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Form N-CSR NORTHERN LIGHTS FUND For: May 31

August 9, 2022 3:39 PM EDT

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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 811-22549

 

Northern Lights Fund Trust II

(Exact name of registrant as specified in charter)

 

225 Pictoria Drive, Suite 450, Cincinnati, Ohio 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: 631-490-4300

 

Date of fiscal year end: 5/31

 

Date of reporting period: 5/31/22

 

Item 1. Reports to Stockholders.

 

 
 
 
 
 
(FUTURE FUND LOGO)
 
 
 
 
 
The Future Fund Active ETF
(FFND)
 
 
 
 
 
 
 
 
 
 
Annual Report
 
May 31, 2022
 
 
 
 
 
 
 
 
 
 
1-877-466-7090
 
www.FutureFundETF.com
 
Distributed by Northern Lights Distributors, LLC
 
Member FINRA

 

 

(Unaudited)

 

Dear Fellow Shareholders:

 

We are pleased to present you with The Future Fund Active ETF Annual Report for the period since inception August 23, 2021 to May 31, 2022.

 

The Future Fund Active ETF (FFND) is an actively managed exchange traded fund (ETF) that invests in the securities of companies that the Adviser, The Future Fund LLC, believes can profit from potential opportunities created by changes in technology, consumer preferences, demographics, regulatory, environmental, and supply/demand dynamics that unfold over long periods of time (“secular trends”). Through its proprietary research, the Adviser seeks to identify companies that can significantly benefit and profit from such trends. The Adviser has maintained a stance consistent with its investment process.

 

Since the inception of the Fund, the landscape for investing in growth stocks has changed drastically due to significant increases in interest rates as the Federal Reserve has found itself behind the curve in addressing inflation. For reference, the 10-year Treasury rate increased from approximately 1.30% at the end of August 2021 to near 3% at the end of May 2022 as a major tightening cycle commenced. With inflation rising due to a zero- interest rate policy and the war between Russia and Ukraine, the Fed’s dual mandate of employment and inflation is unbalanced relative to history and the committee has changed their stance. This hawkish view should continue until inflation comes down substantially or financial conditions tighten enough to reduce demand, which we believe should occur in the back-half of 2022 and into 2023.

 

Since inception through May 31, 2022, The Future Fund Active ETF returned -30.22% at market price and -30.22% at NAV.

 

The top contributors to FFND’s performance were Mandiant (MNDT), Palo Alto Networks (PANW), and LPL Financial (LPLA). Mandiant (MNDT) was purchased by Alphabet Inc. (GOOGL) in March to enhance its security business. Palo Alto Networks (PANW) performed well due to significant growth in demand for security at the corporate level as companies focused on protecting their information and the privacy of their customers. LPL Financial (LPLA), an investment advisory firm, benefited both from its continued acquisition strategy and higher interest rates.

 

The biggest detractors from FFND’s performance were Align Technology (ALGN), Snap Inc. (SNAP), and Yandex (YNDX). Align Technology (ALGN) traded down as the company’s dental aligner business suffered a slowdown, especially in China, due to consumers’ slowing spending post COVID-19. Snap Inc. (SNAP) was affected by two issues, the change in Apple’s (AAPL) privacy policy and a slowdown in advertising. Trading of Yandex (YNDX), the largest technology company in Russia, was halted due to the war between Russia and Ukraine. Although the stock remains halted on U.S. exchanges, it has recently started to trade again on the Russian stock market.

1

 

(Unaudited)

 

While the market for growth stocks of companies focusing on innovation has suffered over the past year, we believe this sector has the potential to create significant opportunities for investors over the next three- to-five years. We continue to be positive on companies that can disrupt their markets and profit from these powerful secular trends.

 

Thank you for being a shareholder of The Future Fund Active ETF and your confidence in us. Please visit the Fund’s website, thefuturefundetf.com, for ongoing updates.

 

Sincerely,

 

Gary Black, Managing Partner
David Kalis, Partner
The Future Fund LLC

 

IMPORTANT INFORMATION

 

Investing involves risk, including loss of principal. There is no guarantee that the Fund will achieve its investment objectives. In general, prices of equity securities are more volatile than those of fixed income securities. The prices of equity securities fluctuate in response to issuer-specific activities as well as factors unrelated to the fundamental condition of the issuer, including general market, economic and political conditions along with other factors. While the shares of ETFs trade on secondary markets, they may not readily trade in all market conditions and may trade at significant discounts in periods of market stress. The Fund was recently organized with no operating history. In addition, the Adviser has not previously managed an ETF, which may increase the risks of investing in the Fund.

 

The Fund is actively managed and is thus subject to management risk. The Adviser will apply its investment techniques and strategies in making investment decisions for the Fund, but there is no guarantee that its techniques will produce the intended results.

 

Shareholders may pay more than NAV when buying fund shares and receive less than NAV when selling fund shares, because shares are bought and sold at current market prices. The performance quoted represents past performance and does not guarantee future results.

 

The Future Fund Active ETF shares are bought and sold at market price (not NAV) and are not individually redeemed from the Fund. Brokerage commissions will reduce returns.

 

Investors should consider the investment objectives, risks, and charges and expenses of the Fund before investing. The prospectus contains this and other information about the Fund and should be read carefully before investing. The prospectus may also be obtained by calling 877.466.7090.

2

 

(Unaudited)

 

As of May 31, 2022, FFND held 0.00% MNDT, 2.43% PANW, 2.93% LPLA, 2.18% ALGN, 0.45% SNAP, and 0.37% YNDX.

 

The Future Fund Active ETF is distributed by Northern Lights Distributors, LLC, member FINRA/SIPC. The Future Fund LLC is the investment Adviser to the Fund, and is not affiliated with Northern Lights Distributors, LLC.

 

15165022-NLD-06142022

3

 

The Future Fund Active ETF
PORTFOLIO REVIEW (Unaudited)

 

The Portfolio’s performance figures* for the period ended May 31, 2022, as compared to its benchmark:

 

  Since Inception**
The Future Fund Active ETF - NAV (30.22)%
The Future Fund Active ETF - Market Price (30.22)%
Russell 3000 Growth Index (17.41)%

 

*The Fund’s past performance does not guarantee future results. The investment return and principal value of an investment in the Fund will fluctuate so that an investor’s shares, when sold 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 Fund distributions or on the sale of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by visiting www.FutureFundETF.com or by calling 1-877-466-7090. The Fund’s per share net asset value or “NAV” is the value of one share of the Fund as calculated in accordance with the standard formula for valuing shares. The NAV return is based on the NAV of the Fund and the market return is based on the market price per share of the Fund. Market price returns are calculated using the closing price and account for distributions from the Fund. Market Price and NAV returns assume that dividends and capital gain distributions have been reinvested in the Fund at Market Price and NAV, respectively. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.FutureFundETF.com. The Fund’s total annual operating expenses, before fee waivers and/or expense reimbursements, is 1.01% per the August 23, 2021 prospectus.

 

**Inception date is August 23, 2021.

 

The Russell 3000 Growth Index is a market capitalization-weighted index based on the Russell 3000 index. The Russell 3000 Growth Index includes companies that display signs of above-average growth. The index is used to provide a gauge of the performance of growth stocks in the United States.

