Beginning on January 1, 2021, as permitted by regulations adopted by the SEC, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies
of the reports from the Fund (defined herein) or from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on the Fund’s website (www.atacfunds.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 by contacting your financial intermediary (such as a broker-dealer or bank) or, if you are a direct investor, by calling 1-855-282-2386 or by sending an e-mail request to info@atacfunds.com.
You may elect to receive all future reports in paper free of charge. If you invest through a financial intermediary, you can contact your financial intermediary to request that you continue to receive
paper copies of your shareholder reports. If you invest directly with the Fund, you can call 1-855-282-2386 or send an e-mail request to info@atacfunds.com to let the Fund know you wish to continue receiving paper copies of your shareholder reports.
Your election to receive reports in paper will apply to all funds held in your account if you invest through your financial intermediary.
On behalf of the Pension Partners team, we would like to thank you for your investment in the ATAC Rotation Fund.
The goal of the ATAC Rotation Fund (“ATACX”) is to serve as a strategy which over time can enhance a portfolio’s risk and return characteristics.
By utilizing a buy and rotate approach which uses historical leading indicators of volatility, our Fund places a large emphasis on risk management, seeking to rotate fully into Treasuries in advance of
periods of market stress.
For the semi-annual period ending February, 2020, the ATAC Rotation Fund Investor Class returned 11.40% versus a return of 1.51% for the Lipper Flexible Portfolio Fund Index and a return of 1.92% for
the S&P 500® Index.
For the first time in a long time, volatility and “risk-off” behavior began expressing itself late January into February as Coronavirus news worsened. The historically proven leading indicators of
volatility that the Fund uses to determine positioning, however, got ahead of the broad market decline in the middle of January. Positioning into Treasuries allowed the Fund to completely sidestep the collapse in equity markets before it was too
late. While we are thrilled with the results the Fund has been able to achieve in a new cycle where risk-on, risk-off behavior dominates, we are as disturbed as everyone else by how it occurred. With the pandemic still on-going, we continue to
anticipate a challenging environment for traditional buy and hold investing, and are hopeful that the Fund can continue to navigate through difficult waters ahead.
Over a complete market cycle, it is risk management which we believe is the most effective way to compound wealth. Compounding wealth requires positive returns and the avoidance of large losses – there
is simply no other way. Importantly, one must take a longer-term view and evaluate a strategy beyond small samples, understanding the process and role that strategy has in one’s overall asset allocation policy.
Thank you again for your trust and confidence in our distinctive approach to portfolio management.
Edward M. Dempsey, CFP® & Michael A. Gayed, CFA
Opinions expressed are those of Pension Partners, LLC and are subject to change, are not guaranteed and should not be considered investment advice.
Fund holdings are subject to change and are not recommendations to buy or sell any security. Please see the schedule of investments for current holdings.
Mutual fund investing involves risk. Principal loss is possible. Because the Fund invests primarily in ETFs, it may invest a greater percentage of its assets in the securities of a
single issuer and therefore could be considered non-diversified. If a fund invests a greater percentage of its assets in the securities of a single issuer, its value may decline to a greater degree than if the fund held were a more diversified mutual
fund. The Fund is expected to have a high portfolio turnover ratio which has the potential to result in the realization by the Fund and distribution to shareholders of a greater amount of capital gains. This means that investors will be likely to
have a higher tax liability. Because the Fund invests in Underlying ETFs an investor will indirectly bear the principal risks of the Underlying ETFs, including but not limited to, risks associated with investments in ETFs, large and smaller
companies, real estate investment trusts, foreign securities, non-diversification, high yield bonds, fixed income investments, derivatives, leverage, short sales and commodities. The Fund will bear its share of the fees and expenses of the Underlying
ETFs. Shareholders will pay higher expenses than would be the case if making direct investments in the Underlying ETFs.
All investing involves risks. Investing in emerging markets has more risk such as increased volatility, relatively unstable governments; social and legal systems that do not protect
shareholders, economies based on only a few industries and securities markets that are substantially smaller, less liquid and more volatile with less government oversight than more developed countries. Investing in small cap companies involve
additional risks such as limited liquidity and greater volatility than large companies.
The Lipper Flexible Portfolio Fund Index is an equal dollar weighted index of the largest mutual funds within the Flexible Portfolio fund classification, as defined by Lipper.
