Wasmer Schroeder High Yield Municipal Fund

[Pages:44]Wasmer Schroeder High Yield Municipal Fund

Annual Report February 28, 2019

Beginning on January 1, 2021, as permitted by regulations adopted by the Securities and Exchange Commission, 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 a website, 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 or your financial intermediary electronically through the Fund's website. You may elect to receive all future reports in paper free of charge. You can inform the Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports. Your election to receive reports in paper will apply to all funds held within the fund complex and may apply to all funds held through your financial intermediary.

Wasmer Schroeder High Yield Municipal Fund

February 28, 2019

Dear Shareholder:

We are pleased to present the February 28, 2019 annual report for the Wasmer Schroeder High Yield Municipal Fund (the "Fund"). The Fund's net asset value ("NAV") per share decreased by $0.02 to $10.61 during the fiscal year ended February 28, 2019. Over those twelve months, shareholders received monthly income distributions totaling 41 cents per share. Factoring in the reinvestment of dividends, the Fund underperformed the Bloomberg Barclays Municipal Bond Index by 0.20% and the Bloomberg Barclays Municipal High Yield Bond Index by 3.03% over the fiscal year. Since its inception on March 31, 2014, the Fund has outperformed the Bloomberg Barclays Municipal Bond Index by 2.35% and the Bloomberg Barclays High Yield Municipal Bond Index by 0.16% on an annualized basis.

Wasmer Schroeder

High Yield Municipal

P__e_ri_o_d_

___F_u_n_d__(_W__S_H__Y_X__) __

3/1/2018 ? 2/28/2019

3.93%

3/31/2014 (Inception) ?

2/28/2019 (Annualized) 5.82%

Bloomberg Barclays Municipal High

__Y_i_e_ld__B_o_n__d_I_n_d_e_x__

6.96%

5.66%

Bloomberg Barclays Municipal Bond

_______I_n_d_e_x_______

4.13%

3.47%

Performance data quoted represents past performance; past performance does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. Performance data current to the most recent month end may be obtained by calling 1.855.WSC.MUNI. The Fund imposes a 1.00% redemption fee on shares held for 60 days or less. Performance data does not reflect the redemption fee. If it had, return would be reduced. The Fund's gross expense ratio is 0.73%.

U.S. Interest Rates

For bond investors, the year ended February 28, 2019, was primarily defined by continued flattening of the yield curve. Yields on 3-month Treasury bills were higher by 78 basis points and 2-year yields were higher by 26 basis points. Meanwhile, yields on 10-year and 30-year Treasuries were lower by 15 basis points and 4 basis points, respectively. These moves left the slope of the U.S. Treasury curve at its flattest levels since 2007, with the difference between 2-year and 10-year yields at just 0.20% and 2-year and 30-year yields at 0.56%.

There were two factors that drove the majority of the curve flattening: tighter monetary policy from the Federal Reserve Board (the "Fed"), and increasing signs of slowing global economic growth. The Fed continued along its "data dependent" approach to fulfilling its dual mandate (maximum employment and price stability) by increasing the federal funds target rate four times to bring the upper-bound to 2.50%. These actions were effectively messaged in advance and came without surprise to the markets. Coming out of the December 2018 meeting, the Fed's updated "dot plots" map (which is used as a guide to measure expectations for the future implied funds

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Wasmer Schroeder High Yield Municipal Fund

target rate) indicated that a majority of the Board of Governors expected between 2 to 3 additional rate hikes over the course of 2019. Through the lens of the U.S. economy, expectations for tighter monetary policy seemed justified. The unemployment rate had trended below 4% for most of the year, average hourly earnings were growing at the fastest pace since the Financial Crisis, and Core-PCE (Personal Consumption Expenditure Index) reached the Fed's 2.00% target rate for the first time since 2012. Given this backdrop, the Fed's aggressive dot plot expectations appeared warranted as we entered 2019.