 

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

 

(LINE GRAPH)

 

Holdings by Asset Class as of May 31, 2022  % of Net Assets 
Internet Media & Services   21.3%
Automotive   15.2%
Software   9.4%
Leisure Facilities & Services   6.6%
Renewable Energy   6.1%
Retail - Discretionary   5.2%
Beverages   5.2%
Electrical Equipment   3.8%
Health Care Facilities & Services   3.5%
Semiconductors   3.5%
Other, Cash & Cash Equivalents   20.2%
    100.0%

 

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

4

 

THE FUTURE FUND ACTIVE ETF
SCHEDULE OF INVESTMENTS
May 31, 2022

 

Shares      Fair Value 
     COMMON STOCKS — 99.3%     
     APPAREL & TEXTILE PRODUCTS - 3.0%     
 2,457   NIKE, Inc., Class B  $292,014 
           
     ASSET MANAGEMENT - 2.9%     
 1,450   LPL Financial Holdings, Inc.   284,476 
           
     AUTOMOTIVE - 15.2%     
 11,305   Harley-Davidson, Inc.   397,710 
 1,434   Tesla, Inc.(a)   1,087,344 
         1,485,054 
     BEVERAGES - 5.2%     
 7,583   Celsius Holdings, Inc.(a)   508,743 
           
     BIOTECH & PHARMA - 2.3%     
 1,311   Zoetis, Inc.   224,089 
           
     E-COMMERCE DISCRETIONARY - 2.5%     
 8,371   Revolve Group, Inc.(a)   245,940 
           
     ELECTRICAL EQUIPMENT - 3.8%     
 1,158   Generac Holdings, Inc.(a)   286,118 
 1,332   Trimble, Inc.(a)   90,643 
         376,761 
     ENGINEERING & CONSTRUCTION - 3.4%     
 2,783   Quanta Services, Inc.   331,177 
           
     HEALTH CARE FACILITIES & SERVICES - 3.5%     
 1,464   Charles River Laboratories International, Inc.(a)   342,694 
           
     INTERNET MEDIA & SERVICES - 21.3%     
 2,365   Airbnb, Inc., CLASS A(a)   285,858 
 416   Alphabet, Inc., Class A(a)   946,499 
 2,868   Match Group, Inc.(a)   225,941 
 3,108   Snap, Inc., Class A(a)   43,854 
 7,673   Tencent Holdings Ltd. - ADR   349,428 

 

See accompanying notes which are an integral part of this schedule of investments.

5

 

THE FUTURE FUND ACTIVE ETF
SCHEDULE OF INVESTMENTS (Continued)
May 31, 2022

 

Shares      Fair Value 
     COMMON STOCKS — 99.3% (Continued)     
     INTERNET MEDIA & SERVICES - 21.3% (Continued)     
 8,068   Uber Technologies, Inc.(a)  $187,178 
 10,372   Yandex N.V., Class A(a) (b)   35,576 
         2,074,334 
     LEISURE FACILITIES & SERVICES - 6.6%     
 6,117   Caesars Entertainment, Inc.(a)   306,890 
 242   Chipotle Mexican Grill, Inc.(a)   339,417 
         646,307 
     MEDICAL EQUIPMENT & DEVICES - 2.2%     
 760   Align Technology, Inc.(a)   211,006 
           
     RENEWABLE ENERGY - 6.1%     
 1,216   Enphase Energy, Inc.(a)   226,407 
 11,289   Green Plains, Inc.(a)   367,796 
         594,203 
     RETAIL - DISCRETIONARY - 5.2%     
 16,619   Hertz Global Holdings, Inc.(a)   333,544 
 612   Lululemon Athletica, Inc.(a)   179,126 
         512,670 
     SEMICONDUCTORS - 3.5%     
 1,218   NVIDIA Corporation   227,425 
 1,494   Wolfspeed, Inc.(a)   112,394 
         339,819 
     SOFTWARE - 9.4%     
 401   Autodesk, Inc.(a)   83,308 
 469   Palo Alto Networks, Inc.(a)   235,804 
 1,714   Salesforce, Inc.(a)   274,651 
 3,163   Splunk, Inc.(a)   324,397 
         918,160 
     TECHNOLOGY HARDWARE - 3.2%     
 6,161   Ciena Corporation(a)   313,102 

 

See accompanying notes which are an integral part of this schedule of investments.

6

 

THE FUTURE FUND ACTIVE ETF
SCHEDULE OF INVESTMENTS (Continued)
May 31, 2022

 

       Fair Value 
     COMMON STOCKS — 99.3% (Continued)     
     TOTAL COMMON STOCKS (Cost $13,593,233)  $9,700,549 
           
     TOTAL INVESTMENTS - 99.3% (Cost $13,593,233)  $9,700,549 
     OTHER ASSETS IN EXCESS OF LIABILITIES- 0.7%   65,197 
     NET ASSETS - 100.0%  $9,765,746 

 

ADR - American Depositary Receipt
   
LTD - Limited Company

 

(a)Non-income producing security.

 

(b)The value of this security has been determined in good faith under policies of the Board of Trustees.

 

See accompanying notes which are an integral part of this schedule of investments.

7

 

The Future Fund Active ETF
STATEMENT OF ASSETS AND LIABILITIES
May 31, 2022

 

ASSETS     
Investment in securities at value (identified cost $13,593,233)  $9,700,549 
Cash   37,038 
Dividends and interest receivable   1,726 
Due from Advisor   38,293 
Deferred Offering costs (see note 2)   3,250 
Prepaid expenses and other assets   3,162 
TOTAL ASSETS   9,784,018 
      
LIABILITIES     
Payable to related parties   18,272 
TOTAL LIABILITIES   18,272 
NET ASSETS  $9,765,746 
      
Net Assets Consist Of:     
Paid in capital  $14,890,184 
Accumulated losses   (5,124,438)
NET ASSETS  $9,765,746 
      
Net Asset Value Per Share:     
Net Assets  $9,765,746 
Shares of beneficial interest outstanding ($0 par value, unlimited shares authorized)   560,000 
Net asset value (Net Assets ÷ Shares Outstanding), offering price and redemption price per share  $17.44 

 

See accompanying notes which are an integral part of these financial statements.

8

 

The Future Fund Active ETF
STATEMENT OF OPERATIONS
For the Period Ended May 31, 2022 *

 

INVESTMENT INCOME     
Dividend income  $26,313 
Foreign withholding taxes   (3,371)
TOTAL INVESTMENT INCOME   22,942 
      
EXPENSES     
Investment advisory fees   73,061 
Administrative services fees   43,346 
Compliance officer fees   17,643 
Custodian fees   16,297 
Legal fees   14,927 
Trustees fees and expenses   11,892 
Offering cost expense   9,250 
Printing and postage expenses   8,905 
Transfer agent fees   6,586 
Insurance expense   1 
Other expenses   7,103 
TOTAL EXPENSES   209,011 
Fees Waived/Expenses Reimbursed by the Advisor   (111,353)
NET EXPENSES   97,658 
      
NET INVESTMENT LOSS   (74,716)
      
REALIZED AND UNREALIZED LOSS ON INVESTMENTS     
      
Net realized loss from:     
Net realized loss from security transactions   (1,178,890)
Net realized loss from in-kind redemptions   (117,959)
    (1,296,849)
Net change in unrealized depreciation on:     
Investments   (3,892,684)
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS   (5,189,533)
      
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS  $(5,264,249)

 

*Commencement of Operations was August 23, 2021.

 

See accompanying notes which are an integral part of these financial statements.

9

 

The Future Fund Active ETF
STATEMENT OF CHANGES IN NET ASSETS

 

   For The 
   Period Ended 
   May 31, 2022 * 
     
FROM OPERATIONS     
Net investment loss  $(74,716)
Net realized loss from security transactions and in-kind redemptions   (1,296,849)
Net change in unrealized depreciation of investments   (3,892,684)
Net decrease in net assets resulting from operations   (5,264,249)
      
DISTRIBUTIONS TO SHAREHOLDERS     
Total distributions paid:     
From net investment income   (4,178)
From return of capital   (1,300)
Net decrease in net assets resulting from distributions to shareholders   (5,478)
      
FROM SHARES OF BENEFICIAL INTEREST     
Proceeds from shares sold:   17,880,150 
Payments for shares redeemed:   (2,850,677)
Transaction Fees (Note 5)   6,000 
Net increase in net assets resulting from shares of beneficial interest   15,035,473 
      
TOTAL INCREASE IN NET ASSETS   9,765,746 
      
NET ASSETS     
Beginning of Period    
End of Period  $9,765,746 
      
SHARE ACTIVITY     
Shares sold   700,000 
Shares redeemed   (140,000)
Net increase in shares of beneficial interest outstanding   560,000 

 

*Commencement of Operations was August 23, 2021.

 

See accompanying notes which are an integral part of these financial statements.

