UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number
811-22572
The Multi-Strategy Growth & Income Fund
(Exact name of registrant as specified in charter)
80 Arkay Drive, Suite 110, Hauppauge, NY 11788
(Address of principal executive offices)
(Zip code)
James Ash, Gemini Fund Services, LLC.
80 Arkay Drive, Suite 110, Hauppauge, NY 11788
(Name and address of agent for service)
Registrant's telephone number, including area code:
631-470-2619
Date of fiscal year end:
2/28
Date of reporting period: 2/28/13
Item 1. Reports to Stockholders.
April 8, 2013
Dear Valued Shareholder,
We have been pleased with the strength and performance of The Multi-Strategy Growth & Income Fund (the Fund) in its inaugural year. Thank you for your investment and continued trust in the Fund.
The Fund launched in March 2012 with an investment strategy focused on achieving over the long-term, returns that are non-correlated to the broad stock and bond markets while providing a consistent quarterly dividend. We strive to achieve this objective by investing in a combination of non-listed real estate investment trusts, alternative investment funds (such as business development companies), and a variety of debt and equity income investments.
There is a clear trend of investors seeking non-traditional investment opportunities driven by fear of inflation, market volatility, and an increasing need for income-focused solutions. We believe the Fund is well positioned, serving as a core allocation of alternative income-focused investments. We encourage investors to consider this Fund as a core portfolio holding representing a variety of alternative and income-oriented investment opportunities. Our belief and conviction has been supported by strong investor demand and growth of our invested assets in the Fund to nearly $50 million in our first year of operation. According to the Investment Company Institute, the average mutual fund takes approximately 2.6 years to achieve a level of invested assets equal to what the Fund raised in its first full year.1
During this first year, the broad stock market, as measured by the S&P 500, experienced extreme volatility both on the downside and upside while the bond market, as measured by the Barclays Aggregate Bond Index, experienced lower volatility and lower total returns. The Multi-Strategy Growth & Income Fund experienced returns between those of stocks and bonds. However, past performance does not guarantee future results.
As of February 28, 2013, the Fund delivered a 7.34% total return since inception, without sales load; compare that to a 10.23% return from the S&P 5002 and a 4.05% return from the Barclays Aggregate Bond Index3. The Fund also experienced three consecutive dividend increases in 2012 with a second-quarter distribution of $0.0650, a third-quarter distribution of $0.1274, and a fourth-quarter distribution of $0.1631. Our fourth distribution, made in the first quarter of 2013, was $0.1736 (after the fiscal year ended on February 28, 2013).
Some key contributing factors to the Funds performance are as follows:
1)
General Economic Strength U.S. economic fundamentals have continued to improve. Federal Reserve actions have continued to keep interest rates near historic lows and support strong U.S. stock market gains.
2)
Non-Listed REITs Becoming the Incubator for Listed REITs Public markets began taking notice of non-listed REITs in 2012, and several non-listed REITs listed or merged with publicly traded REITs that year. This sets the stage for the possibility for many more in 2013. The Fund experienced a merger of one of its top non-listed REIT holdings, ARC Trust III (6.2%), with a listed REIT, ARC Properties Trust (ARCP), in March 2013, which was a significant driver of total return for the Fund.
________________________________
1 Mutual Funds and Institutional Accounts: A Comparison, Investment Company Institute, 2006 - http://www.ici.org/pdf/ppr_06_mf_inst_comparison.pdf
2 S&P 500: An index of 500 stocks chosen for market size, liquidity, and industry grouping (among other factors). It is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large-cap universe.
3 Barclays Aggregate Bond Index: An index commonly used as a benchmark by both passive and active investors to measure portfolio performance relative to the U.S. dollar-denominated investment-grade fixed-rate taxable bond market. It is also an informational measure of broad market returns commonly applied to fixed-income instruments.
3)
Tight Banking Requirements Have Paved the Way for Business Development Companies Business development companies (BDCs) provide lending solutions to private U.S. companies and offer investors the potential for attractive yields. The Fund benefited from gains resulting in higher valuations and increased dividend distributions throughout 2012.
4)
Repositioned Covered Call Strategy in an Effort to Increase Dividend Yield We increased the dividend yield on our sub-advised equity income strategy by reducing the covered call allocation and adding master limited partnerships (MLPs) and preferred stocks to the portfolio. This change was of significant help in increasing the Funds third-quarter dividend distribution.
We continue to evaluate new opportunities for the Fund and look forward to continued success in the years to come.
Sincerely,
1040-NLD-4/25/2013
The Multi-Strategy Growth & Income Fund
PERFORMANCE OF A $10,000 INVESTMENT (Unaudited)
Since Inception through February 28, 2013*
The Funds performance figures for the period ending February 28, 2013, compared to its benchmarks:
| Since Inception* |
The Multi-Strategy Growth & Income Fund |
|
Without Load | 7.34% |
With Load | 1.46% |
Barclays Aggregate Bond Index | 4.05% |
S&P 500 Total Return Index | 10.23% |
________________
* The Fund commenced operations March 16, 2012.
The Barclays Aggregate Bond Index is an unmanaged index which represents the U.S. investment-grade fixed-rate bond market (including government and corporate securities, mortgage pass-through securities and asset-backed securities). Investors cannot invest directly in an index or benchmark.
The S&P 500 Total Return Index is an unmanaged market capitalization-weighted index which is comprised of 500 of the largest U.S. domiciled companies and includes the reinvestment of all dividends. Investors cannot invest directly in an index or benchmark.
Past performance is not predictive of future results. The investment return and principal value of an investment will fluctuate. An investors shares, when redeemed, may be worth more or less than the original cost. Total return is calculated assuming reinvestment of all dividends and distributions. The Funds total gross annual operating expenses, per its prospectus dated March 15, 2012, including underlying funds, are 2.13%. The graph does not reflect the deduction of taxes that a shareholder would have to pay on Fund distributions or the redemption of the fund shares.
The Multi-Strategy Growth & Income Fund | ||||||
PORTFOLIO OF INVESTMENTS | ||||||
February 28, 2013 | ||||||
Shares |
| Security |
|
|
|
Value |
|
|
|
|
|
|
|
|
|
COMMON STOCK - 13.73 % |
|
|
| |
|
|
AEROSPACE/DEFENSE - 0.38 % |
|
|
| |
2,000 |
| Lockheed Martin Corp. |
|
|
|
$ 176,000 |
|
|
|
|
|
|
|
|
| AGRICULTURE - 0.34 % |
|
|
|
|
3,600 |
| Reynolds American, Inc. |
|
|
|
157,248 |
|
|
|
|
|
|
|
|
| BANKS - 0.65 % |
|
|
|
|
3,200 |
| Bank of Hawaii Corp. |
|
|
| 154,848 |
2,400 |
| Bank of Montreal |
|
|
| 149,352 |
|
|
|
|
|
|
304,200 |
|
| CHEMICALS - 0.44 % |
|
|
|
|
4,300 |
|
EI du Pont de Nemours & Co. |
|
|
205,970 | |
|
|
|
|
|
|
|
|
| ELECTRIC - 0.77 % |
|
|
|
|
17,000 |
|
Cia Energetica de Minas Gerais - ADR |
|
|
202,300 | |
5,200 |
| PPL Corp. |
|
|
|
160,264 |
|
|
|
|
|
|
362,564 |
|
|
ENGINEERING & CONSTRUCTION - 0.26 % |
|
| ||
2,000 |
| Fluor Corp. ^ |
|
|
|
123,800 |
|
|
|
|
|
|
|
|
|
ENVIRONMENTAL CONTROL - 0.34 % |
|
|
| |
4,300 |
|
Waste Management, Inc. |
|
|
160,476 | |
|
|
|
|
|
|
|
|
| GAS - 1.00 % |
|
|
|
|
5,000 |
| AGL Resources, Inc. |
|
|
|
199,800 |
11,000 |
| NGL Energy Partners LP |
|
|
|
268,070 |
|
|
|
|
|
|
467,870 |
|
| OIL & GAS - 0.42 % |
|
|
|
|
2,800 |
|
Diamond Offshore Drilling, Inc. |
|
|
195,104 | |
|
|
|
|
|
|
|
|
|
PHARMACEUTICALS - 0.99 % |
|
|
| |
2,900 |
| Eli Lilly & Co. |
|
|
|
158,514 |
3,500 |
| Merck & Co., Inc. |
|
|
|
149,555 |
2,300 |
| Novartis AG - ADR |
|
|
|
155,940 |
|
|
|
|
|
|
464,009 |
|
| PIPELINES - 4.31 % |
|
|
|
|
3,600 |
| Buckeye Partners LP |
|
|
|
200,520 |
7,800 |
|
Crestwood Midstream Partners LP |
|
|
195,780 | |
4,800 |
|
El Paso Pipeline Partners LP |
|
|
200,592 | |
8,000 |
|
Enbridge Energy Partners LP |
|
|
221,680 | |
2,200 |
|
Kinder Morgan Energy Partners LP |
|
|
192,082 | |
6,300 |
| NuStar GP Holdings LLC |
|
|
|
190,575 |
5,800 |
|
Spectra Energy Partners LP |
|
|
214,136 | |
4,900 |
|
Targa Resources Partners LP |
|
|
201,831 | |
4,600 |
| TC Pipelines LP |
|
|
|
210,955 |
3,900 |
| Williams Partners LP |
|
|
|
193,830 |
|
|
|
|
|
|
2,021,981 |
The accompanying notes are an integral part of these financial statements.