Betraying the Fed's planned monetary policy path was an undercurrent of deteriorating global economic conditions. The fourth quarter of 2018, in particular, delivered a significant pivot in terms of shifting bond market expectations. Late October saw news that growth in the Eurozone unexpectedly declined to just 0.2% in the third quarter, a sharp decrease from the already middling 0.4% growth rate in the second quarter. FedEx Corp. weighed in a few weeks later, drastically reducing their 2019 earnings forecast due to the weakness in Europe and signs that the impact of trade tensions between the U.S. and China were taking a toll on global economic growth. Apple rang in the New Year by reducing its revenue expectations for the first time in 16 years due to the impact of China's slowing economy on its sales of iPhones. It was revealed in February that the German economy, the traditional engine of Eurozone GDP, failed to grow at all during the fourth quarter ? in large part due to the impact of trade disputes with the U.S. on their manufacturing exports.

While the Fed's reign over the short end of the yield curve was on full display during the fiscal year, it was the market's reaction to these weakening aggregate economic conditions that drove action on intermediate and long-term bonds. Yields on 10-year U.S. Treasury notes topped out at 3.24% on November 8th, and subsequently fell to 2.72% by the end of February 2019. In another sign of investor angst (and expectations for the European Central Bank interventions), the global supply of bonds yielding below zero once again rose to more than $9 trillion ? the highest levels since late 2017. As we glimpse into March 2019, the Fed has formally acknowledged these headwinds, effectively walking back their guidance for any additional tightening this year. In fact, interest rate futures are now pricing in greater odds of a cut to the federal funds rate by the end of 2019 instead of any additional rate hikes. In summary, it was clearly sea of shifting tides for the U.S. Treasury market over the last 12 months, and these changes had interesting implications for the tone of the municipal bond market.

Tax Exempt Municipal Bond Market

Over the last 10 years, the correlation of 10-year tax exempt municipal bond yields to 10-year U.S. Treasury yields has been very high at 0.9 (with 1.0 meaning perfect positive correlation). So it was not surprising that yields in the municipal bond market followed the Treasury market lower during the fiscal year ended February 28, 2019. What was surprising, was the absolute amount that tax exempt yields fell and the impact that the moves had on the slope of the municipal curve relative to Treasuries.

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Wasmer Schroeder High Yield Municipal Fund

Short tax exempt yields moved higher by 4 basis points, with 2-year municipals ending February at 1.61%. Long-term tax exempt yields moved lower by 4 basis points, with 30-year municipals closing at 3.06%. This was generally consistent with the action we saw in the Treasury curve. However, the belly of the tax exempt curve, specifically 6-11 year maturities, saw yields drop anywhere from 31-39 basis points ? a significant move compared to the 15 basis point decline we saw on 10-year Treasuries. The slope of the tax exempt curve between 2-year and 10-year flattened by 39 basis points to close at 0.53%. The spread between 2-year and 30-year bonds flattened by 8 basis points to 1.45%, which is notable if not solely because that same slope in Treasuries ended February at just 0.56% ? a difference in slope of 89 basis points.

The influence of the Treasury market on tax exempt yields was only one component of the price action we saw in the municipal bond market over the year. Equally important were the technical factors in play, with supply and demand attributions playing a large role in the outperformance we saw in munis compared to Treasuries. Supply proved yet again to be a positive technical influence for spreads and liquidity. Total issuance in the municipal market during the period was $327 billion, the lowest for a 12-month period since February 2014. The demand profile was somewhat volatile, with a string of inflows over the summer leading into 12 consecutive weeks of outflows by mid-December. But the real story for demand came in January and February of 2019. Of the $11.2 billion in total inflows to municipal funds during the 12 month period, $9.6 billion were realized in January and February. The net impact of the lower supply and elevated demand was not just lower yields, but lower municipal-to-Treasury yields ratios. Ratios along the curve were generally volatile during the period, with ratios from 2- to 10-year maturities trading in wide bands. But the deluge of inflows into the muni market to begin 2019 was the icing on the cake. All muni-to-Treasury ratios, from short to long, ended February 2019 below their 12 month average. This left the municipal market in a position of outperformance versus Treasuries for the period, with the Bloomberg Barclays 10-year Municipal Bond Index posting a return of 5.13% compared with 4.04% for 10-year U.S. Treasuries.

