NOTES TO
FINANCIAL STATEMENTS (Unaudited)
December
31, 2013
The
Giralda Fund (the “Fund”) is a series of shares of beneficial interest of the Northern Lights Fund Trust (the “Trust”),
a Delaware statutory trust organized on January 19, 2005. The Fund is registered under the Investment Company Act of 1940, as
amended, (the “1940 Act”), as a non-diversified, open-end management investment company. The Fund offers three classes
of shares designated as Manager Class, Class I and Class A. Each class represents an interest in the same assets of the Fund and
classes are identical. The primary investment objective of the Fund is capital appreciation. Class A has not commenced operations.
The Fund commenced operations on July 19, 2011.
|
|
2.
|
SUMMARY
OF
Significant Accounting Policies
|
The
following is a summary of significant accounting policies followed by the Fund in the preparation of its financial statements.
These policies are in conformity with accounting principles generally accepted in the United States of America (“GAAP”).
The preparation of financial statements in accordance with GAAP requires management to make estimates and assumptions that affect
the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of income and expenses for the period. Actual results could differ from those estimates.
Security
Valuation
– Securities listed on an exchange are valued at the last reported sale price at the close of the regular
trading session of the primary exchange on the business day the value is being determined, or in the case of securities listed
on NASDAQ at the NASDAQ Official Closing Price (“NOCP”). In the absence of a sale such securities shall be valued
at the mean between the current bid and ask prices on the day of valuation. Exchange traded options, futures and options on futures
are valued at the final settle price or, in the absence of a settle price, at the last sale price on the day of valuation. Investments
valued in currencies other than the U.S. dollar are converted to U.S. dollars using exchange rates obtained from pricing services.
Total Return Swaps are valued based on a price received from the underlying financial institution where the swap is being held.
In
unusual circumstances, securities may be valued at their fair market value as determined in good faith by the Trust’s Fair
Value Committee and in accordance with the Trust’s Portfolio Securities Valuation Procedures (the “Procedures”).
The Board of Trustees (the “Board”) will review the fair value method in use for securities requiring a fair market
value determination at least quarterly. The Procedures consider, among others, the following factors to determine a security’s
fair value: the nature and pricing history (if any) of the security; whether any dealer quotations for the security are available;
and possible valuation methodologies that could be used to determine the fair value of the security. Short-term debt obligations
having 60 days or less remaining until maturity, at time of purchase, are valued at amortized cost. Investments in open-end investment
companies are valued at net asset value.
The
Fund may hold securities, such as private placements, 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 at their fair market value as determined using the “fair value” procedures approved by the Board.
The Board has delegated execution of these procedures to a fair value team composed of one or more representative from each of
the (i) Trust, (ii) administrator, and (iii) adviser. The team may also enlist third party consultants such as an audit
firm or financial officer of a security issuer on an as-needed basis to assist in determining a security-specific fair value.
The Board reviews and ratifies the execution of this process and the resultant fair value prices at least quarterly to assure
the process produces reliable results.
Fair
Value Team and Valuation Process -
This team is composed of one or more representative from each of the (i) Trust, (ii)
administrator, and (iii) adviser. The applicable investments are valued collectively via inputs from each of these groups.
For example, fair value determinations are required for the following securities: (i) securities for which market quotations
are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary
lapse in the provision of a price by the regular pricing source), (ii) securities for which, in the judgment of the adviser, the
prices or values available do not represent the fair value of the instrument. Factors which may cause the adviser to make
such a judgment include, but are not limited to, the following: only a bid price or an asked price is available; the spread between
bid and asked prices is substantial; the frequency of sales; the thinness of the
market; the size of reported trades; and actions of the securities markets, such
as the suspension or limitation of trading; (iii) securities determined to be
illiquid; (iv) securities with respect to which an event that will affect the
value thereof has occurred (a “significant event”) since the closing prices were
established on the principal exchange on which they are traded, but prior to the
Fund’s calculation of its net asset value.
