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
41 South High Street, Suite 1700, Columbus, OH 43215
Registrant’s Telephone Number, including Area Code: (440) 922-0066
Date of fiscal year end:July 31
Date of reporting period:January 31, 2019
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.
THE FALLEN ANGELS INCOME FUND
SEMI-ANNUAL REPORT
JANUARY 31, 2019
(UNAUDITED)
Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, paper copies of the Fund’s shareholder reports like this one will no longer be sent by mail, unless you specifically request paper copies of the reports. Instead, the reports will be made available on the Fund’s websitewww.amminvest.com, and you will be notified by mail each time a report is posted and provided with a website link to access the report.
If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. You may elect to receive shareholder reports and other communications from the Fund electronically by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by following the instructions included with paper Fund documents that have been mailed to you.
Series Trust
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
PORTFOLIO ANALYSIS
JANUARY 31, 2019 (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, 2019 and is subject to change. Global Industry Classification Standard "GICS" is used for the industry sector classifications and should not be used for compliance testing purposes.
Excludes securities sold short.
1
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF INVESTMENTS
JANUARY 31, 2019 (UNAUDITED)
Shares |
|
| Value |
|
|
|
|
COMMON STOCKS - 72.65% |
| ||
|
|
|
|
Consumer Discretionary - 16.14% |
| ||
5,920 |
| Twenty-First Century Fox, Inc. Class A | $ 291,915 |
1,135 |
| McDonalds Corp. | 202,915 |
4,780 |
| Papa John's International, Inc. | 202,146 |
3,234 |
| Starbucks Corp. | 220,365 |
1,877 |
| The Walt Disney Co. | 209,323 |
2,235 |
| Yum! Brands, Inc. | 210,045 |
|
|
| 1,336,709 |
Consumer Staples - 7.02% |
| ||
2,175 |
| Anheuser-Busch InBev SA ADR | 166,257 |
1,828 |
| PepsiCo, Inc. | 205,961 |
2,720 |
| Philip Morris International, Inc. | 208,678 |
|
|
| 580,896 |
Financials - 15.72% |
| ||
435 |
| BlackRock, Inc. | 180,560 |
2,125 |
| JP Morgan Chase & Co. | 219,937 |
1,104 |
| MasterCard, Inc. | 233,088 |
4,790 |
| Schwab Charles Corp. | 224,028 |
4,700 |
| Wells Fargo & Co. | 229,877 |
1,585 |
| Visa, Inc. Class A | 213,991 |
|
|
| 1,301,481 |
Healthcare - 12.24% |
| ||
2,295 |
| AbbVie, Inc. | 184,266 |
3,040 |
| Gilead Sciences, Inc. | 212,830 |
1,575 |
| Johnson & Johnson | 209,601 |
2,340 |
| Novartis AG ADR * | 204,797 |
4,748 |
| Pfizer, Inc. | 201,553 |
|
|
| 1,013,047 |
Industrials - 10.57% |
| ||
4,030 |
| DowDuPont, Inc. | 216,854 |
736 |
| Lockheed Martin Corp. | 213,212 |
1,235 |
| Norfolk Southern Corp. | 207,159 |
1,498 |
| Union Pacific Corp. | 238,287 |
|
|
| 875,512 |
Information Technology - 10.96% |
| ||
1,020 |
| Apple, Inc. | 169,769 |
990 |
| Intuit, Inc. | 213,662 |
2,053 |
| Microsoft Corp. | 214,395 |
3,110 |
| Paychex, Inc. | 220,188 |
502 |
| Red Hat, Inc. * | 89,276 |
|
|
| 907,290 |
The accompanying notes are an integral part of these financial statements.
