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 Cove Street Capital Small Cap Value Fund (the “Fund”) is a diversified series with its own investment objectives and policies within the Trust. The investment objective of the Fund is capital appreciation. 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 commenced operations on September 30, 1998 and currently offers Institutional Class shares. 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, as 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 tax or excise tax provision is required. As of and during the period ended March 31, 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. As of and during the period ended March 31, 2020, the Fund did not have liabilities for any unrecognized tax benefits. 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 March 31, 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 year
ended September 30, 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 and expense 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 may utilize earnings and profits distributed to shareholders on redemptions of shares as part of the dividend paid deduction. 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.
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.
Allocation of Expenses – 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.
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Semi-Annual Report 2020 - CSCAX
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Notes to Financial Statements - continued
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Cove Street Capital Small Cap Value Fund
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March 31, 2020 (UNAUDITED)
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Illiquid or Restricted Securities – A security may be considered illiquid if it
lacks a readily available market. Securities are generally considered liquid if they can be sold or disposed of in the ordinary course of business within seven days at approximately the price at which the security is valued by the Fund. Illiquid
securities may be valued under methods approved by the Board of Trustees (the “Board”) as reflecting fair value. The Fund will not hold more than 15% of the value of its net assets in illiquid securities. Certain restricted securities may be
considered illiquid. Restricted securities are often purchased in private placement transactions, are not registered under the Securities Act of 1933, may have contractual restrictions on resale, and may be valued under methods approved by the
Board as reflecting fair value. At March 31, 2020, the Fund had investments in illiquid securities with a total value of $7,129,846 or 8.4% of total net assets.
Information concerning illiquid securities, including restricted securities considered to be illiquid, is as follows:
|
Security
|
Shares/Par
|
|
Dates Acquired
|
Cost Basis
|
|
Apex Global Brands Notes
|
$5,142,857
|
|
8/2018
|
$4,967,044
|
|
Apex Global Brands
|
78,989
|
|
8/2017
|
$828,794
|
|
Apex Global Brands Warrant (08/11/24)
|
19,747
|
|
8/2017
|
$171,206
|
|
Apex Global Brands Warrant (12/07/24)
|
59,259
|
|
12/2017
|
$274,835
|
|
Capital Senior Living Corp
|
696,059
|
|
May 2019 to Feb. 2020
|
$2,852,449
|
GP Strategies
|
460,175
|
|
Jan. 2010 to Feb. 2020
|
$6,083,241
|
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 the 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.
Equity Securities – Equity securities that are primarily traded on a national securities exchange are valued at the
last sale price on the exchange on which they are primarily traded on the day of valuation or, if there has been no sale on such day, at the mean between the bid and ask prices, or last trade. Securities traded primarily in the Nasdaq Global Market
System for which market quotations are readily available are valued using the Nasdaq Official Closing Price (“NOCP”). If the NOCP is not available, such securities are valued at the last sale price on the day of valuation, or if there has been no
sale on such day, at the mean between the bid and ask prices, or last trade. To the extent these securities are actively traded and valuation
Semi-Annual Report 2020 - CSCAX
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Cove Street Capital Small Cap Value Fund
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Notes to Financial Statements - continued
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March 31, 2020 (UNAUDITED)
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adjustments are not applied, they are categorized in Level 1 of the fair value hierarchy. If the market for a particular security is not active, and the mean between bid and ask prices, or last trade is used, these securities are categorized in Level
2 of the fair value hierarchy.
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.
Debt Securities – Convertible bonds and subordinated notes held by the Fund are
valued at fair value on the basis of valuations furnished by an independent pricing service which utilizes both dealer-supplied valuations and formula-based techniques. The pricing service may consider recently executed transactions in securities
of the issuer or comparable issuers, market price quotations (where observable), bond spreads, and fundamental data relating to the issuer. These bonds and notes are categorized in Level 2 of the fair value hierarchy. Due to market data not being
readily available, the subordinated notes may be valued using an income approach, as approved by the Board.