The Giralda
Fund
NOTES TO
FINANCIAL STATEMENTS (Continued) (Unaudited)
December
31, 2013
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 placements or non-traded securities are valued via inputs
from the adviser based upon the current bid for the security from two or more independent dealers or other parties reasonably
familiar with the facts and circumstances of the security (who should take into consideration all relevant factors as may be appropriate
under the circumstances). If the adviser is unable to obtain a current bid from such independent dealers or other independent
parties, the fair value team shall determine the fair value of such security using the following factors: (i) the type of security;
(ii) the cost at date of purchase; (iii) the size and nature of the Fund’s holdings; (iv) the discount from market value of unrestricted
securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers
with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of
any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness;
(viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x)
current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.
Valuation
of Fund of Funds
- The Fund may invest in portfolios of open-end or closed-end investment companies (the “Underlying
Funds”). The Underlying Funds value securities in their portfolios for which market quotations are readily available at
their market values (generally the last reported sale price) and all other securities and assets at their fair value to the methods
established by the boards of directors of the Underlying Funds.
Open-ended
funds are valued at their respective net asset values as reported by such investment companies. The shares of many closed-end
investment companies, after their initial public offering, frequently trade at a price per share, which is different than the
net asset value per share. The difference represents a market premium or market discount of such shares. There can be no assurances
that the market discount or market premium on shares of any closed-end investment company purchased by the Fund will not change.
The
Fund utilizes various methods to measure the fair value of all of its investments on a recurring basis. GAAP establishes a hierarchy
that prioritizes inputs to valuation methods. The three levels of input are:
Level
1
– Unadjusted quoted prices in active markets for identical assets and liabilities that the 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
the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would
be based on the best information available.
The
availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including,
for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets,
and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less
observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment
exercised in determining fair value is greatest for instruments categorized in Level 3.
The
inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes,
the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the
lowest level input that is significant to the fair value measurement in its entirety.
The
inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those
securities. The following tables summarize the inputs used as of December 31, 2013 for the Fund’s assets measured at fair
value:
The Giralda
Fund
NOTES TO
FINANCIAL STATEMENTS (Continued) (Unaudited)
December
31, 2013
|
Assets
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Exchange-Traded Funds
|
|
$
|
264,782,035
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
264,782,035
|
|
|
Open Swap Contracts
|
|
|
—
|
|
|
|
1,347,044
|
|
|
|
—
|
|
|
|
1,347,044
|
|
|
Short-Term Investments
|
|
|
3,935,066
|
|
|
|
—
|
|
|
|
—
|
|
|
|
3,935,066
|
|
|
Total
|
|
$
|
268,717,101
|
|
|
$
|
1,347,044
|
|
|
$
|
—
|
|
|
$
|
270,064,145
|
|
The
Fund did not hold any Level 3 securities during the period.
There
were no transfers into and out of Level 1 and Level 2 during the period.
It
is the Fund’s policy to recognize transfers into or out of Level 1 and Level 2 at the end of the reporting period.
See
Portfolio of Investments for Industry Classification.
Exchange
Traded Funds
- The Fund may invest in exchange traded funds (“ETFs”). ETFs are a type of index fund bought and
sold on a securities exchange. An ETF trades like common stock and represents a fixed portfolio of securities designed to track
the performance and dividend yield of a particular domestic or foreign market index. The risks of owning an ETF generally reflect
the risks of owning the underlying securities they are designed to track, although the lack of liquidity on an ETF could result
in it being more volatile. Additionally, ETFs have fees and expenses that reduce their value.
Swap
Agreements –
The Fund is subject to equity price risk and/or interest rate risk in the normal course of pursuing its
respective investment objectives. The Fund may hold fixed-rate bonds, the value of which may decrease if interest rates rise,
and equities subject to equity price risk. The Fund may enter into various swap transactions for investment purposes or to manage
interest rate, equity, foreign exchange (currency) or credit risk. These would be two-party contracts entered into primarily to
exchange the returns (or differentials in rates of returns) earned or realized on particular pre-determined investments or instruments.