2
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
Shares |
|
| Value |
|
| ||
Transportation - 0.00% |
| ||
45,000 |
| Sea Containers Ltd. Class A (Bermuda) † | $ - |
|
|
|
|
TOTAL FOR COMMON STOCKS (Cost $4,690,469) - 72.65% | 6,014,935 | ||
|
|
|
|
PREFERRED SECURITIES - 3.14% |
| ||
|
|
|
|
Financials - 3.14% |
| ||
201 |
| Bank of America Corp., Series L, 7.250%, 12/31/49 | 259,925 |
|
|
|
|
TOTAL FOR PREFERRED SECURITIES (Cost $237,954) - 3.14% | 259,925 | ||
|
|
|
|
Par Value |
|
|
|
|
|
|
|
CORPORATE BONDS - 14.62% |
| ||
|
|
|
|
Consumer Discretionary - 7.45% |
| ||
220,000 |
| Under Armour, Inc., 3.250%, 06/15/26 | 194,684 |
204,000 |
| Wynn Las Vegas LLC., 5.250%, 05/15/27 | 190,740 |
235,000 |
| Yum! Brands, Inc., 3.750%, 11/01/21 | 231,475 |
|
|
| 616,899 |
Consumer Staples - 2.42% |
| ||
200,000 |
| Edgewell Personel Care Co., 4.700% 05/24/22 | 200,000 |
|
|
|
|
Information Technology - 2.43% |
| ||
200,000 |
| Verisign, Inc., 4.625%, 05/01/23 | 201,250 |
|
|
|
|
Utilities - 2.32% |
| ||
200,000 |
| Suburban Propane Partners L.P., 5.750%, 03/01/25 | 192,000 |
|
|
|
|
|
|
|
|
TOTAL FOR CORPORATE BONDS (Cost $1,236,820) - 14.62% | 1,210,149 | ||
|
|
|
|
STRUCTURED NOTES - 2.21% |
| ||
|
|
|
|
Financials - 2.21% |
| ||
25,000 |
| JP Morgan Chase & Co., 0.790%, 08/31/28 + | 15,906 |
13,000 |
| Morgan Stanley, 0.716%, 12/31/34 + | 6,890 |
14,000 |
| Morgan Stanley, 7.150%, 08/30/28 | 15,177 |
24,000 |
| Morgan Stanley, 7.000%, 09/30/30 | 25,979 |
10,000 |
| Morgan Stanley, 0.800%, 08/19/33 + | 5,400 |
The accompanying notes are an integral part of these financial statements.
3
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF INVESTMENTS (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
Par Value |
|
| Value |
|
| ||
Financials - (Continued) |
| ||
5,000 |
| Morgan Stanley, 0.755%, 08/29/34 + | $ 2,644 |
25,000 |
| Morgan Stanley, 0.800%, 08/19/28 + | 14,969 |
25,000 |
| Morgan Stanley, 0.456%, 09/27/28 + | 15,031 |
22,000 |
| Morgan Stanley, 0.725%, 06/30/34 + | 11,632 |
20,000 |
| Morgan Stanley, 0.918%, 03/31/35 + | 11,000 |
34,000 |
| Natixis U.S. LLC., 0.716%, 08/29/33 + | 26,027 |
10,000 |
| Natixis U.S. LLC., 0.148%, 04/30/34 + | 7,053 |
15,000 |
| Natixis U.S. LLC., 0.532%, 03/31/34 + | 8,231 |
10,000 |
| Natixis U.S. LLC., 1.113%, 10/31/34 + | 5,787 |
10,000 |
| Nomura, 0.000%, 05/30/34 + | 5,603 |
10,000 |
| The Bank of Nova Scotia, 0.000%, 08/28/34 (Canada) + | 5,885 |
TOTAL FOR STRUCTURED NOTES (Cost $221,873) - 2.21% | 183,214 | ||
|
|
|
|
U.S. GOVERNMENT AGENCIES & OBLIGATIONS - 2.41% |
| ||
200,000 |
| US Treasury Bill, 0.000%, 02/28/19 | 199,645 |
TOTAL FOR U.S. GOVERNMENT AGENCIES & OBLIGATIONS (Cost $199,642) - 2.41% | 199,645 | ||
|
|
|
|
Shares |
|
|
|
|
| ||
MONEY MARKET FUND - 4.96% |
| ||
410,124 |
| First American Treasury Obligation Fund Class Z 2.250% ** | 410,124 |
MONEY MARKET FUND (Cost $410,124) - 4.96% | 410,124 | ||
|
|
|
|
TOTAL INVESTMENTS (Cost $6,996,882) - 99.99% | 8,277,992 | ||
|
|
|
|
INVESTMENTS IN SECURITIES SOLD SHORT, AT VALUE (Proceeds $137,305) - (1.79)% | (148,257) | ||
|
|
|
|
OTHER ASSETS LESS LIABILITIES, NET - 1.80% | 149,330 | ||
|
|
|
|
NET ASSETS - 100.00% | $ 8,279,065 |
ADR - American Depository Receipt.