The Multi-Strategy Growth & Income Fund | ||||||
PORTFOLIO OF INVESTMENTS (Continued) | ||||||
February 28, 2013 | ||||||
Shares |
|
Security |
|
|
|
Value |
|
|
|
|
|
|
|
|
|
RETAIL - 0.40 % |
|
|
|
|
9,400 |
|
Inergy LP |
|
|
|
$ 187,624 |
|
|
|
|
|
|
|
|
|
SEMICONDUCTORS - 0.66 % |
|
|
| |
7,000 |
|
Intel Corp. |
|
|
|
145,950 |
4,500 |
|
Microchip Technology, Inc. |
|
|
164,115 | |
|
|
|
|
|
|
310,065 |
|
|
SOFTWARE - 0.42 % |
|
|
|
|
8,000 |
|
CA, Inc. |
|
|
|
195,920 |
|
|
|
|
|
|
|
|
|
TELECOMMUNICATIONS - 0.34 % |
|
|
| |
4,500 |
|
AT&T, Inc. |
|
|
|
161,595 |
|
|
|
|
|
|
|
|
|
TOYS/GAMES/HOBBIES - 0.34 % |
|
|
| |
4,000 |
|
Hasbro, Inc. |
|
|
|
160,080 |
|
|
|
|
|
|
|
|
|
TRANSPORTATION - 1.67 % |
|
|
| |
6,000 |
|
Golar LNG Partners LP |
|
|
|
178,500 |
5,700 |
|
Martin Midstream Partners LP |
|
|
197,562 | |
4,700 |
|
Teekay LNG Partners LP |
|
|
|
184,005 |
8,000 |
|
Teekay Offshore Partners LP |
|
|
223,920 | |
|
|
|
|
|
|
783,987 |
|
|
|
|
|
|
|
|
|
TOTAL COMMON STOCK |
|
|
6,438,493 | |
|
|
( Cost - $6,376,198) |
|
|
|
|
|
|
|
|
|
|
|
|
|
REAL ESTATE INVESTMENT TRUSTS - 54.37 % |
|
|
| |
227,400 |
| American Realty Capital Healthcare Trust # |
|
|
2,103,450 | |
231,076 |
| American Realty Capital Trust III # |
|
|
2,904,275 | |
91,027 |
| American Realty Capital Trust IV # |
|
|
2,105,000 | |
198,378 |
| American Realty Capital New York Recovery # |
|
|
1,835,000 | |
198,688 |
| Carey Watermark Investors, Inc. # |
|
|
|
1,837,861 |
181,081 |
| CV Mission Critical REIT # |
|
|
|
1,675,000 |
198,378 |
| Hines Global REIT, Inc # |
|
|
|
1,886,380 |
4,475 |
|
Hospitality Properties Trust |
|
|
119,483 | |
458,400 |
|
NorthStar Real Estate Income Trust # |
|
|
4,240,200 | |
198,378 |
|
Phillips Edison Shopping Center REIT # |
|
|
1,835,000 | |
6,200 |
|
Senior Housing Properties Trust |
|
|
155,558 | |
283,357 |
|
Steadfast Income REIT # |
|
|
|
2,683,388 |
114,165 |
|
United Development Funding IV # |
|
|
2,112,050 | |
|
|
TOTAL REAL ESTATE INVESTMENT TRUSTS |
|
|
25,492,645 | |
|
|
( Cost - $24,024,119) |
|
|
|
|
|
|
|
|
|
|
|
|
|
BUSINESS DEVELOPMENT CORPORATIONS - 11.83 % |
|
| ||
218,208 |
|
Business Development Corporation of America # |
|
|
2,179,896 | |
329,305 |
|
Corporate Capital Trust # |
|
|
3,365,910 | |
|
|
TOTAL BUSINESS DEVELOPMENT CORPORATIONS |
|
5,545,806 | ||
|
|
( Cost - $5,421,150) |
|
|
|
|
The accompanying notes are an integral part of these financial statements.
The Multi-Strategy Growth & Income Fund | ||||||
PORTFOLIO OF INVESTMENTS (Continued) | ||||||
February 28, 2013 | ||||||
Shares |
| Security |
|
Interest Rate (%) |
|
Value |
|
|
|
|
|
|
|
|
|
PREFERRED STOCK - 12.61 % |
|
|
| |
|
| BANKS - 2.94 % |
|
|
|
|
13,500 |
|
BancorpSouth Capital Trust I | 8.1500 |
|
$ 355,833 | |
10,700 |
|
Deutsche Bank Contingent Capital Trust V | 8.0500 |
|
308,160 | |
13,600 |
|
JP Morgan Chase Capital X | 7.0000 |
|
350,880 | |
14,000 |
|
Zions Capital Trust B | 8.0000 |
|
365,120 | |
|
|
|
|
|
|
1,379,993 |
|
|
DIVERSIFIED FINANCIAL SERVICES - 1.40 % |
|
|
| |
13,800 |
| Citigroup Capital VII |
|
7.1250 |
|
351,072 |
6,200 |
| SLM Corp. |
|
6.9700 |
|
304,668 |
|
|
|
|
|
|
655,740 |
|
| ELECTRIC - 2.35 % |
|
|
|
|
2,898 |
| Duquesne Light Co. |
|
6.5000 |
|
149,131 |
11,600 |
|
Interstate Power & Light Co. | 8.3750 |
|
290,232 | |
13,664 |
|
NextEra Energy Capital Holdings, Inc. | 8.7500 |
|
367,698 | |
11,500 |
|
San Diego Gas & Electric Co. | 1.7000 |
|
296,930 | |
|
|
|
|
|
|
1,103,991 |
|
|
INSURANCE - 2.90 % |
|
|
| |
13,700 |
| Aegon NV |
|
7.2500 |
|
348,802 |
13,900 |
|
Everest Re Capital Trust II | 6.2000 |
|
351,392 | |
10,800 |
| PartnerRE Ltd. |
|
7.2500 |
|
300,564 |
14,000 |
|
WR Berkley Capital Trust II | 6.7500 |
|
358,120 | |
|
|
|
|
|
|
1,358,878 |
|
| REITS - 3.02 % |
|
|
|
|
13,849 |
| BRE Properties, Inc. |
|
6.7500 |
|
354,396 |
17,500 |
|
CommonWealth REIT | 7.2500 |
|
442,400 | |
11,800 |
|
Hospitality Properties Trust | 7.0000 |
|
298,186 | |
12,500 |
| Realty Income Corp. |
|
6.7500 |
|
321,000 |
|
|
|
|
|
|
1,415,982 |
|
|
|
|
|
|
|
|
|
TOTAL PREFERRED STOCK |
|
|
5,914,584 | |
|
| ( Cost - $5,961,072) |
|
|
|
|
|
|
|
|
|
|
|
| SHORT-TERM INVESTMENTS - 6.32 % |
|
| |||
|
| MONEY MARKET FUND - 6.32 % |
|
| ||
2,962,808 |
|
AIM STIT-Government & Agency Portfolio | 0.0200 | + |
2,962,808 | |
|
| TOTAL SHORT-TERM INVESTMENTS |
|
| ||
|
| ( Cost - $2,962,808) |
|
|
|
|
|
|
|
|
|
|
|
|
| TOTAL INVESTMENTS - 98.86 % |
|
| ||
|
|
( Cost - $44,745,347) (a) |
|
|
$ 46,354,336 | |
|
|
CALL OPTIONS WRITTEN - (0.01) % |
|
|
(6,800) | |
|
| OTHER ASSETS IN EXCESS OF LIABILITIES - 1.15 % |
|
540,343 | ||
|
| NET ASSETS - 100.00 % |
|
$ 46,887,879 | ||
|
|
|
|
|
|
|
# Fair Value estimated using Fair Valuation Procedures adopted by the Board of Trustees. Total value of such securitites is $30,763,410 or 65.61% of net assets. | ||||||
+ Money market fund; interest rate reflects the seven-day effective yield on February 28, 2013. |
The accompanying notes are an integral part of these financial statements.
The Multi-Strategy Growth & Income Fund | ||||||
PORTFOLIO OF INVESTMENTS (Continued) | ||||||
February 28, 2013 | ||||||
|
|
|
|
| ||
^ Each stock position is subject to written call options. |
| |||||
ADR - American Depositary Receipt |
|
| ||||
REIT - Real Estate Investment Trust | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
(a) Represents cost for financial reporting purposes. Aggregate cost for federal tax purposes including call options written is $44,687,787 and differs from fair value by net unrealized appreciation (depreciation) of securities as follows: | ||||||
|
|
Unrealized appreciation: |
|
$ 1,787,736 | ||
|
|
Unrealized depreciation: |
|
(127,987) | ||
|
|
Net unrealized appreciation: |
|
$ 1,659,749 | ||
|
|
|
|
|
|
|
Contracts (1) |
|
SCHEDULE OF CALL OPTIONS WRITTEN - (0.01) % |
|
Value | ||
20 |
|
Fluor Corp. |
|
|
|
$ 6,800 |
|
|
Expiration April 2013, Exercise Price $60.00 |
|
| ||
|
|
TOTAL CALL OPTIONS WRITTEN |
|
|
$ 6,800 | |
|
|
( Proceeds - $7,071) |
|
|
|
|
|
|
|
|
|
|
|
(1) Each option contract allows the holder of the option to purchase 100 shares of the underlying stock. | ||||||
| ||||||
| ||||||
Portfolio Composition as of February 28, 2013 (Unaudited) | ||||||
|
|
|
|
|
|
|
|
|
|
|
Percent of Net Assets |
| |
|
|
REITS |
|
57.39% |
| |
|
|
Business Development Corps |
|
11.83% |
| |
|
|
Financial |
|
7.89% |
| |
|
|
Energy |
|
4.73% |
| |
|
|
Utilities |
|
4.13% |
| |
|
|
Industrial |
|
2.65% |
| |
|
|
Consumer, Non-cyclical |
|
1.32% |
| |
|
|
Technology |
|
1.08% |
| |
|
|
Consumer, Cyclical |
|
0.73% |
| |
|
|
Basic Materials |
|
0.44% |
| |
|
|
Communications |
|
0.35% |
| |
|
|
Short-term Investments |
|
6.32% |
| |
|
| Call Options Written |
| (0.01)% |
| |
|
| Other Assets in Excess of Liabilities |
|
1.15% |
| |
|
| Net Assets |
|
100.00% |
|
The accompanying notes are an integral part of these financial statements.