The chart assumes an initial investment of $10,000. Performance reflects waivers of fee and operating expenses in effect. In the absence of such waivers, total return would be
reduced. Performance data quoted represents past performance and does not guarantee future results. Investment returns and principal value will fluctuate, and when sold, may be worth more or less than their original cost. Performance current to the
most recent month-end may be lower or higher than the performance quoted and can be obtained by calling 1-855-282-2386. Performance assumes the reinvestment of capital gains and income distributions. The performance does not reflect the deduction of
taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
The following is expense information for the ATAC Rotation Fund (the “Fund”) as disclosed in the Fund’s most recent prospectus dated December 29, 2019: Investor Class – Gross Expenses: 2.09%, Net
Expenses: 1.90%. Institutional Class – Gross Expenses: 1.84%, Net Expenses: 1.65%. Pension Partners, LLC (the “Adviser”) has contractually agreed to reduce its management fees, and may reimburse the Fund for its operating expenses, in order to ensure
that Total Annual Fund Operating Expense (excluding certain expenses such as taxes, leverage interest, interest expense, dividends paid on short sales, brokerage commissions, acquired fund fees and expenses, or extraordinary expenses) do not exceed
1.74% of the average daily net assets of the Fund’s Investor Class shares and do not exceed 1.49% of the average daily net assets of the Fund’s Institutional Class shares. Fees waived and expenses paid by the Adviser may be recouped by the Adviser
for a period of 36 months following the month during which such fee waiver and expense payment was made if such recoupment can be achieved without exceeding the expense limit in effect at the time the fee waiver and expense payment occurred and the
expense limit in place at the time of recoupment. The Operating Expenses Limitation Agreement is indefinite, but cannot be terminated through at least December 29, 2020. Thereafter, the agreement may be terminated at any time upon 60 days' written
noticed by the Trust’s Board of Trustees (the “Board”) or the Adviser, with the consent of the Board.
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management
fees; distribution and/or service (12b-1) fees; interest expense; 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 (September 1, 2019 – February 29, 2020).
For each class, the first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested,
to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled
“Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
For each class, 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.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the table is
useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if transactional costs were included, your costs may have been higher.
Notes to the Financial Statements (Unaudited)
February 29, 2020
1. ORGANIZATION
Managed Portfolio Series (the “Trust”) was organized as a Delaware statutory trust on January 27, 2011. The Trust is registered under the Investment Company Act of 1940, as amended (the “1940 Act”), as
an open-end management investment company. The ATAC Rotation Fund (the “Fund”) is a diversified series with its own investment objectives and policies within the Trust. The investment objective of the Fund is to achieve absolute positive returns over
time. The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 Financial Services – Investment
Companies. The Fund currently offers two classes of shares, the Investor Class and the Institutional Class. Each class of shares has identical rights and privileges except with respect to the distribution fees and voting rights on matters affecting a
single share class. The Investor Class shares are subject to a 0.25% Rule 12b-1 distribution and servicing fee. The Fund may issue an unlimited number of shares of beneficial interest, with no par value.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in preparation of its financial statements. These policies are in conformity with generally accepted
accounting principles in the United States of America (“GAAP”).
Security Valuation – All investments in securities are recorded at their estimated fair value, as described in Note 3.
Federal Income Taxes – The Fund complies with the requirements of subchapter M of the Internal Revenue Code of 1986, as amended, necessary to qualify as a
regulated investment company and distributes substantially all net taxable investment income and net realized gains to shareholders in a manner which results in no tax cost to the Fund. Therefore, no federal income or excise tax provision is
required. As of and during the period ended February 29, 2020, the Fund did not have any tax positions that did not meet the “more-likely-than-not” threshold of being sustained by the applicable tax authority. The Fund recognizes interest and
penalties, if any, related to unrecognized tax benefits on uncertain tax positions as income tax expense in the Statement of Operations. As of and during the period ended February 29, 2020, the Fund did not incur any interest or penalties. The Fund
is not subject to examination by U.S. tax authorities for tax years prior to the fiscal year ended August 31, 2016.
Security Transactions, Income, and Distributions – The Fund follows industry practice and records security transactions on the trade date. Realized gains and
losses on sales of securities are calculated on the basis of identified cost. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Withholding taxes on foreign dividends have been provided for in
accordance with the Fund’s understanding of the applicable country’s tax rules and regulations. Discounts and premiums on securities purchased are amortized over the expected life of the respective securities using the constant yield method.
