Form N-CSR Northern Lights Fund For: Sep 30
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securities and exchange commission
washington, d.c. 20549
form n-csr
certified shareholder report of registered management
investment companies
Investment Company Act file number 811-21720
Northern Lights Fund Trust
(Exact name of registrant as specified in charter)
225 Pictoria Drive, Suite 450 Cincinnati, OH 45246
(Address of principal executive offices) (Zip code)
Richard Malinowski, Gemini Fund Services, LLC.
17645 Wright Street, Omaha, Nebraska 68130
(Name and address of agent for service)
Registrant's telephone number, including area code: 631-470-2600
Date of fiscal year end: 9/30
Date of reporting period: 9/30/19
Item 1. Reports to Stockholders.
| Grant Park Multi Alternative Strategies Fund | ||
| Class A shares: GPAAX | Class C shares: GPACX | Class I shares: GPAIX |
| Class N shares: GPANX | ||
| Annual Report | ||
| September 30, 2019 | ||
| Distributed by Northern Lights Distributors, LLC | ||
| Member FINRA | ||
| This report is authorized for distribution only to shareholders and to others who have received a | ||
| copy of the Prospectus. | ||
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s website www.grantparkfunds.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically or to continue receiving paper copies of shareholder reports, which are available free of charge, by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by following the instructions included with paper Fund documents that have been mailed to you.
1
Performance
Review for the Grant Park Multi Alternative Strategies Fund
October 1, 2018 – September 30, 2019
Past performance does not guarantee future results. Source: Morningstar
Dear Shareholder:
The Fund’s positive performance during the past 12 months resulted from the Fund’s ability to identify profitable opportunities across global financial and commodities markets. A quarter-by-quarter review provides a summary of the factors that drove Fund performance.
Q4 2018
The Fund’s performance for the quarter was -2.45%. Global economic growth concerns and an escalation of the U.S. and China trade conflict caused a significant decline across global equity markets. Positive returns in fixed income, currencies, and commodities sectors partially offset Fund losses.
Q1 2019
The Fund’s performance for the quarter was +5.21%. Performance was primarily driven by the U.S. Federal Reserve’s decision to lower interest rates. Equity and fixed income markets rallied as the global financial markets rapidly repriced. Losses in currencies and commodities markets partially offset Fund gains.
Q2 2019
The Fund’s performance for the quarter was +5.41%. Accommodative monetary policies drove global fixed income interest rates to historic lows and debt prices rallied in reaction, as did commodities and currencies markets. Equity markets reacted negatively to on-going trade tensions between the U.S. and China and sector performance for the quarter was slightly negative.
Q3 2019
The Fund’s performance for the quarter was +2.31%. Rallies in the fixed income markets were extended as the European Central Bank revised its policies and continued to ease monetary policy. Fund performance for the quarter was led by fixed income, currencies, and commodities investments. Performance in the equities markets was negative.
2
Distributions
Fund
Dividend & Capital Gains Distributions
Record Date: December 12,
2018
Ex-Dividend/Payable/Reinvestment Date: Dec 13, 2018
| Share Class |
Reinvestment Price |
Dividend Income |
Short-Term Capital Gain |
Long-Term Capital Gain |
Distribution Total |
| A (GPAAX) | $10.36 | $0.0000 | $0.0000 | $0.1598 | $0.1598 |
| C (GPACX) | $10.09 | $0.0000 | $0.0000 | $0.1598 | $0.1598 |
| I (GPAIX) | $10.46 | $0.0000 | $0.0000 | $0.1598 | $0.1598 |
| N (GPANX) | $10.38 | $0.0000 | $0.0000 | $0.1598 | $0.1598 |
Past distributions are no guarantee of future distributions or performance results.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Grant Park Funds. This and other important information about the Fund is contained in the Prospectus, which can be obtained by calling 855.501.4758. The Prospectus should be read carefully before investing. The Grant Park Multi Alternative Strategies Fund is distributed by Northern Lights Distributions, LLC member FINRA/SIPC. Dearborn Capital Management, LLC in not affiliated with Northern Lights Distributors, LLC.
The overall, one-year performance for the Grant Park Multi Alternative Strategies Fund for the fiscal year ended September 30, 2019 as compared to its benchmarks was:
| 1 Year Return | |
| GPAAX | 10.40% |
| GPAAX (with load) | 4.09% |
| GPACX | 9.61% |
| GPAIX | 10.68% |
| GPANX | 10.38% |
| Barclays Capital 1-3 Year U.S. Treasury Bond Index | 4.43% |
| Barclays Capital U.S. Government/Corporate Long Bond Index | 22.12% |
Investment Outlook
The Fund’s active management is primarily driven by a quantitative analysis of price movements within its investment universe. Of the multiple factors that affect price movements, rising uncertainty about the global economic outlook and fundamental monetary policies continue to heavily weigh on market performance. As trade disputes begin to adversely impact global economic growth, central banks have committed to easing monetary policies. These factors combined to increase volatility risks across markets during the past 12 months. Moving forward, we believe the key factors that will drive market performance during the next year will be driven by the ability of the regional policy makers in North America, Europe, and China, among others, to effectively implement monetary and trade policies that can provide the basis for sustaining positive economic growth.
In the U.S., the Federal Reserve has committed to decreasing interest rates to support economic growth. Markets may react negatively if the Federal Reserve is not perceived to be reliably executing an effective set of policies – either by not changing interest rates quickly enough, by changing its direction unexpectedly, or by seeming to lack the necessary tools to positively impact the direction of the U.S. economy. The financial markets will also be paying close attention to the 2020 presidential, congressional and state elections and the results of these elections will likely be one of the key drivers of market volatility. Trade and tariff policies will continue to add uncertainty in the financial and commodities markets.
3
In the Eurozone, the European Central Bank has committed to increasing quantitative easing to stimulate growth. The United Kingdom’s exit from the European Union enters its fourth year of debate and the inability to reach an agreement could produce a series of unexpected consequences for the EU and UK. Similarly, the UK’s agreement with the EU and subsequent departure could also produce unexpected consequences during the two-year transition period.
In China, government officials have responded to the country’s slowing economy by easing monetary policies to support growth. The primary challenge will be to manage weakening manufacturing and trade caused by the tariffs dispute with the U.S. Japan’s decades-long monetary easing policy has not succeeded in producing significantly higher inflation. The main question for investors is whether the Bank of Japan (BOJ) will take any other monetary easing actions.
Looking ahead looks similar to the recent past. The Fund identified trading opportunities as global regions addressed their individual economies. The current challenges are significant and we believe they will continue to produce investment opportunities across financial and commodities markets. The Fund’s price-driven, quantitative investment strategies seek to profit from persistent price trends and from pricing dislocations, which are created as each global economy pursues regional priorities. We feel the need for aggressive risk management and active trading will be the keys to pursuing investment opportunities.
We appreciate your support and commitment to the Fund.
3826-NLD-10/30/2019
4
| Grant Park Multi Alternative Strategies Fund |
| PORTFOLIO REVIEW (Unaudited) |
| September 30, 2019 |
The Fund’s performance figures* for the periods ended September 30, 2019, as compared to its benchmarks:
| Inception - | |||
| Annualized | September 30, 2019 ** | ||
| One Year | Five Year | (Annualized) | |
| Grant Park Multi Alternative Strategies Fund - Class A | 10.40% | 4.23% | 4.69% |
| Grant Park Multi Alternative Strategies Fund - Class A with load | 4.09% | 2.99% | 3.62% |
| Grant Park Multi Alternative Strategies Fund - Class C | 9.61% | 3.46% | 3.93% |
| Grant Park Multi Alternative Strategies Fund - Class I | 10.68% | 4.48% | 4.96% |
| Grant Park Multi Alternative Strategies Fund - Class N | 10.38% | 4.24% | 4.72% |
| Bloomberg Barclays 1-3 Year U.S. Treasury Bond Index *** | 4.43% | 1.33% | 1.23% |
| Bloomberg Barclays U.S. Government/Corporate Long Bond Index **** | 22.12% | 6.85% | 8.18% |
| * | The performance data quoted here represents past performance. The performance comparison includes reinvestment of all dividends and capital gains and has been adjusted for the Class A maximum applicable sales charge of 5.75%. Current performance may be lower or higher than the performance data quoted above. Past performance is no guarantee of future results. The investment return and principal value of an investment will fluctuate so that investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. Performance figures for periods greater than one year are annualized. The Fund’s total annual operating expenses are 1.94% for Class A shares, 2.69% for Class C shares, 1.69% for Class I shares, and 1.94% for Class N shares per the Fund’s Prospectus dated January 28, 2019. Class A Shares are subject to a maximum deferred sales charge of 1.00%. Redemptions made within 60 days of purchase of any share class may be assessed a redemption fee of 1.00%. The Fund’s advisor has agreed to waive and/or reimburse certain expenses of the Fund. Absent this agreement, the performance shown would have been lower. For performance information current to the most recent month-end, please call toll-free 1-855-501-4758. |
| ** | Inception date is December 31, 2013. |
| *** | The Bloomberg Barclays 1-3 Year U.S. Treasury Bond Index measures the performance of U.S. Treasury securities that have a remaining maturity of at least one year and less than three years. Investors can not invest directly in an index. |
| **** | The Bloomberg Barclays U.S. Government/Corporate Long Bond Index measures the performance of all medium and larger public issues of U.S. Treasury, agency, investment-grade corporate bonds with maturities longer than 10 years. Investors can not invest directly in an index. |
Comparison of the Change in Value of a $10,000 Investment
5
| Grant Park Multi Alternative Strategies Fund |
| PORTFOLIO REVIEW (Unaudited)(Continued) |
| September 30, 2019 |
Portfolio Composition as of September 30, 2019
| Holdings by type of investment | % of Net Assets at Value | |||
| Bonds & Notes | 61.8 | % | ||
| Short-Term Investment | 27.8 | % | ||
| Exchange Traded Funds | 5.6 | % | ||
| Closed-End Fund | 0.3 | % | ||
| Other Assets Less Liabilities - Net | 4.5 | % | ||
| 100.0 | % | |||
Please refer to the Consolidated Portfolio of Investments in this annual report for a detailed listing of the Fund’s holdings.
Derivative exposure is included in Other Assets Less Liabilities - Net.
