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)
13520 Evening Creek Drive N. Suite 300 San Diego, CA 92128
(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: 8/31/13
Item 1. Reports to Stockholders.
Multi-Strategy Growth & Income Fund
PORTFOLIO REVIEW (Unaudited)
Since Inception through August 31, 2013*
The Fund’s performance figures for the period ending August 31, 2013, compared to its benchmarks:
Annualized Total Returns as of August 31, 2013 | Six Months+ | One Year | Since Inception* |
Multi-Strategy Growth & Income Fund |
|
|
|
Without Load | 3.51% | 9.75% | 7.48% |
With Load | (2.21)% | 3.71% | 3.41% |
Barclays Aggregate Bond Index | (2.61)% | (2.47)% | 0.91% |
S&P 500 Total Return Index | 8.95% | 18.70% | 13.36% |
________________
* The Fund commenced operations March 16, 2012.
+ Non-Annualized.
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 investor’s 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 Fund’s total gross annual operating expenses, per its prospectus dated May 31, 2013, including underlying funds, are 2.44%. The chart does not reflect the deduction of taxes that a shareholder would have to pay on Fund distributions or the redemption of the fund shares.
Multi-Strategy Growth & Income Fund | |||||||
PORTFOLIO OF INVESTMENTS (Unaudited) | |||||||
August 31, 2013 | |||||||
Shares |
| Security |
|
|
|
| Value |
|
|
|
|
|
|
|
|
|
| COMMON STOCK - 13.02 % |
|
|
|
| |
|
| AGRICULTURE - 0.31 % |
|
|
|
|
|
5,500 |
| Reynolds American, Inc. |
|
|
|
| $ 261,965 |
|
|
|
|
|
|
|
|
|
| AUTO MANUFACTURERS - 0.32 % |
|
|
|
| |
4,000 |
| Daimler AG |
|
|
|
| 274,600 |
|
|
|
|
|
|
|
|
|
| BANKS - 0.66 % |
|
|
|
|
|
6,000 |
| Bank of Hawaii Corp. |
|
|
|
| 309,000 |
4,000 |
| Bank of Montreal |
|
|
|
| 251,320 |
|
|
|
|
|
|
| 560,320 |
|
| CHEMICALS - 0.33 % |
|
|
|
|
|
5,000 |
| EI du Pont de Nemours & Co. ^ |
|
|
| 283,100 | |
|
|
|
|
|
|
|
|
|
| COMPUTERS - 0.26 % |
|
|
|
|
|
5,700 |
| Seagate Technology PLC ^ |
|
|
|
| 218,424 |
|
|
|
|
|
|
|
|
|
| ELECTRIC - 0.34 % |
|
|
|
|
|
9,500 |
| PPL Corp. |
|
|
|
| 291,650 |
|
|
|
|
|
|
|
|
|
| ENVIRONMENTAL CONTROL - 0.28 % |
|
|
|
| |
6,000 |
| Waste Management, Inc. ^ |
|
|
| 242,640 | |
|
|
|
|
|
|
|
|
|
| GAS - 0.90 % |
|
|
|
|
|
7,000 |
| AGL Resources, Inc. |
|
|
|
| 307,650 |
15,000 |
| NGL Energy Partners LP |
|
|
|
| 463,200 |
|
|
|
|
|
|
| 770,850 |
|
| OIL & GAS - 0.26 % |
|
|
|
|
|
3,500 |
| Diamond Offshore Drilling, Inc. ^ |
|
|
| 224,105 | |
|
|
|
|
|
|
|
|
|
| PHARMACEUTICALS - 1.02 % |
|
|
|
| |
5,500 |
| Eli Lilly & Co. ^ |
|
|
|
| 282,700 |
5,500 |
| Merck & Co., Inc. |
|
|
|
| 260,095 |
4,500 |
| Novartis AG - ADR ^ |
|
|
|
| 328,410 |
|
|
|
|
|
|
| 871,205 |
|
| PIPELINES - 4.90 % |
|
|
|
|
|
5,000 |
| Buckeye Partners LP ^ |
|
|
|
| 350,000 |
10,000 |
| Crestwood Midstream Partners LP |
|
|
| 259,400 | |
5,500 |
| DCP Midstream Partners LP |
|
|
| 263,615 | |
7,000 |
| El Paso Pipeline Partners LP |
|
|
| 292,110 | |
12,000 |
| Enbridge Energy Partners LP |
|
|
| 357,840 | |
7,000 |
| Energy Transfer Partners LP |
|
|
| 358,890 | |
4,061 |
| Inergy Midstream LP |
|
|
|
| 94,378 |
4,500 |
| Kinder Morgan Energy Partners LP ^ |
|
|
| 367,020 | |
4,500 |
| MarkWest Energy Partners LP ^ |
|
|
| 300,555 | |
15,000 |
| NuStar GP Holdings LLC |
|
|
|
| 355,350 |
7,000 |
| Targa Resources Partners LP ^ |
|
|
| 342,020 | |
6,000 |
| TC Pipelines LP |
|
|
|
| 289,920 |
4,500 |
| TransMontaigne Partners LP |
|
|
| 186,165 | |
7,500 |
| Williams Partners LP ^ |
|
|
|
| 369,975 |
|
|
|
|
|
|
| 4,187,238 |
|
| RETAIL - 0.21 % |
|
|
|
|
|
13,000 |
| Inergy LP |
|
|
|
| 178,620 |
|
|
|
|
|
|
|
|
|
| SEMICONDUCTORS - 0.63 % |
|
|
|
| |
13,000 |
| Intel Corp. |
|
|
|
| 285,740 |
6,500 |
| Microchip Technology, Inc. ^ |
|
|
| 252,265 | |
|
|
|
|
|
|
| 538,005 |
The accompanying notes are an integral part of these financial statements.
