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Rational Special Situations Income Fund

Tickers: RFXIX | RFXCX | RFXAX

Fund Objective

The Fund’s objective is to seek total return consisting of capital appreciation and income.

Investment Strategy

Identification

The investment strategy seeks to identify “special situations” particularly within the NARMBS markets where the Fund will make opportunistic investments in securities that may be mispriced due to structural or market driven factors.

Opportunity

The managers seek to identify inefficiencies or flaws in the underlying legal and technical structures of certain debt issuances, and then exploit these opportunities while seeking to limit downside exposure.

Remediation

The managers will seek to remedy issues it has identified in a security through activist strategies, including (i) bringing the technical issue to the attention of indenture trustees or servicers; (ii) negotiating with the applicable parties to compensate the Fund for the issue; or (iii) through litigation or the threat of litigation. The opportunities may come in the form of flaws of logic or interpretation in a debt security’s pooling and servicing agreements or bond indentures.

Portfolio Manager Insights

Fund Management

ESM Management LLC

ESM Management LLC provides investment advisory services. The Company offers advices on acquiring, analyzing, and liquidating portfolios of non-agency residential mortgage backed securities.

Co-Portfolio Manager
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William R. Van de Water
William has been working in finance since 2005. Mr. Van de Water joined ESM as a RMBS analyst and trader in June 2009 and became a managing director in December 2009.

Co-Portfolio Manager
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Dr. Eric S. Meyer
Dr. Meyer has been working in finance since 1995 and he founded ESM Management LLC in January 2009. From 1997 through 2008, Dr. Meyer worked at Susquehanna International Group.

Growth of $10,000 Investment: Ending 2020-06-30T00:00:00

Performance (%) Ending2020-06-30T00:00:00
Annualized if greater than 1 Year

 1 Year3 Years5 Years10 YearsSince Inception
Class I1.44%8.55%7.92%11.82%15.18%
Barlays US Agg TR Index8.74%5.32%4.30%3.82%4.42%
Bloomberg MBS TR Index5.67%3.97%3.23%3.06%3.57%
Class A1.15%8.28%7.64%11.55%14.90%
Class C0.37%7.46%6.83%10.71%14.04%%
Class A w/Load-3.68%8.28%7.64%11.55%14.90%

Maximum sales charge for Class A shares is 4.75%. Total annual fund operating expenses are 2.07%, 2.22%, and 2.98% for Class I, A, and C shares respectively. A maximum deferred sales charge of 1.00% on Class C shares applies to shares sold within 12 months of purchase. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Results shown reflect the waiver, without which the results could have been lower. A fund’s performance, especially for very short periods of time, should not be the sole factor in making your investment decisions. To obtain the most recent month end performance information or the funds prospectus please call 800-253-0412 or visit www.RationalMF.com.

Performance & Risk Statistics: Ending2020-06-30T00:00:00

 Class IBarclays US Agg TR IndexBloomberg MBS TR Index
Cumulative Return401.51%63.85%49.23%
Annualized Return15.18%4.42%3.57%
Standard Deviation7.70%2.95%2.16%
Sharpe Ratio1.951.451.59
Alpha (vs. Agg)14.24%-0.73%
Beta (vs. Agg)0.18-0.63
Correlation (vs. Agg)0.07-0.87
% of Positive Months85.40%67.20%71.50%
Maximum Drawdown-9.76%-3.67%-2.85%

Monthly Returns: Ending2020-06-30T00:00:00

 JanFebMarAprMayJunJulAugSepOctNovDecYTD
20202.62%0.42%-9.75%2.81%2.60%1.30%-0.63%
20190.59%0.57%0.58%1.21%2.43%0.40%0.07%0.28%0.02%0.71%0.54%0.45%8.13%
20182.61%1.31%1.63%0.36%0.56%0.51%2.86%0.56%0.31%0.86%-0.25%-0.53%11.28%
20170.64%0.69%1.39%3.33%1.01%1.05%0.52%1.54%0.68%1.29%1.21%1.57%15.95%
2016-0.47%-0.78%0.24%0.47%0.20%0.30%0.44%0.32%2.24%0.43%0.44%0.21%4.08%
2015-0.02%0.86%0.58%0.10%0.21%0.64%0.43%0.02%0.18%0.47%0.29%0.06%3.87%
20142.42%0.58%0.11%0.74%1.26%0.68%0.52%0.57%0.27%0.05%1.90%0.71%10.22%
20138.76%2.45%1.02%1.48%2.51%-2.96%-0.54%0.41%1.47%1.97%0.85%0.49%18.97%
20122.07%1.92%3.53%0.00%0.37%0.82%4.55%1.00%4.40%1.05%2.90%5.74%32.10%
20116.27%-0.56%0.13%0.46%-0.45%-1.39%0.76%-2.09%-1.91%-1.91%-0.52%5.22%3.68%
20104.53%0.81%1.30%5.85%-5.23%4.18%1.82%3.87%2.32%-0.06%2.83%2.16%26.74%
2009-1.41%-1.29%5.16%5.33%6.35%5.33%4.61%4.37%5.97%-0.88%6.19%47.03%