10

 

The Future Fund Active ETF
FINANCIAL HIGHLIGHTS

 

Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout The Period

 

   For The 
   Period Ended 
   May 31, 2022 * 
     
Net asset value, beginning of period  $25.00 
Activity from investment operations:     
Net investment loss (1)   (0.13)
Net realized and unrealized loss on investments   (7.42)
Total from investment operations   (7.55)
Less distributions from:     
Net realized gains   (0.01)
Return of capital   (0.00) (6)
Total distributions   (0.01)
Net asset value, end of period  $17.44 
Market price, end of period  $17.44 
Total return (2)   (30.22)% (4)
Net assets, at end of period (000s)  $9,766 
Ratio of gross expenses to average net assets   2.14% (3)
Ratio of net expenses to average net assets   1.00% (3)
Ratio of net investment loss to average net assets   (0.76)% (3)
Portfolio Turnover Rate (5)   79% (4)

 

 

*Commencement of Operations was August 23, 2021.

 

(1)Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period.

 

(2)Total return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last day of the period. Distributions are assumed, for the purpose of this calculation, to be reinvested at the ex-dividend date net asset value per share on their respective payment dates.

 

(3)Annualized for periods less than one full year.

 

(4)Not annualized.

 

(5)Portfolio turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation Units. (Note 3)

 

(6)Represents less than $0.005.

 

See accompanying notes which are an integral part of these financials statements.

11

 

The Future Fund Active ETF
NOTES TO FINANCIAL STATEMENTS
May 31, 2022

 

1.ORGANIZATION

 

The Future Fund Active ETF (the “Fund”) is a non-diversified series of shares of beneficial interest of Northern Lights Fund Trust II (the “Trust”), a statutory trust organized under the laws of the State of Delaware on August 26, 2010, and is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Fund seeks to provide capital appreciation. The Fund commenced operations on August 23, 2021.

 

2.SIGNIFICANT ACCOUNTING POLICIES

 

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

 

Security 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 day of valuation. Investments valued in currencies other than the U.S. dollar are converted to U.S. dollars using exchange rates obtained from pricing services. Short-term debt obligations having 60 days or less remaining until maturity, at time of purchase, may be valued at amortized cost. Investments in open-end investment companies are valued at net asset value.

 

A Fund 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 Trusts’ Board of Trustees (the “Board”). The Board has delegated execution of these procedures to a fair value committee composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) Adviser. The committee may also enlist third party consultants such as a valuation specialist at a public accounting firm, valuation consultant or financial officer of a security issuer on an as-needed basis to assist in determining a security-specific fair value. The Board has also engaged a third-party valuation firm to attend valuation meetings held by the Trust, review minutes of such meetings and report to the Board on a quarterly basis. 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.

12

 

The Future Fund Active ETF
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2022

 

Fair Valuation Process – As noted above, the fair value committee is composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) adviser. The applicable investments are valued collectively via inputs from each of these groups. For example, fair value determinations are required for the following securities: (i) securities for which market quotations are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary lapse in the provision of a price by the regular pricing source), (ii) securities for which, in the judgment of the adviser, the prices or values available do not represent the fair value of the instrument. Factors which may cause the adviser to make such a judgment include, but are not limited to, the following: only a bid price or an asked price is available; the spread between bid and asked prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; (iv) securities with respect to which an event that will affect the value thereof has occurred (a “significant event”) since the closing prices were established on the principal exchange on which they are traded, but prior to a Fund’s calculation of its net asset values. 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 adviser based upon the current bid for the security from two or more independent dealers or other parties reasonably familiar with the facts and circumstances of the security (who should take into consideration all relevant factors as may be appropriate under the circumstances). If the adviser is unable to obtain a current bid from such independent dealers or other independent parties, the fair value committee shall determine the fair value of such security using the following factors: (i) the type of security; (ii) the cost at date of purchase; (iii) the size and nature of the Fund’s holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.

 

The Fund utilizes various methods to measure fair value of all of their investments on a recurring basis. GAAP establishes the 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 Fund has the ability to access.

 

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

13

 

The Future Fund Active ETF
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2022

 

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

 

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

 

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

 

The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following tables summarize the inputs used as of May 31, 2022 for the Fund’s assets and liabilities measured at fair value:

 

Assets*  Level 1   Level 2   Level 3   Total 
Common Stocks  $9,664,973   $   $35,576   $9,700,549 
Total  $9,664,973   $   $35,576   $9,700,549 

 

*Please refer to the Portfolio of Investments for industry classifications.

 

The following table summarizes a summary of changes in the Fund’s assets measured at fair value using significant unobservable inputs (Level 3) for the period ended May 31, 2022.

 

   Common Stock 
Beginning Balance  $ 
Total realized gain (loss)   (19,295)
Appreciation (Depreciation)   (507,921)
Cost of Purchases   607,342 
Proceeds from Sales   (44,550)
Net transfers in/out of level 3    
Ending Balance  $35,576 

14

 

The Future Fund Active ETF
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2022

 

Significant unobservable valuation inputs for Level 3 investments as of May 31, 2022, are as follows:

 

   Fair Value at   Valuation     Range of Inputs
Assets (at fair value)  May 31, 2022   Technique  Unobservable Inputs  (Weighted Average)
Yandex N.V., Class A  $35,576   Market Analysis  Market Data of Similar Companies  Average Daily Change

 

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

 

Federal Income Taxes – The Fund intends to continue to comply with the requirements of the Internal Revenue Code applicable to regulated investment companies and to distribute all of it’s taxable income to it’s shareholders. Therefore, no provision for Federal income tax is required. The Fund recognizes 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 Fund’s tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Fund’s May 31, 2022 year-end tax return. The Fund has identified its major tax jurisdictions as U.S. Federal and Ohio, however, the Fund is 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.

 

Organizational and Offering Costs – Organizational costs include legal fees pertaining to the organization of the Trust, costs of forming the Fund, drafting of bylaws, administration, custody and transfer agency agreements, and audit fees for the initial seed audit. Organizational costs of the Fund are charged to expense as incurred. Offering costs include legal fees pertaining to the preparation, review and filing of the Fund’s initial registration statement with the SEC, and printing, mailing or other distribution charges related to the Fund’s Prospectus and SAI. Offering costs incurred by the Fund were treated as deferred charges until the

15

 

The Future Fund Active ETF
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2022

 

commencement of operation on August 23, 2021, and thereafter are amortized into expense over a 12 month period using the straight line method. For the period ended May 31, 2022 $9,250 in deferred offering costs were expensed. The remaining balance of offering costs to be amortized as of May 31, 2022 is reflected on the Statement of Assets and Liabilities under Deferred Offering costs.

 

Expenses – Expenses of the Trust that are directly identifiable to a specific fund are charged to that fund. Expenses, which are not readily identifiable to a specific fund, are allocated in such a manner as deemed equitable (as determined by the Board), taking into consideration the nature and type of expense and the relative sizes of the fund 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 Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss due to these warranties and indemnities to be remote.

 

3.INVESTMENT TRANSACTIONS

 

For the period ended May 31, 2022, cost of purchases and proceeds from sales of portfolio securities (excluding in-kind transactions and short-term investments), amounted to $10,019,941 and $9,613,362 respectively. For the period ended May 31, 2022, cost of purchases and proceeds from sales of portfolio securities for in-kind transactions, amounted to $17,259,661 and $2,776,158 respectively.

 

4.INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES

 

The Future Fund, LLC (“Adviser”) serves as investment adviser to the Fund. Pursuant to an Advisory Agreement with the Fund, the Adviser, under the oversight of the Board, directs the daily operations of the Fund and supervises the performance of administrative and professional services provided by others. As compensation for its services and the related expenses borne by the Adviser, the Fund pays the Adviser a management fee, computed and accrued daily and paid monthly, at an annual rate of 0.75% of average daily net assets. For the period ended May 31, 2022, the Fund incurred $73,061 in advisory fees.

 

Pursuant to a written contract (the “Waiver Agreement”), the Adviser has agreed, at least until September 30, 2023, to waive a portion of its advisory fee and has agreed to reimburse the Fund for other expenses to the extent necessary so that the total expenses incurred by the Funds (excluding taxes, brokerage fees and commissions, acquired fund fees and expenses, borrowing costs (such as interest and dividend expense on securities sold short), taxes and extraordinary or non-recurring expenses, including, but not limited to, litigation) do not exceed

16

 

The Future Fund Active ETF
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2022

 

1.00%. For the period ended May 31, 2022, the Adviser waived fees/reimbursed expenses of $111,353.