Multi-Strategy Growth & Income Fund | |||||||
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued) | |||||||
August 31, 2013 | |||||||
Shares |
| Security |
|
|
|
| Value |
|
|
|
|
|
|
|
|
|
| SOFTWARE - 0.34 % |
|
|
|
|
|
10,000 |
| CA, Inc. ^ |
|
|
|
| $ 292,500 |
|
|
|
|
|
|
|
|
|
| TELECOMMUNICATIONS - 0.32 % |
|
|
|
| |
8,000 |
| AT&T, Inc. ^ |
|
|
|
| 270,640 |
|
|
|
|
|
|
|
|
|
| TOYS/GAMES/HOBBIES - 0.27 % |
|
|
|
| |
5,000 |
| Hasbro, Inc. ^ |
|
|
|
| 227,900 |
|
|
|
|
|
|
|
|
|
| TRANSPORTATION - 1.67 % |
|
|
|
| |
11,000 |
| Global LNG Partners LP |
|
|
|
| 357,500 |
7,500 |
| Martin Midstream Partners LP ^ |
|
|
| 341,175 | |
7,500 |
| Teekay LNG Partners LP |
|
|
|
| 315,600 |
13,000 |
| Teekay Offshore Partners LP ^ |
|
|
| 413,010 | |
|
|
|
|
|
|
| 1,427,285 |
|
|
|
|
|
|
|
|
|
| TOTAL COMMON STOCK |
|
|
|
| 11,121,047 |
|
| (Cost - $10,513,719) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| REAL ESTATE INVESTMENT TRUSTS - 55.87 % |
|
|
|
| |
507,400 |
| American Realty Capital Healthcare Trust # |
|
|
| 3,914,207 | |
165,189 |
| American Realty Capital Trust IV # |
|
|
| 5,058,093 | |
168,649 |
| American Realty Capital Trust V # |
|
|
| 3,900,000 | |
447,027 |
| American Realty Capital New York Recovery # |
|
|
| 4,135,000 | |
219,521 |
| American Realty Capital Properties Trust |
|
|
| 2,943,777 | |
231,892 |
| American Realty Capital Retail Centers of America, Inc. # |
|
| 2,145,000 | ||
200,047 |
| Carey Watermark Investors, Inc. # |
|
|
|
| 1,850,436 |
340,145 |
| Cottonwood Residential, Inc. # |
|
|
|
| 2,010,255 |
232,432 |
| CV Mission Critical REIT # |
|
|
|
| 2,150,000 |
198,378 |
| Hines Global REIT, Inc # |
|
|
|
| 1,886,380 |
10,000 |
| Hospitality Properties Trust |
|
|
| 270,200 | |
764,346 |
| NorthStar Real Estate Income Trust # |
|
|
| 7,223,373 | |
447,027 |
| Phillips Edison Shopping Center REIT # |
|
|
| 4,135,000 | |
10,000 |
| Senior Housing Properties Trust |
|
|
| 227,500 | |
283,357 |
| Steadfast Income REIT # |
|
|
|
| 2,683,388 |
218,219 |
| United Development Funding IV # |
|
|
| 3,201,863 | |
|
| TOTAL REAL ESTATE INVESTMENT TRUSTS |
|
|
| 47,734,472 | |
|
| (Cost - $46,441,178) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| BUSINESS DEVELOPMENT CORPORATIONS - 17.62 % |
|
|
|
| |
692,087 |
| Business Development Corporation of America # |
|
|
| 7,107,730 | |
650,315 |
| Corporate Capital Trust # |
|
|
|
| 6,677,438 |
134,727 |
| Sierra Income Corp. # |
|
|
|
| 1,271,154 |
|
| TOTAL BUSINESS DEVELOPMENT CORPORATIONS |
|
|
| 15,056,322 | |
|
| (Cost - $14,801,150) |
|
|
|
|
|
|
|
|
| Interest Rate (%) |
|
|
|
|
| PREFERRED STOCK - 10.72 % |
|
|
|
| |
|
| BANKS - 2.12 % |
|
|
|
|
|
22,500 |
| Deutsche Bank Contingent Capital Trust V | 8.0500 |
|
| 621,450 | |
25,000 |
| JP Morgan Chase Capital XXIX | 6.7000 |
|
| 650,000 | |
21,265 |
| SVB Capital II |
| 7.0000 |
|
| 541,832 |
|
|
|
|
|
|
| 1,813,282 |
|
| CLOSED-END FUNDS - 0.59 % |
|
|
|
| |
20,000 |
| General American Investors Co., Inc. | 5.9500 |
|
