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 811-21720
Northern Lights Fund Trust
(Exact name of registrant as specified in charter)
225 Pictoria Drive, Suite 450 Cincinnati, OH 45246
(Address of principal executive offices) (Zip code)
Stephanie Shearer, Gemini Fund Services, LLC.
17605 Wright Street, Omaha, Nebraska 68130
(Name and address of agent for service)
Registrant's telephone number, including area code: 631-470-2600
Date of fiscal year end: 12/31
Date of reporting period: 6/30/22
Item 1. Reports to Stockholders.
Dear Fellow Shareholders,
We hope this letter finds you and your loved ones well as we enter the second half of the year. The first half of this year was a very painful one for investors, with most US equity benchmarks down between 20% and 35% from their respective 52-week highs.
Facing a multi-decade high in inflation, aggressive monetary policy tightening by the Federal Reserve, and the effects of the Russia/Ukraine war, the S&P 500 registered its worst first half since 1970, down 19.96%. The growth-heavy Nasdaq composite fared much worse, as it declined in five of the first six months this year, and posted its worst first half in 20 years, down 29.23%, and worst quarter since the 4th quarter of 2008. The Dow Jones index performed a little better, down 14.44% in the first half; however, June was its worst-performing month this year.
The Biondo Focus Fund reflected this weakness in growth stocks and had a rough second quarter, down 32.77%, to finish the first half of 2022 down 38.29%. Both of these returns are after the reduction of fees.
A few of the Fund’s holdings outperformed on a relative basis, such as Mastercard and Shockwave Medical. The Fund also had some exposure to derivatives during the period. This had a positive impact on performance, as call options positions in Abiomed and covered calls in Bed Bath & Beyond both resulted in gains. There was one new purchase in the period - IDEXX Laboratories, which provides diagnostic, detection, and information systems for veterinary, food, and water testing applications.
The Fund has an overweight position in technology as well as healthcare. Beginning in 2021, the market saw some rotation into more traditional, cyclical sectors such as transportation, leisure, industrials and energy. As a consequence, we believe the Fund has underperformed so far this year due to limited exposure to these groups and overweight exposure to tech and healthcare stocks. Major detractors from performance during the period include Intuitive Surgical, Block Inc., Abiomed and Atlassian. The selloff in tech and healthcare stocks, particularly in the second quarter, significantly impacted all of these positions.
In response to these market dynamics, we also sold positions in a few companies, including Teladoc Health, BioCryst Pharmaceuticals and Bed Bath & Beyond. These are companies we felt would not fare well in the current environment given their interest rate sensitivity and cyclical business models. We’ve added to positions in less cyclical positions that we felt were selling at more attractive valuations, and would provide potential long term price appreciation.
By market capitalization, large-cap stocks marginally outperformed small-cap stocks in the second quarter. Small-cap stocks are typically more reliant on debt financing to sustain their businesses, and therefore, more sensitive to rising interest rates than large-cap stocks. Additionally, investors again moved to the relative safety of large-caps amidst rising risks of a future slowing of economic growth, or recession.
From an investment style standpoint, both value and growth registered losses for the second quarter, unlike the first quarter, where value posted a positive return. However, value did again handily outperform growth on a relative basis in the second quarter. Investors continued to move away from growth-oriented tech stocks and towards more fairly valued sectors of the market, due to rising interest rates, still-high inflation, and increasing recession concerns, although again, both styles finished the quarter with negative returns.
Beginning with the COVID-19 pandemic in March 2020, the US economy and asset markets greatly benefited from the epic jolt of trillions of dollars’ worth of liquidity doled out by the Federal Reserve and Congress. With that liquidity now drying up, the Fed began raising short-term interest rates in the first half of this year.
Over the last three Federal Open Market Committee (FOMC) meetings, the Fed has hiked rates three times in increasing increments: 25bps in March, 50bps in May and 75bps in June. June marked the first 75 basis point rate hike since 1994. While rate hikes were certainly expected this year, they came more rapidly than most thought. The war in Ukraine sent energy prices spiking, and supply-chain problems were more prolonged than expected, causing inflation to spike sharply higher and leading to more swift action by the Fed.
In our opinion, the story of the financial markets continues to be the balancing act being performed by the Federal Reserve. The Fed sees controlling inflation as one of its main policy goals and usually takes a very hawkish stance to get it under control. Raising interest rates should lead to the desired goal of reining in inflation. The trick is in finding the right level of rate increases – too little and inflation runs rampant for a prolonged period of time; too much stifles growth and leads to recession. It seems as though the implications of all these decisions have disrupted the markets for the last few quarters.
While the Fed juggles its response to inflation, we feel the market is giving signals that point in many directions. While company valuations are certainly more attractive now than at the beginning of the year, history tells us it is hard to stay too positive in a rising rate environment. As with any tightening cycle, the risk of recession is rising. Therefore, corporate profits, which have remained strong, are in jeopardy of being revised downward.
But, even with the rising risk of recession, it’s worth noting that each one is unique. The current environment seems most similar to the early 1980s, where inflation was high in large part due to oil price spikes. In response, the Fed raised nominal and real interest rates aggressively. The economy was otherwise relatively healthy, with a solid banking system and consumers who weren’t overextended on debt, similar to now. The tight labor market we are currently experiencing also bolsters the prospects for the economy during the current cycle.
We believe that in this current cycle, inflation is even more important than the aforementioned corporate earnings. Inflation is a far harder problem to contain, while
earnings risk can be mitigated by a change in Fed policy. It would appear that markets have aggressively priced in stubbornly high inflation and numerous additional rate hikes from the Federal Reserve between now and early 2023. If we see a definitive peak in inflationary pressures in the coming months, however, then it’s likely the Fed will hike rates less than currently feared, and that could be a materially positive catalyst for markets. There are signs that inflation may have indeed peaked. Oil prices are trending downward, providing some relief at the pump. Building materials have dropped in price and many retailers are reporting excessive inventories, signaling major discounting in the future.
The sentiment is still very negative at the moment, however, and a lot of potential “bad news” has been at least partially priced into stocks and bonds at these levels, again creating the opportunity for potential positive surprises. To that point, the S&P 500 has declined more than 15% through the first six months of the year five previous times since 1932. In all those instances, the S&P 500 registered a solidly positive return for the final six months of those years.
Of course, we have no crystal ball telling us what ultimately happens, but we feel we have a much clearer picture of the risk factors than we did six months ago. We have been appropriately adjusting holdings to account for these risk factors, specifically increasing concentrations in high quality companies with stable earnings and valuations that are attractive on a relative basis, and trimming some more speculative, interest rate-sensitive positions. Many large-cap tech companies look to be oversold and have more resilient business models that can weather further potential economic slowdowns.
As always, we appreciate the trust and confidence you have placed in us, and we appreciate the opportunity to serve your investment needs.