† This security has been valued according to the fair value pricing policies of the Fund.
+ Variable or floating rate security in which coupon rate adjusts periodically. Maturity date shown for callable securities reflects the earliest possible call date. For certain variable rate securities, the coupon rate is determined by the issuer/agent based on current market conditions. The stated rate represents the rate on January 31, 2019.
* Non-income producing security during the period.
** Variable rate security; the coupon rate shown represents the yield on January 31, 2019.
The accompanying notes are an integral part of these financial statements.
4
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
SCHEDULE OF SECURITIES SOLD SHORT
JANUARY 31, 2019 (UNAUDITED)
Shares |
|
| Value |
|
|
|
|
COMMON STOCKS - 1.79% |
| ||
|
|
|
|
Consumer Discretionary - 1.13% |
| ||
305 |
| Tesla, Inc. * | $ 93,641 |
|
|
|
|
Healthcare - 0.39% |
| ||
1,800 |
| PolarityTE, Inc. * | 31,896 |
|
|
|
|
Information Technology - 0.27% |
| ||
800 |
| GDS Holdings Ltd. ADR * | 22,720 |
|
|
|
|
|
|
|
|
TOTAL COMMON STOCKS (Proceeds $137,305) - 1.79% | 148,257 | ||
|
|
|
|
TOTAL SECURITIES SOLD SHORT (Proceeds $137,305) - 1.79% | $ 148,257 |
* Non-income producing security during the period.
The accompanying notes are an integral part of these financial statements.
5
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
STATEMENT OF ASSETS AND LIABILITIES
JANUARY 31, 2019 (UNAUDITED)
Assets: |
|
|
Investments in Securities, at Value (Cost $6,996,882) | $ 8,277,992 | |
�� Cash |
| 142,383 |
Receivables: |
| |
Dividends and Interest | 23,943 | |
Prepaid Expenses | 2,702 | |
Total Assets | 8,447,020 | |
Liabilities: |
|
|
Securities Sold Short, at Value (Proceeds $137,305) | 148,257 | |
Payables: |
| |
Management Fees | 6,814 | |
Administrative Fees | 1,000 | |
Transfer Agent & Accounting Fees | 2,051 | |
Distribution Fees | 1,744 | |
Shareholder Redemption | 587 | |
Accrued Expenses | 7,502 | |
Total Liabilities | 167,955 | |
Net Assets |
| $ 8,279,065 |
|
|
|
Net Assets Consist of: |
| |
Paid In Capital | $ 6,833,470 | |
Distributable Earnings | 1,445,595 | |
Net Assets, for 697,379 Shares Outstanding | $ 8,279,065 | |
|
|
|
Net Asset Value Per Share | $ 11.87 |
The accompanying notes are an integral part of these financial statements.