The Fund distributes substantially all net investment income and net realized capital gains, if any, at least annually. Distributions to shareholders are recorded on the ex-dividend date. The
treatment for financial reporting purposes of distributions made to shareholders during the year from net investment income or net realized capital gains may differ from their ultimate treatment for federal income tax purposes. These differences are
caused primarily by differences in the timing of the recognition of certain components of income, expense or realized capital gain for federal income tax purposes. Where such differences are permanent in nature, GAAP requires that they be
reclassified in the components of the net assets based on their ultimate characterization for federal income tax purposes. Any such reclassifications will have no effect on net assets, results of operations or net asset values per share of the Fund.
Notes to the Financial Statements (Unaudited) – Continued
February 29, 2020
Allocation of Income, Expenses and Gains/Losses – Income, expenses (other than those deemed attributable to a specific share class), and gains and losses of the
Fund are allocated daily to each class based upon the ratio of net assets represented by each class as a percentage of the net assets of the Fund. Expenses deemed directly attributable to a class of shares are recorded by the specific class. Most
Fund expenses are allocated by class based on relative net assets. 12b-1 fees are expensed at 0.25% of average daily net assets of Investor Class shares (see Note 5). Expenses associated with a specific fund in the Trust are charged to that fund.
Common Trust expenses are typically allocated evenly between the funds of the Trust, or by other equitable means.
Use of Estimates – The preparation of financial statements in conformity with GAAP 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 revenues and expenses during the reporting period. Actual results could differ from those
estimates.
3. SECURITIES VALUATION
The Fund has adopted authoritative fair value accounting standards which establish an authoritative definition of fair value and set out a hierarchy for measuring fair value. These standards require
additional disclosures about the various inputs and valuation techniques used to develop the measurements of fair value, a discussion of changes in valuation techniques and related inputs during the period and expanded disclosure of valuation Levels
for major security types. These inputs are summarized in the three broad Levels listed below:
|
Level 1 –
|
Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund 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 relevant observable inputs are not available, representing each Fund’s own assumptions about the assumptions a market participant
would use in valuing the asset or liability, and would be based on the best information available.
|
Following is 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. The Fund’s investments are carried
at fair value.
Short-Term Investments – Investments in other mutual funds, including money market funds, are valued at their net asset value per share. 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.
Exchange-Traded Funds – Exchange-traded funds (“ETFs”) are valued at the last reported sale price on the exchange on which the security is principally traded. If,
on a particular day, an ETF does not trade, then the mean between the most recent quoted bid and asked prices will be used. 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.
Securities for which market quotations are not readily available, or if the closing price does not represent fair value, are valued following procedures approved by the Board of Trustees (the “Board”).
These procedures consider many
Notes to the Financial Statements (Unaudited) – Continued
February 29, 2020
factors, including the type of security, size of holding, trading volume and news events. There can be no assurance that the Fund could obtain the fair value assigned to a security if they were to sell
the security at approximately the time at which the Fund determine their net asset values per share. The Board has established a Valuation Committee to administer, implement, and oversee the fair valuation process, and to make fair value decisions
when necessary. The Board regularly reviews reports of the Valuation Committee that describe any fair value determinations and methods.
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the inputs used to value the Fund’s
securities as of February 29, 2020:
|
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Exchange-Traded Funds
|
|
$
|
63,575,929
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
63,575,929
|
|
|
Short-Term Investment
|
|
|
286,638
|
|
|
|
—
|
|
|
|
—
|
|
|
|
286,638
|
|
|
Total Investments
|
|
$
|
63,862,567
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
63,862,567
|
|
Refer to the Schedule of Investments for further information on the classification of investments.
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has an agreement with Pension Partners, LLC (“the Adviser”) to furnish investment advisory services to the Fund. For its services, the Fund pays the Adviser a monthly management fee of 1.25%
of the Fund’s average daily net assets up to $500 million, 1.15% of the Fund’s average daily net assets on the next $250 million, 1.05% of the Fund’s average daily net assets on the next $250 million, and 0.95% of the Fund’s average daily net assets
in excess of $1 billion.
The Fund’s Adviser has contractually agreed to waive a portion or all of its management fees and reimburse the Fund for its expenses to ensure that total annual operating expenses (excluding acquired
fund fees and expenses, leverage/borrowing interest, interest expense, taxes, brokerage commissions and extraordinary expenses) based upon the average daily net assets of the Fund not exceeding an annual rate of 1.74% and 1.49% of the Investor Class
and Institutional Class, respectively.
