UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number: 811-21927
AMM Funds
(Exact Name of Registrant as Specified in Charter)
PO Box 675203
14249 Rancho Santa Fe Farms Road
Rancho Santa Fe, CA 92067
(Address of Principal Executive Offices) (Zip Code)
Gabriel B. Wisdom
PO Box 675203
14249 Rancho Santa Fe Farms Road
Rancho Santa Fe, CA 92067
(Name and Address of Agent for Service)
With copy to:
JoAnn M. Strasser, Thompson Hine LLP
312 Walnut Street, 14th Floor, Cincinnati, Ohio 45202
Registrant’s Telephone Number, including Area Code: 858-755-0909
Date of fiscal year end: July 31
Date of reporting period: January 31, 2014
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget ("OMB") control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 450 Fifth Street, NW, Washington, DC 20549-0609. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
SEMI-ANNUAL REPORT
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGELS INCOME FUND
January 31, 2014
(UNAUDITED)
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
PORTFOLIO ANALYSIS
JANUARY 31, 2014 (UNAUDITED)
The following chart gives a visual breakdown of the Fund by the industry sectors the underlying securities represent as a percentage of the portfolio of investments.
AMM FUNDS
THE FALLEN ANGELS INCOME FUND
PORTFOLIO ANALYSIS
JANUARY 31, 2014 (UNAUDITED)
The following chart gives a visual breakdown of the Fund by the industry sectors the underlying securities represent as a percentage of the portfolio of investments.*
* Excludes options written.
|
| Fallen Angels Value Fund |
|
|
| Schedule of Investments |
|
|
| January 31, 2014 (Unaudited) |
|
|
|
|
|
Shares |
|
| Value |
|
|
|
|
COMMON STOCKS - 84.76% |
| ||
|
|
|
|
Consumer Discretionary - 7.96% |
| ||
4,700 |
| Apollo Group, Inc. Class A * | $ 151,763 |
6,400 |
| DeVry, Inc. | 231,296 |
3,000 |
| Time Warner, Inc. | 188,490 |
3,000 |
| Viacom, Inc. Class B | 246,300 |
|
|
| 817,849 |
Consumer Staples - 2.42% |
| ||
3,100 |
| Pepsico, Inc. | 249,116 |
|
|
|
|
Energy - 8.05% |
|
|
|
6,000 |
| Alpha Natural Resources, Inc. * | 34,080 |
2,500 |
| Devon Energy Corp. | 148,050 |
3,000 |
| HollyFrontier Corp. | 138,900 |
3,450 |
| National Oilwell Varco, Inc. | 258,784 |
2,820 |
| Occidental Petroleum Corp. | 246,947 |
|
|
| 826,761 |
Financials - 17.13% |
|
|
|
4 |
| Berkshire Hathaway, Inc. Class A * | 678,048 |
1,800 |
| Berkshire Hathaway, Inc. Class B * | 200,880 |
5,150 |
| JP Morgan Chase & Co. | 285,104 |
6,500 |
| SLM Corp. | 147,940 |
6,500 |
| Wells Fargo & Co. | 294,710 |
10,000 |
| Western Union Co. | 154,000 |
|
|
| 1,760,682 |
Healthcare - 9.56% |
|
|
|
4,150 |
| Express Scripts Holding Co. * | 309,964 |
7,500 |
| Novo-Nordisk A/S ADR * | 297,525 |
8,400 |
| Teva Pharmaceutical Industries Ltd. ADR | 374,892 |
|
|
| 982,381 |
Industrials - 14.61% |
|
|
|
11,700 |
| Exelis, Inc. | 229,203 |
25,000 |
| General Electric Co. | 628,250 |
7,000 |
| General Motors Corp. * | 252,560 |
3,000 |
| Raytheon Co. | 285,210 |
2,857 |
| SAIC, Inc. | 105,738 |
|
|
| 1,500,961 |
Information Technology - 20.34% |
| ||
500 |
| Apple, Inc. | 250,300 |
11,600 |
| Cisco Systems, Inc. | 254,156 |
25,000 |
| Entropic Communications, Inc. * | 104,250 |
330 |
| Google, Inc. Class A * | 389,720 |
13,700 |
| GT Advanced Technologies, Inc. * | 140,699 |
5,000 |
| Hewlett-Packard Co. | 145,000 |
5,000 |
| Leidos Holdings, Inc. | 226,700 |
8,000 |
| Microsoft Corp. | 302,720 |
7,500 |
| Oracle Corp. | 276,750 |
|
|
| 2,090,295 |
Materials - 4.69% |
|
|
|
25,000 |
| Alcoa, Inc. | 287,750 |
6,000 |
| Freeport McMoran Copper & Gold, Inc. | 194,460 |
|
|
| 482,210 |
|
|
|
|
TOTAL FOR COMMON STOCKS (Cost $7,815,399) - 84.76% | 8,710,255 | ||
|
|
|
|
SHORT TERM INVESTMENTS - 15.42% |
| ||
1,584,371 |
| First American Treasury Obligation Fund Class Z 0.00% ** | 1,584,371 |
TOTAL SHORT TERM INVESTMENTS (Cost $1,584,371) - 15.42% | 1,584,371 | ||
|
|
|
|
TOTAL INVESTMENTS (Cost $9,399,770) - 100.18% | 10,294,626 | ||
|
|
|
|
LIABILITIES IN EXCESS OF OTHER ASSETS - (0.18)% | (18,068) | ||
|
|
|
|
NET ASSETS - 100.00% | $ 10,276,558 | ||
|
|
|
|
* Non-income producing security during the period. |
| ||
** Variable rate security; the coupon rate shown represents the yield at January 31, 2014. |
| ||
ADR - American Depository Receipt |
| ||
The accompanying notes are an integral part of these financial statements. |
|
|
| Fallen Angels Income Fund |
|
|
| Schedule of Investments |
|
|
| January 31, 2014 (Unaudited) |
|
|
|
|
|
Shares |
|
| Value |
|
|
|
|
COMMON STOCKS - 71.65% |
| ||
|
|
|
|
Consumer Discretionary - 11.79% |
| ||
3,000 |
| McDonalds Corp. | $ 282,510 |
4,300 |
| Molson Coors Brewing Co. Class B | 226,352 |
1,475 |
| News Corp. Class A * | 23,541 |
5,900 |
| Twenty-First Century Fox, Inc. | 187,738 |
2,000 |
| Wynn Resorts Ltd. | 434,840 |
|
|
| 1,154,981 |
Consumer Staples - 7.64% |
| ||
4,700 |
| Kraft Foods Group, Inc. | 246,045 |
3,400 |
| PepsiCo, Inc. | 273,224 |
3,000 |
| Procter & Gamble Co. | 229,860 |
|
|
| 749,129 |
Energy - 6.73% |
| ||
1,960 |
| Chevron Corp. | 218,795 |
3,800 |
| ConocoPhillips | 246,810 |
2,100 |
| Exxon Mobil Corp. | 193,536 |
|
|
| 659,141 |
Financials - 14.12% |
| ||
9,300 |
| Bank of New York Co., Inc. | 297,228 |
5,300 |
| JP Morgan Chase & Co. | 293,408 |
4,900 |
| Oaktree Capital Group, LLC | 286,209 |
10,700 |
| SLM Corp. | 243,532 |
5,800 |
| Wells Fargo & Co. | 262,972 |
|
|
| 1,383,349 |
Healthcare - 13.40% |
| ||
5,300 |
| AbbVie Inc. | 260,919 |
3,100 |
| Johnson & Johnson | 274,257 |
3,200 |
| Novartis AG ADR * | 253,024 |
8,300 |
| Pfizer, Inc. | 252,320 |
6,100 |
| Teva Pharmaceutical Industries Ltd. ADR | 272,243 |