There were a number of high profile storylines that the municipal market navigated over the course of the year. The effects of the Tax Cuts and Jobs Act, passed in late 2017, continued to be felt throughout 2018 as the new caps on state and local tax ("SALT") deductions drove exceptionally strong demand for high tax, "specialty" state bonds ? particularly New York and California. In the case of California, their SALT-fueled rally took a step back in November as the state was forced to deal with the most destructive wildfire season on record. The uncertainty about the scope and scale of the damage (more than 1.9 million acres burned) represented a stark reminder of the derivative dangers that climate change can present for muni investors with geographically concentrated portfolio allocations. The State of Illinois ushered in new gubernatorial leadership with the election of J.B. Pritzker in the fall. This represented a significant shift for the highly indebted state and investors are closely watching for any clues as to his long-term plans for the state's unfunded pension liabilities and large back-log of vendor payables. The Commonwealth of Puerto Rico made

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Wasmer Schroeder High Yield Municipal Fund

measurable progress in their contentious debt restructuring efforts by successfully exchanging $17.6 billion in defaulted sales tax-backed "COFINA" debt at discounts to par. This was just one step in a long road towards an eventual resolution, and the "Puerto Rico versus Bondholders" fight continues to rage on. For example, the Commonwealth is now arguing that more than $6 billion in general obligation debt issued after 2012 should be invalidated due to breaches of constitutional debt limits.

These stories were effectively relegated to background noise by February 2019. The technical demand patterns in place left a strong bid in the market for credit, with the Bloomberg Barclays `BBB' Municipal Index outperforming the `AAA' Index by 107 basis points. Headline states like New Jersey (+5.16%), Illinois (+4.93%), Pennsylvania (+4.62%) and Connecticut (+4.54%) outperformed as investors went further down the credit curve in their search for yield, while high-tax "specialty" states, including California (+3.85%) and New York (+3.89%), underperformed.

Wasmer Schroeder High Yield Municipal Fund

The Fund's performance over the fiscal year was lower than that of the Bloomberg Barclays Municipal Index and the Bloomberg Barclays Municipal High Yield Bond Index. There were two key reasons for last year's underperformance: shorter duration and no exposure to uninsured Puerto Rico.

The Fund's duration-to-worst ended the quarter at approximately 4.6 compared with 9.0 for the Bloomberg Barclays Municipal High Yield Bond Index. The Index's longer duration reflects a large allocation to zero coupon Tobacco paper and, more recently, the introduction of long maturity COFINA bonds. The curve flattening we saw during the last few months of the period was one of the key drivers of the return differential between the Fund and the benchmark. The Puerto Rico component of the benchmark was equally important. Although the weighting to Puerto Rico was relatively small during the year as its defaulted securities fell out of the Index, the 40.2% total return of the HY Puerto Rico Index added 113 basis points to the overall High Yield Index's 6.96% return. While the Fund does hold Puerto Rico, the exposure is limited to insured credits which have provided the primary source of debt repayment.

All sectors, maturities and credit rating categories within the Fund were positive during the period from a total return standpoint. The Fund's exposure to the Healthcare, Transportation, and General Obligation credits contributed the most overall performance, while the Special Tax, Education, and Water/Sewer sectors underperformed. Credit quality remains higher than the overall Bloomberg Barclays Muni High Yield Index as we have been structuring the portfolio with a preference towards `A' and `BBB' rated names rather than below investment grade and non-rated issuers. Tighter risk premiums between these ratings categories and an overall flattening of the yield curve have resulted in diminishing relative value opportunities. Consistent with our long-term approach to credit, we will continue to focus on the areas of the market where we see the greatest relative value for investors rather than simply chasing rating categories. We believe this approach puts the Wasmer Schroeder High Yield Municipal Fund in a more opportunistic position to mitigate

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Wasmer Schroeder High Yield Municipal Fund

against potential spread widening while also maintaining a higher degree of liquidity to capitalize on opportunities that might develop over the coming quarters.

As of February 28, 2019, the Fund's duration-to-worst was 4.6 years and the Fund's average maturity was 16.0 years. The Fund ended the fiscal year with a portfolio consisting of 88 individual securities. This reflects our belief that diversification is an important risk-management component of any strategy that focuses on credit opportunities.

We look forward to continuing to serve your investment needs in the future and we encourage you to contact us if you have any questions about your investment in the Wasmer Schroeder High Yield Municipal Fund.

Jason D. Diefenthaler Director of Tax Exempt Portfolio Management Wasmer Schroeder

Past performance is not a guarantee of future results.

