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
MSS SERIES TRUST
(Exact Name of Registrant as Specified in Charter)
8000 Town Centre Drive, Suite 400
Broadview Heights, OH 44147
(Address of Principal Executive Offices)(Zip Code)
Gregory B. Getts
8000 Town Centre Drive, Suite 400
Broadview Heights, OH 44147
(Name and Address of Agent for Service)
With copy to:
JoAnn M. Strasser, Thompson Hine LLP
312 Walnut Street, 14th Floor, Columbus, OH 45202
Registrant’s Telephone Number, including Area Code: (440) 922-0066
Date of fiscal year end: July 31
Date of reporting period: January 31, 2017
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
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
January 31, 2017
(UNAUDITED)
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
PORTFOLIO ANALYSIS
JANUARY 31, 2017 (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.
Portfolio composition is shown as of January 31, 2017 and is subject to change. Industry sector classifications are from Morningstar®, and should not be used for compliance testing purposes.
Excludes securities sold short.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF INVESTMENTS
JANUARY 31, 2017 (UNAUDITED)
Shares |
|
| Value |
|
|
|
|
COMMON STOCKS - 64.72% |
| ||
|
|
|
|
Consumer Discretionary - 7.71% |
| ||
2,075 |
| McDonalds Corp. | $ 254,333 |
2,415 |
| The Walt Disney Co. | 267,220 |
3,955 |
| Yum! Brands, Inc. | 259,171 |
|
|
| 780,724 |
Consumer Staples - 12.72% |
| ||
2,405 |
| Anheuser-Busch InBev SA ADR | 250,745 |
2,890 |
| The Kraft Heinz Co. | 258,048 |
2,400 |
| PepsiCo, Inc. | 249,072 |
2,805 |
| Philip Morris International, Inc. | 269,645 |
2,980 |
| Procter & Gamble Co. | 261,048 |
|
|
| 1,288,558 |
Energy - 2.30% |
| ||
2,780 |
| Exxon Mobil Corp. | 233,214 |
|
|
|
|
Financials - 12.48% |
| ||
655 |
| BlackRock, Inc. | 244,957 |
2,910 |
| JP Morgan Chase & Co. | 246,273 |
5,890 |
| Morgan Stanley | 250,266 |
4,550 |
| Wells Fargo & Co. | 256,301 |
3,215 |
| Visa, Inc. Class A | 265,913 |
|
|
| 1,263,710 |
Healthcare - 9.84% |
| ||
4,045 |
| AbbVie, Inc. | 247,190 |
2,185 |
| Johnson & Johnson | 247,451 |
3,465 |
| Novartis AG ADR * | 256,133 |
7,770 |
| Pfizer, Inc. | 246,542 |
|
|
| 997,316 |
Industrials - 7.53% |
| ||
7,920 |
| General Electric Co. | 235,224 |
2,310 |
| Norfolk Southern Corp. | 271,333 |
2,400 |
| Union Pacific Corp. | 255,792 |
|
|
| 762,349 |
Information Technology - 12.14% |
| ||
2,155 |
| Apple, Inc. | 261,509 |
2,430 |
| MasterCard, Inc. | 258,382 |
4,000 |
| Microsoft Corp. | 258,600 |
4,100 |
| Paychex, Inc. | 247,189 |
3,810 |
| Qualcomm, Inc. | 203,568 |
|
|
| 1,229,248 |
* Non-income producing security during the period.
ADR - American Depository Receipt.