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. These procedures consider many factors,
including the type of security, size of holding, trading volume, liquidity, 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 determines its net asset value 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 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
March 31, 2020:
|
|
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Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
|
Common Stocks
|
|
$
|
79,234,091
|
|
|
$
|
-
|
|
|
$
|
27,536
|
|
|
$
|
79,261,627
|
|
|
Subordinated Notes
|
|
|
-
|
|
|
|
3,702,857
|
|
|
|
-
|
|
|
|
3,702,857
|
|
|
Warrants
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
|
-
|
|
|
Short-Term Investment
|
|
|
1,683,577
|
|
|
|
-
|
|
|
|
-
|
|
|
|
1,683,577
|
|
|
Total Investments in Securities
|
|
$
|
80,917,668
|
|
|
$
|
3,702,857
|
|
|
$
|
27,536
|
|
|
$
|
84,648,061
|
|
The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value.
|
Investments in Securities
|
|
Balance as of September 30, 2019
|
|
$
|
96,375
|
|
|
Accrued discounts/premiums
|
|
|
-
|
|
|
Realized losses
|
|
|
-
|
|
|
Change in net unrealized appreciation/depreciation
|
|
|
(68,839
|
)
|
|
Net sales
|
|
|
-
|
|
|
Transfers into and/or out of Level 3
|
|
|
-
|
|
|
Balance as of March 31, 2020
|
|
$
|
27,536
|
|
|
Change in unrealized appreciation/depreciation during the year for Level 3 investments held at March 31, 2020
|
|
$
|
(68,839
|
)
|
|
|
Semi-Annual Report 2020 - CSCAX
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Notes to Financial Statements - continued
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Cove Street Capital Small Cap Value Fund
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March 31, 2020 (UNAUDITED)
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The Level 3 investments as of March 31, 2020, represented 0.0% of the Fund’s net assets. Refer to the Schedule of Investments for further information on the classification of investments.
The following provides information regarding the valuation technique, unobservable input used, and other information related to the fair value of the Level 3 investment as of March 31, 2020:
|
Security Type
|
Fair Value
as of March 31, 2020
|
Valuation
Technique
|
|
Range/Weighted
Average
|
|
Common Stocks
|
$27,536
|
Consensus Pricing
|
Discount for lack of marketability
|
17%
|
4. INVESTMENT ADVISORY FEE AND OTHER TRANSACTIONS WITH AFFILIATES
The Trust has an agreement with Cove Street Capital, LLC (the “Adviser”) to furnish investment advisory services to the Fund. Pursuant to an Investment Advisory Agreement between the Trust and the Adviser, the Adviser
is entitled to receive, on a monthly basis, an annual advisory fee equal to 0.85% of the Fund's average daily net assets.
The Fund’s Adviser has contractually agreed to waive a portion or all of its management fees and/or reimburse the Fund for its expenses to ensure that total annual operating expenses (excluding acquired
fund fees and expenses, interest, taxes, brokerage commissions and extraordinary expenses) do not exceed 1.25% of the average daily net assets. 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 expense reimbursement occurred and at the time of recoupment.
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 Trust’s Board or the Adviser, with the consent of the Board. As of March 31, 2020, the Fund had $441 in waived fees subject to potential recovery.
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 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 March 31, 2020, are disclosed in the Statement 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 was an affiliate of the Administrator during
the period covered in this report. See Note 9 for additional details.