|
|
| 1,312,763 |
Industrials - 6.07% |
| ||
10,100 |
| General Electric Co. | 253,813 |
2,800 |
| Norfolk Southern Corp. | 259,252 |
2,200 |
| SAIC, Inc. | 81,422 |
|
|
| 594,487 |
Information Technology - 11.90% |
| ||
470 |
| Apple, Inc. | 235,282 |
3,850 |
| Leidos Holdings, Inc. | 174,559 |
6,700 |
| Microsoft Corp. | 253,528 |
6,000 |
| Paychex, Inc. | 250,920 |
3,400 |
| Qualcomm, Inc. | 252,348 |
|
|
| 1,166,637 |
Transportation - 0.00% |
| ||
45,000 |
| Sea Containers Ltd. Class A (Bermuda) † | - |
|
|
|
|
TOTAL FOR COMMON STOCKS (Cost $5,828,952) - 71.65% | 7,020,487 | ||
|
|
|
|
CALL OPTIONS - 0.09* |
| ||
|
|
|
|
Underlying Security |
| ||
Expiration Date/Exercise Price |
| ||
|
|
|
|
Shares Subject |
| ||
to Call |
|
|
|
|
| Sears Holdings Corp. |
|
4,000 |
| January 2015 Call @ $60.00 | 9,400 |
|
| Total (Premiums Paid $39,665) - 0.09% | 9,400 |
|
|
|
|
CORPORATE BONDS - 11.29% |
| ||
150,000 |
| Advanced Micro Devices, Inc. 7.75%, 08/01/20 | 149,250 |
100,000 |
| Amerenenergy Generating Co. 7.00%, 04/15/18 | 84,000 |
54,000 |
| Apria Healthcare Group, Inc. 12.375%, 11/01/14 | 54,135 |
236,000 |
| Arch Coal, Inc. 7.25%, 10/01/20 | 181,130 |
110,000 |
| Gymboree Corp. 9.125%, 12/01/18 | 97,900 |
100,000 |
| Exco Resources, Inc. 7.5%, 09/15/18 | 98,750 |
205,000 |
| NRG Energy, Inc. 7.625%, 05/15/19 | 215,763 |
250,000 |
| Sears Holdings Corp. 6.625%, 10/5/18 | 225,312 |
TOTAL FOR CORPORATE BONDS (Cost $1,132,186) - 11.29% | 1,106,240 | ||
|
|
|
|
EXCHANGE TRADED FUND-FIXED INCOME - 1.95% |
| ||
6,200 |
| ProShares Short 20+ Year Treasury * | 191,642 |
TOTAL FOR EXCHANGE TRADED FUND-FIXED INCOME (Cost $194,412) - 1.95% | 191,642 | ||
|
|
|
|
MORTGAGE BACKED SECURITIES - 0.08% |
| ||
7,784 |
| GMAC Commercial Mortgage Securities, Inc. 2004-C3 Class A4 4.55% 12/10/41 | 7,804 |
TOTAL FOR MORTGAGE BACKED SECURITIES (Cost $7,750) - 0.08% | 7,804 | ||
|
|
|
|
PREFERRED SECURITIES - 5.40% |
| ||
7,800 |
| American Homes 4 Rent 5.00%, 12/31/49 | 191,489 |
9,200 |
| Charles Schwab Corp. 6.00%, 12/31/49 | 217,856 |
5,000 |
| Discover Financial Services 6.5%, 12/31/49 | 119,400 |
TOTAL FOR PREFERRED SECURITIES (Cost $528,811) - 5.40% | 528,745 | ||
|
|
|
|
SHORT TERM INVESTMENTS - 9.42% |
| ||
922,790 |
| First American Treasury Obligation Fund Class Z 0.00% ** | 922,790 |
TOTAL SHORT TERM INVESTMENTS (Cost $922,790) - 9.42% | 922,790 | ||
|
|
|
|
TOTAL INVESTMENTS (Cost $8,654,566) - 99.88% | 9,787,108 | ||
|
|
|
|
OTHER ASSETS IN EXCESS OF LIABILITIES - 0.12% | 11,792 | ||
|
|
|
|
NET ASSETS - 100.00% | $ 9,798,900 | ||
|
|
|
|
ADR - American Depository Receipt. |
| ||
† This security has been valued according to the fair value pricing policies of the Fund. |
| ||
* Non-income producing security during the period. |
| ||
** Variable rate security; the coupon rate shown represents the yield at January 31, 2014. |
| ||
The accompanying notes are an integral part of these financial statements. |
|
Fallen Angels Income Fund | ||
Schedule of Call Options Written | ||
January 31, 2014 (Unaudited) | ||
|
|
|
CALL OPTIONS WRITTEN * |
|
|
|
|
|
Underlying Security | Shares Subject |
|
Expiration Date/Exercise Price | to Call | Value |
|
|
|
Leidos Holdings, Inc. |
|
|
February 2014 Call@ $50.00 | 3,800 | $ 1,710 |
|
|
|
Molson Coors Brewing Co |
|
|
February 2014 Call@ $57.50 | 4,300 | 1,290 |
|
|
|
Twenty-First Century Fox, Inc. |
|
|
February 2014 Call@ $33.00 | 5,900 | 2,773 |
|
|
|
Total (Premiums Received $7,695) |
| $ 5,773 |
|
|
|
|
|
|
* Non-income producing securities during the period. |
|
|
The accompanying notes are an integral part of these financial statements. |
|
AMM Funds | ||||
Statements of Assets and Liabilities | ||||
January 31, 2014 (Unaudited) | ||||
|
|
|
|
|
|
| Value Fund |
| Income Fund |
Assets: |
|
|
|
|
Investments in Securities, at Value (Cost $9,399,770 and $8,654,566) | $ 10,294,626 |
| $ 9,787,108 | |
Receivables: |
|
|
| |
Dividends and Interest | 3,525 |
| 32,506 | |
Prepaid Expenses | 8,856 |
| 8,857 | |
Total Assets | 10,307,007 |
| 9,828,471 | |
Liabilities: |
|
|
|
|
Call Options Written (premiums received $7,695) | - |
| 5,773 | |
Payables: |
|
|
| |
Management Fees | 8,898 |
| 8,490 | |
Administrative Fees | 2,224 |
| 2,123 | |
Distribution Fees | 2,322 |
| 2,025 | |
Trustee Fees | 571 |
| 671 | |
Shareholder Redemptions | 6,423 |
| 500 | |
Other Expenses | 10,011 |
| 9,989 | |
Total Liabilities | 30,449 |
| 29,571 | |
Net Assets |
| $ 10,276,558 |
| $ 9,798,900 |
|
|
|
|
|
Net Assets Consist of: |
|
|
| |
Paid In Capital | $ 11,822,112 |
| $ 12,756,009 | |
Accumulated Undistributed Net Investment Income (Loss) | (40,772) |
| 210,039 | |
Accumulated Realized Loss on Investments | (2,399,638) |
| (4,301,612) | |
Unrealized Appreciation in Value of Investments | 894,856 |
| 1,134,464 | |
Net Assets, for 995,415 and 1,030,390 Shares Outstanding | $ 10,276,558 |
| $ 9,798,900 | |
|
|
|
|
|
Net Asset Value Per Share | $ 10.32 |
| $ 9.51 | |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
|
|
AMM Funds | ||||
Statements of Operations | ||||
For the six months ended January 31, 2014 (Unaudited) | ||||
|
|
|
|
|
|
| Value Fund |
| Income Fund |
Investment Income: |
|
|
| |
Dividends (net of foreign withholding of $817 and $516, respectively) | $ 78,841 |
| $ 116,756 | |
Interest |
| - |
| 61,093 |
Total Investment Income | 78,841 |
| 177,849 | |
|
|
|
|
|
Expenses: |
|
|
|
|
Advisory | 51,412 |
| 49,242 | |
Administrative | 12,853 |
| 12,311 | |
Distribution (12b-1) | 12,853 |
| 12,311 | |
Transfer Agent | 15,276 |
| 15,276 | |
Registration | 9,563 |
| 9,561 | |
Custodian | 3,993 |
| 4,593 | |