Very Truly Yours,
 |  |  |
| Scott A. Goginsky | Joseph P. Biondo | Joseph R. Biondo |
| Partner | Chief Executive Officer | Founder |
| Research Analyst | Chief Investment Officer | Senior Portfolio Manager |
| Portfolio Manager | Portfolio Manager | |
Sources: Performance returns – Ultimus, Bloomberg; Benchmark statistics, Fed rate hikes – Nasdaq; S&P decline – FinSyn Insights; Recession history – Charles Schwab; Inflation – FS Insight
6743-NLD-07262022
The Biondo Focus Fund
PORTFOLIO REVIEW (Unaudited)
June 30, 2022
The Fund’s performance figures* for the periods ended June 30, 2022, compared to its benchmarks:
| | | | | | Annualized |
| | Six | One | Annualized | Annualized | Inception**- June |
| | Months | Year | Five Year | Ten Year | 30, 2022 |
| The Biondo Focus Fund - Investor Shares | (38.29)% | (41.42)% | 4.28% | 9.26% | 6.36% |
| Dow Jones Industrial Average Total Return Index | (14.44)% | (9.05)% | 9.98% | 11.70% | 11.61% |
| S&P 500 Total Return Index | (19.96)% | (10.62)% | 11.31% | 12.96% | 12.26% |
| * | The performance data quoted is historical. Past performance is no guarantee of future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or on the redemptions of Fund shares. Per the fee table in the Fund’s May 1, 2022 prospectus, the Fund’s total annual operating expense ratio before waivers is 1.60%. Shares redeemed within 30 days of purchase are subject to a redemption fee of 2.00%. For performance information current to the most recent month-end, please call 1-800-672-9152. |
| ** | Inception date is March 17, 2010. |
The Dow Jones Industrial Average Total Return Index represents large and well-known U.S. companies and covers all industries with the exception of Transportation and Utilities. Investors cannot invest directly in an index.
The S&P 500 Total Return Index is an unmanaged capitalization weighted index of 500 stocks designed to measure performance of the broad domestic economy through changes in the aggregated market value of the 500 stocks representing all major industries. Investors cannot invest directly in an index.
| *** | The Fund’s fiscal year end changed from January 31 to December 31, effective February 1, 2012. |
The Fund’s top holdings by sector are as follows, as of June 30, 2022:
| Sectors | | % of Net Assets | |
| Medical Equipment & Devices | | | 38.6 | % |
| Technology Services | | | 15.0 | % |
| Technology Hardware | | | 11.0 | % |
| Software | | | 10.7 | % |
| Internet Media & Services | | | 5.6 | % |
| Banking | | | 4.9 | % |
| E-Commerce Discretionary | | | 4.9 | % |
| Semiconductors | | | 3.5 | % |
| Biotech & Pharma | | | 1.6 | % |
| Other, Cash & Cash Equivalent | | | 4.2 | % |
| | | | 100.0 | % |
Please refer to the Schedule of Investments in this semi-annual report for a detailed listing of the Fund’s holdings.
| BIONDO FOCUS FUND |
| SCHEDULE OF INVESTMENTS (Unaudited) |
| June 30, 2022 |
| Shares | | | | | Fair Value | |
| | | | | COMMON STOCKS — 95.8% | | | | |
| | | | | BANKING - 4.9% | | | | |
| | 5,375 | | | SVB Financial Group(a) | | $ | 2,123,071 | |
| | | | | | | | | |
| | | | | BIOTECH & PHARMA - 1.6% | | | | |
| | 5,000 | | | Moderna, Inc.(a) | | | 714,250 | |
| | | | | | | | | |
| | | | | E-COMMERCE DISCRETIONARY - 4.9% | | | | |
| | 20,000 | | | Amazon.com, Inc.(a) | | | 2,124,200 | |
| | | | | | | | | |
| | | | | INTERNET MEDIA & SERVICES - 5.6% | | | | |
| | 1,125 | | | Alphabet, Inc., Class A(a) | | | 2,451,667 | |
| | | | | | | | | |
| | | | | MEDICAL EQUIPMENT & DEVICES - 38.6% | | | | |
| | 20,000 | | | ABIOMED, Inc.(a) | | | 4,950,200 | |
| | 22,500 | | | Edwards Lifesciences Corporation(a) | | | 2,139,525 | |
| | 20,000 | | | Exact Sciences Corporation(a) | | | 787,800 | |
| | 2,500 | | | IDEXX Laboratories, Inc.(a) | | | 876,825 | |
| | 9,000 | | | Illumina, Inc.(a),(b) | | | 1,659,240 | |
| | 22,500 | | | Intuitive Surgical, Inc.(a),(b) | | | 4,515,975 | |
| | 10,000 | | | Shockwave Medical, Inc.(a) | | | 1,911,700 | |
| | | | | | | | 16,841,265 | |
| | | | | SEMICONDUCTORS - 3.5% | | | | |
| | 10,000 | | | NVIDIA Corporation | | | 1,515,900 | |
| | | | | | | | | |
| | | | | SOFTWARE - 10.7% | | | | |
| | 5,750 | | | Adobe, Inc.(a) | | | 2,104,845 | |
| | 9,500 | | | Atlassian Corp plc, Class A(a) | | | 1,780,300 | |
| | 25,000 | | | Shopify, Inc., Class A(a) | | | 781,000 | |
| | | | | | | | 4,666,145 | |
| | | | | TECHNOLOGY HARDWARE - 11.0% | | | | |
| | 35,000 | | | Apple, Inc. (b) | | | 4,785,200 | |
| | | | | | | | | |
| | | | | TECHNOLOGY SERVICES - 15.0% | | | | |
| | 30,000 | | | Block, Inc., Class A(a) | | | 1,843,800 | |
See accompanying notes which are an integral part of these financial statements.
| BIONDO FOCUS FUND |
| SCHEDULE OF INVESTMENTS (Unaudited) (Continued) |
| June 30, 2022 |
| Shares | | | | | Fair Value | |
| | | | | COMMON STOCKS — 95.8% (Continued) | | | | |
| | | | | TECHNOLOGY SERVICES - 15.0% (Continued) | | | | |
| | 15,000 | | | Mastercard, Inc., Class A (b) | | $ | 4,732,200 | |
| | | | | | | | 6,576,000 | |
| | | | | | | | | |
| | | | | TOTAL COMMON STOCKS (Cost $25,659,159) | | | 41,797,698 | |
| | | | | | | | | |
| | | | | | | | | |
| | | | | SHORT-TERM INVESTMENTS — 0.7% | | | | |
| | | | | MONEY MARKET FUNDS - 0.7% | | | | |
| | 285,473 | | | First American Treasury Obligations Fund, Class X, 1.33% (Cost | | | 285,473 | |
| | | | | $285,473) (b),(c) | | | | |
| | | | | | | | | |
| | | | | TOTAL INVESTMENTS - 96.5% (Cost $25,944,632) | | $ | 42,083,171 | |
| | | | | OTHER ASSETS IN EXCESS OF LIABILITIES- 3.5% | | | 1,511,807 | |
| | | | | NET ASSETS - 100.0% | | $ | 43,594,978 | |
PLC - Public Limited Company
| (a) | Non-income producing security. |
| (b) | All or a portion of the security is pledged as collateral for the line of credit. Total value of pledged securities at June 30, 2022 is $11,675,828. See Note 6. |
| (c) | Rate disclosed is the seven day effective yield as of June 30, 2022. |
See accompanying notes which are an integral part of these financial statements.