6
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
STATEMENT OF OPERATIONS
FOR THE SIX MONTHS ENDED JANUARY 31, 2019 (UNAUDITED)
Investment Income: |
| |
Dividends (net of foreign withholding of $296) | $ 87,002 | |
Interest |
| 30,445 |
Total Investment Income | 117,447 | |
|
|
|
Expenses: |
|
|
Advisory | 43,913 | |
Administrative | 6,000 | |
Distribution (12b-1) | 10,978 | |
Transfer Agent | 12,526 | |
Registration | 1,453 | |
Custodian | 3,743 | |
Audit |
| 6,600 |
Legal |
| 7,945 |
Trustee |
| 1,329 |
Printing and Mailing | 422 | |
Insurance | 379 | |
Miscellaneous | 2,544 | |
Total Expenses | 97,832 | |
|
|
|
Net Investment Income | 19,615 | |
|
|
|
Realized and Unrealized Gain (Loss) on: |
| |
Realized Gain (Loss) on: |
| |
Investments | 455,835 | |
Options |
| (871) |
Securities Sold Short | 33,430 | |
Net Change in Unrealized Appreciation (Depreciation) on: |
| |
Investments | (611,151) | |
Options |
| 860 |
Securities Sold Short | (29,491) | |
Net Realized and Unrealized Gain (Loss) on Investments | (151,388) | |
|
|
|
Net Decrease in Net Assets Resulting from Operations | $ (131,773) |
The accompanying notes are an integral part of these financial statements.
7
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS
|
| (Unaudited) |
|
|
|
| Six Months |
|
|
|
| Ended |
| Year Ended |
|
| 1/31/2019 |
| 7/31/2018 |
Increase in Net Assets From Operations: |
|
|
| |
Net Investment Income | $ 19,615 |
| $ 65,477 | |
Net Realized Gain on Investments & Options & Securities Sold Short | 488,394 |
| 636,033 | |
Capital Gain Distributions from Portfolio Companies | - |
| - | |
Unrealized Appreciation (Depreciation) on Investments & Options & Securities Sold Short | (639,782) |
| 207,308 | |
Net Increase (Decrease) in Net Assets Resulting from Operations | (131,773) |
| 908,818 | |
|
|
|
|
|
Distributions to Shareholders: |
|
|
| |
Distributions | (25,540) |
| (66,504) | |
Total Distributions Paid to Shareholders | (25,540) |
| (66,504) | |
|
|
|
|
|
Capital Share Transactions | (512,824) |
| (2,046,759) | |
|
|
|
|
|
Total Decrease in Net Assets | (670,137) |
| (1,204,445) | |
|
|
|
|
|
Net Assets: |
|
|
|
|
Beginning of Period | 8,949,202 |
| 10,153,647 | |
|
|
|
|
|
End of Period | $ 8,279,065 |
| $ 8,949,202 |
The accompanying notes are an integral part of these financial statements.
8
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
FINANCIAL HIGHLIGHTS
|
| (Unaudited) Six Months Ended 1/31/2019 |
|
|
|
|
|
|
|
|
|
|
|
|
|
| |
|
|
| Years Ended | |||||
|
|
| 7/31/2018 | 7/31/2017 | 7/31/2016 | 7/31/2015 | 7/31/2014 | |
|
|
|
|
|
|
|
|
|
Net Asset Value, at Beginning of Period | $ 12.08 |
| $ 11.09 | $ 10.31 | $ 9.85 | $ 9.96 | $ 9.19 | |
|
|
|
|
|
|
|
|
|
Income (Loss) From Investment Operations: |
|
|
|
|
|
|
| |
Net Investment Income * | 0.03 |
| 0.08 | 0.10 | 0.07 | 0.13 | 0.14 | |
Net Gain (Loss) on Securities (Realized and Unrealized) | (0.20) |
| 0.99 | 0.77 | 0.46 | (0.10) | 0.74 | |
Total from Investment Operations | (0.17) |
| 1.07 | 0.87 | 0.53 | 0.03 | 0.88 | |
|
|
|
|
|
|
|
|
|
Distributions: |
|
|
|
|
|
|
|
|
Net Investment Income | (0.04) |
| (0.08) | (0.09) | (0.07) | (0.14) | (0.11) | |
Realized Gains | - |
| - | - | - | - | - | |
Total from Distributions | (0.04) |
| (0.08) | (0.09) | (0.07) | (0.14) | (0.11) | |
|
|
|
|
|
|
|
|
|
Net Asset Value, at End of Period | $ 11.87 |
| $ 12.08 | $ 11.09 | $ 10.31 | $ 9.85 | $ 9.96 | |
|
|
|
|
|
|
|
|
|
Total Return ** | (1.44)%(b) |
| 9.67% | 8.52% | 5.47% | 0.29% | 9.59% | |
|
|
|
|
|
|
|
|
|
Ratios/Supplemental Data: |
|
|
|
|
|
|
| |
Net Assets at End of Period (Thousands) | $ 8,279 |
| $ 8,949 | $10,154 | $10,675 | $ 9,738 | $10,205 | |
Ratio of Expenses to Average Net Assets | 2.23%(a) |
| 2.08% | 2.19% | 2.36% | 2.39% | 2.32% | |
Ratio of Net Investment Income to Average Net Assets | 0.45%(a) |
| 0.67% | 0.93% | 0.70% | 1.25% | 1.39% | |
Portfolio Turnover | 15.31%(b) |