The accompanying notes are an integral part of these financial statements.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
Shares |
|
| Value |
|
| ||
Transportation - 0.00% |
| ||
45,000 |
| Sea Containers Ltd. Class A (Bermuda) † * | $ - |
|
|
|
|
TOTAL FOR COMMON STOCKS (Cost $5,143,350) - 64.72% | 6,555,119 | ||
|
|
|
|
CORPORATE BONDS - 5.34% |
| ||
|
|
|
|
Consumer Cyclical - 0.99% |
| ||
100,000 |
| Amazon.com, Inc., 1.20%, 11/29/17 | 99,994 |
|
|
|
|
Consumer Discretionary - 2.35% |
| ||
235,000 |
| Yum! Brands, Inc., 3.75%, 11/1/21 | 238,525 |
|
|
|
|
Information Technology - 2.00% |
| ||
200,000 |
| Verisign, Inc., 4.625%, 05/1/23 | 202,180 |
|
|
|
|
|
|
|
|
TOTAL FOR CORPORATE BONDS (Cost $526,831) - 5.34% | 540,699 | ||
|
|
|
|
PREFERRED SECURITIES - 12.82% |
| ||
|
|
|
|
Financials - 6.63% |
| ||
201 |
| Bank of America Corp., Series L, 7.25%, 12/31/49 | 239,642 |
8,787 |
| Charles Schwab Corp., Series B, 6.00%, 12/31/49 | 223,453 |
8,100 |
| Discover Financial Services, Series B, 6.50%, 12/31/49 | 208,900 |
|
|
| 671,995 |
Healthcare - 3.87% |
| ||
248 |
| Allergan Plc., Mandatory, 5.50%, 03/01/18 (Ireland) | 196,347 |
318 |
| Teva Pharmaceutical Industries Ltd., 7.00%, 12/15/18 (Israel) | 196,079 |
|
|
| 392,426 |
Real Estate - 2.32% |
| ||
8,380 |
| American Homes 4 Rent, Series A, 5.00%, 12/31/49 | 234,640 |
|
|
|
|
TOTAL FOR PREFERRED SECURITIES (Cost $1,337,372) - 12.82% | 1,299,061 | ||
|
|
|
|
REAL ESTATE INVESTMENT TRUST - 2.62% |
| ||
8,390 |
| Gaming & Leisure Properties, Inc. | 265,376 |
TOTAL FOR REAL ESTATE INVESTMENT TRUST (Cost $278,220) - 2.62% | 265,376 |
* Non-income producing security during the period.
† This security has been valued according to the fair value pricing policies of the Fund.
The accompanying notes are an integral part of these financial statements.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
Shares |
|
| Value |
|
|
|
|
STRUCTURED NOTES - 2.00% |
| ||
|
|
|
|
Financials - 2.00% |
| ||
25,000 |
| JP Morgan Chase & Co., 3.10%, 08/31/28 ** | $ 19,000 |
13,000 |
| Morgan Stanley, 10.00%, 12/31/34 | 9,847 |
14,000 |
| Morgan Stanley, 7.15%, 08/30/28 | 13,578 |
24,000 |
| Morgan Stanley, 7.00%, 09/30/30 | 22,902 |
10,000 |
| Morgan Stanley, 6.20%, 08/19/33 ** | 7,550 |
5,000 |
| Morgan Stanley, 8.22%, 08/29/34 ** | 3,631 |
25,000 |
| Morgan Stanley, 4.11%, 08/19/28 ** | 18,438 |
25,000 |
| Morgan Stanley, 5.99%, 09/27/28 ** | 19,875 |
12,000 |
| Morgan Stanley, 7.78%, 06/30/34 ** | 8,895 |
20,000 |
| Morgan Stanley, 10.00%, 03/31/35 | 15,000 |
34,000 |
| Natixis U.S. LLC., 3.89%, 08/29/33 ** | 23,800 |
10,000 |
| Natixis U.S. LLC., 1.868%, 04/30/34 ** | 7,700 |
15,000 |
| Natixis U.S. LLC., 0.00%, 03/31/34 ** | 10,894 |
10,000 |
| Natixis U.S. LLC., 7.16%, 10/31/34 ** | 7,450 |
10,000 |
| Nomura, 5.228%, 05/30/2034 | 7,113 |
10,000 |
| The Bank of Nova Scotia, 1.18%, 08/28/34 (Canada) ** | 6,522 |
TOTAL FOR STRUCTURED NOTES (Cost $204,897) - 2.00% | 202,195 | ||
|
|
|
|
U.S. GOVERNMENT AGENCIES & OBLIGATIONS - 1.97% |
| ||
200,000 |
| US Treasury Bill, 0.00%, 03/30/2017 | 199,853 |
TOTAL FOR U.S. GOVERNMENT AGENCIES & OBLIGATIONS (Cost $199,659) - 1.97% | 199,853 | ||
|
|
|
|
MONEY MARKET FUND - 10.62% |
| ||
1,075,832 |
| First American Treasury Obligation Fund Class Z 0.33% ** | 1,075,832 |
MONEY MARKET FUND (Cost $1,075,832) - 10.62% | 1,075,832 | ||
|
|
|
|
TOTAL INVESTMENTS (Cost $8,766,161) - 100.09% | 10,138,135 | ||
|
|
|
|
LIABILITIES LESS OTHER ASSETS, NET - (0.09)% | (9,002) | ||
|
|
|
|
NET ASSETS - 100.00% | $ 10,129,133 |
** Variable rate security; the coupon rate shown represents the yield at January 31, 2017.
The accompanying notes are an integral part of these financial statements.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF SECURITIES SOLD SHORT
JANUARY 31, 2017 (UNAUDITED)
Shares |
|
| Value |
|
|
|
|
COMMON STOCK |
| ||
|
|
|
|
Consumer Discretionary |
| ||
230 |
| Tesla, Inc. * | 57,944 |
TOTAL COMMON STOCK (Proceeds $49,448) | 57,944 | ||
|
|
|
|
TOTAL SECURITIES SOLD SHORT (Proceeds $49,448) | $ 57,944 |
* Represents non-income producing security during the period.