6
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED PORTFOLIO OF INVESTMENTS |
| September 30, 2019 |
| Shares | Fair Value | |||||||
| CLOSED-END FUND - 0.3% | ||||||||
| 49,000 | Eaton Vance Limited Duration Income Fund (Cost - $615,930) | $ | 612,500 | |||||
| EXCHANGE TRADED FUNDS - 5.6% | ||||||||
| DEBT FUND - 0.4% | ||||||||
| 32,000 | SPDR Bloomberg Barclays Short Term High Yield ETF | 864,320 | ||||||
| EQUITY FUNDS - 5.2% | ||||||||
| 3,474 | iShares Core S&P 500 ETF | 1,037,059 | ||||||
| 14,475 | iShares MSCI ACWI ETF | 1,067,531 | ||||||
| 22,209 | iShares MSCI ACWI ex US ETF | 1,022,725 | ||||||
| 15,844 | iShares MSCI EAFE ETF | 1,033,187 | ||||||
| 18,031 | iShares MSCI EAFE Small-Cap ETF | 1,031,914 | ||||||
| 24,567 | iShares MSCI Emerging Markets ETF | 1,004,053 | ||||||
| 6,295 | iShares Russell 1000 ETF | 1,035,779 | ||||||
| 6,618 | iShares Russell 2000 ETF | 1,001,568 | ||||||
| 19,003 | iShares Russell Mid-Cap ETF | 1,063,218 | ||||||
| 11,395 | iShares U.S. Real Estate ETF | 1,065,888 | ||||||
| 10,362,922 | ||||||||
| TOTAL EXCHANGE TRADED FUNDS (Cost - $8,440,571) | 11,227,242 | |||||||
| Coupon Rate | ||||||||||||
| Par Value | (%) | Maturity | ||||||||||
| BONDS & NOTES - 61.8% | ||||||||||||
| AUTO MANUFACTURERS - 2.3% | ||||||||||||
| $ | 4,405,000 | General Motors Financial Co., Inc. | 3.700 | 11/24/2020 | 4,461,174 | |||||||
| BANKS - 9.6% | ||||||||||||
| 4,000,000 | Bank of Montreal | 2.100 | 6/15/2020 | 4,003,619 | ||||||||
| 5,000,000 | Branch Banking & Trust Co. | 2.100 | 1/15/2020 | 4,999,341 | ||||||||
| 5,000,000 | Fifth Third Bank | 2.200 | 10/30/2020 | 5,010,205 | ||||||||
| 243,000 | Goldman Sachs Group, Inc. | 2.600 | 4/23/2020 | 243,475 | ||||||||
| 2,700,000 | Huntington Bancshares, Inc. | 3.150 | 3/14/2021 | 2,737,065 | ||||||||
| 2,200,000 | Wells Fargo & Co. | 4.600 | 4/1/2021 | 2,280,820 | ||||||||
| 19,274,525 | ||||||||||||
| BEVERAGES - 1.3% | ||||||||||||
| 2,500,000 | Anheuser-Busch InBev Worldwide, Inc. | 2.500 | 7/15/2022 | 2,535,758 | ||||||||
| COMPUTERS - 2.5% | ||||||||||||
| 5,000,000 | Apple, Inc. | 2.100 | 9/12/2022 | 5,037,110 | ||||||||
| INSURANCE - 5.0% | ||||||||||||
| 5,000,000 | Berkshire Hathaway, Inc. | 2.200 | 3/15/2021 | 5,027,314 | ||||||||
| 5,000,000 | New York Life Global Funding | 2.300 | 6/10/2022 | 5,029,687 | ||||||||
| 10,057,001 | ||||||||||||
| SOFTWARE - 4.0% | ||||||||||||
| 8,000,000 | Microsoft Corp. | 1.550 | 8/8/2021 | 7,968,871 | ||||||||
| U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 37.1% | ||||||||||||
| 2,000,000 | Federal Farm Credit Banks | 1.520 | 2/3/2020 | 1,998,020 | ||||||||
| 3,000,000 | Federal Farm Credit Banks | 2.000 | 7/19/2021 | 3,000,077 | ||||||||
| 2,366,000 | Federal Farm Credit Banks | 1.990 | 8/23/2021 | 2,359,324 | ||||||||
| 10,000,000 | Federal Home Loan Banks | 1.750 | 7/13/2020 | 9,984,774 | ||||||||
See accompanying notes to financial statements.
7
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED PORTFOLIO OF INVESTMENTS (Continued) |
| September 30, 2019 |
| Coupon Rate | ||||||||||||
| Par Value | (%) | Maturity | Fair Value | |||||||||
| U.S. GOVERNMENT AND AGENCY OBLIGATIONS - 37.1% (Continued) | ||||||||||||
| 2,000,000 | Federal Home Loan Banks | 2.000 | 8/18/2020 | $ | 2,000,081 | |||||||
| 5,000,000 | Federal Home Loan Banks | 2.375 | 3/12/2021 | 5,043,335 | ||||||||
| 14,000,000 | Federal Home Loan Banks | 2.250 | 6/11/2021 | 14,137,349 | ||||||||
| 1,900,000 | Federal Home Loan Banks | 1.960 | 8/17/2021 | 1,897,351 | ||||||||
| 5,000,000 | Federal Home Loan Banks | 2.625 | 12/10/2021 | 5,104,792 | ||||||||
| 2,500,000 | Federal Home Loan Mortgage Corp. | 1.700 | 6/29/2020 | 2,499,735 | ||||||||
| 4,000,000 | Federal Home Loan Mortgage Corp. | 1.450 | 8/10/2020 | 3,986,954 | ||||||||
| 2,000,000 | Federal Home Loan Mortgage Corp. | 1.500 | 8/28/2020 | 1,994,152 | ||||||||
| 6,000,000 | Federal Home Loan Mortgage Corp. | 2.375 | 2/16/2021 | 6,049,327 | ||||||||
| 2,500,000 | Federal Home Loan Mortgage Corp. | 2.150 | 11/24/2021 | 2,501,107 | ||||||||
| 1,500,000 | Federal National Mortgage Association | 2.000 | 7/26/2021 | 1,500,231 | ||||||||
| 2,000,000 | Federal National Mortgage Association | 1.875 | 10/30/2020 | 1,998,967 | ||||||||
| 8,000,000 | Tennessee Valley Authority | 3.875 | 2/15/2021 | 8,226,310 | ||||||||
| 74,281,886 | ||||||||||||
| TOTAL BONDS & NOTES (Cost - $122,871,385) | 123,616,325 | |||||||||||
| Shares | ||||||||
| SHORT-TERM INVESTMENT - 27.8% | ||||||||
| MONEY MARKET FUND - 27.8% | ||||||||
| 55,705,775 | Morgan Stanley Institutional Liquidity Fund - Government Portfolio - Institutional Class, to yield 2.12% * | 55,705,775 | ||||||
| TOTAL SHORT-TERM INVESTMENT - (Cost - $55,705,775) | ||||||||
| TOTAL INVESTMENTS - 95.5% (Cost - $187,633,661) | $ | 191,161,842 | ||||||
| OTHER ASSETS LESS LIABILITIES - NET - 4.5% | 9,029,953 | |||||||
| NET ASSETS - 100.0% | $ | 200,191,795 | ||||||
| * | Money Market Fund; Interest rate reflects seven-day effective yield on September 30, 2019. A portion represents positions held in GPMAS Fund Limited. |
ETF Exchange Traded Fund
LONG FUTURES CONTRACTS
| Unrealized | ||||||||||||
| Long Contracts | Description | Expiration | Notional Value ^ | Appreciation/(Depreciation) | ||||||||
| 290 | 10 YR Mini JGB Future | December 2019 | 41,575,386 | $ | (62,372 | ) | ||||||
| 92 | 3 Mo Euribor | June 2021 | 25,212,521 | (26,137 | ) | |||||||
| 243 | 3 Mo EuroYen TFX | June 2020 | 56,241,864 | (4,803 | ) | |||||||
| 748 | 3 Mo Sterling | June 2021 | 114,661,262 | 302,655 | ||||||||
| 170 | 90 Day Euro$ Future | June 2021 | 41,915,625 | 2,600 | ||||||||
| 20 | Brent Crude Future + | December 2019 | 1,185,000 | (50,790 | ) | |||||||
| 15 | Cattle Feeder Future + | November 2019 | 1,064,438 | 3,425 | ||||||||
| 36 | Cocoa Future + | December 2019 | 879,120 | (5,030 | ) | |||||||
| 79 | Corn Future + | December 2019 | 1,532,600 | 23,713 | ||||||||
| 34 | Dax Index Future | December 2019 | 11,500,906 | 66,023 | ||||||||
| 168 | Dollar Index Future | December 2019 | 16,635,528 | 183,775 | ||||||||
| 57 | Euro CHF 3 Mo ICE | September 2020 | 14,415,058 | (33,033 | ) | |||||||
| 83 | Euro-Bund Future | December 2019 | 15,767,297 | (156,925 | ) | |||||||
| 121 | FTSE 100 Index Future | December 2019 | 11,009,414 | 90,885 | ||||||||
| 113 | Gold + | December 2019 | 16,643,770 | 373,450 | ||||||||
| 29 | LME Nickel Future + | December 2019 | 2,969,310 | 99,000 | ||||||||
| 1 | LME Zinc Future + | December 2019 | 59,788 | (28,887 | ) | |||||||
| 53 | Long Gilt Future | December 2019 | 8,767,472 | 67,145 | ||||||||
| 28 | Low Su Gasoline + | November 2019 | 1,642,200 | (72,250 | ) | |||||||
See accompanying notes to financial statements.
8
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED PORTFOLIO OF INVESTMENTS (Continued) |
| September 30, 2019 |
LONG FUTURES CONTRACTS (Continued)
| Unrealized | ||||||||||||
| Long Contracts | Description | Expiration | Notional Value ^ | Appreciation/(Depreciation) | ||||||||
| 160 | Mini MSCI Emerging Markets Index Future | December 2019 | 8,015,200 | $ | (187,190 | ) | ||||||
| 8 | Nasdaq 100 E-mini | December 2019 | 1,243,280 | (9,460 | ) | |||||||
| 120 | Nikkei 225 (SGX) | December 2019 | 12,069,396 | 212,033 | ||||||||
| 4 | NY Harbor + | November 2019 | 318,730 | (18,770 | ) | |||||||
| 8 | Oat Future + | December 2019 | 110,300 | (1,725 | ) | |||||||
| 6 | Palladium Future + | December 2019 | 988,500 | 48,140 | ||||||||
| 22 | Platinum Future + | January 2020 | 978,120 | (68,395 | ) | |||||||
| 26 | S&P Mid Cap 400 E-mini | December 2019 | 5,038,800 | 19,535 | ||||||||
| 78 | S&P 500 E-mini | December 2019 | 11,616,150 | (33,351 | ) | |||||||
| 9 | Silver Future + | December 2019 | 764,910 | (24,845 | ) | |||||||
| 10 | Soybean Oil Future + | December 2019 | 174,480 | (6,930 | ) | |||||||
| 136 | US 10 Yr Note | December 2019 | 17,722,500 | (164,602 | ) | |||||||
| 94 | US 5 Yr Note | December 2019 | 11,199,953 | (63,148 | ) | |||||||
| 122 | US Long Bond Future | December 2019 | 19,802,125 | (227,711 | ) | |||||||
| Net Unrealized Appreciation from Open Long Futures Contracts | $ | 246,025 | ||||||||||
| SHORT FUTURES CONTRACTS | ||||||||||||
| Short | Unrealized | |||||||||||
| Contracts | Description | Expiration | Notional Value ^ | Appreciation/(Depreciation) | ||||||||
| 126 | Australian Dollar Future | December 2019 | 8,527,680 | $ | 148,445 | |||||||
| 46 | Canola Future + | November 2019 | 313,592 | (6,623 | ) | |||||||
| 46 | CHF Currency Future + | December 2019 | 5,797,150 | 36,212 | ||||||||
| 16 | Coffee ‘C’ Future + | December 2019 | 16,184 | (19,669 | ) | |||||||
| 146 | Euro Fx Future | December 2019 | 20,006,563 | 323,470 | ||||||||
| 14 | FCOJ-A Future + | November 2019 | 209,475 | (3,667 | ) | |||||||
| 7 | Gasoline RBOB Future + | November 2019 | 460,551 | 1,327 | ||||||||
| 130 | GBP Currency Future | December 2019 | 10,019,750 | 48,684 | ||||||||
| 16 | Hang Seng Index Future | October 2019 | 2,657,550 | 37,054 | ||||||||
| 55 | JPN Yen Currency Future | December 2019 | 6,392,375 | 10,944 | ||||||||
| 9 | LME Copper Future + | December 2019 | 1,287,844 | (34,444 | ) | |||||||
| 82 | LME Primary Aluminum Future + | December 2019 | 3,542,400 | 71,544 | ||||||||
| 2 | Lumber Future + | January 2020 | 81,906 | 935 | ||||||||
| 29 | Natural Gas Future + | November 2019 | 675,700 | (1,360 | ) | |||||||
| 184 | New Zealand Dollar Future | December 2019 | 11,544,160 | 309,560 | ||||||||
| 9 | Rough Rice + | January 2020 | 220,410 | (730 | ) | |||||||
| 12 | Soybean Future + | November 2019 | 543,600 | (11,987 | ) | |||||||
| 84 | Soybean Meal + | December 2019 | 2,528,400 | (51,050 | ) | |||||||
| 27 | Wheat Future + | December 2019 | 669,263 | (51,900 | ) | |||||||
| Net Unrealized Appreciation from Open Short Futures Contracts | $ | 806,745 | ||||||||||
| Total Net Unrealized Appreciation from Open Futures Contracts | $ | 1,052,770 | ||||||||||
| + | This investment is a holding of GPMAS Fund Limited. |
| ^ | The amounts shown are the underlying reference notional amounts to stock exchange indices and equities upon which the fair value of the futures contracts held by the Fund are based. Notional values do not represent the current fair value of, and are not necessarily indicative of the future cash flows of the Fund’s futures contracts. Further, the underlying price changes in relation to the variables specified by the notional values affects the fair value of these derivative financial instruments. The notional values as set forth within this schedule do not purport to represent economic value at risk to the Fund. |
See accompanying notes to financial statements.