Audit |
| 4,234 |
| 4,239 |
Legal |
| 5,337 |
| 4,638 |
Trustee |
| 1,317 |
| 1,416 |
Printing and Mailing | 1,008 |
| 508 | |
Miscellaneous | 1,326 |
| 2,584 | |
Insurance | 441 |
| 440 | |
Total Expenses | 119,613 |
| 117,119 | |
|
|
|
|
|
Net Investment Income (Loss) | (40,772) |
| 60,730 | |
|
|
|
|
|
Realized and Unrealized Gain on: |
|
|
| |
Realized Gain on Investments | 220,283 |
| 534,753 | |
Realized Loss on Options | - |
| (33,395) | |
Capital Gain Distributions from Portfolio Company | - |
| - | |
Net Change in Unrealized Appreciation (Depreciation) on: |
|
|
| |
Investments | 548,198 |
| (181,984) | |
Options |
| - |
| 7,181 |
Net Realized and Unrealized Gain on Investments | 768,481 |
| 326,555 | |
|
|
|
|
|
Net Increase in Net Assets Resulting from Operations | $ 727,709 |
| $ 387,285 | |
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
|
|
Fallen Angels Value Fund | ||||
Statements of Changes in Net Assets | ||||
|
|
|
|
|
|
|
|
|
|
|
| (Unaudited) |
|
|
|
| Six Months |
|
|
|
| Ended |
| Year Ended |
|
| 1/31/2014 |
| 7/31/2013 |
Increase (Decrease) in Net Assets From Operations: |
|
|
| |
Net Investment Loss | $ (40,772) |
| $ (24,105) | |
Net Realized Gain on Investments | 220,283 |
| 153,760 | |
Unrealized Appreciation on Investments | 548,198 |
| 1,864,841 | |
Net Increase in Net Assets Resulting from Operations | 727,709 |
| 1,994,496 | |
|
|
|
|
|
Distributions to Shareholders: |
|
|
| |
Net Investment Income | - |
| - | |
Realized Gains | - |
| - | |
Total Distributions Paid to Shareholders | - |
| - | |
|
|
|
|
|
Capital Share Transactions | (421,625) |
| (2,124,187) | |
|
|
|
|
|
Total Increase (Decrease) in Net Assets | 306,084 |
| (129,691) | |
|
|
|
|
|
Net Assets: |
|
|
|
|
Beginning of Period | 9,970,474 |
| 10,100,165 | |
|
|
|
|
|
End of Period (Including Undistributed Net Investment Income of $0 and $0, respectively) |
|
|
| |
$ 10,276,558 |
| $ 9,970,474 | ||
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
|
|
Fallen Angels Income Fund | ||||
Statements of Changes in Net Assets | ||||
|
|
|
|
|
|
|
|
|
|
|
| (Unaudited) |
|
|
|
| Six Months |
|
|
|
| Ended |
| Year Ended |
|
| 1/31/2014 |
| 7/31/2013 |
Increase (Decrease) in Net Assets From Operations: |
|
|
| |
Net Investment Income | $ 60,730 |
| $ 195,811 | |
Net Realized Gain on Investments & Options | 501,358 |
| 516,162 | |
Capital Gain Distributions from Portfolio Companies | - |
| 7,254 | |
Unrealized Appreciation (Depreciation) on Investments & Options | (174,803) |
| 768,496 | |
Net Increase in Net Assets Resulting from Operations | 387,285 |
| 1,487,723 | |
|
|
|
|
|
Distributions to Shareholders: |
|
|
| |
Net Investment Income | (54,781) |
| (150,190) | |
Realized Gain | - |
| - | |
Total Distributions Paid to Shareholders | (54,781) |
| (150,190) | |
|
|
|
|
|
Capital Share Transactions | (93,055) |
| (1,102,204) | |
|
|
|
|
|
Total Increase in Net Assets | 239,449 |
| 235,329 | |
|
|
|
|
|
Net Assets: |
|
|
|
|
Beginning of Period | 9,559,451 |
| 9,324,122 | |
|
|
|
|
|
End of Period (Including Undistributed Net Investment Income of $210,039 and $204,090, respectively) |
|
|
| |
$ 9,798,900 |
| $ 9,559,451 | ||
|
|
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
|
|
Fallen Angels Value Fund | ||||||||
Financial Highlights | ||||||||
Selected data for a share outstanding throughout the period. | ||||||||
|
|
|
|
|
|
|
|
|
|
| (Unaudited) |
|
|
|
|
|
|
|
| Six Months |
|
|
|
|
|
|
|
| Ended |
| Years Ended | ||||
|
| 1/31/2014 |
| 7/31/2013 | 7/31/2012 | 7/31/2011 | 7/31/2010 | 7/31/2009 |
|
|
|
|
|
|
|
|
|
Net Asset Value, at Beginning of Period | $ 9.61 |
| $ 7.82 | $ 8.35 | $ 7.77 | $ 7.59 | $ 9.14 | |
|
|
|
|
|
|
|
|
|
Income From Investment Operations: |
|
|
|
|
|
|
| |
Net Investment Loss * | (0.04) |
| (0.02) | (0.02) | (0.06) | (0.08) | (0.04) | |
Net Gain (Loss) on Securities (Realized and Unrealized) | 0.75 |
| 1.81 | (0.51) | 0.64 | 0.27 | (1.51) | |
Total from Investment Operations | 0.71 |
| 1.79 | (0.53) | 0.58 | 0.19 | (1.55) | |
|
|
|
|
|
|
|
|
|
Distributions: |
|
|
|
|
|
|
|
|
Net Investment Income | - |
| - | - | - | (0.01) | - | |
Realized Gains | - |
| - | - | - | - | - | |
Total from Distributions | - |
| - | - | - | (0.01) | - | |
|
|
|
|
|
|
|
|
|
Net Asset Value, at End of Period | $ 10.32 |
| $ 9.61 | $ 7.82 | $ 8.35 | $ 7.77 | $ 7.59 | |
|
|
|
|
|
|
|
|
|
Total Return ** | 7.39% |
| 22.89% | (6.35)% | 7.46% | 2.45% | (16.96)% | |
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data: |
|
|
|
|
|
|
| |
Net Assets at End of Period (Thousands) | $ 10,277 |
| $ 9,970 | $ 10,100 | $ 12,830 | $ 13,077 | $ 14,087 | |
Ratio of Expenses to Average Net Assets | 2.33% | † | 2.43% | 2.25% | 2.17% | 2.19% | 2.18% | |
Ratio of Net Investment Income (Loss) to Average Net Assets | (0.79)% | † | (0.25)% | (0.26)% | (0.68)% | (0.96)% | (0.57)% | |
Portfolio Turnover | 12.31% |
| 13.80% | 49.23% | 118.43% | 286.18% | 215.67% | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Per share net investment income (loss) has been determined on the basis of average shares outstanding during the period. |
|
|
| |||||
** Assumes reinvestment of dividends. |
|
|
|
|
|
|
| |
† Annualized |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
|
|
|
|
|
|
Fallen Angels Income Fund | ||||||||
Financial Highlights | ||||||||
Selected data for a share outstanding throughout the period. | ||||||||
|
|
|
|
|
|
|
|
|
|
| (Unaudited) |
|
|
|
|
|
|
|
| Six Months |
|
|
|
|
|
|
|
| Ended |
| Years Ended | ||||
|
| 1/31/2014 |
| 7/31/2013 | 7/31/2012 | 7/31/2011 | 7/31/2010 | 7/31/2009 |
|
|
|
|
|
|
|
|
|
Net Asset Value, at Beginning of Period | $ 9.19 |
