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
41 S. High Street, Suite 1700, Columbus, Ohio 43215
Registrant’s Telephone Number, including Area Code: 858-755-0909
Date of fiscal year end: July 31
Date of reporting period: July 31, 2015
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.
ANNUAL REPORT
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGELS INCOME FUND
July 31, 2015
AMM FUNDS
PRESIDENT’S MESSAGE TO FELLOW SHAREHOLDERS
JULY 31, 2015 (UNAUDITED)
Dear Shareholder,
Contributors and Detractors to Fund Performance
The Fallen Angels Income Fund:
For the fiscal year ended July 31, 2015, the Fallen Angels Income Fund had a total return of .29%, while its benchmark, the Dow Jones Moderate Portfolio Index had a total return of 2.92%. The Fallen Angels Income Fund’s top equity contributors for the fiscal year included AbbVie Inc., Apple Inc., Visa Inc., MasterCard Inc. and The Kraft Heinz Co. The top fixed income contributor for the fiscal year was a corporate bond, HJ Heinz 4.25% due 10/15/2020. The Fund initially bought shares in Kraft Inc. because of an upcoming corporate restructuring. Kraft Inc. spun-off its North American food division as Kraft Foods Inc. and then renamed the parent company Mondelez International Inc. After the restructuring, the Fund held onto its shares in Kraft Foods Inc. and then in May of 2015 the H.J. Heinz Co. announced it was going to buy and then merge with Kraft Foods Inc. in a $36 billion deal. The price of Kraft Foods stock rose 36% immediately following the announcement. For every share of Kraft Foods Inc. that the Fund owned it received 1 share in the new Kraft Heinz Company plus $16.50 in cash per share. As of the date of this letter, the Fund continues to own The Kraft Heinz Co.
Detractors from fiscal year performance out of our equity allocation included Qualcomm Inc., Viacom Inc., and Exxon Mobil Corp. A top detractor from the Fund’s fixed income allocation was Exco Resources 7.5% Notes due 9/15/2018. Horizontal drilling (also known as fracking) combined with high oil prices lead to a boom in drilling for oil in U.S. shale over the last several years. The boom ultimately lead to a global supply glut of oil and the price per barrel of oil declined. We bought debt in several energy companies early in oil's price decline focusing on companies that could break even on operational costs with oil in the $60-70 per barrel range. Exco Resources being one of them. When the price of oil declined below this range the outstanding debt on Exco Resources drastically declined. The Fund sold its position in Exco Resources 7.5% Note as we expect the price of oil to remain below the price per barrel Exco Resources needs to break even operationally and its ability to cover interest payments.
The Fallen Angels Income Fund remains overweight equities, high yield corporate bonds, and cash compared to its benchmark. For the majority of the Fund’s fiscal year, its relative overweight position to equities helped the Fund's performance but the allocation to high yield bonds was a detractor to performance for the majority of fiscal year 2015. The Fund's benchmark has a lower weighting to equities and high yield bonds and a larger weighting to high-grade government bonds.
The Fallen Angels Value Fund:
For the fiscal year ended July 31, 2015, the Fallen Angels Value fund had a total return of 2.42%, while its benchmark, the S&P 500 had a total return of 11.21%.The Fallen Angels Value Fund’s top contributors to performance for the fiscal year included Express Scripts, MasterCard Inc., Novo-Nordisk and Visa. Detractors from fiscal year performance included Alcoa, Inc., Devon Energy, National Oilwell Varco and Viacom
AMM FUNDS
PRESIDENT’S MESSAGE TO FELLOW SHAREHOLDERS (CONTINUED)
JULY 31, 2015 (UNAUDITED)
Inc. While the Fund’s energy sector weighting was not significantly higher than the benchmark energy weighting the Fund’s higher exposure to more volatile energy stocks in the exploration and production, and service areas resulted in more downside relative to the benchmark. Additionally, in the consumer discretionary sector the Fund’s overweight exposure to traditional media companies (specifically Time Warner, and Viacom Inc.) hurt relative performance. Effective October 16, 2015 the Fallen Angels Value Fund was closed and all shares redeemed.
Conclusion
The last fiscal year has been challenging for many reasons. First, by almost any valuation measure domestic stock markets are not cheap, which makes it difficult to find new investments that meet our criteria. Second, some areas of the market for which we have identified value opportunities, have underperformed over this time frame. And finally, recent volatility related to global growth concerns and an eventual Federal Reserve interest rate hike has caused even the highest quality stocks to sell-off significantly. The silver lining is that recent market volatility has begun to correct market valuation concerns and created pockets of opportunity in higher quality stocks for which the fund seeks to invest. While big market downturns are always psychologically difficult, we feel strongly that they also create the best opportunities for long-term investors to buy great companies at favorable prices.
As always, we feel immensely privileged to be entrusted with the stewardship of your capital and can assure you that we will continue to do our best every day to growth your wealth.
Gabriel Wisdom, Michael Moore, Glenn Busch
Portfolio Managers, AMM Funds
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
PERFORMANCE ILLUSTRATION
JULY 31, 2015 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURN
Periods Ended 7/31/2015
FUND/INDEX | One Year | Five Year | Since Inception * |
The Fallen Angels Value Fund | 2.42% | 8.06% | 1.73% |
S&P 500 Index | 11.21% | 16.25% | 7.21% |
* The chart assumes an initial gross investment of $10,000 made on 11/10/2006 (inception).
Performance is historical and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. Current performance may be higher or lower than performance quoted. Returns are shown after the deduction of expenses. The Fund’s investment objectives, risks, and expenses must be considered carefully before investing. Performance data current to the most recent month-end may be obtained by calling (866) 663-8023.
The Standard & Poor’s 500 Index (“S&P 500”) is a market value-weighted index, representing the aggregate market value of the common equity of 500 stocks primarily traded on the New York Stock Exchange. The S&P 500 is a widely recognized, unmanaged index of common stock prices. The figures for the S&P 500 reflect all dividends reinvested but do no reflect any deductions for fees, expenses or taxes. Investors cannot invest directly in an index.
