0001387131-19-006813.txt : 20190909 0001387131-19-006813.hdr.sgml : 20190909 20190909125347 ACCESSION NUMBER: 0001387131-19-006813 CONFORMED SUBMISSION TYPE: N-CSR PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 20190630 FILED AS OF DATE: 20190909 DATE AS OF CHANGE: 20190909 EFFECTIVENESS DATE: 20190909 FILER: COMPANY DATA: COMPANY CONFORMED NAME: 360 Funds CENTRAL INDEX KEY: 0001319067 IRS NUMBER: 000000000 FILING VALUES: FORM TYPE: N-CSR SEC ACT: 1940 Act SEC FILE NUMBER: 811-21726 FILM NUMBER: 191082527 BUSINESS ADDRESS: STREET 1: 4300 SHAWNEE MISSION PARKWAY, SUITE 100 CITY: FAIRWAY STATE: KS ZIP: 66205 BUSINESS PHONE: 888-263-5593 MAIL ADDRESS: STREET 1: 4300 SHAWNEE MISSION PARKWAY, SUITE 100 CITY: FAIRWAY STATE: KS ZIP: 66205 FORMER COMPANY: FORMER CONFORMED NAME: Parr Family of Funds DATE OF NAME CHANGE: 20070905 FORMER COMPANY: FORMER CONFORMED NAME: PARR FINANCIAL GROUP, LLC DATE OF NAME CHANGE: 20070829 FORMER COMPANY: FORMER CONFORMED NAME: POPE FAMILY OF FUNDS DATE OF NAME CHANGE: 20050225 0001319067 S000045520 IMS Capital Value Fund C000141714 Institutional Class Shares IMSCX 0001319067 S000045521 IMS Strategic Income Fund C000141715 Institutional Class Shares IMSIX 0001319067 S000045522 IMS Dividend Growth Fund C000141716 Institutional Class Shares IMSAX N-CSR 1 q360-ncsr_063019.htm ANNUAL SHAREHOLDER REPORT
 

 

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act File Number 811-21726

 

360 Funds 

(Exact name of registrant as specified in charter)

 

4300 Shawnee Mission Pkwy, Suite 100      Fairway, KS

66205

(Address of principal executive offices)

(Zip code)

 

The Corporation Trust Company

Corporation Trust Center

1209 Orange St.

Wilmington, DE 19801 

 

 

(Name and address of agent for service)

 

With Copies To:

John H. Lively

Practus, LLP

11300 Tomahawk Creek Parkway, Suite 310

Leawood, KS 66211

 

 

Registrant’s telephone number, including area code: 800-934-5550

 

Date of fiscal year end:  06/30/2019

 

Date of reporting period: 06/30/2019

 

 

 

 

 

ITEM 1.REPORTS TO SHAREHOLDERS

 

The Annual report to Shareholders of the IMS Family of Funds, series of the 360 Funds (the “registrant”) for the year ended June 30, 2019 pursuant to Rule 30e-1 under the Investment Company Act of 1940 (the “1940 Act”), as amended (17 CFR 270.30e-1) is filed herewith.

 

 

 

  

IMS Capital Value Fund

IMS Strategic Income Fund

IMS Dividend Growth Fund

 

Annual Report

June 30, 2019

 

Fund Advisor:

 

IMS Capital Management, Inc.
8995 S.E. Otty Road
Portland, OR 97086
Toll Free (800) 934-5550 

 

IMPORTANT NOTE: Beginning on January 1, 2021, as permitted by regulations adopted by the SEC, paper copies of the IMS Family of Funds’ shareholder reports will no longer be sent by mail unless you specifically request paper copies of the reports from an IMS Fund 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 all future reports in paper free of charge. You can inform an IMS Fund or your financial intermediary that you wish to continue receiving paper copies of your shareholder reports by calling or sending an e-mail request. Your election to receive reports in paper will apply to all funds held with the IMS Family of Funds complex/your financial intermediary.

 

 

 

 

IMS CAPITAL VALUE FUND 

MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) 

Annual Report 

June 30, 2019

 

Dear Fellow Shareholders,

 

The year ended June 30, 2019 delivered strong returns for U.S. Equity markets.   However, the returns were volatile and unevenly distributed between value, growth, large cap and small cap.  In this environment, the IMS Capital Value Fund (the “Value Fund”) returned a solid +21.10% during the first half of 2019.  The Fund’s benchmark, the S&P 500® Index (“S&P 500”) returned +18.54%.   For the fiscal year ended June 30, 2019, the Fund returned +6.99% vs +10.42% for the benchmark S&P 500 and +8.46% for the Russell 1000 Value Index (“Russell 1000”).  Growth stocks outperformed value stocks handily over the period as demonstrated by the growth-weighted S&P 500 vs the value-weighted Russell 1000.  The Value Fund’s one-year return trailed the benchmark primarily due to the value vs growth performance disparity.

 

Investors had to navigate many obstacles over the past year.  A trade war with China over tariffs, currency and intellectual property rights has been front and center.  The Federal Reserve’s changing posture has created additional uncertainty and risks.  We continue to see U.S. Corporations successfully navigate these risks and changing landscapes.  Based on corporate profit margins, earnings growth and return on equity - U.S. Corporations are executing well-above their global peers.

 

The Fund’s best performers over the past year included Advanced Micro Devices (AMD) +102.6%, Starbucks (SBUX) +71.6% and PayPal Holdings (PYPL) +37.4%.  All three of these companies were bought years ago when their share prices were depressed and undervalued.  The positive trends around gaming, consumer spending, and the smart phone replacing cash and credit cards continue.  We see tremendous opportunities for future growth in these stocks.

 

The Fund’s worst performers included Invivo (NVIV) -56.4%, Apache (APA) -38.0% and Electronic Arts (EA) -28.1%.  Invivo Therapeutics represents less than one tenth of one percent of the Fund’s assets and therefore had very little impact on performance. Apache suffered from the seemingly never-ending slide in oil prices.  While Electronic Arts may be in the high growth gaming industry, but many of the industry’s top publisher’s lost ground to new, subscription-based, web-only competitors, and EA was no exception.

 

We seek to invest in a diversified portfolio of quality hand-picked, long term growth companies that are temporarily undervalued.  Over the past 30 years, our prudent approach has been consistent and we have remained true to our style even when value investing has gone in and out of favor.  We thank you for investing alongside us in the IMS Capital Value Fund as we continue to focus on building wealth wisely.

 

Sincerely,

Carl W. Marker

 

Portfolio Manager 

IMS Capital Value Fund

 

1 

 

 

INVESTMENT RESULTS – (Unaudited)

 

 

 

Average Annual Total Returns

 

 

 

(for periods ended June 30, 2019)

 

 

 

One Year

 

Five Year

 

Ten Year

 

IMS Capital Value Fund*

 

6.99%

 

5.08%

 

9.25%

 

S&P 500® Index**

 

10.42%

 

10.72%

 

14.70%

 

 

 

 

 

 

 

 

 

 

Total annual operating expenses, as disclosed in the Fund’s current prospectus dated October 29, 2018, were 1.74% of average daily net assets. The Advisor has contractually agreed to waive its management fee and/or reimburse expenses so that total annual fund operating expenses (excluding interest, taxes, brokerage fees and commissions, other expenditures that are capitalized in accordance with generally accepted accounting principles, acquired fund fees and expenses, other extraordinary expenses not incurred in the ordinary course of the Value Fund’s business, interest and dividend expense on securities sold short, and amounts, if any payable pursuant to a plan adopted in accordance with Rule 12b-1 under the Investment Company Act of 1940, as amended (the “1940 Act”)) do not exceed 1.95% of the Value Fund’s average daily net assets through October 31, 2019, subject to the Advisor’s right to recoup payments on a rolling three-year basis so long as the payment would not exceed the 1.95% expense cap. This expense cap agreement may be terminated by either party upon 60 days’ written notice prior to the end of the then-current term of the agreement.

 

The performance quoted represents past performance, which 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.  The  returns  shown  do  not  reflect  the deduction  of  taxes  that  a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. Performance data current to the most recent month end may be obtained by calling Shareholder Services at 1-800-934-5550.

 

*

Return figures reflect any change in price per share and assume the reinvestment of all distributions.

**

The S&P 500® Index is a widely recognized unmanaged index of equity prices and is representative of a broader market and range of securities than is found in the Fund’s portfolio. Individuals cannot invest directly in the Index; however, an individual can invest in exchange-traded funds or other investment vehicles that attempt to track the performance of a benchmark index. The annual total returns included for the above Fund are net of the total annual operating expenses for the Fund, while no annual operating expenses are deducted for S&P 500® Index.

2 

 

 

Comparison of the Growth of a $10,000 Investment in the IMS Capital Value Fund and the S&P 500®

Index for the 10 Years Ended June 30, 2019 (Unaudited)

 

(GRAPHIC) 

 

The chart above assumes an initial investment of $10,000 made on June 30, 2009 and held through June 30, 2019. The chart also assumes reinvestment of all dividends and distributions on the reinvestment dates during the period. THE FUND’S RETURN REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment returns and principal values will fluctuate so that your shares, when redeemed, may be worth more or less than their original purchase price.

3 

 

 

IMS STRATEGIC INCOME FUND 

MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) 

Annual Report 

June 30, 2019

 

Dear Fellow Shareholders,

 

During the first half of 2019, the IMS Strategic Income Fund (the “Income Fund”) posted a strong return of +13.71%.  During the same period, the benchmark Bloomberg Barclay’s U.S. Aggregate Bond Index (“Barclay’s Bond Index”) returned +6.11%.   Over the Fund’s full fiscal year ended June 30, 2019, the Income Fund posted a solid +12.22% gain, while the benchmark returned +7.87%.

 

During the period, the Federal Reserve changed its guidance and direction on the Fed Funds rate several times.  After indicating in the fall of 2018 that several additional rate increases may be needed in 2019, they reversed course in late spring and began preparing markets for their first rate cut in 10 years.  It happened in late July of 2019. This was done to support a potentially slowing economy.  Although employment and sentiment measures of the American economy remain strong, some leading indicators suggest future weakness.  Increasing trade disputes and tariffs have not helped.

 

The one year Treasury Bill started the fiscal year yielding 2.31%, and ended at +1.93%. The Fund’s returns were helped by the strong performance of both stocks and bonds over the period. Considering the changing outlook, we have been reducing the Fund’s holdings of dividend stocks in favor of bonds.   As of June 30, 2019, the Fund was 31% stocks, 55% in bonds and 14% in money market funds.

 

The Income Fund’s investments in structured notes also contributed to its positive performance.  The structured notes benefited from a steeper LIBOR (swap) yield curve and lower long-term rates. Both factors were favorable over the fiscal year leading to their positive performance.

 

The Income Fund has had a very encouraging year.  We are pleased with its performance.  The Income Fund has paid a dividend every month since the Income Fund’s inception in November of 2002.  The Income Fund’s ability to be strategic and flexible allows us the opportunity to invest in a wide range of income-producing securities as we continue to look for the best sources of current income. We believe that our Income Fund’s allocation to both dividend-paying stocks and bonds over that past year benefitted shareholders substantially as both bonds and equities performed well.  Going forward, we will be increasing our allocation to bonds and reducing our exposure to stocks.  We thank you for investing alongside us in the IMS Strategic Income Fund as we continue building wealth wisely.

 

Sincerely,

 

Carl W. Marker 

Portfolio Manager 

IMS Strategic Income Fund

 

4 

 

 

INVESTMENT RESULTS – (Unaudited)

 

 

 

Average Annual Total Returns

 

 

 

(for periods ended June 30, 2019)

 

 

 

One Year

 

Five Year

 

Ten Year

 

IMS Strategic Income Fund*

 

12.22%

 

(8.36)%

 

1.34%

 

Bloomberg Barclays U.S. Aggregate Bond Index**

 

7.87%

 

2.95%

 

3.90%

 

 

 

 

 

 

 

 

 

 

Total annual operating expenses, as disclosed in the Fund’s current prospectus dated October 29, 2018, were 3.36% of average daily net assets (2.02% after fee waivers/expense reimbursements by the Advisor). The Advisor contractually agreed to waive its management fee and/or reimburse expenses so that total annual fund operating expenses (excluding interest, taxes, brokerage fees and commissions, other expenditures that are capitalized in accordance with generally accepted accounting principles, acquired fund fees and expenses, other extraordinary expenses not incurred in the ordinary course of the Income Fund’s business, interest and dividend expense on securities sold short, and amounts, if any payable pursuant to a plan adopted in accordance with Rule 12b-1 under the 1940 Act) do not exceed 1.95% of the Income Fund’s average daily net assets through October 31, 2019, subject to the Advisor’s right to recoup payments on a rolling three-year basis so long as the payment would not exceed the 1.95% expense cap. This expense cap agreement may be terminated by either party upon 60 days’ written notice prior to the end of the then-current term of the agreement.

 

The performance quoted represents past performance, which 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.  The  returns  shown  do  not  reflect  the deduction  of  taxes  that  a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. Performance data current to the most recent month end may be obtained by calling Shareholder Services at 1-800-934-5550.

 

*

Return figures reflect any change in price per share and assume the reinvestment of all distributions.