The accompanying notes are an integral part of these financial statements.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 2017 (UNAUDITED)
Assets: |
|
|
Investments in Securities, at Value (Cost $8,766,161) | $ 10,138,135 | |
Cash |
| 68,987 |
Receivables: |
| |
Dividends and Interest | 15,331 | |
Prepaid Expenses | 1,507 | |
Total Assets | 10,223,960 | |
Liabilities: |
|
|
Securities Sold Short, at Value (Proceeds $49,448) | 57,944 | |
Payables: |
| |
Management Fees | 8,869 | |
Administrative Fees | 1,025 | |
Transfer Agent & Accounting Fees | 2,526 | |
Distribution Fees | 2,238 | |
Shareholder Redemption | 10,975 | |
Accrued Expenses | 11,250 | |
Total Liabilities | 94,827 | |
Net Assets |
| $ 10,129,133 |
|
|
|
Net Assets Consist of: |
| |
Paid In Capital | $ 12,154,570 | |
Accumulated Undistributed Net Investment Income | 4,828 | |
Accumulated Realized Loss on Investments | (3,393,743) | |
Unrealized Appreciation in Value of Investments | 1,363,478 | |
Net Assets, for 970,241 Shares Outstanding | $ 10,129,133 | |
|
|
|
Net Asset Value Per Share | $ 10.44 |
The accompanying notes are an integral part of these financial statements.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 2017 (UNAUDITED)
Investment Income: |
| |
Dividends (net of foreign withholding of $3,287) | $ 137,416 | |
Interest |
| 23,162 |
Total Investment Income | 160,578 | |
|
|
|
Expenses: |
|
|
Advisory | 51,731 | |
Administrative | 9,557 | |
Distribution (12b-1) | 12,933 | |
Transfer Agent | 15,276 | |
Registration | 7,292 | |
Custodian | 3,842 | |
Audit |
| 5,822 |
Legal |
| 9,538 |
Trustee |
| 2,092 |
Printing and Mailing | 1,008 | |
Miscellaneous | 1,769 | |
Total Expenses | 120,860 | |
|
|
|
Net Investment Income | 39,718 | |
|
|
|
Realized and Unrealized Gain (Loss) on: |
| |
Realized Gain on Investments | 321,483 | |
Realized Gain on Options | 1,106 | |
Net Change in Unrealized Appreciation (Depreciation) on: |
| |
Investments | (180,261) | |
Net Realized and Unrealized Gain on Investments | 142,328 | |
|
|
|
Net Increase in Net Assets Resulting from Operations | $ 182,046 |
The accompanying notes are an integral part of these financial statements.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
|
| (Unaudited) Six Months Ended 1/31/2017 |
| Year Ended 7/31/2016 |
|
|
| ||
|
|
| ||
|
|
| ||
Increase (Decrease) in Net Assets From Operations: |
|
|
| |
Net Investment Income | $ 39,718 |
| $ 72,439 | |
Net Realized Gain (Loss) on Investments & Options | 322,589 |
| (121,984) | |
Capital Gain Distributions from Portfolio Companies | - |
| 319 | |
Unrealized Appreciation (Depreciation) on Investments & Options | (180,261) |
| 674,885 | |
Net Increase in Net Assets Resulting from Operations | 182,046 |
| 625,659 | |
|
|
|
|
|
Distributions to Shareholders: |
|
|
| |
Net Investment Income | (52,577) |
| (79,601) | |
Realized Gain | - |
| - | |
Total Distributions Paid to Shareholders | (52,577) |
| (79,601) | |
|
|
|
|
|
Capital Share Transactions | (674,850) |
| 390,311 | |
|
|
|
|
|
Total Increase (Decrease) in Net Assets | (545,381) |
| 936,369 | |
|
|
|
|
|
Net Assets: |
|
|
|
|
Beginning of Period | 10,674,514 |
| 9,738,145 | |
|
|
|
|
|
End of Period (Including Undistributed Net Investment Income of $4,828 and $17,687, respectively) |
|
|
| |
$10,129,133 |
| $10,674,514 |
The accompanying notes are an integral part of these financial statements.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
FINANCIAL HIGHLIGHTS
|
| (Unaudited) |
|
|
|
|
|
|
|
| Six Months |
|
|
|
|
|
|
|
| Ended |
| Years Ended | ||||
|
| 1/31/2017 |
| 7/31/2016 | 7/31/2015 | 7/31/2014 | 7/31/2013 | 7/31/2012 |
|
|
|
|
|
|
|
|
|
Net Asset Value, at Beginning of Period | $ 10.31 |
| $ 9.85 | $ 9.96 | $ 9.19 | $ 7.96 | $ 7.74 | |
|
|
|
|
|
|
|
|
|
Income (Loss) From Investment Operations: |
|
|
|
|
|
|
| |
Net Investment Income * | 0.04 |
| 0.07 | 0.13 | 0.14 | 0.18 | 0.24 | |
Net Gain (Loss) on Securities (Realized and Unrealized) | 0.14 |
| 0.46 | (0.10) | 0.74 | 1.19 | 0.20 | |
Total from Investment Operations | 0.18 |
| 0.53 | 0.03 | 0.88 | 1.37 | 0.44 | |
|
|
|
|
|
|
|
|
|
Distributions: |
|
|
|
|
|
|
|
|
Net Investment Income | (0.05) |
| (0.07) | (0.14) | (0.11) | (0.14) | (0.22) | |
Realized Gains | - |
