Purpose Total Return Bond Fund December Commentary

Market Commentary

December saw Bernanke’s last Fed meeting on December 18th that unveiled the tapering program. The market reacted positively to the slow pace of tapering, as U.S. equities rallied into the holidays with the DJIA and S&P hitting new highs. USD/CAD continued its upward trajectory, breaching the 1.07 level by month end. Precious metals sold off again this month. Gold was down approximately 3.75%, and silver was down almost 2.75%, with gold equities performing poorly as investors unwound their holdings. On the other hand, base metals performed well in December as copper was up 1.78%. Looking ahead to 2014, there is improving economic data, along with the likelihood of a U.S. budget deal early in the year. This should point towards higher equity markets, strengthening USD versus CAD and weaker commodity markets. We expect commodities to remain pressured until we see growth signals from China or higher inflation forecasts.

Fund Commentary

The Fund has exposure to three credit segments (government, investment grade and high yield) as well as cash. After rebalancing at month end, high yield remains the largest allocation, with a weight of approximately 66%. Investment grade exposure slightly increased and government exposure slightly decreased. Investment grade, government, and high yield bonds underperformed into the U.S. Fed meeting, and did not rebound into year-end as investors held back, waiting for further details on the tapering program. We expect that our focus on credit rather than duration is positioned well for current central bank policy and the credit environment. The Fund declared a dividend this month, distributing $0.074/share to ETF and F Series shareholders and $0.065/share to A Series shareholders.

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