| $ 7.96 | $ 7.74 | $ 7.36 | $ 6.64 | $ 7.81 | |
|
|
|
|
|
|
|
|
|
Income From Investment Operations: |
|
|
|
|
|
|
| |
Net Investment Income * | 0.06 |
| 0.18 | 0.24 | 0.23 | 0.24 | 0.30 | |
Net Gain (Loss) on Securities (Realized and Unrealized) | 0.31 |
| 1.19 | 0.20 | 0.40 | 0.72 | (1.26) | |
Total from Investment Operations | 0.37 |
| 1.37 | 0.44 | 0.63 | 0.96 | (0.96) | |
|
|
|
|
|
|
|
|
|
Distributions: |
|
|
|
|
|
|
|
|
Net Investment Income | (0.05) |
| (0.14) | (0.22) | (0.25) | (0.24) | (0.21) | |
Realized Gains | - |
| - | - | - | - | - | |
Total from Distributions | (0.05) |
| (0.14) | (0.22) | (0.25) | (0.24) | (0.21) | |
|
|
|
|
|
|
|
|
|
Net Asset Value, at End of Period | $ 9.51 |
| $ 9.19 | $ 7.96 | $ 7.74 | $ 7.36 | $ 6.64 | |
|
|
|
|
|
|
|
|
|
Total Return ** | 4.07% |
| 17.35% | 5.93% | 8.63% | 14.62% | (12.10)% | |
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data: |
|
|
|
|
|
|
| |
Net Assets at End of Period (Thousands) | $ 9,799 |
| $ 9,559 | $ 9,324 | $ 11,067 | $ 12,325 | $ 11,925 | |
Ratio of Expenses to Average Net Assets | 2.38% | † | 2.49% | 2.33% | 2.27% | 2.20% | 2.37% | |
Ratio of Net Investment Income (Loss) to Average Net Assets | 1.23% | † | 2.10% | 3.19% | 3.01% | 3.29% | 4.87% | |
Portfolio Turnover | 34.24% |
| 43.58% | 69.06% | 19.62% | 37.83% | 99.76% | |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
* Per share net investment income has been determined on the basis of average shares outstanding during the period. |
|
|
| |||||
** Assumes reinvestment of dividends. |
|
|
|
|
|
|
| |
† Annualized |
|
|
|
|
|
|
|
|
The accompanying notes are an integral part of these financial statements. |
|
|
|
|
|
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2014 (UNAUDITED)
Note 1. Organization
The Fallen Angels Value Fund (“Value Fund”) and the Fallen Angels Income Fund (“Income Fund”) (each a “Fund” and collectively, the “Funds”) are diversified series of AMM Funds (the “Trust”), an open-end investment company, organized as an Ohio business trust on June 20, 2006. The Funds commenced operations on November 10, 2006. The Trust is permitted to issue an unlimited number of shares of beneficial interest of separate series. The Funds are the only series currently authorized by the Board of Trustees (“the Board”). The investment adviser to the Funds is American Money Management, LLC (the “Advisor”).
The Value Fund’s investment objective is to seek long-term capital appreciation. The Income Fund’s investment objective is to seek high current income with the potential for capital appreciation.
Note 2. Summary of Significant Accounting Policies
The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements. These policies are in conformity with accounting principles generally accepted in the United States of America.
Security Valuation: All investments in securities are recorded at their estimated fair value, as described in Note 3.
In accordance with the Trust’s good faith pricing guidelines, the Advisor is required to consider all appropriate factors relevant to the value of securities for which it had determined other pricing sources are not available or reliable as described above. No single standard for determining fair value controls, since fair value depends upon the circumstances of each individual case. As a general principle, the current fair value of an issue of securities being valued by the Advisor would appear to be the amount which the owner might reasonably expect to receive for them upon their current sale. Methods which are in accord with this principle may, for example, be based on (i) a multiple of earnings; (ii) a discount from market of a similar freely traded security (included a derivative security or a basket of securities traded on other markets, exchanges or among dealers); or (iii) yield to maturity with respect to debt issues, or a combination of these and other methods.
Fair Valuation- The investment in 45,000 shares of Sea Containers Ltd., in the Income Fund, has been valued at $.00 per share. This security has been valued according to the fair value pricing policies of the Funds.
Option Writing- When either Fund writes an option, an amount equal to the premium received by the Fund is recorded as a liability and is subsequently adjusted to the current fair value of the option written. Premiums received from writing options that expire unexercised are treated by a Fund on the expiration date as realized gains from investments. The difference between the premium and the amount paid on effecting a closing purchase transaction, including brokerage commissions, is also treated as a realized gain, or, if the premium is less than the amount paid for the closing purchase transaction, as a realized loss. If a call option is exercised, the premium is added to the proceeds from the sale of the underlying security or currency in determining whether a Fund has realized a gain or loss. If a put option is exercised, the premium reduces the cost basis of the securities purchased by the Fund. A Fund as writer of an option bears the market risk of an unfavorable change in the price of the security underlying the written option.
Repurchase Agreements- In connection with transactions in repurchase agreements, it is the Funds’ policy that its custodian take possession of the underlying collateral securities, the fair value of which exceeds the principal amount of the repurchase transaction, including accrued interest, at all times. If the seller defaults, and the fair value of the collateral declines, realization of the collateral by a Fund may be delayed or limited.