The Multi-Strategy Growth & Income Fund |
|
|
| ||
STATEMENT OF ASSETS AND LIABILITIES |
|
|
| ||
February 28, 2013 |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
| ||
| Investments in Securities at Value (identified cost $44,745,347) |
|
$ 46,354,336 | ||
|
Dividends and Interest Receivable |
|
|
227,750 | |
|
Receivable for Fund Shares Sold |
|
|
529,790 | |
|
Due from Investment Advisor |
|
|
21,571 | |
|
Deferred Cost |
|
|
4,159 | |
|
Prepaid Expenses and Other Assets |
|
|
32,855 | |
|
Total Assets |
|
|
47,170,461 | |
|
|
|
|
|
|
Liabilities: |
|
|
| ||
|
Call Options Written, at value (proceeds $7,071) |
|
|
6,800 | |
|
Payable for Securities Purchased |
|
|
227,865 | |
|
Shareholder Servicing Fees Payable |
|
|
8,464 | |
|
Payable to Other Affiliates |
|
|
12,203 | |
|
Other Accrued Expenses |
|
|
27,250 | |
|
Total Liabilities |
|
|
282,582 | |
|
|
|
|
|
|
Net Assets (Unlimited shares of no par value benficial interest |
|
|
| ||
| authorized; 2,980,425 shares of beneficial interest outstanding) |
|
$ 46,887,879 | ||
|
|
|
|
|
|
Net Asset Value and Redemption Price Per Share |
|
|
| ||
| ($46,887,879/2,980,425 shares of beneficial interest outstanding) |
|
$ 15.73 | ||
Maximum Offering Price Per Share |
|
|
| ||
|
($15.73/0.945) |
|
|
$ 16.65 | |
|
|
|
|
|
|
Composition of Net Assets: |
|
|
| ||
|
At February 28, 2013, Net Assets consisted of: |
|
|
| |
|
|
Paid-in-Capital |
|
|
$ 44,959,532 |
|
|
Undistributed Net Investment Income |
|
|
50,489 |
|
|
Accumulated Net Realized Gain (Loss) on: |
|
|
|
|
|
Investments |
|
|
727,934 |
|
|
Options Written |
|
|
(459,336) |
|
|
Net Unrealized Appreciation on: |
|
|
|
|
|
Investments |
|
|
1,608,989 |
|
|
Options Written |
|
|
271 |
Net Assets |
|
|
$ 46,887,879 |
The accompanying notes are an integral part of these financial statements.
The Multi-Strategy Growth & Income Fund |
|
|
| ||
STATEMENT OF OPERATIONS |
|
|
| ||
For the Period Ended February 28, 2013* |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income: |
|
|
| ||
| Dividend Income (less $1,132 foreign taxes withholding) |
|
|
$ 899,741 | |
| Interest Income |
|
|
54,151 | |
| Total Investment Income |
|
|
953,892 | |
|
|
|
|
|
|
Expenses: |
|
|
| ||
| Investment Advisory Fees |
|
|
180,326 | |
| Offering Cost |
|
|
97,058 | |
| Shareholder Servicing Fees |
|
|
60,109 | |
| Legal Fees |
|
|
41,306 | |
| Trustees' Fees and Expenses |
|
|
37,545 | |
| Chief Compliance Officer Fees |
|
|
35,316 | |
| Administration Fees |
|
|
35,255 | |
| Printing Expense |
|
|
27,222 | |
| Transfer Agent Fees |
|
|
27,086 | |
| Audit Fees |
|
|
22,000 | |
| Fund Accounting Fees |
|
|
20,957 | |
| Insurance Expense |
|
|
19,206 | |
| Custody Fees |
|
|
12,437 | |
| Registration & Filing Fees |
|
|
7,648 | |
| Non 12B-1 Shareholder Servicing |
|
|
5,971 | |
| Miscellaneous Expenses |
|
|
1,813 | |
| Total Expenses |
|
|
631,255 | |
| Less: Fees Waived/Reimbursed by Advisor |
|
|
(207,331) | |
| Net Expenses |
|
|
423,924 | |
|
|
|
|
|
|
| Net Investment Income |
|
|
529,968 | |
|
|
|
|
|
|
Net Realized and Unrealized Gain (Loss) on Investments: |
|
|
| ||
| Net Realized Gain (Loss) on: |
|
|
| |
|
| Investments |
|
|
986,857 |
|
| Options Written |
|
|
(459,336) |
| Total Net Realized Gain |
|
|
527,521 | |
| Net Change in Unrealized Appreciation on: |
|
|
| |
|
| Investments |
|
|
1,608,989 |
|
| Options Written |
|
|
271 |
| Total Net Change in Unrealized Appreciation |
|
|
1,609,260 | |
|
|
|
|
|
|
| Net Realized and Unrealized Gain on Investments |
|
|
2,136,781 | |
|
|
|
|
|
|
Net Increase in Net Assets Resulting From Operations |
|
|
$ 2,666,749 | ||
|
|
|
|
|
|
| * The Fund commenced operations March 16, 2012. |
|
|
|
The accompanying notes are an integral part of these financial statements.
The Multi-Strategy Growth & Income Fund |
|
|
|
| ||
STATEMENT OF CHANGES IN NET ASSETS |
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the Period |
|
|
|
|
|
|
Ended |
|
|
|
|
|
|
February 28, 2013* |
|
|
|
|
|
|
|
Operations: |
|
|
|
| ||
|
Net Investment Income |
|
|
|
$ 529,968 | |
|
Net Realized Gain on Investments |
|
|
|
| |
|
|
and Options Written |
|
|
|
527,521 |
|
Net Change in Unrealized Appreciation |
|
|
|
| |
|
|
on Investments and Options Written |
|
|
|
1,609,260 |
|
Net Increase in Net Assets |
|
|
|
| |
|
|
Resulting From Operations |
|
|
|
2,666,749 |
|
|
|
|
|
|
|
Distributions to Shareholders From: |
|
|
|
| ||
|
Net Investment Income ($0.36 per share) |
|
|
|
(738,402) | |
|
Total Distributions to Shareholders |
|
|
|
(738,402) | |
|
|
|
|
|
|
|
From Shares of Beneficial Interest: |
|
|
|
| ||
|
Proceeds from Shares Issued (2,973,794 shares) |
|
|
|
44,860,835 | |
|
Distributions Reinvested (46,346 shares) |
|
|
|
705,651 | |
|
Cost of Shares Redeemed (46,382 shares) |
|
|
|
(706,954) | |
|
Net Increase in Net Assets From Shares of Beneficial Interest |
|
|
44,859,532 | ||
|
|
|
|
|
|
|
Total Increase in Net Assets |
|
|
|
46,787,879 | ||
|
|
|
|
|
|
|
Net Assets: |
|
|
|
| ||
|
Beginning of Period |
|
|
|
100,000 | |
|
End of Period |
|
|
|
$ 46,887,879 | |
|
|
|
|
|
|
|
|
Undistributed Net Investment Income at End of Period |
|
|
|
$ 50,489 | |
_______ |
|
|
|
| ||
*The Fund commenced operations on March 16, 2012. |
|
|
|
|
The accompanying notes are an integral part of these financial statements.
The Multi-Strategy Growth & Income Fund |
|
| |
STATEMENT OF CASH FLOWS |
|
| |
For the Period Ended February 28, 2013* |
|
| |
|
|
|
|
Cash flows from operating activities: |
|
| |
|
Net increase in net assets resulting from operations |
|
$ 2,666,749 |
|
Adjustments to reconcile net increase in net assets resulting from operations |
|
|
|
to net cash used in operating activities: |
|
|
|
Purchases of investments and options written |
|
(110,919,728) |
|
Proceeds from sales |
|
66,106,595 |
|
Return of Capital Payments on REITS |
|
576,952 |
|
Net realized gain from investments and options written |
|
(502,094) |
|
Net unrealized (appreciation)/depreciation from investments and options written |
|
(1,609,260) |
|
|
|
|
|
|
|
|
|
Changes in assets and liabilities |
|
|
|
(Increase)/Decrease in assets: |
|
|
|
Due From Investment Adviser |
|
(21,571) |
|
Dividends Receivable |
|
(227,750) |
|
Subscriptions Receivable |
|
(529,790) |
|
Deferred Cost |
|
(4,159) |
|
Prepaid Expenses and Other Assets |
|
(32,855) |
|
Increase/(Decrease) in liabilities: |
|
|
|
Payable to Affiliates |
|
12,203 |
|
Payable for Securities Purchased |
|
227,865 |
|
Accrued Shareholder Servicing Fee |
|
8,464 |
|
Accrued Expenses and Other Liabilities |
|
27,250 |
Net cash used in operating activities |
|
(44,221,129) | |
|
|
|
|
Cash flows from financing activities: |
|
| |
|
Proceeds from shares sold |
|
44,860,835 |
|
Payment on shares redeemed |
|
(706,954) |
|
Cash distributions paid |
|
(32,752) |
|
Net cash provided by financing activities |
|
44,121,129 |
|
|
|
|
|
Net decrease in cash |
|
(100,000) |
|
Cash at beginning of period |
|
100,000 |
|
Cash at end of period |
|
- |
|
|
|
|
|
|
|
|
|
Supplemental disclosure of non-cash activity: |
|
|
|
Noncash financing activities not including herein consists of reinvestment of dividends |
$ 705,651 | |
_____ |
|
| |
*The Fund commenced operations on March 16, 2012. |
|
|
See accompanying notes to financial statements.
