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Iron Horse Covered Call Fund
(IRHAX/IRHIX)
A Low Volatility Approach to US Equities
April 2015
Past performance is not indicative of future results
VAN608-4284
HULZEN
ASSET MANAGEMENT
4370 Town Center Blvd, Suite. 220 | El Dorado Hills, CA 95762 | Tel (916)
| www.ironhorsefund.com
Iron Horse Fund Advisor
Van Hulzen Asset Management
2
EXPERIENCED
Thirteen years of direct covered call experience, including managing
through two bull markets and two bear markets
INDEPENDENT
SEC-registered investment advisor based in El Dorado Hills, California;
Majority employee owned firm; $580M in AUM as of 3/31/15
RESULTS ORIENTED
13-year covered call SMA track record ; Strong growth in institutional assets
RISK MANAGED
Fundamentally based portfolio construction integrating covered calls and high
dividend paying equities to provide downside risk management
DIVERSIFIED
Covered call management offered through separate accounts and a
1940 Act fund, the Iron Horse Fund (ticker IRHAX/IRHIX)
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund
Investment Team
The team combines institutional and covered call experience, with a strong focus on fundamentals.
Options &
Risk
Management
Craig Van Hulzen, Founder & President
Mr. Van Hulzen started the business in 1998. He serves on the Board of
Directors and oversees the equity and covered call investment process.
Mr. Van Hulzen is a former risk management consultant and expert
witness for numerous state pensions plans.
Mr. Van Hulzen holds a B.A. in Business Finance from Point Loma
Nazarene University, where he is a member of the Board of Trustees and
the President of the University´s Foundation Board.
Fundamental
Equity
Analysis
John R. Pearce, Managing Director
Mr. Pearce joined the Firm in February 2008. He co-manages the Firm’s
equity and covered call strategies and serves on the Board. Prior to
joining Van Hulzen, Mr. Pearce was a Director in the Investment Banking
division of Credit Suisse Securities. Prior to Credit Suisse, he was an
equity analyst at HOLT.
Mr. Pearce holds a B.A. in Economics from the University of Virginia and
a M.S. in Accounting from the College of Charleston.
Fundamental
Equity
Analysis
Covered
Calls
Institutional
Risk
Management
Fundamental
Analysis /
Construction
Stefan ten Brink, Managing Director
3
Mr. ten Brink joined the Firm in January 2011 from Petercam Asset
Management in Amsterdam. He has 18 years of investment advisory
experience, having co-managed the Ahold Pension Fund prior to joining
Petercam. He has 10+ years experience with the HOLT framework.
Mr. ten Brink holds a degree in Logistics & Economics from Arnhem
Business School and an MBA from Nijmegen University. Stefan is a
Certified European Financial Analyst (CEFA).
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund
Research: The Case For Covered Calls
The CBOE website references three different studies that have been performed over the past 10 years on the
risk-return dynamics of covered calls. All three firms concluded that a passive buy-write strategy has a
superior risk-return profile than long-only equities.
•
Each study covers different periods of time, ranging from 16 to 26 years
•
All three studies found that the covered call index (BXM) earned roughly the same annualized return as the
S&P 500 over the long term, but at lower risk (30-33% lower average standard deviation)
•
Studies are available on the CBOE website (www.cboe.com)
Asset Consulting Group
Callan Associates
Ibbotson Associates
Published January 2012
Published October 2006
Published September 2004
Of course, there is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. Past performance is no
assurance of future results.
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VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund
Benchmarking
S&P 500
5
BXM
Description
• 500 stocks, market-value weighted
• Chosen for market size, liquidity, financial
viability and industry group representation
Description
• Passive buy-write index
• Owns the S&P 500 index
• Sells near-term index options
Benchmark relevance
• The most widely used proxy for US large cap
stocks
Benchmark relevance
• More comparable risk, providing for a more
apples-to-apples comparison
Criteria for addition to index
• US companies
• Market cap > $4 billion
• Public float > 50%
• 4 consecutive quarters of positive earnings
• Adequate liquidity
• Sector representation
Specific criteria
• Own S&P 500 stocks
• Options one month out
• Strike price slightly OTM
• Cash settlement at expiration
• Performance data back to 1986
• Does not incorporate trading costs
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund
Different By Design
Common Covered Call Approach
•
•
Generally option trading strategies
are designed to derive alpha from
implied volatility, or skewness, delta
hedging or other derivative-specific
goals.
