0001518042
2013-01-18
2013-01-18
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2013-01-18
2013-01-18
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2013-01-18
2013-01-18
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2013-01-18
2013-01-18
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Other
2012-10-30
NORTHERN LIGHTS FUND TRUST II
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2013-01-18
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<p style="margin: 0px; font-size: 14pt"><b>Witherspoon Managed Futures Strategy Fund</b></p>
<p style="margin: 0px"><b>Investment Objective:</b></p>
<p style="margin: 0px">The investment objective of the Witherspoon Managed Futures Strategy Fund (the “Fund”) is to generate positive long-term absolute returns.</p>
<p style="margin: 0px"><b>Fees and Expenses of the Fund.</b></p>
<p style="margin: 0pt">This table describes the fees and expenses that you may pay if you buy and hold shares of the Fund. You may qualify for sales charge discounts on Class A shares if you invest, or agree to invest in the future, at least $25,000 in the Fund. More information about these and other discounts is available from your financial professional and under “Shareholder Information – More About Class A Shares” beginning on page 16 of this Prospectus.</p>
<p style="margin: 0px"><b>Shareholder Fees</b> (fees paid directly from your investment)</p>
<p style="margin: 0px; font-size: 9pt"><b>Annual Fund Operating Expenses</b> (expenses that you pay each year as a percentage of the value of your investment)</p>
<p style="margin: 0px"><b>Example.</b></p>
<p style="margin: 0px"><b>Portfolio Turnover.</b></p>
<p style="margin: 0px">The Fund pays transaction costs, such as commissions, when it buys and sells securities (or “turns over” its portfolio). A higher portfolio turnover rate may indicate higher transaction costs and may result in higher taxes when Fund shares are held in a taxable account. These costs, which are not reflected in Total Annual Fund Operating Expenses or in the Example, affect the Fund’s performance.</p>
<p style="margin: 0px"><b>Principal Investment Strategies.</b></p>
<p style="margin: 0">The Fund seeks to achieve risk-adjusted returns in a variety of market environments, while also providing significant diversification and non-correlation benefits relative to both traditional investments and other fund strategies using two principal classes of investment strategies.</p>
<p style="margin: 0"> </p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <b>Managed Futures Strategy.</b>  The Managed Futures strategy is designed to capture returns related to trends in the commodity and financial futures markets by investing primarilyin securities of limited partnerships, corporations, limited liability companies (including individual share classes therein) and other types of pooled investment vehicles (collectively, “Underlying Pools”), as well as swap contracts and structured notes. Each Underlying Pool invests according to a managed futures sub strategy in one or a combination of (i) options, (ii) futures, (iii) forwards or (iv) spot contracts, each of which may be tied to (i) commodities, (ii) financial indices and instruments, (iii) foreign currencies, or (iv) equity indices. Swap contracts and structured notes have payments linked to commodity or financial derivatives that are designed to produce returns similar to those of Underlying Pools and their respective sub-strategies. Managed futures sub-strategies may include investment styles such as (i) long term trend-following, (ii) discretionary macro investing based on economic fundamentals and value, (iii) short-term systematic trading, (iv) specialized approaches to specific or individual market sectors such as financials, equities, currencies, metals, agricultural and soft commodities and (v) counter-trend or mean reversion strategies. Managed Futures strategy investments will be made without restriction as to issuer capitalization, country, or currency.  The Fund may access a Managed Futures strategy by purchasing an Underlying Pool and other investments directly. However, in order to provide the Fund with exposure to certain Managed Futures strategies that trade non-financial commodity futures contracts within the limitations of the federal tax requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), the Fund may invest up to 25% of its total assets in an Underlying Pool or Pools and other investments through a wholly-owned and controlled subsidiary (the “Subsidiary”). The Subsidiary will invest the majority of itsassets in an Underlying Pool or Pools, swap contracts and structured notes and other investments intended to serve as margin or collateral for swap positions. However, the Fund may also make Managed Futures investments outside of the Subsidiary. The Subsidiary is subject to the same investment restrictions as the Fund, when viewed on a consolidated basis with the Fund.</p>
<p style="text-indent: 24px; margin: 0"> </p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <b>Fixed Income Strategy. </b>The fixed income strategy class uses a combination of security selection strategies that emphasizes capital preservation and liquidity.  The Adviser buys short-term securities (<i>i.e.</i>, with maturities of three years or less) that it believes offer sufficient credit quality, income and liquidity and sells them when it believes they have reached their target price or more attractive investments are available.  The Adviser also buys and sells short-term fixed income securities to maintain allocations between the fixed income and the managed futures portions of the Fund’s portfolio. The Adviser may either invest in these short-term securities directly or through ETFs and mutual funds, including money market mutual funds, that invest in such instruments.</p>