| - | - | - | - | - | |
Total from Distributions | (0.05) |
| (0.07) | (0.14) | (0.11) | (0.14) | (0.22) | |
|
|
|
|
|
|
|
|
|
Net Asset Value, at End of Period | $ 10.44 |
| $ 10.31 | $ 9.85 | $ 9.96 | $ 9.19 | $ 7.96 | |
|
|
|
|
|
|
|
|
|
Total Return ** | 1.78%(b) |
| 5.47% | 0.29% | 9.59% | 17.35% | 5.93% | |
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data: |
|
|
|
|
|
|
| |
Net Assets at End of Period (Thousands) | $ 10,129 |
| $ 10,675 | $ 9,738 | $ 10,205 | $ 9,559 | $ 9,324 | |
Ratio of Expenses to Average Net Assets | 2.34%(a) |
| 2.36% | 2.39% | 2.32% | 2.49% | 2.33% | |
Ratio of Net Investment Income to Average Net Assets | 0.77%(a) |
| 0.70% | 1.25% | 1.39% | 2.10% | 3.19% | |
Portfolio Turnover | 10.51%(b) |
| 26.89% | 35.17% | 66.27% | 43.58% | 69.06% |
* Per share net investment income has been determined on the basis of average shares outstanding during the period.
** Assumes reinvestment of dividends.
(a) Annualized.
(b) Not annualized.
The accompanying notes are an integral part of these financial statements.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2017 (UNAUDITED)
Note 1. Organization
The Fallen Angels Income Fund (the “Fund”) is a diversified series of MSS Series Trust (the “Trust”) (formerly known as “AMM Funds”), an open-end investment company that was organized as an Ohio business trust on June 20, 2006. The Fund commenced operations on November 10, 2006. The Trust is permitted to issue an unlimited number of shares of beneficial interest of separate series. The Fund is the only series currently authorized by the Trust’s Board of Trustees (“the Board”). The investment adviser to the Fund is American Money Management, LLC (the “Advisor”).
The 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 Fund in the preparation of the financial statements. The Fund is an investment company that follows the accounting and reporting guidance of Accounting Standards Codification Topic 946 and ASU 2013-08 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 the 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 the 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 the 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. The 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 7 for additional disclosure on the Fund's option transactions during the year.
Repurchase Agreements- In connection with transactions in repurchase agreements, it is the Fund’s 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 the Fund may be delayed or limited.
Financial Futures Contracts- The Fund 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, the 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 the Fund each day, depending on the daily fluctuations in the fair value of the underlying security. The Fund recognizes a gain or loss
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
equal to the daily variation margin. Should market conditions move unexpectedly, the 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 Fund may sell a security that they do not own in anticipation of a decline in the fair value of that security. When the 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 the Fund sold the security short, or a loss, unlimited in size, will be recognized upon the termination of a short sale.
Income Taxes - The Fund intends 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 Fund 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 Fund’s 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 Fund to analyze all open tax years, fiscal years 2012-2016, 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, 2016, the Fund did not have a liability for any unrecognized tax benefits. The Fund has no examination in progress and is 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 the Fund is determined as of the close of the New York Stock Exchange (generally 4:00 p.m. Eastern time) on each day the Fund is open for business and on any other day on which there is sufficient trading in the Fund’s securities to materially affect the net asset value. The 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. The 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 Fund’s understanding of the applicable country’s tax rules and rates.