| 18.97% | 14.53% | 26.89% | 35.17% | 66.27% |
* 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.
9
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS
JANUARY 31, 2019 (UNAUDITED)
Note 1. Organization
The Fallen Angels Income Fund (the “Fund”) is a diversified series of MSS Series Trust (the “Trust”), 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, along with CCA Aggressive Return Fund, Footprints Discover Value Fund, and AINN Fund are 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 its 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
10
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
fluctuations in the fair value of the underlying security. The Fund recognizes a gain or loss 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 it does 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.
Structured Notes–The Fund may invest in structured notes. A structured note is a type of derivative security for which the amount of principal repayments and/or interest payments is based upon the movement of one or more “factors.” The impact of the movements of these factors may increase or decrease through the use of multipliers or deflators. Structured notes may be designed to have particular quality and maturity characteristics and may vary from money market quality to below investment grade.
Federal Income Taxes–The Fund’s policy is to continue to comply with the requirements of the Internal Revenue Code that are applicable to regulated investment companies and to distribute all its taxable income to its shareholders. The Fund also intends to distribute sufficient net investment income and net capital gains, if any, so that it will not be subject to excise tax on undistributed income and gains. Therefore, no federal income tax provision is required.
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained, assuming examination by tax authorities. Management has analyzed the Fund’s tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on returns filed for open tax years (July 31, 2015 through July 31, 2017) or expected to be taken in the Fund’s July 31, 2018 tax returns. The Fund identifies its major tax jurisdiction as U.S. federal, however, the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 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
11
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
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.
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.
Expenses–Expenses of the Trust that are directly identifiable to a specific fund are charged to that fund. Expenses that are not readily identifiable to a specific fund are allocated in such a manner as deemed equitable, taking into consideration the nature and type of expense and the relative assets of the funds in the Trust.
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.
12
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
·
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 Fund’s major categories of assets and liabilities measured at fair value on a recurring basis follows.
Equity securities (common and preferred stocks)– 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
13
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
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 (structured notes, warrants and options)– Derivative transactions which are actively traded, and valuation adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. Derivative transactions traded on inactive markets or valued by reference to similar instruments are categorized in Level 2 of the fair value hierarchy. Options are valued at the last sales prices on the valuation date if the last sales price is between the closing bid and asked prices. Otherwise, options are valued at the closing bid price. These securities will be categorized in Level 2 of the fair value hierarchy if valued at other than closing price.