Rational Special Situations Income Fund Distributions

TickerRecord DatePayable DateMonthly Distribution AmountReinvest Price
RFXAX6/26/20206/29/20200.077719.46
RFXAX5/27/20205/28/20200.077219.29
RFXAX4/28/20204/29/20200.075118.88
RFXAX3/27/20203/30/20200.072918.35
RFXAX2/26/20202/27/20200.082520.53
RFXAX1/29/20201/30/20200.083220.51
RFXAX12/27/201912/30/20190.057220.09
RFXAX11/26/201911/27/20190.054420.08
RFXAX10/29/201910/30/20190.068120.03
RFXAX9/26/20199/27/20190.022819.95
RFXAX8/28/20198/29/20190.034219.96
TickerRecord DatePayable DateMonthly Distribution AmountReinvest Price
RFXIX6/26/20206/29/20200.081519.48
RFXIX5/27/20205/28/20200.080619.30
RFXIX4/28/20204/29/20200.078918.90
RFXIX3/27/20203/30/20200.076018.37
RFXIX2/26/20202/27/20200.086020.54
RFXIX1/29/20201/30/20200.085920.53
RFXIX12/27/201912/30/20190.060420.11
RFXIX11/26/201911/27/20190.057320.10
RFXIX10/29/201910/30/20190.071820.04
RFXIX9/26/20199/27/20190.024019.97
RFXIX8/28/20198/29/20190.036619.97
TickerRecord DatePayable DateMonthly Distribution AmountReinvest Price
RFXCX6/26/20206/29/20200.067419.43
RFXCX5/27/20205/28/20200.066519.25
RFXCX4/28/20204/29/20200.065118.85
RFXCX3/27/20203/30/20200.060518.32
RFXCX2/26/20202/27/20200.074620.49
RFXCX1/29/20201/30/20200.074220.49
RFXCX12/27/201912/30/20190.043320.07
RFXCX11/26/201911/27/20190.047420.06
RFXCX10/29/201910/30/20190.056720.01
RFXCX9/26/20199/27/20190.014019.94
RFXCX8/28/20198/29/20190.032919.94

Fund Overview

Data as of: 2020-07-10T00:00:00

Ticker RFXAX RFXCX RFXIX RFXAX
Share Class Class A Class C Class I Class A w/ Sales Load
CUSIP 628255457 628255440 628255432 628255457
Inception Date 2009-02-01T00:00:00 2009-02-01T00:00:00 2019-07-17T00:00:00 2009-02-01T00:00:00
As of Date 2020-07-10T00:00:00 2020-07-10T00:00:00 2020-07-10T00:00:00 2020-07-10T00:00:00
Daily NAV 19.54 19.5 19.56 19.54
NAV Change 0.05 0.05 0.05 0.05
% NAV Change 0.26% 0.26% 0.26% 0.26%

Current Fund Performance

Data as of: 2020-07-10T00:00:00

Share Class 1 Month 3 Months 6 Months YTD 1 Year 3 Years Annualized 5 Years Annualized 10 Years Annualized Since Inception Annualized
Class A 0.92% 6.55% -1.26% -0.33% N/A N/A N/A N/A 14.91%
Class C 0.86% 6.33% -1.62% -0.74% N/A N/A N/A N/A 14.04%
Class I 0.93% 6.60% -1.16% -0.22% N/A N/A N/A N/A 1.68%
Class A w/Sales Load -3.88% 1.46% -5.95% -5.06% N/A N/A N/A N/A 14.91%

Does not include pre-converted performance.