Fees waived and expenses reimbursed by the Adviser may be recouped by the Adviser for a period of thirty-six months following the month during which such waiver or reimbursement was made if such
recoupment can be achieved without exceeding the expense limit in effect at the time the waiver or reimbursement occurred. The Operating Expenses Limitation Agreement is indefinite in term, but cannot be terminated within a year after the effective
date of the Fund’s prospectus. After that date, the agreement may be terminated at any time upon 60 days’ written notice by the Board or the Adviser, with the consent of the Board. Waived fees and reimbursed expenses subject to potential recovery by
month of expiration are as follows:
|
Expiration
|
|
Amount
|
|
|
March 2020 – August 2020
|
|
$
|
19,247
|
|
|
September 2020 – August 2021
|
|
|
72,971
|
|
|
September 2021 – August 2022
|
|
|
162,117
|
|
|
September 2022 – February 2023
|
|
|
84,666
|
|
U.S. Bancorp Fund Services, LLC (the “Administrator”), doing business as U.S. Bank Global Fund Services, acts as the Fund’s Administrator, Transfer Agent, and Fund Accountant. U.S. Bank N.A. (the
“Custodian”) serves as the custodian to the Fund. The Custodian is an affiliate of the Administrator. The Administrator performs various
Notes to the Financial Statements (Unaudited) – Continued
February 29, 2020
administrative and accounting services for the Fund. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund; prepares reports and materials to be
supplied to the Trustees; monitors the activities of the Custodian; coordinates the payment of the Fund’s expenses and reviews the Fund’s expense accruals. The officers of the Trust, including the Chief Compliance Officer, are employees of the
Administrator. As compensation for its services, the Administrator is entitled to a monthly fee at an annual rate based upon the average daily net assets of the Fund, subject to annual minimums. Fees paid by the Fund for administration and
accounting, transfer agency, custody and compliance services for the period ended February 29, 2020 are disclosed in the Statements of Operations.
Quasar Distributors, LLC (the “Distributor”) acts as the Fund’s principal underwriter in a continuous public offering of the Fund’s shares. The Distributor is an affiliate of the Administrator.
5. DISTRIBUTION COSTS
The Fund has adopted a Distribution Plan pursuant to Rule 12b-1 (the “Plan”) in the Investor Class only. The Plan permits the Fund to pay for distribution and related expenses at an annual rate of
0.25% of the Investor Class’ average daily net assets. The expenses covered by the Plan may include the cost of preparing and distributing prospectuses and other sales material, advertising and public relations expenses, payments to financial
intermediaries and compensation of personnel involved in selling shares of the Fund. For the period ended February 29, 2020, the Fund’s Investor Class incurred $35,635 for expenses pursuant to the Plan.
6. CAPITAL SHARE TRANSACTIONS
|
|
|
Period Ended
|
|
|
Year Ended
|
|
|
|
|
February 29, 2020
|
|
|
August 31, 2019
|
|
|
Transactions in shares of the Fund were as follows:
|
|
|
|
|
|
|
|
Investor Class
|
|
|
|
|
|
|
|
Shares sold
|
|
|
38,957
|
|
|
|
109,912
|
|
|
Shares issued to holders in reinvestment of distributions
|
|
|
7,566
|
|
|
|
13,447
|
|
|
Shares redeemed
|
|
|
(208,199
|
)
|
|
|
(812,063
|
)
|
|
Net decrease
|
|
|
(161,676
|
)
|
|
|
(688,704
|
)
|
|
Institutional Class:
|
|
|
|
|
|
|
|
|
|
Shares sold
|
|
|
63,212
|
|
|
|
284,014
|
|
|
Shares issued in reinvestment of distributions
|
|
|
10,926
|
|
|
|
15,498
|
|
|
Shares redeemed
|
|
|
(300,390
|
)
|
|
|
(865,930
|
)
|
|
Net decrease
|
|
|
(226,252
|
)
|
|
|
(566,418
|
)
|
|
Net decrease in shares outstanding
|
|
|
(387,928
|
)
|
|
|
(1,255,122
|
)
|
7. INVESTMENT TRANSACTIONS
The aggregate purchases and sales, excluding short-term investments, by the Fund for the period ended February 29, 2020, were as follows:
|
|
U.S. Government Securities
|
|
Other
|
|
|
|
Purchases
|
Sales
|
|
Purchases
|
Sales
|
|
|
|
$ —
|
$ —
|
|
$436,976,839
|
$449,159,393
|
|
Notes to the Financial Statements (Unaudited) – Continued
February 29, 2020
8. FEDERAL TAX INFORMATION
The aggregate gross unrealized appreciation and depreciation of securities held by the Fund and the total cost of securities for federal income tax purposes at August 31, 2019, the Fund’s most recently
completed fiscal year end, were as follows:
|
Aggregate
|
Aggregate
|
|
Federal
|
|
|
Gross
|
Gross
|
Net
|
Income
|
|
|
Appreciation
|
Depreciation
|
Appreciation
|
Tax Cost
|
|
|
$4,505,208
|
$ —
|
$4,505,208
|
$65,781,343
|
|
Any difference between book-basis and tax-basis unrealized appreciation (depreciation) would be attributable primarily to the tax deferral of losses on wash sales. For the year ended August 31, 2019,
there were no differences.