| The Biondo Focus Fund |
| STATEMENT OF ASSETS AND LIABILITIES (Unaudited) |
| June 30, 2022 |
| ASSETS | | | | |
| Investment securities: | | | | |
| At cost | | $ | 25,944,632 | |
| At value | | $ | 42,083,171 | |
| Receivable for Fund shares sold | | | 5,612 | |
| Receivable for investments sold | | | 1,568,317 | |
| Dividends and interest receivable | | | 625 | |
| Prepaid expenses & other assets | | | 13,454 | |
| TOTAL ASSETS | | | 43,671,179 | |
| | | | | |
| LIABILITIES | | | | |
| Investment advisory fees payable | | | 22,988 | |
| Payable to related parties | | | 24,933 | |
| Distribution (12b-1) fees payable | | | 9,441 | |
| Accrued expenses and other liabilities | | | 18,839 | |
| TOTAL LIABILITIES | | | 76,201 | |
| NET ASSETS | | $ | 43,594,978 | |
| | | | | |
| Net Assets Consist Of: | | | | |
| Paid in capital ($0 par value, unlimited shares authorized) | | $ | 28,726,796 | |
| Accumulated earnings | | | 14,868,182 | |
| NET ASSETS | | $ | 43,594,978 | |
| | | | | |
| Net Asset Value Per Share: | | | | |
| Investor Class Shares: | | | | |
| Net Assets | | $ | 43,594,978 | |
| Shares of beneficial interest outstanding | | | 3,069,227 | |
| Net asset value (Net Assets ÷ Shares Outstanding), offering price and redemption price per share (a) | | $ | 14.20 | |
| (a) | Redemptions of shares held less than 30 days may be assessed a redemption fee of 2.00%. |
See accompanying notes which are an integral part of these financial statements.
| The Biondo Focus Fund |
| STATEMENT OF OPERATIONS (Unaudited) |
| For the Six Months Ended June 30, 2022 |
| INVESTMENT INCOME | | | | |
| Dividends | | $ | 33,500 | |
| Interest | | | 827 | |
| TOTAL INVESTMENT INCOME | | | 34,327 | |
| | | | | |
| EXPENSES | | | | |
| Investment advisory fees | | | 294,284 | |
| Distribution (12b-1) fees - Investor Class | | | 73,571 | |
| Administration fees | | | 50,519 | |
| Fund accounting fees | | | 16,041 | |
| Transfer agent fees | | | 15,726 | |
| Registration fees | | | 11,162 | |
| Compliance officer fees | | | 10,600 | |
| Audit fees | | | 9,214 | |
| Trustees’ fees and expenses | | | 8,300 | |
| Custody fees | | | 5,047 | |
| Shareholder reporting expense | | | 4,855 | |
| Legal fees | | | 3,967 | |
| Insurance expense | | | 2,794 | |
| Other expenses | | | 1,681 | |
| TOTAL EXPENSES | | | 507,761 | |
| | | | | |
| Less: Fees waived by the Advisor | | | (67,617 | ) |
| | | | | |
| NET EXPENSES | | | 440,144 | |
| NET INVESTMENT LOSS | | | (405,817 | ) |
| | | | | |
| REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | | | | |
| Net realized gain on transactions from: | | | | |
| Investments | | | 1,700,504 | |
| Options written | | | 50,438 | |
| Net realized gain | | | 1,750,942 | |
| | | | | |
| Net change in unrealized appreciation (depreciation) on: | | | | |
| Investments | | | (28,663,888 | ) |
| Options written | | | (648,918 | ) |
| Net change in unrealized appreciation (depreciation) | | | (29,312,806 | ) |
| | | | | |
| NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | | | (27,561,864 | ) |
| | | | | |
| NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | | $ | (27,967,681 | ) |
See accompanying notes which are an integral part of these financial statements.
| The Biondo Focus Fund |
| STATEMENTS OF CHANGES IN NET ASSETS |
| | | For the | | | For the | |
| | | Six Months Ended | | | Year Ended | |
| | | June 30, 2022 | | | December 31, 2021 | |
| | | (Unaudited) | | | | |
| FROM OPERATIONS | | | | | | | | |
| Net investment loss | | $ | (405,817 | ) | | $ | (1,110,592 | ) |
| Net realized gain from investments and options written (a) | | | 1,750,942 | | | | 4,129,952 | |
| Net change in unrealized appreciation (depreciation) of investments and options written (a) | | | (29,312,806 | ) | | | 1,857,379 | |
| Net increase (decrease) in net assets resulting from operations | | | (27,967,681 | ) | | | 4,876,739 | |
| | | | | | | | | |
| DISTRIBUTIONS TO SHAREHOLDERS | | | | | | | | |
| Total distributions paid | | | — | | | | (5,666,914 | ) |
| | | | | | | | | |
| FROM SHARES OF BENEFICIAL INTEREST | | | | | | | | |
| Proceeds from shares sold | | | 1,077,545 | | | | 3,330,630 | |
| Net asset value of shares issued in reinvestment of distributions | | | — | | | | 5,622,520 | |
| Payments for shares redeemed | | | (5,181,017 | ) | | | (8,141,430 | ) |
| Redemption fee proceeds | | | 102 | | | | 542 | |
| Net increase (decrease) in net assets from shares of beneficial interest | | | (4,103,370 | ) | | | 812,262 | |
| | | | | | | | | |
| TOTAL INCREASE (DECREASE) IN NET ASSETS | | | (32,071,051 | ) | | | 22,087 | |
| | | | | | | | | |
| NET ASSETS | | | | | | | | |
| Beginning of Period | | | 75,666,029 | | | | 75,643,942 | |
| End of Period | | $ | 43,594,978 | | | $ | 75,666,029 | |
| | | | | | | | | |
| SHARE ACTIVITY - INVESTOR CLASS | | | | | | | | |
| Shares Sold | | | 57,205 | | | | 134,575 | |
| Shares Reinvested | | | — | | | | 239,154 | |
| Shares Redeemed | | | (276,731 | ) | | | (324,599 | ) |
| Net increase (decrease) in shares of beneficial interest outstanding | | | (219,526 | ) | | | 49,130 | |
See accompanying notes which are an integral part of these financial statements.
| The Biondo Focus Fund |
| FINANCIAL HIGHLIGHTS |
The table sets forth financial data for one share of beneficial interest outstanding throughout each period presented.