9
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES |
| September 30, 2019 |
| Assets | ||||
| Investment securities: | ||||
| Securities at cost | $ | 187,633,661 | ||
| Securities at fair value | $ | 191,161,842 | ||
| Deposit at Broker for futures contracts | 7,364,664 | |||
| Net unrealized appreciation from open futures contracts | 1,052,770 | |||
| Receivable for Fund shares sold | 257,728 | |||
| Dividends and interest receivable | 720,105 | |||
| Prepaid expenses and other assets | 58,336 | |||
| Total Assets | 200,615,445 | |||
| Liabilities | ||||
| Payable for Fund shares redeemed | 129,886 | |||
| Investment advisory fees payable | 201,864 | |||
| Payable to related parties | 21,180 | |||
| Distribution (12b-1) fees payable | 15,091 | |||
| Accrued expenses and other liabilities | 55,629 | |||
| Total Liabilities | 423,650 | |||
| NET ASSETS | $ | 200,191,795 | ||
| Net Assets Consist of: | ||||
| Paid in capital ($0 par value, unlimited shares authorized) | $ | 188,115,809 | ||
| Total distributable earnings | 12,075,986 | |||
| NET ASSETS | $ | 200,191,795 | ||
See accompanying notes to financial statements.
10
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES (Continued) |
| September 30, 2019 |
| Net Asset Value Per Share: | ||||
| Class A Shares | ||||
| Net Assets | $ | 9,371,070 | ||
| Shares of beneficial interest outstanding | 791,516 | |||
| Net asset value (Net Assets ÷ Shares Outstanding) and redemption price per share (a) | $ | 11.84 | ||
| Maximum offering price per share (net asset value plus maximum sales charge of 5.75%) (b) | $ | 12.56 | ||
| Class C Shares | ||||
| Net Assets | $ | 13,008,135 | ||
| Shares of beneficial interest outstanding | 1,134,390 | |||
| Net asset value (Net Assets ÷ Shares Outstanding), offering price and redemption price per share (a) | $ | 11.47 | ||
| Class I Shares | ||||
| Net Assets | $ | 167,041,350 | ||
| Shares of beneficial interest outstanding | 13,949,283 | |||
| Net asset value (Net Assets ÷ Shares Outstanding), offering price and redemption price per share (a) | $ | 11.97 | ||
| Class N Shares | ||||
| Net Assets | $ | 10,771,240 | ||
| Shares of beneficial interest outstanding | 908,197 | |||
| Net asset value (Net Assets ÷ Shares Outstanding), offering price and redemption price per share (a) | $ | 11.86 | ||
| (a) | Redemptions made within 60 days of purchase may be assessed a redemption fee of 1.00%. |
| (b) | On investments of $25,000 or more, the offering price is reduced. |
See accompanying notes to financial statements.
11
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED STATEMENT OF OPERATIONS |
| For The Year Ended September 30, 2019 |
| Investment Income | ||||
| Dividends | $ | 402,286 | ||
| Interest | 4,092,055 | |||
| Total Investment Income | 4,494,341 | |||
| Expenses | ||||
| Investment advisory fees | 2,276,102 | |||
| Distribution (12b-1) fees: | ||||
| Class A | 35,982 | |||
| Class C | 130,100 | |||
| Class N | 31,364 | |||
| Administrative services fees | 183,650 | |||
| Third party administrative servicing fees | 176,757 | |||
| Transfer agent fees | 111,904 | |||
| Registration fees | 59,699 | |||
| Printing and postage expenses | 56,960 | |||
| Accounting services fees | 56,223 | |||
| Compliance officer fees | 37,680 | |||
| Audit and tax fees | 35,153 | |||
| Custodian fees | 20,469 | |||
| Trustees fees and expenses | 18,988 | |||
| Legal Fees | 17,889 | |||
| Insurance expense | 6,658 | |||
| Other expenses | 1,195 | |||
| Total Expenses | 3,256,773 | |||
| Less: Fees waived by the Advisor | (14,090 | ) | ||
| Net Expenses | 3,242,683 | |||
| Net Investment Income | 1,251,658 | |||
| Realized and Unrealized Gain (Loss) | ||||
| Net realized gain (loss) from: | ||||
| Investments | 4,436,941 | |||
| Foreign currency transactions | 401,439 | |||
| Future commissions | (399,919 | ) | ||
| Futures contracts | 20,528,171 | |||
| 24,966,632 | ||||
| Net change in unrealized appreciation (depreciation) of: | ||||
| Investments | (5,070,256 | ) | ||
| Foreign currency translations | 275,267 | |||
| Futures contracts | (5,517,464 | ) | ||
| (10,312,453 | ) | |||
| Net Realized and Unrealized Gain | 14,654,179 | |||
| Net Increase in Net Assets Resulting From Operations | $ | 15,905,837 | ||
See accompanying notes to financial statements.
12
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS |
| For the | For the | |||||||
| Year Ended | Year Ended | |||||||
| September 30, 2019 | September 30, 2018 | |||||||
| From Operations | ||||||||
| Net investment income | $ | 1,251,658 | $ | 835,012 | ||||
| Net realized gain from investment transactions and futures contracts | 24,966,632 | 4,755,708 | ||||||
| Net change in unrealized appreciation (depreciation) of investments and futures contracts | (10,312,453 | ) | 5,402,179 | |||||
| Net increase in net assets resulting from operations | 15,905,837 | 10,992,899 | ||||||
| DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
| From net realized gains: | ||||||||
| Class A | — | (407,919 | ) | |||||
| Class C | — | (219,004 | ) | |||||
| Class I | — | (3,540,820 | ) | |||||
| Class N | — | (646,291 | ) | |||||
| Total distributions paid * | ||||||||
| Class A | (277,232 | ) | — | |||||
| Class C | (200,834 | ) | — | |||||
| Class I | (2,330,051 | ) | — | |||||
| Class N | (187,950 | ) | — | |||||
| Total distributions to shareholders | (2,996,067 | ) | (4,814,034 | ) | ||||
| Capital Transactions | ||||||||
| Class A: | ||||||||
| Proceeds from shares sold | 1,654,394 | 9,736,738 | ||||||
| Net asset value of shares issued in reinvestment of distributions | 267,939 | 388,701 | ||||||
| Redemption fee proceeds | 349 | 1,364 | ||||||
| Payments for shares redeemed | (17,393,268 | ) | (20,625,374 | ) | ||||
| Net decrease from capital transactions | (15,470,586 | ) | (10,498,571 | ) | ||||
| Class C: | ||||||||
| Proceeds from shares sold | 775,985 | 4,511,789 | ||||||
| Net asset value of shares issued in reinvestment of distributions | 191,101 | 208,208 | ||||||
| Redemption fee proceeds | 268 | 749 | ||||||
| Payments for shares redeemed | (3,028,715 | ) | (3,217,238 | ) | ||||
| Net increase (decrease) from capital transactions | (2,061,361 | ) | 1,503,508 | |||||
| Class I: | ||||||||
| Proceeds from shares sold | 58,178,066 | 79,949,250 | ||||||
| Net asset value of shares issued in reinvestment of distributions | 2,173,665 | 3,256,770 | ||||||
| Redemption fee proceeds | 3,312 | 11,460 | ||||||
| Payments for shares redeemed | (98,487,247 | ) | (87,486,214 | ) | ||||
| Net decrease from capital transactions | (38,132,204 | ) | (4,268,734 | ) | ||||
| * | Distributions from net investment income and net realized capital gains are combined for the year ended, September 30, 2019. See “New Accounting pronouncements” in the Notes to Financial Statements for more information. The dividends and distributions to shareholders for the year ended September 30, 2018 have not been reclassified to conform to the current year presentation. |
See accompanying notes to financial statements.
13
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS (Continued) |
| For the | For the | |||||||
| Year Ended | Year Ended | |||||||
| September 30, 2019 | September 30, 2018 | |||||||
| Capital Transactions (Continued) | ||||||||
| Class N: | ||||||||
| Proceeds from shares sold | $ | 1,578,984 | $ | 4,196,887 | ||||
| Net asset value of shares issued in reinvestment of distributions: | 168,569 | 586,938 | ||||||
| Redemption fee proceeds | 284 | 1,678 | ||||||
| Payments for shares redeemed | (10,411,846 | ) | (24,374,915 | ) | ||||
| Net decrease from capital transactions | (8,664,009 | ) | (19,589,412 | ) | ||||
| Total Decrease in Net Assets From Capital Transactions | (64,328,160 | ) | (32,853,209 | ) | ||||
| Net Assets | ||||||||
| Beginning of Year | 251,610,185 | 278,284,529 | ||||||
| End of Year ** | $ | 200,191,795 | $ | 251,610,185 | ||||
| SHARE ACTIVITY | ||||||||
| Class A: | ||||||||
| Shares Sold | 151,111 | 860,239 | ||||||
| Shares Reinvested | 25,863 | 34,613 | ||||||
| Shares Redeemed | (1,588,864 | ) | (1,839,092 | ) | ||||
| Net decrease in shares of beneficial interest outstanding | (1,411,890 | ) | (944,240 | ) | ||||
| Class C: | ||||||||
| Shares Sold | 72,593 | 407,536 | ||||||
| Shares Reinvested | 18,940 | 18,877 | ||||||
| Shares Redeemed | (286,355 | ) | (296,006 | ) | ||||
| Net increase (decrease) in shares of beneficial interest outstanding | (194,822 | ) | 130,407 | |||||
| Class I: | ||||||||
| Shares Sold | 5,110,622 | 7,038,567 | ||||||
| Shares Reinvested | 207,807 | 287,955 | ||||||
| Shares Redeemed | (9,105,666 | ) | (7,805,688 | ) | ||||
| Net decrease in shares of beneficial interest outstanding | (3,787,237 | ) | (479,166 | ) | ||||
| Class N: | ||||||||
| Shares Sold | 137,931 | 371,045 | ||||||
| Shares Reinvested | 16,240 | 52,172 | ||||||
| Shares Redeemed | (962,416 | ) | (2,133,493 | ) | ||||
| Net decrease in shares of beneficial interest outstanding | (808,245 | ) | (1,710,276 | ) | ||||
| ** | Net Assets - End of Period includes accumulated net investment loss of $7,645,965 as of September 30, 2018. |
See accompanying notes to financial statements.
14
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED FINANCIAL HIGHLIGHTS |
| Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Year Presented |
| Class A | ||||||||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Net asset value, beginning of year | $ | 10.89 | $ | 10.67 | $ | 11.23 | $ | 10.78 | $ | 10.58 | ||||||||||
| Activity from investment operations: | ||||||||||||||||||||
| Net investment income (loss) (1) | (0.01 | ) | 0.01 | (0.02 | ) | (0.05 | ) | (0.10 | ) | |||||||||||
| Net realized and unrealized gain (loss) | 1.12 | 0.40 | (0.36 | ) | 0.64 | 0.65 | ||||||||||||||
| Total from investment operations | 1.11 | 0.41 | (0.38 | ) | 0.59 | 0.55 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | (0.18 | ) | (0.06 | ) | (0.35 | ) | ||||||||||||
| Net realized gains | (0.16 | ) | (0.19 | ) | — | (0.08 | ) | — | ||||||||||||
| Total distributions | (0.16 | ) | (0.19 | ) | (0.18 | ) | (0.14 | ) | (0.35 | ) | ||||||||||
| Paid-in-capital from redemption fees (2) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| Net asset value, end of year | $ | 11.84 | $ | 10.89 | $ | 10.67 | $ | 11.23 | $ | 10.78 | ||||||||||
| Total return (3) | 10.40 | % | 3.80 | % | (3.36 | )% | 5.56 | % | 5.23 | % | ||||||||||
| Net assets, at end of year (000s) | $ | 9,371 | $ | 23,986 | $ | 33,575 | $ | 43,005 | $ | 23,547 | ||||||||||
| Ratios/Supplemental Data: | ||||||||||||||||||||
| Ratio of gross expenses to average net assets, including interest expense (4) | 1.84 | % | 1.78 | % | 1.81 | % (5) | 1.80 | % (5) | 1.82 | % (5) | ||||||||||
| Ratio of net expenses to average net assets, including interest expense | 1.83 | % | 1.78 | % | 1.83 | % | 1.83 | % | 1.82 | % | ||||||||||
| Ratio of net investment income (loss) to average net assets | (0.12 | )% | 0.08 | % | (0.22 | )% | (0.50 | )% | (0.87 | )% | ||||||||||
| Portfolio Turnover Rate | 41 | % | 89 | % | 51 | % | 17 | % | 129 | % | ||||||||||
| (1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
| (2) | Less than $0.005 per share. |
| (3) | Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gain distributions, if any. Had the advisor not absorbed a portion of Fund expenses for the year ended September 30, 2015 and September 30, 2019, total returns would have been lower. |
| (4) | Represents the ratio of expenses to average net assets absent fee waivers or expense recapture by the advisor. Interest expense is not included in the waiver. |
| (5) | Ratios of gross expenses to average net assets, excluding interest expense are 1.80%, 1.79% and 1.81%, for the years ended September 30, 2017, 2016 and 2015, respectively. |
See accompanying notes to financial statements.