| 508,000 | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Multi-Strategy Growth & Income Fund | |||||||
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued) | |||||||
August 31, 2013 | |||||||
Shares |
| Security |
| Interest Rate (%) |
|
| Value |
|
|
|
|
|
|
|
|
|
| DIVERSIFIED FINANCIAL SERVICES - 1.19 % |
|
|
|
| |
16,000 |
| Morgan Stanley Capital Trust VI | 6.6000 |
|
| $ 396,960 | |
13,500 |
| SLM Corp. |
| 6.9700 |
|
| 616,680 |
|
|
|
|
|
|
| 1,013,640 |
|
| ELECTRIC - 1.67 % |
|
|
|
|
|
5,472 |
| Duquesne Light Co. |
| 6.5000 |
|
| 274,420 |
24,964 |
| NextEra Energy Capital Holdings, Inc. | 8.7500 |
|
| 639,328 | |
20,000 |
| San Diego Gas & Electric Co. | 1.7000 |
|
| 514,000 | |
|
|
|
|
|
|
| 1,427,748 |
|
| INSURANCE - 1.36 % |
|
|
|
|
|
20,000 |
| Aegon NV |
| 7.2500 |
|
| 503,600 |
26,000 |
| Partnerre, Ltd. |
| 7.2500 |
|
| 657,800 |
|
|
|
|
|
|
| 1,161,400 |
|
|
|
|
|
|
|
|
|
| REITS - 3.79 % |
|
|
|
|
|
21,198 |
| BRE Properties, Inc. |
| 6.7500 |
|
| 535,250 |
28,500 |
| CommonWealth REIT |
| 7.2500 |
|
| 655,500 |
20,000 |
| Digital Realty Trust, Inc. |
| 7.0000 |
|
| 474,000 |
25,500 |
| Health Care REIT, Inc. |
| 6.5000 |
|
| 605,625 |
15,818 |
| Realty Income Corp. |
| 6.7500 |
|
| 395,450 |
23,522 |
| Vornado Realty Trust |
| 6.6250 |
|
| 572,290 |
|
|
|
|
|
|
| 3,238,115 |
|
|
|
|
|
|
|
|
|
| TOTAL PREFERRED STOCK |
|
|
| 9,162,185 | |
|
| (Cost - $9,570,324) |
|
|
|
|
|
|
|
|
|
|
|
|
|
| SHORT-TERM INVESTMENTS - 2.34 % |
|
| ||||
|
| MONEY MARKET FUND - 2.34 % |
|
| |||
1,999,203 |
| AIM STIT-Government & Agency Portfolio, 0.02% + |
|
| 1,999,203 | ||
|
| TOTAL SHORT-TERM INVESTMENTS |
|
| |||
|
| ( Cost - $1,999,203) |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| TOTAL INVESTMENTS - 99.57 % |
|
| |||
|
| ( Cost - $83,325,574) (a) |
|
|
| $ 85,073,229 | |
|
| CALL OPTIONS WRITTEN - (0.13) % |
|
|
| (115,061) | |
|
| OTHER ASSETS LESS LIABILITIES - 0.56 % |
| 475,787 | |||
|
| NET ASSETS - 100.00 % |
| $ 85,433,955 | |||
| |||||||
# Fair Value estimated using Fair Valuation Procedures adopted by the Board of Trustees. Total value of such securities is $59,349,317 or 69.47% of net assets. | |||||||
+ Money market fund; interest rate reflects the seven-day effective yield on August 31, 2013. | |||||||
^ Each stock position is subject to written call options. |
| ||||||
ADR - American Depository Receipt |
|
|
| ||||
REIT - Real Estate Investment Trust | |||||||
|
|
|
|
|
|
|
|
(a) Represents cost for financial reporting purposes. Aggregate cost for federal tax purposes including call options written is $83,268,014 and differs from fair value by net unrealized appreciation (depreciation) of securities as follows: | |||||||
|
| Unrealized appreciation: |
|
| $ 4,001,226 | ||
|
| Unrealized depreciation: |
|
| (2,196,010) | ||
|
| Net unrealized appreciation: |
|
| $ 1,805,216 | ||
|
|
|
|
|
|
|
|
Contracts (1) |
| SCHEDULE OF CALL OPTIONS WRITTEN - (0.13) % |
|
|
| Value | |
70 |
| AT&T, Inc. |
|
|
|
| $ 490 |
|
| Expiration January 2014, Exercise Price $40.00 |
|
|
|
| |
50 |
| Buckeye Partners LP |
|
|
|