The Multi-Strategy Growth & Income Fund |
|
|
| |||
FINANCIAL HIGHLIGHTS |
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below sets forth financial data for one share of beneficial interest outstanding throughout the period presented. | ||||||
|
|
|
|
|
|
|
|
|
|
|
|
|
Since Inception* |
|
|
|
|
|
|
Through |
|
|
|
|
|
|
February 28, 2013 |
|
|
|
|
|
|
|
Net Asset Value, Beginning of Period |
|
|
|
|
$ 15.00 | |
| Increase From Operations: |
|
|
|
|
|
| Net investment income (a) |
|
|
|
|
0.32 |
| Net gain from investments |
|
|
|
|
|
| (both realized and unrealized) |
|
|
|
|
0.77 |
| Total from operations |
|
|
|
|
1.09 |
|
|
|
|
|
|
|
| Less Distributions: |
|
|
|
|
|
| From net investment income |
|
|
|
|
(0.36) |
| Total Distributions |
|
|
|
|
(0.36) |
|
|
|
|
|
|
|
Net Asset Value, End of Period |
|
|
|
|
$ 15.73 | |
|
|
|
|
|
|
|
Total Return (b) |
|
|
|
|
7.34% | |
|
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
| |
| Net assets, end of period (in 000's) |
|
|
|
|
$ 46,888 |
| Ratio to average net assets: |
|
|
|
|
|
| Expenses, Gross (c) |
|
|
|
|
2.61% |
| Expenses, Net of Reimbursement (c) |
|
|
|
|
1.75% |
|
Net investment income, Net of Reimbursement (c) |
|
2.19% | |||
| Portfolio turnover rate (d) |
|
|
|
|
108% |
|
|
|
|
|
|
|
__________ |
|
|
|
|
| |
*The Fund commenced operations on March 16, 2012. |
|
| ||||
(a) Per share amounts are calculated using the average shares method, which more appropriately presents the per share data for the period. | ||||||
(b) Total returns are historical in nature and assume changes in share price, reinvestment of dividends and capital gains distributions, if any. Had the Advisor not absorbed a portion of Fund expenses, total return would have been lower. Total returns for periods less than one year are not annualized. | ||||||
(c) Annualized for periods less than one year. |
|
|
|
|
| |
(d) Not annualized. |
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
The Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS
February 28, 2013
1.
ORGANIZATION
The Multi-Strategy Growth & Income Fund (the Fund) was organized as a Delaware statutory trust on June 3, 2011 and is registered under the Investment Company Act of 1940, as amended, (the 1940 Act), as a non-diversified, closed-end management investment company that operates as an interval fund with a continuous offering of Fund shares. The investment objective of the Fund is to seek returns from capital appreciation and income with an emphasis on income generation. The Fund pursues its investment objective by investing primarily in the income-producing securities of: real estate investment trusts and alternative investment funds, as well as common stocks and structured notes, notes, bonds and asset-backed securities. The Fund commenced operations on March 16, 2012.
2.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies followed by the Fund in preparation of its financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America (GAAP). The preparation of financial statements 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 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 of the closing bid and asked prices on the day of valuation. Short-term investments that mature in 60 days or less are valued at amortized cost, provided such valuations represent fair value.
When price quotations for certain securities are not readily available, or if the available quotations are not believed to be reflective of market value by the Advisor, those securities will be valued at fair value as determined in good faith by the RJL Capital Management, LLC (the Advisor) Valuation Committee using procedures adopted by and under the supervision of the Funds Board of Trustees (the Board). There can be no assurance that the Fund could purchase or sell a portfolio security at the price used to calculate the Funds NAV.
Fair valuation procedures may be used to value a substantial portion of the assets of the Fund. The Fund may use the fair value of a security to calculate its NAV when, for example, (1) a portfolio security is not traded in a public market or the principal market in which the security trades is closed, (2) trading in a portfolio security is suspended and not resumed prior to the normal market close, (3) a portfolio security is not traded in significant volume for a substantial period, or (4) the Advisor determines that the quotation or price for a portfolio security provided by a broker-dealer or independent pricing service is inaccurate.
The fair value of securities may be difficult to determine and thus judgment plays a greater role in the valuation process. The fair valuation methodology may include or consider the following guidelines, as appropriate: (1) evaluation of all relevant factors, including but not limited to, pricing history, current market level, supply and demand of the respective security; (2) comparison to the values and current pricing of securities that have comparable characteristics; (3) knowledge of historical market information with respect to the security; (4) other factors relevant to the security which would include, but not be limited to, duration, yield, fundamental analytical data, the Treasury yield curve, and credit quality.
The values assigned to fair valued investments are based on available information and do not necessarily represent amounts that might ultimately be realized, since such amounts depend on future developments inherent in long-term investments. Changes in the fair valuation of portfolio securities may be less frequent and of greater magnitude than changes in the price of portfolio securities valued at their last sale price, by an independent pricing
The Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
February 28, 2013
service, or based on market quotations. Imprecision in estimating fair value can also impact the amount of unrealized appreciation or depreciation recorded for a particular portfolio security and differences in the assumptions used could result in a different determination of fair value, and those differences could be material.
The Fund invests in some securities which are not traded and the Valuation Committee has established a methodology for fair value of each type of security. Investments in non-traded Real Estate Investment Trusts represent 100% of Level III assets as of February 28, 2013. All non-traded REITs are currently in the public offering period (or start-up phase) and according to managements fair valuation methodology are valued at cost unless the REIT issues an updated valuation. The Fund generally purchases REITs at Net Asset Value (NAV) or without a commission. However, start-up REITs amortize a significant portion of their start-up costs and therefore potentially carry additional risks that may impact valuation should the REIT be unable to raise sufficient capital and execute their business plan. As such, start-up REITs pose a greater risk than seasoned REITs because, if they encounter going concern issues, they may see significant deviation in value from the fair value, cost basis approach as represented. Management is not aware of any information which would cause a change in cost basis valuation methodology currently being utilized for non-traded REITs in their offering period. Once a REIT closes to new investors, the Fund values the security based on the movement of an appropriate market index or a similar security that is publicly traded until the REIT issues an updated market valuation. Other non-traded private investments are monitored for any independent audits of the security or impairments reported on the potential value of the security. The Valuation Committee meets frequently to discuss the valuation methodology and will adjust the value of a security if there is a public update to such valuation.
The Fund utilizes various methods to measure the fair value 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 on 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 Funds 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 February 28, 2013 for the Funds assets and liabilities measured at fair value:
The Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
February 28, 2013
Assets* |
Level 1 |
Level 2 |
Level 3 |
Total |
Investments: |
|
|
|
|
Common Stock |
$ 6,438,493 |
$ - |
$ - |
$ 6,438,493 |
Real Estate Investment Trusts |
275,041 |
2,904,275 |
22,313,329 |
25,492,645 |
Business Development Corporations |
- |
5,545,806 |
- |
5,545,806 |
Preferred Stock |
5,914,584 |
|
- |
5,914,584 |
Short-Term Investments |
2,962,808 |
- |
- |
2,962,808 |
Total Investments: |
$ 15,590,926 |
$ 8,450,081 |
$ 22,313,329 |
$ 46,354,336 |
Liabilities |
|
|
|
|
Call Options Written |
$ 6,800 |
$ - |
$ - |
$ 6,800 |
*Refer to the Portfolio of Investments for industry classifications.
There were no transfers into or out of any level during the current period presented.
It is the Funds policy to record transfers into or out of any level at the end of the reporting period.
The following is a reconciliation of assets in which level 3 inputs were used in determining value:
|
Real Estate Investment Trusts |
Beginning Balance | $ - |
Total realized gain (loss) |
- |
Appreciation (Depreciation) |
630,543 |
Cost of Purchases |
22,196,750 |
Proceeds from Sales and returns of capital |
(513,964) |
Accrued Interest |
- |
Net transfers in/out of level 3 |
- |
Ending Balance |
$ 22,313,329 |
*Represents unrealized appreciation on assets held as of the end of period
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.
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 writer of an option, the Fund has no control over whether the option will be exercised and, as a result, retains the market risk of an unfavorable change in the price of the security underlying the written option.
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 Funds 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
The Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
February 28, 2013
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 exchanges clearinghouse, as counterparty to all exchange traded options, guarantees against a possible default.
As of February 28, 2013, the amount of unrealized appreciation and realized loss on option contracts subject to equity price risk amounted to $271 and $459,336, respectively. Such figures can be found on the Statement of Assets & Liabilities and Statement of Operations. The table presented under Note 4 provides an indication of the volume of derivative activity during the period ended February 28, 2013.
Offering Costs Offering costs incurred by the Fund of $101,217 were treated as deferred charges until operations commenced of which $97,058 are being amortized over a 12 month period using the straight line method. The remaining unamortized $4,159 as of February 28, 2013 will be amortized over the next fiscal year.
Federal Income Taxes The Fund intends 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 when the position is more likely than not to be sustained assuming examination by tax authorities. Management has reviewed the tax positions and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Funds 2012 tax returns. The Fund identifies its major tax jurisdiction as U.S. Federal. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement 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.
Distributions to Shareholders Distributions from investment income are declared and paid quarterly. Distributions from net realized capital gains, if any, are declared and paid annually and are recorded on the ex-dividend date. The character of income and gains to be distributed is determined in accordance with 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 Funds 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 industry experience, the Trust 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 (the Advisory Agreement), investment advisory services are provided to the Fund by RJL Capital Management, LLC (the Advisor). Under the terms of the Advisory Agreement, the Advisor receives monthly fees calculated at an annual rate of 0.75% of the average daily net assets of the Fund. For the period ended February 28, 2013, the Advisor earned advisory fees of $180,326.
The Advisor has contractually agreed to waive all or part of its advisory fees and/or make reimbursement payments to limit Fund expenses (including offering costs but exclusive of any front-end or contingent deferred loads, taxes, leverage interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, dividend expense on securities sold short, acquired fund fees and expenses, or extraordinary expenses such as litigation) at least until June 30, 2014, so that the total annual operating expenses of the Fund do
The Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
February 28, 2013
not exceed 1.75% of the Funds average daily net assets. Waivers and expense reimbursement payments may be recouped by the Advisor from the Fund, to the extent that overall expenses fall below the expense limitation, within three years of when the amounts were waived or reimbursed. During the period ended February 28, 2013, the Advisor waived and reimbursed fees of $207,331, all of which will expire in 2016. In addition, prior to the commencement of operations, the Advisor reimbursed $18,889 of organization expenses, which will expire in 2015.
Sub-advisory services were provided to the Fund pursuant to agreements between the Advisor and First Allied Asset Management, Inc. (the Sub-Adviser). Under the terms of the sub-advisory agreements, The Advisor compensated the Sub-Advisor based on a portion of the Funds average daily net assets which they had been allocated to manage.
Pursuant to separate servicing agreements with Gemini Fund Services LLC, (GFS), the Fund pays GFS customary fees for providing administration, fund accounting and transfer agency services to the Fund.
In addition, certain affiliates of GFS provide ancillary services to the Fund 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). The Board of Trustees has adopted, on behalf of the Fund, a Shareholder Services Plan under which the Fund may compensate financial industry professionals for providing ongoing services in respect of clients with whom they have distributed shares of the Fund. Under the Shareholder Services Plan, the Fund may pay 0.25% per year of its average daily net assets for such services. For the period ended February 28, 2013, the Fund incurred distribution fees of $60,109.