For the six months ended December 31, 2013, the net change in unrealized appreciation on the swap contracts was $881,742.
The
gross returns to be exchanged or “swapped” between parties are calculated with respect to a notional amount, i.e.,
the return on or increase in value of a particular dollar amount invested at a particular interest rate, in a particular foreign
currency, or in a “basket” of securities representing a particular index or market segment. Changes in the value of
swap agreements are recognized as unrealized gains or losses in the Statement of Operations by “marking to market”
on a daily basis to reflect the value of the swap agreement at the end of each trading day. Payments received or paid at the beginning
of the agreement are reflected as such on the Statement of Assets and Liabilities and may be referred to as upfront payments.
The Fund amortizes upfront payments and/or accrues for the fixed payment stream on swap agreements on a daily basis with the net
amount recorded as a component of unrealized gain or loss on the Statement of Operations. A liquidation payment received or made
at the termination of the swap agreement is recorded as a realized gain or loss on the Statement of Operations. The Fund maintains
a cash balance as collateral to secure its obligations under the swaps. The amounts posted as collateral for each broker were
as follows, for Societe General, $1,340,000 was posted to the Fund in cash and for Bank of America and Barclays no cash collateral
was required at December 31, 2013. Entering into these agreements involves, to varying degrees, lack of liquidity and elements
of credit, market, and counterparty risk in excess of amounts recognized on the Statement of Assets and Liabilities. The Fund’s
maximum risk of loss from counterparty credit risk is the discounted net value of the cash flows to be received from the counterparty
over the contract’s remaining life, to the extent that that amount is positive. For the six months ended December 31, 2013,
the Fund had net realized loss of $(315,396), resulting from swap activity.
Option
Transactions –
The Fund is subject to equity price risk in the normal course of pursuing its investment objective and
may purchase or sell options to help hedge against risk. When the Fund writes a call option, an amount equal to the premium received
is included in the Statement of Assets and Liabilities as a liability. The amount of the liability is subsequently marked-to-market
to reflect the current market value of the option. If an option expires on its stipulated expiration date or if the Fund enters
into a closing purchase transaction, a gain or loss is realized. If a written call option is exercised, a gain or loss is realized
for the sale of the underlying security and the proceeds from the sale are increased by the premium originally received. As the
writer of an option, a Fund has no control over whether the option will be
exercised and, as a result, retains the market risk of an unfavorable change in
price of the security underlying the written option.
The Giralda
Fund
NOTES TO
FINANCIAL STATEMENTS (Continued) (Unaudited)
December
31, 2013
The
Fund did not have any open option positions as of December 31, 2013.
The
Fund may purchase put and call options. Put options are purchased to hedge against a decline in the value of securities held in
the Fund’s portfolio. If such a decline occurs, the put options will permit the Fund to sell the securities underlying such
options at the exercise price, or to close out the options at a profit. The premium paid for a put or call option plus any transaction
costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying
security rises or declines sufficiently, the option may expire worthless to the Fund. In addition, in the event that the price
of the security in connection with which an option was purchased moves in a direction favorable to the Fund, the benefits realized
by the Fund as a result of such favorable movement will be reduced by the amount of the premium paid for the option and related
transaction costs. Written and purchased options are non-income producing securities. With purchased options, there is minimal
counterparty risk to the Fund since these options are exchange traded and the exchange’s clearinghouse, as counterparty
to all exchange traded options, guarantees against a possible default.
The
derivative instruments outstanding as of December 31, 2013 as disclosed in the Portfolio of Investments and the amounts of realized
and changes in unrealized gains and losses on derivative instruments during the period as disclosed in the Statements of Operations
serve as indicators of the volume of derivative activity for the Fund.