The following table summarizes the inputs used to value the Fund’s assets and liabilities measured at fair value as of January 31, 2019:
* 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, 2019. Therefore, a reconciliation of assets in which significant unobservable inputs were used in determining fair value is not applicable.
14
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
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., 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 furnishes or arranges to be furnished a continuous investment 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, 2019, the Advisor earned a fee of $43,913 under the Management Agreement for the Fund. The Fund owed the Advisor management fees of $6,814 as of January 31, 2019.
Note 5. Rule 12b-1 Plan
The Trust has adopted with respect to the Fund, a plan pursuant to Rule 12b-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) whereby the Fund reimburses 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 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, 2019, the Fund accrued distribution (12b-1) fees under the Plan of $10,978. The Fund owed the Advisor $1,744 for distribution fees as of January 31, 2019.
Note 6. Related Party Transactions
An interested Trustee, Gregory B. Getts, is the owner/president of Mutual Shareholder Services, LLC (“MSS”), the Fund’s transfer agent and fund accountant. MSS receives an annual fee from the Trust of $11.50 per shareholder for the transfer agency services. For its services as fund accountant, MSS receives an annual fee from the Trust based on the average net assets of the Fund. The fund accounting fees range from $21,000 to $59,250 depending on the average net assets of the Fund. For the six months ended January 31, 2019, MSS earned $12,526 from the Fund for transfer agent and accounting services. At January 31, 2019, the Fund owes MSS $2,051.
The Trust also had an administration agreement with Empirical Administration, LLC (“Empirical”) which 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 six months ended January 31, 2019, Empirical earned $6,000 for its services. At January 31, 2019, the Fund owed Empirical $1,000.
15
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
Note 7. Derivative Transactions
The Fund has adopted amendments to authoritative guidance on disclosures about derivative instruments and hedging activities which require that the Fund disclose: a) how and why an entity uses derivative instruments; and b) how derivative instruments and related hedged items affect an entity’s financial position, financial performance and cash flows.
The Fund may trade financial instruments where they are considered to be a seller of credit derivatives in accordance with authoritative guidance under GAAP on derivatives and hedging.
As of January 31, 2019, the Statement of Assets and Liabilities included the following financial derivative instrument fair values:
Assets | Derivatives |
Purchased Options – equity contracts | $ 0 |
Structured Notes | 183,214 |
Total Assets | $ 183,214 |
For the six months ended January 31, 2019, financial derivative instruments had the following effect on the Statement of Operations:
Net change in unrealized appreciation (depreciation) on: |
| Equity Contracts |
| Total |
Purchased Options |
| $ - |
| $ - |
Structured Notes |
| (3,182) |
| (3,182) |
|
| $ (3,182) |
| $ (3,182) |
Net realized gain (loss) on: |
| Equity Contracts |
| Total |
Purchased Options |
| $ - |
| $ - |
Written Options |
| - |
| - |
|
| $ - |
| $ - |
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, 2019 was $6,833,470 for the Fund.
Transactions in capital stock for the six months ended January 31, 2019 and year ended July 31, 2018 were as follows:
16
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
Note 9. Investment Transactions
For the six months ended January 31, 2019, purchases and sales of investment securities other than U.S. Government obligations aggregated $1,223,146 and $1,601,760.Purchases and sales of U.S. Government obligations aggregated $447,284 and $500,000.Purchases and sales of options aggregated $0 and $0. Purchases and sales of securities sold short aggregated $16,216 and $20,078.
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, 2018, 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) | $ | 1,909,940 |
Undistributed Ordinary Income |
| 22,005 |
Capital loss carryforward expiring +: |
|
|
2019 |
| (329,037) |
Total Distributable Earnings | $ | 1,602,908 |
+ 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 (the “Act”), 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. During the year ended July 31, 2018, the Fund utilized capital loss carryforwards of $636,033. Capital loss carryforwards of $1,490,772 expired July 31, 2018.