Per the Fund's December 1, 2014 prospectus, the Fund's total annual operating expense ratio is 2.30%.
AMM FUNDS
THE FALLEN ANGELS INCOME FUND
PERFORMANCE ILLUSTRATION
JULY 31, 2015 (UNAUDITED)
AVERAGE ANNUAL TOTAL RETURN
Periods Ended 7/31/2015
FUND/INDEX | One Year | Five Year | Since Inception * |
The Fallen Angels Income Fund | 0.29% | 8.31% | 3.27% |
Dow Jones Moderate Portfolio Index | 2.92% | 8.60% | 5.64% |
* The chart assumes an initial gross investment of $10,000 made on 11/10/2006 (inception).
Performance is historical and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. The returns shown do not reflect deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares. Current performance may be higher or lower than performance quoted. Returns are shown after the deduction of expenses. The Fund’s investment objectives, risks, and expenses must be considered carefully before investing. Performance data current to the most recent month-end may be obtained by calling (866) 663-8023.
The Dow Jones Moderate Portfolio is a member of the Dow Jones Relative Risk Indexes that measures the performance of conservative, moderate and aggressive portfolios based on incremental levels of potential risk. The indexes are designed to systematically measure various levels of risk relative to the risk of a global all-stock index. Investors can identify an appropriate benchmark as the index that has the most similar historic risk characteristics. Investors cannot invest directly in an index.
Per the Fund's December 1, 2014 prospectus, the Fund's total annual operating expense ratio is 2.34%
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
PORTFOLIO ANALYSIS
JULY 31, 2015 (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
JULY 31, 2015 (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 VALUE FUND
SCHEDULE OF INVESTMENTS
JULY 31, 2015
Shares |
|
| Value |
|
|
|
|
COMMON STOCKS - 87.03% |
| ||
|
|
|
|
Consumer Discretionary - 10.39% |
| ||
4,700 |
| DeVry, Inc. | $ 142,786 |
375 |
| Liberty Broadband Corp., Class A * | 20,239 |
982 |
| Liberty Broadband Corp., Class C * | 52,566 |
1,500 |
| Liberty Media Corp. Class A * | 56,700 |
3,000 |
| Liberty Media Corp. Class C * | 113,100 |
3,525 |
| Time Warner, Inc. | 310,341 |
4,505 |
| Viacom, Inc. Class B | 256,785 |
|
|
| 952,517 |
Consumer Staples - 6.43% |
| ||
3,160 |
| PepsiCo, Inc. | 304,466 |
3,335 |
| Philip Morris International, Inc. | 285,243 |
|
|
| 589,709 |
Energy - 7.13% |
| ||
3,740 |
| Devon Energy Corp. | 184,831 |
3,325 |
| Exxon Mobil Corp. | 263,373 |
4,890 |
| National Oilwell Varco, Inc. | 206,016 |
|
|
| 654,220 |
Financials - 18.86% |
| ||
4 |
| Berkshire Hathaway, Inc. Class A * | 856,000 |
4,835 |
| JP Morgan Chase & Co. | 331,343 |
3,000 |
| Visa, Inc. | 226,020 |
5,470 |
| Wells Fargo & Co. | 316,548 |
|
|
| 1,729,911 |
Healthcare - 12.74% |
| ||
3,390 |
| AbbVie, Inc. | 237,334 |
3,600 |
| Baxalta, Inc. * | 118,188 |
3,600 |
| Baxter International, Inc. | 144,288 |
4,150 |
| Express Scripts Holding Co. * | 373,791 |
5,000 |
| Novo-Nordisk A/S ADR | 294,800 |
|
|
| 1,168,401 |
Industrials - 10.58% |
| ||
15,510 |
| General Electric Co. | 404,811 |
8,795 |
| General Motors Corp. | 277,130 |
2,645 |
| Raytheon Co. | 288,543 |
|
|
| 970,484 |
* Non-income producing security during the period.
ADR - American Depository Receipt
The accompanying notes are an integral part of these financial statements.
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2015
Shares |
|
| Value |
|
|
|
|
Information Technology - 18.85% |
| ||
2,680 |
| Apple, Inc. | $ 325,084 |
210 |
| Google, Inc. Class A * | 138,075 |
330 |
| Google, Inc. Class C * | 206,451 |
5,000 |
| Hewlett-Packard Co. | 152,600 |
3,485 |
| MasterCard, Inc. | 339,439 |
6,440 |
| Microsoft Corp. | 300,748 |
6,680 |
| Oracle Corp. | 266,799 |
|
|
| 1,729,196 |
Materials - 2.05% |
| ||
19,025 |
| Alcoa, Inc. | 187,777 |
|
|
|
|
TOTAL FOR COMMON STOCKS (Cost $5,975,713) - 87.03% | 7,982,215 | ||
|
|
|
|
SHORT TERM INVESTMENTS - 13.11% |
| ||
1,202,298 |
| First American Treasury Obligation Fund Class Z 0.00% ** | 1,202,298 |
TOTAL SHORT TERM INVESTMENTS (Cost $1,202,298) - 13.11% | 1,202,298 | ||
|
|
|
|
TOTAL INVESTMENTS (Cost $7,178,011) - 100.14% | 9,184,513 | ||
|
|
|
|
LIABILITIES IN EXCESS OF OTHER ASSETS, NET - (0.14)% | (13,064) | ||
|
|
|
|
NET ASSETS - 100.00% | $ 9,171,449 |
* Non-income producing security during the period.
** Variable rate security; the coupon rate shown represents the yield at July 31, 2015.
The accompanying notes are an integral part of these financial statements.