The Distributor acts as the Funds principal underwriter in a continuous public offering of the Funds shares. The Distributor is an affiliate of GFS. For the period ended February 28, 2013, the Distributor received $2,297,178 in underwriting commissions for sales of the Funds shares, of which $86,266 was retained by the principal underwriter or other affiliated broker-dealers.
Trustees The Fund pays each Trustee who is not affiliated with the Trust or Advisor a quarterly fee of $2,500, as well as reimbursement for any reasonable expenses incurred attending meetings. The interested persons who serve as Trustees of the Trust receive no compensation for their services as Trustees. None of the executive officers receive compensation from the Trust.
Other Affiliates During the period ended February 28, 2013, Lucia Securities, a registered broker/dealer and an affiliate of the Advisor, executed trades on behalf of the Fund for which it received trade commission of $297,554. Additionally, during the same period of time, First Allied Securities, Inc., a registered broker/dealer and an affiliate of the Sub-Adviser, executed trades on behalf of the Fund for which it received $113,359 in trade commissions.
4.
INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from the sale of securities, other than short-term securities, for the period ended February 28, 2013 amounted to $68,758,990 and $27,360,929, respectively.
The Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
February 28, 2013
Transactions in option contracts written during the period ended February 28, 2013 were as follows:
|
Contracts |
Premium |
Outstanding at Beginning of Period | - | $ - |
Options Written | 15,592 | 3,630,153 |
Options Closed | (14,352) | (3,421,058) |
Options Exercised | (950) | (187,471) |
Options Expired | (270) | (14,553) |
Outstanding at End of Period |
20 |
$ 7,071 |
5.
DISTRIBUTIONS TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
The tax character of Fund distributions for the following period was as follows:
|
|
Period Ended |
|
|
February 28, 2013 |
Ordinary Income |
|
$ 738,402 |
Long-Term Capital Gain |
|
- |
|
|
$ 738,402 |
As of February 28, 2013, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed |
|
Undistributed |
|
Other |
|
Unrealized |
|
Total |
Ordinary |
|
Long-Term |
|
Book/Tax |
|
Appreciation/ |
|
Accumulated |
Income |
|
Gains |
|
Differences |
|
(Depreciation) |
|
Earnings/(Deficits) |
$ 243,171 |
|
$ 25,427 |
|
$ - |
|
$ 1,659,749 |
|
$ 1,928,347 |
The differences between book basis and tax basis unrealized appreciation/ (depreciation) of investments and undistributed net investment income are primarily attributable to the adjustment for publicly traded partnerships and the tax treatment of short-term capital gains.
Permanent book and tax differences, primarily attributable to distribution reclass and adjustment related to grantor trust, resulted in reclassification for the period ended February 28, 2013 as follows: a decrease in accumulated net investment loss of $258,923 and a decrease in accumulated net realized gain on investments of $258,923.
6.
REPURCHASE OFFERS
Pursuant to Rule 23c-3 under the Investment Company Act of 1940, as amended, the Fund offers shareholders on a quarterly basis the option of redeeming shares, at net asset value, of no less than 5% and no more than 25% of the shares outstanding. There is no guarantee that shareholders will be able to sell all of the shares they desire in a quarterly repurchase offer, although each shareholder will have the right to require the Fund to purchase up to and including 5% of such shareholder's shares in each quarterly repurchase. Limited liquidity will be provided to shareholders only through the Fund's quarterly repurchases.
The Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Continued)
February 28, 2013
During the period ended February 28, 2013, the Fund completed three quarterly repurchase offers. In those offers, the Fund offered to repurchase up to 5% of the number of its outstanding shares as of the Repurchase Pricing Dates. The results of those repurchase offers were as follows:
|
Repurchase Offer #1 |
|
Repurchase Offer #2 |
|
Repurchase Offer #3 |
Commencement Date | June 14, 2012 |
|
September 17, 2012 |
|
December 14, 2012 |
Repurchase Request Deadline | July 13, 2012 |
|
October 16, 2012 |
|
January 14, 2013 |
Repurchase Pricing Date | July 13, 2012 |
|
October 16, 2012 |
|
January 14, 2013 |
Net Asset Value as of Repurchase Offer Date | $14.84 |
|
$15.18 |
|
$15.51 |
Amount Repurchased | - |
|
$571,494 |
|
$135,450 |
Percentage of Outstanding Shares Repurchased | - |
|
1.76% |
|
0.34% |
7.
NEW ACCOUNTING PRONOUNCEMENTS
In December 2011, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update (ASU) No. 2011-11 related to disclosures about offsetting assets and liabilities. In January 2013, the FASB issued ASU No. 2013-01 which gives additional clarification to ASU 2011-11. The amendments in this ASU require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The ASU is effective for annual reporting periods beginning on or after January 1, 2013, and interim periods within those annual periods. The guidance requires retrospective application for all comparative periods presented. Management is currently evaluating the impact this amendment may have on the Funds financial statements.
8.
SUBSEQUENT EVENTS
The Fund is required to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the Statement of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Fund is required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has determined that there were no subsequent events to report through the issuance of these financial statements.
Subsequent to the February 28, 2013, the Funds net assets have increased to a level such that the Adviser has begun to recoup fees waived and expenses reimbursed.
On March 27, 2013, the Fund paid a dividend of $0.1736 per share to shareholders of record on March 26, 2013.
The Fund completed a quarterly repurchase offer on April 16, 2013 which resulted in 0.56% of Fund shares being repurchased for $318,199.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees of
The Multi-Strategy Growth & Income Fund
We have audited the accompanying statement of assets and liabilities of The Multi-Strategy Growth & Income Fund (the "Fund"), including the portfolio of investments, as of February 28, 2013, the related statements of operations, changes in net assets, cash flows and the financial highlights for the period March 16, 2012 (commencement of operations) through February 28, 2013. These financial statements and financial highlights are the responsibility of the Funds management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audit.
We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of February 28, 2013 by correspondence with the custodian and broker. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.
As explained in Note 2, the financial statements include securities valued at $30,763,410 (66% of net assets), whose fair values have been estimated by the Board of Trustees in the absence of readily ascertainable fair values. These estimated values may differ significantly from the values that would have been used had a ready market for the securities existed, and the differences could be material.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of The Multi-Strategy Growth & Income Fund as of February 28,
2013, the results of its operations, the changes in its net assets, its cash flows and its financial highlights for the period March 16, 2012 (commencement of operations) through February 28, 2013, in conformity with accounting principles generally accepted in the United States of America.
BBD, LLP
Philadelphia, Pennsylvania
April 26, 2013
The Multi-Strategy Growth & Income Fund
DISCLOSURE OF FUND EXPENSES (Unaudited)
February 28, 2013
As a shareholder of the Fund you incur two types of cost, transaction costs or sales loads and ongoing costs, including management fees, shareholder service fees and other Fund operating 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 of time as indicated in the table below.
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 Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Funds 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 (9/1/12) |
Ending Account Value (2/28/13) |
Expenses Paid During the Period* (9/1/12 to 2/28/13) |
Actual |
$1,000.00 |
$1,060.20 |
$8.91 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,016.07 | $8.72 |
* Expenses Paid During Period are equal to Funds annualized expense ratio of 1.75%, multiplied by the number of days in the period from September 1, 2012 through February 28, 2013 (181) divided by the number of days in the fiscal year (365).
The Multi-Strategy Growth & Income Fund
TRUSTEE TABLE (Unaudited)
February 28, 2013
Independent Trustees
Name, Address and Age (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 Last Five Years |
Mark J. Riedy, PhD. (1942) | Trustee since September, 2011 | Executive Director of the Burnham-Moores Center for Real Estate and the Ernest W. Hahn Professor of Real Estate Finance at the University of San Diego (1992 to Present); | 1 | BioMed Realty Trust |
Ira J. Miller (1946) | Trustee since September, 2011 | Retired as of August 2007; CFO, Treasurer and Board member of Healthy Fast Food, Inc. (2006 to 2007) | 1 | Healthy Fast Food, Inc. |
John D. Frager (1958) | Trustee since September, 2011 | Executive Managing Director of CBRE (2010 to present); CEO and President of Cassidy Turley San Diego (2002 to 2010); Senior Managing Director of CB Richard Ellis (Prior to 2002) | 1 | None |
Interested Trustees, Officers
Name, Address and Age | 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 Last 5 Years |
Raymond J. Lucia, Jr. ***^ (1975) | Trustee and President since September, 2011 | Chief Executive Officer (2010 Present), RJL Wealth Management; Executive Vice President (2000-2010), Raymond J. Lucia Companies, Inc | 1 | None |
Stephanie Pimentel (1983) | Treasurer, since September, 2012 | Vice President for RJL Capital Management (2012 to present); Director of Finance (2010 to 2012; Director of Finance for LPL Financial (2008 to 2010); Senior Financial Analyst for LPL Financial (2006 to 2008) | N/A | N/A |
Interested Trustees, Officers (Continued)
Name, Address and Age (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 Last Five Years |
James Colantino (1969) | Assistant Treasurer, since September, 2011 | Senior Vice President (2012 to present); Vice President (2004 to 2012); Senior Fund Administrator (1999 to 2004), Gemini Fund Services, LLC. | N/A | N/A |
Joseph P. Lucia^ (1974) | Secretary, since September, 2011 | President for RJL Capital Management (2012 to present); Executive Vice President for RJL Wealth Management, LLC (2006 2012); Executive Vice President for Raymond J Lucia Companies, Inc. (2006-2010) | N/A | N/A |
James P. Ash (1976) | Assistant Secretary, since September, 2011 | Senior Vice President, Gemini Fund Services, LLC (since 2012); Vice President (2011 - 2012); Director of Legal Administration, (2009 - 2011); Assistant Vice President of Legal Administration, (2008 to 2011), Gemini Fund Services, LLC | N/A | N/A |
Emile R. Molineaux (1962) | Chief Compliance Officer and Anti-Money Laundering Officer, since December 2010 | CCO of various clients of Northern Lights Compliance Services, LLC, (Secretary since 2003 and Senior Compliance Officer since 2011); General Counsel, CCO and Senior Vice President, Gemini Fund Services, LLC (2003-2011) |
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|
* The term of office for each Trustee listed above will continue indefinitely. Officers are elected annually.