Generally a higher beta portfolio
with a high turnover rate and lower
quality holdings. Option income
drives portfolio decisions, which in
turn can lead to poor credit quality.
The Fund offers a high income,
hedged equity solution.
It is not an option trading strategy
Iron Horse Fund Covered Call Approach
•
The first priority is building a portfolio
of high quality companies with
sustainable business models and above
average dividends
•
The portfolio is built through
fundamental equity research. The
options applied are tailor-designed for
each individual underlying equity
position and are dynamically managed
•
The options add incremental income
and downside protection, through
strike price and option duration
selection
•
The objective is consistent returns, not
home runs, with roughly equal parts
income & growth
Note: There is no assurance that the Strategy will achieve its investment objectives. Writing call options can result in an option exercise and may
cause shares to be “called away” and sold. The use of covered call strategies does not ensure profits or guarantee against losses.
6
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund
The Covered Call Spectrum
Replication
Semi-replication
Seeks alpha through
active option
management
Index:
Seeks no alpha
Actively managed
Seeks alpha through higher
beta stock positions and
active option management
Seeks alpha from equity
research and active option
management
Low Relative Risk
Seeks alpha through
position leverage
Seeks alpha through
higher beta and option
implied volatility capture
High Relative Risk
(deviation from benchmark)
Iron Horse Fund
Note: There is no assurance that the Strategy will achieve its investment objectives. The use of covered call strategies does not ensure
profits or guarantee against losses.
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VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund Process
Fundamental Security Selection
Intellectual Capital Basis
The Iron Horse Fund process is built upon
two primary sources of intellectual capital:
U.S. Equity Universe
Fundamental Screens
Catalyst Driven
HOLTTM
Team
Fundamental Analysis (HOLT )
TM
HOLT’s objective, fundamental valuation
framework attempts to distill away accounting
distortions and identify companies that the
managers believe will create wealth over time
Risk Analysis (proprietary risk models)
The Fund uses fundamental and technical
models to establish key support levels and
“stress test” the watch list. The Funds unique
portfolio construction process ensures that the
largest holdings are those with the best
risk/reward ratios
HOLT is a trademark of Credit Suisse Securities
Fundamental Stock
Selection
Risk Analysis
(Stress Testing)
Fundamental
Portfolio
Buy-Write Position
Construction
Note: There is no assurance that the Strategy will achieve its investment objectives. The use of covered call strategies does not ensure
profits or guarantee against losses.
8
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund Process
Quality & Consistency Are Two Primary Criteria – Don’t Chase Premium
United Technologies
Return on capital
Profitability
Cost of capital
Alcoa
Performance
Growth
Asset growth
Total Return, relative to S&P 500
Attractive Profile
Unattractive Profile
Source: HOLT database. HOLT is a trademark of Credit Suisse Securities
Key Points on UTX (1% holding):
•
•
•
Strong, stable returns reflect strong business models
Good companies manage well through downturns and business cycles
Consistent returns above cost of capital combined with asset growth create shareholder value
For illustrative purposes only and may not be representative of the Strategy's current or future investments. This is not a recommendation to buy or sell
securities. Note: There is no assurance that the Strategy will achieve its investment objectives. The use of covered call strategies does not ensure profits
or guarantee against losses.
9
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund Process
A Different Approach To Shareholder Yield
The Fund does not necessarily own the stocks with the highest dividend yields. The Fund prefers
stocks with strong dividend growth and low payout ratios (capacity for future growth)
Portfolio holdings are subject to change at any time and should not be considered investment advice. Yields presented are those of portfolio holdings, not represent
that of the Fund and subject to change at any time
10
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund Process
Portfolio Profile
Iron Horse Fund Core Holdings Profile:
60-80 high quality, high ROI companies with below average debt, above average dividends, and
above average fundamental upside
Portfolio Profile
Return on Investment (t+1 estimate)
Iron Horse Fund
S&P 500
12.2%
10.5%
6.3%
5.2%
Fundamental Upside
15.2%
1.5%
Leverage (debt % of EV)
19.1%
24.9%
Dividend Yield
2.5 - 3.0%
1.8%
Option Premiums
3.5 - 5.0%
0%
Potential Distribution
6.0 - 8.0%
1.8%
Sales Growth (5yr average)
The Credit Suisse HOLTTM database allows us to efficiently screen for companies that fit these parameters.
The Fund uses a proprietary risk models to validate the upside & timeliness of each investment.