 

If the Adviser waives any fee or reimburses any expenses pursuant to the Waiver Agreement, and any Funds operating expenses are subsequently lower than their respective expense limitation, the Adviser shall be entitled to reimbursement by the Fund provided that such reimbursement does not cause the Fund’s operating expenses to exceed the expense limitation. The Adviser is permitted to receive reimbursement from the Fund for fees it waived and Fund expenses it paid, subject to the limitation that: (1) the reimbursement for fees and expenses will be made only if payable within three years from the date the fees and expenses were initially waived or reimbursed; and (2) the reimbursement may not be made if it would cause the expense limitation in effect at the time of the waiver or currently in effect, whichever is lower, to be exceeded. The Fund must pay its current ordinary operating expenses before the Adviser is entitled to any reimbursement of management fees and/or expenses. This Operating Expense Limitation Agreement can be terminated only by, or with the consent, of the Board of Trustees.

 

As of May 31, 2022, the Advisor has $111,353 of waived fees within 3 years of reimbursement that may be recovered by the following date:

 

May 31, 2025   Total 
$111,353   $111,353 

 

The Trust has entered into a Global Custody Agreement with Brown Brothers Harriman & Co. (the “Custodian”) to serve as custodian and to act as transfer and shareholder services agent.

 

Distributor- Northern Lights Distributors, LLC, (the “Distributor”), serves as the principal underwriter and national distributor for the shares of the Fund pursuant to an ETF Distribution Agreement with the Trust (the “Distribution Agreement”). The offerings of the Shares are continuous and the Distributor acts as an agent for the Trust.

 

The Fund does not pay the Distributor any fees under the Distribution Agreement. However, the Advisor pays an annual fee to the Distributor plus reasonable out-of-pocket expenses incurred by Distributor in connection with activities performed for the Fund, including, without limitation, printing and distribution of prospectuses and shareholder reports, out of its own resources.

 

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

 

Ultimus Fund Solutions, LLC (“UFS”) – UFS, an affiliate of the Distributor, provides administration, and fund accounting services to the Trust. Pursuant to separate servicing agreements with UFS, the Fund pays UFS customary fees for providing administration, and fund accounting services to the Fund. Certain officers of the Trust are also officers of UFS, and are not paid any fees directly by the Trust for serving in such capacities.

17

 

The Future Fund Active ETF
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2022

 

Northern Lights Compliance Services, LLC (“NLCS”) – NLCS, an affiliate of UFS 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 the Fund.

 

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

 

5.CAPITAL SHARE TRANSACTIONS

 

Shares are not individually redeemable and may be redeemed by the Fund at NAV only in large blocks known as “Creation Units.” Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 20,000 shares. Only Authorized Participants are permitted to purchase or redeem Creation Units from the Fund. An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a Depository Trust Company participant and, in each case, must have executed a Participant Agreement with the distributor. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per share of the Funds on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the Authorized Participant or as a result of other market circumstances. In addition, the Fund may impose transaction fees on purchases and redemptions of Fund shares to cover the custodial and other costs incurred by the Fund in effecting trades A fixed fee payable to the Custodian is imposed on each creation and redemption transaction regardless of the number of Creation Units involved in the transaction (“Fixed Fee”). Purchases and redemptions of Creation Units for cash or involving cash-in-lieu (as defined below) are required to pay an additional variable charge to compensate the Fund and its ongoing shareholders for brokerage and market impact expenses relating to Creation Unit transactions (“Variable Charge,” and together with the Fixed Fee, the “Transaction Fees”). With the approval of the Board, the Adviser may waive or adjust the Transaction Fees, including the Fixed Fee and/or Variable Charge (shown in the table below), from time to time. In such cases, the Authorized Participant will reimburse the Fund for, among other things, any difference between the market value at which the securities and/or financial instruments were purchased by the Fund and the cash-in-lieu amount, applicable registration fees, brokerage commissions and certain taxes. In addition, purchasers of Creation Units are responsible for the costs of transferring the Deposit Securities to the accounts of the Fund. Transactions in capital shares for the Fund is disclosed in the Statement of Changes in Net Assets.

18

 

The Future Fund Active ETF
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2022

 

Investors who use the services of a broker, or other such intermediary may be charged a fee for such services. The Transaction Fees for the Fund are listed in the table below:

 

Fee for In-Kind and Maximum Additional Variable
Cash Purchases Charge for Cash Purchases*
$300 Slippage - Maximum Amount 200 bps

 

*As a percentage of the amount invested.

 

6.DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL

 

The tax character of distributions paid during the following fiscal period was as follows:

 

   Fiscal Year Ended 
   May 31, 2022 
Ordinary Income  $4,178 
Long-Term Capital Gain    
Return of Capital   1,300 
   $5,478 

 

As of May 31, 2022, 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/   Distributable Earnings 
Income   Gains   Late Year Loss   Forwards   Differences   (Depreciation)   /(Accumulated Deficit) 
$   $   $(1,197,182)  $   $   $(3,927,256)  $(5,124,438)

 

The difference between book basis and tax basis accumulated net investment losses, accumulated net realized losses, and unrealized depreciation from investments is primarily attributable to the tax deferral of losses on wash sales.

 

Late year losses incurred after December 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The Fund incurred and elected to defer such late year losses of $33,310.

 

Capital losses incurred after October 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The Fund incurred and elected to defer such capital losses of $1,163,872.

19

 

The Future Fund Active ETF
NOTES TO FINANCIAL STATEMENTS (Continued)
May 31, 2022

 

Permanent book and tax differences, primarily attributable to the book/tax basis treatment of in-kind redemptions, resulted in reclassifications for the Fund for the fiscal period ended May 31, 2022, as follows:

 

Paid     
In   Distributable 
Capital   Earnings 
$(143,989)  $143,989 

 

7.AGGREGATE UNREALIZED APPRECIATION AND DEPRECIATION – TAX BASIS

 

    Gross   Gross   Net Unrealized 
Tax   Unrealized   Unrealized   Appreciation/ 
Cost   Appreciation   Depreciation   (Depreciation) 
$13,627,805   $129,211   $(4,056,467)  $(3,927,256)

 

8.SUBSEQUENT EVENTS

 

Subsequent events after the date of the Statement 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.

20

 

(BBD LOGO)

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Trustees of Northern Lights Fund Trust II

and the Shareholders of The Future Fund Active ETF

 

Opinion on the Financial Statements

 

We have audited the accompanying statement of assets and liabilities of The Future Fund Active ETF, a series of shares of beneficial interest in Northern Lights Fund Trust II (the “Fund”), including the schedule of investments, as of May 31, 2022, and the related statement of operations, statement of changes in net assets and the financial highlights for the period from August 23, 2021 (Commencement of operations) through May 31, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of May 31, 2022, and the results of its operations, the changes in its net assets and its financial highlights for the period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities law and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.

 

Our audit included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of May 31, 2022 by correspondence with the custodian. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.

 

(-s- BBD, LLP)

 

BBD, LLP

 

We have served as the auditor of one or more of the Funds in the Northern Lights Fund Trust II since 2012.

 

Philadelphia, Pennsylvania

July 28, 2022

21

 

The Future Fund Active ETF
EXPENSE EXAMPLES (Unaudited)
May 31, 2022

 

As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1 fees) fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds. Please note, the expenses shown in the tables are meant to highlight ongoing costs only and do not reflect any transactional costs.

 

The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as disclosed in the table below.

 

Actual Expenses

 

The “Actual Expenses” line in the table below provides 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” line in the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’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, such as sales charges (loads), or redemption fees. 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.