**

The Bloomberg Barclays U.S. Aggregate Bond Index is a widely-used indicator of the bond market. The index is market capitalization-weighted and is made up of U.S. bonds that are primarily investment grade, which has a greater number of securities than is found in the Fund’s portfolio. Individuals cannot invest directly in the Index; however, an individual can invest in exchange-traded funds or other investment vehicles that attempt to track the performance of a benchmark index. The annual total returns included for the above Fund are net of the total annual operating expenses for the Fund, while no annual operating expenses are deducted for the Bloomberg Barclays U.S. Aggregate Bond Index.

5 

 

 

Comparison of the Growth of a $10,000 Investment in the IMS Strategic Income Fund and the Bloomberg Barclays U.S. Aggregate Bond Index for the 10 Years Ended June 30, 2019 (Unaudited)

 

image

 

The chart above assumes an initial investment of $10,000 made on June 30, 2009 and held through June 30, 2019. The chart also assumes reinvestment of all dividends and distributions on the reinvestment dates during the period. THE FUND’S RETURN REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment returns and principal values will fluctuate so that your shares, when redeemed, may be worth more or less than their original purchase price.

6 

 

 

IMS DIVIDEND GROWTH FUND 

MANAGEMENT’S DISCUSSION AND ANALYSIS (Unaudited) 

Annual Report 

June 30, 2019

 

Dear Fellow Shareholders,

 

U.S. Equity markets for the year ended June 30, 2019, delivered strong returns. However, the returns were volatile and unevenly distributed as value lagged growth and large cap outpaced small cap. The market volatility picked up in Q4 of calendar year 2018 with rhetoric about the increasing possibilities of trade tensions, the breakdown of negotiations with China on trade, currency and intellectual property rights.  The Federal Reserve posture has created additional uncertainty and risks. These risks have impacted both domestic and international business reinvestment spending, resulting in a global manufacturing slowdown. On balance we continue to see U.S. Corporations navigate these risks and changing landscape well. Based on corporate profit margins, earnings growth and return on equity, U.S. Corporations are executing above their global peers.

 

Again this year, the U.S. Equity markets performed strong compared to the majority of the International and Emerging Equity markets.

 

The Federal Reserve and central banks around the world will continue to have a significant role in the health of the global economy.

 

The IMS Dividend Growth Fund (the “Dividend Growth Fund”) returned +7.53% compared to the S&P 500® Index’s (“S&P 500”) return of +10.42% for the twelve months ended June 30, 2019. The Russell 1000 Value Index (“Russell 1000”) returned +8.46% over the same twelve month period.

 

The disappointing results relative to the indices are primarily the result of our allocation to consumer staples and tobacco related stocks which significantly underperformed.

 

The Dividend Growth Fund’s best performers over the past year included Outfront Media +41.50%, Abbott Laboratories +40.29%, Microsoft +38.07%, PayPal +37.46% and Visa +31.89%. We continue to see opportunity in large, predictable dividend paying businesses in areas like financial services, technology, and healthcare.

 

The Dividend Growth Fund’s worst performers included Kraft Heinz, which declined 48.09% as continued pricing pressure, large debt loads and business execution issues disappointed investors. PG&E declined 46.15% and State Street Bank declined 38.04%.

 

We think the companies in the Dividend Growth Fund have unique operating businesses, strong financial positioning, and opportunities for long-term future growth. These characteristics increase the likelihood that the companies in our Dividend Growth Fund will continue to pay and increase dividends and appreciate over time. We believe our portfolio is undervalued to the broader markets.  The Dividend Growth Fund’s typical holding has a robust dividend yield and attractive long-term earnings growth rate. We thank you for investing alongside us in the IMS Dividend Growth Fund as we continue to focus on building wealth wisely.

 

Sincerely,

 

Carl W. Marker & Christopher L. Magaña
Co-Portfolio Managers, IMS Dividend Growth Fund

7 

 

  

INVESTMENT RESULTS – (Unaudited)

 

 

Average Annual Total Returns
(for periods ended June 30, 2019)

 

 

One Year

 

Five Year

 

Ten Year

 

IMS Dividend Growth Fund*

7.53%

 

6.85%

 

10.08%

 

S&P 500® Index**

10.42%

 

10.72%

 

14.70%

 

 

 

 

 

 

 

 

 

Total annual operating expenses, as disclosed in the Fund’s current prospectus dated October 29, 2018, were 2.13% of average daily net assets (1.96% after fee waivers/expense reimbursements by the Advisor). The Advisor has contractually agreed to waive its management fee and/or reimburse expenses so that total annual fund operating expenses (excluding interest, taxes, brokerage fees and commissions, other expenditures that are capitalized in accordance with generally accepted accounting principles, acquired fund fees and expenses, other extraordinary expenses not incurred in the ordinary course of the Growth Fund’s business, interest and dividend expense on securities sold short, and amounts, if any payable pursuant to a plan adopted in accordance with Rule 12b-1 under the 1940 Act) do not exceed 1.95% of the Growth Fund’s average daily net assets through October 31, 2019, subject to the Advisor’s right to recoup payments on a rolling three-year basis so long as the payment would not exceed the 1.95% expense cap. This expense cap agreement may be terminated by either party upon 60 days’ written notice prior to the end of the then-current term of the agreement.

 

The performance quoted represents past performance, which 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.  The  returns  shown  do  not  reflect  the deduction  of  taxes  that  a shareholder would pay on Fund distributions or the redemption of Fund shares. Current performance of the Fund may be lower or higher than the performance quoted. The Fund’s investment objectives, risks, charges and expenses must be considered carefully before investing. Performance data current to the most recent month end may be obtained by calling Shareholder Services at 1-800-934-5550.

 

*

Return figures reflect any change in price per share and assume the reinvestment of all distributions.

**

The S&P 500® Index is a widely recognized unmanaged index of equity prices and has a greater number of securities than is found in the Fund’s portfolio. Individuals cannot invest directly in the Index; however, an individual can invest in exchange-traded funds or other investment vehicles that attempt to track the performance of a benchmark index. The annual total returns included for the above Fund are net of the total operating expenses for the Fund, while no annual operating expenses are deducted for the S&P 500 Index.

8 

 

 Comparison of the Growth of a $10,000 Investment in the IMS Dividend Growth Fund and the
S&P 500® Index for the 10 years Ended June 30, 2019 (Unaudited)

 

(GRAPHIC) 

 

The chart above assumes an initial investment of $10,000 made on June 30, 2009 and held through June 30, 2019. The chart also assumes reinvestment of all dividends and distributions on the reinvestment dates during the period. THE FUND’S RETURN REPRESENTS PAST PERFORMANCE AND DOES NOT GUARANTEE FUTURE RESULTS. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment returns and principal values will fluctuate so that your shares, when redeemed, may be worth more or less than their original purchase price.

9 

 

FUND HOLDINGS (Unaudited)

 

IMS Capital Value Fund Holdings as of June 30, 20191

 

image

 

1 As a percent of net assets.

 

The investment objective of the IMS Capital Value Fund is long-term growth from capital appreciation and, secondarily, income from dividends. The IMS Capital Value Fund typically invests in mid-cap securities, which the Advisor defines as those with a market capitalization of approximately $2 billion to $11 billion, and in large-cap securities, which the Advisor defines as those with a market capitalization of greater than $11 billion. 

10 

 

FUND HOLDINGS (Unaudited) (continued)

 

IMS Strategic Income Fund Holdings as of June 30, 20191

 

image

 

1 As a percent of net assets.

 

The investment objective of the IMS Strategic Income Fund is current income, and a secondary objective of capital appreciation. In pursuing its investment objectives, the Strategic Income Fund generally invests in corporate bonds, government bonds, dividend-paying common stocks, preferred and convertible preferred stocks, income trusts (including business trusts, oil royalty trusts and real estate investment trusts), money market instruments and cash equivalents. The Strategic Income Fund may also invest in structured products, such as reverse convertible notes, a type of structured note, and in 144A securities that are purchased in private placements and thus are subject to restrictions on resale (either as a matter of contract or under federal securities laws), but only where the Advisor has determined that a liquid trading market exists. Under normal circumstances, the Strategic Income Fund will invest at least 80% of its assets in dividend paying or other income producing securities. 

11 

 

FUND HOLDINGS (Unaudited) (continued)

 

IMS Dividend Growth Fund Holdings as of June 30, 20191

 

image

 

1 As a percent of net assets.

 

The investment objective of the IMS Dividend Growth Fund is long-term growth from capital appreciation and dividends. The Dividend Growth Fund invests primarily in a diversified portfolio of dividend–paying common stocks. The Dividend Growth Fund’s Advisor, IMS Capital Management, Inc., employs a combination of fundamental, technical and macro market research to identify companies that the Advisor believes have the ability to maintain or increase their dividend payments, because of their significant cash flow production.

 

Availability of Portfolio Schedules – (Unaudited)

 

The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available at the SEC’s website at www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. 

12 

 

Summary of Funds’ Expenses – (Unaudited)

 

As a shareholder of the Funds, you incur two types of costs: (1) transaction costs, such as short-term redemption fees; and (2) ongoing costs, including management fees and other Fund expenses. This Example is intended to help you understand your ongoing costs (in dollars) of investing in the Funds 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 (January 1, 2019 through June 30, 2019).

 

Actual Expenses

 

The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.60), 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.

 

Hypothetical Example for Comparison Purposes

 

The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Funds’ actual expense ratios and an assumed rate of return of 5% per year before expenses, which are not the Funds’ actual returns. 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 Funds and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.

 

Please note that the expenses shown in the table are meant only to highlight your ongoing costs and do not reflect any transactional costs, such as short-term redemption fees.  Therefore, the second line is only useful in comparing ongoing costs only and will not help you determine the relative costs of owning different funds. In addition, if these transactions costs were included, your costs would have been higher.

 

IMS Funds

Beginning
Account Value
January 1, 2019

Ending Account
Value
June 30, 2019

Expenses Paid
During the Period*
January 1, 2019 –
June 30, 2019

Capital Value Fund

 

 

 

 

 

 

 

 

 

Actual (+21.10%)

$

1,000.00

 

$

1,211.04

 

$

9.76

 

Hypothetical**

$

1,000.00

 

$

1,016.00

 

$

8.90

 

Strategic Income Fund

 

 

 

 

 

 

 

 

 

Actual (+13.71)%

$

1,000.00

 

$

1,137.10

 

$

10.60

 

Hypothetical**

$

1,000.00

 

$

1,014.90

 

$

9.99

 

Dividend Growth Fund

 

 

 

 

 

 

 

 

 

Actual (+16.80%)

$

1,000.00

 

$

1,168.04

 

$

10.59

 

Hypothetical**

$

1,000.00

 

$

1,015.00

 

$

9.84

 

 

*

Expenses are equal to the Funds’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 181/365 (to reflect the one-half year period). The annualized expense ratios for the Capital Value Fund, Strategic Income Fund, and the Dividend Growth Fund were 1.78%, 2.00%, and 1.97%, respectively.

**

Assumes a 5% annual return before expenses.

13 

 

 

IMS CAPITAL VALUE FUND

SCHEDULE OF INVESTMENTS

June 30, 2019

 

COMMON STOCK - 98.61%

 

Shares

 

 

Fair Value

 

             

Communication Services - 14.07%

 

 

 

 

 

 

 

 

Alphabet, Inc. - Class C (a)

 

 

947

 

 

$

1,023,622

 

Electronic Arts, Inc. (a)

 

 

6,800

 

 

 

688,568

 

Facebook, Inc. - Class A (a)

 

 

5,500

 

 

 

1,061,500

 

Netflix, Inc. (a)

 

 

2,000

 

 

 

734,640

 

Verizon Communications, Inc.

 

 

13,400

 

 

 

765,542

 

 

 

 

 

 

 

 

4,273,872

 

Consumer Discretionary - 20.91%

 

 

 

 

 

 

 

 

Amazon.com, Inc. (a)

 

 

500

 

 

 

946,815

 

Dollar Tree, Inc. (a)

 

 

8,500

 

 

 

912,815

 

Domino’s Pizza, Inc.

 

 

3,430

 

 

 

954,500

 

Home Depot, Inc.

 

 

4,478

 

 

 

931,290

 

Service Corp. International

 

 

18,250

 

 

 

853,735

 

Starbucks Corp.

 

 

9,124

 

 

 

764,865

 

Yum! Brands, Inc.

 

 

8,911

 

 

 

986,180

 

 

 

 

 

 

 

 

6,350,200

 

Consumer Staples - 2.87%

 

 

 

 

 

 

 

 

Walmart, Inc.

 

 

7,900

 

 

 

872,871

 

 

 

 

 

 

 

 

 

 

Energy - 5.07%

 

 

 

 

 

 

 

 

Apache Corp.

 

 

28,700

 

 

 

831,439

 

Helmerich & Payne, Inc.

 

 

14,000

 

 

 

708,680

 

 

 

 

 

 

 

 

1,540,119

 

Financials - 13.37%

 

 

 

 

 

 

 

 

Bank of America Corp.

 

 

31,500

 

 

 

913,500

 

Capital One Financial Corp.

 

 

9,600

 

 

 

871,104

 

Goldman Sachs Group, Inc.

 

 

3,500

 

 

 

716,100

 

New York Community Bancorp, Inc.

 

 

78,900

 

 

 

787,422

 

Wells Fargo & Co.

 

 

16,300

 

 

 

771,316

 

 

 

 

 

 

 

 

4,059,442

 

Health Care - 14.78%

 

 

 

 

 

 

 

 

Bristol-Myers Squibb Co.

