Description of Northern Lights Capital Group and Principal Owners Northern Lights Capital Group, LLC (“Northern Lights”) is a limited liability company
formed in October 2006, and is a wholly owned subsidiary of Northern Lights Midco, LLC
“Midco”), a wholly owned US subsidiary of an Australian private equity fund organized as a
trust, Aurora Trust. The sole equity unitholder of Aurora Trust is Pacific Current Group
Limited (“PAC”), an Australian publicly traded company, which holds 100% of Aurora
Trust’s ordinary shares. No other investor holds more than 25% of the total economic interests
of Aurora Trust. Because Aurora Trust is not a separate legal person under Australian law,
the assets of Aurora Trust are held in the name of its trustee, Aurora Investment Management
Pty. Ltd. (“Trustee”), which currently holds such assets in trust for its unitholders and
exercises management discretion. Trustee is a wholly owned subsidiary of PAC.
Northern Lights has been a registered investment adviser with the U.S. Securities and
Exchange Commission (SEC) since June 2011.
Investment Management Services to Pooled Investment Vehicles
Northern Lights provides investment advice on behalf of Aurora Trust to the Executive
Committee and the Board of Trustee in the form of:
•
Continuous management and supervision of the investments made by Aurora Trust
in its portfolio companies;
•
Research on investment managers for potential investment by Aurora Trust;
•
Due diligence on investment managers for investment by Aurora Trust;
•
Structuring and negotiating investments by Aurora Trust in portfolio companies;
and
•
Consulting services to Aurora Trust portfolio companies to enhance the success of
the portfolio companies, and therefore the return to Aurora Trust investors.
Northern Lights manages Aurora Trust’s assets on a non-discretionary basis.
NLCG Distributors, LLC (“Distributors”), which conducts business under the name Pacific
Current Group, may also provide sales and marketing services to Aurora Trust portfolio
companies. Distributors is a wholly owned subsidiary of Northern Lights. Distributors does
not sell or market the Aurora Trust.
Assets Under Management As of June 30, 2019, Northern Lights had approximately $299,118,473 in assets under
management, all of which was non-discretionary.
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For Pooled Investment Vehicles:
Northern Lights is wholly owned by Aurora Trust, and its operational budget is approved by
Aurora Trust’s corporate budgeting process.
For Other Clients:
For any other private funds Northern Lights may manage in the future, compensation will be
determined in accordance with the governing documents for such other private funds.
Compensation will be negotiated or determined at the time each such other private fund is
created. Negotiations over fees and services typically involve Northern Lights and its partners
or existing and potential fund investors, who are often large financial institutions or other
institutional investors. Because of the nature of Northern Lights’ business, Northern Lights
does not have a fee schedule.
Compensation to Distributors:
With respect to Aurora Trust, Distributors, in some instances, has been hired to sell the
investment products of Aurora Trust’s portfolio companies, principally to US institutional
investors investing directly with the portfolio. In such cases, Distributors and its
representatives may receive sales and solicitation compensation directly from the portfolio
company. Sales of portfolio company investment products and services are intended to
increase the portfolio companies’ assets under management, which in turn increases the value
of the portfolio company to Aurora Trust and its investors.
Sales are not made to Northern Lights’ advisory clients. Distributors does not have customers,
and sales made by Distributors are solely as a finder and solicitor. Distributors does not sell
or market securities of Aurora Trust or its investors.
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Northern Lights is a captive investment adviser to Aurora Trust. As a captive adviser to
Aurora Trust, Northern Lights operates under a budget approved by the Trustee’s board and
no performance based fees are charged to Aurora Trust.
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As of the date of this Brochure, Northern Lights provides investment services only to Aurora
Trust, an Australian Trust for which Aurora Investment Management Pty. Ltd. serves as
Trustee.
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Northern Lights employs both qualitative and quantitative strategies in selecting portfolio
investments for its Funds, and in monitoring those investments on a going-forward basis.
Aurora Trust typically invests in asset management firms, which Northern Lights believes
present significant prospects for growth. Asset management firms funded by Aurora Trust
include long-only equity managers, private equity managers and real estate managers. In
screening potential portfolio companies for Aurora Trust, Northern Lights’ analysis includes,
but is not limited to, the following key components:
•
Business analysis: Northern Lights performs extensive quantitative and qualitative
business analysis including in-depth management review, competitive review, and
where appropriate, client review. Qualitative analysis includes characteristics like
the character, work ethic, perspective and intelligence of the potential portfolio
companies’ management teams.
•
Economic forecasting: Northern Lights performs extensive quantitative analysis
and simulation to build financial projections to understand the potential range of
future outcomes, tail events, key risk factors and sensitivity to economic factors.
•
Reference calls: Northern Lights performs reference checking, both from among
management-provided references and from “off-list” industry references.
• Finance and accounting reviews: Northern Lights performs on-site due diligence
reviews of accounting systems and controls.
•
Compliance and systems reviews: Northern Lights uses a select list of outside
vendors to perform compliance and operational reviews.
Making investments in private portfolio companies funded by Aurora Trust involves a high
degree of risk. While the management teams within the private portfolio companies identified
by Northern Lights may be experienced, the companies themselves are typically unseasoned.
Furthermore, as private companies, there may be limited publicly available information about
them.