 

   Beginning  Ending  Expenses Paid  Expense Ratio
   Account Value  Account Value  During Period*  During Period*
Actual  12/1/21  5/31/22  12/1/21 - 5/31/22  12/1/21 - 5/31/22
Future Fund Active ETF  $1,000.00  $697.00  $4.23  1.00%
             
   Beginning  Ending  Expenses Paid  Expense Ratio
   Account Value  Account Value  During Period*  During Period*
Hypothetical  12/1/21  5/31/22  12/1/21 - 5/31/22  12/1/21 - 5/31/22
Future Fund Active ETF  $1,000.00  $1,019.95  $5.04  1.00%
(5% return before expenses)            

 

*Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by the number of days in the six month period ended May 31, 2022 (182), divided by the number of days in the fiscal year (365).

22

 

The Future Fund Active ETF
SUPPLEMENTAL INFORMATION (Unaudited)(Continued)
May 31, 2022

 

FACTORS CONSIDERED BY THE TRUSTEES IN THE APPROVAL OF AN INVESTMENT ADVISORY AGREEMENT

 

At a meeting (the “Meeting”) of the Board of Trustees (the “Board”) of Northern Lights Fund Trust II (the “Trust”) held on April 27 and 28, 2021, the Board, including the disinterested Trustees (the “Independent Trustees”), considered the approval of the advisory agreement between The Future Fund, LLC (“FFA”) and the Trust on behalf of The Future Fund Active ETF (the “Future Fund”) (the “Future Fund Advisory Agreement”)

 

Based on their evaluation of the information provided by FFA, in conjunction with The Future Fund Active ETF’s other service providers, the Board, by a unanimous vote (including a separate vote of the Independent Trustees), approved the Advisory Agreement with respect to The Future Fund Active ETF.

 

In advance of the Meeting, the Board requested and received materials to assist them in considering the Future Fund Advisory Agreement. The materials provided contained information with respect to the factors enumerated below, including the Future Fund Advisory Agreement, a memorandum prepared by the Trust’s outside legal counsel discussing in detail the Trustees’ fiduciary obligations and the factors they should assess in considering the approval of the Future Fund Advisory Agreement and comparative information relating to the advisory fee and other expenses of The Future Fund Active ETF. The materials also included due diligence materials relating to FFA (including due diligence questionnaires completed by FFA, select financial information of FFA, bibliographic information regarding FFA’s key management and investment advisory personnel, and comparative fee information relating to the Fund) and other pertinent information. At the Meeting, the Independent Trustees were advised by counsel that is experienced in Investment Company Act of 1940 matters and that is independent of fund management and met with such counsel separately from fund management.

 

The Board then reviewed and discussed the written materials that were provided in advance of the Meeting and deliberated on the approval of the approval of the Future Fund Advisory Agreement with respect to The Future Fund Active ETF. 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 Future Fund Advisory Agreement and the weight to be given to each such factor. The conclusions reached by the Board were based on a comprehensive evaluation of all of the information provided 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 Future Fund Advisory Agreement. In considering the approval of the Future Fund Advisory Agreement, the Board reviewed and analyzed various factors that they determined were relevant, including the factors enumerated below.

 

Nature, Extent and Quality of Services. The Board reviewed materials provided by FFA related to the proposed approval of the Future Fund Advisory Agreement, including its draft ADV, a description of the manner in which investment decisions will be made and executed, and a review of the personnel performing services for the Future Fund, including the team of individuals that will primarily monitor and execute the investment process. The Board noted that FFA was a newly formed investment adviser with no experience managing a 1940 Act registered fund but that its personnel had many years of experience and knowledge managing registered funds in their previous positions at other firms. The Board discussed the extent of FFA’s research capabilities, the quality of its compliance infrastructure noting that FFA had hired an outside compliance consulting firm, Constellation Advisors (“Constellation”), to assist in the continued development and oversight of its compliance program. The Board noted that the personnel at Constellation who would be assisting FFA with its compliance program were very experienced in the 1940 Act and

23

 

The Future Fund Active ETF
SUPPLEMENTAL INFORMATION (Unaudited)(Continued)
May 31, 2022

 

experienced in the operations and regulations governing the management of registered investment companies including exchange traded funds. Additionally, the Board received satisfactory responses from representatives of FFA with respect to a series of important questions, including: whether FFA or its principals were involved in any lawsuits or pending regulatory actions; whether the management of other accounts would conflict with its management of the Future Fund; and whether there are procedures in place to adequately allocate trades among its clients. The Board reviewed the description provided on the practices for monitoring compliance with the Future Fund’s investment limitations, noting that FFA’s chief compliance officer would actively review the portfolio managers’ performance of their duties to ensure compliance under FFA’s compliance program. The Board discussed the capitalization of FFA, noting that FFA was newly formed, and, based on discussions with the representatives of FFA, concluded that FFA’s principals had the ability to make additional contributions in order to meet their obligations to the Future Fund. The Board also discussed FFA’s compliance program with the CCO of the Trust. The Board noted that the CCO of the Trust represented that FFA’s policies and procedures were reasonably designed to prevent violations of applicable securities laws. The CCO of the Trust further represented that he would work closely with FFA and its compliance personnel to ensure close monitoring of the Future Fund’s operations and risk management practices. The Board concluded that FFA had sufficient quality and depth of personnel, resources, investment methods and compliance policies and procedures essential to performing its duties under the Future Fund Advisory Agreement and that the nature, overall quality and extent of the management services to be provided by FFA to the Future Fund appear to be satisfactory.

 

Performance. Because the Future Fund had not yet commenced operations nor had FFA or its portfolio managers managed similar accounts, the Board did not consider past performance.

 

Fees and Expenses. As to the costs of the services to be provided by FFA, the Board reviewed and discussed the Future Fund’s proposed advisory fee and anticipated total operating expenses compared to its peer group and Morningstar category as presented in the Broadridge Report. The Board noted that the 0.75% proposed advisory fee for the Future Fund, although higher than its peer group median and Morningstar category median was not the highest in either its peer group or Morningstar category. The Board then reviewed the proposed contractual arrangements for the Future Fund noting that FFA was willing to agree to contractually waive or limit its advisory fee and/or reimburse expenses in order to limit net annual operating expenses, exclusive of certain fees, for at least a year from the date of the Future Fund’s initial prospectus so as not to exceed 1.00% of the average annual net assets, and found such arrangements would be beneficial to shareholders of the Future Fund . The Board concluded that the advisory fee to be charged by FFA to the Future Fund was not unreasonable.

 

Profitability. The Board also considered the level of profits that could be expected to accrue to FFA with respect to the Future Fund based on profitability estimates and analyses provided by FFA and reviewed by the Board. After review and discussion, the Board concluded that, based on the services to be provided by FFA and the projected growth of the Future Fund, the anticipated level of profit from FFA’s relationship with the Future Fund was not excessive.

 

Economies of Scale. As to the extent to which the Future Fund will realize economies of scale as it grows, and whether the fee levels reflect these economies of scale for the benefit of investors, the Board discussed FFA’s expectations for growth of for the Future Fund, and concluded that any material economies of scale would not be achieved in the near term.

 

Conclusion. The Board relied upon the advice of counsel, and their own business judgment in determining the material factors to be considered in evaluating the Future Fund Advisory Agreement and the weight to be given to each such factor. Accordingly, having requested and received such information from FFA as the Trustees believed to be reasonably necessary to evaluate the terms of the Future Fund Advisory

24

 

The Future Fund Active ETF
SUPPLEMENTAL INFORMATION (Unaudited)(Continued)
May 31, 2022

 

Agreement, and as assisted by the advice of independent counsel, the Board, including a majority of the Independent Trustees voting separately, determined that (a) the terms of the Future Fund Advisory Agreement are not unreasonable; (b) the investment advisory fee payable pursuant to the future Fund Advisory Agreement is not unreasonable; and (c) the Future Fund Advisory Agreement is in the best interests of The Future Fund Active ETF and its shareholders. Moreover, the Board noted that each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the Future Fund Advisory Agreement.