| | | Investor Class |
| | | Six Months Ended | | | Year Ended | | | Year Ended | | | Year Ended | | | Year Ended | | | Year Ended | |
| | | June 30, | | | December 31, | | | December 31, | | | December 31, | | | December 31, | | | December 31, | |
| | | 2022 | | | 2021 | | | 2020 | | | 2019 | | | 2018 | | | 2017 | |
| | | (Unaudited) | | | | | | | | | | | | | | | | |
| | | | | | | | | | | | | | | | | | | |
| Net asset value, beginning of period | | $ | 23.01 | | | $ | 23.35 | | | $ | 18.87 | | | $ | 16.72 | | | $ | 16.74 | | | $ | 14.40 | |
| Activity from investment operations: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net investment loss (1) | | | (0.13 | ) | | | (0.35 | ) | | | (0.27 | ) | | | (0.20 | ) | | | (0.25 | ) | | | (0.38 | ) |
| Net realized and unrealized gain (loss) on investments and option transactions | | | (8.68 | ) | | | 1.86 | | | | 5.98 | | | | 4.11 | | | | 1.37 | (7) | | | 4.90 | |
| Total income from investment operations | | | (8.81 | ) | | | 1.51 | | | | 5.71 | | | | 3.91 | | | | 1.12 | | | | 4.52 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Less distributions from: | | | | | | | | | | | | | | | | | | | | | | | | |
| Net realized gains | | | — | | | | (1.85 | ) | | | (1.23 | ) | | | (1.76 | ) | | | (1.14 | ) | | | (2.18 | ) |
| Total distributions | | | — | | | | (1.85 | ) | | | (1.23 | ) | | | (1.76 | ) | | | (1.14 | ) | | | (2.18 | ) |
| Paid-in-Capital from redemption fees (1,2) | | | 0.00 | | | | 0.00 | | | | 0.00 | | | | 0.00 | | | | 0.00 | | | | 0.00 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Net asset value, end of period | | $ | 14.20 | | | $ | 23.01 | | | $ | 23.35 | | | $ | 18.87 | | | $ | 16.72 | | | $ | 16.74 | |
| Total return (3) | | | (38.29 | )% (8) | | | 6.32 | % | | | 30.62 | % | | | 23.67 | % (5) | | | 6.47 | % (5) | | | 31.29 | % (5) |
| Net assets, end of period (in 000s) | | $ | 43,595 | | | $ | 75,666 | | | $ | 75,644 | | | $ | 64,359 | | | $ | 56,495 | | | $ | 27,336 | |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| Ratio of gross expenses to average net assets including interest expense (4) | | | 1.73 | % (9) | | | 1.59 | % | | | 1.66 | % | | | 1.65 | % | | | 1.98 | % | | | 2.75 | % |
| Ratio of gross expenses to average net assets excluding interest expense (4) | | | 1.73 | % (9) | | | 1.59 | % | | | 1.66 | % | | | 1.65 | % | | | 1.93 | % | | | 2.45 | % |
| Ratio of net expenses to average net assets including interest expense | | | 1.50 | % (9) | | | 1.50 | % | | | 1.50 | % | | | 1.50 | % | | | 1.78 | % | | | 2.55 | % |
| Ratio of net expenses to average net assets excluding interest expense | | | 1.50 | %(9) | | | 1.50 | % | | | 1.50 | % | | | 1.50 | % | | | 1.73 | % (6) | | | 2.25 | % |
| Ratio of net investment loss to average net assets | | | (1.38 | )% (9) | | | (1.41 | )% | | | (1.34 | )% | | | (1.08 | )% | | | (1.34 | )% | | | (2.20 | )% |
| Portfolio turnover rate | | | 1 | % (8) | | | 21 | % | | | 29 | % | | | 43 | % | | | 56 | % | | | 48 | % |
| | | | | | | | | | | | | | | | | | | | | | | | | |
| (1) | Per share amounts calculated using average shares method which appropriately presents the per share data for the period. |
| (2) | Amount represents less than $0.01 per share. |
| (3) | Total return represents aggregate total return based on Net Asset Value. Total returns would have been lower absent waived fees and reimbursed expenses. Total returns are historical in nature and assume changes in share price. The returns shown exclude the effect of applicable redemption fees. |
| (4) | Represents the ratio of expenses to average net assets absent fee waivers by the advisor. |
| (5) | Includes adjustments in accordance with accounting principles generally accepted in the United States and consequently, the net asset value for financial reporting purposes and the returns based upon those net asset may differ from the net asset values and returns for shareholder processing. |
| (6) | Effective June 1, 2018, the expense limitation was reduced to 1.50%. |
| (7) | Net realized and unrealized gain on investments and option transactions does not accord with the amount reported in the Statement of Operations for the year ended December 31, 2018 due to the timing of shareholder subscriptions and redemptions relative to fluctuating net asset values during the year. |
See accompanying notes which are an integral part of these financial statements.
The Biondo Focus Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
June 30, 2022
The Biondo Focus Fund (the “Fund”) is a non-diversified series of shares of beneficial interest of Northern Lights Fund Trust (the “Trust”), a statutory trust organized under the laws of the State of Delaware on January 19, 2005. The Fund is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company. The Fund currently offers Investor Class shares.
The Fund seeks long- term capital appreciation, which it pursues by investing primarily in a combination of long and short positions in (1) common stock of US companies of any capitalization; (2) American Depositary Receipts (“ADRs”) representing common stock of foreign companies; (3) investment grade fixed income securities; (4) exchange-traded funds (“ETFs”) that invest primarily in (i) common stocks of US companies, (ii) ADRs or (iii) investment grade fixed income securities; and (5) options on common stock, ADRs and ETFs.
| 2. | 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 Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 “Financial Services – Investment Companies” including FASB Accounting Standards Update (“ASU”) 2013-08.
Security Valuation – Securities listed on an exchange are valued at the last reported sale price at the close of the regular trading session of the primary exchange on the business day the value is being determined, or in the case of securities listed on NASDAQ at the NASDAQ Official Closing Price (“NOCP”) . In the absence of a sale, such securities shall be valued at the mean between the current bid and ask prices on the primary exchange on the day of valuation. Options contracts listed on a securities exchange or board of trade for which market quotations are readily available shall be valued at the last quoted sales price or, in the absence of a sale, at the mean between the current bid and ask prices on the day of valuation. Option contracts not listed on a securities exchange or board of trade for which over-the-counter market quotations are not readily available shall be valued at the mean between the current bid and ask prices on the day of valuation. Index options shall be valued at the mean between the current bid and ask prices on the day of valuation. Debt securities (other than short term obligations) are valued each day by an independent pricing service approved by the Trust’s Board of Trustees (the “Board”) using methods which include current market quotations from a major market maker in the securities and based on methods which include the consideration of yields or prices of securities of comparable quality, coupon, maturity and type. Short-term debt obligations with remaining maturities in excess of sixty days are valued at current market prices by an independent pricing service approved by the Board. Short-term debt obligations having 60 days or less remaining until maturity, at time of purchase, may be valued at amortized cost. Investments in open-end investment companies are valued at net asset value.