** The term "Fund Complex" refers to The Multi-Strategy Growth & Income Fund.
*** Raymond J. Lucia, Jr. is an interested person of the Trust by virtue of his position as President of the Trust and his indirect controlling interest in the Trust's Adviser.
^ Raymond J. Lucia, Jr. and Joseph P. Lucia are cousins.
The Fund's Statement of Additional Information includes additional information about the Trustees and is available free of charge, upon request, by calling toll-free 1-855-601-3841.
PRIVACY NOTICE | ||||||||
FACTS | WHAT DOES THE MULTI-STRATEGY GROWTH & INCOME FUND DO WITH YOUR PERSONAL INFORMATION? | |||||||
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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. | |||||||
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What? |
The types of personal information we collect and share depend on the product or service you have with us. This information can include: § Social Security number § Purchase History § Assets § Account Balances § Retirement Assets § Account Transactions § Transaction History § Wire Transfer Instructions § Checking Account Information When you are no longer our customer, we continue to share your information as described in this notice. | |||||||
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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 The Multi-Strategy Growth & Income Fund chooses to share; and whether you can limit this sharing. | |||||||
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Reasons we can share your personal information | Does The Multi-Strategy Growth & Income Fund share? | Can you limit this sharing? | ||||||
For our everyday business purposes such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus | Yes | No | ||||||
For our marketing purposes to offer our products and services to you | 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 experiences | No | We don't share | ||||||
For our affiliates' everyday business purposes information about your creditworthiness | No | We don't share | ||||||
For nonaffiliates to market to you | No | We don't share | ||||||
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Questions? | Call 1-855-601-3841 | |||||||
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Who we are | ||||||||
Who is providing this notice? | The Multi-Strategy Growth & Income Fund | |||||||
What we do | ||||||||
How does The Multi-Strategy Growth & Income Fund 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 The Multi-Strategy Growth & Income Fund collect my personal information? | We collect your personal information, for example, when you § Open an account § Provide account information § Give us your contact information § Make deposits or withdrawals from your account § Make a wire transfer § Tell us where to send the money § Tells us who receives the money § Show your government-issued ID § Show your driver's license We also collect your personal information from 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. § The Multi-Strategy Growth & Income Fund does not share with our affiliates. | |||||||
Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies § The Multi-Strategy Growth & Income Fund 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. § The Multi-Strategy Growth & Income Fund does not jointly market. |
Investment Advisor
RJL Capital Management
13520 Evening Creek Drive N. Suite 300
San Diego, CA 92128
Distributor
Northern Lights Distributor, LLC
17605 Wright Street Suite 2
Omaha, NE 68130
Legal Counsel
Thompson Hine LLC
41 South High Street, Suite 1700
Columbus, OH 43215
Independent Registered Public Accounting Firm
BBD, LLP
1835 Market Street, 26th Floor
Philadelphia, PA 19103
__________________________________________________________________________________________________________
How to Obtain Proxy Voting Information
Information regarding how the Fund votes proxies relating to portfolio securities for the 12 month period ended June 30th 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 1-855-601-3841 or by referring to the Securities and Exchange Commissions (SEC) website at http://www.sec.gov.
How to Obtain 1st and 3rd 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 SECs website at http://www.sec.gov and may be reviewed and copied at the SECs Public Reference Room in Washington, DC (1-800-SEC-0330). The information on Form N-Q is available without charge, upon request, by calling 1-855-601-3841.
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 Registrants board of trustees has determined that Mark Riedy and Ira Miller are auditing committee financial experts, as defined in Item 3 of Form N-CSR. Mark Riedy and Ira Miller are independent for purposes of this Item.
Item 4. Principal Accountant Fees and Services.
(a)
Audit Fees
2013 - $16,000
(b)
Audit-Related Fees
2013 - $2,750
(c)
Tax Fees
2013 - $3,500
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
2013 - $0
(e)
(1)
Audit Committees Pre-Approval Policies
The registrants 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 registrants 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
2013
Audit-Related Fees:
100.00%
Tax Fees:
0.00%
All Other Fees:
0.00%
(f)
During the audit of registrant's financial statements for the most recent fiscal year, less than 50 percent of the hours expended on the principal accountant's engagement were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
(g)
The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant:
2013 - $6,250
(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
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.
See attached exhibits P1A and P1B, which contain the Adviser and Sub-Adviser proxy voting policies and procedures. Each votes proxies on behalf of the Fund for its portion of the Funds portfolio.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Raymond J. Lucia, Jr.
Mr. Lucia, Chief Executive Officer of the Adviser, is the Fund's portfolio manager. Mr. Lucia has primary responsibility for management of the Fund's investment portfolio and has served the Fund in this capacity since it commenced operations in 2012. Mr. Lucia is also CEO of RJL Wealth Management, LLC, a Registered Investment Advisor, and Lucia Securities, LLC, a Registered Broker Dealer and member FINRA/SIPC. Mr. Lucia was previously with Raymond J. Lucia Companies, Inc. for 10 years where he held the position of Executive Vice President and was responsible for creating and managing the firm's strategic plans, including: developing and implementing the firm's investment strategies, growing the fee-based asset management platform, and expanding the firm's client base in over 15 office locations nationwide. Prior to joining RJL, Inc. in 2000, Mr. Lucia worked for Deloitte and Touche as a tax accountant in the Personal Financial Services group providing financial advice to high-net-worth individuals. Mr. Lucia graduated from Loyola Marymount University in 1997 with a Bachelor of Science in Accounting. Mr. Lucia is a Certified Public Accountant and holds the Personal Financial Specialist designation offered by the AICPA. Mr. Lucia holds the Series 7, 24, 63, and 65 licenses.
Jeffrey J. Mindlin, CFA
Mr. Mindlin, Managing Director and Chief Operating Officer of the sub-adviser, is the portfolio manager for that portion allocated by the Adviser to the sub-adviser and has served the Fund in this capacity since it commenced operations in 2012. Mr. Mindlin has served as the sub
-
adviser's Managing Director and Chief Operating Officer since 2006. Mr. Mindlin is responsible for the sub-adviser's portfolio management team and its efforts, including portfolio selection, trading, execution, proprietary money management and product development. Prior to joining the sub
-
adviser, Mr. Mindlin was the Director of Research and Co-Portfolio Manager of Greenbook Investment Management, Inc., where he was instrumental in the design of sophisticated, proprietary investment strategies. Before that, he worked as the Assistant Portfolio Manager and Senior Financial Engineer for Pinnacle Investment Advisors, LLC, which operated a hedge fund and a series of managed accounts for institutional and high-net-worth clients, and sub-advised a mutual fund. Previously, Mr. Mindlin was the Manager of Financial Engineering at Camelback Research, leading the development of several successful institutional grade quantitative products, including the popular MSN Money Stockscouter system. Mr. Mindlin earned his Chartered Financial Analyst (CFA) designation, as well as a BS in Economics and a BS in Finance from the College of Business Honor's Program at Arizona State University, where he received the prestigious Moore Award.
As of February 28, 2013, Raymond J. Lucia Jr. was responsible for the management of the following types of accounts in addition to the Fund:
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Other Accounts By Type | Total Number of Accounts by Account Type | Total Assets By Account Type | Number of Accounts by Type Subject to a Performance Fee | Total Assets By Account Type Subject to a Performance Fee |
Registered Investment Companies | 01 | $0 | 0 | $0 |
Other Pooled Investment Vehicles | 0 | $0 | 0 | $0 |
Other Accounts | 0 | $0 | 0 | $0 |
As of December 31, 2012, Jeffrey J. Mindlin, CFA was responsible for the management of the following types of accounts in addition to the Fund:
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Other Accounts By Type | Total Number of Accounts by Account Type | Total Assets By Account Type | Number of Accounts by Type Subject to a Performance Fee | Total Assets By Account Type Subject to a Performance Fee |
Registered Investment Companies | 0 | $0 | 0 | $0 |
Other Pooled Investment Vehicles | 0 | $0 | 0 | $0 |
Other Accounts | 4,000 | $798,149,148 | 0 | $0 |
Because the portfolio manager manages assets for other pooled investment vehicles and/or other accounts (including institutional clients, pension plans and certain high net worth individuals) (collectively "Client Accounts"), or may be affiliated with such Client Accounts, there may be an incentive to favor one Client Account over another, resulting in conflicts of interest. For example, the Adviser may, directly or indirectly, receive fees from Client Accounts that are higher than the fee it receives from the Fund, or it may, directly or indirectly, receive a performance-based fee on a Client Account. In those instances, the portfolio manager may have an incentive to not favor the Fund over the Client Accounts. The Adviser has adopted trade allocation and other policies and procedures that it believes are reasonably designed to address these and other conflicts of interest.
Raymond J. Lucia Jr. and Jeffrey J. Mindlin are compensated through a salary.
As of February 28, 2013, the Portfolio Managers ownership of the Fund was as follows:
Portfolio Managers | Dollar Range of Shares Owned |
Raymond J. Lucia Jr. | Over $100,000 |
Jeffrey J. Mindlin | $0 |
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable
Item 10. Submission of Matters to a Vote of Security Holders. None
Item 11. Controls and Procedures.
(a)
Based on an evaluation of the Registrants 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 Registrants management, including the Registrants principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b)
There were no significant changes in the Registrants internal control over financial reporting that occurred during the Registrants last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrants internal control over financial reporting.
Item 12. Exhibits.
(a)(1)
Code of Ethics filed herewith.
(a)(2)
Certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 (and Item 11(a)(2) of Form N-CSR) are filed herewith.
(a)(3)
Not applicable.
(b)
Certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 (and Item 11(b) of Form N-CSR) are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) The Multi-Strategy Growth & Income Fund
By (Signature and Title)
/s/ Raymond J. Lucia Jr
Raymond J. Lucia Jr., President
Date
5/9/13
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/ Raymond J. Lucia Jr
Raymond J. Lucia Jr., President
Date
5/9/13
By (Signature and Title)
/s/ Stephanie Pimentel
Stephanie Pimentel, Treasurer
Date
5/9/13
CERTIFICATIONS
I, Raymond J. Lucia Jr., President, certify that:
1.