Note: Portfolio statistics are based on normal market conditions. There is no assurance that the Strategy will achieve its investment objectives. The use of
covered call strategies does not ensure profits or guarantee against losses. Data as of December 31, 2014.
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VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund Process
Portfolio Construction – Equities
• 60-80 holdings
• Holdings limited to positions with sufficient liquidity
• Position size determined by upside/downside ratio (not purely upside potential)
• Maximum position size is 5%
• No significant sector bets (sector exposure within a 5% +/- range of S&P 500 sector
weights)
• Margin and leverage not permitted
• Allocations considered to remain fully invested unless directed otherwise
• Weekly review, monthly rebalancing
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VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund Process
Portfolio Construction – Options
Call options are typically further Out of the Money (OTM) and longer in duration than BXM
Summarized below are portfolio targets for each option parameter as well as how these parameters tend to behave under
certain market conditions. All relative to the covered call index BXM.
Percent
OTM
Option
Income
Option
Duration
Percent
Covered
Portfolio (normalized)
BXM
3 - 10%
0.1 - 1.5%
3 - 6%
1 - 2%
2 - 9 mo
1 - 2 mo
90 - 100%
100%
When the Stock market
- Rises
- Declines
Declines
Rises
-
-
-
When Volatility
- Rises
- Declines
-
Rises
Declines
-
-
Passage of time
-
-
Declines
-
Lower
Higher
Lower
Higher
Shorter
Longer
Less at extreme
Max coverage
Volatility at entry point
- Low vol at entry
- High vol at entry
For illustrative purposes only and may not be representative of the Strategy's current or future investments.
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VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund Process
Risk Management
Risk Management is a key element of the Funds strategy. Portfolio construction process
includes the following risk management procedures:
Portfolio Construction & Size Limits
Holdings are “equal weighted” based on downside risk…not investment dollars.
•
The stronger the upside/ downside ratio, the larger the holding
Individual positions cannot exceed 5% of the portfolio
•
The average holding is closer to 2.5-3.0%
No sector bets
•
Sector allocation within +/- 5% of S&P 500 sector weights
Sell Discipline
Upon entering a position, pre-determine price targets for trim/sell orders
• Target prices are established based on a combination of fundamental/technical
investment process
Apply strict stop-loss rules to all positions
•
14
Using technical analytics to determine “break” points to sell positions that unexpectedly
begin a meaningful downward trend
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund Performance
Growth of $100 investment
Benchmarking : 04/30/2015
IRHIX
BXM
AMDSX
GATEX
Maximum sales charge for Class A is 5.75%. Total Annual Operating Expenses are 1.86% and 1.61% for the Class A and I shares respectively. The performance data quoted here
represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that
shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Results shown reflect the waiver, without which the
results could have been lower. A Fund's performance, especially for very short periods of time, should not be the sole factor in making your investment decisions. For performance
information current to the most recent month-end, please call toll-free 855-241-7514 or visit our website, www.ironhorsefund.com
Note: Past performance may not be indicative of future returns. There is no assurance that the strategy will achieve its investment objectives. The use of covered call strategies does not ensure
profits or guarantee against losses. Investors cannot directly invest in an index; unmanaged index returns do not reflect any fees, expenses or sales charges. Material differences are
disclosed on page 22. RISK: On the above fund mentioned: You could lose money by investing in the Funds. There can be no assurance that the Fund’s investment objective will be
achieved.
15
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund
Benchmarking Risk Reward Analysis (04/30/2015)
10.0%
IRHIX
Return (annualized)
8.0%
BXM
AMDSX
6.0%
GATEX
4.0%
2.0%
0.0%
0.0%
1.0%
2.0%
3.0%
4.0%
5.0%
6.0%
Risk (standard deviation)
*Regression line represents the best fit for the risk/return profile of each fund
Maximum sales charge for Class A is 5.75%. Total Annual Operating Expenses are 1.86% and 1.61% for the Class A and I shares respectively. The performance data quoted here
represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that
shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Results shown reflect the waiver, without which the
results could have been lower. A Fund's performance, especially for very short periods of time, should not be the sole factor in making your investment decisions. For performance
information current to the most recent month-end, please call toll-free 855-241-7514 or visit our website, www.ironhorsefund.com. Investors cannot directly invest in an index;
unmanaged index returns do not reflect any fees, expenses or sales charges. Material differences are disclosed on page 22. RISK: On the above fund mentioned: You could lose
money by investing in the Funds. There can be no assurance that the Fund’s investment objective will be achieved.