Semi-Annual Report 2020 - CSCAX
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Cove Street Capital Small Cap Value Fund
|
Notes to Financial Statements - continued
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|
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March 31, 2020 (UNAUDITED)
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5. CAPITAL SHARE TRANSACTIONS
Transactions in shares of the Fund were as follows:
|
TRANSACTIONS IN SHARES:
|
|
For the Six
Months Ended
March 31, 2020
|
|
|
For the
Year Ended
September 30, 2019
|
|
|
Institutional Class:
|
|
|
|
|
|
|
|
Shares sold
|
|
|
705,558
|
|
|
|
470,738
|
|
|
Shares issued to holders in reinvestment of distributions
|
|
|
23,205
|
|
|
|
99,189
|
|
|
Shares redeemed
|
|
|
(464,640
|
)
|
|
|
(1,044,331
|
)
|
|
Net increase (decrease) in shares outstanding
|
|
|
264,123
|
|
|
|
(474,404
|
)
|
6. INVESTMENT TRANSACTIONS
The aggregate purchases and sales, excluding Short-Term investments, by the Fund for the period ended March 31, 2020, were as follows:
|
|
Purchases
|
Sales
|
|
U.S. Government Securities
|
$-
|
$-
|
|
Other Securities
|
$45,331,012
|
$34,305,221
|
7. INCOME 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 September 30, 2019, the Fund’s most recently completed
fiscal year-end were as follows:
|
Aggregate Gross
Appreciation
|
Aggregate Gross
Depreciation
|
Net
Appreciation
|
Federal Income
Tax Cost
|
|
$17,325,180
|
$(5,477,426)
|
$11,847,754
|
$109,458,238
|
Any difference between book-basis and tax-basis unrealized appreciation would be attributable primarily to the tax deferral of losses on wash sales in the Fund.
At September 30, 2019, the Fund’s components of distributable earnings on a tax-basis were as follows:
|
Undistributed
Ordinary
Income
|
Undistributed
Long-Term
Capital Gain
|
Other
Accumulated
Losses
|
Unrealized
Appreciation
|
Total
Distributable
Earnings
|
|
$844,613
|
$-
|
$(779,414)
|
$11,847,754
|
$11,912,853
|
|
|
Semi-Annual Report 2020 - CSCAX
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Notes to Financial Statements - continued
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Cove Street Capital Small Cap Value Fund
|
March 31, 2020 (UNAUDITED)
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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 a Fund’s taxable year subsequent to October 31 and December 31, respectively. For the taxable year ended September 30, 2019, the Fund did not defer any qualified late year losses.
As of September 30, 2019, the Fund had a short-term capital loss carryforward of $779,414, which will be permitted to be carried over for an unlimited period.
The tax character of distributions paid for the period ended March 31, 2020, were as follows:
|
|
Ordinary
Income*
|
Long Term
Capital Gains
|
Total
|
|
Amount in Dollars
|
$995,461
|
$ -
|
$995,461
|
|
Amount per Share
|
$0.25781
|
$ -
|
$0.25781
|
*For federal income tax purposes, distributions of short-term capital gains are treated as ordinary income distributions.
The tax character of distributions paid for the year ended September 30, 2019, were as follows:
|
|
Ordinary
Income*
|
Long Term
Capital Gains
|
Total
|
|
Amount in Dollars
|
$159,360
|
$3,813,644
|
$3,973,004
|
|
Amount per Share
|
$0.04073
|
$0.97476
|
$1.01549
|
*For federal income tax purposes, distributions of short-term capital gains are treated as ordinary income distributions.
8. 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 the fund, under Section 2(a)(9) of the Investment Company
Act of 1940. As of March 31, 2020, Charles Schwab & Co., for the benefit of its customers, owned 33.62% of the outstanding shares of the Fund.
9. SUBSEQUENT EVENTS
The global outbreak of COVID-19 has disrupted economic markets and the full prolonged economic impact is uncertain. The operational and financial performance of issuers in securities for which the Fund invests depend
on future developments of the pandemic, such as duration and spread of the virus. These developments may impact the value of the Fund’s investments.
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.
Management has performed an evaluation of subsequent events through the date this shareholder report was issued and has determined that no additional items require recognition or disclosure.