I have reviewed this report on Form N-CSR of The Multi-Strategy Growth & Income Fund;
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 registrants 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 registrants 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:
5/9/13
/s/ Raymond J. Lucia Jr
Raymond J. Lucia Jr., President
I, Stephanie Pimentel, certify that:
1.
I have reviewed this report on Form N-CSR of The Multi-Strategy Growth & Income Fund;
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 registrants 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 registrants 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:
5/9/13
/s/ Stephanie Pimentel
Stephanie Pimentel, Treasurer
CERTIFICATION
Raymond J. Lucia Jr., President, and Stephanie Pimentel, Treasurer of The Multi-Strategy Growth & Income Fund (the Registrant), each certify to the best of his knowledge that:
1.
The Registrants periodic report on Form N-CSR for the period ended February 28, 2013 (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.
President
Treasurer
The Multi-Strategy Growth & Income Fund
The Multi-Strategy Growth & Income Fund
/s/ Raymond J. Lucia Jr
/s/ Stephanie Pimentel
Raymond J. Lucia Jr., President
Stephanie Pimentel
Date:
5/9/13
Date:
5/9/13
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the The Multi-Strategy Growth & Income Fund and will be retained by the The Multi-Strategy Growth & Income Fund 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.
The Multi-Strategy Growth & Income Fund
CODE OF ETHICS
[___ _], 2011
The Multi-Strategy Growth & Income Fund (the "Trust") 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 FUND MUST ALWAYS BE PARAMOUNT
Access Persons have a legal, fiduciary duty to place the interests of the Fund ahead of their own. In any decision relating to their personal investments, Access Persons must scrupulously avoid serving their own interests ahead of those of the Trust.
Access Persons may not take advantage of their relationship with the Fund
Access Persons should avoid any situation (unusual investment opportunities, perquisites, accepting gifts of more than token value from persons seeking to do business with the Fund) that might compromise, or call into question, the exercise of their fully independent judgment in the interests of the Fund.
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 Fund, 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 Fund.
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. 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 directors (or persons occupying a similar status or performing a similar function) of the Fund;
2.
all officers and directors (or persons occupying a similar status or performing a similar function) of each Adviser or Sub-Adviser with respect to its corresponding series of the Trust (together, the "Advisers");
3.
any employee of the Trust or the Advisers (or of any company controlling or controlled by or under common control with the Trust or the Advisers) who, in connection with his or her regular functions or duties, makes, participates in, or obtains information regarding the purchase or sale of Covered Securities by the Fund, or whose functions relate to the making of any recommendations with respect to the purchase or sale; and
4.
any other natural person controlling, controlled by or under common control with the Trust or the Advisers who obtains information concerning recommendations made to the Fund with regard to the purchase or sale of Covered Securities by the Fund.
"Beneficial Ownership" means in general and subject to the specific provisions of Rule 16a-1(a)(2) under the Securities Exchange Act of 1934, as amended, having or sharing, directly or indirectly, through any contract arrangement, understanding, relationship, or otherwise, a direct or indirect "pecuniary interest" in the security.
"Chief Compliance Officer" means the Code of Ethics Compliance Officer of the Trust with respect to Trustees and officers of the Trust, or the CCO of the Advisers with respect to each Adviser's 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 Fund, or whose functions relate to the making of any recommendations with respect to such purchases or sales. Decision Makers typically are Adviser personnel.
"Fund" means the Trust.
"Immediate family" means an individual's spouse, child, stepchild, grandchild, parent, stepparent, grandparent, siblings, mother-in-law, father-in-law, son-in-law, daughter-in-law, brother-in-law, or sister-in-law and should include adoptive relationships. For purposes of determining whether an Access Person has an "indirect pecuniary interest" in securities, only ownership by "immediate family" members sharing the same household as the Access Person will be presumed to be an "indirect pecuniary interest" of the Access Person, absent special circumstances.
"Independent Trustees" means those Trustees of the Trust that would not be deemed an "interested person" of the Trust, as defined in Section 2(a)(19)(A) of the 1940 Act.
"Indirect Pecuniary Interest" includes, but is not limited to: (a) securities held by members of the person's Immediate Family sharing the same household (which ownership interest may be rebutted); (b) a general partner's proportionate interest in portfolio 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 trust; (e) a person's right to acquire securities through the exercise or conversion of any derivative security, whether or not presently exercisable; and (f) a performance-related fee, other than an asset based fee, received by any broker, dealer, bank, insurance company, investment company, investment manager, trustee, or person or entity performing a similar function, with certain exceptions.
"Pecuniary Interest" means the opportunity, directly or indirectly, to profit or share in any profit derived from a transaction in securities.
"Personal Securities Transaction" means any transaction in a Covered Security in which an Access Person has a direct or indirect Pecuniary Interest.
"Purchase or Sale of a Security" includes the writing of an option to purchase or sell a Security. A Security shall be deemed "being considered for Purchase or Sale" for the Trust when a recommendation to purchase or sell has been made and communicated by a Decision Making Access Person, and, with respect to the person making the recommendation, when such person seriously considers making such a recommendation. These recommendations are placed on the "Restricted List" until they are no longer being considered for Purchase or Sale, or until the Security has been purchased or sold.
"Restricted List" means the list of securities maintained by the Chief Compliance Officer in which trading by Access Persons is generally prohibited.
"Security" means any note, stock, treasury stock, bond, debenture, evidence of indebtedness, certificate of interest or participation in any profit-sharing agreement, collateral-trust certificate, pre-organization certificate or subscription, transferable share, investment contract, voting-trust certificate, certificate of deposit for a security, fractional undivided interest in oil, gas, or other mineral rights, or, in general, an interest or instrument commonly know as "security", or any certificate or interest or participation in temporary or interim certificate for, receipt for, guarantee of, or warrant or right to subscribe to or purchase (including options) any of the foregoing.
"Sub-Adviser" means the sub-adviser, if any, to the Trust.
"Trust" means The Multi-Strategy Growth & Income Fund.
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 the Fund, or
(2)
is being purchased or sold by the Fund.
A.
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 prior to such participation;
B.
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;
C.
Access Persons may not accept any fee, commission, gift, or services, other than de minimis gifts, from any single person or entity that does business with or on behalf of the Trust;
D.
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 based upon a determination that such service would be consistent with the interests of the Trust. If such service is authorized, procedures will then be put in place to isolate such Decision-Making Access Persons serving as directors of outside entities from those making investment decisions on behalf of the Trust.
Advanced notice should be given so that the Trust, Adviser, or Sub-Adviser may take such action concerning the conflict as deemed appropriate by the Chief Compliance Officer.
E.
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.
F.
It shall be a violation of this Code for any Access Person, in connection with the purchase or sale, directly or indirectly, of any Covered Security held or to be acquired by a Fund:
a.
to employ any device, scheme or artifice to defraud the Trust;
b.
to make to the Trust any untrue statement of a material fact or to omit to state to the Trust a material fact necessary in order to make the statements made, in light of the circumstances under which they are made, not misleading;
c.
to engage in any act, practice or course of business that operates or would operate as a fraud or deceit upon the Trust; or
d.
to engage in any manipulative practice with respect to the Trust.
EXEMPTED TRANSACTIONS
The provisions described above under the heading Prohibited Actions and Activities and the preclearance procedures under the heading Preclearance of Personal Securities Transactions do not apply to:
·
Purchases or Sales of Securities effected in any account in which an Access Person has no Beneficial Ownership;
·
Purchases or Sales of Securities which are non-volitional on the part the Access Person (for example, the receipt of stock dividends);
·
Purchase of Securities made as part of automatic dividend reinvestment plans;
·
Purchases of Securities made as part of an employee benefit plan involving the periodic purchase or company stock or mutual funds; and
·
Purchases of Securities effected upon the exercise of rights issued by an issuer pro rata to all holders of a class of its Securities, to the extent such rights were acquired from such issuer, and sale of such rights so acquired.
PRECLEARANCE OF PERSONAL SECURITIES TRANSACTIONS
All Decision-Making Access Persons wishing to engage in a Personal Securities Transaction must obtain prior authorization of any such Personal Securities Transaction from the Chief Compliance Officer or such person or persons that the Chief Compliance Officer may from time to time designate to make such authorizations. Personal Securities Transactions by the Chief Compliance Officer shall require prior authorization from the President or Chief Executive Officer of the Trust (unless such person is also the Chief Compliance Officer), who shall perform the review and approval functions relating to reports and trading by the Chief Compliance Officer. The Trust 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 are effective unless the order conflicts with a Trust order.
If a person wishing to effect a Personal Securities Transaction learns, while the order is pending, that the same Security is being considered for Purchase or Sale by a Fund, such person shall cancel the trade.
REPORTING AND MONITORING
The Chief Compliance Officer or his designees shall monitor all personal trading activity of all Access Persons pursuant to the procedures established under this Code.
Disclosure of Personal Brokerage Accounts
Within ten days of the commencement of employment or at the commencement of a relationship with the Trust, all Access Persons, except Independent Trustees, are required to submit to the Chief Compliance Officer 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 must be notified immediately.
The information required by the above paragraph must be provided to the Chief Compliance Officer 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. These statements and confirms for each series of the Trust may be sent to its respective Adviser.
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 designees 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 the appropriate 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 Fund's Board of Trustees.
Upon being informed of a violation of this Code, the Fund's 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 Fund shall impose sanctions in accordance with the principle that no Access Person may profit at the expense of its clients. Any losses are the responsibility of the violator. Any profits realized on personal securities transactions in violation of the Code must be disgorged in a manner directed by the Board of Trustees.
Annually, the Chief Compliance Officer at each regular meeting of the Board shall issue a report on Personal Securities Transactions by Access Person. The report submitted to the board shall:
·
Summarize existing procedures concerning Personal Securities investing and any changes in the procedures made during the prior year;
·
Identify any violations of this Code and any significant remedial action taken during the prior year; and;
·
Identify any recommended changes in existing restrictions or procedures based upon the experience under the Code, evolving industry practices or developments in applicable laws and regulations.