| 6,500 |
|
| Expiration February 2014, Exercise Price $75.00 |
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Multi-Strategy Growth & Income Fund | |||||||
PORTFOLIO OF INVESTMENTS (Unaudited) (Continued) | |||||||
August 31, 2013 | |||||||
Contracts (1) |
| Security |
|
|
|
| Value |
|
|
|
|
|
|
|
|
|
| SCHEDULE OF CALL OPTIONS WRITTEN - (0.13) % (Continued) |
|
|
|
|
|
100 |
| CA, Inc. |
|
|
|
| $ 4,500 |
|
| Expiration February 2014, Exercise Price $33.00 |
|
|
|
| |
35 |
| Diamond Offshore Drilling, Inc. |
|
|
| 4,935 | |
|
| Expiration December 2013, Exercise Price $68.50 |
|
|
|
| |
50 |
| El du Pont de Nemours & Co. |
|
|
| 6,200 | |
|
| Expiration January 2014, Exercise Price $60.00 |
|
|
|
| |
55 |
| Eli Lilly & Co. |
|
|
|
| 1,540 |
|
| Expiration January 2014, Exercise Price $60.00 |
|
|
|
| |
50 |
| Hasbro, Inc. |
|
|
|
| 8,000 |
|
| Expiration January 2014, Exercise Price $47.50 |
|
|
|
| |
45 |
| Kinder Morgan Energy Partners LP |
|
|
| 1,350 | |
|
| Expiration January 2014, Exercise Price $92.50 |
|
|
|
| |
45 |
| MarkWest Energy Partners LP |
|
|
| 20,250 | |
|
| Expiration January 2014, Exercise Price $65.00 |
|
|
|
| |
75 |
| Martin Midstream Partners LP |
|
|
| 6,375 | |
|
| Expiration January 2014, Exercise Price $50.00 |
|
|
|
| |
65 |
| Microchip Technology, Inc. |
|
|
| 9,100 | |
|
| Expiration January 2014, Exercise Price $40.00 |
|
|
|
| |
45 |
| Novartis AG - ADR |
|
|
|
| 8,550 |
|
| Expiration January 2014, Exercise Price $75.00 |
|
|
|
| |
57 |
| Seagate Technology PLC |
|
|
|
| 14,421 |
|
| Expiration January 2014, Exercise Price $40.00 |
|
|
|
| |
70 |
| Targa Resources Partners LP |
|
|
| 2,800 | |
|
| Expiration December 2013, Exercise Price $55.00 |
|
|
|
| |
130 |
| Teekay Offshore Partners LP |
|
|
| 5,200 | |
|
| Expiration February 2014, Exercise Price $35.00 |
|
|
|
| |
60 |
| Waste Management, Inc. |
|
|
|
| 11,100 |
|
| Expiration January 2014, Exercise Price $40.00 |
|
|
|
| |
75 |
| Williams Partners LP |
|
|
|
| 3,750 |
|
| Expiration January 2014, Exercise Price $55.00 |
|
|
|
| |
|
| TOTAL CALL OPTIONS WRITTEN |
|
|
| 115,061 | |
|
| (Proceeds - $159,311) |
|
|
|
|
|
|
|
|
|
|
|
|
|
(1) Each option contract allows the holder of the option to purchase 100 shares of the underlying stock. | |||||||
| |||||||
Portfolio Composition as of August 31, 2013 (Unaudited) |
| ||||||
| |||||||
|
|
|
| Percent of Net Assets |
|
| |
|
| REITS |
| 59.66% |
|
| |
|
| Business Development Corporations | 17.62% |
|
| ||
|
| Financial |
| 5.92% |
|
| |
|
| Energy |
| 5.16% |
|
| |
|
| Utilities |
| 2.91% |
|
| |
|
| Industrial |
| 1.95% |
|
| |
|
| Consumer, Non-Cyclical |
| 1.33% |
|
| |
|
| Technology |
| 1.23% |
|
| |
|
| Consumer, Cyclical |
| 0.80% |
|
| |
|
| Basic Materials |
| 0.33% |
|
| |
|
| Communications |
| 0.32% |
|
| |
|
| Short-term Investments |
| 2.34% |
|
| |
|
| Call Options Written |
| (0.13)% |
|
| |
|
| Other Assets Less Liabilities |
| 0.56% |
|
| |
|
| Net Assets |
| 100.00% |
|
|
The accompanying notes are an integral part of these financial statements.