AMM FUNDS
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF INVESTMENTS
JULY 31, 2015
Shares |
|
| Value |
|
|
|
|
COMMON STOCKS - 64.47% |
| ||
|
|
|
|
Consumer Discretionary - 5.87% |
| ||
2,250 |
| McDonalds Corp. | $ 224,685 |
46,400 |
| SFX Entertainment, Inc. * | 147,552 |
3,500 |
| Viacom, Inc. Class B | 199,500 |
|
|
| 571,737 |
Consumer Staples - 11.06% |
| ||
1,860 |
| Anheuser-Busch InBev SA ADR | 222,363 |
3,200 |
| The Kraft Heinz Co. | 254,304 |
2,100 |
| PepsiCo, Inc. | 202,335 |
2,500 |
| Philip Morris International, Inc. | 213,825 |
2,400 |
| Procter & Gamble Co. | 184,080 |
|
|
| 1,076,907 |
Energy - 3.28% |
| ||
2,600 |
| ConocoPhillips | 130,884 |
2,380 |
| Exxon Mobil Corp. | 188,520 |
|
|
| 319,404 |
Financials - 9.41% |
| ||
620 |
| BlackRock, Inc. | 208,518 |
3,300 |
| JP Morgan Chase & Co. | 226,149 |
3,900 |
| Wells Fargo & Co. | 225,693 |
3,400 |
| Visa, Inc. | 256,156 |
|
|
| 916,516 |
Healthcare - 11.98% |
| ||
3,300 |
| AbbVie, Inc. | 231,033 |
3,200 |
| Baxalta, Inc. * | 105,056 |
3,200 |
| Baxter International, Inc. | 128,256 |
2,000 |
| Johnson & Johnson | 200,420 |
2,400 |
| Novartis AG ADR | 249,000 |
7,000 |
| Pfizer, Inc. | 252,420 |
|
|
| 1,166,185 |
Industrials - 9.79% |
| ||
8,400 |
| General Electric Co. | 219,240 |
2,300 |
| Norfolk Southern Corp. | 193,959 |
5,202 |
| Polypore International, Inc. * | 312,744 |
2,160 |
| Union Pacific Corp. | 210,794 |
725 |
| Vectrus, Inc. * | 16,820 |
|
|
| 953,557 |
* Non-income producing security during the period.
ADR - American Depository Receipt
The accompanying notes are an integral part of these financial statements.
AMM FUNDS
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2015
Shares |
|
| Value |
|
|
|
|
Information Technology - 13.08% |
| ||
2,210 |
| Apple, Inc. | $ 268,073 |
2,400 |
| MasterCard, Inc. | 233,760 |
4,200 |
| Microsoft Corp. | 196,140 |
4,400 |
| Paychex, Inc. | 204,160 |
2,840 |
| Qihoo 360 Technology Co., Ltd. ADR * | 176,108 |
3,040 |
| Qualcomm, Inc. | 195,746 |
|
|
| 1,273,987 |
Transportation - 0.00% |
| ||
45,000 |
| Sea Containers Ltd. Class A (Bermuda) † * | - |
|
|
|
|
TOTAL FOR COMMON STOCKS (Cost $5,233,625) - 64.47% | 6,278,293 | ||
|
|
|
|
CORPORATE BONDS - 14.08% |
| ||
|
|
|
|
Consumer Cyclical - 3.07% |
| ||
100,000 |
| Amazon.com, Inc., 1.20%, 11/29/17 | 99,613 |
210,000 |
| Outerwall, Inc., 5.875%, 06/15/21 | 199,500 |
|
|
| 299,113 |
Energy - 4.81% |
| ||
215,000 |
| California Resources Corp., 5.50%, 09/15/21 | 177,375 |
210,000 |
| Denbury Resources, Inc., 6.375%, 08/15/21 | 176,400 |
255,000 |
| Exco Resources, Inc., 7.5%, 09/15/18 | 114,750 |
|
|
| 468,525 |
Industrials - 2.12% |
| ||
205,000 |
| Iron Mountain, Inc., 5.75%, 08/15/24 | 206,538 |
|
|
|
|
Information Technology - 1.99% |
| ||
200,000 |
| Verisign, Inc., 4.625%, 05/1/23 | 193,500 |
|
|
|
|
Real Estate - 2.09 |
| ||
205,000 |
| Toys R Us PPTY Co. II, 8.5%, 12/1/17 | 203,975 |
|
|
|
|
TOTAL FOR CORPORATE BONDS (Cost $1,557,361) - 14.08% | 1,371,651 | ||
|
|
|
|
PREFERRED SECURITIES - 8.69% |
| ||
|
|
|
|
Financials - 6.51% |
| ||
174 |
| Bank of America Corp., Series L, 7.25% | 193,497 |
8,787 |
| Charles Schwab Corp., Series B, 6.00%, 12/31/49 | 226,968 |
8,100 |
| Discover Financial Services, Series B, 6.50%, 12/31/49 | 213,435 |
|
|
| 633,900 |
* Non-income producing security during the period.
† This security has been valued according to the fair value pricing policies of the Fund.
ADR - American Depository Receipt
The accompanying notes are an integral part of these financial statements.
AMM FUNDS
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JULY 31, 2015
Shares |
|
| Value |
|
| ||
Real Estate - 2.18% |
| ||
8,380 |
| American Homes 4 Rent, Series A, 5.00%, 12/31/49 | $ 212,433 |
|
|
|
|
TOTAL FOR PREFERRED SECURITIES (Cost $815,879) - 8.69% | 846,333 | ||
|
|
|
|
REAL ESTATE INVESTMENT TRUST - 2.49% |
| ||
7,400 |
| Gaming and Leisure Properties, Inc. | 242,350 |
TOTAL FOR REAL ESTATE INVESTMENT TRUST (Cost $262,898) - 2.49% | 242,350 | ||
|
|
|
|
US TREASURY BILL - 2.57% |
| ||
250,000 |
| US Treasury Bills, 0.0% Due 09/24/2015 | 249,981 |
TOTAL FOR US TREASURY BILL (Cost $249,991) - 2.57% | 249,981 | ||
|
|
|
|
SHORT TERM INVESTMENT - 7.41% |
| ||
721,442 |
| First American Treasury Obligation Fund Class Z 0.00% ** | 721,442 |
TOTAL SHORT TERM INVESTMENT (Cost $721,442) - 7.41% | 721,442 | ||
|
|
|
|
TOTAL INVESTMENTS (Cost $8,841,196) - 99.71% | 9,710,050 | ||
|
|
|
|
OTHER ASSETS IN EXCESS OF LIABILITIES, NET - 0.29% | 28,095 | ||
|
|
|
|
NET ASSETS - 100.00% | $ 9,738,145 |
** Variable rate security; the coupon rate shown represents the yield at July 31, 2015.
The accompanying notes are an integral part of the financial statements.