At August 31, 2019, components of accumulated loss on a tax-basis were as follows:
|
Undistributed
|
|
Other
|
Total
|
|
|
Ordinary
|
Unrealized
|
Accumulated
|
Accumulated
|
|
|
Income
|
Appreciation
|
Loss
|
Loss
|
|
|
$585,614
|
$4,505,208
|
$(14,421,410)
|
$(9,330,588)
|
|
As of August 31, 2019, the Fund had short-term capital loss carryovers of $14,421,410 which will be permitted to be carried over for an unlimited period. A regulated investment company may elect for any
taxable year to treat any portion of any qualified late year loss as arising on the first day of the next taxable year. Qualified late year losses are certain capital, and ordinary losses which occur during the portion of the Fund’s taxable year
subsequent to October 31 and December 31, respectively. The Fund deferred no short-term post-October losses. The Fund did not defer any qualified late year losses.
The tax character of distributions paid for the period ended February 29, 2020, were as follows:
|
Ordinary Income*
|
Long-Term Capital Gains
|
Total
|
|
|
$585,614
|
$ —
|
$585,614
|
|
The tax character of distributions paid for the year ended August 31, 2019, were as follows:
|
Ordinary Income*
|
Long-Term Capital Gains
|
Total
|
|
|
$886,411
|
$ —
|
$886,411
|
|
|
*
|
For federal income tax purposes, distributions of short-term capital gains are treated as ordinary income distributions.
|
Notes to the Financial Statements (Unaudited) – Continued
February 29, 2020
9. TRANSACTIONS WITH AFFILIATES
If the Fund’s holding represents ownership of 5% or more of the voting securities of a company, the company is deemed to be an affiliate as defined by the 1940 Act. The Fund conducted transactions
during the period ended February 29, 2020 with affiliated companies as so defined:
|
|
Beginning shares
|
Additions
|
Reductions
|
Ending Shares
|
|
Direxion Emerging Markets Bull 3x Fund
|
—
|
385,814
|
(385,814)
|
—
|
|
|
|
|
|
|
|
|
|
|
|
Change in
|
|
|
|
|
|
Unrealized
|
|
|
Value
|
Dividend
|
Realized
|
Appreciation/
|
|
|
February 29, 2020
|
Income
|
Gain
|
Depreciation
|
|
Direxion Emerging Markets Bull 3x Fund
|
$ —
|
$6,476
|
$660,468
|
$ —
|
10. LINE OF CREDIT
The Fund established an unsecured line of credit (“LOC”) in the amount of $12,000,000, 10% of the gross fair value of the Fund, or 33.33% of the fair value of the Fund’s investments, whichever is less.
The LOC matures, unless renewed on July 24, 2020. This LOC is intended to provide short-term financing, if necessary, subject to certain restrictions and covenants in connection with shareholder redemptions and other short-term liquidity needs of the
Fund. The LOC is with the Custodian. Interest is charged at the prime rate, which was 4.75% as of February 29, 2020. The interest rate during the period was between 4.75% and 5.25%. The weighted average interest rate paid on outstanding borrowings
was 4.84%. The Fund has authorized the Custodian to charge any of the accounts of the Fund for any missed payments.
For the period ended February 29, 2020, the Fund’s credit facility activity is as follows:
|
Credit
|
Average
|
Amount Outstanding as
|
Interest
|
Maximum
|
Maximum
|
|
Facility Agent
|
Borrowings
|
of February 29, 2020
|
Expense
|
Borrowing
|
Borrowing Date
|
|
U.S. Bank N.A.
|
$57,720
|
$ —
|
$1,389
|
$1,237,000
|
November 4, 2019
|
11. LEVERAGED ETFS
Leveraged ETFs are funds that rely on financial derivatives and/or debt (“leverage”) to amplify the investment return of an underlying index. The use of leverage will magnify the effect of any increase
or decrease in the value of a Leveraged ETF’s portfolio. During the period ended February 29, 2020, the Fund invested in Leveraged ETFs.
12. CONTROL 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 that fund, under Section 2(a)(9) of the 1940 Act. As of
February 29, 2020, UBS Wealth Management and National Financial Services held 40.6% and 29.0% outstanding shares of the Fund, respectively.