Multi-Strategy Growth & Income Fund |
|
|
| ||
STATEMENT OF ASSETS AND LIABILITIES (Unaudited) |
|
|
| ||
August 31, 2013 |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
Assets: |
|
|
| ||
| Investments in Securities at Value (identified cost $83,325,574) |
| $ 85,073,229 | ||
| Dividends and Interest Receivable |
|
| 370,093 | |
| Receivable for Securities Sold |
|
| 194,917 | |
| Receivable for Fund Shares Sold |
|
| 60,119 | |
| Prepaid Expenses and Other Assets |
|
| 99,186 | |
| Total Assets |
|
| 85,797,544 | |
|
|
|
|
|
|
Liabilities: |
|
|
| ||
| Call Options Written, at value (proceeds $159,311) |
|
| 115,061 | |
| Payable for Securities Purchased |
|
| 165,281 | |
| Shareholder Servicing Fees Payable |
|
| 13,407 | |
| Accrued Advisory Fees |
|
| 51,048 | |
| Payable to Other Affiliates |
|
| 8,131 | |
| Other Accrued Expenses |
|
| 10,661 | |
| Total Liabilities |
|
| 363,589 | |
|
|
|
|
|
|
Net Assets (Unlimited shares of no par value benficial interest |
|
|
| ||
| authorized; 5,411,409 shares of beneficial interest outstanding) |
| $ 85,433,955 | ||
|
|
|
|
|
|
Net Asset Value and Redemption Price Per Share |
|
|
| ||
| ($85,433,955/5,411,409 shares of beneficial interest outstanding) |
| $ 15.79 | ||
Maximum Offering Price Per Share |
|
|
| ||
| ($15.79/0.945) |
|
| $ 16.71 | |
|
|
|
|
|
|
Composition of Net Assets: |
|
|
| ||
| At August 31, 2013, Net Assets consisted of: |
|
|
| |
|
| Paid-in-Capital |
|
| $ 83,737,987 |
|
| Accumulated Net Investment Loss |
|
| (359,159) |
|
| Accumulated Net Realized Gain (Loss) on: |
|
|
|
|
| Investments |
|
| 721,516 |
|
| Options Written |
|
| (458,294) |
|
| Net Unrealized Appreciation on: |
|
|
|
|
| Investments |
|
| 1,747,655 |
|
| Options Written |
|
| 44,250 |
Net Assets |
|
| $ 85,433,955 |
The accompanying notes are an integral part of these financial statements.
Multi-Strategy Growth & Income Fund |
|
|
| ||
STATEMENT OF OPERATIONS (Unaudited) |
|
|
| ||
For the Six Months Ended August 31, 2013 |
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
Investment Income: |
|
|
| ||
| Dividend Income (less $635 foreign taxes withholding) |
|
| $ 2,262,301 | |
| Interest Income |
|
| 233 | |
| Total Investment Income |
|
| 2,262,534 | |
|
|
|
|
|
|
Expenses: |
|
|
| ||
| Investment Advisory Fees |
|
| 249,095 | |
| Shareholder Servicing Fees |
|
| 88,046 | |
| Administration Fees |
|
| 36,218 | |
| Transfer Agent Fees |
|
| 21,541 | |
| Registration & Filing Fees |
|
| 16,548 | |
| Chief Compliance Officer Fees |
|
| 16,296 | |
| Fund Accounting Fees |
|
| 16,319 | |
| Trustees' Fees and Expenses |
|
| 19,044 | |
| Audit Fees |
|
| 13,537 | |
| Insurance Expense |
|
| 13,035 | |
| Legal Fees |
|
| 15,034 | |
| Printing Expense |
|
| 12,534 | |
| Custody Fees |
|
| 7,082 | |
| Miscellaneous Expenses |
|
| 1,254 | |
| Total Expenses |
|
| 525,583 | |
| Plus: Expense Reimbursment Recaptured |
|
| 39,605 | |
| Net Expenses |
|
| 565,188 | |
|
|
|
|
|
|
| Net Investment Income |
|
| 1,697,346 | |
|
|
|
|
|
|
Net Realized and Unrealized Gain (Loss) on Investments: |
|
|
| ||
| Net Realized Gain (Loss) on: |
|
|
| |
|
| Investments |
|
| (6,418) |
|
| Options Written |
|
| 1,042 |
| Total Net Realized Loss |
|
| (5,376) | |
| Net Change in Unrealized Appreciation on: |
|
|
| |
|
| Investments |
|
| 138,666 |
|
| Options Written |
|
| 43,979 |
| Total Net Change in Unrealized Appreciation |
|
| 182,645 | |
|
|
|
|
|
|
| Net Realized and Unrealized Gain on Investments |
|
| 177,269 | |
|
|
|
|
|
|
Net Increase in Net Assets Resulting From Operations |
|
| $ 1,874,615 |
The accompanying notes are an integral part of these financial statements.
