Dear Investor:

In December, the S&P 500 TR Index decreased by -9.03% while the Catalyst Hedged Futures Strategy Fund (HFXIX) declined by -3.64%. The CBOE Volatility Index (VIX) increased from 18.07 to 25.42.

The relationship between December’s S&P 500 TR Index and VIX movements conformed to the typical VIX upward movement when the S&P declines. However, on a day to day basis, upside volatility moves and absolute levels of options volatility were muted relative to historical tendencies. Despite six daily declines of -2.0% or more, the VIX closed above 30 only three times with two of them by less than half a point. This level of implied volatility remains historically modest.

It is important to remember the two different types of volatility: volatility of the daily price movements of the S&P 500 (“realized” volatility) and the “implied” volatility built into S&P 500 options, which is commonly measured by the VIX. Normally, implied volatility (VIX) trades at a premium to actual (realized) volatility, but in Q4 2018 and December in particular, this was not the case.

On December 24, the S&P 500 completed (on a closing basis) a nearly 500-point and approximately -20% drop, with the VIX reaching 36 at its peak. For perspective, in February 2018, the VIX closed higher than 37 on a decline that was about half the size. In August 2015, the VIX closed above 40 following an -11% decline in the S&P 500. During August 2011, a -16.6% S&P decline over 12 trading days resulted in a VIX close of 48, and more importantly, 10 consecutive weeks of VIX closes above 30 following the initial August 2011 decline. And, during October 2008, the S&P fell more than -27% and the VIX closed above 80.

We rely on the VIX to reflect price volatility because that is what affects options pricing. We trade options volatility, not price movement. In October and November, for example, the Fund performed as expected during a period when the VIX more closely reflected actual price volatility. Those two months had positive returns, low drawdowns, and low standard deviation of daily NAV’s. The Fund’s positive performance occurred across both an up month and a down month for the S&P 500, demonstrating the Fund’s dependence on options volatility rather than price action.

In December, the VIX did not respond as vigorously to price action as it has historically. Our put spreads were stressed due to this relative lack of options volatility, despite the large amount of price (realized) volatility. Again, to put numbers to the narrative, in Q4 2018, 90% of days saw a 21-day actual S&P price move greater than the VIX had implied for that period. The 15-day decline between November 30 and December 24 saw an average VIX of only 23.63. Compare this level to previous periods of S&P volatility described above. The S&P price decline we just saw during this period measured just beyond 15%. The second largest drawdown in history for a 15-day average VIX between 22-24 is 10.98%, over 4% smaller than December’s move. Without a record price move for these implied volatility levels, the portfolio may have performed in December more similarly to its October and November behavior. A relative bright spot for the quarter was our ability to control the Fund’s drawdown to half that of the S&P despite the large price swings and relatively unresponsive implied volatility levels.

December’s results were disappointing especially in the context of price volatility that normally provides correspondingly favorable options pricing for the Fund’s positions. However, we view this muted options volatility as a “one off” condition and look to October and November performance as more representative of how the Fund can perform with moderate volatility elevation. In December, we were active in adding January call positions, while at the same time taking advantage of the moderately higher VIX levels to add and adjust put positions to maintain a positive volatility exposure in the January and February expirations. If we see the typical January effect, with stocks getting a small boost to start the year, the Fund is positioned to take advantage. In addition, if we were to get a volatility event similar to that in Q1 2018, we should also be well positioned. With the reminder that we operate the Fund without relying on predictions of price direction or changes in volatility, the Fund can benefit from a seasonal upswing in the S&P 500 as well as similar levels of volatility seen over the course of the past month should either of these market conditions materialize into Q1 of 2019.

We thank you for your continued support.

Sincerely,

Ed Walczak

Senior Portfolio Manager

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