Purpose Tactical Hedged Equity Fund May Commentary

Market Commentary

The Fund gained in May as equities rallied during the month. The best performing sectors were health care, information technology and consumer staples, while the worst performing sectors were industrials, materials and telecommunication services.
The best performing stocks were Murphy USA, Wellcare Health Plans and Health Net,while the worst performing stocks were Nuskin Enterprises, Commercial Metals and Target Inc.

Murphy USA was up on strong earnings stemming from strong year over year earnings growth versus peers which allowed them to service their debt faster than expected. Health Net was up from exchange enrollment growth capturing 153k new enrollments at the close of Q1 2014, with guidance of 380k new enrollments for FY 2014. Wellcare Health Plans also had strong earnings from increased enrollments from an expanding Medicare and Medicaid program. The company earns upwards of 59% of its revenue from Medicaid and the balance from Medicare-related businesses.

Nuskin underperformed this month as uncertainty in the growth of their Chinese business weighed on the company. Commercial Metals declined at the end of month after announcing the acquisition of Newell Recycling in San Antonio, Texas. Target also underperformed as the company’s CEO and chairman stepped down in response to the credit card data breaches that occurred during the holiday season. This was followed by a management change in their Canadian operations stemming from weak sales and a subsequent reduced FY 2014 earnings guidance. Target also announced plans to make investments to increase U.S. traffic, and improve their Canadian operations and online platform.

The Fund completed a monthly rebalance at the end of May, turning over 22 names in the portfolio. The equities rebalance targeted profit taking and diversification. New positions added were Arrow Electronics, Axiall Corp, Cabot Corp, Cigna Corp, Dana Holdings, Dick’s Sporting Goods, Dr. Pepper Snapple, Ford Motor Co. Fluor Corp, General Motors, GNC Holdings, The Gap, IBM, Altria Group, Occidental Petroleum, Rowan Companies, Tutor Perini, Tyson Foods, Unifirst Corp, Valero Energy, Walmart and Xerox. Positions sold were Aecom Technologies, Agco Co., Bunge, Cooper Tire & Rubber, Centurylink, Ensco PLC, Flextronics, Gran Tierra Energy, Hill-Rom, International Game Technology, Kellogg Co., Kroger, Louisiana Pacific, Macy’s, MRC Global, Murphy USA, Noble Corp, Nu Skin Eneterprises, Pultegroup, Sandisk, Schweitzer-Mauduit and Target. Short futures hedges were maintained at approximately 21% of the Fund’s NAV.

The Fund continued to hedge its U.S. dollar exposure, maintaining a net U.S. dollar exposure at approximately 10% of the Fund’s NAV.

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