Quarterly Fund Performance

Data as of Quarter End: 2020-06-30T00:00:00

Share Class 1 Month 3 Months 6 Months YTD 1 Year 3 Years Annualized 5 Years Annualized 10 Years Annualized Since Inception Annualized
Class A 1.28% 6.80% -0.74% -0.74% 1.15% 8.28% 7.64% 11.55% 14.90%
Class C 1.18% 6.58% -1.15% -1.15% 0.37% 7.46% 6.83% 10.71% 14.04%
Class I 1.30% 6.85% -0.63% -0.63% 1.44% 8.55% 7.92% 11.82% 15.18%
Class A w/Sales Load -3.52% 1.72% -5.45% -5.45% -3.68% 8.28% 7.64% 11.55% 14.90%

Maximum sales charge for Class A is 4.75%. Maximum Deferred Sales Charge of 1.00% on Class C Shares applies to shares sold within 12 months of purchase. The performance data quoted here represents past performance. Current performance may be lower or higher than the performance data quoted above. Investment return and principal value will fluctuate, so that shares, when redeemed, may be worth more or less than their original cost. Past performance is no guarantee of future results. Results shown reflect the waiver, without which the results could have been lower. A fund’s performance, especially for very short periods of time, should not be the sole factor in making your investment decisions. To obtain the most recent month end performance information or the Fund’s prospectus please call 800-253-0412 or visit www.RationalMF.com.

Fund Expenses

Data as of: 2020-07-10T00:00:00

Share Class Class I Class A Class C Class A w/ Sales Load
Prospectus Gross Expense Ratio (May 1, 2020) 2.07% 2.22% 2.98% 2.22%
Prospectus Net Expense Ratio* (May 1, 2020) 1.76% 2.01% 2.76% 2.01%

*The Fund’s investment advisor, Rational Advisors, Inc., has contractually agreed to waive all or a portion of its management fee and/or reimburse certain operating expenses of the Fund to the extent necessary in order to limit the Total Annual Fund Operating Expenses (but excluding (i) acquired fund fees and expenses, (ii) brokerage commissions and trading costs, (iii) interest (including borrowing costs and overdraft charges), (iv) taxes, (v) short sale dividends and interest expenses, (vi) non-routine or extraordinary expenses (such as litigation or reorganizational costs), and (vii) costs and expenses of litigation or claims on behalf of the Fund regarding portfolio investments initiated (or threatened) by the investment adviser or sub-advisor) to not more than 1.75%, 2.00% and 2.75% of the daily net assets of the Fund’s Institutional Shares, Class A Shares and Class C Shares, respectively, through April 30, 2021.

Past performance is not a guarantee of future results.

Investors should carefully consider the investment objectives, risks, charges and expenses of the Rational Funds. This and other important information about the Fund is contained in the prospectus, which can be obtained by calling (800) 253-0412 or at www.RationalMF.com. The prospectus should be read carefully before investing. The Rational Funds are distributed by Northern Lights Distributors, LLC member FINRA/SIPC. Rational Advisors, Inc. 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 a new mutual fund and has a limited history of operations for investors to evaluate. Investors in the Fund bear the risk that the Fund may not be successful in implementing its investment strategies. 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 Fund is subject to concentration risk. When the Fund invests in asset-backed securities and mortgage-backed securities, the Fund is subject to the risk that, if the underlying borrowers fail to pay interest or repay principal, the assets backing these securities may not be sufficient to support payments on the securities. Interest rate risk is the risk that bond prices overall, including the prices of securities held by the Fund, will decline over short or even long periods of time due to rising interest rates. Bonds with longer maturities tend to be more sensitive to interest rates than bonds with shorter maturities. Lower-quality bonds, known as "high yield" or "junk" bonds, present greater risk than bonds of higher quality, including an increased risk of default. Credit risk is the risk that the issuer of a security will not be able to make principal and interest payments when due. These factors may affect the value of your investment.

The Fund commenced operations by acquiring all of the assets and liabilities of ESM Fund I, L.P. (the “Predecessor Fund”) in a tax-free reorganization on July 17, 2019 (the “Reorganization”). In connection with the Reorganization, investors in the Predecessor Fund received Institutional Shares of the Fund. The Fund’s investment objectives, policies, guidelines and restrictions are, in all material respects, equivalent to those of the Predecessor Fund. However, the Predecessor Fund was not registered under the 1940 Act and, therefore, was not subject to certain investment restrictions, limitations and diversification requirements that are imposed by the 1940 Act or Subchapter M of the Internal Revenue Code, which, if they had been applicable, might have adversely affected the Predecessor Fund’s performance. The Fund’s Sub-Advisor was the investment adviser to the Predecessor Fund. The Fund’s fees and expenses are expected to be higher than those of the Predecessor Fund, so if the Fund’s expenses were applied to the Predecessor Fund’s performance, the performance would have been lower.

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