 

 

13,314

 

 

 

603,790

 

Celgene Corp. (a)

 

 

6,100

 

 

 

563,884

 

Edwards Lifesciences Corp. (a)

 

 

4,250

 

 

 

785,145

 

Gilead Sciences, Inc.

 

 

9,900

 

 

 

668,844

 

IDEXX Laboratories, Inc. (a)

 

 

3,500

 

 

 

963,655

 

InVivo Therapeutics Holdings Corp. (a)

 

 

20,009

 

 

 

14,807

 

Zoetis, Inc.

 

 

7,830

 

 

 

888,627

 

 

 

 

 

 

 

 

4,488,752

 

14 

 

 

IMS CAPITAL VALUE FUND

SCHEDULE OF INVESTMENTS

June 30, 2019

 

COMMON STOCK - 98.61% (continued)

 

Shares

 

 

Fair Value

 

             

Industrials - 8.73%

 

 

 

 

 

 

 

 

General Electric Co.

 

 

84,500

 

 

$

887,250

 

Kansas City Southern

 

 

8,500

 

 

 

1,035,470

 

Stanley Black & Decker, Inc.

 

 

5,040

 

 

 

728,834

 

 

 

 

 

 

 

 

2,651,554

 

Information Technology - 15.91%

 

 

 

 

 

 

 

 

Advanced Micro Devices, Inc. (a)

 

 

25,000

 

 

 

759,250

 

Apple, Inc.

 

 

4,070

 

 

 

805,534

 

NVIDIA Corp.

 

 

5,300

 

 

 

870,419

 

PayPal Holdings, Inc. (a)

 

 

7,121

 

 

 

815,070

 

QUALCOMM, Inc.

 

 

10,000

 

 

 

760,700

 

Symantec Corp.

 

 

26,000

 

 

 

565,760

 

Western Digital Corp.

 

 

5,350

 

 

 

254,393

 

 

 

 

 

 

 

 

4,831,126

 

Utilities - 2.90%

 

 

 

 

 

 

 

 

Vistra Energy Corp.

 

 

38,950

 

 

 

881,828

 

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCK (Cost $25,316,643)

 

 

 

 

 

 

29,949,764

 

 

 

 

 

 

 

 

 

 

MONEY MARKET SECURITIES - 1.51%

 

 

 

 

 

 

 

 

Federated Government Obligations Fund - Institutional Shares, 2.24% (b)

 

 

457,942

 

 

 

457,942

 

 

 

 

 

 

 

 

 

 

TOTAL MONEY MARKET SECURITIES (Cost $457,942)

 

 

 

 

 

 

457,942

 

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS AT VALUE (Cost $25,774,585) - 100.12%

 

 

 

 

 

$

        30,407,706

 

LIABILITES IN EXCESS OF OTHER ASSETS, NET - (0.12%)

 

 

 

 

 

 

(36,054

)

NET ASSETS - 100.00%

 

 

 

 

 

$

30,371,652

 

 

Percentages are stated as a percent of net assets.

 

(a) Non-income producing security. 

(b) Rate shown represents the 7-day yield at June 30, 2019, is subject to change and resets daily.

 

See accompanying notes which are an integral part of these financial statements.

 

15 

 

 

IMS STRATEGIC INCOME FUND

SCHEDULE OF INVESTMENTS

June 30, 2019

 

COMMON STOCK - 30.79%

 

Shares

 

 

Fair Value

 

             

Communication Services - 4.18%

 

 

 

 

 

 

 

 

AT&T, Inc.

 

 

3,800

 

 

$

127,338

 

Verizon Communications, Inc.

 

 

2,100

 

 

 

119,973

 

 

 

 

 

 

 

 

247,311

 

Consumer Staples - 3.62%

 

 

 

 

 

 

 

 

Colgate-Palmolive Co.

 

 

1,300

 

 

 

93,171

 

General Mills, Inc.

 

 

2,300

 

 

 

120,796

 

 

 

 

 

 

 

 

213,967

 

Energy - 1.37%

 

 

 

 

 

 

 

 

Helmerich & Payne, Inc.

 

 

1,600

 

 

 

80,992

 

 

 

 

 

 

 

 

 

 

Financials - 8.63%

 

 

 

 

 

 

 

 

Bank of Nova Scotia

 

 

2,300

 

 

 

125,005

 

BGC Partners, Inc. - Class A

 

 

26,000

 

 

 

135,980

 

JPMorgan Chase & Co.

 

 

1,100

 

 

 

122,980

 

Umpqua Holdings Corp.

 

 

7,600

 

 

 

126,084

 

 

 

 

 

 

 

 

510,049

 

Health Care - 8.53%

 

 

 

 

 

 

 

 

AbbVie, Inc.

 

 

1,900

 

 

 

138,168

 

Bristol-Myers Squibb Co.

 

 

2,700

 

 

 

122,445

 

Cardinal Health, Inc.

 

 

2,700

 

 

 

127,170

 

Patterson Cos., Inc.

 

 

5,100

 

 

 

116,790

 

 

 

 

 

 

 

 

504,573

 

Information Technology - 2.41%

 

 

 

 

 

 

 

 

Cisco Systems, Inc.

 

 

3,000

 

 

 

142,650

 

 

 

 

 

 

 

 

 

 

Materials - 2.05%

 

 

 

 

 

 

 

 

Nucor Corp.

 

 

2,200

 

 

 

121,220

 

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCK (Cost $1,818,807)

 

 

 

 

 

 

1,820,762

 

 

 

 

Principal Amount

 

 

Fair Value

 

CORPORATE BONDS - 31.19%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California Resources Corp., 8.000% due 12/15/2022 (c)

 

$

350,000

 

 

$

            263,813

 

General Electric Co., 5.000%, Fixed to Variable Perpetual Bond (b) (m)

 

 

320,000

 

 

 

308,627

 

Genworth Holdings, Inc., 7.625%, due 09/24/2021

 

 

125,000

 

 

 

122,500

 

HollyFrontier Corp. 5.875%, due 04/01/2026

 

 

300,000

 

 

 

328,552

 

PetSmart, Inc. , 7.125%, due 03/15/2023 (c)

 

 

200,000

 

 

 

187,500

 

Tenneco, Inc., 5.000%, due 07/15/2026

 

 

350,000

 

 

 

281,750

 

Under Armour, Inc., 3.250%, due 06/15/2026

 

 

250,000

 

 

 

235,812

 

Vector Group Ltd., 6.125%, due 02/01/2025 (c)

 

 

125,000

 

 

 

115,848

 

 

 

 

 

 

 

 

 

 

TOTAL CORPORATE BONDS (Cost $1,854,714)

 

 

 

 

 

 

1,844,402

 

 

 

 

 

 

 

 

 

 

FOREIGN BONDS DENOMINATED IN US DOLLARS  - 1.14%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Cash Store Financial Services, Inc., 11.500%, 01/31/2017 - Canada (a) (c) (d) (e) (f)

 

 

1,289,000

 

 

 

67,702

 

 

 

 

 

 

 

 

 

 

TOTAL FOREIGN BONDS DENOMINATED IN US DOLLARS (Cost $1,120,977)

 

 

 

 

 

 

67,702

 

 

 

16 

 

IMS STRATEGIC INCOME FUND

SCHEDULE OF INVESTMENTS

June 30, 2019

 

STRUCTURED NOTES  - 22.43%

 

Principal Amount

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

Barclays Bank PLC Callable Fixed to Floating Rate U.S. Dollar ICE Swap Rate Linked Note, 8.000%, 08/30/2030 - Great Britain (g)

 

$

      250,000

 

 

$

249,875

 

Citigroup Global Markets Holdings, Inc. Callable Fixed to Float Range Accrual Note, 8.000%, 12/26/2033 (h)

 

 

300,000

 

 

 

287,670

 

Morgan Stanley Fixed to Floating Rate Leveraged CMS and Index Linked Note, 1.320%, 08/30/2028 (b) (i)

 

 

350,000

 

 

 

251,562

 

Natixis US Medium-Term Note Program LLC Callable Fixed to Floating Capped Range Accrual Note, 3.003%, 10/31/2034 (b) (j)

 

 

500,000

 

 

 

314,375

 

Societe Generale SA Callable Fixed to Floating Rate CMS and Index Linked Note, 10.000%, 06/28/2034 - France (k)

 

 

225,000

 

 

 

223,313

 

 

 

 

 

 

 

 

 

 

TOTAL STRUCTURED NOTES (Cost $1,611,406)

 

 

 

 

 

 

1,326,795

 

 

MONEY MARKET SECURITIES - 13.96%

 

Shares

 

 

Fair Value

 

Federated Government Obligations Fund - Institutional Shares, 2.24% (l)

 

 

825,829

 

 

 

825,829

 

 

 

 

 

 

 

 

 

 

TOTAL MONEY MARKET SECURITIES (Cost $825,829)

 

 

 

 

 

 

825,829

 

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS AT VALUE (Cost $7,231,733) - 99.51%

 

 

 

 

 

$

    5,885,490

 

OTHER ASSETS IN EXCESS OF LIABILITIES, NET - 0.49%

 

 

 

 

 

 

28,785

 

NET ASSETS - 100.00%

 

 

 

 

 

$

     5,914,275

 

 

Percentages are stated as a percent of net assets.

 

(a) This security is currently valued by the Advisor using fair valuation procedures approved by the Board of Trustees under the oversight of the Fair Valuation Committee. 

(b)  Variable rate security. Rate shown represents the rate in effect at June 30, 2019. 

(c)  Security exempted from registration under Rule 144A of the Securities Act of 1933.  The security may be resold in transactions exempt from registration, normally to qualified institutional investors. 

(d)  Non-income producing security. 

(e)  Security is illiquid at June 30, 2019, at which time the aggregate value of illiquid securities is $67,702 or 1.14% of net assets. 

(f)  Issue is in default. 

(g)  For each Interest Period commencing on or after the Original Issue Date to but excluding August 30, 2019 (the “Fixed Rate Period”), the interest rate per annum will be equal to the Fixed Interest Rate of 8.000%. For each Interest Period commencing on or after August 30, 2019 (the “Floating Rate Period”), the interest rate per annum will be equal to the product of (a) the 30-Year swap rate minus the 2-Year swap rate and (b) the Multiplier rate of 50, subject to the Maximum Interest Rate of 8.000% and the Minimum Interest Rate of 0.000%. 

(h)  On each coupon payment date occurring during the first year following issuance of the securities, the securities will pay a fixed coupon of 8.00% per annum, regardless of the CMS spread or the level of the underlying indices. Beginning in March 2020, the variable coupon rate will be determined as follows:  Contingent rate of 8.000% multiplied by the number of days the accrual condition is met divided by the number of days in the accrual period, subject to the Maximum Interest Rate of 8.000% and the Minimum Interest Rate of 0.000%.  The accrual condition will be satisfied on an elapsed day if, and only if, (i) the CMS spread is greater than the CMS spread barrier on that elapsed day and (ii) the closing level of each underlying index is greater than or equal to its accrual barrier level on that elapsed day. 

(i)  The variable rate is equal to 5 times the difference, if any, between the 30-Year Constant Maturity Swap Rate (“30CMS”) and the 2-year Constant Maturity Swap Rate (“2CMS”) as determined on the CMS reference determination date at the start of the quarterly interest payment period; subject to a maximum interest rate of 12.00% per annum for each interest payment period during the floating rate interest period and the minimum interest rate of 0.00% per annum. 

(j)  The variable rate is determined by multiplying (a) the product of the Multiplier and the applicable CMS30/CMS2 Spread determined as of the reference date at the start of the interest period, and subject to the minimum interest rate of 0.00% and the maximum interest rate of 10.00%, by (b) a fraction equal to the number of calendar days in such interest period with respect to which the closing level of the S&P 500® Index is greater than or equal to 60% of its closing level on trade date divided by the number of calendar days in such interest period.

(k)  For each Interest Period commencing on or after the Original Issue Date through January 2021 (the “Fixed Rate Period”), the interest rate per annum will be equal to the Fixed Interest Rate of 10.000%. For each Interest Period beginning in January 2021 (the “Floating Rate Period”), the interest rate per annum will be equal to the product of (a) the 30-Year Constant Maturity Swap Rate minus the 2-Year Constant Maturity Swap Rate multiplied by the number of days the accrual condition is met divided by the number of days in the accrual period and (b) the Multiplier rate of 50, subject to the Maximum Interest Rate of 10.000% and the Minimum Interest Rate of 0.000%. The accrual condition is satisfied on days where RTY and SX7E are greater than or equal to 60% of the initial index level. 

(l) Variable rate security. Rate shown represents the 7-day yield at June 30, 2019 and resets daily. 

(m) With respect to the Fixed Rate Period ending January 21, 2021, interest will be paid at a rate of 5.00% per annum, payable semi-annually.  Effective January 21, 2021, interest will be paid based on a floating rate equal to three-month LIBOR plus 3.33% per annum, payable quarterly.

 

See accompanying notes which are an integral part of these financial statements.

 

17 

 

 

IMS DIVIDEND GROWTH FUND

SCHEDULE OF INVESTMENTS

June 30, 2019

 

COMMON STOCK - 99.96%

 

Shares

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

Communication Services - 1.08%

 

 

 

 

 

 

 

 

Alphabet, Inc. - Class C (a)

 

 

100

 

 

$

108,091

 

 

 

 

 

 

 

 

 

 

Consumer Discretionary - 11.02%

 

 

 

 

 

 

 

 

General Motors Co.

 

 

4,000

 

 

 

154,120

 

NVR, Inc. (a)

 

 

42

 

 

 

141,551

 

TJX Cos, Inc.