25

 

The Future Fund Active ETF
SUPPLEMENTAL INFORMATION (Unaudited)(Continued)
May 31, 2022

 

The Trustees and the 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 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
Brian Nielsen
1972
Trustee  Since May 2011 Trustee of Northern Lights Fund Trust II(since 2011); Special Projects Counsel of NorthStar Financial Services Group, LLC (from 2018 to 2019); Secretary of CLS Investments, LLC(from 2001 to 2018); Secretary of Orion Advisor Services, LLC(from 2001 to 2018); General Counsel and Secretary (from 2003 to 2018) of NorthStar Financial Services Group, LLC; CEO (from 2012 to 2018), Secretary (from 2003 to 2018) and Manager (from 2005 to 2018) of Northern Lights Distributors, LLC; Director, Secretary and General Counsel of Constellation Trust Company (from 2004 to 2018); CEO (from 2015 to 2018), General Counsel and Secretary (from 2011 to 2018) of Northern Lights Compliance Services, LLC; General Counsel and Secretary of Blu Giant, LLC(from 2011 to 2018); Secretary of Gemini Fund Services, LLC(from 2012 to 2018); Manager of Arbor Point Advisors, LLC (from 2012 to 2018); Director, Secretary and General Counsel of NorthStar CTC Holdings, Inc. (from 2015 to 2018) and Secretary and Chief Legal Officer of AdvisorOne Funds(from 2003 to 2018). 1 Manager of Northern Lights Distributors, LLC (from 2005 to 2018); Manager of Arbor Point Advisors, LLC (from 2012 to 2018); Director of Constellation Trust Company(from 2004 to 2018)
Thomas T. Sarkany
1946
Trustee Since October 2011 President, TTS Consultants, LLC (financial services)(since 2010). 1 Director, Aquila Distributors; Trustee, Arrow ETF Trust; Trustee, Arrow Investments Trust; Trustee, Northern Lights Fund Trust IV
Anthony H. Lewis
1946
Trustee Since May 2011 Chairman and CEO of The Lewis Group USA (executive consulting firm)(since 2007). 1 Director, Member of the Compensation Committee and Member of the Risk Committee of Torotel Inc. (Magnetics, Aerospace and Defense), Trustee, Chairman of the Fair Valuation Committee and Member of the Audit Committee of the Wildermuth Endowment Strategy Fund
Keith Rhoades
1948
Trustee Since May 2011 Retired since 2008. 1 None
Randal D. Skalla
1962
Trustee Since May 2011 President, L5 Enterprises, Inc. (financial services company) (since 2001).   Board Member, Orizon Investment Counsel (financial services company) (from 2001 to 2017)

26

 

The Future Fund Active ETF
SUPPLEMENTAL INFORMATION (Unaudited)(Continued)
May 31, 2022

 

Officers

 

Name 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
1969
President Since January 2013 Vice President of The Ultimus Group, LLC; Executive Vice President, Head of Fund Administration and Product (since 2019) and President (2012 - 2019) of Ultimus Fund Solutions, LLC (formerly, Gemini Fund Services, LLC). N/A N/A
Richard Malinowski
 1983
Secretary Since January 2018 Senior Vice President and Senior Managing Counsel (since February 2020), Senior Vice President Legal Administration (April 2017 to February 2020) and Vice President and Counsel (April 2016 to April 2017) of Ultimus Fund Solutions, LLC (formerly, Gemini Fund Services, LLC). N/A N/A
Erik Naviloff
1968
Treasurer  Since January 2013 Vice President of Ultimus Fund Solutions, LLC (formerly, Gemini Fund Services, LLC) (since 2011). N/A N/A
Jared Lahman
1986
Anti-Money Laundering Officer sinceJanuary 2022 Compliance Analyst, Northern Lights Compliance Services, LLC (since January 2019); Manager, Fund Accounting, Gemini Fund Services, LLC (January 2014 to December 2018). N/A N/A
Emile R. Molineaux
1962
Chief Compliance Officer Since May 2011 Senior Compliance Officer and CCO of Various clients of Northern Lights Compliance Services, LLC (since 2011). N/A N/A

 

*The term of office for each Trustee and Officer listed above will continue indefinitely.

 

**As of May 31, 2022, the Trust was comprised of 21 active portfolios managed by unaffiliated investment advisers. The term “Fund Complex” applies only to the Fund and not to any other series of the Trust. The Fund does not hold itself out as related to any other series within the Trust for investment purposes, nor does it share the same investment adviser with any other series.

27

 

Privacy Policy

 

Rev. May 2021

 

FACTS WHAT DOES NORTHERN LIGHTS FUND TRUST II (“NLFT II”) 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 depend on the product or service you have with us. This information can include:

●    Social Security number

 

●    Employment information

 

●    Account balances

●    Account transactions

 

●    Income

 

●    Investment experience

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 a customer’s personal information to run their everyday business - to process transactions, maintain customer accounts, and report to credit bureaus. In the section below, we list the reasons financial companies can share their customer’s personal information; the reasons NLFT II chooses to share; and whether you can limit this sharing.
     

Reasons we can share your personal information Does NLFT II
share?
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

Yes No

For joint marketing with other financial companies

Yes No

For our affiliates’ everyday business purposes —
information about your transactions and experiences


Yes No

For our affiliates’ everyday business purposes —
information about your creditworthiness

No We don’t share

For nonaffiliates to market to you

No We don’t share

Questions? Call 1-631-490-4300

28

 

Who we are
Who is providing this notice? Northern Lights Fund Trust II
What we do
How does NLFT II 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.

How does NLFT II collect my personal information? We collect your personal information, for example, when you

●    open an account

 

●    give us your income information

 

●    provide employment information

 

●    provide account information

 

●    give us your contact information

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.

 

●    NLFT II has no affiliates.

 

Nonaffiliates

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

 

●    NLFT II 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 and services to you.

 

●    Our joint marketing partners include other financial service companies.

29

 

PROXY VOTING POLICY

 

Information regarding how the Fund 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 Fund uses to determine how to vote proxies is available without charge, upon request, by calling 1-855-754-7935 or by referring to the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.

 

PORTFOLIO HOLDINGS

 

The Fund files its 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 at the SEC’s website at www.sec.gov. The information on Form N-PORT is available without charge, upon request, by calling 1-888-928-9774.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

INVESTMENT ADVISOR
The Future Fund, LLC
330 N Wabash, Suite 2300
Chicago, IL 60611
 
ADMINISTRATOR
Ultimus Fund Solutions, LLC
4221 North 203rd Street Suite 100
Elkhorn, Nebraska 68022
 
 
 
 
FFETF-A22

 

 

Item 2. Code of Ethics.

 

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

 

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

 

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

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

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

(5)        Accountability for adherence to the code.

 

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

 

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

 

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

 

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

 

Item 3. Audit Committee Financial Expert.

 

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

 

Item 4. Principal Accountant Fees and Services.

 

 

(a)Audit Fees

2022 - $ 12,000

 

(b)Audit-Related Fees

2022 - None

 

(c)Tax Fees

2022 – $ 3,000

 

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

 

(d)All Other Fees

2022 - 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
   2022
Audit-Related Fees:   0.00%
Tax Fees:   0.00%
All Other Fees:   0.00%

 

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

 

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

 

2022 - $ 3,000

 

(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. The registrant is an issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and has a separately-designated standing audit committee established in accordance with Section 3(a)(58)A of the Exchange Act. The registrant’s audit committee members are Keith Rhoades, Brian Nielsen, Randy Skalla, Tony Lewis and Thomas T. Sarkany

 

Item 6. Schedule of Investments. See Item 1.

 

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

 

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

 

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

 

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

 

 

Item 11. Controls and Procedures.

 

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

 

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

 

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

 

Item 13. Exhibits.

 

(a)(1) Code of Ethics herewith.