16
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund Performance
04/30/2015
Iron Horse Fund
Maximum sales charge for Class A is 5.75%. Total Annual Operating Expenses are 1.86% and 1.61% for the Class A and I shares respectively. The performance data quoted here
represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that
shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Results shown reflect the waiver, without which the
results could have been lower. A Fund's performance, especially for very short periods of time, should not be the sole factor in making your investment decisions. For performance
information current to the most recent month-end, please call toll-free 855-241-7514 or visit our website, www.ironhorsefund.com. Past performance may not be indicative of future
returns. There is no assurance that the strategy will achieve its investment objectives. The use of covered call strategies does not ensure profits or guarantee against losses.
17
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund Performance
04/30/2015
PERFORMANCE AT NAV without sales charge
1m
3m
6m
YTD
1Y
2Y
3Y
Since Inception
A Share
I Share
1.57%
1.67%
3.14%
3.21%
0.51%
0.65%
0.96%
1.03%
5.04%
5.32%
7.22%
7.50%
7.92%
8.32%
6.91%*
9.87%**
BXM
1.44%
4.63%
4.40%
3.15%
5.31%
7.69%
7.15%
S&P 500
0.96%
5.07%
4.09%
1.92%
12.98%
16.65%
16.73%
7.90% (A)
9.24% (I)
14.41% (A)
18.82% (I)
CALENDAR YEAR RETURN*
2011
2012
2013
2014
A Share
I Share
-2.80%
-
7.17%
7.16%
15.74%
16.15%
6.20%
6.48%
BXM
S&P 500
2.96%
-6.07%
5.20%
15.99%
13.26%
32.39%
5.64%
13.69%
PERFORMANCE as of 03/31/2015
A Share (no Load)
I Share
A Share (with Load)
1Y
4.51%
4.78%
-1.24%
Since Inception***
6.63%*
9.59%**
4.95%*
*
Inception date A Share: July 7, 2011/Returns greater than 1 year are annualized
** Inception date I Share: November 16th, 2011/Returns greater than 1 year are annualized
*** Since inception return for most recent quarter-end (03/31/2015)
Investors should carefully consider the investment objectives, risks, charges and expenses of the Iron Horse Fund. This and other important
information about the Fund is contained in the prospectus, which can be obtained at www.ironhorsefund.com or by calling (855) 241-7514. The
prospectus should be read carefully before investing. The Iron Horse Fund is distributed by Northern Lights Distributors, LLC member FINRA. Van
Hulzen Asset Management and Northern Lights Distributors are not affiliated. Past performance may not be indicative of future results. Unmanaged
index returns do not reflect any fees, expenses or sales charges. Investment returns and principal value will fluctuate so that an investor's shares,
when redeemed, may be worth more or less than their original cost; current performance may be lower or higher than the performance data quoted.
Performance data current to the most recent month-end can be obtained by calling (855)241-7514. Maximum sales charge for Class A is 5.75%. Total
Annual Operating Expenses are 1.86% and 1.61% for the Class A and I shares respectively. The performance data quoted here represents past
performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so
that shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Results shown reflect
the waiver, without which the results could have been lower. A Fund's performance, especially for very short periods of time, should not be the sole factor in
making your investment decisions. For performance information current to the most recent month-end, please call toll-free 855-241-7514 or visit our website,
www.ironhorsefund.com.The S&P 500 Index consists of 500 stocks chosen for market size, liquidity, and industry group representation. It is a market-value
weighted index (stock price times number of shares outstanding), with each stock's weight in the Index proportionate to its market value. It is widely used as
a benchmark of U.S. equity performance. It is not possible to invest directly in an index.
18
VAN HULZEN ASSET MANAGEMENT
Iron Horse Fund
Appendix
APPENDIX
19
VAN HULZEN ASSET MANAGEMENT
Appendix I
Portfolio Characteristics (as of 04/30/2015)
Top 10 Holdings
Name
GENERAL ELECTRIC
AIG
IBM
VERIZON COMMUNIC
PHILIP MORRIS IN
MICROSOFT CORP
SOUTHERN CO
PRICELINE GROUP
APPLE INC
SYSCO CORP
Portfolio Characteristics
%
4.0
3.2
3.1
3.0
2.9
2.9
2.8
2.7
2.7
2.5
Number of Holdings
Median Market Cap
Dividend Yield
67
97 bln
2.4%
Risk Analysis Since Inception*
Standard Deviation – Fund (Annualized)
Standard Deviation – S&P 500 (Annualized)
Sharp Ratio
Beta vs. S&P 500
R-Squared
10.6%
15.9%
1.75
0.6
0.9
Risk measures apply to Class A Shares only.