ACKNOWLEDGMENT
The Trust must provide all Access Persons with a copy of this Code. Upon receipt of this Code, all Access Persons must do the following:
All new Access Persons must read the Code, complete all relevant forms supplied by the Chief Compliance Officer (including a written acknowledgement of their receipt of the Code in a form substantially similar to the example below), and schedule a meeting with the Chief Compliance Officer to discuss the provisions herein within two calendar weeks of employment.
I certify that I have read and understand the Code of Ethics of The Multi-Strategy Growth & Income Fund and recognize that I am subject to it. [if an employee of the Adviser or Sub-Adviser] I further certify I will fulfill my personal securities holdings and transactions reporting obligates through the procedures of the Adviser or Sub-Adviser with respect to covered securities.
Printed Name:
Signature:
Date:
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 (including a written acknowledgement of their receipt of the Code), and schedule a meeting with the Chief Compliance Officer 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.
EXHIBIT P1A
Adviser RJL Capital Management
Proxy Voting
Policy
RJL Capital Management, LLC, as a matter of policy and as a fiduciary to our clients, has responsibility for voting proxies for portfolio securities consistent with the best economic interests of the clients. Our firm maintains written policies and procedures as to the handling, research, voting and reporting of proxy voting and makes appropriate disclosures about our firms proxy policies and practices. Our policy and practice includes the responsibility to monitor corporate actions, receive and vote client proxies and disclose any potential conflicts of interest as well as making information available to clients about the voting of proxies for their portfolio securities and maintaining relevant and required records.
Background
Proxy voting is an important right of shareholders and reasonable care and diligence must be undertaken to ensure that such rights are properly and timely exercised. Investment advisers registered with the SEC, and which exercise voting authority with respect to client securities, are required by Rule 206(4)-6 of the Advisers Act to (a) adopt and implement written policies and procedures that are reasonably designed to ensure that client securities are voted in the best interests of clients, which must include how an adviser addresses material conflicts that may arise between an adviser's interests and those of its clients; (b) to disclose to clients how they may obtain information from the adviser with respect to the voting of proxies for their securities; (c) to describe to clients a summary of its proxy voting policies and procedures and, upon request, furnish a copy to its clients; and (d) maintain certain records relating to the adviser's proxy voting activities when the adviser does have proxy voting authority.
Responsibility
Theresa Ochs has the responsibility for the implementation and monitoring of our proxy voting policy, practices, disclosures and record keeping, including outlining our voting guidelines in our procedures.
Procedure
RJL Capital Management, LLC has adopted procedures to implement the firms policy and conducts reviews to monitor and ensure the firms policy is observed, implemented properly and amended or updated, as appropriate, which include the following:
Voting Procedures
l All employees will forward any proxy materials received on behalf of clients to Theresa Ochs; l Theresa Ochs will determine which client accounts hold the security to which the proxy relates; l Absent material conflicts, Theresa Ochs will determine how RJL Capital Management, LLC should vote the proxy in accordance with applicable voting guidelines, complete the proxy and vote the proxy in a timely and appropriate manner.
Disclosure
l RJL Capital Management, LLC will provide required disclosures in response to Item 17 of Form ADV Part 2A summarizing this proxy voting policy and procedures, including a statement that clients may request information regarding how RJL Capital Management, LLC voted a clients proxies, and that clients may request a copy of the firm's proxy policies and procedures.
l Theresa Ochs will also send a copy of this summary to all existing clients who have previously received RJL Capital Management, LLC's Form ADV Part 2; or Theresa Ochs may send each client the amended Form ADV Part 2.
Client Requests for Information
l All client requests for information regarding proxy votes, or policies and procedures, received by any employee should be forwarded to Theresa Ochs. l In response to any request, Theresa Ochs will prepare a written response to the client with the information requested, and as applicable will include the name of the issuer, the proposal voted upon, and how RJL Capital Management, LLC voted the clients proxy with respect to each proposal about which client inquired.
Voting Guidelines
l In the absence of specific voting guidelines from the client, RJL Capital Management, LLC will vote proxies in the best interests of each particular client. RJL Capital Management, LLC's policy is to vote all proxies
from a specific issuer the same way for each client absent qualifying restrictions from a client. Clients are permitted to place reasonable restrictions on RJL Capital Management, LLC's voting authority in the same manner that they may place such restrictions on the actual selection of account securities. l RJL Capital Management, LLC will generally vote in favor of routine corporate housekeeping proposals such as the election of directors and selection of auditors absent conflicts of interest raised by an auditors non-audit services. l RJL Capital Management, LLC will generally vote against proposals that cause board members to become entrenched or cause unequal voting rights. l In reviewing proposals, RJL Capital Management, LLC will further consider the opinion of management and the effect on management, and the effect on shareholder value and the issuers business practices.
Conflicts of Interest
l RJL Capital Management, LLC will identify any conflicts that exist between the interests of the adviser and the client by reviewing the relationship of RJL Capital Management, LLC with the issuer of each security to determine if RJL Capital Management, LLC or any of its employees has any financial, business or personal relationship with the issuer. l If a material conflict of interest exists, Theresa Ochs will determine whether it is appropriate to disclose the conflict to the affected clients, to give the clients an opportunity to vote the proxies themselves, or to address the voting issue through other objective means such as voting in a manner consistent with a predetermined voting policy or receiving an independent third party voting recommendation. l RJL Capital Management, LLC will maintain a record of the voting resolution of any conflict of interest.
Recordkeeping
Theresa Ochs shall retain the following proxy records in accordance with the SECs five-year retention requirement.
l These policies and procedures and any amendments;
l Each proxy statement that RJL Capital Management, LLC receives;
l A record of each vote that RJL Capital Management, LLC casts;
l Any document RJL Capital Management, LLC created that was material to making a decision how to vote proxies, or that memorializes that decision including periodic reports to Theresa Ochs or proxy committee, if applicable.
l A copy of each written request from a client for information on how RJL Capital Management, LLC voted such clients proxies, and a copy of any written response.
(NOTE: In the event an adviser retains the research, voting and/or recordkeeping services of an
outside proxy firm, the adviser must tailor its proxy policy and procedures to be consistent with the
services received and the firm's actual proxy handling and voting processes.)
In addition, advisers should conduct initial due diligence reviews of any proxy service firm engaged as well as oversight on an on-going or periodic basis. These reviews of the proxy firms services and practices should include conflicts of interest, consistency of voting with guidelines, fees and disclosures, as relevant, among other things. Advisers, as a matter of best practices, should document any initial and oversight reviews.
EXHIBIT P1B
Sub-Adviser First Allied Asset Management
I.
PROXY VOTING
In most instances, FAAM is responsible for voting proxies on behalf of clients invested in its strategies. This delegation is generally made by the client upon signing the sponsors investment advisory agreement. SEC Rule 206(4)-6 requires FAAM to develop and follow policies and procedures relating to this responsibility.
The COO is responsible for monitoring corporate actions, making voting decisions, and for ensuring that proxies are submitted timely. Proxies should be voted in the best interest of the clients. However, the COO can consider other factors by agreement with a client or to comply with statutory requirements.
In the event that a proxy proposal raises a material conflict of interest between FAAMs interests and the clients, FAAM will obtain the clients informed consent to vote the proxy in a specific manner. When seeking client consent, FAAM will provide the clients with sufficient information regarding the matter and the nature of the conflict to enable the clients to make an informed decision. Should a client not respond to such a conflict disclosure request or denies the request, FAAM shall abstain from voting the securities held by that clients account for the proposal in question.
There may be times when refraining from voting a proxy is in the clients best interest, such as when the cost of voting exceeds the expected benefit to the clients. An example might be in casting a vote on a foreign security that may involve additional costs such as hiring an interpreter.
The following guidelines summarize positions on various issues of concern to clients and give a general indication as to how FAAM will vote shares on each issue. Although many proxy proposals can be voted in accordance with our established guidelines, we recognize that some proposals require special consideration, which may dictate that FAAM make an exception to these guidelines in order to vote in clients best interests.
Generally, FAAM will vote in favor of:
·
Election of directors recommended by management, except if there is a proxy fight;
·
Election of auditors recommended by management, unless seeking to replace if there exists a dispute over policies;
·
Date and place of annual meeting;
·
Rotation of annual meeting place;
·
Limitation on charitable contributions or fees paid to lawyers;
·
Ratification of directors actions on routine matters since previous annual meeting;
·
Confidential voting;
·
Limiting directors liability.
Generally, FAAM will vote against:
·
Issues regarding board entrenchment and anti-takeover measures such as the following:
·
Proposals to stagger board members terms;
·
Proposals to limit the ability of shareholders to call special meetings;
·
Proposals to require super majority votes;
·
Proposals requesting excessive increases in authorized common or preferred shares where management provides no explanation for the use or need of these additional shares;
·
Proposals regarding fair price provisions;
·
Proposals regarding poison pill provisions;
·
Permitting green mail;
·
Providing cumulative voting rights; and
·
Social issues, unless specific client restrictions supersede.
FAAM will consider the following proposals on a case-by-case basis:
·
Pay directors solely in stock;
·
Mandatory retirement age for directors;
·
Mergers and acquisitions;
·
Option and stock grants to management and directors;
·
Allowing indemnification of directors and/or officers.
These guidelines are not meant to be all-encompassing. Should a proxy proposal not be covered by a category above, FAAM will consider the proposal and vote (or abstain) in the clients best interests.
First Allied Asset Managements proxy voting policy (as outlined above) is available to the public upon request. In addition, clients can request and obtain information about how FAAM voted proxies for their securities by requesting such information directly from FAAM or through their financial advisor (who will forward the request to FAAM).
Records of all proxy votes will be retained for a five-year period, pursuant to Section 204-2 of the Advisers Act. Other documentation pertinent to the proxy voting process, such as proxy voting policies and procedures, copies of issuers proxy statements received, research used in making voting decisions, and records of written client requests for proxy voting information, will be maintained for the same period. Should any person request a copy of FAAMs proxy voting policy, the CCO should be notified. All requests are logged by the CCO, who will deliver Appendix D to fulfill approved requests.
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