AMM FUNDS
STATEMENT OF ASSETS AND LIABILITIES
JULY 31, 2015
|
| Value Fund | Income Fund |
Assets: |
|
|
|
Investments in Securities, at Value (Cost $7,178,011 and $8,841,196) | $ 9,184,513 | $ 9,710,050 | |
Receivables: |
|
| |
Due From Broker | - | 9,849 | |
Dividends and Interest | 3,501 | 37,085 | |
Prepaid Expenses | 12,080 | 11,850 | |
Total Assets | 9,200,094 | 9,768,834 | |
Liabilities: |
|
|
|
Payables: |
|
| |
Management Fees | 7,799 | 8,391 | |
Administrative Fees | 1,950 | 2,098 | |
Distribution Fees | 1,937 | 2,072 | |
Trustee Fees | 287 | 287 | |
Shareholder Redemption | - | 250 | |
Accrued Expenses | 16,672 | 17,591 | |
Total Liabilities | 28,645 | 30,689 | |
Net Assets |
| $ 9,171,449 | $ 9,738,145 |
|
|
|
|
Net Assets Consist of: |
|
| |
Paid In Capital | $ 9,498,488 | $12,439,109 | |
Accumulated Undistributed Net Investment Income (Loss) | - | 24,849 | |
Accumulated Realized Loss on Investments | (2,333,541) | (3,594,667) | |
Unrealized Appreciation in Value of Investments | 2,006,502 | 868,854 | |
Net Assets, for 800,953 and 988,818 Shares Outstanding | $ 9,171,449 | $ 9,738,145 | |
|
|
|
|
Net Asset Value Per Share | $ 11.45 | $ 9.85 |
The accompanying notes are an integral part of the financial statements.
AMM FUNDS
STATEMENT OF OPERATIONS
FOR THE YEAR ENDED JULY 31, 2015
|
| Value Fund | Income Fund |
Investment Income: |
|
| |
Dividends (net of foreign withholding of $2,881 and $3,565, respectively) | $ 153,513 | $ 232,319 | |
Interest |
| - | 136,818 |
Total Investment Income | 153,513 | 369,137 | |
|
|
|
|
Expenses: |
|
|
|
Advisory | 97,993 | 101,424 | |
Administrative | 24,498 | 25,356 | |
Distribution (12b-1) | 24,498 | 25,356 | |
Transfer Agent | 28,580 | 30,377 | |
Registration | 19,661 | 19,854 | |
Custodian | 5,616 | 7,675 | |
Audit |
| 14,275 | 14,394 |
Legal |
| 9,901 | 9,751 |
Trustee |
| 3,482 | 3,704 |
Printing and Mailing | 700 | 650 | |
Miscellaneous | 2,380 | 2,544 | |
Insurance | 952 | 956 | |
Total Expenses | 232,536 | 242,041 | |
|
|
|
|
Net Investment Income (Loss) | (79,023) | 127,096 | |
|
|
|
|
Realized and Unrealized Gain on: |
|
| |
Realized Gain on Investments | 59,060 | 93,668 | |
Realized Loss on Options | - | (10,698) | |
Net Change in Unrealized Appreciation (Depreciation) on: |
|
| |
Investments | 269,702 | (202,886) | |
Options |
| - | 36,761 |
Net Realized and Unrealized Gain (Loss) on Investments | 328,762 | (83,155) | |
|
|
|
|
Net Increase in Net Assets Resulting from Operations | $ 249,739 | $ 43,941 |
The accompanying notes are an integral part of the financial statements.
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
STATEMENTS OF CHANGES IN NET ASSETS
|
| Years Ended | |
|
| 7/31/2015 | 7/31/2014 |
Increase (Decrease) in Net Assets From Operations: |
|
| |
Net Investment Loss | $ (79,023) | $ (69,031) | |
Net Realized Gain on Investments | 59,060 | 227,320 | |
Unrealized Appreciation on Investments | 269,702 | 1,390,142 | |
Net Increase in Net Assets Resulting from Operations | 249,739 | 1,548,431 | |
|
|
|
|
Distributions to Shareholders: |
|
| |
Net Investment Income | - | - | |
Realized Gains | - | - | |
Total Distributions Paid to Shareholders | - | - | |
|
|
|
|
Capital Share Transactions | (1,259,061) | (1,338,134) | |
|
|
|
|
Total Increase (Decrease) in Net Assets | (1,009,322) | 210,297 | |
|
|
|
|
Net Assets: |
|
|
|
Beginning of Period | 10,180,771 | 9,970,474 | |
|
|
|
|
End of Period (Including Undistributed Net Investment Income (Loss) of $0 and $0, respectively) |
|
| |
$ 9,171,449 | $10,180,771 |
The accompanying notes are an integral part of the financial statements.