As of January 31, 2019, the unrealized appreciation (depreciation) and tax cost of investment securities for the Fund were as follows:
|
|
| Income |
Gross unrealized appreciation on investment securities |
| $ | 1,602,178 |
Gross unrealized depreciation on investment securities |
|
| (332,020) |
Net unrealized appreciation on investment securities |
| $ | 1,270,158 |
|
|
|
|
Cost of investment securities, including short-term investments |
| $ | 6,996,882 |
17
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
The Fund paid distributions in the amount of $25,540, from ordinary income, for the six months ended January 31, 2019.
The Fund paid distributions in the amount of $66,504, from ordinary income, for the year ended July 31, 2018.
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 1940 Act. As of January 31, 2019, Charles Schwab, for the benefit of its customers, owned, in aggregate, approximately 84.16% 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 Fund that have not yet occurred. The Fund expects the risk of loss to be remote.
Note 13. Subsequent Events
On February 26, 2019, the Fund paid shareholders of record as of February 25, 2019, a net investment income distribution of $3,467, equivalent to $0.005 per share. Management has evaluated the impact of all subsequent events through the date the financial statements were available to be issued and has determined that there were no additional subsequent events requiring disclosure in the financial statements for the Funds.
Note 14. New Accounting Pronouncement
In March 2017, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“ASU”) No. 2017-08, Receivables-Nonrefundable Fees and Other Costs (Subtopic 310-20): Premium Amortization on Purchased Callable Debt Securities. The amendments in the ASU shorten the amortization period for certain callable debt securities, held at a premium, to be amortized to the earliest call date. The ASU does not require an accounting change for securities held at a discount; which continues to be amortized to maturity. The ASU is effective for fiscal years and interim periods within those fiscal years beginning after December 15, 2018. Management is currently evaluating the impact, if any, of applying this provision.
In August 2018, FASB issued ASU 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of ASU 2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Management is currently evaluating the impact these changes will have on the Fund’s financial statements and disclosures.
18
MSS SERIES TRUST
THE FALLEN ANGLES INCOME FUND
EXPENSE ILLUSTRATION
JANUARY 31, 2019 (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, 2018 through January 31, 2019.
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 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 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, 2018 | January 31, 2019 | August 1, 2018 to January 31, 2019 |
|
|
|
|
Actual | $1,000.00 | $985.56 | $11.16 |
Hypothetical |
|
|
|
(5% Annual Return before expenses) | $1,000.00 | $1,013.96 | $11.32 |
|
|
|
|
* Expenses are equal to the Fund’s annualized expense ratio of 2.23%, multiplied by the average account value over the period, multiplied by 184/365 (to reflect the one-half year period). |
19
MSS SERIES TRUST
THE FALLEN ANGLES INCOME FUND
TRUSTEES & OFFICERS
JANUARY 31, 2019 (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 1940 Act.
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. | 4 | None |
Michael Young 8000 Town Centre Drive, Suite 400, Broadview Heights, OH 44147 Year: 1950 | Trustee | Indefinite/ October 2016 - present | Consultant/Practitioner for Purdue, Rutgers and Northeastern Universities since November 2013. | 4 | None |
1The “Fund Complex” consists of the MSS Series Trust.
Non-interested trustees receive $300 each per quarterly meeting for each series in the Trust.
The following table provides information regarding each Trustee who is an “interested person” of the Trust, as defined in the 1940 Act 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 Complex2 Overseen by Trustee | Other Directorships Held by Trustee During Past 5 Years |
Dr. Gregory B. Getts1 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. | 4 | None |
Brandon M. Pokersnik, Esq. 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 1940 Act because he is an officer of the Trust and president/owner of the Fund’s transfer agent, fund accountant, and distributor.
