FOR PROFESSIONAL USE ONLY
PORTFOLIO PROCESS
THE PORTFOLIO:
GENERAL OVERVIEW
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Individual Equity Securities. Buy stocks on local exchanges.
Global Mid to Large-Cap Value.
Long-only orientation in individual stocks.
“Bottoms-Up” stock-picking discipline. Consistent process.
Focus on “Risk-Adjusted Return” through market cycles.
Ability to significantly reduce risk.
Diversification across sectors, regions, and currencies.
50 to 100 positions.
Disclosure
Investments in foreign securities could subject the Fund to greater risks including, currency fluctuation, economic conditions, and different governmental and accounting
standards.
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THE PORTFOLIO:
VALUE-BASED STOCK SELECTION
1. Cash Flow and Traditional Value
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EV to EBITDA
EV to Free Cash Flow
Price to Book
Normalized Figures
Typically, valuations significantly below index levels.
2. Balance Sheet
– Altman Z-Score
– Solid balance sheets. Avoid surprises.
3. Technical
– Intermediate-Term Price Momentum and Relative Strength.
– Avoid “Falling Knives.”
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THE PORTFOLIO:
DEFENSE
All three areas below must align negatively to significantly reduce exposures:
1. Valuation
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Normalized 10-year P/E
Market Based Q-Ratio
Domestic and International Valuations
Both valuation measures must exceed a Z-score threshold to hedge
2. Economic
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6 Month annualized leading economic indicators
US: Conference Board LEI is used
EAFE: Internal LEI composite based upon OECD indicators
Emerging: Internal LEI composite based upon OECD indicators
3. Technical
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Intermediate Price Momentum, Positive or Negative
Disclosure
Hedge may not protect full value of the portfolio at any given time and can be the cause of additional costs and risks to the fund
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A PORTFOLIO SHOULD…
INVEST GLOBALLY
The Waning Influence of US Geography on Stock Returns
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A PORTFOLIO SHOULD…
PLAY DEFENSE
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In the last 82 years, there have been 26 years with negative returns,
amounting to 1 every 3.4 years.
The average annual decline equals 14%.
6 of the declines exceeded 20%
Successfully reducing exposure to just one of these declines would
potentially increase long-run returns substantially.
S&P 500 Negative Returns (1926 – 2015)
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ANTHEM INC. (USA)
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1.64% of Portfolio (Sept 2015)
Have owned since the inception of the Conductor Global portfolio.
One of America’s largest health care benefits company; formerly known as WellPoint.
At 12/31/2013:
• 3.8x EV/EBITDA vs. 11.9x for MSCI Health Care Index and 10.6x for MSCI World.
• 1.1x Price to Book vs. 3.6x for Consumer Staples and 2.1x for the MSCI World.
Disclosure:
Holdings are subject to change and should not be considered investment advice.
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KOITO MANUFACTURING (JAPAN)
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1.47% of Portfolio (Sept 2015)
Automotive component manufacturer.
Purchased May 2014.
At purchase:
• 4.8x EV/EBITDA vs. 9.4x for MSCI Consumer Disc. Index and 10.3x for MSCI World.
• 1.6x Price to Book vs. 2.8x for Consumer Disc. and 2.1x for the MSCI World.
Disclosure:
Holdings are subject to change and should not be considered investment advice.
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YAMAZAKI BAKING (JAPAN)
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1.25% of Portfolio (Sept 2015)
Purchased February 2014.
Consumer Staples company that produces baked goods for distribution throughout Japan.
At purchase:
• 5.3x EV/EBITDA vs. 11.2x for MSCI Consumer Staples Index and 10.4x for MSCI World.
• 0.96x Price to Book vs. 3.4x for Consumer Staples and 2.1x for the MSCI World.
Disclosure:
Holdings are subject to change and should not be considered investment advice.
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RISK MANAGEMENT EXAMPLE
PACIFIC RUBIALES (CANADA)
• Owned from July 2014 to October 2014.