The Fund may hold securities, such as private investments, interests in commodity pools, other non-traded securities or temporarily illiquid securities, for which market quotations are not readily available or are determined to be unreliable. These securities will be valued using the “fair value” procedures approved by the Board. The Board has delegated execution of these procedures to a fair value committee composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) advisor. The committee may also enlist third party consultants such as a valuation specialist at a public accounting firm, valuation consultant or financial officer of a security issuer on an as-needed basis to assist in determining a security-specific fair value. The Board has also
The Biondo Focus Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2022
engaged a third party valuation firm to attend valuation meetings held by the Trust, review minutes of such meetings and report to the Board on a quarterly basis. The Board reviews and ratifies the execution of this process and the resultant fair value prices at least quarterly to assure the process produces reliable results.
Fair Valuation Process. As noted above, the fair value committee is composed of one or more representatives from each of the (i) Trust, (ii) administrator, and (iii) advisor. The applicable investments are valued collectively via inputs from each of these groups. For example, fair value determinations are required for the following securities: (i) securities for which market quotations are insufficient or not readily available on a particular business day (including securities for which there is a short and temporary lapse in the provision of a price by the regular pricing source), (ii) securities for which, in the judgment of the advisor, the prices or values available do not represent the fair value of the instrument. Factors which may cause the advisor to make such a judgment include, but are not limited to, the following: only a bid price or an ask price is available; the spread between bid and ask prices is substantial; the frequency of sales; the thinness of the market; the size of reported trades; and actions of the securities markets, such as the suspension or limitation of trading; (iii) securities determined to be illiquid; (iv) securities with respect to which an event that will affect the value thereof has occurred (a “significant event”) since the closing prices were established on the principal exchange on which they are traded, but prior to the Fund’s calculation of its net asset value. Specifically, interests in commodity pools or managed futures pools are valued on a daily basis by reference to the closing market prices of each futures contract or other asset held by a pool, as adjusted for pool expenses. Restricted or illiquid securities, such as private placements or non-traded securities are valued via inputs from the advisor based upon the current bid for the security from two or more independent dealers or other parties reasonably familiar with the facts and circumstances of the security (who should take into consideration all relevant factors as may be appropriate under the circumstances). If the advisor is unable to obtain a current bid from such independent dealers or other independent parties, the fair value committee shall determine the fair value of such security using the following factors: (i) the type of security; (ii) the cost at date of purchase; (iii) the size and nature of the Fund’s holdings; (iv) the discount from market value of unrestricted securities of the same class at the time of purchase and subsequent thereto; (v) information as to any transactions or offers with respect to the security; (vi) the nature and duration of restrictions on disposition of the security and the existence of any registration rights; (vii) how the yield of the security compares to similar securities of companies of similar or equal creditworthiness; (viii) the level of recent trades of similar or comparable securities; (ix) the liquidity characteristics of the security; (x) current market conditions; and (xi) the market value of any securities into which the security is convertible or exchangeable.
The Fund utilizes various methods to measure the fair value of all of their investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of input are:
Level 1 – Unadjusted quoted prices in active markets for identical assets and liabilities that the Fund has the ability to access.
Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument in an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
The Biondo Focus Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2022
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 June 30, 2022 for the Fund’s investments measured at fair value:
| Assets * | | Level 1 | | | Level 2 | | | Level 3 | | | Total | |
| Common Stocks | | $ | 41,797,698 | | | $ | — | | | $ | — | | | $ | 41,797,698 | |
| Short-Term Investments | | | 285,473 | | | | — | | | | — | | | | 285,473 | |
| Total | | $ | 42,083,171 | | | $ | — | | | $ | — | | | $ | 42,083,171 | |
The Fund did not hold any Level 3 securities during the period.
| * | Refer to the Schedule of Investments for security classifications. |
Security Transactions and Related Income – Security transactions are accounted for on the trade date. Interest income is recognized on an accrual basis. Discounts are accreted and premiums are amortized on securities purchased over the lives of the respective securities. Dividend income is recorded on the ex-dividend date. Realized gains or losses from sales of securities are determined by comparing the identified cost of the security lot sold with the net sales proceeds.
Exchange-Traded Funds - The Fund may invest in exchange-traded funds (“ETFs”). An ETF is a type of open-end fund, however, unlike a mutual fund, its shares are bought and sold on a securities exchange at market price and only certain financial institutions called authorized participants may buy and redeem shares of the ETF at net asset value. ETF shares can trade at either a premium or discount to net asset value. Each ETF like a mutual fund is subject to specific risks depending on the type of strategy (actively managed or passively tracking an index) and the composition of its underlying holdings. Investing in an ETF involves substantially the same risks as investing directly in the ETF’s underlying holdings. ETFs pay fees and incur operating expenses, which reduce the total return earned by the ETFs from their underlying holdings. An ETF may not achieve its investment objective or execute its investment strategy effectively, which may adversely affect the Fund’s performance.
Dividends and Distributions to Shareholders – Dividends from net investment income and distributable net realized capital gains, if any, are declared and paid annually. Dividends from net investment income and distributions from net realized gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These “book/tax” differences are considered either temporary (i.e., deferred losses, capital loss carry forwards) or permanent in nature. To the extent these differences are permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment; temporary
The Biondo Focus Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2022
differences do not require reclassification. Dividends and distributions to shareholders are recorded on the ex-dividend date.
Federal Income Taxes – The Fund complies with the requirements of the Internal Revenue Code applicable to regulated investment companies and distributes all of its taxable income to its shareholders. Therefore, no provision for federal income tax is required. The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Management has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (December 2019 - December 2021), or expected to be taken in the Fund’s 2022 tax returns. The Fund identifies its major tax jurisdictions as U.S. federal, Ohio and foreign jurisdictions where the Fund makes significant investments. The Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
Options Transactions – The Fund is subject to equity price risk in the normal course of pursuing its investment objectives and may purchase or sell options to help hedge against this risk.
The Fund may write call options only if it (i) owns an offsetting position in the underlying security or (ii) has an absolute or immediate right to acquire that security without additional cash consideration or exchange of other securities held in its portfolio.
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, retain 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. Call options are purchased to hedge against an increase in the value of securities held in the Fund’s portfolio. If such an increase occurs, the call options will permit the Fund to purchase the securities underlying such options at the exercise price, not at the current market price. Put options are purchased to hedge against a decline in the value of securities held in a Fund’s portfolio. If such a decline occurs, the put options will permit the Fund to sell the securities underlying such options at the exercise price, or to close out the options at a profit. The premium paid for a put or call option plus any transaction costs will reduce the benefit, if any, realized by the Fund upon exercise of the option, and, unless the price of the underlying security rises or declines sufficiently, the option may expire worthless to the Fund. In addition, in the event that the price of the security in connection with which an option was purchased moves in a direction favorable to the Fund, the benefits realized by the Fund as a result of such favorable movement will be reduced by the amount of the premium paid for the option and related transaction costs. Written and purchased options are non-income producing securities. With purchased options, there is minimal counterparty credit risk to the Fund since these options are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded options, guarantees against a possible default.