 

 

9,000

 

 

 

475,920

 

Whirlpool Corp.

 

 

2,300

 

 

 

327,428

 

 

 

 

 

 

 

 

1,099,019

 

Consumer Staples - 7.58%

 

 

 

 

 

 

 

 

Altria Group, Inc.

 

 

6,860

 

 

 

324,821

 

Kraft Heinz, Co.

 

 

3,000

 

 

 

93,120

 

Philip Morris International, Inc.

 

 

4,296

 

 

 

337,365

 

 

 

 

 

 

 

 

755,306

 

Financials - 23.68%

 

 

 

 

 

 

 

 

Axis Capital Holdings Ltd.

 

 

2,500

 

 

 

149,125

 

Bank of America Corp.

 

 

14,344

 

 

 

415,976

 

BlackRock, Inc.

 

 

1,000

 

 

 

469,300

 

CME Group, Inc.

 

 

2,500

 

 

 

485,275

 

M&T Bank Corp.

 

 

1,300

 

 

 

221,091

 

S&P Global, Inc.

 

 

2,500

 

 

 

569,475

 

State Street Corp.

 

 

900

 

 

 

50,454

 

 

 

 

 

 

 

 

2,360,696

 

Health Care - 15.28%

 

 

 

 

 

 

 

 

Abbott Laboratories

 

 

6,500

 

 

 

546,650

 

AbbVie, Inc.

 

 

5,600

 

 

 

407,232

 

Cardinal Health, Inc.

 

 

2,034

 

 

 

95,801

 

Johnson & Johnson

 

 

3,400

 

 

 

473,552

 

 

 

 

 

 

 

 

1,523,235

 

Industrials - 13.34%

 

 

 

 

 

 

 

 

Boeing Co.

 

 

300

 

 

 

109,203

 

Copa Holdings SA - Class A - Panama

 

 

1,000

 

 

 

97,570

 

Lockheed Martin Corp.

 

 

1,598

 

 

 

580,937

 

Parker-Hannifin Corp.

 

 

1,000

 

 

 

170,010

 

Southwest Airlines Co.

 

 

7,330

 

 

 

372,217

 

 

 

 

 

 

 

 

1,329,937

 

Information Technology - 25.42%

 

 

 

 

 

 

 

 

Apple, Inc.

 

 

2,600

 

 

 

514,592

 

CDK Global, Inc.

 

 

3,000

 

 

 

148,320

 

Microsoft Corp.

 

 

4,250

 

 

 

569,330

 

Oracle Corp.

 

 

3,869

 

 

 

220,417

 

PayPal Holdings, Inc. (a)

 

 

3,100

 

 

 

354,826

 

QUALCOMM, Inc.

 

 

5,000

 

 

 

380,350

 

Visa, Inc. - Class A

 

 

2,000

 

 

 

347,100

 

 

 

 

 

 

 

 

2,534,935

 

 

18 

 

 

IMS DIVIDEND GROWTH FUND

SCHEDULE OF INVESTMENTS

June 30, 2019

 

COMMON STOCK - 99.96% (continued)

 

Shares

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

Real Estate - 2.33%

 

 

 

 

 

 

 

 

Outfront Media, Inc.

 

 

9,000

 

 

$

232,110

 

 

 

 

 

 

 

 

 

 

Utilities - 0.23%

 

 

 

 

 

 

 

 

PG&E Corp. (a)

 

 

1,000

 

 

 

22,920

 

 

 

 

 

 

 

 

 

 

TOTAL COMMON STOCK (Cost $8,375,853)

 

 

 

 

 

 

9,966,249

 

 

 

 

 

 

 

 

 

 

MONEY MARKET SECURITIES - 0.14%

 

 

 

 

 

 

 

 

Federated Government Obligations Fund - Institutional Shares, 2.24% (b)

 

 

13,877

 

 

 

13,877

 

 

 

 

 

 

 

 

 

 

TOTAL MONEY MARKET SECURITIES (Cost $13,877)

 

 

 

 

 

 

13,877

 

 

 

 

 

 

 

 

 

 

TOTAL INVESTMENTS AT VALUE (Cost $8,389,730) - 100.10%

 

 

 

 

 

$

9,980,126

 

LIABILITIES IN EXCESS OF OTHER ASSETS, NET - (0.10%)

 

 

 

 

 

 

(10,150

)

NET ASSETS - 100.00%

 

 

 

 

 

$

9,969,976

 

 

Percentages are stated as a percent of net assets.

 

(a)  Non-income producing security. 

(b) Rate shown represents the 7-day yield at June 30, 2019, is subject to change and resets daily.

 

See accompanying notes which are an integral part of these financial statements.

19 

 

 

IMS FAMILY OF FUNDS

STATEMENTS OF ASSETS AND LIABILITIES

June 30, 2019

 

  

 

 

 

IMS Capital
Value Fund

 

 

IMS Strategic
Income Fund

 

 

IMS Dividend
Growth Fund

 

Assets:

 

 

 

 

 

 

 

 

 

 

 

 

Investments in securities:

 

 

 

 

 

 

 

 

 

 

 

 

At cost

 

$

25,774,585

 

 

$

7,231,733

 

 

$

8,389,730

 

At value

 

$

30,407,706

 

 

$

5,885,490

 

 

$

9,980,126

 

Receivables:

 

 

 

 

 

 

 

 

 

 

 

 

Interest

 

 

315

 

 

 

30,542

 

 

 

94

 

Dividends

 

 

6,580

 

 

 

11,722

 

 

 

12,787

 

Investments sold

 

 

 

 

 

235,813

 

 

 

 

Prepaid expenses

 

 

5,381

 

 

 

3,505

 

 

 

3,839

 

Total assets

 

 

30,419,982

 

 

 

6,167,072

 

 

 

9,996,846

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Liabilities:

 

 

 

 

 

 

 

 

 

 

 

 

Payables:

 

 

 

 

 

 

 

 

 

 

 

 

Investments purchased

 

 

 

 

 

223,313

 

 

 

 

Due to advisor

 

 

29,138

 

 

 

10,584

 

 

 

8,438

 

Due to administrator, fund accountant and transfer agent

 

 

2,174

 

 

 

2,264

 

 

 

2,398

 

Accrued expenses

 

 

17,018

 

 

 

16,636

 

 

 

16,034

 

Total liabilities

 

 

48,330

 

 

 

252,797

 

 

 

26,870

 

Net Assets

 

$

30,371,652

 

 

$

5,914,275

 

 

$

9,969,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Assets consist of:

 

 

 

 

 

 

 

 

 

 

 

 

Paid-in capital

 

$

24,387,186

 

 

$

29,797,209

 

 

$

7,974,405

 

Total distributable earnings

 

 

5,984,466

 

 

 

(23,882,934

)

 

 

1,995,571

 

Total Net Assets

 

$

30,371,652

 

 

$

5,914,275

 

 

$

9,969,976

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Shares outstanding (unlimited number of shares authorized, no par value)

 

 

1,294,221

 

 

 

2,262,864

 

 

 

596,624

 

Net asset value and offering price per share

 

$

23.47

 

 

$

2.61

 

 

$

16.71

 

Minimum redemption price per share (a)

 

$

23.35

 

 

$

2.60

 

 

$

16.63

 

 

(a) A redemption fee of 0.50% will be assessed on shares of the Fund that are redeemed within 90 days of purchase.

 

See accompanying notes which are an integral part of these financial statements.

 

20 

 

 

IMS FAMILY OF FUNDS

STATEMENTS OF OPERATIONS

For the Year Ended June 30, 2019

 

 

 

 

IMS Capital
Value Fund

 

 

IMS Strategic
Income Fund

 

 

IMS Dividend
Growth Fund

 

Investment income:

 

 

 

 

 

 

 

 

 

 

 

 

Dividends (net of foreign withholding taxes of $0, $425 and $0, respectively)

 

$

526,576

 

 

$

214,245

 

 

$

264,062

 

Interest

 

 

4,495

 

 

 

75,970

 

 

 

2,615

 

Total investment income

 

 

531,071

 

 

 

290,215

 

 

 

266,677

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Expenses:

 

 

 

 

 

 

 

 

 

 

 

 

Management fees (a)

 

 

378,285

 

 

 

50,479

 

 

 

132,491

 

Accounting, administration and transfer agent fees and expenses (a)

 

 

99,512

 

 

 

47,860

 

 

 

57,556

 

Registration expenses

 

 

8,665

 

 

 

7,066

 

 

 

5,577

 

Trustee expenses

 

 

20,292

 

 

 

20,292

 

 

 

20,292

 

Audit expenses

 

 

13,000

 

 

 

13,000

 

 

 

13,000

 

Miscellaneous expenses

 

 

14,534

 

 

 

11,610

 

 

 

11,792

 

Custodian expenses

 

 

6,206

 

 

 

5,765

 

 

 

4,066

 

Legal expenses

 

 

5,985

 

 

 

6,398

 

 

 

5,985

 

Shareholder networking fees

 

 

7,193

 

 

 

1,633

 

 

 

1,821

 

Interest expenses

 

 

2,239

 

 

 

1,113

 

 

 

809

 

Pricing expenses

 

 

4,362

 

 

 

5,191

 

 

 

4,491

 

Insurance expenses

 

 

2,548

 

 

 

1,584

 

 

 

1,874

 

Total expenses

 

 

562,821

 

 

 

171,991

 

 

 

259,754

 

Less: Fees waived and expenses absorbed by Advisor (a)

 

 

 

 

 

(81,754

)

 

 

(47,020

)

Less: Fees waived by Administrator (a)

 

 

 

 

 

(11,000

)

 

 

(6,875

)

Net expenses

 

 

562,821

 

 

 

79,237

 

 

 

205,859

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Investment Income (Loss)

 

 

(31,750

)

 

 

210,978

 

 

 

60,818

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Realized and unrealized gain (loss) on investment securities:

 

 

 

 

 

 

 

 

 

 

 

 

Net realized gain (loss) on investments

 

 

1,561,393

 

 

 

(823,906

)

 

 

408,322

 

Change in unrealized appreciation on investments

 

 

489,146

 

 

 

1,025,534

 

 

 

305,852

 

Net realized and unrealized gain on investments

 

 

2,050,539

 

 

 

201,628

 

 

 

714,174

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Increase in Net Assets Resulting from Operations

 

$

2,018,789

 

 

$

412,606

 

 

$

774,992

 

 

(a) See Note 4 in the Notes to Financial Statements.

 

See accompanying notes which are an integral part of these financial statements.

 

21 

 

IMS STRATEGIC INCOME FUND

STATEMENT OF CASH FLOWS 

 

For the Year Ended June 30, 2019

 

 

Increase (decrease) in cash:

 

 

 

 

Cash flows from operating activities:

 

 

 

 

Net increase in net assets from operations

 

$

412,606

 

Adjustments to reconcile net increase in net assets from operations to net cash used for operating activities:

 

 

 

 

Accretion of discount/Amortization of premium, net

 

 

(9,148

)

Purchase of investment securities

 

 

(26,794,392

)

Proceeds from disposition of investment securities

 

 

25,665,664

 

Purchases of short-term investment securities, net

 

 

(581,988

)

Increase in dividends and interest receivable

 

 

(16,458

)

Increase in receivables for securities sold

 

 

(235,813

)

Increase in prepaid expenses

 

 

(243

)

Increase in payable for securities purchased

 

 

223,313

 

Decrease in accrued expenses

 

 

(4,292

)

Net unrealized depreciation on investment securities and foreign currency

 

 

(1,025,534

)

Net realized loss on investment securities

 

 

823,906

 

Net cash used for operating activities

 

 

(1,542,379

)

 

 

 

 

 

Cash flows from financing activities:

 

 

 

 

Proceeds from loan

 

 

1,666,035

 

Payments on loan

 

 

(1,666,035

)

Proceeds from Fund shares sold

 

 

3,123,941

 

Payment on Fund shares redeemed

 

 

(1,567,331

)

Cash distributions paid

 

 

(14,231

)

Net cash provided from financing activities

 

 

1,542,379

 

 

 

 

 

 

Net increase in cash

 

 

 

 

 

 

 

 

Cash:

 

 

 

 

Beginning of year

 

 

 

End of year

 

$

 

 

Supplemental disclosure of cash flow information:

 

Noncash financing activities not included herein consist of reinvestment of distributions of $193,223and a decrease in payable for Fund shares redeemed of $31,783.

 

Interest paid by the Fund for outstanding balances on the line of credit amounted to $1,113.

 

See accompanying notes which are an integral part of these financial statements.