15
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED FINANCIAL HIGHLIGHTS |
| Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Year Presented |
| Class C | ||||||||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Net asset value, beginning of year | $ | 10.63 | $ | 10.50 | $ | 11.08 | $ | 10.68 | $ | 10.53 | ||||||||||
| Activity from investment operations: | ||||||||||||||||||||
| Net investment income (loss) (1) | (0.11 | ) | (0.06 | ) | (0.09 | ) | (0.12 | ) | (0.18 | ) | ||||||||||
| Net realized and unrealized gain (loss) | 1.11 | 0.38 | (0.37 | ) | 0.62 | 0.65 | ||||||||||||||
| Total from investment operations | 1.00 | 0.32 | (0.46 | ) | 0.50 | 0.47 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | (0.12 | ) | (0.02 | ) | (0.32 | ) | ||||||||||||
| Net realized gains | (0.16 | ) | (0.19 | ) | — | (0.08 | ) | — | ||||||||||||
| Total distributions | (0.16 | ) | (0.19 | ) | (0.12 | ) | (0.10 | ) | (0.32 | ) | ||||||||||
| Paid-in-capital from redemption fees (2) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| Net asset value, end of year | $ | 11.47 | $ | 10.63 | $ | 10.50 | $ | 11.08 | $ | 10.68 | ||||||||||
| Total return (3) | 9.61 | % | 3.00 | % | (4.08 | )% | 4.71 | % | 4.52 | % | ||||||||||
| Net assets, at end of year (000s) | $ | 13,008 | $ | 14,126 | $ | 12,582 | $ | 9,897 | $ | 4,510 | ||||||||||
| Ratios/Supplemental Data: | ||||||||||||||||||||
| Ratio of gross expenses to average net assets, including interest expense (4) | 2.59 | % | 2.53 | % | 2.56 | % (5) | 2.54 | % (5) | 2.59 | % (5) | ||||||||||
| Ratio of net expenses to average net assets, including interest expense | 2.58 | % | 2.53 | % | 2.58 | % | 2.58 | % | 2.59 | % | ||||||||||
| Ratio of net investment income (loss) to average net assets | (1.03 | )% | (0.56 | )% | (0.85 | )% | (1.08 | )% | (1.64 | )% | ||||||||||
| Portfolio Turnover Rate | 41 | % | 89 | % | 51 | % | 17 | % | 129 | % | ||||||||||
| (1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
| (2) | Less than $0.005 per share. |
| (3) | Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gain distributions, if any. Had the advisor not absorbed a portion of Fund expenses for the year ended September 30, 2015 and September 30, 2019, total returns would have been lower. |
| (4) | Represents the ratio of expenses to average net assets absent fee waivers or expense recapture by the advisor. Interest expense is not included in the waiver. |
| (5) | Ratios of gross expenses to average net assets, excluding interest expense are 2.56%, 2.53% and 2.58%, for the years ended September 30, 2017, 2016 and 2015, respectively. |
See accompanying notes to financial statements.
16
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED FINANCIAL HIGHLIGHTS |
| Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Year Presented |
| Class I | ||||||||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Net asset value, beginning of year | $ | 10.98 | $ | 10.73 | $ | 11.29 | $ | 10.84 | $ | 10.61 | ||||||||||
| Activity from investment operations: | ||||||||||||||||||||
| Net investment income (loss) (1) | 0.08 | 0.05 | 0.01 | 0.00 | (2) | (0.07 | ) | |||||||||||||
| Net realized and unrealized gain (loss) | 1.07 | 0.39 | (0.37 | ) | 0.61 | 0.65 | ||||||||||||||
| Total from investment operations | 1.15 | 0.44 | (0.36 | ) | 0.61 | 0.58 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | (0.20 | ) | (0.08 | ) | (0.35 | ) | ||||||||||||
| Net realized gains | (0.16 | ) | (0.19 | ) | — | (0.08 | ) | — | ||||||||||||
| Total distributions | (0.16 | ) | (0.19 | ) | (0.20 | ) | (0.16 | ) | (0.35 | ) | ||||||||||
| Paid-in-capital from redemption fees (2) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| Net asset value, end of year | $ | 11.97 | $ | 10.98 | $ | 10.73 | $ | 11.29 | $ | 10.84 | ||||||||||
| Total return (3) | 10.68 | % | 4.06 | % | (3.14 | )% | 5.70 | % | 5.59 | % | ||||||||||
| Net assets, at end of year (000s) | $ | 167,041 | $ | 194,781 | $ | 195,509 | $ | 184,654 | $ | 77,087 | ||||||||||
| Ratios/Supplemental Data: | ||||||||||||||||||||
| Ratio of gross expenses to average net assets, including interest expense (4) | 1.59 | % | 1.53 | % | 1.56 | % (5) | 1.55 | % (5) | 1.59 | % (5) | ||||||||||
| Ratio of net expenses to average net assets, including interest expense | 1.58 | % | 1.53 | % | 1.58 | % | 1.58 | % | 1.59 | % | ||||||||||
| Ratio of net investment income (loss) to average net assets | 0.75 | % | 0.41 | % | 0.08 | % | 0.01 | % | (0.67 | )% | ||||||||||
| Portfolio Turnover Rate | 41 | % | 89 | % | 51 | % | 17 | % | 129 | % | ||||||||||
| (1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
| (2) | Less than $0.005 per share. |
| (3) | Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gain distributions, if any. Had the advisor not absorbed a portion of Fund expenses for the year ended September 30, 2015 and September 30, 2019, total returns would have been lower. |
| (4) | Represents the ratio of expenses to average net assets absent fee waivers or expense recapture by the advisor. Interest expense is not included in the waiver. |
| (5) | Ratios of gross expenses to average net assets, excluding interest expense are 1.56%, 1.54% and 1.58%, for the years ended September 30, 2017, 2016 and 2015, respectively. |
See accompanying notes to financial statements.
17
| Grant Park Multi Alternative Strategies Fund |
| CONSOLIDATED FINANCIAL HIGHLIGHTS |
| Per Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout Each Year Presented |
| Class N | ||||||||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| September 30, | September 30, | September 30, | September 30, | September 30, | ||||||||||||||||
| 2019 | 2018 | 2017 | 2016 | 2015 | ||||||||||||||||
| Net asset value, beginning of year | $ | 10.90 | $ | 10.69 | $ | 11.25 | $ | 10.81 | $ | 10.59 | ||||||||||
| Activity from investment operations: | ||||||||||||||||||||
| Net investment income (loss) (1) | 0.23 | 0.01 | (0.03 | ) | (0.02 | ) | (0.10 | ) | ||||||||||||
| Net realized and unrealized gain (loss) | 0.89 | 0.39 | (0.35 | ) | 0.61 | 0.66 | ||||||||||||||
| Total from investment operations | 1.12 | 0.40 | (0.38 | ) | 0.59 | 0.56 | ||||||||||||||
| Less distributions from: | ||||||||||||||||||||
| Net investment income | — | — | (0.18 | ) | (0.07 | ) | (0.34 | ) | ||||||||||||
| Net realized gains | (0.16 | ) | (0.19 | ) | — | (0.08 | ) | — | ||||||||||||
| Total distributions | (0.16 | ) | (0.19 | ) | (0.18 | ) | (0.15 | ) | (0.34 | ) | ||||||||||
| Paid-in-capital from redemption fees (2) | 0.00 | 0.00 | 0.00 | 0.00 | 0.00 | |||||||||||||||
| Net asset value, end of year | $ | 11.86 | $ | 10.90 | $ | 10.69 | $ | 11.25 | $ | 10.81 | ||||||||||
| Total return (3) | 10.38 | % | 3.80 | % | (3.35 | )% | 5.48 | % | 5.39 | % | ||||||||||
| Net assets, at end of year (000s) | $ | 10,771 | $ | 18,718 | $ | 36,619 | $ | 44,914 | $ | 13,017 | ||||||||||
| Ratios/Supplemental Data: | ||||||||||||||||||||
| Ratio of gross expenses to average net assets, including interest expense (4) | 1.84 | % | 1.78 | % | 1.81 | % (5) | 1.80 | % (5) | 1.83 | % (5) | ||||||||||
| Ratio of net expenses to average net assets, including interest expense | 1.83 | % | 1.78 | % | 1.83 | % | 1.84 | % | 1.83 | % | ||||||||||
| Ratio of net investment income (loss) to average net assets | 2.11 | % | 0.06 | % | (0.24 | )% | (0.20 | )% | (0.91 | )% | ||||||||||
| Portfolio Turnover Rate | 41 | % | 89 | % | 51 | % | 17 | % | 129 | % | ||||||||||
| (1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the period. |
| (2) | Less than $0.005 per share. |
| (3) | Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gain distributions, if any. Had the advisor not absorbed a portion of Fund expenses for the year ended September 30, 2015 and September 30, 2019, total returns would have been lower. |
| (4) | Represents the ratio of expenses to average net assets absent fee waivers or expense recapture by the advisor. Interest expense is not included in the waiver. |
| (5) | Ratios of gross expenses to average net assets, excluding interest expense are 1.81%, 1.81% and 1.82%, for the years ended September 30, 2017, 2016 and 2015, respectively. |
See accompanying notes to financial statements.
18
| Grant Park Multi Alternative Strategies Fund |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS |
| September 30, 2019 |
| 1. | ORGANIZATION |
The Grant Park Multi Alternative Strategies Fund (the “Fund”) is a diversified series of shares of beneficial interest of Northern Lights Fund Trust (the “Trust”), a statutory trust organized under the laws of the State of Delaware on January 19, 2005, and registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Fund’s investment objective is to seek to provide positive absolute returns.
The Fund offers four classes of shares each: Class A, Class C, Class I, and Class N. Class C, I, and N shares are offered at net asset value. Class A shares are offered at net asset value plus a maximum sales charge of 5.75%. Each class represents an interest in the same assets of the Fund and classes are identical except for differences in their sales charge structures and ongoing service and distribution charges. All classes of shares have equal voting privileges except that each class has exclusive voting rights with respect to its service and/or distribution plans. The Fund’s income, expenses (other than class specific distribution fees) and realized and unrealized gains and losses are allocated proportionately each day based upon the relative net assets of each class.
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of significant accounting policies followed by the Fund in preparation of its consolidated financial statements. The policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”). The preparation of the consolidated 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 consolidated 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” including FASB Accounting Standard Update ASU 2013-08. Fund level income and expenses and realized and unrealized capital gains and losses are allocated to each class of shares based on their relative assets within the Fund. Class specific expenses are allocated to that share class.
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. 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. Futures and future options are valued at the final settled price or, in the absence of a settled price, at the last sale price on the day of valuation. Options contracts listed on a securities exchange or board of trade for which market quotations are readily available shall be valued at the last quoted sales price or, in the absence of a sale, at the mean between the current bid and ask prices on the primary exchange on the day of valuation. Option contracts not listed on a securities exchange or board of trade for which over-the-counter market quotations are readily available shall be valued at the mean between the current bid and ask prices on the day of valuation. Index options shall be valued at the mean between the current bid and ask prices on the day of valuation. Forward foreign exchange contracts are valued by reference to the forward foreign exchange rate corresponding to the remaining life of the contract. Investments in swap contracts are reported at fair value based on daily price reporting from the swap counterparty. Debt securities (other than short term obligations) are valued each day by an independent pricing service approved by the Trust’s Board of Trustees (“Board”) based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type, indications as to values from dealers, and general market conditions or market quotations from a major market maker in the securities. Investments valued in currencies other than the U.S. dollar are converted to U.S. dollars using exchange rates obtained from pricing services. Fair value may also be used by the Board if extraordinary events occur after the close of the relevant world market but prior to the NYSE close. The independent pricing service does not distinguish between smaller-sized bond positions known as “odd lots” and larger institutional-sized bond positions known as “round lots”. The Fund may fair value a particular bond if the adviser does not believe that the round lot value provided by the independent pricing service reflects fair value of the Fund’s holding. 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 and closed-end investment companies are valued at net asset value.