Offsetting
of Financial Assets and Derivative Assets –
The
Fund’s policy is to recognize a net asset or liability equal to the net appreciation (depreciation) of the derivative.
During the six months ended December 31, 2013, the Fund was subject to master netting arrangements. The following table
shows additional information regarding the offsetting of assets and liabilities at December 31, 2013.
|
Assets:
|
|
|
|
|
|
|
|
|
|
|
Gross
Amounts Not Offset in the Statement of
Assets & Liabilities
|
|
|
|
|
|
Description
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
|
Gross
Amounts
Offset in the
Statement of
Assets & Liabilities
|
|
|
Net
Amounts
Presented in the
Statement of
Assets & Liabilities
|
|
|
Financial
Instruments
|
|
|
Collateral
Pledged/Received
|
|
|
Net
Amount
|
|
|
Swap
contracts
|
|
$
|
1,520,208
|
|
|
$
|
(173,164
|
)
|
|
$
|
1,347,044
|
|
|
$
|
—
|
|
|
$
|
1,347,044
|
|
|
$
|
—
|
|
|
Total
|
|
$
|
1,520,208
|
|
|
$
|
(173,164
|
)
|
|
$
|
1,347,044
|
|
|
$
|
—
|
|
|
$
|
1,347,044
|
|
|
$
|
—
|
|
|
Liabilities:
|
|
|
|
|
|
|
|
|
|
|
Gross
Amounts Not Offset in the Statement of
Assets & Liabilities
|
|
|
|
|
|
Description
|
|
Gross
Amounts of
Recognized
Liabilities
|
|
|
Gross
Amounts
Offset in the
Statement of
Assets & Liabilities
|
|
|
Net
Amounts
Presented in the
Statement of
Assets & Liabilities
|
|
|
Financial
Instruments
|
|
|
Collateral
Pledged/Received
|
|
|
Net
Amount
|
|
|
Swap
contracts
|
|
$
|
173,164
|
|
|
$
|
(173,164
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
Total
|
|
$
|
173,164
|
|
|
$
|
(173,164
|
)
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
—
|
|
Security
Transactions and Investment Income
– Investment security transactions are accounted for on a trade date basis. Cost
is determined and gains and losses are based upon the specific identification method for both financial statement and federal
income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on the accrual basis.
Purchase discounts and premiums on securities are accreted and amortized over the life of the respective securities. Withholding
taxes on foreign dividends have been provided for in accordance with the Fund’s understanding of the applicable country’s
tax rules and rates. The Fund did not have withholding taxes on foreign dividends for the six months ended December 31, 2013.
The Giralda
Fund
NOTES TO
FINANCIAL STATEMENTS (Continued) (Unaudited)
December
31, 2013
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, taking into consideration
the nature and type of expense and the relative sizes of the funds in the Trust. The Fund’s income, expenses (other than
the class specific distribution fees) and realized and unrealized gains and losses are allocated proportionally each day between
the classes based upon the relative net assets of each class.
Federal
Income Taxes
– The Fund intends to continue to comply with the requirements of Subchapter M of the Internal Revenue
Code applicable to regulated investment companies and will distribute all of its taxable income, if any, to shareholders. Accordingly,
no provision for Federal income taxes is required in the financial statements. The Fund recognizes the tax benefits of uncertain
tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities.
Management has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should
be recorded as of or during the year ended June 30, 2013, related to uncertain tax positions taken on the returns filed for the
open tax year 2012, or expected to be taken in the Fund’s 2013 tax returns. The Fund identifies its major tax jurisdictions
as U.S. Federal, Nebraska State 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.
Distributions
to Shareholders
– Distributions from investment income, if any, are declared and paid quarterly and are recorded on
the ex-dividend date. The Fund will declare and pay net realized capital gains, if any, annually. The character of income and
gains to be distributed is determined in accordance with Federal income tax regulations, which may differ from GAAP.
