Catalyst Hedged Futures Strategy Fund Investor Update

February 2019: Catalyst Hedged Futures Strategy Fund Investor Update (HFXAX, HFXCX, HFXIX)

Dear Investor:

In January, the S&P 500 TR Index increased by +8.01%, while the Catalyst Hedged Futures Strategy Fund (HFXIX) declined by -0.63%. The CBOE Volatility Index (VIX) decreased from 23.22 to 16.57.

Last month we remarked about the muted upside volatility moves with the S&P 500 falling to the degree that it did. This month, the VIX exhibited a more typical decline during the strong S&P 500 advance. Although the VIX declined by nearly 35%, it managed to close below 17 only on the last day of the month, a level still well above that seen in 2017 and the summer of 2018. The VIX remaining elevated while the S&P 500 advances is important to the strategy because it provides opportunities to enter both call and put positions as well as a better risk/reward profile in terms of entry prices. Although implied volatility remains elevated in comparison to the low levels of recent years, it also remains modest by historical standards.

In January, Fund performance was impacted by a declining VIX and a relentless advance in the S&P 500. These are typically the least favorable market conditions for the Fund. However, the main driver of the Fund’s performance this month was the S&P 500 advancing into and then beyond the range of an “iron butterfly” in the week 3 January expiration. Those positions were put on when the market was significantly lower and are able to profit in a 100point range above the market. Above or below this range at expiration can result in a breakeven or small loss. This particular spread was placed more than 10% above the market with less than a month to expiration. However, the S&P 500 actually advanced up to, into, and then beyond the entire spread. Call spreads in later months have even higher targets and can be profitable if the S&P 500 continues its advance. To put market swings into perspective, this was the best January for the S&P 500 Index since 1987 following the worst December since 1931. Again, this illustrates the kind of realized volatility that we have described, while the VIX (implied volatility) has not kept pace, registering no significant extremes over the last two months.

January’s results were encouraging given the 8% advance in the S&P 500 and an implied volatility decline that historically has caused material drawdowns in the Fund. In addition to the enhanced risk management we put in place following 2017’s drawdown, we have modified position placement and adjustment techniques in these types of market conditions. From that standpoint, January’s minor drawdown validates the utility of these adjustments.

We do not believe that volatility will continue its decline to levels seen in 2017 and 2018. Our view remains that a deteriorating macroeconomic/earnings environment and unresolved geopolitical risks are providing a “price floor” to the VIX. Of course, as always, we’ll react to whatever volatility environment we are presented with.

In January, we were active in adding March call positions, while at the same time taking advantage of the moderately higher VIX levels to add and adjust April put positions to maintain a positive volatility exposure in the February and March expirations. If we see the typical February seasonality, with stocks weakening into mid-month, the Fund is positioned to take advantage. In addition, if the market continues higher, we may also be able to benefit. With the reminder that we operate the Fund without relying on predictions of price direction or changes in volatility, the Fund remains positioned to benefit from a variety of market outcomes in February.

We thank you for your continued support.

Sincerely,

Ed Walczak
Senior Portfolio Manager

Performance (%): Ending December 31, 2018

Annualized if greater than a year

Performance (%): Ending December 31, 2018
Share Class/Benchmark	1 Year	3 Years	5 Years	10 Years	Since Inception*
Class A	-2.12	-7.16	-1.45	3.69	10.19
Class A w/ Sales Charge	-7.76	-8.97	-2.61	3.08	9.70
S&P 500 TR Index	-4.38	9.26	8.49	13.12	7.58
Class C	-2.84	-7.86	-2.20	n/a	-2.90
Class I	-1.85	-6.93	-1.22	n/a	-1.95
S&P 500 TR Index	-4.38	9.26	8.49	n/a	10.62
*Inception: 12/15/2005 (A Share), 8/30/2013 (C & I Shares)

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. Gross expense ratios for the Fund are 2.44%, 3.20%, and 2.20% for A, C, and I shares respectively. To obtain the most recent month end performance information or the Fund’s prospectus please call the Fund, toll free at 1-866-447-4228. You can also obtain a prospectus at www.CatalystMF.com. 866‐447‐4228 | 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. The Fund has been managed in the same style and by the same portfolio manager since the predecessor limited liability company’s inception on December 15, 2005. The Fund’s investment goals, policies, guidelines and restrictions are, in all material respects, equivalent to the predecessor limited liability company’s investment goals, policies, guidelines and restrictions. The predecessor limited liability company was not subject to certain investment restrictions, diversification requirements and other restrictions of the 1940 Act of the Code, which if they had been applicable, might have adversely affected its performance. In addition, the predecessor limited liability company was not subject to sales loads that would have adversely affected performance.

Important Risk Considerations:

Investing in the Fund carries certain risks. 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. 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.

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.

4231-NLD-2/1/2019