AMM FUNDS
THE FALLEN ANGELS INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
|
| Years Ended | |
|
| 7/31/2015 | 7/31/2014 |
Increase (Decrease) in Net Assets From Operations: |
|
| |
Net Investment Income | $ 127,096 | $ 139,630 | |
Net Realized Gain on Investments & Options | 82,970 | 1,036,789 | |
Capital Gain Distributions from Portfolio Companies | - | - | |
Unrealized Depreciation on Investments & Options | (166,125) | (274,288) | |
Net Increase in Net Assets Resulting from Operations | 43,941 | 902,131 | |
|
|
|
|
Distributions to Shareholders: |
|
| |
Net Investment Income | (142,657) | (111,409) | |
Realized Gain | - | - | |
Total Distributions Paid to Shareholders | (142,657) | (111,409) | |
|
|
|
|
Capital Share Transactions | (368,542) | (144,770) | |
|
|
|
|
Total Increase (Decrease) in Net Assets | (467,258) | 645,952 | |
|
|
|
|
Net Assets: |
|
|
|
Beginning of Period | 10,205,403 | 9,559,451 | |
|
|
|
|
End of Period (Including Undistributed Net Investment Income of $24,849 and $232,311, respectively) |
|
| |
$ 9,738,145 | $10,205,403 |
The accompanying notes are an integral part of the financial statements.
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
|
| Years Ended | ||||
|
| 7/31/2015 | 7/31/2014 | 7/31/2013 | 7/31/2012 | 7/31/2011 |
|
|
|
|
|
|
|
Net Asset Value, at Beginning of Period | $ 11.18 | $ 9.61 | $ 7.82 | $ 8.35 | $ 7.77 | |
|
|
|
|
|
|
|
Income From Investment Operations: |
|
|
|
|
| |
Net Investment Loss * | (0.09) | (0.07) | (0.02) | (0.02) | (0.06) | |
Net Gain (Loss) on Securities (Realized and Unrealized) | 0.36 | 1.64 | 1.81 | (0.51) | 0.64 | |
Total from Investment Operations | 0.27 | 1.57 | 1.79 | (0.53) | 0.58 | |
|
|
|
|
|
|
|
Distributions: |
|
|
|
|
|
|
Net Investment Income | - | - | - | - | - | |
Realized Gains | - | - | - | - | - | |
Total from Distributions | - | - | - | - | - | |
|
|
|
|
|
|
|
Net Asset Value, at End of Period | $ 11.45 | $ 11.18 | $ 9.61 | $ 7.82 | $ 8.35 | |
|
|
|
|
|
|
|
Total Return ** | 2.42% | 16.34% | 22.89% | (6.35)% | 7.46% | |
|
|
|
|
|
|
|
Ratios/Supplemental Data: |
|
|
|
|
| |
Net Assets at End of Period (Thousands) | $ 9,171 | $ 10,181 | $ 9,970 | $ 10,100 | $ 12,830 | |
Ratio of Expenses to Average Net Assets | 2.37% | 2.29% | 2.43% | 2.25% | 2.17% | |
Ratio of Net Investment Loss to Average Net Assets | (0.81)% | (0.67)% | (0.25)% | (0.26)% | (0.68)% | |
Portfolio Turnover | 15.63% | 22.35% | 13.80% | 49.23% | 118.43% |
* Per share net investment income (loss) has been determined on the basis of average shares outstanding during the period.
** Assumes reinvestment of dividends.
The accompanying notes are an integral part of the financial statements.
AMM FUNDS
THE FALLEN ANGELS INCOME FUND
FINANCIAL HIGHLIGHTS
SELECTED DATA FOR A SHARE OUTSTANDING THROUGHOUT THE PERIOD.
|
| Years Ended | ||||
|
| 7/31/2015 | 7/31/2014 | 7/31/2013 | 7/31/2012 | 7/31/2011 |
|
|
|
|
|
|
|
Net Asset Value, at Beginning of Period | $ 9.96 | $ 9.19 | $ 7.96 | $ 7.74 | $ 7.36 | |
|
|
|
|
|
|
|
Income From Investment Operations: |
|
|
|
|
| |
Net Investment Income * | 0.13 | 0.14 | 0.18 | 0.24 | 0.23 | |
Net Gain (Loss) on Securities (Realized and Unrealized) | (0.10) | 0.74 | 1.19 | 0.20 | 0.40 | |
Total from Investment Operations | 0.03 | 0.88 | 1.37 | 0.44 | 0.63 | |
|
|
|
|
|
|
|
Distributions: |
|
|
|
|
|
|
Net Investment Income | (0.14) | (0.11) | (0.14) | (0.22) | (0.25) | |
Realized Gains | - | - | - | - | - | |
Total from Distributions | (0.14) | (0.11) | (0.14) | (0.22) | (0.25) | |
|
|
|
|
|
|
|
Net Asset Value, at End of Period | $ 9.85 | $ 9.96 | $ 9.19 | $ 7.96 | $ 7.74 | |
|
|
|
|
|
|
|
Total Return ** | 0.29% | 9.59% | 17.35% | 5.93% | 8.63% | |
|
|
|
|
|
|
|
Ratios/Supplemental Data: |
|
|
|
|
| |
Net Assets at End of Period (Thousands) | $ 9,738 | $ 10,205 | $ 9,559 | $ 9,324 | $ 11,067 | |
Ratio of Expenses to Average Net Assets | 2.39% | 2.32% | 2.49% | 2.33% | 2.27% | |
Ratio of Net Investment Income to Average Net Assets | 1.25% | 1.39% | 2.10% | 3.19% | 3.01% | |
Portfolio Turnover | 35.17% | 66.27% | 43.58% | 69.06% | 19.62% |
* Per share net investment income has been determined on the basis of average shares outstanding during the period.
** Assumes reinvestment of dividends.
The accompanying notes are an integral part of the financial statements.
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JULY 31, 2015
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. The Fund is an investment company that follows the accounting and reporting guidance of Accounting Standards Codification Topic 946 applicable to investment companies.
Security Valuation: All investments in securities are recorded at their estimated fair value, as described in Note 3.
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. See Note 6 for additional disclosure on the Income Fund's option transactions during the year.
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
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JULY 31, 2015
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 2012-2015, 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 year ended July 31, 2015, 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 determined as of the close of the New York Stock Exchange (generally 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.