Semi-Annual Report 2020 - CSCAX
|
|
Cove Street Capital Small Cap Value Fund
|
Additional Information
|
|
|
(UNAUDITED)
|
APPROVAL OF INVESTMENT ADVISORY AGREEMENT
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 Cove Street Capital, LLC (“Cove Street” or the “Adviser”) regarding the Cove Street Capital Small Cap Value 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 Cove Street 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 Cove Street with respect to the Fund; (2) the Fund’s historical performance and the performance of other investment accounts managed by Cove Street; (3) the costs of the services
provided by Cove Street and the profits realized by Cove Street 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 Cove Street 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 a representative of Cove Street, and the Support Materials, the Board concluded that the
overall arrangements between the Trust and Cove Street set forth in the Investment Advisory Agreement continue to be fair and reasonable in light of the services that Cove Street performs, investment advisory fees 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 Cove Street provides under the Investment Advisory Agreement, 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 Cove Street 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 policies and procedures of the Trust and with applicable securities laws. The Trustees considered the investment
philosophy of the portfolio manager and his extensive
|
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Semi-Annual Report 2020 - CSCAX
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Additional Information - continued
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Cove Street Capital Small Cap Value Fund
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|
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APPROVAL OF INVESTMENT ADVISORY AGREEMENT continued
investment analysis and management experience which spans nearly thirty years and is focused on investment strategies and techniques similar to those used to manage the Fund’s assets. The Trustees further considered
that he has managed the Fund, including its predecessors, since inception in 1998. The Trustees took into account Cove Street’s strong capitalization and its assets under management. The Trustees concluded that they were satisfied with the
nature, extent and quality of services that Cove Street provides to the Fund under the Investment Advisory Agreement.
Fund Historical Performance and the Overall Performance of Cove Street. In assessing the quality of the portfolio management delivered by Cove Street, the Trustees reviewed
the short-term and long-term performance of the Fund on both an absolute basis and in comparison to appropriate benchmark indices, the Fund’s peer group according to Morningstar classifications, and the composite of separate accounts that Cove
Street manages utilizing a similar investment strategy as that of the Fund. When reviewing the Fund’s performance against its Morningstar peer group, the Trustees took into account that the Fund’s performance for the year-to-date, one-year,
three-year, five-year, and ten-year periods ended October 31, 2019, trailed the peer group median and average. The Trustees also noted that the Fund had underperformed the benchmark Russell 2000 Index and the Russell 2000 Value Index over all
reviewed periods ended October 31, 2019. The Trustees also considered the analysis provided by the Adviser regarding the Fund’s underperformance relative to the benchmark indexes. The Trustees observed that the Fund’s performance was consistent
with the performance of a composite of similar accounts managed by Cove Street over relevant time periods, although there was some discrepancy attributable to Cove Street’s efforts to mitigate the tax impact on taxable accounts in the composite. In
addition, the Trustees considered that the Fund had achieved positive total returns across all reviewed periods.
Cost of Advisory Services and Profitability. The Trustees considered the annual advisory fee that the Fund pays to Cove Street under the Investment Advisory Agreement, as
well as Cove Street’s profitability from services that Cove Street 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 Cove Street’s compensation
and that Cove Street 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, for the Fund’s fiscal year ended September 30,
2019, the Fund was operating below the expense cap. The Trustees further considered that the management fees that Cove Street charges to separately managed accounts with similar investment strategies to that of the Fund are higher than the advisory
fee that the Fund pays to Cove Street. The Trustees concluded that Cove Street’s service relationship with the Fund provides a reasonable profit.
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 the Fund’s management fee was above the median and average management fees reported for the peer group. The Trustees also noted that the Fund’s management fee was above the peer group average and equal to the median when
compared to similarly-sized funds. They also considered the total expenses of the Fund were higher than the average and median total expenses reported for the peer group, but that the average net assets of funds comprising the peer group were
significantly higher than the assets of the Fund. 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 Cove
Street’s advisory fee continues to be reasonable.
Continued on the next page.