2 The “Fund Complex” consists of the MSS Series Trust.
20
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
ADDITIONAL INFORMATION
JANUARY 31, 2019 (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 atwww.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 (866) 663-8023 and (2) from Fund documents filed with the Securities and Exchange Commission (“SEC”) on the SEC’s website atwww.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 October 31 and April 30. The Fund's Form N-Q is available on the SEC’s website atwww.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 held on September 26, 2018, Counsel reviewed a memorandum provided to the Trustees entitled “Duties of Trustees with Respect to Approval and Renewal of Investment Advisory Contract” which highlights the Trustees’ duties when considering the Management Agreement renewal. Counsel reminded the Trustees that their review must include a discussion and a conclusion with respect to each of the following items: (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.
21
MSS SERIES TRUST
THE FALLEN ANGELS INCOME FUND
ADDITIONAL INFORMATION (CONTINUED)
JANUARY 31, 2019 (UNAUDITED)
Nature, Extent and Quality of Service. As to the nature, extent, and quality of the service provided by AMM, the Trustees considered AMM’s investment philosophy and strategy. The Trustees discussed AMM’s organizational structure, and the background and experience of each of the people responsible for the management and/or support of the FA Fund and its operations. The Trustees discussed AMM’s approach to risk management and how AMM monitored compliance with the FA Fund’s limitations. The Trustees reviewed AMM’s broker selection process, noting that the process considered a variety of factors. The Trustees expressed their satisfaction with AMM’s overall experience, operation, and compliance culture, as well as with the open communication between the Trustees and AMM.
Performance. The Trustees reviewed the FA Fund’s stated objective of providing high current income with the potential for capital appreciation. The Trustees observed that the FA Fund outperformed its peer group average over one-year and five-year periods. Furthermore, the Trustees noted the FA Fund outperformed the Morningstar Moderate Target Risk Index over one-year period and only slightly underperformed the index over a five-year period. The Trustees further noted that the FA Fund provided positive returns for the one-year, five-year, and since inception periods with returns of 11.52%, 7.32%, and 6.63%, respectively.
Fees and Expenses. The Trustees noted the Fund’s management fee is 1.00% with a net expense ratio of 2.08%. The Trustees compared the management 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 for the Morningstar category, it is within the range of fees charged by funds in the category. With respect to the Fund’s net expense ratio, they noted that it was also higher than the average of 1.89% for funds in its Morningstar category, but concluded the differences in net expenses ratios were attributed to the differences in assets under management. They noted AMM proactively worked to find ways to limit total FA Fund’s expenses with the aim of lowering net expense ratio to the benefit of shareholders.
Profitability. The Trustees reviewed a profitability analysis provided by AMM and noted that based on the information provided, AMM realized a modest profit in connection with its relationship with the FA Fund. After further discussion, the Trustees concluded that excessive profitability was not a concern at this time.
Economies of Scale. The Trustees considered whether AMM had realized economies of scale with respect to the management services provide to the FA Fund. They agreed, based on current asset levels, economies had not yet been reached. The Trustees noted AMM’s willingness to discuss the matter of economies of scale as the FA Fund’s assets grow. The Trustees concluded that while the absence of economies of scale were reasonable at this time, they would revisit the issue as the FA Fund increased materially in size.
Conclusion. Having requested and received such information from AMM 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 FA Fund and its shareholders.
22
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) The registrant’s president and chief financial officer concluded that the disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) were effective as of a date within 90 days of the filing date of this report, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the Act.
(b) There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the registrant’s second fiscal quarter of the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.
Item 12. Exhibits.
(a)(1)
EX-99.CODE ETH. Not applicable.
(a)(2)
EX-99.CERT. Filed herewith.
(a)(3)
Any written solicitation to purchase securities under Rule 23c-1 under the Act (17 CFR 270.23c-1) sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable.
(b)
EX-99.906CERT. Filed herewith.
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
MSS SERIES TRUST
By/s/ Gregory B. Getts, President
Gregory B. Getts
President
Date: April 9, 2019
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 9, 2019
By/s/Brandon M. Pokersnik
Brandon M. Pokersnik
Secretary
Date: April 9, 2019