Multi-Strategy Growth & Income Fund |
|
|
|
| ||
STATEMENT OF CHANGES IN NET ASSETS |
|
|
|
| ||
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| For the Six |
| For the Period |
|
|
|
| Months Ended |
| Ended |
|
|
|
| August 31, 2013 |
| February 28, 2013* |
|
|
|
| (Unaudited) |
|
|
Operations: |
|
|
|
| ||
| Net Investment Income |
| $ 1,697,346 |
| $ 529,968 | |
| Net Realized Gain (Loss) on Investments |
|
|
|
| |
|
| and Options Written |
| (5,376) |
| 527,521 |
| Net Change in Unrealized Appreciation |
|
|
|
| |
|
| on Investments and Options Written |
| 182,645 |
| 1,609,260 |
| Net Increase in Net Assets |
|
|
|
| |
|
| Resulting From Operations |
| 1,874,615 |
| 2,666,749 |
|
|
|
|
|
|
|
Distributions to Shareholders From: |
|
|
|
| ||
| Net Investment Income ($0.49 and $0.36 per share, respectively) |
| (2,106,994) |
| (738,402) | |
| Total Distributions to Shareholders |
| (2,106,994) |
| (738,402) | |
|
|
|
|
|
|
|
From Shares of Beneficial Interest: |
|
|
|
| ||
| Proceeds from Shares Issued (2,357,116 and 2,973,794 shares, respectively) | 37,628,993 |
| 44,860,835 | ||
| Distributions Reinvested (123,728 and 46,346 shares, respectively) | 1,957,228 |
| 705,651 | ||
| Cost of Shares Redeemed (49,860 and 46,382 shares, respectively) | (807,766) |
| (706,954) | ||
| Net Increase in Net Assets From Shares of Beneficial Interest |
| 38,778,455 |
| 44,859,532 | |
|
|
|
|
|
|
|
Total Increase in Net Assets |
| 38,546,076 |
| 46,787,879 | ||
|
|
|
|
|
|
|
Net Assets: |
|
|
|
| ||
| Beginning of Period |
| 46,887,879 |
| 100,000 | |
| End of Period |
| $ 85,433,955 |
| $ 46,887,879 | |
|
|
|
|
|
|
|
| Accumulated Net Investment Income (Loss) at End of Period |
| $ (359,159) |
| $ 50,489 | |
_______ |
|
|
|
| ||
*The Fund commenced operations on March 16, 2012. |
|
|
|
|
The accompanying notes are an integral part of these financial statements.
Multi-Strategy Growth & Income Fund |
|
| |
STATEMENT OF CASH FLOWS (Unaudited) |
|
| |
For the Six Months Ended August 31, 2013 |
|
| |
|
|
|
|
Cash flows from operating activities: |
|
| |
| Net increase in net assets resulting from operations |
| $ 1,874,615 |
| Adjustments to reconcile net increase in net assets resulting from operations |
|
|
| to net cash used in operating activities: |
|
|
| Purchases of investments and options written |
| (71,122,405) |
| Proceeds from sales |
| 34,566,900 |
| Net realized gain from investments and options written |
| (263,222) |
| Net unrealized (appreciation)/depreciation from investments and options written |
| (1,791,905) |
|
|
|
|
|
|
|
|
| Changes in assets and liabilities |
|
|
| (Increase)/Decrease in assets: |
|
|
| Due From Investment Adviser |
| 21,571 |
| Dividends Receivable |
| (142,343) |
| Receivable Securities Sold |
| (194,917) |
| Subscriptions Receivable |
| 469,671 |
| Deferred Cost |
| 4,159 |
| Prepaid Expenses and Other Assets |
| (53,791) |
| Increase/(Decrease) in liabilities: |
|
|
| Payable to Affiliates |
| (11,112) |
| Payable for Securities Purchased |
| (62,584) |
| Accrued Advisory Fee |
| 51,048 |
| Accrued Shareholder Servicing Fee |
| 4,943 |
| Accrued Expenses and Other Liabilities |
| (22,089) |
Net cash used in operating activities |
| (36,671,461) | |
|
|
|
|
Cash flows from financing activities: |
|
| |
| Proceeds from shares sold |
| 37,628,993 |
| Payment on shares redeemed |
| (807,766) |
| Cash distributions paid |
| (149,766) |
| Net cash provided by financing activities |
| 36,671,461 |
|
|
|
|
| Net decrease in cash |
| - |
| Cash at beginning of period |
| - |
| Cash at end of period |
| - |
|
|
|
|
|
|
|
|
| Supplemental disclosure of non-cash activity: |
|
|
| Noncash financing activities not including herein consists of reinvestment of dividends | $ 807,766 |
The accompanying notes are an integral part of these financial statements.