Indemnification
–
The Trust indemnifies its officers and trustees for certain liabilities that may
arise from the performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into
contracts that contain a variety of representations and warranties and which provide general indemnities. The Fund’s maximum
exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have
not yet occurred. However, based on experience, the Fund expects the risk of loss due to these warranties and indemnities to be
remote.
|
|
3.
|
Advisory
Fee and Other Related Party Transactions
|
Advisory
Fees
- Pursuant to the Investment Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”),
investment advisory services are provided to the Fund by Giralda Advisors, LLC (the “Adviser”). Under the terms of
the Advisory Agreement, the Adviser receives monthly fees calculated at an annual rate of 1.00% of the average daily net assets
of the Fund. For the six months ended December 31, 2013, the Adviser earned advisory fees of $1,283,553, of which $1,234,459 were
waived.
The
Fund was previously managed by Brinton Eaton Associates, Inc. (“Brinton Eaton”). In fourth quarter 2012, a change
of control resulted when Brinton Eaton contributed a portion of its assets to the Adviser, and Montage Investments (“MI”)
then purchased a controlling interest in the Adviser. This change of control did not result in any changes in the investment advisory
management personnel, operation or organization, nor did it result in any changes to the Fund’s advisory fee or fee waiver
in place prior to the change of control and the new Advisory Agreement was approved by the Board of Trustees and the Fund’s
shareholders.
The
Adviser has contractually agreed to waive all or part of its management fees and/or make payments to limit Fund expenses (exclusive
of any front-end or contingent deferred loads, brokerage fees and commissions, acquired fund 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, contractual indemnification of Fund service providers (other
than the Adviser)) at least until October 31, 2014, so that the total annual operating expenses of the Fund do not exceed 0.30%
and 1.30% of the average daily net assets of Manager Class and Class I shares, respectively (the “Waiver Agreement”).
In addition to the Waiver Agreement, the Adviser has contractually agreed to waive its management fee for services rendered to
the Manager Class at least until October 31, 2014.
The Giralda
Fund
NOTES TO
FINANCIAL STATEMENTS (Continued) (Unaudited)
December
31, 2013
Contractual waivers and expense payments may be recouped by the Adviser from
the Fund, to the extent that overall expenses fall below the expense limitation, within three years of when the amounts were waived,
except the advisory fee waiver for the Manager Class may not be recouped. As of December 31, 2013, there were no contractually
waived fees or expense reimbursements subject to recapture.
Pursuant
to a separate servicing agreement with Gemini Fund Services (“GFS”), the Fund pays GFS customary fees for providing
administration, fund accounting and transfer agency services to the Fund. GFS provides a Principal Executive Officer and a Principal
Financial Officer to the Fund.
In
addition, certain affiliates of GFS provide ancillary services to the Fund(s) as follows:
Northern
Lights Compliance Services, LLC (“NLCS”) -
NLCS, an affiliate of GFS, 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.
Gemcom,
LLC (“Gemcom”)
- Gemcom, an affiliate of GFS, 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, Gemcom receives customary fees from the Fund.
Distributor
–
The distributor of the Fund is Northern Lights Distributors, LLC (the “Distributor”), an affiliate of
GFS.
|
|
4.
|
Investment
Transactions
|
The
cost of security purchases and the proceeds from the sale of securities, other than short-term securities, for the six months
ended December 31, 2013, amounted to $45,570,429 and $52,429,865, respectively.