Reclassifications: In accordance with GAAP, the Fund recorded a permanent book/tax difference of ($79,023) from net investment loss to paid-in capital for the Value Fund. This reclassification has no impact on the net asset value of the Value Fund and is designed generally to present undistributed income and paid-in capital on a tax basis, which is considered to be more informative to shareholders.
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.
Note 3. Security Valuations
Processes and Structure
The Trusts’ Board of Trustees has adopted guidelines for valuing securities and other derivative instruments including in circumstances in which market quotes are not readily available, and has delegated to the Trusts’ Advisor to apply those methods in making fair value determinations, subject to board oversight. 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.
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 stocks, real estate investment trusts). Securities traded on a national securities exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded, and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Certain foreign securities may be fair valued using a pricing service that considers the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, Exchange Traded Funds, and the movement of the certain indexes of securities based on a statistical analysis of the historical relationship and that are categorized in Level 2. Preferred stock and other equities traded on inactive markets or valued by reference to similar instruments are also categorized in Level 2.
Corporate Bonds. The fair value of corporate bonds is estimated using various techniques, which may consider recently executed transactions in securities of the issuer or comparable issuers, market price quotations (when observable), bond spreads, fundamental data relating to the issuer, and credit default swap spreads adjusted for any basis difference between cash and derivative instruments. Although most corporate bonds are categorized in Level 2 of the fair value hierarchy, in instances when lower relative weight is placed on transaction prices, quotations, or similar observable inputs, they are categorized in Level 3.
U.S. government securities - U.S. government securities are normally valued using a model that incorporates market observable data, such as reported sales of similar securities, broker quotes, yields, bids, offers, and reference data. Certain securities are valued principally using dealer quotations. U.S. government securities are categorized in level 1 or level 2 of the fair value hierarchy, depending on the inputs used and market activity levels for specific securities. US Treasury Bills with a maturity of 60 days or less are valued using amortized cost and included in level 2 of the fair value hierarchy.
Derivative Instruments (equity options) – Listed derivatives that are actively traded, and valuations adjustments are not applied, are valued based on quoted prices from the exchange and categorized in Level 1 of the fair value hierarchy.
The following table summarizes the inputs used to value the Value Fund’s assets and liabilities measured at fair value as of July 31, 2015:
Value Fund | Financial Instruments—Assets | |||
|
|
|
|
|
Categories | Level 1 | Level 2 | Level 3 | Fair Value |
|
|
|
|
|
Common Stocks * | $ 7,982,215 | $ - | $ - | $ 7,982,215 |
Short-Term Investment | 1,202,298 | - | - | 1,202,298 |
| $ 9,184,513 | $ - | $ - | $ 9,184,513 |
The Value Fund did not hold any Level 2 or Level 3 assets during the year ended July 31, 2015. 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 July 31, 2015.
The following table summarizes the inputs used to value the Income Fund’s assets and liabilities measured at fair value as of July 31, 2015:
Income Fund | Financial Instruments—Assets | |||
|
|
|
|
|
Categories | Level 1 | Level 2 | Level 3 | Fair Value |
|
|
|
|
|
Common Stocks * | $ 6,278,293 | $ - | $ - | $ 6,278,293 |
Corporate Bonds | - | 1,371,651 | - | 1,371,651 |
Preferred Securities | 846,333 | - | - | 846,333 |
Real Estate Investment Trust | 242,350 | - | - | 242,350 |
US Treasury Bill | - | 249,981 | - | 249,981 |
Short-Term Investment | 721,442 | - | - | 721,442 |
Total | $ 8,088,418 | $1,621,632 | $ - | $ 9,710,050 |
* Industry classifications for these categories are detailed in the Schedule of Investments.
The Income Fund did not hold any Level 3 assets (those valued using significant unobservable inputs) at any time during the year ended July 31, 2015. Therefore a reconciliation of assets in which significant unobservable inputs were used in determining fair value is not applicable. Transfers that were made out of the Income Fund represent securities that are now being valued using evaluated bid prices in active markets during the year ended July 31, 2015. The Income Fund considers transfers into and out of Level 1 and Level 2 as of the end of the reporting period.
Fair Valuation- The investment in 45,000 shares of Sea Containers Ltd., in the Income Fund, has been valued at $0.00 per share. This security has been valued according to the fair value pricing policies of the Funds.
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 investment advice 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 year ended July 31, 2015, the Advisor earned a fee of $97,993 and $101,424 for the Value Fund and Income Fund, respectively. The Funds owed the Advisor management fees of $7,799 and $8,391 for the Value Fund and Income Fund, respectively, as of July 31, 2015.
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 year ended July 31, 2015, the Advisor earned a fee of $24,498 and $25,356 from the Value Fund and Income Fund, respectively. The Funds owed the Advisor administrative fees of $1,950 and $2,098 for the Value Fund and Income Fund, respectively, as of July 31, 2015.
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 year ended July 31, 2015, the Funds accrued distribution (12b-1) fees under the Plan of $24,498 and $25,356 for the Value Fund and Income Fund, respectively. The Funds owed the Advisor $1,937 and $2,072 for the Value Fund and Income Fund, respectively, as of July 31, 2015.
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 year ended July 31, 2015, each Independent Trustee received $2,000 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
The Income Fund has no options outstanding at July 31, 2015. Transactions in call options purchased during the year ended July 31, 2015 for the Income Fund were as follows:
| Number of |
| Premiums |
| Contracts |
| Paid |
Options outstanding at July 31, 2014 | 40 |
| $ 39,665 |
Options purchased | - |
| - |
Options exercised | - |
| - |
Options expired | (40) |
| 39,665 |
Options terminated in closing sale transaction | - |
| - |
Options outstanding at July 31, 2015 | - |
| $ - |
Transactions in written call options during the year ended July 31, 2015 for the Income Fund were as follows:
| Number of |
| Premiums |
| Contracts |
| Received |
Options outstanding at July 31, 2014 | 5 |
| $ 1,389 |
Options written | 408 |
| 43,655 |
Options exercised | (26) |
| (4,313) |
Options expired | (322) |
| (33,443) |
Options terminated in closing purchase transaction | (65) |
| (7,288) |
Options outstanding at July 31, 2015 | - |
| $ - |
Realized and unrealized gains and losses on derivatives contracts entered into during the year ended July 31, 2015, 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 | $(10,698) | Change in Unrealized Appreciation on Options | $36,761 |
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 July 31, 2015 was $9,498,488 and $12,439,109 for the Value Fund and Income Fund, respectively.
