Purpose Tactical Hedged Equity Fund February Commentary

Market Commentary

Global stock markets shrugged off their January losses and rallied back in February as investors reversed their aversion to risk assets and poured money back into equity markets across the globe. The geopolitical trouble in Ukraine impacted agriculture and energy exports from the region raising anxiety and world commodity prices. Natural gas was especially volatile as the cold snap continued into February, depleting the already low reserves in the U.S. and Canada. Physical gold and equities continued their 2014 rally and were top performing asset classes. The ECB echoed the U.S. Fed’s statements about continuing with their policy of low rates to avoid a weak inflationary environment. Currencies saw increased volatility, with the Canadian Dollar touching 1.12 relative to the U.S. Dollar towards the end of January and then settling back in at 1.11 for February.

Fund Commentary

The Fund gained in February as U.S. equities recovered during the month. The best performing sectors were consumer discretionary, materials and information technology while the worst performing sectors were telecommunications, industrials and health care.

The best performing stocks were Superior Energy Services, Cummins and Dana Holdings while the worst performing stocks were URS Corp, MRC Global and Gran Tierra Energy. Superior Energy Services outperformed during the month and received an analyst upgrade because of a recovery in the pressure pumping market and the companies’ expectations to reduce costs by up to $30 million by 2015. Cummins was up over the month as their 2014 guidance showed that they were on track to return to normal levels. Dana Holdings had positive earnings and beat analyst estimates by over 11% after disappointing in the previous quarter. The stock continued to rally as investors and analysts bought into management’s ability to execute well in future years. URS Corp underperformed in February as they reduced their earnings outlook citing execution issues in their oil and gas division. MRC Global underperformed in February with weak Q4 2013 earnings as sales in Asia and Australia declined resulting in lower margins. Gran Tierra Energy was also down this month as the company missed estimates by a significant amount causing the stock to sell off into the end of the month.

The Fund‘s monthly rebalance turned over 14 names. The Fund added Pier 1 imports, Kellogg, Nu Skin Enterprises, CVR Energy, Phillips 66, Centene Corp, HealthSouth Corp, Applied Industrial Tech, Manpower Group, Oshkosh Corp, Anixter International, Ingram Micro, Cabot and Commercial Metals and sold its positions in Aarons, Altria Group, Sysco, Baker Hughes, Marathon Petroleum, CareFusion, Express Scripts, Cummins, Crane, Lockheed Martin, Activision Blizzard, Broadcom, Lyondell Basell and Steel Dynamics. The Fund also increased the size of the short S&P 500 index futures hedge position to approximately 31% of the net asset value of the Fund.

The Fund continues to hedge its USD currency exposure maintaining a net USD exposure at approximately 10% of the Fund’s net assets.

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