The number
of option contracts written and the premiums received by the Fund during the six months ended December 31, 2013, were as follows:
|
|
|
Number of
|
|
|
Premiums
|
|
|
|
|
Contracts
|
|
|
Received
|
|
|
Options outstanding, beginning of period
|
|
|
—
|
|
|
$
|
—
|
|
|
Options written
|
|
|
7,450
|
|
|
|
660,244
|
|
|
Options closed
|
|
|
(7,450
|
)
|
|
|
(660,244
|
)
|
|
Options outstanding, end of period
|
|
|
—
|
|
|
$
|
—
|
|
The
Fund may assess a short-term redemption fee of 1.00% of the total redemption amount if a shareholder sells his or her shares after
holding them for less than 60 days. The redemption fee is paid directly to the Fund. For the six months ended December 31, 2013,
the Fund assessed $387 in redemption fees.
|
|
6.
|
DISTRIBUTIONS
TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
|
The
tax character of Fund distributions for the following periods was as follows:
|
|
|
Fiscal Year Ended
|
|
|
Fiscal Year Ended
|
|
|
|
|
June 30, 2013
|
|
|
June 30, 2012
|
|
|
Ordinary Income
|
|
$
|
92,330
|
|
|
$
|
2,099,099
|
|
|
Long-Term Capital Gain
|
|
|
—
|
|
|
|
—
|
|
|
|
|
$
|
92,330
|
|
|
$
|
2,099,099
|
|
The Giralda
Fund
NOTES TO
FINANCIAL STATEMENTS (Continued) (Unaudited)
December
31, 2013
As
of June 30, 2013, the components of accumulated earnings/(deficit) on a tax basis were as follows:
|
Undistributed
|
|
|
Undistributed
|
|
|
Post October
|
|
|
Capital
|
|
|
Unrealized
|
|
|
Total
|
|
|
Ordinary
|
|
|
Long-Term
|
|
|
and Late Year
|
|
|
Loss Carry
|
|
|
Appreciation/
|
|
|
Accumulated
|
|
|
Income
|
|
|
Gains
|
|
|
Losses
|
|
|
Forwards
|
|
|
(Depreciation)
|
|
|
Earnings/(Deficits)
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
(1,339,575
|
)
|
|
$
|
(11,166,706
|
)
|
|
$
|
28,782,655
|
|
|
$
|
16,276,374
|
|
The
difference between book basis and tax basis unrealized appreciation, undistributed ordinary income and accumulated net realized
loss from security transactions is primarily attributable to the tax deferral of losses on wash sales and the mark-to-market on
open swap contracts.
Late
year losses incurred after December 31 within the fiscal year are deemed to arise on the first business day of the following fiscal
year for tax purposes. The Fund incurred and elected to defer such late year losses of $1,339,575.
At
June 30, 2013, the Fund had capital loss carry forwards for federal income tax purposes available to offset future capital gains
as follows:
|
Year-Generated
|
|
Short-term
|
|
|
Long-term
|
|
|
Total
|
|
|
Expiration
|
|
6/30/2012
|
|
$
|
11,166,706
|
|
|
$
|
—
|
|
|
$
|
11,166,706
|
|
|
Non-expiration
|
Permanent
book and tax differences primarily attributable to the tax treatment of net operating losses and adjustment for swaps resulted
in reclassification for the period ended June 30, 2013 as follows:
|
Undistributed
|
|
|
Undistributed
|
|
|
Paid
|
|
|
Ordinary Income
|
|
|
Long-Term
|
|
|
In
|
|
|
Income (Loss)
|
|
|
Gains (Loss)
|
|
|
Capital
|
|
|
$
|
(5,555,622
|
)
|
|
$
|
7,187,286
|
|
|
$
|
(1,631,664
|
)
|
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 concluded that there is no impact requiring adjustment or disclosure in the financial
statements.
The Giralda
Fund
DISCLOSURE
OF FUND EXPENSES (Unaudited)
December
31, 2013
As
a shareholder of the Fund you incur 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. Please note, the expenses shown in the tables are
meant to highlight ongoing costs only and do not reflect any transactional costs.
This
example is based on an investment of $1,000 invested for the period from July 1, 2013 through December 31, 2013.
Actual
Expenses
: The first line of the table provides information about actual account values
and actual expenses. You may use the information in this line, 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 first line under the heading entitled “Expenses Paid During the Period”
to estimate the expenses you paid on your account during the period.