 

22 

 

IMS CAPITAL VALUE FUND

STATEMENTS OF CHANGES IN NET ASSETS

 

 

 

 

 

Year Ended
June 30, 2019

 

 

Year Ended
June 30, 2018

 

Increase (Decrease) in Net Assets due to:

 

 

 

 

 

 

 

 

Operations:

 

 

 

 

 

 

 

 

Net investment loss

 

$

(31,750

)

 

$

(3,205

)

Net realized gain on investments

 

 

1,561,393

 

 

 

3,231,265

 

Change in unrealized appreciation (depreciation) on investments

 

 

489,146

 

 

 

(1,332,804

)

Net increase in net assets resulting from operations

 

 

2,018,789

 

 

 

1,895,256

 

 

 

 

 

 

 

 

 

 

Distributions to shareholders from:

 

 

 

 

 

 

 

 

Total distributable earnings

 

 

(3,206,262

)

 

 

(773,249

)(a)

Total Distributions

 

 

(3,206,262

)

 

 

(773,249

)

 

 

 

 

 

 

 

 

 

Capital share transactions:

 

 

 

 

 

 

 

 

Proceeds from shares purchased

 

 

200,587

 

 

 

390,800

 

Reinvestment of distributions

 

 

3,158,798

 

 

 

763,379

 

Amount paid for shares redeemed

 

 

(5,482,597

)

 

 

(9,301,256

)

Proceeds from redemption fees

 

 

13

 

 

 

14

 

Net decrease in net assets from share transactions

 

 

(2,123,199

)

 

 

(8,147,063

)

 

 

 

 

 

 

 

 

 

Total Decrease in Net Assets

 

 

(3,310,672

)

 

 

(7,025,056

)

 

 

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

 

 

 

Beginning of year

 

 

33,682,324

 

 

 

40,707,380

 

 

 

 

 

 

 

 

 

 

End of year

 

$

30,371,652

 

 

$

33,682,324

(b)

 

 

 

 

 

 

 

 

 

Capital Share Transactions

 

 

 

 

 

 

 

 

Shares purchased

 

 

8,746

 

 

 

18,516

 

Shares issued in reinvestment of distributions

 

 

160,345

 

 

 

30,843

 

Shares redeemed

 

 

(235,860

)

 

 

(381,225

)

Net decrease in capital shares

 

 

(66,769

)

 

 

(331,866

)

 

(a) Represents $30,009 of net investment income distributions and $743,240 of net realized capital gains distributions.

(b) Includes accumulated net investment loss of $23,838.

 

See accompanying notes which are an integral part of these financial statements.

23 

 

 

IMS STRATEGIC INCOME FUND
STATEMENTS OF CHANGES IN NET ASSETS

 

 

 

 

Year Ended
June 30, 2019

 

 

Year Ended
June 30, 2018

 

Increase (Decrease) in Net Assets due to:

 

 

 

 

 

 

 

 

Operations:

 

 

 

 

 

 

 

 

Net investment income

 

$

210,978

 

 

$

340,910

 

Net realized loss on investments and foreign currency

 

 

(823,906

)

 

 

(3,242,198

)

Change in unrealized appreciation on investments and foreign currency

 

 

1,025,534

 

 

 

2,370,157

 

Net increase (decrease) in net assets resulting from operations

 

 

412,606

 

 

 

(531,131

)

 

 

 

 

 

 

 

 

 

Distributions to shareholders from:

 

 

 

 

 

 

 

 

Total distributable earnings

 

 

(207,454

)

 

 

(323,707

)(a)

Total Distributions

 

 

(207,454

)

 

 

(323,707

)

 

 

 

 

 

 

 

 

 

Capital share transactions:

 

 

 

 

 

 

 

 

Proceeds from shares purchased

 

 

3,123,941

 

 

 

147,604

 

Reinvestment of distributions

 

 

193,223

 

 

 

298,478

 

Amount paid for shares redeemed

 

 

(1,537,861

)

 

 

(1,244,135

)

Proceeds from redemption fees

 

 

2,313

 

 

 

 

Net increase (decrease) in net assets from share transactions

 

 

1,781,616

 

 

 

(798,053

)

 

 

 

 

 

 

 

 

 

Total Increase (Decrease) in Net Assets

 

 

1,986,768

 

 

 

(1,652,891

)

 

 

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

 

 

 

Beginning of year

 

 

3,927,507

 

 

 

5,580,398

 

 

 

 

 

 

 

 

 

 

End of year

 

$

5,914,275

 

 

$

3,927,507

(b)

 

 

 

 

 

 

 

 

 

Capital Share Transactions

 

 

 

 

 

 

 

 

Shares purchased

 

 

1,206,276

 

 

 

51,199

 

Shares issued in reinvestment of distributions

 

 

77,284

 

 

 

108,902

 

Shares redeemed

 

 

(625,652

)

 

 

(460,521

)

Net increase (decrease) in capital shares

 

 

657,908

 

 

 

(300,420

)

 

(a)Represents $323,707 of net investment income distributions.
(b)Includes accumulated net investment income of $9,441.

 

See accompanying notes which are an integral part of these financial statements. 

 

24 

 

 

IMS DIVIDEND GROWTH FUND
STATEMENTS OF CHANGES IN NET ASSETS

 

 

 

 

Year Ended
June 30, 2019

 

 

Year Ended
June 30, 2018

 

Increase (Decrease) in Net Assets due to:

 

 

 

 

 

 

 

 

Operations:

 

 

 

 

 

 

 

 

Net investment income

 

$

60,818

 

 

$

76,869

 

Net realized gain on investments

 

 

408,322

 

 

 

631,069

 

Change in unrealized appreciation on investments

 

 

305,852

 

 

 

27,616

 

Net increase in net assets resulting from operations

 

 

774,992

 

 

 

735,554

 

 

 

 

 

 

 

 

 

 

Distributions to shareholders from:

 

 

 

 

 

 

 

 

Total distributable earnings

 

 

(63,965

)

 

 

(89,904

)(a)

Total Distributions

 

 

(63,965

)

 

 

(89,904

)

 

 

 

 

 

 

 

 

 

Capital share transactions:

 

 

 

 

 

 

 

 

Proceeds from shares purchased

 

 

687,809

 

 

 

3,612,764

 

Reinvestment of distributions

 

 

63,627

 

 

 

89,392

 

Amount paid for shares redeemed

 

 

(2,524,931

)

 

 

(3,112,582

)

Proceeds from redemption fees

 

 

 

 

 

71

 

Net increase (decrease) in net assets from share transactions

 

 

(1,773,495

)

 

 

589,645

 

 

 

 

 

 

 

 

 

 

Total Increase (Decrease) in Net Assets

 

 

(1,062,468

)

 

 

1,235,295

 

 

 

 

 

 

 

 

 

 

Net Assets:

 

 

 

 

 

 

 

 

Beginning of year

 

 

11,032,444

 

 

 

9,797,149

 

 

 

 

 

 

 

 

 

 

End of year

 

$

9,969,976

 

 

$

11,032,444

(b)

 

 

 

 

 

 

 

 

 

Capital Share Transactions

 

 

 

 

 

 

 

 

Shares purchased

 

 

47,431

 

 

 

230,719

 

Shares issued in reinvestment of distributions

 

 

4,099

 

 

 

5,621

 

Shares redeemed

 

 

(160,420

)

 

 

(196,511

)

Net increase (decrease) in capital shares

 

 

(108,890

)

 

 

39,829

 

 

(a)Represents $84,089 of net investment income distributions and $5,815 return of capital.
(b)Includes accumulated net investment income of $0.

 

See accompanying notes which are an integral part of these financial statements. 

 

25 

 

 

IMS CAPITAL VALUE FUND
FINANCIAL HIGHLIGHTS

 

For a Fund share outstanding throughout each year

 

 

 

 

For the Years Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2017

 

 

June 30, 2016

 

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Year

 

$

24.75

 

 

$

24.05

 

 

$

21.52

 

 

$

23.16

 

 

$

21.10

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income (loss)

 

 

(0.02

)

 

 

(0.00

)(a)

 

 

0.02

 

 

 

(0.04

)

 

 

(0.04

)

Net realized and unrealized gain (loss) on investments

 

 

1.27

 

 

 

1.22

 

 

 

2.51

 

 

 

(1.60

)

 

 

2.10

 

Total from investment operations

 

 

1.25

 

 

 

1.22

 

 

 

2.53

 

 

 

(1.64

)

 

 

2.06

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less Distributions to shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From net investment income

 

 

 

 

 

(0.02

)

 

 

 

 

 

 

 

 

 

From net realized capital gains

 

 

(2.53

)

 

 

(0.50

)

 

 

 

 

 

 

 

 

 

Total distributions

 

 

(2.53

)

 

 

(0.52

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid in capital from redemption fees (a)

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Asset Value, End of Year

 

$

23.47

 

 

$

24.75

 

 

$

24.05

 

 

$

21.52

 

 

$

23.16

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return (b)

 

 

6.99

%

 

 

5.05

%

 

 

11.76

%

 

 

(7.08

)%

 

 

9.76

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in 000’s)

 

$

30,372

 

 

$

33,682

 

 

$

40,707

 

 

$

38,683

 

 

$

40,716

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of expenses to average net assets:

 

 

1.80

%(d)

 

 

1.74

%(c)

 

 

1.69

%

 

 

1.69

%

 

 

1.74

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of net investment income (loss) to average net assets:

 

 

(0.10

)%(d)

 

 

(0.01

)%(c)

 

 

0.08

%

 

 

(0.19

)%

 

 

(0.17

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio turnover rate

 

 

17.29

%

 

 

40.01

%

 

 

84.33

%

 

 

64.78

%

 

 

62.98

%

 

(a)Net investment loss and redemption fees resulted in less than $0.005 per share.
(b)Total return in the above table represents the rate that the investor would have earned or lost on an investment in the Fund assuming reinvestment of dividends.
(c)The ratios include 0.01% of interest expense during the year ended June 30, 2018.
(d)The ratios include 0.01% of interest expense during the year ended June 30, 2019.

 

See accompanying notes which are an integral part of these financial statements. 

 

26 

 

 

IMS STRATEGIC INCOME FUND
FINANCIAL HIGHLIGHTS

 

For a Fund share outstanding throughout each year

 

 

 

 

For the Years Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2017

 

 

June 30, 2016

 

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Year

 

$

2.45

 

 

$

2.93

 

 

$

3.27

 

 

$

4.53

 

 

$

5.95

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

0.13

 

 

 

0.19

 

 

 

0.24

 

 

 

0.35

 

 

 

0.45

 

Net realized and unrealized gain (loss) on investments and foreign currency (a)

 

 

0.16

 

 

 

(0.49

)

 

 

(0.32

)

 

 

(1.28

)

 

 

(1.37

)

Total from investment operations

 

 

0.29

 

 

 

(0.30

)

 

 

(0.08

)

 

 

(0.93

)

 

 

(0.92

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less Distributions to shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From net investment income

 

 

(0.13

)

 

 

(0.18

)

 

 

(0.26

)

 

 

(0.33

)

 

 

(0.39

)

Tax return of capital

 

 

 

 

 

 

 

 

 

 

 

 

 

 

(0.11

)

Total distributions

 

 

(0.13

)

 

 

(0.18

)

 

 

(0.26

)

 

 

(0.33

)

 

 

(0.50

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid in capital from redemption fees (b)

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

 

 

0.00

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Asset Value, End of Year

 

$

2.61

 

 

$

2.45

 

 

$

2.93

 

 

$

3.27

 

 

$

4.53

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return (c)

 

 

12.22

%

 

 

(10.71

)%

 

 

(2.69

)%

 

 

(20.99

)%

 

 

(16.13

)%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in 000’s)

 

$

5,914

 

 

$

3,928

 

 

$

5,580

 

 

$

8,865

 

 

$

20,865

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of expenses to average net assets:

 

 

1.98

%(h)

 

 

2.02

%(g)

 

 

1.98

%(f)

 

 

1.98

%(e)

 

 

1.96

%(d)

Ratio of expenses to average net assets before waiver & reimbursement:

 

 

4.29

%(h)

 

 

3.36

%(g)

 

 

2.93

%(f)

 

 

2.25

%(e)

 

 

1.92

%(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of net investment income to average net assets:

 

 

5.27

%(h)

 

 

6.99

%(g)

 

 

7.83

%(f)

 

 

9.13

%(e)

 

 

8.94

%(d)

Ratio of net investment income to average net assets before waiver & reimbursement:

 

 

2.95

%(h)

 

 

5.64

%(g)

 

 

6.87

%(f)

 

 

8.85

%(e)

 

 

8.90

%(d)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio turnover rate

 

 

728.46

%

 

 

758.79

%

 

 

505.62

%

 

 

394.23

%

 

 

562.40

%

  

(a)Realized and unrealized gain (loss) per share in this caption are balancing amounts due to timing of subscriptions and redemptions in relation to fluctuating market prices.
(b)Redemption fees resulted in less than $0.005 per share.
(c)Total return in the above table represents the rate that the investor would have earned or lost on an investment in the Fund assuming reinvestment of dividends.
(d)The ratios include 0.01% of interest expense during the year ended June 30, 2015.
(e)The ratios include 0.03% of interest expense during the year ended June 30, 2016.
(f)The ratios include 0.04% of interest expense during the year ended June 30, 2017.
(g)The ratios include 0.07% of interest expense during the year ended June 30, 2018.
(h)The ratios include 0.03% of interest expense during the year ended June 30, 2019.

 

See accompanying notes which are an integral part of these financial statements. 