The 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 Board. The Board has delegated execution of these procedures to a fair value committee composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) advisor/sub-advisor. The committee may also enlist third party consultants such as a valuation specialist at a public accounting firm, valuation consultant or financial officer of the 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 the 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.
19
| Grant Park Multi Alternative Strategies Fund |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| September 30, 2019 |
Fair Valuation Process – As noted above, the fair value committee is composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) advisor/sub-advisor. The applicable investments are valued collectively via inputs from each of these groups. For example, fair value determinations are required for the following securities: (i) securities for which market quotations are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary lapse in the provision of a price by the regular pricing source), (ii) securities for which, in the judgment of the advisor, the prices or values available do not represent the fair value of the instrument. Factors which may cause the advisor to make such a judgment include, but are not limited to, the following: only a bid price or an ask price is available; the spread between bid and ask prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; (iv) securities with respect to which an event that will affect the value thereof has occurred (a “significant event”) since the closing prices were established on the principal exchange on which they are traded, but prior to the portfolio’s calculation of its net asset value. Specifically, interests in commodity pools or managed futures pools are valued on a daily basis by reference to the closing market prices of each futures contract or other asset held by a pool, as adjusted for pool expenses. Restricted or illiquid securities, such as private investments or non-traded securities are valued via inputs from the advisor/sub-advisor based upon the current bid for the security from two or more independent dealers or other parties reasonably familiar with the facts and circumstances of the security (who should take into consideration all relevant factors as may be appropriate under the circumstances). If the advisor/sub-advisor is unable to obtain a current bid from such independent dealers or other independent parties, the fair value committee shall determine the fair value of such security using the following factors: (i) the type of security; (ii) the cost at date of purchase; (iii) the size and nature of the portfolio’s holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.
The Fund utilizes various methods to measure the fair value of all of its investments on a recurring basis. GAAP establishes a fair value hierarchy that prioritizes inputs to valuation methods. The three levels of the hierarchy are:
Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities that a 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.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing a 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 September 30, 2019 for the Funds’ investments measured at fair value:
| Assets * | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
| Closed-End Fund | $ | 612,500 | $ | — | $ | — | $ | 612,500 | ||||||||
| Exchange Traded Funds | 11,227,242 | — | — | 11,227,242 | ||||||||||||
| Bonds & Notes | — | 123,616,325 | — | 123,616,325 | ||||||||||||
| Short-Term Investment | 55,705,775 | — | — | 55,705,775 | ||||||||||||
| Long Futures Contracts | 246,025 | — | — | 246,025 | ||||||||||||
| Short Futures Contracts | 806,745 | — | — | 806,745 | ||||||||||||
| Total | $ | 68,598,287 | $ | 123,616,325 | $ | — | $ | 192,214,612 | ||||||||
The Fund did not hold any Level 3 securities during the period.
| * | Refer to the Consolidated Portfolios of Investments for security classifications. |
20
| Grant Park Multi Alternative Strategies Fund |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| September 30, 2019 |
Offsetting of Financial Assets and Derivative Assets
The Fund’s policy is to recognize a net asset or liability equal to the unrealized appreciation (depreciation) for swap contracts and futures contracts. The following table presents financial instruments that are subject to enforceable netting arrangements or other similar agreements as of September 30, 2019:
| Assets: | ||||||||||||
| Gross Amounts of Liabilities | Net Amounts of Assets Presented in | |||||||||||
| Gross Amounts of | Offset in the Consolidated | the Consolidated Statement of | ||||||||||
| Description | Recognized Assets | Statement of Assets & Liabilities | Assets & Liabilities (1) | |||||||||
| Futures Contracts | $ | 2,480,554 | $ | (1,427,784 | ) | $ | 1,052,770 | |||||
| Total | $ | 2,480,554 | $ | (1,427,784 | ) | $ | 1,052,770 | |||||
| (1) | The amount is limited to the derivative balance and accordingly, does not include excess collateral pledged. Total collateral held for the futures contract as of September 30, 2019 was $7,364,664. |
Impact of Derivatives on the Consolidated Statement of Assets and Liabilities
The following is a summary of the location of derivative investments on the Fund’s Consolidated Statement of Assets and Liabilities for the year ended September 30, 2019:
| Derivative Investment Type | Asset/Liability Derivatives | |
| Equity/Currency/Commodity/Interest Rate Contracts | Net unrealized appreciation from open futures contracts | |
The following table sets forth the fair value of the Fund’s derivative contracts by primary risk exposure for the year ended September 30, 2019:
| Derivative Investment Value | ||||||||||||||||||||
| Derivative Investment | Equity | Currency | Commodity | Interest Rate | Total for the year ended | |||||||||||||||
| Type | Contracts | Contracts | Contracts | Contracts | September 30, 2019 | |||||||||||||||
| Futures | $ | 196,128 | $ | 1,060,491 | $ | 162,481 | $ | (366,330 | ) | $ | 1,052,770 | |||||||||
Impact of Derivatives on the Consolidated Statement of Operations
The following is a summary of the location of derivative investments on the Fund’s Consolidated Statement of Operations for the year ended September 30, 2019:
| Derivative Investment Type | Location of Gain (Loss) on Derivatives | |
| Equity/Currency/Commodity/Interest Rate Contracts | Net realized gain (loss) from futures contracts Net change in unrealized appreciation (depreciation) on futures contracts |
The following is a summary of the Fund’s net realized gain (loss) and change in unrealized appreciation (depreciation) on derivative investments recognized in the Consolidated Statements of Operations categorized by primary risk exposure for the year ended September 30, 2019:
| Net realized gain (loss) on derivatives recognized in the Consolidated Statement of Operations | ||||||||||||||||||||
| Equity | Currency | Commodity | Interest Rate | Total for the year ended | ||||||||||||||||
| Derivative Investment Type | Contracts | Contracts | Contracts | Contracts | September 30, 2019 | |||||||||||||||
| Futures | $ | (4,222,815 | ) | $ | (1,176,388 | ) | $ | 4,151,665 | $ | 21,775,709 | $ | 20,528,171 | ||||||||
21
| Grant Park Multi Alternative Strategies Fund |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| September 30, 2019 |
| Net change in net unrealized gain on derivatives recognized in the Consolidated Statement of Operations | ||||||||||||||||||||
| Equity | Currency | Commodity | Interest Rate | Total for the year ended | ||||||||||||||||
| Derivative Investment Type | Contracts | Contracts | Contracts | Contracts | September 30, 2019 | |||||||||||||||
| Futures | $ | (4,422,941 | ) | $ | 1,231,499 | $ | (511,514 | ) | $ | (1,814,508 | ) | $ | (5,517,464 | ) | ||||||
Consolidation of Subsidiaries – The consolidated financial statements of the Grant Park Multi Alternative Strategies Fund include GPMAS Fund Limited (“GPMAS”), a wholly-owned and controlled subsidiary. All inter-company accounts and transactions have been eliminated in consolidation.
The Fund may invest up to 25% of its total assets in a controlled foreign corporation, which acts as an investment vehicle in order to effect certain investments consistent with the Fund’s investment objectives and policies. GPMAS commenced operations on December 31, 2013.
A summary of the Grant Park Multi Alternative Strategies Fund’s investments in GPMAS is as follows:
| GPMAS Fund Limited (GPMAS) | |||||
| September 30, 2019 | |||||
| Fair Value of GPMAS | $ | 9,913,374 | |||
| Other Assets | $ | — | |||
| Total Net Assets | $ | 9,913,374 | |||
| Percentage of the Fund’s Total Net Assets | 5.0 | % | |||
For tax purposes, GPMAS is an exempted Cayman investment company. GPMAS received an undertaking from the Government of the Cayman Islands exempting it from all local income, profits and capital gains taxes. No such taxes are levied in the Cayman Islands at the present time. For U.S. income tax purposes, GPMAS is a controlled foreign corporation which generates and is allocated no income which is considered effectively connected with U.S. trade of business and as such is not subject to U.S. income tax. However, as a wholly-owned controlled foreign corporation, GPMAS’s net income and capital gain, to the extent of its earnings and profits, will be included each year in the Grant Park Multi Alternative Strategies Fund’s investment company taxable income.
Management Risk – The Adviser’s judgements regarding the attractiveness of investing in certain securities and derivatives may prove incorrect and may result in significant losses to the Fund.
Market Risk – Market risk is the risk that changes in interest rates, foreign exchange rates or equity prices will affect the positions held by the Fund. The Fund is exposed to market risk on financial instruments that are valued at market prices as disclosed in the schedule of investments. The prices of derivative instruments, including options, forwards and futures prices, can be highly volatile. Price movements of derivative contracts in which the Fund’s assets may be invested are influenced by, among other things, interest rates, changing supply and demand relationships, trade, fiscal, monetary and exchange control programs and policies of governments, and national and international political and economic events and policies. The Fund is exposed to market risk on derivative contracts in that the Fund may not be able to readily dispose of its holdings when it chooses and also that the price obtained on disposal is below that at which the investment is included in the Funds’ financial statements. All financial instruments are recognized at fair value, and all changes in market conditions directly affect net income. The Fund’s investments in derivative instruments are exposed to market risk and are disclosed in the consolidated portfolio of investments.
Credit Risk – Credit risk relates to the ability of the issuer to meet interest and principal payments, or both, as they come due. In general, lower-grade, higher-yield bonds are subject to credit risk to a greater extent than lower-yield, higher-quality bonds.
Counterparty Risk – Counterparty risk is the risk that the counterparty to a financial instrument will cause a financial loss for the Fund by failing to discharge an obligation. A concentration of counterparty risk exists in that the part of a Fund’s cash is held at the broker. The Fund could be unable to recover assets held at the prime broker, including assets directly traceable to the Fund, in the event of the broker’s bankruptcy. The Fund does not anticipate any material losses as a result of this concentration.
Exchange Traded Funds – The Fund may invest in exchange traded funds (“ETFs”). ETFs are a type of fund bought and sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities. The risks of owning an ETF generally reflect the risks of owning the underlying securities they are designed to track, although the lack of liquidity on an ETF could result in it being more
22
| Grant Park Multi Alternative Strategies Fund |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| September 30, 2019 |
volatile. Additionally, ETFs have fees and expenses that reduce their value.
Futures Contracts – The Fund is subject to equity price risk, interest rate risk, commodity price risk and foreign currency exchange rate risk in the normal course of pursuing its investment objectives. The Fund may purchase or sell futures contracts to hedge against market risk and to reduce return volatility. Initial margin deposits required upon entering into futures contracts as presented in deposit at broker for futures contracts in the Consolidated Statements of Assets and Liabilities are satisfied by the segregation of specific securities or cash as collateral for the account of the broker (the Fund’s agent in acquiring the futures position). During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by “marking to market” on a daily basis to reflect the market value of the contracts at the end of each day’s trading. Variation margin payments are received or made depending upon whether unrealized gains or losses are incurred. When the contracts are closed, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transaction and the Fund’s basis in the contract. If the Fund was unable to liquidate a futures contract and/or enter into an offsetting closing transaction, the Fund would continue to be subject to market risk with respect to the value of the contracts and continue to be required to maintain the margin deposits on the futures contracts. The Fund segregates liquid securities having a value at least equal to the amount of the current obligation under any open futures contract. Risks may exceed amounts recognized in the Consolidated Statements of Assets and Liabilities. With futures, there is minimal counterparty credit risk to the Fund because futures are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded futures, guarantees the futures against default.