13. SUBSEQUENT EVENTS
The recent global outbreak of COVID-19 has disrupted economic markets and the prolonged economic impact is uncertain. The operational and financial performance of the issuers of securities in which the
Fund invests depends on future developments, including the duration and spread of the outbreak, and such uncertainty may in turn impact the value of the Fund’s investments.
Notes to the Financial Statements (Unaudited) – Continued
February 29, 2020
Effective March 31, 2020, Foreside Financial Group, LLC (“Foreside”) acquired Quasar Distributors, LLC (“Quasar”), the Fund’s distributor, from U.S. Bancorp. As a result of the acquisition, Quasar
became a wholly-owned broker-dealer subsidiary of Foreside and is no longer affiliated with U.S. Bancorp. The Board has approved a new Distribution Agreement to enable Quasar to continue serving as the Fund’s distributor.
On April 7, 2020, the Fund held a special shareholder meeting (the “Special Meeting”) to consider a vote on a new advisory agreement (the “Advisory Agreement”) between the Trust and Toroso Investments,
LLC (“Toroso”). Shareholders of record of the Fund at the close of business on the record date, February 20, 2020, were entitled to notice of and to vote at the Special Meeting and any adjournment(s) or postponements thereof. The Board approved the
Advisory Agreement at a meeting held on February 18, 2020 and proposed shareholders approve the Advisory Agreement. The Notice of Special Meeting of Shareholders, proxy statement and proxy card were mailed on or about March 3, 2020, to such
shareholders of record.
Management has performed an evaluation of subsequent events through the date the financial statements were issued and has determined that no additional items require recognition or disclosure.
Approval of Investment Advisory Agreement (Unaudited)
Pension Partners, LLC
At the regular meeting of the Board of Trustees of Managed Portfolio Series (“Trust”) on February 17-18, 2020, the Trust’s Board of Trustees (“Board”), each of whom were present in person, including all
of the Trustees who are not “interested persons” of the Trust, as that term is defined in Section 2(a)(19) of the Investment Company Act of 1940, as amended, (“Independent Trustees”) considered and approved the continuation of the Investment Advisory
Agreement between the Trust and Pension Partners, LLC (“Pension Partners” or the “Adviser”) regarding the ATAC Inflation Rotation Fund (the “Fund”) (the “Investment Advisory Agreement”) for another annual term.
Prior to the meeting and at a meeting held on January 7, 2020, the Trustees received and considered information from Pension Partners and the Trust’s administrator designed to provide the Trustees with
the information necessary to evaluate the continuance of the Investment Advisory Agreement (“Support Materials”). Before voting to approve the continuance of the Investment Advisory Agreement, the Trustees reviewed the Support Materials with Trust
management and with counsel to the Independent Trustees, and received a memorandum from such counsel discussing the legal standards for the Trustees’ consideration of the renewal of the Investment Advisory Agreement. This information, together with
the information provided to the Board throughout the course of the year, formed the primary (but not exclusive) basis for the Board’s determinations.
In determining whether to continue the Investment Advisory Agreement, the Trustees considered all factors they believed relevant, including the following with respect to the Fund: (1) the nature,
extent, and quality of the services provided by Pension Partners with respect to the Fund; (2) the Fund’s historical performance and the performance of other investment accounts managed by Pension Partners; (3) the costs of the services provided by
Pension Partners and the profits realized by Pension Partners from services rendered to the Fund; (4) comparative fee and expense data for the Fund and other investment companies with similar investment objectives; (5) the extent to which economies
of scale may be realized as the Fund grows, and whether the advisory fee for the Fund reflects such economies of scale for the Fund’s benefit; and (6) other benefits to Pension Partners resulting from its relationship with the Fund. In their
deliberations, the Trustees weighed to varying degrees the importance of the information provided to them and did not identify any particular information that was all-important or controlling.
Based upon the information provided to the Board throughout the course of the year, including at an in-person presentation by representatives of Pension Partners, and the Support Materials, the Board
concluded that the overall arrangements between the Trust and Pension Partners set forth in the Investment Advisory Agreement, as it relates to the Fund, continue to be fair and reasonable in light of the services that Pension Partners performs,
investment advisory fees that the Fund pays, and such other matters as the Trustees considered relevant in the exercise of their reasonable business judgment. The material factors and conclusions that formed the basis of the Trustees’ determination
to approve the continuation of the Investment Advisory Agreement are summarized below.