Hypothetical
Examples for Comparison Purposes
: The second line of the table below provides information
about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate
of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses
may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information
to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the
5% hypothetical examples that appear in the shareholder reports of the other funds.
Please
note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional
costs which may be applicable to your account. Therefore, the second line of the table is useful in comparing ongoing costs only,
and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs
were included, your costs would have been higher.
|
|
|
Beginning
Account
Value (7/1/13)
|
|
|
Ending Account
Value (12/31/13)
|
|
|
Expense
Ratio
|
|
Expenses Paid During
the Period*
(7/1/13 to 12/31/13)
|
|
|
Actual
|
|
|
|
|
|
|
|
|
|
|
|
|
Manager Class
|
|
$
|
1,000.00
|
|
|
$
|
1,161.30
|
|
|
0.19%
|
|
$
|
1.04
|
|
|
Class I
|
|
$
|
1,000.00
|
|
|
$
|
1,155.90
|
|
|
1.19%
|
|
$
|
6.47
|
|
|
Hypothetical
(5% return before expenses)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Manager Class
|
|
$
|
1,000.00
|
|
|
$
|
1,024.25
|
|
|
0.19%
|
|
$
|
0.97
|
|
|
Class I
|
|
$
|
1,000.00
|
|
|
$
|
1,019.21
|
|
|
1.19%
|
|
$
|
6.06
|
|
|
|
*
|
Expenses
Paid During Period are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period,
multiplied by 184 days and divided by 365 (to reflect the number of days in the period ended December 31, 2013).
|
PORTFOLIO
COMPOSITION** (Unaudited)
|
Exchange Traded Funds
|
|
|
98.5
|
%
|
|
Short-Term Investments
|
|
|
1.5
|
%
|
|
|
|
|
100.0
|
%
|
|
|
**
|
Based
on Portfolio Market Value as of December 31, 2013.
|
The Giralda
Fund
ADDITIONAL
INFORMATION (Unaudited)
December
31, 2013
PROXY
VOTING
At
a Special Meeting of Shareholders of the Trust, held at the offices of GFS, 80 Arkay Drive, Suite 110, Hauppauge, NY 11788, on
Tuesday, September 10, 2013, Trust shareholders of record as of the close of business on July 22, 2013 voted to approve the following
proposal:
Proposal
1:
To elect Mark H. Taylor, John V. Palancia, Andrew Rogers, Mark D. Gersten, and Mark Garbin to the Board of Trustees of
the Trust.
|
|
|
Shares Voted
|
|
Shares Voted Against
|
|
|
|
In Favor
|
|
or Abstentions
|
|
Mark Garbin
|
|
609,702,446
|
|
7,380,704
|
|
Mark D. Gersten
|
|
609,750,246
|
|
7,332,904
|
|
John V. Palancia
|
|
609,370,118
|
|
7,713,033
|
|
Andrew Rogers
|
|
609,691,730
|
|
7,391,421
|
|
Mark H. Taylor
|
|
608,885,975
|
|
8,197,175
|
Effective
September 24, 2013, Michael Miola resigned from the Board of Trustees.
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
|
PRIVACY
NOTICE
Northern
Lights Fund Trust
|
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
.
|
How to
Obtain Proxy Voting Information
Information
regarding how the Fund votes proxies relating to portfolio securities during the most recent year ending June 30 as well as a
description of the policies and procedures that the Fund used to determine how to vote proxies is available without charge, upon
request, by calling 1-855-GIRALDA or by referring to the Securities and Exchange Commission’s (“SEC”) website at
http://www.sec.gov
.
How to
Obtain 1
st
and 3
rd
Fiscal Quarter Portfolio Holdings
The
Fund files its 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-GIRALDA.
Investment
Adviser
Giralda Advisors,
LLC
One Giralda Farms,
Suite 130
Madison, NJ 07940
Administrator
Gemini Fund
Services, LLC
80 Arkay Drive
Hauppauge, NY 11788