Opinions expressed above are those of the adviser and are subject to change, are not guaranteed and should not be considered recommendations to buy or sell any security and should not be considered investment advice.

Must be preceded or accompanied by a prospectus.

Mutual fund investing involves risk. Principal loss is possible. Investments in debt securities typically decrease in value when interest rates rise. This risk is usually greater for longer-term debt securities. Investments in municipal securities may involve additional risks, such as credit risk, prepayment risk, possible illiquidity and default, and susceptibility to adverse political, legislative, regulatory and economic developments. The Fund may invest in securities which involve limited liquidity that can be difficult to sell. Income from investments in tax-exempt securities may be subject to state and local taxes and a portion of income could be subject to the federal alternative minimum tax.

Investment by the Fund in lower-rated and non-rated securities presents a greater risk of loss to principal and interest than higher-rated securities.

Bond ratings provide the probability of an issuer defaulting based on the credit rating agency's analysis of the issuer's financial condition and profit potential. Bond rating services are provided by Standard & Poor's Ratings Service, Moody's Investors Service, Inc., and Fitch Ratings, Inc. Bond ratings start at AAA (denoting the highest investment quality) and usually end at D (meaning payment is in default).

Certain investments in the Fund are covered by bond insurance issued by a monoline bond insurer. Bond insurance is a type of credit enhancement. A bond insurer unconditionally and irrevocably guarantees that interest and principal will be paid as scheduled even if the bond issuer defaults. A monoline bond insurer backs debt securities only and is not exposed to risks from other lines of business.

Diversification does not assure a profit or protect against risk in a declining market.

The Bloomberg Barclays Municipal High Yield Bond Index is a rules-based, market-value-weighted index. Bonds eligible for inclusion in the Index must have a credit quality classification of Ba1/BB+ or lower or be unrated or nonrated by all three categories. They must have an outstanding par value of at least $3 million and be issued as part of a transaction of at least $20 million. The bonds must have a dated-date after December 31, 1990 and must be at least one year from their maturity date. The Bloomberg Barclays Municipal High Yield Puerto Rico Index represents bonds issued by the Commonwealth of Puerto Rico that are eligible for inclusion in the Bloomberg Barclays Municipal High Yield Bond Index.

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Wasmer Schroeder High Yield Municipal Fund

The Bloomberg Barclays Municipal Bond Index, the Bloomberg Barclays `AAA' Municipal Bond Index, the Bloomberg Barclays 10-Year Municipal Index and the Bloomberg Barclays `BBB' Municipal Bond Index are rules-based, market-weighted indices which represents various components of the investment grade tax-exempt bond market. Bonds eligible for inclusion in the indices must be rated investment grade, must have an outstanding par value of at least $7 million, be issued as part of a transaction of at least $75 million and meet the maturity or rating thresholds described in the index name. The bonds must also be fixed rate, have a dated-date after December 31, 1990, and must be at least one year from their maturity date. The "core" PCE price Index is defined as personal consumption expenditures (PCE) prices excluding food and energy prices. The core PCE Index measures the prices paid by consumers for goods and services without the volatility caused by movements in food and energy prices to reveal underlying inflation trends. An investment cannot be made directly in an index. Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. Duration-to-worst is the duration of a bond computed to the redemption date which would provide the lowest yield (for callable bonds) or highest yield (for putable bonds). For securities without calls or puts, duration-to-worst is calculated to maturity. Average maturity is the weighted average maturity of the securities in the portfolio, expressed in years. Cash flow is the net amount of cash and cash equivalents moving into and out of a business. Basis point equals 1/100th of 1%. Please refer to the schedule of investments in the report for complete holdings information. Fund holdings and sector allocations are subject to change at any time and are not recommendations to buy or sell any security. Investment performance reflects fee waivers in effect. In the absence of such waivers, total return would be reduced. Quasar Distributors, LLC, Distributor

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Wasmer Schroeder High Yield Municipal Fund

ALLOCATION OF PORTFOLIO ASSETS at February 28, 2019 (Unaudited) As a Percentage of Total Municipal Bonds

Municipal Bond Type

0.5%

10.8%

88.7% General Obligation Bonds ? 10.8% Revenue Bonds ? 88.7% Special Assessment ? 0.5%

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