Semi-Annual Report 2020 - CSCAX
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|
Cove Street Capital Small Cap Value Fund
|
Additional Information - continued
|
|
|
(UNAUDITED)
|
APPROVAL OF INVESTMENT ADVISORY AGREEMENT continued
Economies of Scale. The Trustees considered whether the Fund may benefit from any economies of scale, noting that the investment advisory fee for the Fund does not contain
breakpoints. The Trustees took into account the fact that Cove Street expressed reservation about the implementation of breakpoints because of concerns about capacity constraints associated with the Fund’s strategy of investing in small cap
stocks. The Trustees noted given current asset levels, it was not necessary to consider the implementation of fee breakpoints at the present time, but agreed to revisit the issue in the future as circumstances change and Fund asset levels
increase.
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 Cove Street does not utilize soft dollar arrangements with respect to portfolio transactions and has no affiliated brokers to execute the Fund’s portfolio transactions. The Trustees considered that Cove Street 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 Cove Street does not receive additional material benefits from its relationship with the
Fund.
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Semi-Annual Report 2020 - CSCAX
|
|
Additional Information - continued
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Cove Street Capital Small Cap Value Fund
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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 1-866-497-0097.
AVAILABILITY OF FUND PROXY VOTING INFORMATION
A description of the Fund’s Proxy Voting Policies and Procedures is available without charge, upon request, by calling 1-866-497-0097. 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 1-888-621-9258, or (2) on the SEC’s website at www.sec.gov.
Semi-Annual Report 2020 - CSCAX
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Cove Street Capital Small Cap Value Fund
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Additional Information - continued
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(UNAUDITED)
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PRIVACY NOTICE
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.
www.CoveStreetFunds.com
866-497-0097
C S C A X
Semi-Annual Report 2020
Cove Street Capital
Small Cap Value Fund
C S C A X
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 1-866-497-0097.
INVESTMENT ADVISER
Cove Street Capital, LLC
2101 East El Segundo Boulevard, Suite 302
El Segundo, CA 90245
DISTRIBUTOR
Quasar Distributors, LLC
111 E. Kilbourn Ave., Suite 1250
Milwaukee, WI 53202
CUSTODIAN
U.S. Bank N.A.
1555 N. Rivercenter Drive, Suite 302
Milwaukee, WI 53212
ADMINISTRATOR, FUND ACCOUNTANT
AND TRANSFER AGENT
U.S. Bancorp Fund Services, LLC
615 E. Michigan Street
Milwaukee, WI 53202
INDEPENDENT REGISTERED PUBLIC
ACCOUNTING FIRM
Cohen & Company, Ltd.
342 N. Water Street, Suite 830
Milwaukee, WI 53202
LEGAL COUNSEL
Stradley Ronon Stevens & Young, LLP
2005 Market Street, Suite 2600
Philadelphia, PA 19103
www.CoveStreetFunds.com
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Note applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable to Registrants who are not listed as issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Schedule of Investments.
(a) Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
(b) Not applicable.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed‑End Management Investment Company and Affiliated Purchases.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholder may recommend nominees to the Registrant’s Board of Trustees.
Item 11. Controls and Procedures.
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(a)
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The Registrant’s President and Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of
this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d‑15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are
effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.
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(b)
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There were no significant changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the period covered by this report that has materially affected, or is
reasonably likely to materially affect, the Registrant's internal control over financial reporting.
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Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable to open-end investment companies.
Item 13. Exhibits.
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(a)
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(1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the Registrant intends to satisfy Item 2 requirements through filing an exhibit.
Not applicable for semi-annual reports.
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(3) Any written solicitation to purchase securities under Rule 23c‑1 under the Act sent or given during the period covered by the report by or on behalf of the Registrant to 10 or more
persons. Not applicable to open-end investment companies.
(4) Change in the Registrant’s independent public accountant. There was no change in the Registrant’s independent public accountant for the period covered by this report.
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.
(Registrant) Managed Portfolio Series
By (Signature and Title) /s/Brian R. Wiedmeyer
Brian R. Wiedmeyer, President
Date June 8, 2020
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 (Signature and Title) /s/Brian R. Wiedmeyer
Brian R. Wiedmeyer, President
Date June 8, 2020
By (Signature and Title) /s/Benjamin J. Eirich
Benjamin J. Eirich, Treasurer
Date June 8, 2020