The Biondo Focus Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2022
For the six months ended June 30, 2022, The Biondo Focus Fund had a net realized gain of $50,438 on written options subject to equity price risk. The realized gains/(losses) are included in the line item marked “Net realized gain on transactions from options written” on the Statements of Operations. For the six months ended June 30, 2022, the Fund had net unrealized depreciation of $648,918 on written options subject to equity price risk and this unrealized depreciation amount is included in the line item marked “Net change in unrealized appreciation (depreciation) on options written” on the Statements of Operations.
The amounts of realized and changes in unrealized gains and losses on derivative instruments during the period as disclosed in the Statement of Operations serve as indicators of the volume of derivative activity.
Sector Risk – The value of securities from a specific sector can be more volatile than the market as a whole and may be subject to economic or regulatory risks different than the economy as a whole.
Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operations during the reporting year. Actual results could differ from those estimates.
Expenses – Expenses of the Trust that are directly identifiable to a specific fund are charged to that fund. Expenses which are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable (as determined by the Board), taking into consideration the nature and type of expense and the relative sizes of the funds in the Trust.
Indemnification – The Trust indemnifies its officers and Trustees for certain liabilities that may arise from the performance of their duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of representations and warranties and which provide general indemnities. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss due to these warranties and indemnities to be remote.
3. INVESTMENT TRANSACTIONS
For the six months ended June 30, 2022, cost of purchases and proceeds from sales of portfolio securities, other than short-term investments and U.S. Government securities, amounted to the following:
| Purchases | | | Sales | |
| $ | 4,640,605 | | | $ | 9,497,970 | |
4. AGGREGATE TAX UNREALIZED APPRECIATION AND DEPRECIATION
At June 30, 2022 the aggregate cost for federal tax purposes, which differs from fair value by net unrealized appreciation(depreciation) of securities, are as follows:
| | | | Gross Unrealized | | | Gross Unrealized | | | Net Unrealized | |
| Tax Cost | | | Appreciation | | | Depreciation | | | Appreciation | |
| $ | 25,944,632 | | | $ | 19,493,909 | | | $ | (3,355,370 | ) | | $ | 16,138,539 | |
The Biondo Focus Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2022
| 5. | INVESTMENT ADVISORY AGREEMENT AND TRANSACTIONS WITH RELATED PARTIES |
Biondo Investment Advisors, LLC serves as the Fund’s investment advisor (the “Advisor”). Pursuant to an investment advisory agreement between the Advisor and the Trust, on behalf of the Fund, the Advisor, under the oversight of the Board, directs the daily operations of the Fund and supervises the performance of administrative and professional services provided by others. As compensation for its services and the related expenses borne by the Advisor, the Fund pays the Advisor a management fee, computed and accrued daily and paid monthly, at an annual rate of 1.00% the Fund’s average daily net assets. For the six months ended June 30, 2022, the Advisor earned fees of $294,284 for its service to the Fund.
Effective March 27, 2019, pursuant to a written contract (the “Waiver Agreement”), the Advisor has agreed, at least until April 30, 2023, to waive a portion of its advisory fee and has agreed to reimburse a portion of the Fund’s other expenses to the extent necessary so that the total expenses incurred by the Fund (excluding any front-end or contingent deferred loads; brokerage fees and commissions; acquired fund fees and expenses; fees and expenses associated with investments in other collective investment vehicles or derivative instruments (including for example option and swap fees and expenses); borrowing costs (such as interest and dividend expense on securities sold short); taxes; and extraordinary expenses such as litigation expenses (which may include indemnification of Fund officers and Trustees, contractual indemnification of Fund service providers (other than the Advisor)) does not exceed 1.50% per annum of the Fund’s average daily net assets. This amount will herein be referred to as the “expense limitation.” For the six months ended June 30, 2022, the Advisor waived fees in the amount of $67,617 for the Fund pursuant to the Waiver Agreement and a prior expense limitation agreement.
If the Advisor waives any fee or reimburses any expense pursuant to the Waiver Agreement (or a prior expense limitation agreement), and the Fund’s operating expenses are subsequently lower than its expense limitation, the Advisor shall be entitled to reimbursement by the Fund for such waived fees or reimbursed expenses provided that such reimbursement does not cause the Fund’s expenses to exceed the expense limitation. If operating expenses subsequently exceed the expense limitation, the reimbursements for the Fund shall be suspended. The Advisor may seek reimbursement only for expenses waived or paid by it during the three years or prior to such reimbursement; provided, however, that such expenses may only be reimbursed to the extent they were waived or paid after the date of the Waiver Agreement (or any similar agreement). The Board may terminate this expense reimbursement arrangement at any time.
As of December 31, 2021, the Advisor had $266,228 of waived expenses that may be recovered by the following dates:
| December 31, 2022 | | | December 31, 2023 | | | December 31, 2024 | | | Total | |
| $ | 85,957 | | | $ | 105,519 | | | $ | 74,752 | | | $ | 266,228 | |
The Trust, with respect to the Fund, has adopted the Trust’s Master Distribution and Shareholder Servicing Plan (or “Plan”) for Investor Class shares. The Plan provides that a monthly service fee is calculated by the Fund at an annual rate of 0.25% of the average daily net assets attributable to the Investor Class shares for the Fund. Pursuant to the Plan, the Fund may compensate the securities dealers or other financial intermediaries, financial institutions, investment advisors, and others for activities primarily intended to result in the sale of Fund shares and for maintenance and personal service provided to existing shareholders. The Plan further provides for periodic payments to brokers, dealers and other financial intermediaries, including insurance companies, for providing shareholder services and for promotional and other sales-related costs. During the six months ended June 30, 2022, the Fund was charged $73,571 pursuant to the Plan.
The Biondo Focus Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2022
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Northern Lights Distributors, LLC (the “Distributor”) acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s shares. For the six moths ended June 30, 2022, the Distributor received no underwriting commissions.
In addition, certain affiliates of the Distributor provide services to the Fund as follows:
Ultimus Fund Solutions, LLC (“UFS”)
UFS, an affiliate of the Distributor, provides administration, fund accounting, and transfer agent services to the Trust. Pursuant to a separate servicing agreement with UFS, the Fund pays UFS customary fees for providing administration, fund accounting and transfer agency services to the Fund. Certain officers of the Trust are also officers of UFS, and are not paid any fees directly by the Fund for serving in such capacities.
Northern Lights Compliance Services, LLC (“NLCS”)
NLCS, an affiliate of UFS and the Distributor, provides a Chief Compliance Officer to the Trust, as well as related compliance services, pursuant to a consulting agreement between NLCS and the Trust. Under the terms of such agreement, NLCS receives customary fees from the Fund.
Blu Giant, LLC (“Blu Giant”)
Blu Giant, an affiliate of UFS and the Distributor, provides EDGAR conversion and filing services as well as print management services for the Fund on an ad-hoc basis. For the provision of these services, Blu Giant receives customary fees from the Fund.