Distributions to Shareholders- The Fund typically will distribute substantially all of its net investment income in the form of dividends and capital gains to its shareholders. The 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.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
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 Board 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 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 Fund utilizes various methods to measure the fair value of most of the 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
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
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 Fund’s 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.
Fixed income securities (corporate bonds and structured notes). The fair value of fixed income securities 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 fixed income securities 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 Fund’s assets and liabilities measured at fair value as of January 31, 2017:
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
* Industry classifications for these categories are detailed in the Schedule of Investments.
The Fund did not hold any Level 3 assets (those valued using significant unobservable inputs) at any time during the six months ended January 31, 2017. Therefore a reconciliation of assets in which significant unobservable inputs were used in determining fair value is not applicable. The 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 Fund, has been valued at $0.00 per share. This security has been valued according to the fair value pricing policies of the Fund.
Note 4. Investment Management Agreement
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 Fund investment advice and will furnish or arrange to be furnished a continuous investments program for the Fund consistent with the Fund’s investment objective and policies. Under the Management Agreement, the Fund will pay the Advisor a monthly fee based on the Fund’s average daily net assets at the annual rate of 1.00%. For the six months ended January 31, 2017, the Advisor earned a fee of $51,731 for the Fund. The Fund owed the Advisor management fees of $8,869 as of January 31, 2017.
Note 5. Rule 12b-1 Plan
The Trust has adopted with respect to the Fund, a Plan pursuant to Rule 12b-1 under the 1940 Act whereby the Fund pays the Advisor for certain distribution and promotion expenses activities which are primarily intended to result in the sale of the Fund’s 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
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
dealers and shareholder servicing agents who enter into agreements with the Fund. The Fund incurs such distribution expenses at the rate of 0.25% per annum of the Fund’s average daily net assets. For the six months ended January 31, 2017, the Fund accrued distribution (12b-1) fees under the Plan of $12,933. The Fund owed the Advisor $2,238 for distribution fees as of January 31, 2017.
Note 6. Related Party Transactions
Independent Trustees received $300 per meeting for their 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.
An interested Trustee, Gregory B. Getts, is the owner/president of Mutual Shareholder Services, LLC (“MSS”), the Fund’s transfer agent and fund accountant. Please refer to the Fund’s Prospectus for MSS’s fee structure. For the six months ended January 31, 2017, MSS earned $15,276 from the Fund for transfer agent and accounting services. At January 31, 2017, the Fund owes MSS $2,526.
The Trust also had 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 the agreement, the Fund paid the Advisor a monthly fee based on the Fund’s average daily net assets at the annual rate of 0.25%. For the period August 1, 2016 through November 2, 2016, the Advisor earned $6,598 from the Fund for administration services. On November 3, 2016, Empirical Administration, LLC (“Empirical”) took over the administration services of the Fund.
Empirical provides administration and compliance services to the Fund. Brandon M. Pokersnik is the owner/president of Empirical, and also an employee of MSS. Mr. Pokersnik also serves as an officer of the Trust. See the Trustee & Officer table for more information. Empirical earns $1,000 per month for its services. For the period November 3, 2016 through January 31, 2017, Empirical earned $2,959 for its services. At January 31, 2017, the Fund owed Empirical $1,025.
Note 7. Derivative Transactions
As of January 31, 2017 the Fund had no outstanding written call options. Transactions in written call options during the six months ended January 31, 2017 were as follows:
| Number of Contracts |
| Premiums Received |
|
| ||
Options outstanding at July 31, 2016 | - |
| $ - |
Options written | 10 |
| 1,482 |
Options exercised | - |
| - |
Options expired | (-) |
| (-) |
Options terminated in closing purchase transaction | (10) |
| (1,482) |
Options outstanding at January 31, 2017 | - |
| $ - |
Realized and unrealized gains and losses on derivatives contracts entered into during the six months ended January 31, 2017, by the Fund, are recorded in the following locations in the Statement of Operations:
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
| Location | Realized Gain/(Loss) | Location | Unrealized Gain/(Loss) |
Options Written & Purchased | Realized Gain on Options | $1,106 | Change in Unrealized Appreciation on Options | $ - |
The selling of written call options may tend to reduce the volatility of the 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 Fund’s gain on the underlying securities. Written call options expose the Fund to minimal counterparty risk since they are exchange-traded and the exchange’s clearing house guarantees the options against default.