Multi-Strategy Growth & Income Fund |
|
|
|
|
|
| |
FINANCIAL HIGHLIGHTS |
|
|
|
|
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The table below sets forth financial data for one share of beneficial interest outstanding throughout each period presented. | |||||||
|
|
|
|
|
|
|
|
|
|
|
| For the Six |
| Since Inception* |
|
|
|
|
| Months Ended |
| Through |
|
|
|
|
| August 31, 2013 |
| February 28, 2013 |
|
|
|
|
| (Unaudited) |
|
|
|
Net Asset Value, Beginning of Period |
|
| $ 15.73 |
| $ 15.00 |
| |
| Increase From Operations: |
|
|
|
|
|
|
| Net investment income (a) |
|
| 0.41 |
| 0.32 |
|
| Net gain from investments |
|
|
|
|
|
|
| (both realized and unrealized) |
|
| 0.14 |
| 0.77 |
|
| Total from operations |
|
| 0.55 |
| 1.09 |
|
|
|
|
|
|
|
|
|
| Less Distributions: |
|
|
|
|
|
|
| From net investment income |
|
| (0.49) |
| (0.36) |
|
| Total Distributions |
|
| (0.49) |
| (0.36) |
|
|
|
|
|
|
|
|
|
Net Asset Value, End of Period |
|
| $ 15.79 |
| $ 15.73 |
| |
|
|
|
|
|
|
|
|
Total Return (b) |
|
| 3.51% |
| 7.34% |
| |
|
|
|
|
|
|
|
|
Ratios/Supplemental Data |
|
|
|
|
|
| |
| Net assets, end of period (in 000's) |
|
| $ 85,434 |
| $ 46,888 |
|
| Ratio to average net assets: |
|
|
|
|
|
|
| Expenses, Gross (c) |
|
| 1.59% |
| 2.61% |
|
| Expenses, Net of Reimbursement (c) |
|
| 1.75% | (e) | 1.75% |
|
| Net investment income, Net of Reimbursement (c) |
| 5.12% |
| 2.19% |
| |
| Portfolio turnover rate (d) |
|
| 12% |
| 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. |
|
|
|
|
|
| |
(e) Such ratio includes Adviser's recapture of waived/reimbursed fees from prior periods. |
|
The accompanying notes are an integral part of these financial statements.
Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited)
August 31, 2013
1.
ORGANIZATION
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 Fund’s 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 Fund’s Net Asset Value (“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
Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
August 31, 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 August 31, 2013. Non-traded Real Estate Investment Trusts (“REITs”) that are in the public offering period (or start-up phase) are valued at cost according to management’s fair valuation methodology unless the REIT issues an updated valuation. The Fund generally purchases REITs at 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 Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The following tables summarize the inputs used as of August 31, 2013 for the Fund’s assets and liabilities measured at fair value:
Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
August 31, 2013
Assets* | Level 1 | Level 2 | Level 3 | Total |
Investments: |
|
|
|
|
Common Stock | $ 11,121,047 | $ - | $ - | $ 11,121,047 |
Real Estate Investment Trusts | 3,441,477 | 19,397,536 | 24,895,459 | 47,734,472 |
Business Development Corporations | - | 15,056,322 | - | 15,056,322 |
Preferred Stock | 9,162,186 |
| - | 9,162,186 |
Short-Term Investments | 1,999,203 | - | - | 1,999,203 |
Total Investments: | $ 25,723,913 | $ 34,453,858 | $ 24,895,459 | $ 85,073,230 |
Liabilities |
|
|
|
|
Call Options Written | $ 115,061 | $ - | $ - | $ 115,061 |
|
|
|
|
|
|
|
|
|
|
*Refer to the Portfolio of Investments for industry classifications.
There were no transfers into or out of Level 1 and Level 2 during the current period presented.
It is the Fund’s 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 | $ 22,313,329 |
Total realized gain (loss) | - |
Appreciation (Depreciation) | 376,250 |
Cost of Purchases | 13,120,000 |
Proceeds from Sales and returns of capital | (353,420) |
Accrued Interest | - |
Net transfers in/out of level 3 | (10,560,700) |
Ending Balance | $ 24,895,459 |
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 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
Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
August 31, 2013
costs. Written and purchased options are non-income producing securities. With purchased options, there is minimal counterparty risk to the Fund since these options are exchange traded and the exchange’s clearinghouse, as counterparty to all exchange traded options, guarantees against a possible default.