Inception date: A Share July 7, 2011
Holdings are subject to change and should not be
considered investment advice
Portfolio holdings are subject to change and should not be considered investment
advice.
Sector Exposure
Iron Horse Fund
S&P 500
Standard Deviation: a measure of daily volatility of returns. Typically, the higher the volatility, the riskier the security. Beta: a measure of the volatility of a fund relative to the overall market. Sharpe
Ratio: A risk-adjusted measure used to determine reward per unit of risk. R-Squared: The percentage of a fund’s movement that can be explained by movements in its benchmark index.
20
VAN HULZEN ASSET MANAGEMENT
Appendix II
Fundamental Security Selection Framework
Cash flow based metric with the highest empirical correlation
with stock price multiples. The CFROI metric incorporates the
balance sheet and eliminates accounting distortions. It is
comparable over time & across borders.
R2 = 73%
Price/Book
Superior Performance Metric (CFROI®):
“We find that
economic returns, not
growth, have by far the
greatest predictive
power. “
- Anthony Ling
CFROI Spread
Goldman Sachs
Fade Replaces Terminal Value:
HOLT’s life-cycle framework is an economically sound basis for
forecasting long-term CFROIs and reinvestment rates beyond
the explicit forecast period. The HOLT model “fades” company
CFROIs to the cost of capital over the long term.
Market Driven Valuation Methodology:
HOLT is a sophisticated discounted cash flow (DCF) model.
Discount rates and terminal values are objective and empirical,
allowing users to focus on fundamentals rather than valuation
models. The HOLT model also allows users to quickly quantify
the performance that is “priced in” for a stock.
Historical Cash
Flow Returns
Discount Rate
Future Returns
Implied By Today’s
Stock Price
The Fund has two of HOLT’s most experienced and long term users on the team
HOLT is a trademark of Credit Suisse Securities
21
VAN HULZEN ASSET MANAGEMENT
Appendix III
Benchmarking
Rationale of comparing the Iron Horse Fund (IRHIX) to Gateway (GATEX) and ASTON/Anchor Capital Enhanced Equity Fund
(AMDSX):
The three funds described above all utilized covered call options as a core part of their strategy. Both Iron Horse and AMDSX seek
total return as stated in their investment objectives and both Iron Horse and Gateway seek a lower risk/volatility than other
investments as stated in their investment objective. Both AMDSX and IRHIX utilize an actively managed approach to their strategy
while GATEX uses a semi-active approach to portfolio management. Before investing, consider the fund’s investment objectives,
risks, charges, and expenses. Visit ngam.natixis.com or call 800-225-5478 for a prospectus or a summary prospectus containing this
and other information. Read it carefully. Before investing, carefully consider the fund’s investment objectives, risk, charges and
expenses. Contact 800-992-8151 for a prospectus or a summary prospectus containing this and other information. Read it carefully.
Aston Funds are distributed by Foresight Fund Distributors LLC. Iron Horse Fund and GATEX and AMDSX are not affiliated. Both
AMDSX and IRHIX utilize an actively managed approach to their strategy while GATEX uses a semi-active approach to portfolio
management.
ASTON/Anchor Capital Enhanced Equity Fund (AMDSX):
Investment Objectives- The Fund seeks total return through a combination of a high level of current income and capital appreciation.
Class N Shares
Class I Shares
Management Fees
0.70%
0.70%
Distribution and Services (12b-1) fees
0.25%
None
Other Expenses
0.28%
0.28%
TOTAL Annual Fund Operating Expenses
1.23%
0.98%
Gateway (GATEX):
Investment Objectives- The Fund seeks to capture the majority
exposing investors to less risk than other equity investments.
Class A Shares
Management Fees
0.63%
Distribution and Services (12b-1) fees
0.25%
Other Expenses
0.15%
TOTAL Annual Fund Operating Expenses
1.03%
Fee waiver and/or expense reimbursement 0.09%
TOTAL
0.94%
of the returns associated with equity market investments, while
Class C Shares
0.63%
1.00%
0.15%
1.78%
0.08%
1.70%
Class Y Shares
0.63%
0.00%
0.15%
0.78%
0.08%
0.70%
Iron Horse Fund (IRHAX/IRHIX):
Investment Objectives- The Fund seeks total return with less volatility than equity markets in general.