• Canada listed oil and gas exploration company; resource extraction primarily in Colombia.
• At time of purchase, stock was trading at a significant valuation discount to energy peers and
the overall MSCI World. PRE CN was hard hit in late 2014 with the rest of the energy sector,
though. Conductor Global’s process initiated exit before major damage occurred.
• The company lost over 60% of value after sale, in line with many other companies in the
energy sector.
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CONDUCTOR GLOBAL PERFORMANCE – Q4 2015
Share Class
QTD
YTD
1 Yr
3 Yr
Since Inception
Class A
Class I
0.10%
Without Sales Charge
Class I
4.05%
1.83%
1.83%
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Class A
3.95%
1.63%
1.63%
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1.43%
-2.06%
-4.22% -4.22%
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-1.99%
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Morningstar World Stock Median
4.12%
-1.68% -1.68%
8.25%
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MSCI World Index Total Return
-8.33%
-0.32% -0.32% 10.23%
3.06%
2.75%
With Sales Charge
Class A: w/ 5.75% max sales charge
Comparison
Disclaimer: There is no assurance that the fund’s investment objective will be achieved or maintained. The MSCI World TR Index performance is not
illustrative of the fund’s security performance. The Fund’s maximum sales charge for Class “A” shares is 5.75%. The performance data quoted here
represents past performance. Current performance may be lower or higher than the performance data quoted above. Past performance is no guarantee of
future results. The investment return and principal value of an investment will fluctuate so that investor’s shares, when redeemed, may be worth more or
less than their original cost. The Fund’s investment adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, at least until
February 28, 2015, to ensure that the net annual fund operating expenses will not exceed 2.20%, 2.95%, and 1.95% attributable to Class A, Class C, and
Class I shares, respectively, subject to possible recoupment from the Fund in future years. Without these waivers, the Fund’s total annual operating expenses
would be 3.08%, 3.83%, and 2.83% to Class A, Class C, and Class I shares respectively. Please review the fund’s prospectus for more information regarding
the fund’s fees and expenses. For performance information current to the most recent month-end, please call toll-free 844-467-2459 or by visiting
http://www.conductorfunds.com.
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DISCLOSURES
The Adviser from time to time employs various hedging techniques. The success of the Fund’s
hedging strategy will be subject to the Adviser’s ability to correctly assess the degree of
correlation between the performance of the instruments used in the hedging strategy and the
performance of the investments in the portfolio being hedged.
The risk on a short sale is the risk of loss if the value of a security sold short increases prior to
the delivery date, since the Fund must pay more for the security than it received from the
purchaser in the short sale. Therefore, the risk of loss may be unlimited.
Investors should carefully consider the investment objectives, risks, charges and expenses of
the Conductor Funds. This and other information about the Funds is contained in the prospectus
and should be read carefully before investing. The prospectus for both funds can be obtained by
calling toll free 1-844-GO-RAILX or by clicking here. The Conductor Funds are distributed by
Northern Lights Distributors, LLC., Member FINRA IronHorse Capital Management and Northern
Lights Distributors, LLC are not affiliated.
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DISCLOSURES
Performance of the Conductor private accounts does not represent that past or future
performance of the Conductor Global Fund and should not be considered indicative of future
performance of any strategy account or the Fund. There is no assurance that any investment
strategy will achieve its objectives, generate profits or avoid losses.
Investing in the Fund carries certain risks. Adverse changes in currency exchange rates may
erode or reverse any potential gains from the Fund’s investments. The risk of investing in
emerging market securities, primarily increased foreign investment risk. Investments in foreign
securities could subject the Fund to greater risks including, currency fluctuation, economic
conditions, and different governmental and accounting standards. 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.
Investments in lesser-known, small and medium capitalization companies may be more
vulnerable than larger, more established organizations. There can be a higher portfolio turnover
due to active and frequent trading that may result in higher transactional and brokerage costs.
4140-NLD-2/12/2016
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