do:

 

How does Northern Lights Variable Trust protect my personal information?

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

 

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

 

How does Northern Lights Variable Trust collect my personal information?

We collect your personal information, for example, when you

●     open an account or deposit money

 

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

 

●     seek advice about your investments

 

We also collect your personal information from others, such as credit bureaus, affiliates, or other companies.

 

Why can’t I limit all sharing?

Federal law gives you the right to limit only:

●     sharing for affiliates’ everyday business purposes – information about your creditworthiness.

 

●     affiliates from using your information to market to you.

 

●     sharing for nonaffiliates to market to you.

 

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

 

Definitions
Affiliates

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

 

●     Northern Lights Variable Trust does not share with our affiliates.

Nonaffiliates

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

 

●     Northern Lights Variable Trust does not share with nonaffiliates so they can market to you.

Joint marketing

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

 

●     Northern Lights Variable Trust doesn’t jointly market.

62

 

PROXY VOTING POLICY

 

Information regarding how the Portfolios voted proxies relating to portfolio securities for the most recent twelve month period ended June 30 as well as a description of the policies and procedures that the Portfolios use to determine how to vote proxies is available without charge, upon request, by calling 1-855-572-5945 or by referring to the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

 

PORTFOLIO HOLDINGS

 

Each Portfolio files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, within sixty days after the end of the period. Form N-PORT reports are available on the SEC’s website at www.sec.gov. The information on Form N-PORT is available without charge, upon request, by calling 1-855-572-5945.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT ADVISOR
ValMark Advisers, Inc.
130 Springside Drive
Akron, OH 44333
 
INVESTMENT SUB-ADVISOR
Milliman Financial Risk Management, LLC
71 S. Wacker Drive, 31st Floor
Chicago, IL 60606
 
ADMINISTRATOR
Gemini Fund Services, LLC
4221 North 203rd Street, Suite 100
Elkhorn, NE 68022

 

 

Item 2. Code of Ethics.

 

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

 

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

 

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

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

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

(5)        Accountability for adherence to the code.

 

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

 

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

 

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

 

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

 

Item 3. Audit Committee Financial Expert.

 

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

 

Item 4. Principal Accountant Fees and Services.

 

(a)Audit Fees

FYE 2020 - $34,725

FYE 2019 - $33,900

 

(b)Audit-Related Fees

FYE 2020 - None

FYE 2019 - None

 

(c)Tax Fees

FYE 2020 - $9,900

FYE 2019 - $9,600

 

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

 

(d)All Other Fees

FYE 2020 - None

FYE 2019 - None

 

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

 

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

 

 

 

 

 

(2)Percentages of Services Approved by the Audit Committee
   2020  2019
Audit-Related Fees:   0.00%   0.00%
Tax Fees:   0.00%   0.00%
All Other Fees:   0.00%   0.00%

 

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

 

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

 

2020 - $34,725

2019 - $33,900

 

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

 

Item 5. Audit Committee of Listed Companies. Not applicable to open-end investment companies.

 

Item 6. Schedule of Investments. Schedule of investments in securities of unaffiliated issuers is included under Item 1.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable to open-end investment companies.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable to open-end investment companies.

 

Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable to open-end investment companies.

 

Item 10. Submission of Matters to a Vote of Security Holders. None

 

Item 11. Controls and Procedures.

 

(a)       Based on an evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of filing date of this Form N-CSR, the principal executive officer and principal financial officer of the Registrant have concluded that the disclosure controls and procedures of the Registrant are reasonably designed to ensure that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported by the filing date, including that information required to be disclosed is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.

 

(b)       There were no significant changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.

 

Item 12. Disclosure Of Securities Lending Activities For Closed-End Management Investment Companies. Not applicable to open-end investment companies.

 

Item 13. Exhibits.

 

(a)(1) Not applicable.

 

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

 

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

 

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

 

SIGNATURES

 

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

 

(Registrant) Northern Lights Variable Fund Trust

 

By (Signature and Title)

/s/ Kevin E. Wolf

Kevin E. Wolf, Principal Executive Officer/President

 

Date 3/8/2021

 

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/ Kevin E. Wolf

Kevin E. Wolf, Principal Executive Officer/President

 

Date 3/8/2021

 

 

By (Signature and Title)

/s/ Jim Colantino

Jim Colantino, Principal Financial Officer/Treasurer

 

Date 3/8/2021