 

27 

 

 

IMS DIVIDEND GROWTH FUND
FINANCIAL HIGHLIGHTS

 

For a Fund share outstanding throughout each year

 

 

 

 

For the Years Ended

 

 

 

June 30, 2019

 

 

June 30, 2018

 

 

June 30, 2017

 

 

June 30, 2016

 

 

June 30, 2015

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Asset Value, Beginning of Year

 

$

15.64

 

 

$

14.72

 

 

$

12.62

 

 

$

13.03

 

 

$

12.44

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Investment Operations:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net investment income

 

 

0.09

 

 

 

0.10

 

 

 

0.10

 

 

 

0.11

 

 

 

0.09

 

Net realized and unrealized gain (loss) on investments

 

 

1.08

 

 

 

0.94

 

 

 

2.09

 

 

 

(0.41

)

 

 

0.59

 

Total from investment operations

 

 

1.17

 

 

 

1.04

 

 

 

2.19

 

 

 

(0.30

)

 

 

0.68

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Less Distributions to shareholders:

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

From net investment income

 

 

(0.10

)

 

 

(0.12

)

 

 

(0.09

)

 

 

(0.11

)

 

 

(0.09

)

Tax return of capital

 

 

 

 

 

0.00

(f)

 

 

 

 

 

 

 

 

 

Total distributions

 

 

(0.10

)

 

 

(0.12

)

 

 

(0.09

)

 

 

(0.11

)

 

 

(0.09

)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Paid in capital from redemption fees

 

 

 

 

 

0.00

(a)

 

 

0.00

(a)

 

 

0.00

(a)

 

 

0.00

(a)

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net Asset Value, End of Year

 

$

16.71

 

 

$

15.64

 

 

$

14.72

 

 

$

12.62

 

 

$

13.03

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Total Return (b)

 

 

7.53

%

 

 

7.05

%

 

 

17.38

%

 

 

(2.27

)%

 

 

5.48

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratios/Supplemental Data

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Net assets, end of year (in 000’s)

 

$

9,970

 

 

$

11,032

 

 

$

9,797

 

 

$

8,476

 

 

$

10,291

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of expenses to average net assets:

 

 

1.96

%(e)

 

 

1.96

%(d)

 

 

1.95

%

 

 

1.96

%(c)

 

 

1.95

%

Ratio of expenses to average net assets before waiver & reimbursement:

 

 

2.47

%(e)

 

 

2.13

%(d)

 

 

2.34

%

 

 

2.37

%(c)

 

 

2.50

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Ratio of net investment income to average net assets:

 

 

0.58

%(e)

 

 

0.64

%(d)

 

 

0.71

%

 

 

0.85

%(c)

 

 

0.69

%

Ratio of net investment income to average net assets before waiver & reimbursement:

 

 

0.07

%(e)

 

 

0.47

%(d)

 

 

0.32

%

 

 

0.44

%(c)

 

 

0.14

%

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Portfolio turnover rate

 

 

5.26

%

 

 

23.39

%

 

 

32.76

%

 

 

6.63

%

 

 

86.92

%

 

(a)

Redemption fees resulted in less than $0.005 per share.

(b)

Total return in the above table represents the rate that the investor would have earned or lost on an investment in the Fund assuming reinvestment of dividends.

(c)

The ratios include 0.01% of interest expense during the year ended June 30, 2016.

(d)

The ratios include 0.01% of interest expense during the year ended June 30, 2018.

(e)

The ratios include 0.01% of interest expense during the year ended June 30, 2019.

(f)

Tax return of capital distributions were less than $0.005 per share.

  

See accompanying notes which are an integral part of these financial statements.

 

28 

 

 

IMS FAMILY OF FUNDS 

NOTES TO THE FINANCIAL STATEMENTS 

June 30, 2019

 

NOTE 1. ORGANIZATION

 

The IMS Family of Funds (the “Funds”), comprising the IMS Capital Value Fund (the “Value Fund”), IMS Strategic Income Fund (the “Income Fund”) and IMS Dividend Growth Fund (the “Dividend Growth Fund”), were each organized as a diversified series of 360 Funds (the “Trust”) on June 20, 2014. The Trust was organized on February 24, 2005 as a Delaware statutory trust. The Trust is registered as an open-end management investment company under the Investment Company Act of 1940 (the “1940 Act”). The investment objective of the Value Fund is to provide long-term growth from capital appreciation and secondarily, income from dividends. The investment objective of the Income Fund is to provide current income and secondarily, capital appreciation. The investment objective of the Dividend Growth Fund is to provide long-term growth from capital appreciation and dividends. The investment advisor of each Fund is IMS Capital Management, Inc. (the “Advisor”).

 

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES

 

The following is a summary of significant accounting policies followed by each Fund in the preparation of its financial statements. The Funds are investment companies and accordingly follow the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 applicable to investment companies.

 

Securities Valuations – All investments in securities are recorded at their estimated fair value as described in Note 3.

 

Foreign Currency – Investment securities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. Reported net realized foreign exchange gains or losses arise from currency gains or losses realized between the trade and settlement dates on securities transactions, and the difference between the amounts of dividends, interest and foreign withholding taxes recorded on the Funds’ books and the U.S. dollar equivalent of the amounts actually received or paid. The Funds do not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments from the fluctuations arising from changes in market prices of securities. Such fluctuations are included with the net realized and unrealized gain or loss from investments.

 

Reverse Convertible Bonds – The Funds may invest in reverse convertible notes, which are short-term notes (i.e., with maturities of one year or less) that are linked to individual equity securities. These notes make regular interest payments by the issuer, but also have a put option attached, giving the issuer the right to exercise that option only if the price of the related security drops below a stated price.

 

Structured notes, such as reverse convertible notes, are subject to a number of fixed income risks including general market risk, interest rate risk, as well as the risk that the issuer on the note may fail to make interest and/ or principal payments when due, or may default on its obligations entirely. In addition, as a result of imbedded derivative features in these securities, structured notes generally are subject to more risk than investing in a simple note or bond issued by the same issuer.

 

29 

 

 

IMS FAMILY OF FUNDS 

NOTES TO THE FINANCIAL STATEMENTS – (continued) 

June 30, 2019

 

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Federal Income Taxes – The Funds intend to qualify each year as regulated investment companies (“RICs”) under subchapter M of the Internal Revenue Code of 1986, as amended, by complying with the requirements applicable to RICs and by distributing substantially all of their taxable income. The Funds also intend to distribute sufficient net investment income and net capital gains, if any, so that they will not be subject to excise tax on undistributed income and gains. If the required amount of net investment income or gains is not distributed, the Funds could incur a tax expense.

 

Management has evaluated the Funds’ tax positions taken on Federal income tax returns for all open tax years (tax years ended June 30, 2016, June 30, 2017 and June 30, 2018) and expected to be taken during the year ended June 30, 2019 and has concluded that no provision for income tax is required in these financial statements. As of and during the year ended June 30, 2019, the Funds did not have a liability for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statements of operations. During the year ended June 30, 2019, the Funds did not incur any interest or penalties. The Funds are not subject to examination by U.S. federal tax authorities for tax years prior to 2016.

 

Expenses – Expenses incurred by the Trust that do not relate to a specific fund of the Trust are allocated to the individual funds based on each Fund’s relative net assets or another appropriate basis (as determined by the Board of Trustees (the “Board”)).

 

Security Transactions and Related Income – Each Fund follows industry practice and records security transactions on the trade date for financial reporting purposes. The first in, first out method is used for determining gains or losses for financial statements and income tax purposes. Dividend income is recorded on the ex-dividend date and interest income is recorded on an accrual basis. Dividend income from real estate investment trusts (REITS) and distributions from limited partnerships are recognized on the ex-date and included in dividend income. The calendar year-end classification of distributions received from REITS during the fiscal year are reported subsequent to year end; accordingly, the Funds estimate the character of REIT distributions based on the most recent information available. Withholding taxes on foreign dividends have been provided for in accordance with each Fund’s understanding of the applicable country’s tax rules and rates. Discounts and premiums on securities purchased are amortized or accreted using the effective interest method. For bonds that miss a scheduled interest payment, after the grace period, all interest accrued on the bond is written off and no additional interest will be accrued. However, for illiquid bonds or those bonds fair valued by the Advisor, if the Advisor’s research indicates a high recovery rate in restructuring, and the Fund expects to hold the bond until the issue is restructured, past due interest may not be written off in its entirety. The ability of issuers of debt securities held by the Funds to meet their obligations may be affected by economic and political developments in a specific country or region.

 

Use of Estimates – The preparation of financial statements in conformity with U.S. generally accepted accounting principles (“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.

 

30 

 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS – (continued)

June 30, 2019

 

NOTE 2. SIGNIFICANT ACCOUNTING POLICIES (continued)

 

Dividends and Distributions – The Income Fund intends to distribute substantially all of its net investment income as dividends to its shareholders on a monthly basis. The Value Fund and Dividend Growth Fund intend to distribute substantially all of their net investment income as dividends to their shareholders on at least an annual basis. Each Fund intends to distribute its net realized long-term capital gains and its net realized short-term capital gains at least once a year. Dividends to shareholders, which are determined in accordance with income tax regulations, 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, they are 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 Funds.

 

For the year ended June 30, 2019, the Funds made the following reclassifications to increase (decrease) the components of net assets. The reclassifications are primarily attributable to the expiration of capital loss carryforwards.

 

Fund

 

Paid in Capital

 

 

Total
Distributable
Earnings

 

Value Fund

 

$

 

 

$

 

Income Fund

 

 

(2,678,326

)

 

 

2,678,326

 

Dividend Growth Fund

 

 

 

 

 

 

 

NOTE 3. SECURITIES VALUATION AND FAIR VALUE MEASUREMENTS

 

Fair value is defined as the price that a Fund would receive upon selling an investment in an orderly transaction to an independent buyer in the principal or most advantageous market of the investment. GAAP establishes a three-tier hierarchy to maximize the use of observable market data and minimize the use of unobservable inputs and to establish classification of fair value measurements for disclosure purposes.

 

Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk (the risk inherent in a particular valuation technique used to measure fair value such as a pricing model and/or the risk inherent in the inputs to the valuation technique). Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

 

Various inputs are used in determining the value of each Fund’s investments. These inputs are summarized in the three broad levels listed below.

 

 

Level 1 – quoted prices in active markets for identical securities

 

Level 2 – other significant observable inputs (including, but not limited to, quoted prices for an identical security in an inactive market, quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.)

  

31 

 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS – (continued)

June 30, 2019

 

NOTE 3. SECURITIES VALUATION AND FAIR VALUE MEASUREMENTS (continued)

 

 

Level 3 – significant unobservable inputs (including each Fund’s own assumptions in determining fair value of investments based on the best information available)

 

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

A description of the valuation techniques applied to each Fund’s major categories of assets measured at fair value on a recurring basis follows:

 

Equity securities, including common stock, real estate investment trusts, and preferred securities, are generally valued by using market quotations, but may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices more accurately reflect the fair value of such securities. Securities that are traded on any stock exchange are generally valued by the pricing service at the last quoted sale price. Lacking a last sale price, an exchange traded security is generally valued by the pricing service at its last bid price.

 

Securities traded in the NASDAQ over-the-counter market are generally valued by the pricing service at the NASDAQ Official Closing Price. When using the market quotations or close prices provided by the pricing service and when the market is considered active, the security will be classified as a Level 1 security. Sometimes, an equity security owned by a Fund will be valued by the pricing service with factors other than market quotations or when the market is considered inactive. When this happens, the security will be classified as a Level 2 security.

 

Investments in mutual funds, including money market mutual funds, are generally priced at the ending net asset value (NAV) provided by the service agent of the mutual funds. These securities will be categorized as Level 1 securities.

 

Fixed income securities such as corporate bonds, municipal bonds, structured notes, and foreign bonds denominated in U.S. dollars, when valued using market quotations in an active market, will be categorized as Level 2 securities. However, they may be valued on the basis of prices furnished by a pricing service when the Advisor believes such prices more accurately reflect the fair value of such securities. A pricing service utilizes electronic data processing techniques based on yield spreads relating to securities with similar characteristics to determine prices for normal institutional-size trading units of debt securities without regard to sale or bid prices. These securities will generally be categorized as Level 2 securities. If the Advisor decides that a price provided by the pricing service does not accurately reflect the fair value of the securities, when prices are not readily available from a pricing service, or when certain restricted or illiquid securities are being valued, securities are valued at fair value as determined in good faith by the Advisor, in conformity with guidelines adopted by and subject to review of the Board and the Fair Valuation Committee. These securities will be categorized as Level 3 securities. See the chart on page 34 for more information on the inputs used by the Advisor in determining fair value of such Level 3 securities. The Advisor has used inputs such as evaluated broker quotes in inactive markets, actual trade prices in inactive markets, present value of expected future cash flows, terms of expected bond restructurings, and yields on similar securities in determining the fair value of such Level 3 securities. 

 

32 

 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS – (continued)

June 30, 2019

 

NOTE 3. SECURITIES VALUATION AND FAIR VALUE MEASUREMENTS (continued)

 

Short-term investments in fixed income securities (those with maturities of less than 60 days when acquired) are valued by using the amortized cost method of valuation, which the Board has determined will represent fair value. These securities will be classified as Level 2 securities.

 

In accordance with the Trust’s good faith pricing guidelines, the Advisor is required to consider all appropriate factors relevant to the value of securities for which it has determined other pricing sources are not available or reliable as described above. No single standard exists for determining fair value, because fair value depends upon the circumstances of each individual case. As a general principle, the current fair value of an issue of securities being valued by the Advisor would appear to be the amount which the owner might reasonably expect to receive for them upon their current sale. Methods which are in accordance with this principle may, for example, be based on (i) a multiple of earnings; (ii) a discount from market of a similar freely traded security (including a derivative security or a basket of securities traded on other markets, exchanges or among dealers); or (iii) yield to maturity with respect to debt issues, or a combination of these and other methods. Good faith pricing is permitted if, in the Advisor’s opinion, the validity of market quotations appears to be questionable based on factors such as evidence of a thin market in the security based on a small number of quotations, a significant event occurs after the close of a market but before a Fund’s NAV calculation that may affect a security’s value, or the Advisor is aware of any other data that calls into question the reliability of market quotations. Good faith pricing may also be used in instances when the bonds in which the Funds invest may default or otherwise cease to have market quotations readily available.