The derivative instruments outstanding as of September 30, 2019 as disclosed in the Consolidated Portfolio of Investments and the amounts of net realized gain and losses and changes in unrealized appreciation and depreciation on derivative instruments during the period as disclosed in the Consolidated Statements of Operations serve as indicators of the volume of derivative activity for the Fund.
Security Transactions and Related Income – Security transactions are accounted for on the trade date. Interest income is recognized on an accrual basis. Discounts are accreted and premiums are amortized on securities purchased over the lives of the respective securities. Dividend income is recorded on the ex-dividend date. Realized gains or losses from sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds. The difference between the cost and fair value of open investments is reflected as unrealized appreciation (depreciation) on investments and any change in that amount from the prior period is reflected in the accompanying Consolidated Statement of Operations.
Dividends and Distributions to Shareholders – Dividends from net investment income, if any, are declared and paid at least annually for the Fund. Distributable net realized capital gains, if any, are declared and distributed annually. 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 the 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 its taxable income to its 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 reviewed the tax positions taken by the Fund on returns filed for open tax years 2016 to 2018 or expected to be taken in the Fund’s September 30, 2019 year-end tax return. The Fund identifies its major tax jurisdictions as U.S. Federal, Ohio (Nebraska in prior years) and foreign jurisdictions where the Fund makes significant investments; 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. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Consolidated Statements of Operations. During the period, the Fund did not incur any interest or penalties. Generally, tax authorities can examine tax returns filed for the last three years.
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 funds 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 risk of loss due to these warranties and indemnities appears to be remote.
23
| Grant Park Multi Alternative Strategies Fund |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| September 30, 2019 |
| 3. | INVESTMENT TRANSACTIONS |
For the year ended September 30, 2019, the cost of purchases and proceeds from the sale and/or maturity of securities, other than short-term securities and U.S. Government securities, amounted to $70,183,882 and $52,769,790, respectively.
| 4. | AGGREGATE TAX UNREALIZED APPRECIATION AND DEPRECIATION |
At September 30, 2019 the aggregate cost for federal tax purposes, which differs from fair value by net unrealized appreciation (depreciation) of securities, are as follows:
| Net Unrealized | ||||||||||||||
| Gross Unrealized | Gross Unrealized | Appreciation/ | ||||||||||||
| Tax Cost | Appreciation | Depreciation | (Depreciation) | |||||||||||
| $ | 189,915,869 | $ | 4,595,517 | $ | (2,296,774 | ) | $ | 2,298,743 | ||||||
| 5. | INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES |
Dearborn Capital Management, LLC, serves as the Fund’s investment advisor (the “Advisor”). EMC Capital Advisors, LLC serves as the sub-advisor for the Fund and is paid by the Advisor, not the Fund.
Pursuant to an investment advisory agreement with the Trust, on behalf of the Fund, the Advisor, 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 Advisor, the Fund pays the Advisor a management fee, computed and accrued daily and paid monthly, at an annual rate of 1.18%, of the applicable Fund’s average daily net assets.
Pursuant to an operating expenses limitation agreement with the Trust, on behalf of the Fund, effective January 28, 2016 the Advisor has agreed, at least until January 31, 2020, 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 Fund (excluding any front-end or contingent deferred loads, brokerage fees and commissions, acquired fund fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example options and swap fees and expenses), borrowing costs (such as interest and dividend expense on securities sold short), taxes, and extraordinary expenses, such as litigation expenses (which may include indemnification of Fund officers and Trustees and contractual indemnification of Fund service providers, other than the Advisor)) do not exceed 1.83%, 2.58%, 1.58%, and 1.83% per annum of the Fund’s average daily net assets for Class A, Class C, Class I, and Class N shares, respectively (the “Expense Limitation”). For the year ended September 30, 2019, the Advisor earned $2,276,102 in management fees for the Fund.
With respect to the Fund, if the Advisor waives any applicable or reimburses any expense pursuant to the operating expenses limitation agreement, and the Fund’s operating expenses are subsequently less than the Expense Limitation, the Advisor shall be entitled to reimbursement by the Fund for such waived fees or reimbursed expenses provided that such reimbursement does not cause the Fund’s expenses to exceed its Expense Limitation for each share class. If the Fund’s operating expenses subsequently exceed the Expense Limitation, the reimbursements shall be suspended. For the year ended September 30, 2019, the Advisor waived $14,090, which is subject to recapture until September 30, 2022.
The Trust, with respect to the Fund, has adopted the Trust’s Master Distribution and Shareholder Servicing Plans for Class A, Class C and Class N shares of the Fund (the “Plan”). The Plan provides that a monthly service fee is calculated at an annual rate of 0.25%, 1.00% and 0.25% of the average daily net assets attributable to the Class A, Class C and Class N shares, of the Fund, respectively. Pursuant to the Plan, the Fund may compensate the securities dealers or other financial intermediaries, financial institutions, investment advisors, and others for activities primarily intended to result in the sale of the Fund’s shares and for maintenance and personal service provided to existing shareholders. The Plan further provides for periodic payments to brokers, dealers and other financial intermediaries, including insurance companies, for providing shareholder services and for promotional and other sales-related costs. During the year ended September 30, 2019, the Fund incurred $197,446 in fees, pursuant to the Plan.
Northern Lights Distributors, LLC (the “Distributor”) acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s Class A, Class C, Class I and Class N shares. On sales of Class A shares for the year ended September 30, 2019, the Distributor received $25,739 from front-end sales charges of which $3,581 was retained by the principal underwriter or other affiliated broker-dealer.
24
| Grant Park Multi Alternative Strategies Fund |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| September 30, 2019 |
In addition, certain affiliates of the Distributor provide services to the Fund as follows:
Gemini Fund Services, LLC (“GFS”)
GFS, an affiliate of the Distributor, provides administration, fund accounting, and transfer agent services to the Trust. Pursuant to separate servicing agreements with GFS, the Fund pays GFS customary fees for providing administration, fund accounting and transfer agency services to the Fund. Certain officers of the Trust are also officers of GFS, and are not paid any fees directly by the Fund for serving in such capacities.
Northern Lights Compliance Services, LLC (“NLCS”)
NLCS, an affiliate of GFS and the Distributor, provides a Chief Compliance Officer to the Trust, as well as related compliance services, pursuant to a consulting agreement between NLCS and the Trust. Under the terms of such agreement, NLCS receives customary fees from the Fund.
Blu Giant, LLC (“Blu Giant”)
Blu Giant, an affiliate of GFS 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.
Effective February 1, 2019, NorthStar Financial Services Group, LLC, the parent company of GFS and its affiliated companies including NLD, NLCS and Blu Giant (collectively, the “Gemini Companies”), sold its interest in the Gemini Companies to a third party private equity firm that contemporaneously acquired Ultimus Fund Solutions, LLC (an independent mutual fund administration firm) and its affiliates (collectively, the “Ultimus Companies”). As a result of these separate transactions, the Gemini Companies and the Ultimus Companies are now indirectly owned through a common parent entity, The Ultimus Group, LLC.
| 6. | REDEMPTION FEE PROCEEDS |
The Fund may assess a short-term redemption fee of 1.00% of the total redemption amount if a shareholder sells its shares after holding them for less than 60 days. The redemption fee is paid directly to the Fund. For the year ended September 30, 2019 the redemption fees assessed for the Fund was $4,213.
| 7. | UNDERLYING INVESTMENT IN OTHER INVESTMENT COMPANIES |
The Fund seeks to achieve its investment objectives by investing a portion of their assets in the Morgan Stanley Institutional Liquidity Funds- Government Portfolio (the “Portfolio”), ticker MVRXX, a registered open-end fund. The Fund may redeem its investment from the Portfolio at any time if the Advisor determines that it is in the best interest of the Fund and its shareholders to do so.
The performance of the Fund will be directly affected by the performance of the Portfolio. The annual report of the Portfolio, along with the report of the independent registered public accounting firm is available at www.sec.gov. As of September 30, 2019, the percentage of the Fund’s net assets invested in the Portfolio was 27.8%.
| 8. | CONTROL OWNERSHIP |
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a portfolio creates presumption of the control of the portfolio, under section 2(a)(9) of the 1940 Act. As of September 30, 2019, Charles Schwab & Co. held 25.36% of the voting securities of the Fund and may be deemed to control the Fund.
| 9. | TAX COMPONENTS OF CAPITAL |
The tax character of distributions paid during the fiscal years ended September 30, 2019 and September 30, 2018 was as follows:
| Fiscal Year Ended | Fiscal Year Ended | |||||||
| September 30, 2019 | September 30, 2018 | |||||||
| Ordinary Income | $ | — | $ | — | ||||
| Long-Term Capital Gain | 2,996,067 | 4,814,034 | ||||||
| Return of Capital | — | — | ||||||
| $ | 2,996,067 | $ | 4,814,034 | |||||
25
| Grant Park Multi Alternative Strategies Fund |
| NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued) |
| September 30, 2019 |
As of September 30, 2019, the components of accumulated earnings/ (deficit) on a tax basis were as follows:
| Undistributed | Undistributed | Post October Loss | Capital Loss | Other | Unrealized | Total | ||||||||||||||||||||
| Ordinary | Long-Term | and | Carry | Book/Tax | Appreciation/ | Accumulated | ||||||||||||||||||||
| Income | Gains | Late Year Loss | Forwards | Differences | (Depreciation) | Earnings/(Deficits) | ||||||||||||||||||||
| $ | 16,926,444 | $ | 3,202,233 | $ | — | $ | — | $ | (10,530,877 | ) | $ | 2,478,186 | $ | 12,075,986 | ||||||||||||
The difference between book basis and tax basis accumulated net investment loss, accumulated net realized gain/(loss), and unrealized appreciation/(depreciation) from investments is primarily attributable to the tax deferral of losses on wash sales, the mark-to-market on futures contracts, and adjustments for the Fund’s wholly owned subsidiary. Other book/tax differences include unrealized losses from in kind liquidation proceeds received from a substantially held affiliate.
Permanent book and tax differences, primarily attributable to the adjustments for in kind liquidation proceeds received from a substantially held affiliate resulted in reclassifications for the following Funds for the year ended September 30, 2019 as follows:
| Paid | ||||||
| In | Accumulated | |||||
| Capital | Earnings (Losses) | |||||
| $ | 1,119,640 | $ | (1,119,640 | ) | ||
| 10. | NEW ACCOUNTING PRONOUNCEMENTS |
In August 2018, the FASB issued Accounting Standards Update (“ASU”) No. 2018-13, which changes certain fair value measurement disclosure requirements. The new ASU, in addition to other modifications and additions, removes the requirement to disclose the amount and reasons for transfers between Level 1 and Level 2 of the fair value hierarchy, and the policy for the timing of transfers between levels. For investment companies, the amendments are effective for financial statements issued for fiscal years beginning after December 15, 2019, and interim periods within those fiscal years. Early adoption is allowed. These amendments have been adopted in these consolidated financial statements.
In August 2018, the Securities and Exchange Commission adopted amendments to certain disclosure requirements under Regulation S-X to conform to US GAAP, including: (i) an amendment to require presentation of the total, rather than the components, of distributable earnings on the Statement of Assets and Liabilities; and (ii) an amendment to require presentation of the total, rather than the components, of distributions to shareholders, except for tax return of capital distributions, on the Consolidated Statement of Changes in Net Assets. The amendments also removed the requirement for parenthetical disclosure of undistributed net investment income on the Consolidated Statement of Changes in Net Assets. These amendments have been adopted with these financial statements.
| 11. | 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.
26
Report of Independent Registered Public Accounting Firm
To the Board of Trustees of Northern Lights Fund Trust
and the Shareholders of Grant Park Multi Alternative Strategies Fund
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated portfolio of investments, of Grant Park Multi Alternative Strategies Fund (the Fund), a series of the Northern Lights Fund Trust, as of September 30, 2019, the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, including the related notes, and the consolidated financial highlights for each of the five years in the period then ended (collectively, the financial statements). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of September 30, 2019, and the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in 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 audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The 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 audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. Our procedures included confirmation of investments owned as of September 30, 2019, by correspondence with the custodians and brokers. We believe that our audits provide a reasonable basis for our opinion.
/s/ RSM US LLP
We have served as the auditor of one or more Dearborn Capital Management, LLC advised investment companies since 2003.