Financial Futures Contracts- The Funds may invest in financial futures contracts solely for the purpose of hedging its existing portfolio securities, or securities that the Fund intends to purchase, against fluctuations in fair value caused by changes in prevailing market interest rates. Upon entering into a financial futures contract, a Fund is required to pledge to the broker an amount of cash, U.S. government securities, or other assets, equal to a certain percentage of the contract amount (initial margin deposit). Subsequent payments, known as “variation margin,” are made or received by a Fund each day, depending on the daily fluctuations in the fair value of the underlying security. A Fund recognizes a gain or loss equal to the daily variation margin. Should market conditions move unexpectedly, A Fund may not achieve the anticipated benefits of the financial futures contracts and may realize a loss. The use of futures transactions involves the risk of imperfect correlation in movements in the price of futures contracts, interest rates, and the underlying hedged assets.
Short Sales- The Funds may sell a security that they do not own in anticipation of a decline in the fair value of that security. When a Fund sells a security short, it must borrow the security sold short and deliver it to the broker-dealer through which it made the short sale. A gain, limited to the price at which a Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of a short sale.
Income Taxes - The Funds intend to continue to qualify each year as a “regulated investment company” under Subchapter M of the Internal Revenue Code of 1986, as amended. By so qualifying, the Funds will not be subject to federal income taxes to the extent that they distribute substantially all of their net investment income and any realized capital gains. It is the Funds’ policy to distribute annually, prior to the end of the calendar year, dividends sufficient to satisfy excise tax requirements of the Internal Revenue Service. This Internal Revenue Service requirement may cause an excess of distributions over the book year-end accumulated income.
In addition, GAAP requires management of the Funds to analyze all open tax years, fiscal years 2011-2013, as defined by IRS statute of limitations for all major industries, including federal tax authorities and certain state tax authorities. As of and during the period ended January 31, 2014, the Funds did not have a liability for any unrecognized tax benefits. The Funds have no examination in progress and are not aware of any tax positions for which it is reasonably possible that the total tax amounts of unrecognized tax benefits will significantly change in the next twelve months.
Share Valuation – The price (net asset value) of the shares of each Fund is normally determined as of 4:00 p.m. Eastern time on each day the Funds are open for business and on any other day on which there is sufficient trading in the Funds’ securities to materially affect the net asset value. Each Fund is normally open for business on every day except Saturdays, Sundays and the following holidays: New Year’s Day, Martin Luther King Day, Presidents’ Day, Good Friday, Memorial Day, Independence Day, Labor Day, Thanksgiving and Christmas.
Security Transaction Timing – Security transactions are recorded on the dates transactions are entered into (the trade dates). Dividend income and distributions to shareholders are recognized on the ex-dividend date. Interest income is recognized on an accrual basis. Each Fund uses the identified cost basis in computing gain or loss on sale of investment securities. Discounts and premiums on securities purchased are amortized over the life of the respective securities. Withholding taxes on foreign dividends are provided for in accordance with the Funds’ understanding of the applicable country’s tax rules and rates.
Distributions to Shareholders- Each Fund typically will distribute substantially all of its net investment income in the form of dividends and capital gains to its shareholders. The Value Fund will distribute dividends and capital gains annually, and expects that distributions will consist primarily of capital gains. The Income Fund will distribute dividends monthly and capital gains annually, and expects that distributions will consist primarily of ordinary income. Distributions will be recorded on ex-dividend date.
Use of Estimates- The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increase and decreases in net assets from operations during the reporting period. Actual results could differ from these estimates.
Subsequent Events - Management has evaluated the impact of all subsequent events through the date the financial statements were issued and has determined that there were no subsequent events requiring recognition or disclosure in these financial statements.
Note 3. Security Valuations
Hierarchy of Fair Value Inputs
The Funds utilize various methods to measure the fair value of most of their investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The three levels of inputs are as follows:
·
Level 1. Unadjusted quoted prices in active markets for identical assets or liabilities that the company has the ability to access.
·
Level 2. Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data.
·
Level 3. Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the company's own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available.
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Fair Value Measurements
A description of the valuation techniques applied to the Funds’ major categories of assets and liabilities measured at fair value on a recurring basis follows.
Equity securities (common and preferred stock). Each Fund’s assets are generally valued at their market value using market quotations. If market prices are not available or, in the Advisor’s opinion, market prices do not reflect fair value, or if an event occurs after the close of trading on the domestic or foreign exchange or market on which the security is principally traded (but prior to the time the NAV is calculated) that materially affects fair value, the Advisor will value the Funds’ assets at their fair value in accordance with policies approved by the Funds’ Board of Trustees (the “Board”). For example, fair value pricing may be used if an event occurs after the close of the foreign market that could have an impact on the foreign securities value. The Board has adopted guidelines for good faith pricing, and has delegated to the Advisor the responsibility for determining fair value prices, subject to review by the Board.
Fixed income securities generally are valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices accurately reflect the fair market value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional size trading units of debt securities without regard to sale or bid prices. If the Advisor decides that a price provided by the pricing service does not accurately reflect the fair market value of the securities, when prices are not readily available from a pricing service, or when restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review of the Board of Trustees. Short term investments in fixed income securities with maturities of less than 60 days when acquired, or which subsequently are within 60 days of maturity, are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value.
The following table summarizes the inputs used to value each Fund’s assets and liabilities measured at fair value as of January 31, 2014:
Value Fund | Financial Instruments—Assets | |||
|
|
|
|
|
Categories | Level 1 | Level 2 | Level 3 | Fair Value |
|
|
|
|
|
Common Stocks | $ 8,710,255 | - | - | $ 8,710,255 |
Short-Term Investments: |
|
|
|
|
First American Treasury Obligation Fund Class Z | 1,584,371 | - | - | 1,584,371 |
| $ 10,294,626 | - | - | $ 10,294,626 |
The Value Fund did not hold any Level 2 or Level 3 assets during the six months ended January 31, 2014. There were no significant transfers into or out of Level 1, Level 2, or Level 3 during the period. It is the Value Fund’s policy to recognize transfers into and out of Level 1, Level 2, and Level 3 at the end of the reporting period. The Value Fund did not hold any derivative instruments at any time during the period ended January 31, 2014.
The following table summarizes the inputs used to value each Fund’s assets and liabilities measured at fair value as of January 31, 2014:
Income Fund | Financial Instruments—Assets | |||
|
|
|
|
|
Categories | Level 1 | Level 2 | Level 3 | Fair Value |
|
|
|
|
|
Common Stocks | $ 7,020,487 | - | - | $ 7,020,487 |
Call Options | 9,400 |
|
| 9,400 |
Corporate Bonds | 1,106,240 | - | - | 1,106,240 |
Exchange Traded Fund | 191,642 | - | - | 191,642 |
Mortgage Backed Securities | 7,804 | - | - | 7,804 |
Preferred Securities | 528,745 |
|
| 528,745 |
Short-Term Investments: |
|
|
|
|
First American Treasury Obligation Fund Class Z | 922,790 | - | - | 922,790 |
Total | $ 9,787,108 | - | - | $ 9,787,108 |
|
|
|
|
|
| Financial Instruments—Liabilities | |||
|
|
|
|
|
Categories | Level 1 | Level 2 | Level 3 | Fair Value |
|
|
|
|
|
Call Options | $ 5,773 | - | - | $ 5,773 |
Total | $ 5,773 | - | - | $ 5,773 |
The Income Fund did not hold any Level 2 or Level 3 assets during the six months ended January 31, 2014. There were no significant transfers into or out of Level 1, Level 2, or Level 3 during the period. It is the Income Fund’s policy to recognize transfers into and out of Level 1, Level 2, and Level 3 at the end of the reporting period.