The Fund has a secured $5,000,000 bank line of credit through Lakeland Bank (the “Bank”) for the purpose of investment purchases, subject to the limitations of the 1940 Act for borrowings. The Fund has until June 1, 2023 to pay back the line of credit. Borrowings under this arrangement bear interest at the greater of i) the lender’s prime rate minus 0.50% or ii) 3.25% per annum at the time of borrowing. During the six months ended June 30, 2022, the Fund had no outstanding borrowings.
As collateral security for the bank line of credit, the Fund grants the Bank a first position security interest in and lien on all securities of any kind or description pledged by the Fund. As of June 30, 2022, the Fund had $11,675,828 in securities pledged as collateral for the line of credit.
The Fund may assess a short-term redemption fee of 2.00% of the total redemption amount if shareholders sell their shares after holding them for less than 30 days. The redemption fee is paid directly to the Fund. For the six months ended June 30, 2022 the Fund assessed $102 in redemption fees.
As of June 30, 2022, the Biondo Focus Fund had 38.6% of the value of net assets invested in stocks within the Medical Equipment & Devices sector.
The Biondo Focus Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2022
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a Fund creates presumption of control of the Fund, under Section 2(a)(9) of the 1940 Act. As of June 30, 2022, National Financial Services LLC held approximately 85.9% of the Fund. The Fund has no knowledge as to whether all or any portion of the shares owned of record by National Financial Services LLC are also owned beneficially.
| 10. | TAX COMPONENTS OF CAPITAL |
The tax character of fund distributions paid for the years ended December 31, 2021 and December 31, 2020 was as follows:
| | | Fiscal Year Ended | | | Fiscal Year Ended | |
| | | December 31, 2021 | | | December 31, 2020 | |
| Ordinary Income | | $ | 707,731 | | | $ | — | |
| Long-Term Capital Gains | | | 4,959,183 | | | | 3,870,984 | |
| | | $ | 5,666,914 | | | $ | 3,870,984 | |
Tax equalization allows a Fund to treat as distribution that portion of redemption proceeds representing a redeeming shareholder’s portion of undistributed taxable and net capital gains. Tax equalization allows a Fund to treat as distribution that portion of redemption The Fund utilized equalization in the amount of $86,726, which resulted in a difference between tax distributions and book distributions as disclosed on the Statement of Changes for the year ended December 31, 2020. Net investment income and net realized gains(losses), as disclosed on the Statements of Operations and net assets were not affected by these reclassifications.
As of December 31, 2021, the components of accumulated earnings/ (deficit) on a tax basis were as follows:
| Post October Loss | | | Other | | | Net | | | Total | |
| and | | | Book/Tax | | | Unrealized | | | Accumulated | |
| Late Year Loss | | | Differences | | | Appreciation | | | Earnings | |
| $ | (1,454,237 | ) | | $ | (1,161,245 | ) | | $ | 45,451,345 | | | $ | 42,835,863 | |
The difference between book basis and tax basis accumulated net investment loss, unrealized appreciation and accumulated net realized gains from security and options transactions is primarily attributable to the tax deferral of losses on straddles. Amounts listed under other book/tax differences are primarily attributable to the tax deferral of losses on straddles.
Capital losses incurred after October 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The Fund incurred and elected to defer such capital losses of $1,454,237.
The Biondo Focus Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
June 30, 2022
Permanent book and tax differences, primarily attributable to the tax treatment of net operating losses, and tax adjustments for prior year tax returns, resulted in reclassification for the Fund for the year ended December 31, 2021 as follows:
| | | | Accumulated | |
| Paid In Capital | | | Earnings (Losses) | |
| $ | (455,248 | ) | | $ | 455,248 | |
| 11. | MARKET AND GEOPOLITICAL RISK |
The increasing interconnectivity between global economies and financial markets increases the likelihood that events or conditions in one region or financial market may adversely impact issuers in a different country, region or financial market. Securities in the Fund’s portfolio may underperform due to inflation (or expectations for inflation), interest rates, global demand for particular products or resources, natural disasters, pandemics, epidemics, terrorism, regulatory events and governmental or quasi-governmental actions. The occurrence of global events similar to those in recent years may result in market volatility and may have long term effects on both the U.S. and global financial markets. The current novel coronavirus (COVID-19) global pandemic and the aggressive responses taken by many governments, including closing borders, restricting international and domestic travel, and the imposition of prolonged quarantines or similar restrictions, as well as the forced or voluntary closure of, or operational changes to, many retail and other businesses, has had negative impacts, and in many cases severe negative impacts, on markets worldwide. It is not known how long such impacts, or any future impacts of other significant events described above, will or would last, but there could be a prolonged period of global economic slowdown, which may impact your Fund investment.
| 12. | NEW REGULATORY UPDATES |
In October 2020, the Securities and Exchange Commission (the “SEC”) adopted new regulations governing the use of derivatives by registered investment companies (“Rule 18f-4”). The Funds will be required to comply with Rule 18f-4 by August 19, 2022. Once implemented, Rule 18f-4 will impose limits on the amount of derivatives a fund can enter into, eliminate the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, treat derivatives as senior securities and require funds whose use of derivatives is more than a limited specified exposure amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager. The Funds are currently evaluating the impact, if any, of this provision.
Subsequent events after the date of the Statement of Assets and Liabilities have been evaluated through the date the financial statements were issued. Management has determined that no events or transactions occurred requiring adjustment or disclosure in the financial statements.
The Biondo Focus Fund
LIQUIDITY RISK MANAGEMENT PROGRAM (Unaudited)
June 30, 2022
The Fund has adopted and implemented a written liquidity risk management program as required by Rule 22e-4 (the “Liquidity Rule”) under the 1940 Act. The program is reasonably designed to assess and manage the Fund’s liquidity risk, taking into consideration, among other factors, the Fund’s investment strategy and the liquidity of its portfolio investments during normal and reasonably foreseeable stressed conditions; its short and long-term cash flow projections; and its cash holdings and access to other funding sources.
During the six months ended June 30, 2022, the Trust’s Liquidity Risk Management Program Committee (the “Committee”) reviewed the Fund’s investments and determined that the Fund held adequate levels of cash and highly liquid investments to meet shareholder redemption activities in accordance with applicable requirements. Accordingly, the Committee concluded that (i) the Fund’s liquidity risk management program is reasonably designed to prevent violations of the Liquidity Rule and (ii) the Fund’s liquidity risk management program has been effectively implemented.
The Biondo Focus Fund
EXPENSE EXAMPLES (Unaudited)
June 30, 2022
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including redemption fees; and (2) ongoing costs, including management fees; distribution and/or service (12b-1) fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from January 1, 2022 through June 30, 2022.