Denver, Colorado
November 27, 2019
27
| Grant Park Multi Alternative Strategies Fund |
| EXPENSE EXAMPLES (Unaudited) |
| September 30, 2019 |
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including sales charges (loads) on purchases of Class A shares and deferred sales charges on certain sales of class A shares; (2) ongoing costs, including management fees; distribution and/or service (12b-1) 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.
Actual Expenses
The “Actual Expenses” columns in the tables below provide information about actual account values and actual expenses. You may use the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The “Hypothetical” columns in the tables below provide information about hypothetical account values and hypothetical expenses based on 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 tables 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 tables are useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Hypothetical | ||||||||||||
| Actual | (5% return before expenses) | |||||||||||
| Consolidated | ||||||||||||
| Expenses | Ending | Expenses | ||||||||||
| Fund’s | Beginning | Ending | Paid During | Account | Paid During | |||||||
| Annualized | Account Value | Account Value | Period * | Value | Period * | |||||||
| Expense Ratio | 4/1/19 | 9/30/19 | 4/1/19– 9/30/19 | 9/30/19 | 4/1/19– 9/30/19 | |||||||
| Grant Park Multi Alternative Strategies Fund: | ||||||||||||
| Class A | 1.83% | $1,000.00 | $1,077.30 | $ 9.53 | $1,015.89 | $ 9.25 | ||||||
| Class C | 2.58% | $1,000.00 | $1,074.00 | $13.41 | $1,012.13 | $13.01 | ||||||
| Class I | 1.58% | $1,000.00 | $1,078.40 | $ 8.23 | $1,017.15 | $ 7.99 | ||||||
| Class N | 1.83% | $1,000.00 | $1,077.20 | $ 9.53 | $1,015.89 | $ 9.25 | ||||||
| * | 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 period (183) divided by the number of days in the fiscal year (365). |
28
| Grant Park Multi Alternative Strategies Fund |
| SUPPLEMENTAL INFORMATION (Unaudited) |
| September 30, 2019 |
Grant Park Multi-Alternative Strategies Fund (Adviser – Dearborn Capital Management LLC) *
In connection with the regular meeting held on November 14-15, 2018 of the Board of Trustees (the “Trustees” or the “Board”) of the Northern Lights Fund Trust (the “Trust”), including a majority of the Trustees who are not “interested persons,” as that term is defined in the Investment Company Act of 1940, as amended, discussed the re-approval of an investment advisory agreement (the “Advisory Agreement”) between Dearborn Capital Management LLC (“Dearborn”) and the Trust, with respect to the Grant Park Multi-Alternative Strategies Fund (“Grant Park Multi”) ( the “Fund”). In considering the re-approval of the Advisory Agreement, the Board received materials specifically relating to the Advisory Agreement.
The Trustees were assisted by independent legal counsel throughout the Advisory Agreement review process. The Trustees relied upon the advice of independent legal counsel and their own business judgment in determining the material factors to be considered in evaluating the Advisory Agreement and the weight to be given to each such factor. The conclusions reached by the Trustees were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the Advisory Agreement.
Nature, Extent and Quality of Service. The Trustees noted that Dearborn was founded in 1989, managed approximately $383 million in assets under management, and specialized in offering a variety of alternative investment strategies to high net worth individuals and institutional investors through public and private funds and hedge funds. They reviewed the background information of the key investment personnel responsible for servicing the Fund. They noted the investment team was highly experienced in futures products, alternative investments, hedge funds and mutual funds. The Trustees discussed the adviser’s research-driven proprietary investment process, which utilized robust due diligence and thorough evaluation of underlying managers to effect tactical and strategic rebalancing of the Fund’s portfolio. They noted that Dearborn owned a substantial minority interest in EMC Capital Advisors, LLC, (“EMC”) sub-adviser to Grant Park Multi, and they discussed the adviser’s process for overseeing EMC. They discussed the adviser’s multi-layered approach to risk management, as well as how the adviser monitored compliance with the Fund’s investment limitations. They noted that the adviser collaborated with EMC to select broker-dealers, and discussed the adviser’s multi-factor process for broker-dealer selection. The Trustees observed that the adviser had sufficient resources to service the Fund, and concluded that the adviser should continue to provide high quality service to the Fund and its shareholders.
Performance. The Trustees considered the Fund’s objective to provide positive absolute returns and noted that the Fund allocated assets among four underlying strategies. They considered the historical performance of the Fund and its three star Morningstar rating, noting that the Fund outperformed the peer group, benchmark and Morningstar category over the one-year, three-year and since inception time periods. They also observed that over those same periods, the Fund exhibited a relatively high level of volatility and had Sharpe and Sortino ratios of less than one. They reasoned, however, that such metrics were consistent with those shown by funds in the Multi-Alternative Morningstar category. The Trustees noted that the Fund achieved its objective of providing positive absolute returns across all time periods presented, had fared well as compared to its peer group and Morningstar category, and had experienced very satisfactory performance.
Fees and Expenses. The Trustees noted the Fund’s advisory fee of 1.18% and recalled that the sub-adviser received a portion of this overall advisory fee. They observed that the advisory fee was higher than the independently selected peer group average, slightly higher than the Morningstar category average, and well within the ranges of both. The Trustees also noted that the Fund’s net expense ratio was higher than the peer group, slightly higher than the category average, and within the ranges of the peer group and category. They considered the adviser’s explanation that the fees were reasonable given the expertise required to research, create, execute and maintain the trading programs that drive the Fund’s investment programs, and after discussion, concluded that the advisory fee was not unreasonable.
29
| Grant Park Multi Alternative Strategies Fund |
| SUPPLEMENTAL INFORMATION (Unaudited)(Continued) |
| September 30, 2019 |
Economies of Scale. The Trustees considered whether the adviser had achieved economies of scale with respect to the management of Grant Park Multi. They noted the Fund’s current asset levels and considered the adviser’s expectations for growth in assets of the Fund. After further discussion, the Trustees concluded that the Fund had not attained an asset level at which economies have been achieved, but acknowledged the adviser’s willingness to discuss the matter as material asset growth was realized in the Fund.
Profitability. The Trustees reviewed a profitability analysis provided by the adviser and considered whether the amount of profit earned was a fair entrepreneurial profit. The Trustees noted that with respect to Grant Park Multi, the adviser realized a profit in connection with its relationship with the Fund. After discussion, they agreed that such profits were reasonable in terms of both actual dollars and percentage of revenue in light of the effort required to maintain and enhance the effectiveness of the Fund’s complex and actively managed investment program. The Trustees concluded that the adviser’s profit realized with respect to the Fund was not excessive.
Conclusion. Having requested and received such information from the adviser as the Trustees believed to be reasonably necessary to evaluate the terms of the advisory agreement, and as assisted by the advice of independent counsel, the Trustees concluded that the advisory fee was not unreasonable and that renewal of the agreement was in the best interests of the shareholders of the Fund.
EMC Capital Advisors, LLC - Sub-Adviser to Grant Park Multi
In connection with the regular meeting held on November 14-15, 2018 of the Board, including a majority of the Trustees who are not “interested persons,” as that term is defined in the Investment Company Act of 1940, as amended, discussed the approval of a sub-advisory agreement (the “Sub-Advisory Agreement”) between EMC Capital Advisors, LLC. (EMC) and Dearborn, with respect to the Grant Park Multi. In considering the approval of the Sub-Advisory Agreement, the Board received materials specifically relating to the Sub-Advisory Agreement.
The Trustees were assisted by independent legal counsel throughout the Sub-Advisory Agreement review process. The Board relied upon the advice of independent legal counsel and their own business judgment in determining the material factors to be considered in evaluating the Sub-Advisory Agreement and the weight to be given to each such factor. The conclusions reached by the Trustees were based on a comprehensive evaluation of all of the information provided and were not the result of any one factor. Moreover, each Trustee may have afforded different weight to the various factors in reaching his conclusions with respect to the Sub-Advisory Agreement.
Nature, Extent and Quality of Service. The Trustees noted that EMC, established in 1988, currently managed approximately $319 million in assets. They noted that the firm offered investors diversified portfolios of global commodity and financial instruments. They further noted that Dearborn owned a substantial minority interest in EMC. The Trustees reviewed the key personnel responsible for sub-advising the Fund and discussed their financial and futures industry experience. The Trustees noted that the sub-adviser provided the Fund with a multi-alternative, quantitatively driven strategy comprised of four sub-strategies, each managed independently by the sub-adviser. The Trustees observed that the sub-adviser managed each sub-strategy utilizing proprietary algorithms and models. They discussed the sub-adviser’s approach to risk management. The Trustees noted the sub-adviser’s business emphasized the use of technology and observed that the firm’s business continuity plan was robust. The Trustees reviewed the sub-adviser’s process for monitoring compliance with the Fund’s investment limitations and for executing trades. The Trustees noted the adviser’s long-standing relationship with the sub-adviser and observed that the adviser was highly satisfied with the sub-adviser’s service and reputation. The Trustees concluded that EMC had provided high quality service to the adviser, the Fund and its shareholders.
Performance. The Trustees noted that EMC was the sole sub-adviser to the Fund. They reviewed the historical performance of the Fund, noting that it had outperformed its benchmark, peer group and Morningstar category over all periods presented and that the Fund had shown some recent improvements in performance. They
30
| Grant Park Multi Alternative Strategies Fund |
| SUPPLEMENTAL INFORMATION (Unaudited)(Continued) |
| September 30, 2019 |
also noted that the Fund exhibited a high level of volatility. They observed the Fund’s Sharpe and Sortino ratios, noting that although they were generally less than one, such metrics were consistent with other funds in the Morningstar category. They reasoned that the Fund was achieving its objective of providing positive absolute returns and had performed well as compared to its peer group and Morningstar category. The Trustees concluded that the sub-adviser was essential to the favorable returns and consistency of performance.
Fees and Expenses. The Trustees reviewed the sub-advisory fee of 0.40%, noting the sub-adviser received a portion of the Fund’s overall advisory fee. They noted the sub-advisory fee was materially lower than the average fee charged by the sub-adviser to other clients and that the adviser indirectly receives a portion of the sub-advisory fee as a minority owner of EMC. The Trustees concluded that the sub-advisory fee was not unreasonable.
Economies of Scale. The Trustees considered whether there were economies of scale with respect to the management of the Fund, but agreed that economies of scale was a Fund level issue and should be considered with respect to the Fund’s overall advisory agreement and fee.
Profitability. The Trustees reviewed the profitability analysis provided by the sub-adviser. They considered whether the firm earned a fair entrepreneurial profit in connection with its relationship with the Fund. They noted the sub-adviser earned a modest profit during the prior year in terms of actual dollars, although solid in terms of percentage of revenue. The Trustees concluded that excessive profitability was not a concern.
Conclusion. Having requested and received such information from the sub-adviser as the Trustees believed to be reasonably necessary to evaluate the terms of the sub-advisory agreement, and as assisted by the advice of independent counsel, the Trustees concluded that the sub-advisory fee was not unreasonable and that renewal of the agreement was in the best interests of the shareholders of the Fund.
| * | Due to the timing of the contract renewal schedule, these deliberations may or may not relate to the current performance results of the Fund. |
31
| Grant Park Multi Alternative Strategies Fund |
| SUPPLEMENTAL INFORMATION (Unaudited) |
| September 30, 2019 |
The following is a list of the Trustees and executive officers of the Trust and each person’s principal occupation over the last five years. Unless otherwise noted, the address of each Trustee and Officer is 17645 Wright Street, Suite 200, Omaha, Nebraska 68130.