Note 4. Investment Management and Service Agreements
The Trust has entered into a management agreement (the “Management Agreement”) with the Advisor pursuant to which the Advisor, subject to the supervision of the Board, provides, or arranges to be provided, to the Funds such investment advice as it deems advisable and will furnish or arrange to be furnished a continuous investments program for the Funds consistent with each Funds investment objective and policies. Under the Management Agreement, each Fund will pay the Advisor a monthly fee based on the Fund’s average daily net assets at the annual rate of 1.00% per Fund. For the six months ended January 31, 2014, the Advisor earned a fee of $51,412 and $49,242 for the Value Fund and Income Fund, respectively. The Funds owed the Advisor management fees of $8,898 and $8,490 for the Value Fund and Income Fund, respectively, as of January 31, 2014.
The Trust also has an administration agreement with the Advisor to furnish sponsorship, administrative and supervisory services as may from time to time be reasonably requested by the Trust and in general to provide supervision of the overall operations of the Trust. Under this agreement, each Fund pays the Advisor a monthly fee based on the Fund’s average daily net assets at the annual rate of 0.25%. For the six months ended January 31, 2014, the Advisor earned a fee of $12,853 and $12,311 from the Value Fund and Income Fund, respectively. The Funds owed the Advisor administrative fees of $2,224 and $2,123 for the Value Fund and Income Fund, respectively, as of January 31, 2014.
The Funds have adopted a Plan pursuant to Rule 12b-1 under the 1940 Act whereby the Funds pay the Advisor for certain distribution and promotion expenses activities which are primarily intended to result in the sale of the Funds’ shares, including, but not limited to: advertising, printing of prospectuses and reports for prospective shareholders, preparation and distribution of advertising materials and sales literature, and payments to dealers and shareholder servicing agents who enter into agreements with the Funds. The Funds’ incur such distribution expenses at the rate of 0.25% per annum of the Funds average net assets. For the six months ended January 31, 2014, distribution (12b-1) fees of the Plan accrued fees of $12,853 and $12,311 under the plan from the Value Fund and Income Fund, respectively. The Funds owed the Advisor $2,322 and $2,025 for the Value Fund and Income Fund, respectively as of January 31, 2014.
Note 5. Related Party Transactions
Gabriel B. Wisdom is the control person of the Advisor and also serves as a trustee and officer of the Trust. Mr. Wisdom receives benefits from the Advisor resulting from management, administration and distribution (12b-1) fees paid to the Advisor by the Funds.
For the six months ended January 31, 2014, each Independent Trustee received $500 for his or her attendance at the regularly scheduled meetings of the Board of Trustees. The “interested persons” who serve as Trustees of the Trust receive no compensation for their services as Trustees. None of the executive officers receive compensation from the Trust.
Note 6. Options
Transactions in purchased options for the Income Fund during the six months ended January 31, 2014 were as follows:
| Number of |
| Premiums Paid |
| Contracts |
| |
Options outstanding at July 31, 2013 | - |
| $ - |
Options written | 151 |
| 125,391 |
Options exercised | - |
| - |
Options expired | - |
| - |
Options terminated in closing purchase transaction | (111) |
| (85,726) |
Options outstanding at January 31, 2014 | 40 |
| $ 39,665 |
Transactions in written call options for the Income Fund during the six months ended January 31, 2014 were as follows:
| Number of |
| Premiums Received |
| Contracts |
| |
Options outstanding at July 31, 2013 | 175 |
| $ 12,308 |
Options written | 313 |
| 18,682 |
Options exercised | (102) |
| (10,012) |
Options expired | (196) |
| (10,823) |
Options terminated in closing purchase transaction | (50) |
| (2,460) |
Options outstanding at January 31, 2014 | 140 |
| $ 7,695 |
Realized and unrealized gains and losses on derivatives contracts entered into during the six months ended January 31, 2014, by the Income Fund, are recorded in the following locations in the Statement of Operations:
| Location | Realized Gain/(Loss) | Location | Unrealized Gain/(Loss) |
Options Written & Purchased | Realized Loss on Options | $(33,395) | Change in Unrealized Appreciation on Options | $7,181 |
The selling of written call options may tend to reduce the volatility of the Income Fund because the premiums received from selling the options will reduce any losses on the underlying securities, but only by the amount of the premiums. However, selling the options may also limit the Income Fund’s gain on the underlying securities. Written call options expose the Income Fund to minimal counterparty risk since they are exchange-traded and the exchange’s clearing house guarantees the options against default.
Note 7. Capital Share Transactions
The Funds are authorized to issue an unlimited number of shares with no par value of separate series. Paid in capital at January 31, 2014 was $11,822,112 and $12,756,009 representing 995,415 and 1,030,390 shares outstanding for the Value Fund and Income Fund, respectively.
Transactions in capital stock for the six months ended January 31, 2014 were as follows:
| Value Fund | Income Fund | ||
| Shares | Amount | Shares | Amount |
Shares Sold | 15,330 | $ 156,459 | 26,434 | $ 250,147 |
Shares issued in reinvestment of distributions | - | - | 5,813 | 54,729 |
Shares redeemed | (57,641) | (578,084) | (42,383) | (397,931) |
Net Increase (decrease) | (42,311) | $ (421,625) | (10,136) | $ (93,055) |
Transactions in capital stock for the fiscal year ended July 31, 2013 were as follows:
| Value Fund | Income Fund | ||
| Shares | Amount | Shares | Amount |
Shares Sold | 47,531 | $ 400,485 | 106,520 | $ 895,130 |
Shares issued in reinvestment of distributions | - | - | 17,735 | 149,312 |
Shares redeemed | (300,719) | (2,524,672) | (254,722) | (2,146,646) |
Net Increase (decrease) | (253,188) | $ (2,124,187) | (130,467) | $ (1,102,204) |
Note 8. Investment Transactions
For the six months ended January 31, 2014, purchases and sales of investment securities other than U.S. Government obligations aggregated $1,058,707 and $1,523,851 for the Value Fund and $3,132,491 and $3,089,240 for the Income Fund, respectively. Purchases and sales of U.S. Government obligations aggregated $0 and $0 for the Value Fund and $0 and $0 for the Income Fund.