As of August 31, 2013, the amount of unrealized appreciation and realized gain on option contracts subject to equity price risk amounted to $43,979 and $1,042, respectively. Such figures can be found on the Statement of Operations. The table presented under Note 4 provides an indication of the volume of derivative activity during the six months ended August 31, 2013.
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 Fund’s 2013 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 were declared and paid quarterly through June 2013. Effective July 2013, distributions from investment income were declared and paid monthly. 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 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 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 six months ended August 31, 2013, the Advisor earned advisory fees of $249,095.
The Advisor has contractually agreed to waive all or part of its advisory fees and/or make reimbursement payments to limit Fund expenses (exclusive of any front-end or contingent deferred loads, taxes, leverage interest, borrowing interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, dividend expense on securities sold short, acquired underlying 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 not exceed 1.75% of the Fund’s average daily net assets. During the six months ended August 31, 2013, the Advisor did not waive or reimburse any fees.
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. For the six months ended August 31, 2013, the Advisor recouped $39,605 from the Fund in prior
Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
August 31, 2013
period fee waivers/expense reimbursements. As of August 31, 2013, the cumulative expenses subject to recapture amounted to $186,615 and will expire on February 28, 2016.
Sub-advisory services were provided to the Fund pursuant to agreements between the Advisor and First Allied Asset Management, Inc. (the “Sub-Advisor”). Under the terms of the sub-advisory agreements, the Advisor compensated the Sub-Advisor based on a portion of the Fund’s average daily net assets which the Sub-Advisor 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 six months ended August 31, 2013, the Fund incurred distribution fees of $88,046.
The Distributor acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s shares. The Distributor is an affiliate of GFS. For the six months ended August 31, 2013, the Distributor received $3,201,075 in underwriting commissions for sales of the Fund’s shares, of which $265,579 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 six months ended August 31, 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 commissions of $295,600. Additionally, during the six months ended August 31, 2013, First Allied Securities, Inc., a registered broker/dealer and an affiliate of the Sub-Advisor, executed trades on behalf of the Fund for which it received $20,888 in trade commissions.
4.
INVESTMENT TRANSACTIONS
The cost of purchases and proceeds from the sale of securities, other than short-term securities, for the six months ended August 31, 2013, amounted to $47,278,944 and $7,735,112, respectively.
Transactions in option contracts written during the six months ended August 31, 2013 were as follows:
Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
August 31, 2013
| Contracts | Premium |
Outstanding at Beginning of Period | 20 | $ 7,071 |
Options Written | 1,097 | 163,086 |
Options Closed | (20) | (7,071) |
Options Exercised | (20) | (3,775) |
Options Expired | - | - |
Outstanding at End of Period | 1,077 | $ 159,311 |
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.
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 Fund’s financial statements.
Multi-Strategy Growth & Income Fund
NOTES TO FINANCIAL STATEMENTS (Unaudited) (Continued)
August 31, 2013
7.
SUBSEQUENT EVENTS
Subsequent events after the date of the Statement of Assets and Liabilities have been evaluated through the date the financial statements were issued. Management has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
PRIVACY NOTICE Rev: April 2013 | |||||||||
FACTS | WHAT DOES 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 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? | 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 doesn’t jointly market. |
Multi-Strategy Growth & Income Fund
DISCLOSURE OF FUND EXPENSES (Unaudited)
August 31, 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 Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs which may be applicable to your account. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
| Beginning Account Value (3/1/13) | Ending Account Value (8/31/13) | Expenses Paid During the Period* (3/1/13 to 8/31/13) |
Actual | $1,000.00 | $1,035.10 | $8.93 |
Hypothetical (5% return before expenses) | $1,000.00 |
$1,016.29 | $8.85 |
* Expenses Paid During Period are equal to the Fund’s annualized expense ratio of 1.75%, multiplied by the number of days in the period from March 1, 2013 through August 31, 2013 (183) divided by the number of days in the fiscal year (365).
Investment Advisor
RJL Capital Management
13520 Evening Creek Drive N. Suite 300
San Diego, CA 92128
Distributor
Northern Lights Distributors, LLC
17605 Wright Street
Omaha, NE 68130
Legal Counsel
Thompson Hine LLP
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 Commission’s (“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 SEC’s website at http://www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (1-800-SEC-0330). The information on Form N-Q is available without charge, upon request, by calling 1-855-601-3841.
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.
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.
Item 8. Portfolio Managers of Closed-End Management Investment Companies. Not applicable.
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 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. 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.
(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
11/07/13
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
11/07/13
By (Signature and Title)
/s/Stephanie Pimentel
Stephanie Pimentel, Treasurer
Date
11/07/13