Actual Expenses
The “Actual” line in the table below provides information about actual account values and actual expenses. You may use the information below together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the table under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The “Hypothetical” line in the table below provides information about hypothetical account values and hypothetical expenses based on the Biondo Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balances or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), or redemption fees. Therefore, the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| | Beginning | Ending | Expenses Paid | Expense Ratio |
| | Account Value | Account Value | During Period* | During Period |
| Actual | 1/1/22 | 6/30/22 | 1/1/22- 6/30/22 | 1/1/22- 6/30/22 |
| The Biondo Focus Fund | $1,000.00 | $617.10 | $6.01 | 1.50% |
| | | | | |
| | Beginning | Ending | Expenses Paid | Expense Ratio |
| Hypothetical (5% return before expenses) | Account Value
1/1/22 | Account Value
6/30/22 | During Period**
1/1/22- 6/30/22 | During Period
1/1/22- 6/30/22 |
| The Biondo Focus Fund | $1,000.00 | $1,017.36 | $7.50 | 1.50% |
| * | “Actual” expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by the number of days in the period (181) divided by the number of days in the fiscal year (365). |
| ** | “Hypothetical” expense information for each Fund is presented on the basis of the full one-half year period to enable comparison to other funds. Expenses are equal to the average account value over the period, multiplied by the Fund’s annualized expense ratio, multiplied by the number of days in the period (181) divided by the number of days in the fiscal year (365). |
PRIVACY NOTICE
Northern Lights Fund Trust
Rev. February 2014
| FACTS | WHAT DOES NORTHERN LIGHTS FUND TRUST DO WITH YOUR PERSONAL INFORMATION? |
| Why? | Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some, but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. |
| What? | The types of personal information we collect and share depends on the product or service that you have with us. This information can include: ● Social Security number and wire transfer instructions ● account transactions and transaction history ● investment experience and purchase history When you are no longer our customer, we continue to share your information as described in this notice. |
| How? | All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Northern Lights Fund Trust chooses to share; and whether you can limit this sharing. |
Reasons we can share your
personal information: | Does Northern Lights Fund Trust
share information? | Can you limit this sharing? |
| For our everyday business purposes - such as to process your transactions, maintain your account(s), respond to court orders and legal investigations, or report to credit bureaus. | YES | NO |
| For our marketing purposes - to offer our products and services to you. | NO | We don’t share |
| For joint marketing with other financial companies. | NO | We don’t share |
| For our affiliates’ everyday business purposes - information about your transactions and records. | NO | We don’t share |
| For our affiliates’ everyday business purposes - information about your credit worthiness. | NO | We don’t share |
| For nonaffiliates to market to you | NO | We don’t share |
| QUESTIONS? | Call 1-402-493-4603 |
PRIVACY NOTICE
Northern Lights Fund Trust
| What we do: |
How does Northern Lights Fund Trust protect my personal information? | To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. Our service providers are held accountable for adhering to strict policies and procedures to prevent any misuse of your nonpublic personal information. |
How does Northern Lights Fund Trust collect my personal information? | We collect your personal information, for example, when you ● open an account or deposit money ● direct us to buy securities or direct us to sell your securities ● seek advice about your investments We also collect your personal information from others, such as credit bureaus, affiliates, or other companies. |
Why can’t I limit all sharing? | Federal law gives you the right to limit only: ● sharing for affiliates’ everyday business purposes – information about your creditworthiness. ● affiliates from using your information to market to you. ● sharing for nonaffiliates to market to you. State laws and individual companies may give you additional rights to limit sharing. |
| Definitions |
| Affiliates | Companies related by common ownership or control. They can be financial and nonfinancial companies. ● Northern Lights Fund Trust does not share with our affiliates. |
| Nonaffiliates | Companies not related by common ownership or control. They can be financial and nonfinancial companies. ● Northern Lights Fund Trust does not share with nonaffiliates so they can market to you. |
| Joint marketing | A formal agreement between nonaffiliated financial companies that together market financial products or services to you. ● Northern Lights Fund Trust doesn’t jointly market. |
PROXY VOTING POLICY
Information regarding how the Fund voted proxies relating to portfolio securities for the most recent twelve month period ended June 30 as well as a description of the policies and procedures that the Fund use to determine how to vote proxies is available without charge, upon request, by calling 1-800-672-9152 or by referring to the Securities and Exchange Commission’s (“SEC”) website at http://www.sec.gov.
PORTFOLIO HOLDINGS
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT, within sixty days after the end of the period. Form N-PORT reports are available at the SEC’s website at www.sec.gov.
| INVESTMENT ADVISOR |
| Biondo Investment Advisors, LLC |
| 540 Routes 6 & 209, PO Box 909 |
| Milford, PA 18337 |
| |
| ADMINISTRATOR |
| Ultimus Fund Solutions, LLC |
| 225 Pictoria Drive, Suite 450 |
| Cincinnati, OH 45246 |
| |
| |
BFF-SAR22
(a) Include a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Act (17 CFR 270.30e-1).
(b) Include a copy of each notice transmitted to stockholders in reliance on Rule 30e-3 under the Act (17 CFR 270.30e-3) that contains disclosures specified by paragraph (c)(3) of that rule. Not applicable.
Item 2. Code of Ethics. Not applicable.
Item 3. Audit Committee Financial Expert. Not applicable.
Item 4. Principal Accountant Fees and Services. Not applicable.
Item 5. Audit Committee of Listed Companies. Not applicable to open-end investment companies.
Item 6. Schedule of Investments. Schedule of investments in securities of unaffiliated issuers is included under Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders. None
Item 11. Controls and Procedures.
(a) Based on an evaluation of the Registrant’s disclosure controls and procedures as of a date within 90 days of filing date of this Form N-CSR, the principal executive officer and principal financial officer of the Registrant have concluded that the disclosure controls and procedures of the Registrant are reasonably designed to ensure that the information required in filings on Form N-CSR is recorded, processed, summarized, and reported by the filing date, including that information required to be disclosed is accumulated and communicated to the Registrant’s management, including the Registrant’s principal executive officer and principal financial officer, as appropriate to allow timely decisions regarding required disclosure.
(b) There were no significant changes in the Registrant’s internal control over financial reporting that occurred during the Registrant’s last fiscal half-year that have materially affected, or are reasonably likely to materially affect, the Registrant’s internal control over financial reporting.
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. Not applicable.
Item 13. Exhibits.
(a)(1) Not applicable.
(a)(2) Certifications required by Section 302 of the Sarbanes-Oxley Act of 2002 (and Item 11(a)(2) of Form N-CSR) are filed herewith.
(a)(3) Not applicable for open-end investment companies.
(b) Certifications required by Section 906 of the Sarbanes-Oxley Act of 2002 (and Item 11(b) of Form N-CSR) are filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) Northern Lights Fund Trust
By (Signature and Title)
/s/ Kevin E. Wolf
Kevin E. Wolf, Principal Executive Officer/President
Date 8/30/22
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)
/s/ Kevin E. Wolf
Kevin E. Wolf, Principal Executive Officer/President
Date 8/30/22
By (Signature and Title)
/s/ James Colantino
James Colantino, Principal Financial Officer/Treasurer
Date 8/30/22