Note 9. Tax Matters
The Funds tax basis capital gains and losses are determined only at the end of each fiscal year. For tax purposes, at July 31, 2013, the following represents the tax basis capital gains and losses:
|
| Value Fund |
|
| Income Fund |
|
|
|
|
|
|
Undistributed ordinary income | $ | - |
| $ | 9,233 |
|
|
|
|
|
|
Capital loss carryforward expiring 7/31/2017+ | $ | 874,559 |
| $ | 2,253,299 |
Capital loss carryforward expiring 7/31/2018+ |
| 1,647,626 |
|
| 2,126,805 |
Capital loss carryforward expiring 7/31/2019+ |
| -0- |
|
| 329,037 |
| $ | 2,522,185 |
| $ | 4,709,141 |
|
|
|
|
|
|
Post-October capital loss deferrals |
|
|
|
|
|
realized between 11/1/12 and 7/31/13* | $ | 97,738 |
| $ | - |
As of January 31, 2014, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities for each of the Funds were as follows:
Gross unrealized appreciation on investment securities | $ | 1,805,402 |
| $ | 1,300,585 |
Gross unrealized depreciation on investment securities |
| (910,546) |
|
| (166,121) |
Net unrealized appreciation on investment securities | $ | 894,856 |
| $ | 1,134,464 |
|
|
|
|
|
|
Cost of investment securities, including short-term investments** | $ | 9,399,770 |
| $ | 8,654,566 |
*These deferrals are considered incurred in the subsequent year.
** The difference between book and tax cost represents disallowed wash sales for tax purposes.
+ The capital loss carryforward will be used to offset any capital gains realized by the Funds in future years through the expiration date. The Funds will not make distributions from capital gains while a capital loss carryforward remains.
The Income Fund paid distributions in the amount of $54,781, from ordinary income, for the six months ended January 31, 2014.
The Income Fund paid distributions in the amount of $150,190, from ordinary income, for the year ended July 31, 2013.
Permanent book and tax differences relating to shareholder distributions may result in reclassifications to paid in capital and may affect the per-share allocation between net investment income and realized and unrealized gain/loss. Undistributed net investment income and accumulated undistributed net realized gain/loss on investment transactions may include temporary book and tax differences which reverse in subsequent periods. Any taxable income or gain remaining at fiscal year end is distributed in the following year.
The Regulated Investment Company Modernization Act of 2010 (the “Act”) was enacted on December 22, 2010. The Act makes changes to several tax rules impacting the Funds. In general, some provisions of the Act, not including the changes to capital loss carryforwards, are effective for the Funds’ fiscal year ending July 31, 2013. Although the Act provides several benefits, including the unlimited carryover of future capital losses, there may be a greater likelihood that all or a portion of the Funds’ pre-enactment capital loss carryovers may expire without being utilized due to the fact that post-enactment capital losses get utilized before pre-enactment capital loss carryovers.
Note 10. Control and Ownership
The beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of a fund creates a presumption of control of the fund, under Section 2(a)(9) of the Investment Company Act of 1940, as amended. As of January 31, 2014, Charles Schwab for the benefit of its customers owned, in aggregate, approximately 90.13% and 87.96% of the Value Fund and Income Fund, respectively, and may be deemed to control the Funds.
Note 11. Subsequent Events
Subsequent events after the date of the Statement of Assets and Liabilities have been evaluated through the date the financial statements were issued. Management has concluded that there is no impact requiring adjustment or disclosure in the financial statements.
AMM Funds | |||
Expense Illustration | |||
January 31, 2014 (Unaudited) | |||
|
|
|
|
Expense Example | |||
As a shareholder of the Funds, you incur ongoing costs which typically consist of management fees, 12b-1 distribution and/or service fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other mutual funds. | |||
|
|
|
|
The Example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period, August 1, 2013 through January 31, 2014. | |||
|
|
|
|
Actual Expenses | |||
|
|
|
|
The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled "Expenses Paid During Period" to estimate the expenses you paid on your account during this period. | |||
|
|
|
|
Hypothetical Example for Comparison Purposes | |||
|
|
|
|
The second line of the table below provides information about hypothetical account values and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in these funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. | |||
|
|
|
|
Value Fund |
|
|
|
| Beginning Account Value | Ending Account Value | Expenses Paid During the Period * |
| August 1, 2013 | January 31, 2014 | August 1, 2013 to January 31, 2014 |
|
|
|
|
Actual | $1,000.00 | $1,073.88 | $12.18 |
Hypothetical (5% Annual |
|
|
|
Return before expenses) | $1,000.00 | $1,013.46 | $11.82 |
|
|
|
|
* Expenses are equal to the Fund's annualized expense ratio of 2.33%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). | |||
|
|
|
|
Income Fund |
|
|
|
| Beginning Account Value | Ending Account Value | Expenses Paid During the Period * |
| August 1, 2013 | January 31, 2014 | August 1, 2013 to January 31, 2014 |
|
|
|
|
Actual | $1,000.00 | $1,040.65 | $12.24 |
Hypothetical (5% Annual |
|
|
|
Return before expenses) | $1,000.00 | $1,013.21 | $12.08 |
|
|
|
|
* Expenses are equal to the Fund's annualized expense ratio of 2.38%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGELS INCOME FUND
ADDITIONAL INFORMATION
JANUARY 31, 2014 (UNAUDITED)
Additional Information
The Funds’ Statement of Additional Information ("SAI") includes additional information about the trustees and is available, without charge, upon request. You may call toll-free (866) 663-8023 to request a copy of the SAI or to make shareholder inquiries.
Proxy Voting
The Funds’ Advisor is responsible for exercising the voting rights associated with the securities held by the Funds. A description of the policies and procedures used by the Advisor in fulfilling this responsibility is available without charge by calling (866) 663-8023. It is also included in the Funds’ SAI, which is available on the Securities and Exchange Commission’s website at http://www.sec.gov.
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities and information regarding how the Funds voted proxies during the most recent 12-month period ended July 31, are available without charge upon request by (1) calling the Funds at (800) 595-4866 and (2) from Fund documents filed with the Securities and Exchange Commission ("SEC") on the SEC's website at www.sec.gov.
Portfolio Holdings
The Funds file a complete schedule of investments with the SEC for the first and third quarter of each fiscal year on Form N-Q. The Funds’ first and third fiscal quarters end on April 30 and October 31. The Funds’ Forms N-Q are available on the SEC’s website at http://sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC (call 1-800-732-0330 for information on the operation of the Public Reference Room). You may also obtain copies by calling the Funds at (866) 663-8023.
Management Agreement Renewal
At a meeting of the Board of Trustees (the “Board” or the “Trustees”) of the AMM Funds (the “Trust”), held on September 13, 2013, the Board considered the renewal of an investment advisory agreement between the Trust and American Money Management, LLC (the “Advisor”), with respect to the Fallen Angels Income Fund (the “Income Fund”) and the Fallen Angels Value Fund (the “Value Fund,” and each a “Fund” and collectively the “Funds”) (the “Management Agreement”).
The Trustees' review was informed by a memorandum provided by the Advisor as well as by supplemental information provided by the Advisor. As part of its deliberations, the Board also considered and relied upon the information about the Funds and the Advisor that the Trustees had received throughout the year as part of their ongoing oversight of the Funds and their operations.