<p style="text-indent: 0px; margin: 0"> </p>
<p style="margin: 0">The Fund will execute its Managed Futures strategy by investing up to 25% of its total assets (measured at the time of purchase) in a wholly-owned and controlled subsidiary(the “Subsidiary”).  The Subsidiary will invest the majority of its assets in an Underlying Pool or Pools, swap contracts and structured notes, and other investments intended to serve as margin or collateral for swap positions.  The Subsidiary is subject to the same investment restrictions as the Fund, except that the Subsidiary may invest in commodity interests without limitation.  The Adviser anticipates that the Fund will allocate approximately 25% of its assets to the Managed Futures strategy and approximately 75% of its assets to the Fixed Income strategy.  However, as market conditions change the portion allocated may change.  </p>
<p style="text-indent: 0px; margin: 0"> </p>
<p style="margin: 0">The Fund is “non-diversified”for purposes of the Investment Company Act of 1940, as amended (the “1940 Act”), which means that the Fund may invest in fewer securities at any one time than a diversified fund.</p>
<p style="margin: 0px;"><b>Principal Risks.</b></p>
<p style="margin: 0px">Remember that in addition to possibly not achieving your investment goals, you could lose money by investing in the Fund.  The principal risks of investing in the Fund are:</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Commodities Risk:</i> Investing in the commodities markets (directly or indirectly) may subject the Fund to greater volatility than investments in traditional securities.  Commodity prices may be influenced by unfavorable weather, animal and plant disease, geologic and environmental factors as well as changes in government regulation such as tariffs, embargoes or burdensome production rules and restrictions.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Credit Risk: </i>There is a risk that issuers and counterparties will not make payments on securities and other investments held by the Fund, resulting in losses to the Fund. In addition, the credit quality of securities held by the Fund may be lowered if an issuer’s financial condition changes.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Derivatives Risk: </i>The Fund’s indirect use of derivative instruments involves risks different from, or possibly greater than, the risks associated with investing directly in securities including leverage risk, counterparty default risk and tracking risk.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Fixed Income Securities Risks: </i>Fixed income securities are subject to the risk that securities could lose value because of interest rate changes.  Fixed income securities with longer maturities are subject to greater price shifts as a result of interest rate changes than fixed income securities with shorter maturities.  Fixed income securities are also subject to prepayment and credit risks.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Structured Notes Risk: </i>Structured notes involve leverage risk, tracking risk and issuer default risk.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Swap Agreement Risk.</i> The risk that a swap contract may not be assigned without the consent of the counter-party, and may result in losses in the event of a default or bankruptcy of the counter-party.<br /></p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Issuer-Specific Risk: </i>The value of a specific security can be more volatile than the market as a whole and can perform differently from the value of the market as a whole.  The value of securities of smaller issuers can be more volatile than those of larger issuers.  The value of certain types of securities can be more volatile due to increased sensitivity to adverse issuer, political, regulatory, market, or economic developments.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Leverage Risk: </i>Using derivatives to increase the Underlying Pools’ combined long and short exposure creates leverage, which can magnify the Underlying Pools’ potential for gain or loss and, therefore, amplify the effects of market volatility on the Underlying Pools’ (and, indirectly, the Fund’s) share price.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Limited History of Operations: </i>The Fund is a new mutual fund and has a limited history of operation.  In addition, the Adviser has not previously managed a mutual fund.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Liquidity Risk</i>: Liquidity risk exists when particular investments of the Fund would be difficult to purchase or sell, possibly preventing the Fund from selling such illiquid securities at an advantageous time or price, or possibly requiring the Fund to dispose of other investments at unfavorable times or prices in order to satisfy its obligations.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Management Risk:</i> The risk that investment strategies employed by the Adviser in selecting investments and asset allocations for the Fund may notresult in an increase in the value of your investment or in overall performance equal to other similar investment vehicles having similar investment strategies.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Market Risk: </i>Overall securities and derivatives market risks may affect the value of individual instruments in which the Fund invests.  Factors such as domestic and foreign economic growth and market conditions, interest rate levels, and political events affect the securities and derivatives markets.  When the value of the Fund’s investments goes down, your investment in the Fund decreases in value and you could lose money.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Short Position Risk: </i>The Fund will incur a loss as a result of a short position if the price of the short position instrument increases in value between the date of the short position sale and the date on which an offsetting position is purchased.  