Nature, Extent and Quality of Services Provided. The Trustees considered the scope of services that Pension Partners provides under the Investment Advisory
Agreement with respect to the Fund, noting that such services include, but are not limited to, the following: (1) investing the Fund’s assets consistent with the Fund’s investment objective and investment policies; (2) determining the portfolio
securities to be purchased, sold, or otherwise disposed of, and the timing of such transactions; (3) voting all proxies, if any, with respect to the Fund’s portfolio securities; (4) maintaining the required books and records for transactions that
Pension Partners effects on behalf of the Fund; (5) selecting broker-dealers to execute orders on behalf of the Fund; and (6) monitoring and maintaining the Fund’s compliance with the Trust’s policies and procedures and with applicable securities
laws. The Trustees also considered the substantial investment management experience of the Fund’s portfolio managers, and further noted one portfolio manager had co-authored several white papers with respect to the theories and strategies underlying
Pension Partners’ management of the Fund’s assets. The
Approval of Investment Advisory Agreement (Unaudited) – Continued
Pension Partners, LLC
Trustees noted that Pension Partners had recently entered into an agreement with a new third-party chief compliance officer and believed that the new chief compliance officer had the necessary resources
to adequately provide compliance services to the Fund. The Trustees concluded that Pension Partners has the quality and depth of personnel, resources, investment methods and compliance policies and procedures essential to performing its duties under
the Investment Advisory Agreement and that the nature, extent and quality of such services would be satisfactory.
Fund Historical Performance and the Overall Performance of Pension Partners. In assessing the quality of the portfolio management delivered by Pension Partners,
the Trustees reviewed the short-term and longer-term performance of the Fund on both an absolute basis and in comparison to one or more appropriate securities benchmark indices, the Fund’s respective peer funds according to Morningstar
classifications. The Board noted that Pension Partners does not manage a composite of separate accounts utilizing a similar investment strategy to the Fund. The Trustees noted that the Fund had outperformed its peer group median over the one-year,
three-year and five-year periods ended October 31, 2019 and outperformed the peer group average over the three-year and five-year periods ended October 31, 2019. The Trustees also considered that the Fund had underperformed the peer group median and
average over the year-to-date period ended October 31, 2019 and the peer group average over the one-year period ended October 31, 2019. The Trustees noted that Pension Partners had underperformed its primary benchmark across all periods. In addition,
the Trustees considered that the Fund had outperformed its secondary index of mutual funds managed in a similar strategy across the three-year and five-year periods ended October 31, 2019, but underperformed the secondary index over the year-to-date
and one-year periods ended October 31, 2019.
Cost of Advisory Services and Profitability. The Trustees considered the annual advisory fee that the Fund pays to Pension Partners under the Investment Advisory
Agreement, as well as Pension Partners’ profitability from services that it rendered to the Fund during the 12-month period ended September 30, 2019. The Trustees also considered the effect of an expense limitation agreement on Pension Partners’
compensation and that Pension Partners has contractually agreed to reduce its advisory fees and, if necessary, reimburse the Fund for operating expenses, as specified in the Fund’s prospectus. The Trustees noted that the relationship with the Fund
had been profitable for Pension Partners over the 12-month period ended September 30, 2019. The Trustees then considered that Pension Partners does not manage similarly managed accounts in a strategy similar to the Fund but that the management fee
that Pension Partners charges to the Fund is within the range of fees charged by Pension Partners to separately managed accounts utilizing other strategies. The Trustees also took into account that Pension Partners has additional responsibilities
with respect to the Fund, including additional compliance obligations, managing daily liquidity, and the preparation of Board and shareholder materials. The Trustees concluded that Pension Partners’ service relationship with the Fund yields a
reasonable profit to Pension Partners.
Comparative Fee and Expense Data. The Trustees considered a comparative analysis of the contractual expenses borne by the Fund and those of funds in the same
Morningstar peer group. The Trustees noted that he Fund’s advisory fee was higher than the peer group median and average. The Trustees also considered the total expenses of the Fund (after waivers and expense reimbursements), noting they were
higher than the peer group median and average. The Trustees also considered the average net assets of the funds comprising the Morningstar peer group were significantly higher than the assets of the Fund. The Trustees noted that when limiting the
benchmark category to funds with similar asset sizes, the total expenses of the Fund were closer to the peer group median and average. The Trustees further considered the Fund’s unique investment strategy and the resources provided by Pension
Partners’ in implementing the Fund’s strategies. While recognizing that it is difficult to compare advisory fees because the scope of advisory services provided may vary from one investment adviser to another, the Trustees concluded that Pension
Partners’ advisory fee with respect to the Fund continues to be reasonable.