Transactions in capital stock for the fiscal year ended July 31, 2015 were as follows:
| Value Fund | Income Fund | ||
| Shares | Amount | Shares | Amount |
Shares Sold | 12,734 | $ 144,261 | 50,359 | $ 505,754 |
Shares issued in reinvestment of distributions | - | - | 14,105 | 142,642 |
Shares redeemed | (122,541) | (1,403,322) | (100,581) | (1,016,938) |
Net Decrease | (109,807) | $ (1,259,061) | (36,117) | $ (368,542) |
Transactions in capital stock for the fiscal year ended July 31, 2014 were as follows:
| Value Fund | Income Fund | ||
| Shares | Amount | Shares | Amount |
Shares Sold | 21,562 | $ 224,015 | 129,745 | $ 1,295,109 |
Shares issued in reinvestment of distributions | - | - | 11,479 | 111,302 |
Shares redeemed | (148,527) | (1,562,149) | (156,815) | (1,551,181) |
Net Decrease | (126,965) | $(1,338,134) | (15,591) | $ (144,770) |
Note 8. Investment Transactions
For the year ended July 31, 2015, purchases and sales of investment securities other than U.S. Government obligations aggregated $1,364,780 and $2,760,764 for the Value Fund and $3,108,037 and $3,593,381 for the Income Fund, respectively. Purchases and sales of U.S. Government obligations aggregated $0 and $0 for the Value Fund, respectively, and $2,249,942 and $1,999,950 for the Income Fund, respectively. Purchases and sales of options for the Income Fund aggregated $16,077 and $43,655, respectively.
Note 9. Tax Matters
Each Fund’s distributable earnings on a tax basis are determined only at the end of each fiscal year. As of July 31, 2015, the Trust’s most recent fiscal year-end, the components of distributable earnings on a tax basis were as follows:
|
| Value Fund |
|
| Income Fund |
Unrealized Appreciation (Depreciation) | $ | 2,006,502 |
| $ | 868,854 |
Undistributed Ordinary Income |
| - |
|
| 24,849 |
Post October capital losses, pushed to next fiscal year |
| (142,997) |
|
| (126,110) |
Capital loss carryforward expiring +: |
|
|
|
|
|
7/31/2017 |
| (542,920) |
|
| (1,012,715) |
7/31/2018 |
| (1,647,626) |
|
| (2,126,805) |
7/31/2019 |
| - |
|
| (329,037) |
Total Distributable Earnings | $ | (327,039) |
| $ | (2,700,964) |
The undistributed ordinary income and capital gains (losses) shown above differ from corresponding accumulated net investment income and accumulated net realized gain (loss) figures reported in the statement of assets and liabilities due to post-October capital loss deferrals on the Funds.
+ The capital loss carryforward will be used to offset any capital gains realized by the Funds in future years. The Funds will not make distributions from capital gains while a capital loss remains.
As of July 31, 2015, the tax basis components of distributable earnings, unrealized appreciation (depreciation) and cost of investment securities for each of the Funds were as follows:
|
| Value |
|
| Income |
Gross unrealized appreciation on investment securities | $ | 2,387,453 |
| $ | 1,339,916 |
Gross unrealized depreciation on investment securities |
| (380,951) |
|
| (471,062) |
Net unrealized appreciation on investment securities | $ | 2,006,502 |
| $ | 868,854 |
|
|
|
|
|
|
Cost of investment securities, including short-term investments | $ | 7,178,011 |
| $ | 8,841,196 |
+ 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 $142,657, from ordinary income, for the year ended July 31, 2015.
The Income Fund paid distributions in the amount of $111,409, from ordinary income, for the year ended July 31, 2014.
Under current tax law, net capital losses realized after October 31st and net ordinary losses incurred after December 31st may be deferred and treated as occurring on the first day of the following fiscal year. Each Fund’s carryforward losses, post-October losses and post December losses are determined only at the end of each fiscal year. Under the Regulated Investment Company Modernization Act of 2010, net capital losses recognized after December 31, 2010, may be carried forward indefinitely, and their character is retained as short-term and/or long-term. 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 each Fund’s 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 July 31, 2015, Charles Schwab, for the benefit of its customers, owned, in aggregate, approximately 90.14% and 86.73% of the Value Fund and Income Fund, respectively, and may be deemed to control the Funds.
Note 11. Subsequent Events
At the September 16, 2015 meeting of the Board, the Trustees determined that it was in the best interest of the AMM Value Fund and its shareholders that the Value Fund cease operations. The Board has determined to close the Value Fund, and redeem all outstanding shares, on October 16, 2015.
The Funds are required to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the Statement of Assets and Liabilities. For non-recognized subsequent events that must be disclosed to keep the financial statements from being misleading, the Funds are required to disclose the nature of the event as well as an estimate of its financial effect, or a statement that such an estimate cannot be made. Management has determined that there were no other subsequent events to report through the issuance of these financial statements.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders and Board of Trustees
of AMM Funds
We have audited the accompanying statements of assets and liabilities of The Fallen Angels Value Fund and The Fallen Angels Income Fund (the “Funds”), both a series of AMM Funds, including the schedules of investments in securities, as of July 31, 2015 and the related statements of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Funds were not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. Our procedures included confirmation of securities owned as of July 31, 2015, by correspondence with the custodian and brokers. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial positions of The Fallen Angels Value Fund and The Fallen Angels Income Fund (the “Funds”), both a series of AMM Funds, as of July 31, 2015, the results of their operations for the year then ended, the changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.