Independent Trustees
| Name,
Address and Year of Birth |
Position/Term
of Office* |
Principal
Occupation During the Past Five Years |
Number
of Portfolios in Fund Complex** Overseen by Trustee |
Other
Directorships held by Trustee During the Past Five Years |
| Mark
Garbin Born in 1951 |
Trustee Since 2013 | Managing Principal, Coherent Capital Management LLC (since 2007). | 1 | Northern Lights Fund Trust (for series not affiliated with the Funds since 2013); Two Roads Shared Trust (since 2012); Forethought Variable Insurance Trust (since 2013); Northern Lights Variable Trust (since 2013); OHA Mortgage Strategies Fund (offshore), Ltd. (2014 -2017); and Altegris KKR Commitments Master Fund (since 2014); and OFI Carlyle Private Credit Fund (since March 2018) |
| Mark
D. Gersten Born in 1950 |
Trustee Since 2013 | Independent Consultant (since 2012). | 1 | Northern Lights Fund Trust (for series not affiliated with the Funds since 2013); Northern Lights Variable Trust (since 2013); Two Roads Shared Trust (since 2012); Altegris KKR Commitments Master Fund (since 2014); previously, Ramius Archview Credit and Distressed Fund (2015-2017); and Schroder Global Series Trust (2012 to 2017) |
| Anthony
J. Hertl Born in 1950 |
Trustee Since 2005; Chairman of the Board since 2013 | Retired, previously held several positions in a major Wall Street firm including Capital Markets Controller, Director of Global Taxation, and CFO of the Specialty Finance Group. | 1 | Northern Lights Fund Trust (for series not affiliated with the Funds since 2005); Northern Lights Variable Trust (since 2006); Alternative Strategies Fund (since 2010); Satuit Capital Management Trust (2007-2019). |
| Gary
W. Lanzen Born in 1954 |
Trustee Since 2005 | Retired (since 2012). Formerly, Founder, President, and Chief Investment Officer, Orizon Investment Counsel, Inc. (2000-2012). | 1 | Northern Lights Fund Trust (for series not affiliated with the Funds since 2005) Northern Lights Variable Trust (since 2006); AdvisorOne Funds (since 2003); Alternative Strategies Fund (since 2010); and previously, CLA Strategic Allocation Fund (2014-2015) |
| John
V. Palancia Born in 1954 |
Trustee Since 2011 | Retired (since 2011). Formerly, Director of Futures Operations, Merrill Lynch, Pierce, Fenner & Smith Inc. (1975-2011). | 1 | Northern Lights Fund Trust (for series not affiliated with the Funds since 2011); Northern Lights Fund Trust III (since February 2012); Alternative Strategies Fund (since 2012) and Northern Lights Variable Trust (since 2011) |
Mark
H. Taylor |
Trustee Since 2007; Chairman of the Audit Committee since 2013 | Director, Lynn Pippenger School of Accountancy Muma College of Business (since 2019); Chair, Department of Accountancy and Andrew D. Braden Professor of Accounting and Auditing, Weatherhead School of Management, Case Western Reserve University (2009-2019); Vice President-Finance, American Accounting Association (2017-2020); President, Auditing Section of the American Accounting Association (2012-15). AICPA Auditing Standards Board Member (2009-2012). | 1 | Northern Lights Fund Trust (for series not affiliated with the Funds since 2007); Alternative Strategies Fund (since 2010); Northern Lights Fund Trust III (since 2012); and Northern Lights Variable Trust (since 2007) |
9/30/19 – NLFT_v2
32
| Grant Park Multi Alternative Strategies Fund |
| SUPPLEMENTAL INFORMATION (Unaudited)(Continued) |
| September 30, 2019 |
Officers
| Name,
Address and Year of Birth |
Position/Term
of Office* |
Principal
Occupation During the Past Five Years |
Number
of Portfolios in Fund Complex** Overseen by Trustee |
Other
Directorships held by Trustee During the Past Five Years |
| Kevin
E. Wolf 80 Arkay Drive Hauppauge, NY 11788 Born in 1969 |
President Since June 2017 | Vice President, The Ultimus Group, LLC and Executive Vice President, Gemini Fund Services, LLC (since 2019); President, Gemini Fund Services, LLC (2012-2019) Treasurer of the Trust (2006-June 2017); Director of Fund Administration, Gemini Fund Services, LLC (2006 -2012); and Vice-President, Blu Giant, LLC, (2004 -2013). | N/A | N/A |
| Richard
Malinowski 80 Arkay Drive Hauppauge, NY 11788 Born in 1983 |
Vice President Since March 2018 | Senior Vice President (since 2017); Vice President and Counsel (2016-2017) and Assistant Vice President, Gemini Fund Services, LLC (2012-2016) | N/A | N/A |
| James
Colantino 80 Arkay Drive Hauppauge, NY 11788 Born in 1969 |
Treasurer Since June 2017 | Assistant Treasurer of the Trust (2006-June 2017); Senior Vice President -Fund Administration, Gemini Fund Services, LLC (since 2012). | N/A | N/A |
| Stephanie
Shearer 80 Arkay Drive Hauppauge, NY 11788 Born in 1979 |
Secretary Since February 2017 | Assistant Secretary of the Trust (2012-February 2017); Manager of Legal Administration, Gemini Fund Services, LLC (since 2018); Senior Paralegal, Gemini Fund Services, LLC (from 2013 - 2018); Paralegal, Gemini Fund Services, LLC (2010-2013). | N/A | N/A |
| Lynn
Bowley Born in 1958 |
Chief Compliance Officer Since 2017 | Senior Compliance Officer of Northern Lights Compliance Services, LLC (since 2007). | N/A | N/A |
| * | The term of office for each Trustee and officer listed above will continue indefinitely until the individual resigns or is removed. |
| ** | As of September 30, 2019, the Trust was comprised of 77 active portfolios managed by unaffiliated investment advisors. The term “Fund Complex” applies only to the Funds in the Trust advised by the Fund’s advisor. The Funds do not hold themselves out as related to any other series within the Trust that is not advised by the Fund’s advisor. |
The Funds’ SAI includes additional information about the Trustees and is available free of charge, upon request, by calling toll-free at 1-855-501-4758.
9/30/19 – NLFT_v2
33
PRIVACY NOTICE
Northern Lights Fund Trust
Rev. February 2014
| FACTS | WHAT DOES NORTHERN LIGHTS FUND TRUST DO WITH YOUR PERSONAL INFORMATION? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some, but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The types of personal information we collect and share depends on the product or service that you have with us. This information can include:
● Social Security number and wire transfer instructions
● account transactions and transaction history
● investment experience and purchase history
When you are no longer our customer, we continue to share your information as described in this notice. |
| How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Northern Lights Fund Trust chooses to share; and whether you can limit this sharing. |
| Reasons
we can share your personal information: |
Does
Northern Lights Fund Trust share information? |
Can you limit this sharing? |
| For our everyday business purposes - such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus. | YES | NO |
| For our marketing purposes - to offer our products and services to you. | NO | We don’t share |
| For joint marketing with other financial companies. | NO | We don’t share |
| For our affiliates’ everyday business purposes - information about your transactions and records. | NO | We don’t share |
| For our affiliates’ everyday business purposes - information about your credit worthiness. | NO | We don’t share |
| For nonaffiliates to market to you | NO | We don’t share |
| QUESTIONS? | Call 1-402-493-4603 |
34
PRIVACY NOTICE
Northern Lights Fund Trust
| Page 2 |
| What we do: | |
How does Northern Lights Fund Trust protect my personal information? |
To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings.
Our service providers are held accountable for adhering to strict policies and procedures to prevent any misuse of your nonpublic personal information. |
How does Northern Lights Fund Trust collect my personal information? |
We collect your personal information, for example, when you ● open an account or deposit money
● direct us to buy securities or direct us to sell your securities
● seek advice about your investments
We also collect your personal information from others, such as credit bureaus, affiliates, or other companies. |
Why can’t I limit all sharing? |
Federal law gives you the right to limit only: ● sharing for affiliates’ everyday business purposes – information about your creditworthiness.
● affiliates from using your information to market to you.
● sharing for nonaffiliates to market to you.
State laws and individual companies may give you additional rights to limit sharing. |
| Definitions | |
| Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies.
● Northern Lights Fund Trust does not share with its affiliates. |
| Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies.
● Northern Lights Fund Trust does not share with nonaffiliates so they can market to you. |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you.
● Northern Lights Fund Trust doesn’t jointly market. |
35
PROXY VOTING POLICY
Information regarding how the Funds 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 Funds use to determine how to vote proxies is available without charge, upon request, by calling 1-855-501-4758 or by referring to the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Funds file the complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. Form N-Q is available on the SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (1-800-SEC-0330). The information on Form N-Q is available without charge, upon request, by calling 1-855-501-4758.
| INVESTMENT ADVISOR |
| Dearborn Capital Management, LLC |
| 555 W. Jackson Boulevard, Suite 600 |
| Chicago, IL 60661 |
| ADMINISTRATOR |
| Gemini Fund Services, LLC |
| 80 Arkay Drive, Suite 110 |
| Hauppauge, NY 11788 |
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 Mark Gersten, Anthony J. Hertl, and Mark H. Taylor are audit committee financial experts, as defined in Item 3 of Form N-CSR. Mr. Gersten, Mr. Hertl and Mr. Taylor are independent for purposes of this Item 3
Item 4. Principal Accountant Fees and Services.
| (a) | Audit Fees |
2019 - $18,750
2018 - $21,000
| (b) | Audit-Related Fees |
2019 - None
2018 - None
| (c) | Tax Fees |
2019 - $6,200
2018 - $6,000
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 |
2019 – None
2018 - 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 |
2018 2019%
Audit-Related Fees: 0.00% 0.00%
Tax Fees: 0.00% 0.00%
All Other Fees: 0.00% 0.00%
| (f) | During the audit of registrant's financial statements for the most recent fiscal year, less than 50 percent of the hours expended on the principal accountant's engagement were attributed to work performed by persons other than the principal accountant's full-time, permanent employees. |
| (g) | The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant: |
2019 - $6,200
2018 - $6,000
(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. Not applicable to open-end investment companies.
Item 6. Schedule of Investments. Schedule of investments in securities of unaffiliated issuers is included under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders. None
Item 11. Controls and Procedures.
(a) Based on an evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of filing date of this Form N-CSR, the principal executive officer and principal financial officer of the Registrant have concluded that the disclosure controls and procedures of the Registrant are reasonably designed to ensure that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported by the filing date, including that information required to be disclosed is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no significant changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. Not applicable.
Item 13. Exhibits.
(a)(1) Code of Ethics filed herewith.
(a)(3) Not applicable for open-end investment companies.
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
By (Signature and Title)
/s/ Kevin E. Wolf
Kevin E. Wolf, Principal Executive Officer/President
Date 12/9/2019
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 12/9/2019
By (Signature and Title)
/s/ James Colantino
James Colantino, Principal Financial Officer/Treasurer
Date 12/9/2019
CERTIFICATIONS
I, Kevin E. Wolf, certify that:
1. I have reviewed this report on Form N-CSR of the Grant Park Multi-Alternative Strategies Fund series of Northern Lights Fund Trust;
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 second fiscal quarter of 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: 12/9/19 /s/ Kevin E. Wolf
Kevin E. Wolf
Principal Executive Officer/President
I, James Colantino, certify that:
1. I have reviewed this report on Form N-CSR of the Grant Park Multi-Alternative Strategies Fund series of Northern Lights Fund Trust;
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 second fiscal quarter of 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: 12/9/19 /s/ James Colantino
James Colantino
Principal
Financial Officer/Treasurer
certification
Kevin E. Wolf, President, and James Colantino, Treasurer of Northern Lights Fund Trust (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 September 30, 2019 (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 Northern Lights Fund Trust
/s/ Kevin E. Wolf /s/James Colantino
Kevin E. Wolf James Colantino
Date: 12/9/19 Date: 12/9/19
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to Northern Lights Funds Trust and will be retained by Northern Lights Fund Trust 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 and the Northern Lights Variable Trust
CODE OF ETHICS
February 19, 2007
Northern Lights Fund Trust and the Northern Lights Variable Trust (the “Trusts”) 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 Trusts.
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 Trusts
3.
any employee of the Trusts or the Advisers (or of any company controlling or controlled by or under common control with the Trusts 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 Trusts 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 Trusts with respect to Trustees and officers of the Trusts, 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 Trusts.
“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 Trusts that would not be deemed an “interested person” of the Trusts, 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 a Trusts; (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 Trusts 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-Trusts certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-Trusts 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 Trusts.
“Trusts” mean Northern Lights Fund Trust and the Northern Lights Variable Trust.
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 Trusts;
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 Trusts. 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 Trusts.
Advanced notice should be given so that the Trusts 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 Trusts;
b.
to make to the Trusts any untrue statement of a material fact or to omit to state to the Trusts 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 Trusts; or
d.
to engage in any manipulative practice with respect to the Trusts.
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 Trusts (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 Trusts 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 Trusts, 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 Trusts 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 Trusts 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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