The location on the Statement of Assets and Liabilities of the Fund’s derivative positions, which are not accounted for as hedging instruments under GAAP, is as follows:
Asset Derivatives
Investment in Securities, at Value
Schedule of Investments - Structured Notes $ 202,195
Unrealized gains and losses on derivatives during the six months ended January 31, 2017, are included in the Statement of Operations, in the location, “Net Change in Unrealized Appreciation (Depreciation) on Investments” in the amount of $(2,702).
There was no realized gain or loss on sales of Structured Notes for the Fund for the six months ended January 31, 2017.
Note 8. Capital Share Transactions
The Fund is authorized to issue an unlimited number of shares with no par value of separate series. Paid in capital at January 31, 2017 was $12,154,570 for the Fund.
Transactions in capital stock for the six months ended January 31, 2017 and the year ended January 31, 2016 were as follows:
| January 31, 2017 | July 31, 2016 | ||
| Shares | Amount | Shares | Amount |
Shares Sold | 21,374 | $ 219,005 | 345,756 | $ 3,196,751 |
Shares issued in reinvestment of distributions | 5,089 | 52,563 | 8,304 | 79,581 |
Shares redeemed | (91,947) | (946,418) | (307,153) | (2,886,021) |
Net Increase (Decrease) | (65,484) | $(674,850) | 46,907 | $ 390,311 |
Note 9. Investment Transactions
For the six months ended January 31, 2017, purchases and sales of investment securities other than U.S. Government obligations aggregated $705,835 and $2,450,598. Purchases and sales of U.S. Government obligations aggregated $174,907 and $300,000. Purchases and sales of options aggregated $377 and $1,482.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
Note 10. Tax Matters
The Fund’s distributable earnings on a tax basis are determined only at the end of each fiscal year. As of July 31, 2016, the Trust’s most recent fiscal year-end, the components of distributable earnings on a tax basis were as follows:
|
|
|
| Income Fund |
Unrealized Appreciation (Depreciation) |
|
| $ | 1,543,739 |
Undistributed Ordinary Income |
|
|
| 17,687 |
Capital loss carryforward expiring +: |
|
|
|
|
2017 |
|
|
| (1,012,715) |
2018 |
|
|
| (2,126,805) |
2019 |
|
|
| (329,037) |
No expiration – short term |
|
|
| (218,572) |
No expiration – long term
|
|
|
| (29,203) |
Total Distributable Earnings |
|
| $ | (2,154,906) |
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 Fund.
The capital loss carryforward will be used to offset any capital gains realized by the Fund in future years. The Fund will not make distributions from capital gains while a capital loss remains.
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. The 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 the 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.
As of July 31, 2016, the unrealized appreciation (depreciation) and tax cost of investment securities for the Fund were as follows:
|
|
| Income |
Gross unrealized appreciation on investment securities |
| $ | 1,784,413 |
Gross unrealized depreciation on investment securities |
|
| (240,674) |
Net unrealized appreciation on investment securities |
| $ | 1,543,739 |
|
|
|
|
Cost of investment securities, including short-term investments |
| $ | 9,121,277 |
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
The Fund paid distributions in the amount of $52,577, from ordinary income, for the six months ended January 31, 2017.
The Fund paid distributions in the amount of $79,601, from ordinary income, for the year ended July 31, 2016.
Note 11. 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, 2017, Charles Schwab, for the benefit of its customers, owned, in aggregate, approximately 87.39% of the Fund and may be deemed to control the Fund.
Note 12. Indemnifications
In the normal course of business, the Fund enters into contracts that contain general indemnification to other parties. The Fund’s maximum exposure under these contracts is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. The Fund expects the risk of loss to be remote.
Note 13. New Accounting Pronouncement
In October 2016, the U.S. Securities and Exchange Commission (“SEC”) issued a new rule, Investment Company Reporting Modernization, which, among other provisions, amends Regulation S-X to require standardized, enhanced disclosures, particularly related to derivatives, in investment company financial statements. Compliance with the guidance is required for financial statements filed with the SEC on or after August 1, 2017. Management is currently evaluating the impact the amendments will have on the Funds’ financial statements and related disclosures.
MSS SERIES TRUST
THE FALLEN ANGLES INCOME FUND
EXPENSE ILLUSTRATION
JANUARY 31, 2017 (UNAUDITED)
Expense Example
As a shareholder of the Fund, 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 Fund 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, 2016 through January 31, 2017.