Short positions may be considered speculative transactions and involve special risks, including greater reliance on the Adviser’s or an underlying portfolio manager’s ability to accurately anticipate the future value of a security or instrument.  The Fund’s losses are potentially unlimited in a short position transaction.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Strategy Risk:</i> The risk that investment strategies employed by the Adviser in selecting investments and asset allocations for the Fund may not result in an increase in the value of your investment or in overall performance equal to other investments.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Non-Diversification Risk:</i> As a non-diversified fund, the Fund may invest more than 5% of its total assets in the securities of one or more issuers. The Fund may also invest in Underlying Pools that are non-diversified. Because a relatively high percentage of the assets of the Fund may be invested in the securities of a limited number of issuers, the value of shares of the Fund may be more sensitive to any single economic, business, political or regulatory occurrence than the value of shares of a diversified investment company. This fluctuation, if significant, may affect the performance of the Fund.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Regulatory Change Risk:</i> The Fund has filed with the National Futures Association a notice claiming an exclusion from the definition of the term “commodity pool operator” or “CPO” under Section 4.5 of regulations of the Commodity Exchange Act, as amended, with respect to the Fund’s operation. However, as of December, 31, 2012, the Adviser no longer qualifies for the exclusion from the definition of CPO and is required to register with the CFTC. Accordingly, the Adviser has filed its application for registration as a CPO, and its registration, as of the date of this prospectus, was pending with the CFTC. In February of 2012, the CFTC issued proposed revisions to its requirements for investment advisers to mutual funds who will be subject to dual regulation by the U.S. Securities and Exchange Commission (“SEC”) and the CFTC. However, these proposals have not been finalized. Once they have been finalized, the Adviser will be required to comply with such provisions with respect to the Fund. Such compliance will likely increase the costs associated with an investment in the Fund. Ongoing changes to SEC and CFTC regulation could potentially limit or restrict the ability of the Fund to pursue its investment strategy, and/or increase the costs of implementing its strategy.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Tax Risk:</i> Certain of the Fund’s investment strategies, including transactions in options, futures contracts, swap contract and hedging transactions may be subject to the special tax rules, the effect of which may have adverse tax consequences for the Fund.  Also, by investing in commodities indirectly through the Subsidiary, the Fund will obtain exposure to the commodities markets within the U.S. federal tax requirements that apply to the Fund.  However, because the Subsidiary is a controlled foreign corporation, any income received from its investments will be passed through to the Fund as ordinary income, which may be taxed at less favorable rates than capital gains.  Additionally, the Internal Revenue Service (“IRS”) has issued a number of private letter rulings to other mutual funds (unrelated to the Fund), which indicate that certain income from a fund’s investment in a wholly-owned foreign subsidiary will constitute “qualifying income” for purposes of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”).  However, the IRS has suspended issuance of any further letters pending a review of its position.  If the IRS were to change its position with respect to the conclusions reached in its private letter rulings (which change in position might be applied to the Fund retroactively), the income from the Fund’s investment in the Subsidiary might not be qualifying income, and the Fund might not qualify as a regulated investment company for one or more years.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Underlying Pools Risk: </i>Underlying Pools are subject to investment advisory and other expenses, which will be indirectly paid by the Fund.  As a result, the cost of investing in the Fund will be higher than the cost of investing directly in an Underlying Pool and may be higher than other mutual funds that invest directly in stocks and bonds.  The Underlying Pools will pay management fees, brokerage commissions, and operating expenses as well as performance based fees to each Underlying Pool manager.  Those performance based fees will be paid by the Underlying Pool to each manager without regard to the performance of other managers and the Underlying Pool’s overall profitability.  Underlying Pools are subject to specific risks, depending on the nature of the fund.  There is no guarantee that any of the trading strategies used by the managers retained by an Underlying Pool will be profitable or avoid losses.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Wholly-Owned Subsidiary Risk: </i>The Subsidiary will not be registered under the 1940 Act and, unless otherwise noted in this Prospectus, will not be subject to all of the investor protections of the 1940 Act.  Additionally, the CFTC regulations provide relief relating to CFTC disclosure and reporting requirements for commodity pools, such as the Subsidiary, that are operated by a CPO that is the same as, controls, is controlled by or is under common control with the CPO of an offered pool (such as the Fund).  Changes in the laws or regulations of the United States and/or the Cayman Islands, under which the Fund and the Subsidiary, respectively, are organized, could result in the inability of the Fund and/or Subsidiary to operate as described in this Prospectus and could negatively affect the Fund and its shareholders.  Your cost of investing in the Fund will be higher because you indirectly bear the expenses of the Subsidiary.</p>
