Catalyst Insider Buying Fund INSAX INSCX INSIX

Transcription

1 Investor Presentation 4Q2014 Website: Phone: Catalyst Insider Buying Fund INSAX INSCX INSIX Client Approved See Slide 9 for Standard Performance and Slide 14 for Disclosures

2 Executive Summary Overview: The Catalyst Insider Buying Fund is a large-cap, long-only equity fund that only invests in companies where corporate insiders are buying their own company s stock on the open market. Distinctive Strategy: The insider buying strategy has historically outperformed the market over the long-run. We believe that there are no other mutual funds or ETFs that implement a similar strategy. Strong Performance: The Fund has outperformed the S&P 500 TR Index since inception. It received a Lipper rating of 4 out of 5 for total return, consistent return and preservation. Past performance does not guarantee future results and there is no assurance that the Fund will achieve its investment objective. Lipper ratings are based on the three-year period ending 12/31/2014 for the Multi-Cap Core category. A score of 5 is the highest score and a score of 1 is the lowest score. INSAX received a rating a rating of 4 for Total Return (based on total return performance) out of 685 funds, a rating of 4 for Consistent Return (based on risk-adjusted returns) out of 684 funds and a rating of 4 for Preservation (a relative rather than absolute measure) out of 11,118 funds. 2

3 Catalyst Insider Buying Fund Background Inception: July 29, 2011 Management: Managed by David Miller since inception Co-founder and Senior Portfolio Manager of Catalyst Capital Advisors LLC Manages five mutual funds that implement corporate insider buying strategy B.S. in Economics from the University of Pennsylvania, Wharton School MBA in Finance from the University of Michigan Ross School of Business Category: Large-Cap Value/Large-Cap Blend Optimized for Alpha*: not closet indexers Alpha: 1.34 Low correlation to the Index: R-squared of 85.07% * Benchmarked against the S&P 500 TR Index since inception as of most recent quarter end (December 31, 2014) 3

4 Investment Strategy: Tracking SEC Form 4 Filings Insiders must file Form 4 within 2 days of trading their own stock For illustrative purposes only. 4

5 Insider Investment Philosophy: Use legal information from SEC filings to create an insider portfolio Identify stocks with insider buying Key criteria to understand and filter choices Number of Insiders Buying Seniority of Insiders Size of Transactions Buying / Selling History Is there cluster buying? Are there conflicting signals? What positions do the insiders hold in their company? (CEO, CFO, VP, or Directors?) Are insiders buying / selling a significant stake? What has the history of insider transactions been at the company? Filter and invest in positions with the most significant signals 5

6 Insider Buying Fund Investment Process Proprietary Quantitative Screen - Track and rank corporate insider activity based on Form 4 filings - Focus on: open market purchases, insider identity (position in company), transaction size, number of insiders buying, historical track record, etc. Qualitative Review - Analyze results of quantitative screen for potential inclusion in portfolio - Take into consideration: potential motivations, company and/or industry trends, conflicting buy/sell signals, etc. Active Monitoring - Monitor portfolio holdings for changes in insider activity - Sell positions at any time if significant insider selling occurs - If a position has no continued buying, seek to replace after 1 year with new holding - Seek to stay focused on the best opportunities Portfolio Construction - Seek to hold 30 to 50 companies meeting quantitative screen & qualitative review criteria - Focus on companies with a market capitalization over $10 billion - Consider both value and growth companies - Limit industry concentration to 25% Of course, there is no guarantee that any investment strategy will achieve its objectives, generate profits or avoid losses. 6

7 Portfolio Characteristics as of December 31, 2014 Seeking to hold the largest and most well-known companies experiencing significant corporate insider buying Top 10 Holdings* % Net Assets Covidien PLC 4.6% Valeant Pharmaceuticals 4.0% Flextronics International Ltd 4.0% KeyCorp 3.9% Fastenal Co 3.7% Dominion Resources Inc 3.6% Synchrony Financial 3.5% Freeport-McMoRan Inc 3.4% Genuine Parts Company 3.3% Boston Scientific Corp 3.3% TOTAL 37.3% * Portfolio holdings are subject to change and should not be considered investment advice. GICS Sector Allocation* % Equity Holdings Materials 17% Health Care 15% Financials 14% Information Technology 13% Energy 11% Industrials 10% Consumer Discretionary 7% Consumer Staples 6% Utilities 4% Telecommunication Services 3% Portfolio Characteristics* Holdings 37 Average market capitalization $30.4B Median market capitalization $17.7B Median P/E ratio

8 INSAX Annual Performance as of December 31, % 15% -5% INSAX -1% 17% 38% 9% S&P 500 TR -2% 16% 32% 14% 2011 performance is partial year from July 31 to December 31. Investors cannot directly invest in an index and unmanaged index returns do not reflect any fees, expenses or sales charges. Inception: 07/29/ Year Annualized 2 Years Annualized 3 Years Annualized Since Inception Annualized INSAX 9.27% 22.88% 20.88% 17.86% S&P 500 TR Index 13.69% 22.68% 20.41% 17.09% INSAX +/- S&P 500 TR -4.42% +0.20% +0.47% +0.77% 8