 

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

 

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

 

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

 

SIGNATURES

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

 

(Registrant) Northern Lights Fund Trust II

 

By (Signature and Title)

/s/ Kevin E. Wolf

Kevin E. Wolf, Principal Executive Officer/President

 

Date 08/08/22

 

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 08/08/22

 

 

By (Signature and Title)

/s/ Erik Naviloff

Erik Naviloff, Principal Financial Officer/Treasurer

 

Date 08/08/22

CERTIFICATIONS

 

I, Kevin E. Wolf, certify that:

 

1.       I have reviewed this report on Form N-CSR of The Future Fund Active ETF (a series of Northern Lights Fund Trust II);

 

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.       The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

a)       designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)       designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)       evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

d)       disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.       The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a)       all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

b)       any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: 08/08/22  /s/ Kevin E. Wolf
   Kevin E. Wolf
   Principal Executive Officer/President

 

 

 

 

I, Erik Naviloff, certify that:

 

1.       I have reviewed this report on Form N-CSR of The Future Fund Active ETF (a series of Northern Lights Fund Trust II);

 

2.       Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

3.       Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations, changes in net assets, and cash flows (if the financial statements are required to include a statement of cash flows) of the registrant as of, and for, the periods presented in this report;

 

4.       The registrant's other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) for the registrant and have:

 

a)       designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b)       designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c)       evaluated the effectiveness of the registrant's disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

d)       disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

 

5.       The registrant's other certifying officer(s) and I have disclosed to the registrant's auditors and the audit committee of the registrant's board of directors (or persons performing the equivalent functions):

 

a)       all significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant's ability to record, process, summarize, and report financial information; and

b)       any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant's internal control over financial reporting.

 

 

Date: 8/08/22  /s/ Erik Naviloff
   Erik Naviloff
   Principal Financial Officer/Treasurer

certification

Kevin E. Wolf, Principal Executive Officer/President, and Erik Naviloff, Principal Financial Officer/Treasurer of Northern Lights Fund Trust II (the “Registrant”), each certify to the best of his knowledge that:

1.       The Registrant’s periodic report on Form N-CSR for the period ended May 31, 2022 (the “Form N-CSR”) fully complies with the requirements of Sections 15(d) of the Securities Exchange Act of 1934, as amended; and

2.       The information contained in the Form N-CSR fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

Principal Executive Officer/President  Principal Financial Officer/Treasurer
Northern Lights Fund Trust II  Northern Lights Fund Trust II
    
    
/s/ Kevin E. Wolf  /s/ Erik Naviloff
Kevin E. Wolf  Erik Naviloff
Date: 08/08/22  Date: 08/08/22

 

 

A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Northern Lights Fund Trust II and will be retained by the Northern Lights Fund Trust II and furnished to the Securities and Exchange Commission (the “Commission”) or its staff upon request.

 

This certification is being furnished to the Commission solely pursuant to 18 U.S.C. § 1350 and is not being filed as part of the Form N-CSR filed with the Commission.

 


Northern Lights Fund Trust II

 CODE OF ETHICS

May 17, 2011


Northern Lights Fund Trust II (the “Trust”) and each of its series (the “Funds”) has adopted this Code of Ethics (the “Code”) in order to set forth guidelines and procedures that promote ethical practices and conduct by all of its Access Persons and to ensure that all Access Persons comply with the federal securities laws.  Although this Code contains a number of specific standards and policies, there are four key principles embodied throughout the Code.


THE INTERESTS OF THE FUNDS MUST ALWAYS BE PARAMOUNT


Access Persons have a legal, fiduciary duty to place the interests of the Funds ahead of their own.  In any decision relating to their personal investments, Access Persons must scrupulously avoid serving their own interests ahead of those of the Trust.


Access Persons may not take advantage of their relationship with the Funds


Access Persons should avoid any situation (unusual investment opportunities, perquisites and accepting gifts of more than token value from persons seeking to do business with the Funds) that might compromise, or call into question, the exercise of their fully independent judgment in the interests of the Funds.


All Personal Securities Transactions should avoid any actual, potential, or apparent conflicts of interest


Although all Personal Securities Transactions by Access Persons must be conducted in a manner consistent with this Code, the Code itself is based on the premise that Access Persons owe a fiduciary duty to the Funds, and should avoid any activity that creates an actual, potential, or apparent conflict of interest. This includes executing transactions through or for the benefit of a third party when the transaction is not in keeping with the general principles of this Code.


Access Persons must adhere to these general principles as well as comply with the specific provisions of this Code. Technical compliance with the Code and its procedures will not automatically prevent scrutiny of trades that show a pattern of abuse of an individual’s fiduciary duty to the Funds.


Access Persons must comply with all applicable laws

In both work-related and personal activities, Access Persons must comply with all applicable laws, including the federal securities laws.


Any violations of this Code should be reported promptly to the Chief Compliance Officer or his designee.  Failure to do so will be deemed a violation of the Code.

DEFINITIONS


“Access Person” shall have the same meaning as set forth in Rule 17j-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) and shall include:

 

1.

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

2.

all officers and trustees (or persons occupying a similar status or performing a similar function) of the Advisers with respect to its corresponding series of the Trust

3.

any employee of the Trust or the Advisers (or of any company controlling or controlled by or under common control with the Trust or the Advisers) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of Covered Securities by the Funds, or whose functions relate to the making of any recommendations with respect to the purchase or sale; and

4.

any other natural person controlling, controlled by or  under common control with the Trust or the Advisers who obtains information concerning recommendations made to the Funds with regard to the purchase or sale of Covered Securities by the Funds.


“Beneficial Ownership” means in general and subject to the specific provisions of Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, having or sharing, directly or indirectly, through any contract arrangement, understanding, relationship, or otherwise, a direct or indirect “pecuniary interest” in the security.


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


“Code” means this Code of Ethics.


“Covered Security” means any Security, except (i) direct obligations of the U.S. Government, (ii) bankers’ acceptances, bank certificates of deposit, commercial paper and high quality short-term debt instruments, including repurchase agreements, and (iii) shares issued by open-end mutual Funds.


Decision Making Access Person” means any Access Person who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of a security by the Funds, or whose functions relate to the making of any recommendations with respect to such purchases or sales. Decision Makers typically are Advisers personnel.


“Funds” means series of the Trust.


“Immediate family” means an individual’s spouse, child, stepchild, grandchild, parent, stepparent, grandparent, siblings, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law and should include adoptive relationships.  For purposes of determining whether an Access Person has an “indirect pecuniary interest” in securities, only ownership by “immediate family” members sharing the same household as the Access Person will be presumed to be an “indirect pecuniary interest” of the Access Person, absent special circumstances.


“Independent Trustees” means those Trustees of the Trust that would not be deemed an “interested person” of the Trust, as defined in Section 2(a)(19)(A) of the 1940 Act.


“Indirect Pecuniary Interest” includes, but is not limited to: (a) securities held by members of the person’s Immediate Family sharing the same household (which ownership interest may be rebutted); (b) a general partner’s proportionate interest in Fund securities held by a general or limited partnership; (c) a person’s right to dividends that is separated or separable from the underlying securities (otherwise, a right to dividends alone will not constitute a pecuniary interest in securities); (d) a person’s interest in securities held by the Trust; (e) a person’s right to acquire securities through the exercise or conversion of any derivative security, whether or not presently exercisable; and (f) a performance-related fee, other than an asset based fee, received by any broker, dealer, bank, insurance company, investment company, investment manager, Trustee, or person or entity performing a similar function, with certain exceptions.


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


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


“Purchase or Sale of a Security” includes the writing of an option to purchase or sell a Security. A Security shall be deemed “being considered for Purchase or Sale” for the Trust when a recommendation to purchase or sell has been made and communicated by a Decision Making Access Person, and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation.  These recommendations are placed on the “Restricted List” until they are no longer being considered for Purchase or Sale, or until the Security has been purchased or sold.


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


“Security” means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-Trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-Trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, an interest or instrument commonly know as “security”, or any certificate or interest or participation in temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase (including options) any of the foregoing.


“Advisers” means the Advisers to the Trust.


“Trust” means Northern Lights Fund Trust II.



PROHIBITED ACTIONS AND ACTIVITIES


A.

No Access Person shall purchase or sell directly or indirectly, any Covered Security in which he or she has, or by reason of such transaction acquires, any direct or indirect beneficial ownership and which he or she knows or should have known at the time of such purchase or sale;


(1)

is being considered for purchase or sale by a Fund, or


(2)

is being purchased or sold by a Fund.


B.

Decision-Making Access Persons may not participate in any initial public offering of Covered Securities in any account over which they exercise Beneficial Ownership.  All other Access Persons must obtain prior written authorization from the Chief Compliance Officer or his designee prior to such participation;


C.

