CPEAX Investor Update | January 2019

Catalyst Dynamic Alpha Fund Investor Update January 2019 (CPEAX, CPECX, CPEIX)

Dear Investor:

The Catalyst Dynamic Alpha Fund (CPEAX) outperformed the S&P 500 TR Index in December with a -7.39% return versus -9.03% for the Index. The Fund finished 2018 with a -4.05% return, outperforming the S&P 500 TR Index return of -4.38%.

CPEAX seeks to outperform over the long term and has achieved that objective since inception. For the three-year, five-year, and since-inception periods, the Fund has outperformed the S&P 500 TR Index by 24 basis points (bps), 281 bps, and 204 bps, respectively.

For more than 30 years, the Fund’s investment management team has consistently implemented a high-conviction, high-active-share investment strategy. Accordingly, CPEAX has significantly outperformed its benchmark (net of fees) by employing an alpha-driven, quantitative, and disciplined investment process based on price momentum, relative strength, and sector rotation.

Manager Commentary

In December, domestic equities suffered sharp losses as investor sentiment soured and stocks fell to fresh annual lows in the days before Christmas. An acute rally in the final week of the year served to lessen the blow, but the first negative calendar year return for the S&P 500 since 2008 was unavoidable nonetheless. While defensive, yield-oriented stocks mitigated the downside, they lagged significantly when the averages turned upward late in the month. Catalysts for the swoon included the usual culprits: a flattening yield curve, trade jitters, slowing economic momentum, and an unwavering Fed topping the list. As outlined last month, these are valid and proximate concerns, but their manifestation in the equity markets seems to be misaligned with their current significance. Ultimately, these risk factors and others may conspire to derail the current economic expansion, but the current probability of this seems far smaller than equities appear to be discounting.

In this environment of quickly falling equity prices, CPEAX provided significant insulation to the downside. The Fund fell -7.39% on the month, while the benchmark S&P 500 Index lost more than -9.0%. This advantage allowed the Fund to outperform its benchmark index on a calendar year basis for the fifth time in the past six years. Sector allocation effects were nominal, while selection effects were broadly positive. The selection advantage accrued most notably in the technology sector where all four of the Fund’s holdings provided positive relative performance. Selections from the finance sector were the primary drag on overall results, though HollyFrontier Corp. (HFC), an oil and gas refining company, was the poorest performing holding. Only one security, Jacobs Engineering Group Inc. (JEC), was sold from the portfolio in December, and no new positions were added. Thus, sector allocations were broadly similar to last month.

Looking forward we anticipate that volatility will persist but see fundamentals supportive of further gains. Economic growth is likely to slow from its 2018 trajectory, but it appears that investors are overly pessimistic. While risk factors abound, from trade wars to narrowing yield spreads, the possible reward for accepting these risks now appears positively skewed. We believe that equities present a compelling case for investment in the months ahead.

We thank you for your continued support.

Sincerely,

Cory Krebs
Portfolio Manager
Catalyst Dynamic Alpha Fund

Performance (%): Ending December 31, 2018 Annualized if greater than a year
Share Class/Benchmark	YTD	1 Year	3 Years	5 Years	Since Inception*
Class A	-4.05	-4.05	9.50	11.30	14.74
Class C	-4.81	-4.81	8.69	10.46	13.88
S&P 500 TR Index	-4.38	-4.38	9.26	8.49	12.70
Class A w/ Sales Charge	-9.57	-9.57	7.36	9.99	13.78
Class I	-3.81	-3.81	9.78	n/a	10.69
S&P 500 TR Index	-4.38	-4.38	9.26	n/a	7.85
*Inception: 12/22/2011 (A & C Share) & 06/06/2014 (I Share)

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 are 1.44%, 2.19%, 1.19% for class 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.

There is no assurance that the Fund will achieve its investment objective.

You cannot invest directly in an index and unmanaged index returns do not reflect any fees, expenses or sales charges.

As of December 31, 2018, HollyFrontier Corp. (HFC) and Jacobs Engineering Group Inc. (JEC) were 1.71% and 0.0% of net assets. Fund holdings are subject to change (and have changed) and should not be considered investment advice.

Important Risk Considerations:

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.

Investing in the Fund carries certain risks. The value of the Fund may decrease in response to the activities and financial prospects of an individual security in the Fund’s portfolio. The Fund is non-diversified and may invest a greater percentage of its assets in a particular issue and may own fewer securities than other mutual funds. The performance of the Fund may be subject to substantial short-term changes. To the extent the Fund invests in the stocks of smaller-sized companies, the Fund may be subject to additional risks, including the risk that earnings and prospects of these companies are more volatile than larger companies. Smaller-sized companies may experience higher failure rates than larger companies and normally have lower trading volume than larger companies. These factors may affect the value of your investment. 4230-NLD-2/1/2019