Abington, Pennsylvania
September 28, 2015
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGLES INCOME FUND
EXPENSE ILLUSTRATION
JULY 31, 2015 (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, February 1, 2015 through July 31, 2015.
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 the 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 this Fund 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 |
|
|
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| Beginning Account Value | Ending Account Value | Expenses Paid During the Period * |
| February 1, 2015 | July 31, 2015 | February 1, 2015 to July 31, 2015 |
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|
Actual | $1,000.00 | $1,041.86 | $12.00 |
Hypothetical (5% Annual |
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|
|
Return before expenses) | $1,000.00 | $1,013.04 | $11.83 |
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|
|
* Expenses are equal to the Fund's annualized expense ratio of 2.37%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). | |||
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Income Fund |
|
|
|
| Beginning Account Value | Ending Account Value | Expenses Paid During the Period * |
| February 1, 2015 | July 31, 2015 | February 1, 2015 to July 31, 2015 |
|
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|
|
Actual | $1,000.00 | $1,012.61 | $11.88 |
Hypothetical (5% Annual |
|
|
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Return before expenses) | $1,000.00 | $1,012.99 | $11.88 |
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* Expenses are equal to the Fund's annualized expense ratio of 2.38%, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). |
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGLES INCOME FUND
TRUSTEES AND OFFICERS
JULY 31, 2015 (UNAUDITED)
TRUSTEES AND OFFICERS
The following table provides information regarding each Trustee who is not an “interested person” of the Trust, as defined in the Investment Company Act of 1940, as amended. Each Trustee serves as a Trustee until the termination of the Trust unless the Trustee dies, resigns, retires or is removed.
Name, Address and Birth Year | Position & Length of Time Served with the Trust | Number of Portfolios Overseen | Principal Occupations During Past 5 Years and Directorships |
Kelly C. Huang c/o American Money Management P.O. Box 675203 Rancho Santa Fe, CA 92067 Year of Birth: 1966 | Trustee since August 2006 | 2 | Management Consultant, self-employed (2002-present); Instructor, UCSD Extension (2009-present) |
Ingram S. Chodorow P.O. Box 675167, Rancho Santa Fe, CA 92067 Year of Birth: 1939 | Trustee since August 2006 | 2 | President/CEO, Elsac Group, Inc.(2009), (investments) |
Linda J. Rock 211 23rd St. Del Mar, CA 92014 Year of Birth: 1957 | Trustee since August 2006 | 2 | Management consultant, self-employed (1990-present) |
Miro Copic c/o American Money Management P.O. Box 675203 Rancho Santa Fe, CA 92067 Year of Birth: 1961 | Trustee since August 2006 | 2 | President/CEO, BottomLine Marketing (2001-present) (marketing) |
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGLES INCOME FUND
TRUSTEES AND OFFICERS (CONTINUED)
JULY 31, 2015 (UNAUDITED)
The following table provides information regarding each Trustee who is an “interested person” of the Trust, as defined in the Investment Company Act of 1940 as amended, and each officer of the Trust.
Name, Address, and Birth Year | Position & Length of Time Served with the Trust | Number of Portfolios Overseen | Principal Occupations During Past 5 Years and Directorships |
Gabriel B. Wisdom1 P.O. Box 675203 Rancho Santa Fe, CA 92067 Year of Birth: 1950 | Trustee since June 2006; President since August 2006 | 2 | Chief Executive Officer and Managing Director, American Money Management, LLC (1999 to present) |
Michael J. Moore P.O. Box 675203 Rancho Santa Fe, CA 92067 Year of Birth: 1976 | Chief Compliance Officer since March 2012; Secretary since March 2012; Treasurer since August 2006 | N/A | Chief Investment Officer, American Money Management (2005 to present) |
1 Gabriel B. Wisdom is considered an "Interested” Trustee, as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Trust, President of the Advisor, and control person of the Advisor.
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGELS INCOME FUND
ADDITIONAL INFORMATION
JULY 31, 2015 (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 June 30, 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.
AMM FUNDS
THE FALLEN ANGELS VALUE FUND
THE FALLEN ANGELS INCOME FUND
ADDITIONAL INFORMATION
JULY 31, 2015 (UNAUDITED)
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.
(a)
Audit Fees
FY 2015
$ 20,000
FY 2014
$ 20,000
(b)
Audit-Related Fees
Registrant
Adviser
FY 2015
$ 0
$ 0
FY 2014
$ 0
$ 0
(c)
Tax Fees
Registrant
Adviser
FY 2015
$ 4,200
$ 0
FY 2014
$ 3,000
$ 0
Nature of the fees:
Preparation of tax returns
(d)
All Other Fees
Registrant
Adviser
FY 2015
$ 0
$ 0
FY 2014
$ 0
$ 0
(e)
(1)
Audit Committee’s Pre-Approval Policies
The audit committee has not adopted pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of Regulation S-X.
(2)
Percentages of Services Approved by the Audit Committee
None of the services described in paragraph (b) through (d) of this Item were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f)
During audit of registrant's financial statements for the most recent fiscal year, less than 50 percent of the hours expended on the principal accountant's engagement were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.
(g)
The aggregate non-audit fees billed by the registrant's accountant for services rendered to the registrant, and rendered to the registrant's investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the adviser that provides ongoing services to the registrant:
Registrant
Adviser
FY 2015
$ 4,200
$ 0
FY 2014
$ 3,000
$ 0
(h)
Not applicable. The auditor performed no services for the registrant's investment adviser or any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant.
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)
Disclosure Controls & Procedures. Principal executive and financial officers have concluded that Registrant’s disclosure controls & procedures are effective based on their evaluation as of a date within 90 days of the filing date of this report.
(b)
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the registrant’s fiscal half-year 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, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
AMM Funds
By /s/Gabriel B. Wisdom, President
Gabriel B. Wisdom
President
Date: October 7, 2015
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 October 7, 2015
By /s/Michael Moore
Michael Moore
Secretary
Date October 7, 2015