 

The Trustees of the 360 Funds adopted the M3Sixty Consolidated Valuation Procedures on June 24, 2014, which established a Valuation Committee to work with the Advisor and report to the Board on securities being fair valued or manually priced. The Lead Chairman and Trustee for the 360 Funds, along with the Fund Principal Financial Officer and Chief Compliance Officer are members of the Valuation Committee which meets at least monthly or, as required, to review the interim actions and coordination with the Advisor in pricing fair valued securities, and consideration of any unresolved valuation issue or a request to change the methodology for manually pricing a security. In turn, the Lead Chairman provides updates to the Board at the regularly scheduled board meetings as well as interim updates to the board members on substantive changes in a daily valuation or methodology issue.

 

The following is a summary of the inputs used to value the Value Fund’s investments as of June 30, 2019:

 

 

 

Valuation Inputs

 

Investments at Value

 

Level 1 – Quoted Prices in Active Markets

 

 

Level 2 – Other Significant Observable Inputs

 

 

Level 3 – Significant Unobservable Inputs

 

 

Total

 

Common Stocks*

 

$

29,949,764

 

 

$

 

 

$

 

 

$

29,949,764

 

Money Market Securities

 

 

457,942

 

 

 

 

 

 

 

 

 

457,942

 

Total

 

$

30,407,706

 

 

$

 

 

$

 

 

$

30,407,706

 

 

* Refer to the Schedule of Investments for industry classifications. 

 

33 

 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS – (continued)

June 30, 2019

 

NOTE 3. SECURITIES VALUATION AND FAIR VALUE MEASUREMENTS (continued)

 

The Value Fund did not hold any investments at any time during the reporting period in which significant unobservable inputs were used in determining fair value; therefore, no reconciliation of Level 3 securities is included for this reporting period. The Value Fund did not hold any derivative instruments during the reporting period. During the year ended June 30, 2019, there were no transfers between levels. The Value Fund recognizes transfers between fair value hierarchy levels at the end of the reporting period.

 

The following is a summary of the inputs used to value the Income Fund’s investments as of June 30, 2019:

 

 

 

Valuation Inputs

 

Investments at value

 

Level 1 – Quoted Prices in Active Markets

 

 

Level 2 – Other Significant Observable Inputs

 

 

Level 3 – Significant Unobservable Inputs

 

 

Total

 

Common Stocks*

 

$

1,820,762

 

 

$

 

 

$

 

 

$

1,820,762

 

Corporate Bonds

 

 

 

 

 

1,844,402

 

 

 

 

 

 

1,844,402

 

Foreign Bonds

 

 

 

 

 

 

 

 

67,702

 

 

 

67,702

 

Structured Notes

 

 

 

 

 

1,326,795

 

 

 

 

 

 

1,326,795

 

Money Market Securities

 

 

825,829

 

 

 

 

 

 

 

 

 

825,829

 

Total

 

$

2,646,591

 

 

$

3,171,197

 

 

$

67,702

 

 

$

5,885,490

 

 

* Refer to the Schedule of Investments for industry classifications.

 

Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value for the Income Fund:

 

 

 

Balance as of 
June 30, 2018

 

 

Realized gain (loss)

 

 

Amortization

 

 

Change in unrealized appreciation (depreciation)

 

 

Purchases

 

 

Sales

 

 

Transfers in to Level 3

 

 

Transfers out of Level 3

 

 

Balance as of 
June 30, 2019

 

Foreign Bonds

 

$

74,220

 

 

$

 

 

$

 

 

$

(6,518

)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

67,702

 

Total

 

$

74,220

 

 

$

 

 

$

 

 

$

(6,518

)

 

$

 

 

$

 

 

$

 

 

$

 

 

$

67,702

 

 

The following is a quantitative summary of the techniques and inputs used to fair value the Level 3 securities as of June 30, 2019:

 

Quantitative information about Level 3 fair value measurements

 

 

Fair value at 06/30/2019

 

 

Valuation technique(s)

 

Unobservable input

 

Range (Weighted Average)

 

 

 

 

 

 

 

 

 

 

 

Foreign Bonds

 

$

67,702

 

 

Asset based

 

Estimated value of potential litigation proceeds (1)

 

20%-30% of outstanding debt

 

 

 

 

 

 

 

 

Marketability discount

 

28%

 

(1) A significant increase in this input in isolation would result in a significantly higher fair value measurement.

 

34 

 

 

IMS FAMILY OF FUNDS 

NOTES TO THE FINANCIAL STATEMENTS – (continued) 

June 30, 2019

 

NOTE 3. SECURITIES VALUATION AND FAIR VALUE MEASUREMENTS (continued)

 

The total change in unrealized appreciation (depreciation) attributable to Level 3 investments still held at June 30, 2019 was $(6,518) as shown below.

 

 

Total Change in Unrealized
Depreciation

 

Foreign Bonds

 

$

(6,518

)

Total

 

$

(6,518

)

 

See reconciliation of investments for Level 3 securities in chart above. The Income Fund recognizes transfers between fair value hierarchy levels at the end of the reporting period.

 

There were no transfers of assets between levels during the year ended June 30, 2019 for the Income Fund.

 

The following is a summary of the inputs used to value the Dividend Growth Fund’s investments as of June 30, 2019:

 

 

 

Valuation Inputs

 

Investments at value

 

Level 1 – Quoted Prices in Active Markets

 

 

Level 2 – Other Significant Observable Inputs

 

 

Level 3 – Significant Unobservable Inputs

 

 

Total

 

Common Stocks*

 

$

9,966,249

 

 

$

 

 

$

 

 

$

9,966,249

 

Money Market Securities

 

 

13,877

 

 

 

 

 

 

 

 

 

13,877

 

Total

 

$

9,980,126

 

 

$

 

 

$

 

 

$

9,980,126

 

 

*Refer to the Schedule of Investments for industry classifications.

 

The Dividend Growth Fund did not hold any investments at any time during the reporting period in which significant unobservable inputs were used in determining fair value; therefore, no reconciliation of Level 3 securities is included for this reporting period. During the year ended June 30, 2019, there were no transfers between levels. The Dividend Growth Fund recognizes transfers between fair value hierarchy levels at the end of the reporting period.

 

35 

 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS  (continued)

June 30, 2019

 

NOTE 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES

 

The Advisor serves as investment advisor to the Funds pursuant to an Investment Advisory Agreement (the “Advisory Agreement”) with the Trust.  Pursuant to the Advisory Agreement, the Advisor manages the operations of the Funds and manages the Funds’ investments in accordance with the stated policies of the Funds, subject to approval of the Board of Trustees.

 

In addition, the Funds have entered into an Expense Limitation Agreement under which the Advisor has agreed to waive or reduce its fees and to assume other expenses of the Funds, if necessary, in an amount that limits annual operating expenses (exclusive of interest, taxes, brokerage fees and commissions, acquired fund fees and expenses, shareholder servicing fees, extraordinary expenses, and, dividend and interest expenses in connection with securities sold short) to not more than 1.95% of the Funds’ average daily net assets through October 31, 2019, subject to the Advisor’s right to recoup payments on a rolling three-year basis, so long as the payments would not exceed the 1.95% expense cap.

 

Under the terms of the Advisory Agreement, the Funds are obligated to pay the Advisor a fee computed and accrued daily and paid monthly. Please see the chart below for information regarding the management fee rates, management fees earned, fee waivers and recoupments, and expenses reimbursed during the year ended June 30, 2019, as well as amounts due to the Advisor at June 30, 2019.

 

 

 

Value Fund

 

 

Income Fund

 

 

Dividend Growth Fund

 

Management fee under Advisory Agreement (as a percentage of average net assets)

 

 

1.21

%

 

 

1.26

%

 

 

1.26

%

Expense limitation (as a percentage of average net assets)

 

 

1.95

%

 

 

1.95

%

 

 

1.95

%

Management fees earned

 

$

378,285

 

 

$

50,479

 

 

$

132,491

 

Fees recouped (waived) and (expenses reimbursed)

 

$

 

 

$

(81,754

)

 

$

(47,020

)

Payable to Advisor

 

$

29,138

 

 

$

10,584

 

 

$

8,438

 

 

Each waiver or reimbursement by the Advisor is subject to repayment by the Funds within the three fiscal years following the fiscal year in which the particular expense was incurred, provided that the Funds are able to make the repayment without exceeding the expense limitations in effect at the time the expenses were waived or currently in effect, whichever is lower as described above.

 

The amounts subject to repayment by the Income Fund and Dividend Growth Fund, pursuant to the aforementioned conditions, are as follows:

 

Fund

 

Amount

 

 

Expires

June 30,

 

Income Fund

 

$

69,739

 

 

 

2020

 

Income Fund

 

$

65,700

 

 

 

2021

 

Income Fund

 

$

81,754

 

 

 

2022

 

Dividend Growth Fund

 

$

36,744

 

 

 

2020

 

Dividend Growth Fund

 

$

20,568

 

 

 

2021

 

Dividend Growth Fund

 

$

47,020

 

 

 

2022

 

 

There are no amounts subject to repayment by the Value Fund.

 

36 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS  (continued)

June 30, 2019

 

NOTE 4. FEES AND OTHER TRANSACTIONS WITH AFFILIATES (continued)

 

The Trust has entered into an Investment Company Services Agreement (the “Services Agreement”) with M3Sixty Administration, LLC (“M3Sixty”).  Under the Services Agreement, M3Sixty is responsible for a wide variety of functions, including but not limited to: (a) Fund accounting services; (b) financial statement preparation; (c) valuation of the Funds’ portfolio securities; (d) pricing the Funds’ shares; (e) assistance in preparing tax returns; (f) preparation and filing of required regulatory reports; (g) communications with shareholders; (h) coordination of Board and shareholder meetings; (i) monitoring the Funds’ legal compliance; (j) maintaining shareholder account records.

 

For the year ended June 30, 2019, the Funds accrued servicing fees, including out of pocket expenses, as follows:

 

Fund

 

Service Fees

 

Value Fund

 

$

99,512

 

Income Fund

 

$

47,860

 

Dividend Growth Fund

 

$

57,556

 

 

M3Sixty has also agreed to voluntarily waive certain fees until certain thresholds are met by the Funds. During the year ended June 30, 2019, M3Sixty waived fees as follows:

 

Fund

 

Service Fees Waived

 

Value Fund

 

$

 

Income Fund

 

$

11,000

 

Dividend Growth Fund

 

$

6,875

 

 

Certain officers and a Trustee of the Trust are also employees and/or officers of M3Sixty.

 

Matrix 360 Distributors, LLC (the “Distributor”) acts as the principal distributor of the Funds. There were no payments made to the Distributor by the Funds for the year ended June 30, 2019.

 

The Distributor is not affiliated with the Advisor. The Distributor is an affiliate of M3Sixty.

 

NOTE 5. LINE OF CREDIT

 

During the year ended June 30, 2019, the IMS Funds each respectively entered into an agreement with The Huntington National Bank, the custodian of the Funds’ investments, to open secured lines of credit secured by the Funds’ investments. Borrowings under this agreement bear interest at LIBOR plus 1.500%. Maximum borrowings for each Fund are lesser of $2,000,000 or 10.000% of the Fund’s daily investments at value.  Total borrowings for the Funds cannot exceed $2,000,000 at any time. The current agreement expires on September 8, 2019.

 

37 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS  (continued)

June 30, 2019

 

NOTE 5. LINE OF CREDIT (continued)

 

 

 

Value Fund

 

 

Income Fund

 

 

Dividend Growth Fund

 

Maximum available bank line of credit as of June 30, 2019

 

$

    2,000,000

 

 

$

      588,549

 

 

$

        998,013

 

Average borrowings for the period

 

$

       208,276

 

 

$

      204,747

 

 

$

          42,812

 

Average interest rate for the period

 

 

3.873

%

 

 

3.882

%

 

 

 3.914

%

Highest balance drawn during the year

 

$

1,267,269

 

 

$

      407,925

 

 

$

423,223

 

Interest rate at June 30, 2019

 

 

3.930

%

 

 

3.930

%

 

 

3.930

%

Line of credit borrowing at June 30, 2019

 

$

 

 

$

 

 

$

        —

 

 

NOTE 6. INVESTMENTS

 

For the year ended June 30, 2019, purchases and sales of investment securities, other than short-term investments and short-term U.S. government obligations were as follows:

 

 

 

Value Fund

 

 

Income Fund

 

 

Dividend Growth
Fund

 

Purchases

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

$

5,381,984

 

 

$

26,794,392

 

 

$

548,408

 

Sales

 

 

 

 

 

 

 

 

 

 

 

 

Other

 

$

10,747,840

 

 

$

25,657,781

 

 

$

2,260,452

 

 

As of June 30, 2019, the net unrealized appreciation (depreciation) of investments for tax purposes was as follows:

 

 

 

Value Fund

 

 

Income Fund

 

 

Dividend Growth
Fund

 

Gross Appreciation

 

$

    9,520,653

 

 

$

        88,502

 

 

$

    2,256,682

 

Gross (Depreciation)

 

 

(5,041,992

)

 

 

(1,434,745

)

 

 

(666,286

)

Net Appreciation (Depreciation) on Investments

 

$

    4,478,661

 

 

$

  (1,346,243

)

 

$

    1,590,396

 

Tax Cost

 

$

  25,929,045

 

 

$

   7,231,733

 

 

$

    8,389,730

 

 

For the Value Fund, the difference between book basis and tax basis unrealized appreciation (depreciation) of investments is primarily attributable to the tax deferral of losses on wash sales.