<p style="text-indent: 24px; margin: 0"><b>·</b> <i>Interest Rate Risk:</i> Certain tax requirements dictate that only 25% of the Fund’s assets can be invested in the Subsidiary in order to gain exposure to commodities. As a result, a significant portion of the Fund’s assets will be invested in short-term interest rate instruments or securities to increase returns. If interest rates increase, the Fund may earn interest at rates below prevailing market rates.</p>
<p style="margin: 0px"><b>Performance</b>.</p>
<p style="margin: 0px">Because the Fund has less than a full calendar year of investment operations, no performance information is presented for the Fund at this time. In the future, performance information will be presented in this section of this Prospectus. Also, shareholder reports containing financial and performance information will be mailed to shareholders semi-annually. Updated performance information will be available at no cost by calling the Fund toll-free at 1-855-754-7934.</p>
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<p style="margin: 0px">Remember that in addition to possibly not achieving your investment goals, you could lose money by investing in the Fund.<p>
<p style="margin: 0px">As a non-diversified fund, the Fund may invest more than 5% of its total assets in the securities of one or more issuers. The Fund may also invest in Underlying Pools that are non-diversified. Because a relatively high percentage of the assets of the Fund may be invested in the securities of a limited number of issuers, the value of shares of the Fund may be more sensitive to any single economic, business, political or regulatory occurrence than the value of shares of a diversified investment company. This fluctuation, if significant, may affect the performance of the Fund.</p>
Other Expenses do not include the costs of investing in Underlying Pools, like commodity pools. The Fund estimates that Underlying Pool expenses, if presented, would be 0.83%, which would be in addition to the Funds Total Annual Fund Operating Expenses. This would result in total annual operating expenses of 3.20% and 2.95% for Class A and Class I shares, respectively. Underlying Pools pay performance fees estimated to range from 20% to 30% of an Underlying Pools profits. Because performance-based fees cannot be meaningfully estimated, they are not included. The expenses of the Funds wholly- owned Subsidiary are consolidated with those of the Fund and are not presented as a separate expense.
<p style="margin: 0px">Because the Fund has less than a full calendar year of investment operations, no performance information is presented for the Fund at this time.</p>
1-855-754-7934
25000
<p style="margin: 0pt"> You may qualify for sales charge discounts on Class A shares if you invest, or agree to invest in the future, at least $25,000 in the Fund.</p>
These expenses are based on estimated amounts for the Funds current fiscal year.
<p style="margin: 0px"> The Example assumes that you invest $10,000 in the Fund for the time periods indicated and then redeem all of your shares at the end of those periods. The Example also assumes that your investment has a 5% return each year and that the Fund’s operating expenses remain the same. Although your actual costs may be higher or lower, based on these assumptions, your costs would be:</p>
<p style="margin: 0px">This Example is intended to help you compare the cost of investing in the Fund with the cost of investing in other mutual funds.</p>
These expenses are based on estimated amounts for the Funds current fiscal year. Other Expenses do not include the costs of investing in Underlying Pools, like commodity pools. The Fund estimates that Underlying Pool expenses, if presented, would be 0.83%, which would be in addition to the Funds Total Annual Fund Operating Expenses. This would result in total annual operating expenses of 3.20% and 2.95% for Class A and Class I shares, respectively. Underlying Pools pay performance fees estimated to range from 20% to 30% of an Underlying Pools profits. Because performance-based fees cannot be meaningfully estimated, they are not included. The expenses of the Funds wholly- owned Subsidiary are consolidated with those of the Fund and are not presented as a separate expense.
Pursuant to an operating expense limitation agreement between Witherspoon Asset Management LLC, (the Adviser) and the Fund, the Adviser has agreed to waive its fees and/or absorb expenses of the Fund to ensure that Total Annual Fund Operating Expenses (exclusive of any taxes, interest, brokerage commissions, expenses incurred in connection with any merger or reorganization, indirect expenses, expenses of other investment companies or underlying pools in which the Fund may invest, or extraordinary expenses such as litigation) for the Fund do not exceed 1.99% and 1.74% of the Funds average net assets, for Class A and Class I shares respectively, through March 31, 2014, subject thereafter to annual re-approval of the agreement by the Trusts Board of Trustees (the Board of Trustees). This operating expense limitation agreement can be terminated only by, or with the consent of, the Board of Trustees. The Adviser is permitted to seek reimbursement from the Fund, subject to limitations, for fees it waived and Fund expenses it paid. The Adviser is permitted to seek reimbursement from the Fund for the prior three fiscal years, as long as the reimbursement does not cause the Funds operating expenses to exceed the expense cap.