Class A Shares
Class I Shares
Management Fees
0.75%
0.75%
Distribution and Services (12b-1) fees
0.25%
None
Other Expenses
0.85%
0.85%
Acquired Fund Fees and Expenses
0.01%
0.01%
TOTAL Annual Fund Operating Expenses
1.86%
1.61%
Fee waiver and/or expense reimbursement 0.06%
0.06%
TOTAL
1.86%
1.61%
Note: Past performance may not be indicative of future returns. There is no assurance that the strategy will achieve its investment objectives. The use of covered call strategies does not ensure
profits or guarantee against losses.
22
VAN HULZEN ASSET MANAGEMENT
Appendix IV
Important Definitions
Important Definitions: Call Option: An agreement that gives an investor the right (but not the obligation) to buy a security at a specified price within a specific time
period. Covered Call: An options strategy whereby an investor holds a long position in an asset and writes (sells) call options on that same asset in an attempt to
generate increased income from the asset. Return on Investment: rate of return annualized over a given period, expressed on an annual basis or as a return per
year. Volatility: A statistical measure of the dispersion of returns for a given security or market index. Volatility is often measured by using the standard deviation
between a security’s returns and a market index. Typically, the higher the volatility, the riskier the security. Standard Deviation: a measure of daily volatility of
returns. Typically, the higher the volatility, the riskier the security. Beta: a measure of the volatility of a fund relative to the overall market. Sharpe Ratio: A riskadjusted measure used to determine reward per unit of risk. R-Squared: The percentage of a fund’s movement that can be explained by movements in its
benchmark index. Jensen Alpha: A market risk balanced measure of performance, based on CAPM. It is calculated as the difference between security average return
vs. risk free rate and beta times benchmark excess return. Information Ratio: The excess return (alpha) of an active manager over an appropriate benchmark,
divided by the standard deviation of excess returns (tracking error). The equation is as follows: Information Ratio = ERt/STDV(ERt) Where: ERt = (RPt-RBt),where RPt = Return on a portfolio over time period t - RBt = Return on a benchmark over time period t STDV(ERt) = Standard deviation of ERt over the same time period t.
Track error: It quantifies how closely a manager's return pattern follows that of a benchmark index, and is defined as the standard deviation of the funds excess
return over the benchmark index return. Since selection return is defined as the excess return over the benchmark index, tracking error can also be defined as the
standard deviation of the selection return.
23
VAN HULZEN ASSET MANAGEMENT
Appendix V
Disclosure Information
Principal Investment Strategies: The Fund's adviser seeks to achieve the Fund's investment objective by investing primarily in:
•Dividend-paying common stocks
•By writing call options on common stocks and common stock indices
Written Call Option Risk: Selling covered call or stock index options will limit the Fund's gain, if any, on its underlying
securities. Losses on stock index options may only be partially offset by gains in the Fund's portfolio if the portfolio does not track the
call-related stock index. The Fund continues to bear the risk of a decline in the value of its underlying stocks. Option premiums are
treated as short-term capital gains and when distributed to shareholders, are usually taxable as ordinary income, which may have a
higher tax rate than long-term capital gains for shareholders holding Fund shares in a taxable account. Call options involve risks
different from, or possibly greater than, the risks associated with investing directly in securities and other traditional investments.
Investors should carefully consider the investment objectives, risks, charges and expenses of the Iron Horse Fund.
This and other important information about the Fund is contained in the prospectus, which can be obtained at
www.ironhorsefund.com or by calling 855-241-7514. The prospectus should be read carefully before investing.
The Iron Horse Fund is distributed by Northern Lights Distributors, LLC member FINRA/SIPC. Van Hulzen Asset
Management is not affiliated with Northern Lights Distributors, LLC.
Mutual Funds involve risk including the possible loss of principal. There is no assurance that the fund will achieve
its investment objectives. The use of leverage embedded in written options will limit the Fund's gains because the
Fund may lose more than the option premium received. Investments in lesser-known, small and medium
capitalization companies may be more vulnerable than larger, more established organizations. Selling covered
call or stock index options will limit the Fund's gain, if any, on its underlying securities and The Fund continues to
bear the risk of a decline in the value of its underlying stocks. 4303-NLD-5/1/2015
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VAN HULZEN ASSET MANAGEMENT