No Access Person may purchase a Covered Security in which by reason of such transaction they acquire Beneficial Ownership in a private placement of a Security, without prior written authorization of the acquisition by the Chief Compliance Officer or his designee;


D.

Access Persons may not accept any fee, commission, gift, or services, other than de minimus gifts, from any single person or entity that does business with or on behalf of the Trust;


E.

Decision-Making Access Persons may not serve on the board of directors of a publicly traded company without prior authorization from the Chief Compliance Officer or his designee based upon a determination that such service would be consistent with the interests of the Trust.  If such service is authorized, procedures will then be put in place to isolate such Decision-Making Access Persons serving as directors of outside entities from those making investment decisions on behalf of the Trust.


Advanced notice should be given so that the Trust or Advisers may take such action concerning the conflict as deemed appropriate by the Chief Compliance Officer or his designee.


F.

Decision-Making Access Person may not execute a Personal Securities Transaction involving a Covered Security without authorization of the Chief Compliance Officer or such persons who may be designated by the Chief Compliance Officer from time to time.


G.

It shall be a violation of this Code for any Access Person, in connection with the purchase or sale, directly or indirectly, of any Covered Security held or to be acquired by a Fund:

 

a.

to employ any device, scheme or artifice to defraud the Trust;

b.

to make to the Trust any untrue statement of a material fact or to omit to state to the Trust a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;

c.

to engage in any act, practice or course of business that operates or would operate as a fraud or deceit upon the Trust; or

d.

to engage in any manipulative practice with respect to the Trust.



EXEMPTED TRANSACTIONS


The provisions described above under the heading Prohibited Actions and Activities and the preclearance procedures under the heading Preclearance of Personal Securities Transactions do not apply to:


·

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


·

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


·

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


·

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


·

Purchases of Securities effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its Securities, to the extent such rights were acquired from such issuer, and sale of such rights so acquired.



PRECLEARANCE OF PERSONAL SECURITIES TRANSACTIONS


All Decision-Making Access Persons wishing to engage in a Personal Securities Transaction must obtain prior authorization of any such Personal Securities Transaction from the Chief Compliance Officer or such person or persons that the Chief Compliance Officer may from time to time designate to make such authorizations. Personal Securities Transactions by the Chief Compliance Officer shall require prior authorization from the President or Chief Executive Officer of the Trust (unless such person is also the Chief Compliance Officer), who shall perform the review and approval functions relating to reports and trading by the Chief Compliance Officer. The Trusts shall adopt the appropriate forms and procedures for implementing this Code of Ethics.


Any authorization so provided is effective until the close of business on the fifth trading day after the authorization is granted. In the event that an order for the Personal Securities Transaction is not placed within that time period, a new authorization must be obtained. If the order for the transaction is placed but not executed within that time period, no new authorization is required unless the person placing the order originally amends the order in any manner.  Authorization for “good until canceled” orders is effective unless the order conflicts with a Trust order.


If a person wishing to effect a Personal Securities Transaction learns, while the order is pending, that the same Security is being considered for Purchase or Sale by a Fund, such person shall cancel the trade.



REPORTING AND MONITORING


The Chief Compliance Officer or such person or persons that the Chief Compliance Officer may from time to time designate shall monitor all personal trading activity of all Access Persons pursuant to the procedures established under this Code.

 

Disclosure of Personal Brokerage Accounts


Within ten days of the commencement of employment or at the commencement of a relationship with the Trust, all Access Persons, except Independent Trustees, are required to submit to the Chief Compliance Officer or his designee a report stating the names and account numbers of all of their personal brokerage accounts, brokerage accounts of members of their Immediate Family, and any brokerage accounts which they control or in which they or an Immediate Family member has Beneficial Ownership.  Such report must contain the date on which it is submitted and the information in the report must be current as of a date no more than 45 days prior to that date.  In addition, if a new brokerage account is opened during the course of the year, the Chief Compliance Officer or his designee must be notified immediately.  


The information required by the above paragraph must be provided to the Chief Compliance Officer or his designee on an annual basis, and the report of such should be submitted with the annual holdings reports described below.


Each of these accounts is required to furnish duplicate confirmations and statements to the Chief Compliance Officer or his designee. These statements and confirms for each series of the Trust may be sent to the Advisers.


INITIAL HOLDINGS REPORT

Within ten days of becoming an Access Person (and with information that is current as of a date no more than 45 days prior to the date that the report was submitted), each Access Person, except Independent Trustees must submit a holdings report that must contain, at a minimum, the title and type of Security, and as applicable, the exchange ticker symbol or CUSIP number, number of shares, and principal amount of each Covered Security in which the Access Person has any direct or indirect Beneficial Ownership.  This report must state the date on which it is submitted.


ANNUAL HOLDINGS REPORTS


All Access Persons, except Independent Trustees, must supply the information that is required in the initial holdings report on an annual basis, and such information must be current as of a date no more than 45 days prior to the date that the report was submitted.  Such reports must state the date on which they are submitted.


QUARTERLY TRANSACTION REPORTS


All Access Persons shall report to the Chief Compliance Officer or his designee the following information with respect to transactions in a Covered Security in which such person has, or by reason of such transaction acquires, any direct or indirect Beneficial Ownership in the Covered Security:


·

The date of the transaction, the title, and as applicable the exchange ticker symbol or CUSIP number, interest rate and maturity date, number of shares, and the principal amount of each Covered Security;

·

The nature of the transaction (i.e., purchase, sale or any other type of acquisition or disposition);

·

The price of the Covered Security at which the transaction was effected; and

·

The name of the broker, dealer, or bank with or through whom the transaction was effected.

·

The date the Access Person Submits the Report.


Reports pursuant to this section of this Code shall be made no later than 30 days after the end of the calendar quarter in which the transaction to which the report relates was effected, and shall include a certification that the reporting person has reported all Personal Securities Transactions required to be disclosed or reported pursuant to the requirements of this Code. Confirmations and Brokerage Statements sent directly to each Adviser’s address noted above is an acceptable form of a quarterly transaction report.


An Independent Trustee need only make a quarterly transaction report if he or she, at the time of the transaction, knew, or in the ordinary course of fulfilling his or her official duties as a Trustee, should have known that during the 15-day period immediately preceding or following the date of the transaction by the Independent Trustee, the Covered Security was purchased or sold by a Fund or was considered for purchase or sale by a Fund.



ENFORCEMENTS AND PENALTIES


The Chief Compliance Officer or his designee shall review the transaction information supplied by Access Persons.  If a transaction appears to be a violation of this Code, the transaction will be reported to the Trusts Board of Trustees.


Upon being informed of a violation of this Code, the Trusts Board of Trustees may impose sanctions as it deems appropriate, including but not limited to, a letter of censure or suspension, termination of the employment of the violator, or a request for disgorgement of any profits received from a securities transaction effected in violation of this Code.  The Trusts shall impose sanctions in accordance with the principle that no Access Person may profit at the expense of its clients. Any losses are the responsibility of the violator. Any profits realized on personal securities transactions in violation of the Code must be disgorged in a manner directed by the Board of Trustees.


Annually, the Chief Compliance Officer at each regular meeting of the Board shall issue a report on Personal Securities Transactions by Access Person. The report submitted to the board shall:


·

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

·

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

·

Identify any recommended changes in existing restrictions or procedures based upon the experience under the Code, evolving industry practices or developments in applicable laws and regulations.




ACKNOWLEDGMENT


The Trust must provide all Access Persons with a copy of this Code.  Upon receipt of this Code, all Access Persons must do the following:


All new Access Persons must read the Code, complete all relevant forms supplied by the Chief Compliance Officer or his designee (including a written acknowledgement of their receipt of the Code), and schedule a meeting with the Chief Compliance Officer or his designee to discuss the provisions herein within two calendar weeks of employment.


Existing Access Persons who did not receive this Code upon hire, for whatever reason, must read the Code, complete all relevant forms supplied by the Chief Compliance Officer or his designee (including a written acknowledgement of their receipt of the Code), and schedule a meeting with the Chief Compliance Officer or his designee to discuss the provisions herein at the earliest possible time, but no later than the end of the current quarter.


All Access Persons must certify on an annual basis that they have read and understood the Code.




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