Investing in securities involves risk of loss that the Funds and Northern Lights’ potential
clients should be prepared to bear. Past performance is not indicative of future results.
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As a registered investment adviser, Northern Lights is required to disclose all material facts
regarding any legal or disciplinary events that would be material to an evaluation of Northern
Lights or any of the Company’s management persons.
Northern Lights does not have any current or pending legal or disciplinary action related to
Northern Lights, its management persons or any other employee.
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Other Financial Industry Activities
Northern Lights is not actively engaged in any other financial industry activities.
Other Financial Industry Affiliations
Northern Lights is the sole owner of Distributors, a limited purpose securities broker-dealer.
Two management employees of Northern Lights are registered principals of Distributors: Mr.
Justin Kroll, Managing Director, Business Development, of Distributors and Mr. David
Griswold, General Counsel and Chief Compliance Officer of Northern Lights and Chief
Compliance Officer of Distributors.
Portfolio companies of Aurora Trust are asset management firms, and their overall success is
fundamental to the success of Aurora Trust. Distributors may enter into sales agreements
with Aurora Trust portfolio companies to solicit institutional advisory clients for the portfolio
companies or to find institutional investors for products managed by the portfolio companies.
Clients of the portfolio companies are not clients of Northern Lights or Aurora Trust and are
not customers of Distributors.
Northern Lights believes Distributors’ activities are fully in alignment with the interests of
Aurora Trust.
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and Personal Trading As required by regulation (SEC Rule 204A-1), Northern Lights has adopted a Code of Ethics
(“Code”) to oversee potential and actual conflicts of interest associated with the investment
advice Northern Lights provides to its clients.
Our Code comprises written standards that are reasonably designed to deter wrongdoing and
describe Northern Lights’ policies and procedures concerning:
1. The prohibited misuse of material, non-public information.
2. Personal trading by employees, disclosure of family members’ trading activities,
and disclosure of other accounts or securities of which the employee has direct or
indirect beneficial interest or control. These accounts are reviewed initially upon
hire, and then on a quarterly and annual basis.
3. Reporting requirements and restrictions that limit the value of gifts, entertainment
and gratuities given or received.
4. Limitations and reporting on political contributions to political figures and/or
candidates that could be construed as to earn advisory services for Aurora Trust,
or other funds to which we may provide advisory, management, and/or
administrative services (a practice known as “pay-to-play”).
5. Requiring employees to obtain pre-approval for any outside business affiliations.
6. Prohibiting employees from purchasing or participating in initial public offerings.
7. Limitations on the ability of employees to invest in stock of Pacific Current Group
Limited, owner of the Aurora Trust.
Northern Lights employees are permitted to investment in Aurora Trust portfolio company
products, which could result in a potential conflict of interest should the employee receive
special pricing that would otherwise generate revenue for the portfolio company. Northern
Lights mitigates any such conflicts by requiring pre-approval by the Chief Compliance
Officer of all private securities transactions.
The Code generally reminds each Northern Lights employee of his or her personal
responsibility in identifying and mitigating potential conflicts of interest created when he or
she is engaged in an outside business activity, or purchases or sells securities.
To obtain a copy of Northern Lights’ Code of Ethics, please contact David Griswold, Chief
Compliance Officer at 206-965-8721 or via email at
[email protected].
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As a private equity manager and investment adviser, Northern Lights identifies and evaluates
target portfolio companies and strategies for Aurora Trust to invest in, and through
Distributors, supports Aurora Trust through the sale and distribution of the portfolio
companies’ investment products and investment advisory services.
Northern Lights typically negotiates private securities transactions on behalf of Aurora Trust.
This involves negotiating direct investments in Aurora Trust portfolio companies. Northern
Lights receives no commissions or other transaction-based compensation for doing so.
Northern Lights does not have brokerage discretionary authority (or responsibility) for Aurora
Trust.
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Review of Accounts
Northern Lights is a captive investment adviser to Aurora Trust. Norther Lights monitors
Aurora Trust’s existing portfolio companies and makes investment recommendations to the
Trustee’s board. Reviews of Aurora Trust’s holdings are conducted on an on-going basis and
reports to the Board are made at least quarterly. Paul Greenwood, Northern Lights’ Managing
Director, is a member of the Trustee board.
Further information regarding the individuals responsible for reviewing investments made by
Aurora Trust may be found in Northern Lights’ Part 2B Supplement, which is available upon
request.
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Northern Lights does not receive economic benefits from other parties in connection with
providing investment advice to Aurora Trust.
Distributors receives compensation from the Aurora Trust portfolio companies for which it
acts as a finder or solicitation agent. Portfolio company clients are direct clients of the
portfolio companies and are not clients of Northern Lights.
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Northern Lights recommends the purchase and sale of private equity interests in target
companies to Aurora Trust, which exercises investment discretion through its Trustee’s board
and executive committee.
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Proxy voting is not applicable to Northern Lights; as a result, it does not have or maintain
proxy voting policies or procedures, nor does it have authority to vote Fund securities.
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Northern Lights is required in this Item to provide certain financial information or disclosures
about its financial condition if a financial condition is present that impairs its ability to meet
contractual and fiduciary commitments, including a bankruptcy proceeding. As of the date of
this Brochure, there are no such issues to disclose.
Item 19 – Requirements for State-Registered Advisers Northern Lights is registered with the SEC.
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Open Brochure from SEC website