Catalyst Hedged Futures Strategy Fund HFXAX, HFXCX & HFXIX 2015 Q1 About Catalyst Funds Intelligent Alternatives We strive to provide innovative strategies to support financial advisors and their clients in meeting the investment challenges of an ever-changing global market environment. From our founding in 2006, Catalyst Funds set out to be decidedly different. We understood that the market did not need another traditional family of mutual funds. At Catalyst, we endeavor to offer unique investment products to meet the needs of discerning financial advisors and their clients. We offer a broad range of distinctive funds that offer specialized strategies seeking to produce income- and equity-oriented returns while limiting risk and volatility. We offer these exclusive strategies through a team of in-house portfolio managers and boutique institutional investment management partners. Website: www.CatalystMF.com Phone: 646-827-2761 E-mail: [email protected] 2 Catalyst Hedged Futures Strategy Fund Overview Invests in long and short option positions on the S&P 500 Index Strategy seeks to exploit the unique limited risk characteristics of options contracts Objective to preserve capital and provide consistent returns with low volatility relative to equities, regardless of market direction The Fund’s strategy is driven by index and options volatility patterns The strategy does not incorporate a directional bias to generate returns 3 Investment Strategy: Seeking Multiple Ways to Generate Returns Volatility Trading -- the Fund may enter options positions designed to hedge or seek profit from an increase in stock index volatility Upside Index Price Exposure -- the Fund may enter options spreads in an attempt to profit from an established price trend Volatility Trading Upside Price Exposure Option Premium Collection Option Premium Collection techniques are used to mitigate options time decay and to take partial profits on open positions; however, it is not a primary source of return for the fund There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. 4 Investment Strategy: Opportunity Analysis Macro View - Is market overbought or oversold? - Is volatility historically high or low? - Is there an established uptrend in place? Rising Market -Evaluate Butterfly & Ratio Spreads Rising Volatility -Evaluate Diagonal Calendar Spreads There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. Trade 5 Investment Strategy: Trading Methodology The majority of the strategy is systematic in determining what, where and when to trade Manager’s discretion is used in determining precisely when to enter a trade, how and when to adjust the portfolio structure and take profits, and in technical analysis interpretation Position holding period is driven by options volatility models; typical holding period ranges from 60 to 120 days allowing the Fund to be nimble in response to changing market conditions Risk control is an important part of the strategy; risk metrics are also monitored by an external risk manager There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. 6 Investment Strategy: Daily Investment Process Stress Fund for Risk Trade Analyze New Trades with Existing Positions Make Adjustments if Needed Evaluate Trade Opportunities 7 HFXAX Performance Characteristics Fund performance has exhibited a low, negative correlation to the S&P 500 index (R2 of 0.07) Performance has exhibited a strong positive relationship with equity market volatility Best environment: high market and options volatility; VIX>20. Example years: 2008, 2011 Worst environment: low options volatility, large market moves (normally up); VIX<15. Examples: 2013, Q4 2014 Past performance does not guarantee future results and there is no assurance that the Fund will achieve its investment objective. 8 Risk Management Diversification is not the same as Risk Management - Diversification seeks to allocate capital across non correlated assets to dilute the impact of a large loss on a portfolio. Risk management seeks to actively avoid large losses. The Fund employs a distinct Risk Management Strategy – In addition to the strategy and tactics we use to earn profits, we use a specific set of rules and tactics focused on limiting losses. This is not common among public mutual funds. Our Risk Management includes: • Optimized position sizing • Trade entry scaling • Diversification of time and price exposure • Dynamic hedging of option structures • Limiting overall portfolio risk There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. 9 Other Important Fund Attributes Diversification – Fund returns have exhibited a low correlation to the S&P 500. But the nature of options pricing results in an increase in potential returns as equity market volatility increases. Liquidity - The S&P 500 Futures market is among the most liquid equity index markets in the world. Roughly 50% of the Fund’s capital is typically required as collateral by our primary broker, providing ample daily shareholder liquidity. No Financial Leverage - No borrowing is utilized to increase the size of the fund’s portfolio. The number and size of positions are set at a level proportional to the fund’s capital and consistent with the fund’s objectives of limiting volatility and drawdowns. Tax Treatment – All of the Fund’s holdings are classified as “Section 1256 Contracts”. By IRS code, this means that gains and losses are reported as 60% long term and 40% short term, regardless of holding period. There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. 10 Key Reasons to Invest The Fund Seeks to Provide: Consistent returns from S&P 500 options strategies that are structured for profit potential across a broad range of market environments. Unique diversification from a low correlation to equity indexes and the ability to outperform in volatile market conditions. A Risk Management Strategy explicitly focused on limiting losses by hedging individual positions at initiation, ongoing adjustment based on well-defined risk parameters, and aggregate portfolio stop loss measures. There is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. 11 Performance as of March 31, 2015 Growth of $10,000 for HFXAX and S&P 500 TR Index $40,000 $30,000 $20,000 $10,000 $0 2005 2006 2007 2008 2009 HFXAX 2010 S&P 500 TR 2011 2012 2012 11% 16% 2013 -3% 32% 2013 2014 Annual Returns for HFXAX and S&P 500 TR Index 100% 50% 0% -50% HFXAX S&P 500 2006 53% 16% 2007 4% 5% 2008 50% -37% 2009 12% 26% 2010 10% 15% 2011 16% 2% 2014 8% 14% 2015 YTD 4% 1% Past performance is not a guarantee of future results. 