Performance
As to each Fund's performance, the Trustees reviewed performance information relative-to-index and peer group for each Fund over varying time periods, including 3 month, 1-year, 3-year, 5-year and since-inception periods provided by the Advisor, which was derived, in part, from a Morningstar mutual fund database. The Trustees noted the total return of the Value Fund for the 3-month period was higher than the S&P 500 Index, but lower for the 1-year, 3-year, 5-year and since-inception periods. The Income Fund's total return was higher than the peer group average of Morningstar Moderate Allocation similar-sized funds employing a similar investment strategy for 1-year and 3-year periods and the 5-year period. Performance of the peer group for the since-inception period was not available. Additionally, the Trustees noted that the total return of the Value Fund for the 1-year period ended July 31, 2013 of 22.89% was 2.11% below and 3.18% higher than the S&P 500 and peer group, respectively. They further noted this performance was significantly better than prior periods. The Trustees stated that the Advisor's re-focused investment strategy was promising. Specifically, they explained that the Advisor had shifted from restructuring the Fund and is now focused on reducing turnover and taking a more patient approach. The Trustees noted that this has resulted in improved performance for the Fund, as it has beaten the S&P 500 Index the previous two quarters. Overall, the Trustees concluded that they were pleased with the steps the Advisor had taken in regards to the Value Fund.
The Trustees noted the total return of the Income Fund for the 1-year period ended July 31, 2013, of 17.35% was 4.17% above the Dow Jones US Moderate Portfolio index and 8.10% above the peer group of Morningstar Moderate Allocation similar-sized funds employing a similar investment strategy. Furthermore, the Trustees noted that the Fund outperformed the index over the 3-year period, but lagged in the 5-year and since-inception periods. They also noted that the Fund outperformed in the peer group over the 3-year and 5-year periods. Performance of the peer group for the since-inception was not available. The Trustees noted that they concurred with the Advisor’s strategy and were very pleased with the changes to the Fund’s portfolio. Overall, the Trustees concluded that they were pleased with the performance and steps the Advisor had taken in regards to the Income Fund.
After further discussion, it was the consensus of the Trustees that the Advisor was following the mandate of each Fund and the Funds’ performance was satisfactory.
Nature, Extent and Quality of Services
As to the nature, extent, and quality of the services provided by the Advisor, the Board considered the Advisor's investment philosophy and strategy. The Trustees also reviewed a description of the organizational structure of the Advisor, including a description of each employee's title, responsibilities and position within the reporting hierarchy of the Advisor. The Trustees noted that the Advisor is adequately staffed relative to its responsibilities and obligations to the Funds. They also observed that the Advisor's operational and compliance processes are well-designed and give the Trustees confidence that the Funds will be managed in conformity with their respective investment objectives and restrictions.
Additionally, the Trustees noted some of the prominent features of the Advisor's investment process, including a weekly meeting of its investment committee, which reviews financial market developments and the Advisor's approved investments. The Trustees also noted that the Advisor expends significant resources and personnel time promoting the Funds via radio and web related marketing. In particular, the Trustees noted total compensation paid to financial intermediaries and other distribution-related expenses such as advertising, exceeded 12b-1 fees collected from the Funds, and the Advisor bears those excess expenses. They also noted the Advisor certified that it had complied with the Trust's Code of Ethics. The Board also reviewed the Advisor's unaudited financial statements. A representative of the Advisor discussed the Advisor's personnel and their Fund-related responsibilities. The Board discussed the compliance activities of Mr. Moore who serves as Chief Compliance Officer of the Fund and Advisor. Based on the information in the report and their discussions with representatives of the Advisor, the Trustees concluded that the Advisor has generally provided high quality advisory services to the Funds. The Trustees agreed that the portfolio managers are very engaged and are dedicated to the success of the Funds. They concluded that the nature and extent of services provided by the Advisor were consistent with the Board's expectations.
Costs of Services and Profits
The Trustees noted the Funds’ advisory fees compared favorably to the high low range of fees (0.30% to 1.40% for the Value Fund and 0.00% to 1.60% for the Income Fund) charged by peer group funds and considered the wide range of fees may be attributed to myriad circumstances including assets under management and other potential economies realized by certain funds. They also discussed the 0.25% administration fee paid by each Fund to the Advisor and the indirect benefits to the Advisor from the Rule 12b-1 fees. The Trustees noted that while each Fund's expenses, including management fees, were above those of their Morningstar peer group, they were in a range of reasonable expectations when compared to the peer group of funds with similar investment objectives and similar asset sizes. Additionally, the Trustees noted that while the Income Fund and the Value Fund's management fee were above those of the respective Morningstar peer group average, 0.75% and 0.83% respectively, they were within the range of management fees paid by the peer group funds. The Trustees concluded the each Fund's management fee was fair and reasonable particularly considering the small size of each Fund.
As to costs incurred by and profits realized by the Advisor, the Board reviewed information regarding the Advisor's per-Fund income from management, 12b-1 and administrative fees and related per-Fund expenses. The Trustees observed that the Advisor generates modest profits from management and administrative services and no profits from 12b-1 fees. The Trustees discussed the reasonableness of the Advisor's expense allocation method across the three sources of revenue and determined the Advisor does not appear to have an excessively high profit margin. After discussion regarding the Advisor's financial position, the Board concluded that the Advisor has adequate resources to fulfill its responsibilities to the Funds. The Trustees determined that the Advisor was not excessively profitable from its relationship with the Funds.
Economies of Scale
The Trustees discussed economies of scale for each Fund and mechanisms by which these economies might be shared with the Funds. The Trustees concluded that means of sharing these economies was not yet relevant at this time due to the relatively small size of the Funds, but that the issue would be considered again on a Fund specific basis as each Fund grows, and annually at each contract renewal period.
Conclusion
The Trustees determined that the overall arrangement for each Fund provided under the terms of the Management Agreement was a reasonable business arrangement and that renewal of the Management Agreement was in the best interests of the Trust and each Fund's shareholders.
Board of Trustees
Ingram S. Chodorow
Miro Copic
Kelly C. Huang
Linda J. Rock
Gabriel B. Wisdom
Investment Advisor
American Money Management, LLC
P.O. Box 675203
Rancho Santa Fe, CA 92067
Dividend Paying Agent,
Shareholders’ Servicing Agent,
Transfer Agent
Mutual Shareholder Services, LLC
Custodian
U.S. Bank, NA
Independent Registered Public Accounting Firm
Sanville & Company
Legal Counsel
Thompson Hine LLP
This report is provided for the general information of the shareholders of the AMM Funds. This report is not intended for distribution to prospective investors in the Funds, unless preceded or accompanied by an effective prospectus.
Item 2. Code of Ethics. Not applicable.
Item 3. Audit Committee Financial Expert. Not applicable.
Item 4. Principal Accountant Fees and Services. Not applicable.
Item 5. Audit Committee of Listed Companies. Not applicable.
Item 6. Schedule of Investments. Not applicable – schedule filed with Item 1.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Funds. Not applicable.
Item 8. Portfolio Managers of Closed-End Funds. Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Funds. Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not adopted procedures by which shareholders may recommend nominees to the registrant's board of trustees.
Item 11. Controls and Procedures.
(a) The registrant’s president and chief financial officer concluded that the disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) were effective as of a date within 90 days of the filing date of this report, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1)
EX-99.CODE ETH. Not applicable.
(a)(2)
EX-99.CERT. Filed herewith.
(a)(3)
Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b)
EX-99.906CERT. Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
AMM Funds
By /s/Gabriel B. Wisdom, President
Gabriel B. Wisdom
President
Date: April 2, 2014
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By /s/Gabriel B. Wisdom, President
Gabriel B. Wisdom
President
Date April 2, 2014
By /s/Michael Moore
Michael Moore
Secretary
Date April 2, 2014