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 the 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 the 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.
| Beginning Account Value | Ending Account Value | Expenses Paid During the Period* |
| August 1, 2016 | January 31, 2017 | August 1, 2016 to January 31, 2017 |
|
|
|
|
Actual | $1,000.00 | $1,017.81 | $11.90 |
Hypothetical |
|
|
|
(5% Annual Return before expenses) | $1,000.00 | $1,013.41 | $11.88 |
|
|
|
|
* Expenses are equal to the Fund's annualized expense ratio of 2.34%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
MSS SERIES TRUST
THE FALLEN ANGLES INCOME FUND
TRUSTEES & OFFICERS
JANUARY 31, 2017 (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.
Name Address and Year of Birth | Position(s) Held with the Fund | Term of Office/Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex1 Overseen by Trustee | Other Directorships Held by Trustee During Past 5 Years |
Paul K. Rode, Esq. 8000 Town Centre Drive, Suite 400, Broadview Heights, OH 44147 Year: 1980 | Trustee | Indefinite/ October 2016- present | Attorney, Keith D. Weiner & Assoc. Co. L.P.A. since September 2005 | 1 | None |
Michael Young 8000 Town Centre Drive, Suite 400, Broadview Heights, OH 44147 Year: 1950 | Trustee | Indefinite/ October 2016 - present | November 2013-Present: Consultant/Practitioner for Purdue, Rutgers and Northeastern Universities; June 2002-November 2013: Senior Federal Security Director for U.S. Department of Homeland Security | 1 | None |
1The "Fund Complex" consists of the MSS Series Trust.
Non-interested trustees receive $300 each per quarterly meeting.
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 Year of Birth | Position(s) Held with the Fund | Term of Office/ Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex 2 Overseen by Trustee | Other Directorships Held by Trustee During Past 5 Years |
Dr. Gregory B. Getts 1 8000 Town Centre Drive, Suite 400, Broadview Heights, OH 44147 Year: 1957 | Trustee | Indefinite/ October 2016 - present | Owner/President, Mutual Shareholder Services, LLC, since 1999; Owner/President Arbor Court Capital, LLC, since January 2012. | 1 | None |
Brandon M. Pokersnik 8000 Town Centre Drive, Suite 400, Broadview Heights, OH 44147 Year: 1978 | Treasurer, Secretary and Chief Compliance Officer | Indefinite/ October 2016 - present | Accountant, Mutual Shareholder Services, LLC, since 2008; Attorney Mutual Shareholder Services, LLC, since June 2016; Owner/President, Empirical Administration, LLC, since September 2012. | NA | NA |
1 Gregory B. Getts is considered an "Interested” Trustee as defined in the Investment Company Act of 1940, as amended, because he is an officer of the Trust and president/owner of the Fund’s transfer agent, fund accountant, and distributor.
2The "Fund Complex" consists of the MSS Series Trust.
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
ADDITIONAL INFORMATION
JANUARY 31, 2017 (UNAUDITED)
Additional Information
The Fund's 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 Fund's Advisor is responsible for exercising the voting rights associated with the securities held by the Fund. 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 Fund’s 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 Fund uses to determine how to vote proxies relating to portfolio securities and information regarding how the Fund voted proxies during the most recent 12-month period ended June 30, are available without charge upon request by (1) calling the Fund 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 Fund files a complete schedule of investments with the SEC for the first and third quarter of the fiscal year on Form N-Q. The Fund's first and third fiscal quarters end on April 30 and October 31. The Fund's Form N-Q is available on the SEC’s website at http://sec.gov, or it 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 Fund at (866) 663-8023.
Management Agreement Renewal
At a regular meeting of the Board of Trustees held on September 20, 2016, the Trustees approved the management agreement for another year.
Counsel reviewed a memorandum provided to the Trustees entitled "Duties of Trustees with Respect to Approval and Renewal of Investment Advisory Contracts" which highlights the Trustees' duties when considering the Management Agreement renewal. Counsel reminded the Trustees that their review must include: (1) investment performance of the Fund and the Adviser; (2) the nature, extent and quality of services provided to the Fund; (3) costs of the services and profits of the Adviser (including any affiliates); (4) economies of scale realized as the Fund grows; and (5) whether fees indicate that the Fund benefits or shares in the economies of scale. The Trustees' review was informed by a memorandum provided by the Adviser as well as by supplemental information provided by the Adviser. As part of its deliberations, the Board also considered and relied upon the information about the Fund and the Adviser that the Trustees had received throughout the year as part of their ongoing oversight of the Fund and its operations.