12 Standard Performance as of March 31, 2015 Annualized Return Performance 1 Year 3 Years 5 Years Since Inception* Class A without Sales Charge (HFXAX) 1.66% 5.16% 8.23% 16.93% Class A with Sales Charge -4.15% 3.12% 6.96% 16.20% S&P 500 TR Index 12.73% 16.11% 14.47% 7.64% *Inception: 12/15/2005. There is no assurance that the Fund will achieve its investment objective. The Fund’s maximum sales charge for Class “A” shares is 5.75%. Investments in mutual funds involve risks. Performance is historic and does not guarantee future results. Investment return and principal value will fluctuate with changing market conditions so that when redeemed, shares may be worth more or less than their original cost. The Fund’s total annual operating expenses are estimated to be 2.23%, 2.98% and 1.98% for Class A, C, and I shares respectively. To request most recent performance or obtain a prospectus, please call 1-866-447-4228 or go to www.CatalystMF.com. Performance shown before September 2013 is for the Fund's predecessor limited liability company (Harbor Assets, LLC). The prior performance is net of management fees and other expenses including the effect of the performance fee (see full disclosure on page 2). The Fund’s maximum sales charge for Class “A” shares is 5.75%. Investments in mutual funds involve risks. Performance is historic and does not guarantee future results. Investment return and principal value will fluctuate with changing market conditions so that when redeemed, shares may be worth more or less than their original cost. Current performance may be lower or higher than the performance data quoted. To obtain the most recent month end performance information or the funds prospectus please call the fund, toll free at 1-866-447-4228. You can also obtain a prospectus at www.CatalystMF.com. 13 Performance Statistics as of March 31, 2015 Modern Portfolio Theory Statistics vs. S&P 500 TR Index Since Inception Statistic HFXAX S&P 500 TR Index Alpha 17.18 0.00 Beta -0.26 1.00 R-squared 0.07 1.00 HFXAX Has Generated More Consistent Positive Returns than the S&P 500 TR Index % Months with Positive Returns Catalyst Hedged Futures Strategy Fund 78.6% S&P 500 Total Return Index 65.2% Past performance is not a guarantee of future results. 14 Appendix: HFXAX Fund Background Inception: December, 2005. Non public fund regulated by the CFTC. Conversion*: September 2013. ‘40 Act Mutual Fund regulated by the SEC Management: Managed by Edward Walczak since inception • Founder of Harbor Financial LLC, a Commodity Trading Advisor registered with the National Futures Association and Portfolio Manager of Catalyst Capital Advisors LLC • B.A. in Physics and Economics from Middlebury College • MBA from the Harvard University Graduate School of Business Category: Managed Futures * The Fund’s trading instruments, strategy, and objectives, have remained the same before and after this conversion. 15 Glossary Alpha: A measure of the difference between a fund's actual returns and its expected performance, given its level of risk as measured by beta. Beta: A measure of a fund's sensitivity to market movements. Bull Call Spread: An option strategy that involves purchasing call options at a specific strike price while also selling the same number of calls of the same asset and expiration date but at a higher strike price. A bull call spread is used when moderate price rise in the price of the underlying asset is expected. The maximum profit is the difference in strike prices of the long and short options, less the net cost of the options. Butterfly Spread: A neutral option strategy using four option contracts with the same expiration but three different strike prices to create a range of prices that the strategy can profit from. The trader sells two option contracts at the middle strike and buys one option contract at a lower strike and one at a higher strike. Both puts and calls can be used. Calendar Spread: An options or futures spread established by simultaneously entering a long and short position on the same underlying asset but with different delivery months. Correlation: A statistical measure of how two securities move in relation to each other. R-squared: A measure of the relationship between a portfolio and its benchmark. Ratio Spread: An options strategy in which an investor simultaneously holds an unequal number of long and short positions. A commonly used ratio is two short options for every option purchased. S&P 500 Total Return Index is considered to be generally representative of the U.S. large capitalization stock market as a whole. 16 Disclosures Investors should carefully consider the investment objectives, risks, charges and expenses of the Catalyst Funds. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling 866-447-4228 or at www.CatalystMF.com. The prospectus should be read carefully before investing. The Catalyst Funds are distributed by Northern Lights Distributors, LLC, member FINRA/SIPC. Catalyst Capital Advisors, LLC is not affiliated with Northern Lights Distributors, LLC. Mutual Funds involve risk including possible loss of principal. The Fund will invest a percentage of its assets in derivatives, such as futures and options contracts. The use of such derivatives and the resulting high portfolio turn-over may expose the Fund to additional risks that it would not be subject to if it invested directly in the securities and commodities underlying those derivatives. The Fund may experience losses that exceed those experienced by funds that do not use futures contracts, options and hedging strategies. Changes in interest rates and the liquidity of certain investments could affect the Fund’s overall performance. The Fund is non-diversified and as a result, changes in the value of a single security may have significant effect on the Fund’s value. Other risks include U.S. Government securities risks and investments in fixed income securities. Typically, a rise in interest rates causes a decline in the value of fixed income securities or derivatives owned by the Fund. Furthermore, the use of leveraging can magnify the potential for gain or loss and amplify the effects of market volatility on the Fund’s share price. The Fund is subject to regulatory change and tax risks; changes to current rules could increase costs associated with an investment in the Fund. 4245-NLD-4/15/2015 17
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