Approval of Investment Advisory Agreement (Unaudited) – Continued
Pension Partners, LLC
Economies of Scale. The Trustees considered whether the Fund may benefit from any economies of scale, noting that the Investment Advisory Agreement includes
breakpoints in the investment advisory fee schedule for the Fund at $500 million, $750 million, and $1 billion in assets under management. The Trustees considered that the breakpoint structure of the Fund’s investment advisory fee had the potential
to share such economies with Fund shareholders as the Fund grows.
Other Benefits. The Trustees considered the direct and indirect benefits that could be realized by the Adviser from its relationship with the Fund. The Trustees
considered that Pension Partners does not utilize soft dollar arrangements with respect to portfolio transactions and does not use affiliated brokers to execute the Fund’s portfolio transactions. The Trustees considered that Pension Partners may
receive some form of reputational benefit from services rendered to the Fund, but that such benefits are immaterial and cannot otherwise be quantified. The Trustees concluded that Pension Partners does not receive additional material benefits from
its relationship with the Fund.
Additional Information (Unaudited)
February 29, 2020
AVAILABILITY OF FUND PORTFOLIO INFORMATION
The Fund files a complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q or Part F of Form N-PORT (beginning with filings after March 31,
2020). The Fund’s Form N-Q or Part F of Form N-PORT are available on the SEC’s website at www.sec.gov and may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. For information on the Public Reference Room call
1-800-SEC-0330. In addition, the Fund’s Form N-Q or Part F of Form N-PORT is available without charge upon request by calling 1-855-282-2386.
AVAILABILITY OF PROXY VOTING INFORMATION
A description of the Fund’s Proxy Voting Policies and Procedures is available without charge, upon request, by calling 1-855-282-2386. Information regarding how the Fund voted proxies relating to
portfolio securities during the most recent 12-month period ended June 30, is available (1) without charge, upon request, by calling 1-855-282-2386, or (2) on the SEC’s website at www.sec.gov.
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Privacy Notice (Unaudited)
The Fund collects only relevant information about you that the law allows or requires it to have in order to conduct its business and properly service you. The Fund collects financial and personal
information about you (“Personal Information”) directly (e.g., information on account applications and other forms, such as your name, address, and social security number, and information provided to access account information or conduct account
transactions online, such as password, account number, e-mail address, and alternate telephone number), and indirectly (e.g., information about your transactions with us, such as transaction amounts, account balance and account holdings).
The Fund does not disclose any non-public personal information about its shareholders or former shareholders other than for everyday business purposes such as to process a
transaction, service an account, respond to court orders and legal investigations or as otherwise permitted by law. Third parties that may receive this information include companies that provide transfer agency, technology and administrative
services to the Fund, as well as the Fund’s investment adviser who is an affiliate of the Fund. If you maintain a retirement/educational custodial account directly with the Fund, we may also disclose your Personal Information to the custodian for
that account for shareholder servicing purposes. The Fund limits access to your Personal Information provided to unaffiliated third parties to information necessary to carry out their assigned responsibilities to the Fund. All shareholder records
will be disposed of in accordance with applicable law. The Fund maintains physical, electronic and procedural safeguards to protect your Personal Information and requires its third party service providers with access to such information to treat
your Personal Information with the same high degree of confidentiality.
In the event that you hold shares of the Fund through a financial intermediary, including, but not limited to, a broker-dealer, credit union, bank or trust company, the privacy policy
of your financial intermediary governs how your non-public personal information is shared with unaffiliated third parties.
INVESTMENT ADVISER
Pension Partners, LLC
103 Avenue De Diego, Suite 1608
San Juan, PR 00911
DISTRIBUTOR
Quasar Distributors, LLC
111 East Kilbourn Avenue, Suite 1250
Milwaukee, WI 53202
CUSTODIAN
U.S. Bank N.A.
1555 North Rivercenter Drive, Suite 302
Milwaukee, WI 53212
ADMINISTRATOR, FUND ACCOUNTANT
AND TRANSFER AGENT
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
Cohen & Company, Ltd.
342 North Water Street, Suite 830
Milwaukee, WI 53202
LEGAL COUNSEL
Stradley Ronon Stevens & Young, LLP
2005 Market Street, Suite 2600
Philadelphia, PA 19103
This report should be accompanied or preceded by a prospectus.
The Fund’s Statement of Additional Information contains additional information about the
Fund’s trustees and is available without charge upon request by calling 1-855-282-2386.