Nature, Extent and Quality of Services. As to the nature, extent, and quality of the services provided by the Adviser, the Board considered the Adviser's investment philosophy and strategy. The Trustees discussed the Adviser’s organizational structure, and the background and experience of each of the people responsible for the management and/or support of the Fund and its operations. The Trustees discussed the Adviser’s compliance processes and procedures and agreed that the Adviser consistently demonstrates a process oriented nature
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
ADDITIONAL INFORMATION (CONTINUED)
JANUARY 31, 2017 (UNAUDITED)
that exhibits a strong culture of compliance. They acknowledged that the Adviser works in a proactive fashion to increase Fund assets thus providing additional value to the Fund and its shareholders. They discussed their experience with the Adviser and its portfolio managers during the term of the Adviser’s relationship with the Fund, and agreed that the Fund benefits from the continuity and experience of the portfolio manager’s team and that the Adviser provides high quality services to the Fund. The Trustees discussed the amount of time spent on research by the Adviser and the time and dedication to the Fund by its staff. The Trustees agreed that the Adviser has done a satisfactory job of managing the Fund despite a difficult market. The Trustees concluded that the Adviser provided services consistent with the Board's expectations and should be retained.
Performance. The Trustees reviewed the Fund’s performance relative to its index and peer group over the 12-month, 3-year and 5-year periods provided by the Adviser. The Trustees noted that the Income Fund provided positive returns for the 3-year and 5-year periods with returns of 5.05% and 7.58%, respectively. They considered that the Fund’s returns were in line with the range of returns of funds in its Morningstar category. The Trustees also noted that the Fund posted the highest total return among its Morningstar category over the past 12-month period with a return of 15.08%. The Trustees concluded that the Fund’s recent and history performances were reasonable and in line with the Board’s expectations.
Fees and Expenses. The Trustees noted that the Fund’s advisory fee is 1.00% with a net expense ratio of 2.40%. They compared the advisory fee to the average fee charged by similarly sized funds in the Fund’s Morningstar category (70% - 85% Equity, funds under $20M) and noted that although the Fund’s fee is higher than the average it is within the range of fees charged by funds in the category, which are as high as 1.10%. With respect to the Fund’s net expense ratio, they noted that it was also higher than the average of 1.56% for the funds in its Morningstar category, but well within the range of fees charged by other funds in the category, which are as high as 3.27%. They noted that the Adviser works proactively to find ways to limit total Fund expenses with the aim of lowering net expense ratio to the benefit of shareholders. The Trustees discussed the 0.25% administration fee paid by the Fund to the Adviser and the indirect benefits to the Adviser from the Rule 12b-1 fees. The Trustees concluded the Fund's management fee was reasonable.
Profitability. The Trustees reviewed a profitability analysis provided by the Adviser and noted that based on the information provided, the Adviser realized a net profit in connection with its relationship with each Fund, but agreed that such profit, both in terms of actual dollars and percentage of revenue is minimal. After further discussion, the Trustees concluded that excessive profitability was not a concern at this time.
Economies of Scale. The Trustees noted the absence of breakpoints, but considered, given the size of the Fund, this was reasonable given the size of the Fund. They noted that the Adviser has indicated its willingness to discuss the matter with the Board when the Fund experiences significant asset growth, possibly as a result of the transition of the Fund into a series trust model. The Trustees noted that economies do not appear to have been reached at this time, and agreed that the matter of economies of scale would be revisited if the size of the Fund materially increases.
Conclusion. Having requested and received such information from the Adviser as the Trustees believed to be reasonably necessary to evaluate the terms of the Management Agreement and as assisted by the advice of Counsel, the Trustees concluded that the fee structure is reasonable and that approval of the Management Agreement is in the best interests of the shareholders of the Fund.
Board of Trustees
Paul Rode
Michael Young
Gregory Getts
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 Fallen Angels Income Fund. This report is not intended for distribution to prospective investors in the Fund, 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)
Based on an evaluation of the registrant’s disclosure controls and procedures as of Decmeber 29, 2006, the disclosure controls and procedures are reasonably designed to ensure that the information required in filings on Forms N-CSR is recorded, processed, summarized, and reported on a timely basis.
(b)
There were no significant changes in the registrant’s internal control over financial reporting that occurred during the registrant’s first 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, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MSS SERIES TRUST
By /s/ Gregory B. Getts, President
Gregory B. Getts
President
Date: April 6, 2017
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/Gregory B. Getts, President
Gregory B. Getts
President
Date: April 6, 2017
By /s/Brandon M. Pokersnik
Brandon M. Pokersnik
Secretary
Date: April 6, 2017