9 Standard Performance as of December 31, 2014 Growth of $10,000 for Catalyst Insider Buying Fund (INSAX) vs. S&P 500 TR Index $18,000 $16,000 $14,000 $12,000 $10,000 $8, INSAX S&P 500 TR Index Inception: 07/29/ Year 2 Years 3 Years Since Inception Class A 9.27% 22.88% 20.88% 17.86% Class C 8.45% 21.97% 20.91% 17.77% S&P 500 TR Index 13.69% 22.68% 20.41% 17.09% Class A with Sales Charge 2.98% 19.31% 18.53% 15.84% 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 Investment Adviser has contractually agreed to reduce its fees at least until October 31, 2015, to ensure that the net annual fund operating expenses will not exceed 1.25%. Without these waivers, the Fund s total annual operation expenses would be 1.49%, 2.24% and 1.48% for Class A, C and I shares, respectively (based on June 2014 annual report). To request most recent performance or obtain a prospectus, please call or go to 9

10 Modern Portfolio Theory Statistics as of December 31, 2014 Key Comparisons Since Inception MPT Statistics* Catalyst Insider Buying Fund (INSAX) S&P 500 TR Index Alpha (vs. benchmark) 1.34% 0.00% Beta (vs. benchmark) R-Squared (vs. benchmark) 85.07% % Aggregate Return 75.53% 71.64% Annualized Return 17.86% 17.09% Standard Deviation 12.50% 11.67% Sharpe Ratio * Assumes risk free rate of 1.49% The performance data quoted here represents past performance. Current performance may be lower or higher. 10

11 Key Reasons to Invest The Catalyst Insider Buying Fund seeks to offer investors an opportunity to invest in large capitalization U.S. companies that are experiencing significant insider buying. Insider-Driven Disciplined Strategy Potential Core Allocation The Fund only invests in companies where corporate insiders (CEO, CFO, directors, etc.) are purchasing their own company stock on the open market. We believe corporate insiders understand their own firm better than any outsider possibly could. We use a proprietary, quantitative model to rank stocks based on insider activity. A qualitative review is performed on all stocks that meet our quantitative criteria. While we implement an alpha-driven investment approach by only investing in companies that insiders are purchasing, we focus on the largest, most wellknown U.S. companies. 11

12 Insider Buying Example: Freeport-McMoRan (Ticker: FCX) For illustrative purposes only. Insider Signals 1. In July 2013, Vice Chairman Flores purchases $14.8M and Chairman of the Board Moffett purchases $28.5M 2. In August 2013, Director Ford purchases $29.2M and Director Lackey purchases $54K Buying & Selling 1. Buy stock around $29/share after cluster buying signal 2. By 10/4/13, share price is around $34/share 3. S&P 500 Index was flat over same time period Chart Significant insider buying after market oversells FCX on commodities/china concerns gold slipped from $1650 to below $1250 For chart above, ^GSPC refers to S&P 500 Index. 12

13 Insider Buying Example: Keurig Green Mountain (Ticker: GMCR) For illustrative purposes only. Insider Signals 1. In the Fall of 2013, multiple insiders purchase over $1.5 million worth of GMCR stock 2. Some of these insiders made very well-timed transactions in the past Buying & Selling 1. Buy stock around $65-70/share after insider buying signal 2. Partnership with Coca-Cola announced after market close on February 5th 3. Sell after announcement ($120) Chart Corporate insiders at GMCR buy stock months before deal with Coca-Cola is announced. GMCR insiders have strong track record timing stock. For chart above, ^GSPC refers to S&P 500 Index. 13

14 Disclosures 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. 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. Sharpe Ratio: A risk-adjusted measure of a fund s performance that indicates a fund s return per unit of risk, defining risk as volatility (standard deviation). Standard Deviation: A risk metric that measures the volatility of a fund's excess returns over its benchmark; measures volatility of both positive and negative excess returns. S&P 500 Total Return Index is considered to be generally representative of the U.S. large capitalization stock market as a whole. 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 or at 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. There are risks associated with the sale and purchase of call and put options. These factors may affect the value of your investment. 14

15 Disclosures Lipper Ratings for Preservation reflect fund's historical loss avoidance relative to other funds within the same asset class as of 12/31/2014. Preservation ratings are relative, rather than absolute measures, and funds named Lipper Leaders for Preservation may still experience losses periodically; those losses may be larger for equity and mixed equity funds than for fixed income funds. The Lipper Rating for Total Return denotes a fund that has provided superior total returns (income from dividends and interest as well as capital appreciation) when compared to a group of similar funds as of 12/31/2014. The Lipper Rating for Consistent Return denotes a fund that has provided superior risk-adjusted returns (income from dividends and interest as well as capital appreciation) when compared to a group of similar funds as of 12/31/2014. The Lipper Ratings are subject to change every month. The overall calculation is based on an equalweighted average of percentile ranks for the Preservation over the 3-,5-, and 10-year periods (if applicable). The highest 20% of funds in each peer group are named Lipper Leaders, the next 20% receive a rating of 4, the middle 20% are rated 3, the next 20% are rated 2, and the lowest 20% are rated NLD-8/14/