 

NOTE 7. 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 increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.

38 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS  (continued)

June 30, 2019

 

NOTE 8. BENEFICIAL 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 June 30, 2019, National Financial Securities Corp. (“National Financial”) held, for the benefit of its customers, 39.13% of the Value Fund and 48.28% of the Dividend Growth Fund. As a result, National Financial may be deemed to control the Value Fund and Dividend Growth Fund. As of June 30, 2019, TD Ameritrade, Inc. (“Ameritrade”) held, for the benefit of its customers, 30.62% of the Value Fund, 45.86% of the Income Fund and 41.14% of the Dividend Growth Fund. As a result, Ameritrade may be deemed to control the Value Fund, Income Fund and Dividend Growth Fund.

 

NOTE 9. DISTRIBUTIONS TO SHAREHOLDERS

 

Value Fund – For the fiscal year ended June 30, 2019, the Value Fund paid distributions totaling $2.526808 per share.

 

The tax characterization of distributions for the fiscal year ended June 30, 2019 and for the fiscal year ended June 30, 2018 was as follows:

 

Distributions paid from:

 

Fiscal Year
Ended
June 30, 2019 

 

 

Fiscal Year
Ended

June 30, 2018

 

Ordinary Income

 

$

609,750

 

 

$

30,009

 

Long-term Capital Gains

 

 

2,596,512

 

 

 

743,240

 

Total Distributions paid

 

$

3,206,262

 

 

$

773,249

 

 

Income Fund – For the fiscal year ended June 30, 2019, the Income Fund paid monthly distributions totaling $0.130 per share.

 

The tax characterization of distributions for fiscal year ended June 30, 2019 and for the fiscal year ended June 30, 2018 was as follows:

 

Distributions paid from:

 

Fiscal Year
Ended
June 30, 2019 

 

 

Fiscal Year
Ended

June 30, 2018

 

Ordinary Income

 

$

207,454

 

 

$

323,707

 

Total Distributions paid

 

$

207,454

 

 

$

323,707

 

 

Dividend Growth Fund – For the fiscal year ended June 30, 2019, the Dividend Growth Fund paid distributions totaling $0.100 per share.

 

The tax characterization of distributions for the fiscal year ended June 30, 2019 and for the fiscal year ended June 30, 2018 was as follows:

 

Distributions paid from:

 

Fiscal Year
Ended
June 30, 2019

 

 

Fiscal Year
Ended

June 30, 2018

 

Ordinary Income

 

$

63,965

 

 

$

84,089

 

Return of Capital

 

 

 

 

 

5,815

 

Total Distributions paid

 

$

63,965

 

 

$

89,904

 

 

39 

 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS — (continued)

June 30, 2019

 

NOTE 9. DISTRIBUTIONS TO SHAREHOLDERS (continued)

 

The Funds’ tax basis distributable earnings are determined only at the end of each fiscal year. As of June 30, 2019, the components of distributable earnings (accumulated losses) on a tax basis were as follows:

 

 

 

Value Fund

 

 

Income Fund

 

 

Dividend Growth Fund

 

Undistributed net investment income

 

$

552,132

 

 

$

12,965

 

 

$

17,260

 

Deferred capital and other losses

 

 

(24,545

)

 

 

(76,184

)

 

 

 

Accumulated realized capital gains (losses)

 

 

978,218

 

 

 

(22,473,472

)

 

 

387,915

 

Net unrealized appreciation (depreciation)

 

 

4,478,661

 

 

 

(1,346,243

)

 

 

1,590,396

 

 

 

$

5,984,466

 

 

$

(23,882,934

)

 

$

1,995,571

 

 

Under current law, capital losses and specified gains realized after October 31, and net investment losses realized after December 31 of a Fund’s fiscal year may be deferred and treated as occurring on the first business day of the following fiscal year for tax purposes. For disclosure purposes, these deferrals are included in “Deferred capital and other losses” above.

 

As of June 30, 2019, deferred capital and other losses noted above consist of:

 

 

 

Post-October
Capital Losses

 

 

Late Year
Ordinary Losses

 

Value Fund

 

$

 

 

$

24,545

 

Income Fund

 

 

76,184

 

 

 

 

Dividend Growth Fund

 

 

 

 

 

 

 

NOTE 10. CAPITAL LOSS CARRYFORWARDS

 

At June 30, 2019, for federal income tax purposes, the Funds have capital loss carryforwards, in the following amounts:

 

 

 

Value Fund

 

 

Income Fund

 

 

Dividend Growth Fund

 

No expiration — short term

 

$

 

 

$

8,547,242

 

 

$

 

No expiration — long term

 

 

 

 

 

13,926,230

 

 

 

 

 

 

$

 

 

$

22,473,472

 

 

$

 

 

Capital loss carryforwards are available to offset future realized capital gains. To the extent that these carryforwards are used to offset future capital gains, it is probable that the amount offset will not be distributed to shareholders. During the year ended June 30, 2019, the Funds did not utilize any capital loss carryforwards. Capital loss carryforwards of $2,678,326 expired in the Income Fund.

 

40 

 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS — (continued)

June 30, 2019

 

NOTE 11. RESTRICTED SECURITIES

 

Restricted securities are securities that may only be resold upon registration under federal securities laws or in transactions exempt from such registration. In some cases, the issuer of restricted securities has agreed to register such securities for resale, at the issuer’s expense, either upon demand by a fund or in connection with another registered offering of the securities. Many restricted securities may be resold in the secondary market in transactions exempt from registration. Such restricted securities may be determined to be liquid. The Funds will not incur any registration costs upon such resale. The Income Fund’s restricted securities are valued at the price provided by pricing services or dealers in the secondary market or, if no market prices are available, at the fair value price as determined by the Fund’s Advisor or pursuant to the Fund’s fair value policy, subject to oversight by the Board of Trustees. The Income Fund has acquired securities, the sale of which is restricted under Rule 144A or Regulation S the Securities Act of 1933. It is possible that the fair value price may differ significantly from the amount that may ultimately be realized in the near term, and the difference could be material.

 

At June 30, 2019, the aggregate value of such securities amounted to $634,863 and the value amounts to 10.73% of the net assets of the Income Fund.

 

 

 

Acquisition Date

 

 

Shares or
Principal Amount

 

 

Amortized
Cost

 

 

Fair Value

 

 

 

 

 

 

 

 

 

 

 

 

 

 

California Resources Corp., 8.000% due 12/15/2022

 

 

4/17/2019

 

 

$

 350,000

 

 

$

293,103

 

 

$

263,813

 

Cash Store Financial Services, Inc. 11.500%, 01/31/2017, 144A

 

 

5/21/2012

(a)

 

 

 

1,289,000

 

 

 

1,120,977

 

 

 

67,702

 

PetSmart, Inc. , 7.125%, due 03/15/2023

 

 

5/02/2019

 

 

 

200,000

 

 

 

179,714

 

 

 

187,500

 

Vector Group Ltd., 6.125%, due 02/01/2025

 

 

6/05/2019

 

 

 

125,000

 

 

 

115,560

 

 

 

115,848

 

 

 

 

 

 

 

 

 

 

 

$

1,709,354

 

 

$

634,863

 

 

(a)Purchased on various dates beginning 05/21/2012.

 

NOTE 12. SUBSEQUENT EVENTS

 

On July 15, 2019, the Income Fund declared a dividend of $22,623, which was payable on July 15, 2019. On August 15, 2019, the Income Fund declared a dividend of $22,368, which was payable on August 15, 2019.

 

Management has evaluated subsequent events through the issuance of the financial statements and has noted no other such events that would require disclosure.

 

NOTE 13. INDEMNIFICATIONS

 

In the normal course of business, the Funds enter into contracts that contain general indemnifications to other parties. The Funds’ maximum exposure under these contracts is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. The Funds expect the risk of loss to be remote.

 

41 

 

 

IMS FAMILY OF FUNDS

NOTES TO THE FINANCIAL STATEMENTS — (continued)

June 30, 2019

 

NOTE 14. CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

The Audit Committee of the Board of Trustees of the Trust (the “Board”) has approved and selected (and the Board has approved) BBD, LLP (“BBD”) to replace Sanville & Company. (“Sanville”) as the Funds’ independent registered public accounting firm for the Funds’ fiscal year ended June 30, 2019. Through the past two fiscal years and through the date of Sanville’s replacement as auditor of the Funds, the Funds had no disagreements with Sanville on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which, if not resolved to the satisfaction of Sanville would have caused Sanville to make reference to the disagreement in a Sanville report, and there were no reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K under the Securities Exchange Act of 1934. With respect to the Funds, Sanville’s audit opinions, including for the years ended June 30, 2018 and June 30, 2017 for the Funds, have not contained either an adverse opinion or disclaimer of opinion, nor were they qualified or modified as to uncertainty, audit scope or accounting principles. During the last fiscal year of the Funds, neither the Funds nor anyone on their behalf has consulted BBD on items concerning the application of accounting principles to a specified transaction (either completed or proposed) or the type of audit opinion that might be rendered on the Funds’ financial statements, or concerning the subject of a disagreement of the kind described in Item 304(a)(1)(iv) of Regulation S-K or reportable events of the kind described in Item 304(a)(1)(v) of Regulation S-K.

42 

 

 

image

 

REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

 

To the Board of Trustees of 360 Funds

and the Shareholders of IMS Capital Value Fund, IMS Strategic Income Fund,

and IMS Dividend Growth Fund

 

Opinion on the Financial Statements

 

We have audited the accompanying statements of assets and liabilities of IMS Capital Value Fund, IMS Strategic Income Fund and IMS Dividend Growth Fund, each a series of shares of beneficial interest in  360 Funds  (the “Funds”), including the schedules of investments, as of June 30, 2019, and the related statements of operations, changes in net assets, and cash flows and financial highlights for the year then ended, and the related notes to the financial statements (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Funds as of June 30, 2019, and the results of their operations, the changes in their net assets, cash flows and financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America. The statement of changes in net assets for the year ended June 30, 2018 and the financial highlights for each of the years in the two-year period ended June 30, 2018, were audited by other auditors, whose report dated August 28, 2018, expressed an unqualified opinion on such financial statement and financial highlights. The financial highlights for each of the years in the two-year period ended June 30, 2016 were audited by other auditors, whose report dated August 29, 2016, expressed an unqualified opinion on such financial highlights.

 

Basis for Opinion

 

These financial statements are the responsibility of the Funds’ management.  Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities law and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB.  Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.

 

43 

 

 

Our audits included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Our procedures included confirmation of securities owned as of June 30, 2019 by correspondence with the custodian and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements.  We believe that our audits provide a reasonable basis for our opinion.

 

image

 

BBD, LLP

 

We have served as the auditor of one or more of the Funds in the 360 Funds since 2018.

 

Philadelphia, Pennsylvania 

August 29, 2019

 

44 

 

 

TRUSTEES AND OFFICERS – (Unaudited)

 

The Trustees are responsible for the management and supervision of the Funds. The Trustees approve all significant agreements between the Trust, on behalf of the Funds, and those companies that furnish services to the Funds; review performance of the Funds; and oversee activities of the Funds. This section provides information about the persons who serve as Trustees and Officers to the Trust and Funds, respectively. The Statement of Additional Information for each Fund includes additional information about the Trustees and officers and is available, without charge, upon request by calling the Funds toll-free at (800) 934-5550.

 

Trustees and Officers. Following are the Trustees and Officers of the Trust, their age and address, their present position with the Trust or the Funds, and their principal occupation during the past five years. As described above under “Description of the Trust”, each of the Trustees of the Trust will generally hold office indefinitely. The Officers of the Trust will hold office indefinitely, except that: (1) any Officer may resign or retire and (2) any Officer may be removed any time by written instrument signed by at least two-thirds of the number of Trustees prior to such removal. In case a vacancy or an anticipated vacancy on the Board of Trustees shall for any reason exist, the vacancy shall be filled by the affirmative vote of a majority of the remaining Trustees, subject to certain restrictions under the 1940 Act. Those Trustees who are “interested persons” (as defined in the 1940 Act) by virtue of their affiliation with either the Trust or the Adviser, are indicated in the table. The address of each trustee and officer is 4300 Shawnee Mission Parkway, Suite 100, Fairway, KS 66205. 

 

Name and
Year of Birth

 

Position(s)
Held with
Trust

 

Length of
Service

 

Principal Occupation(s)
During Past 5 Years

 

Number
of Series
Overseen

 

Other
Directorships

During Past
5 Years

Independent Trustees

Arthur Q. Falk
YOB : 1937

 

Trustee

 

Since 2011

 

Retired. President, Murray Hill Financial Marketing, (financial marketing consultant) (1990–2012).

 

Ten

 

None

Tom M. Wirtshafter
YOB : 1954

 

Trustee

 

Since 2011

 

Senior Vice President, American Portfolios Financial Services, (broker-dealer), American Portfolios Advisors (investment adviser) (2009–Present).

 

Ten

 

None

Gary W. DiCenzo
YOB : 1962

 

Trustee

 

Independent Chairman

 

Since 2014

 

Since 2019

 

Chief Executive Officer, Cognios Capital (investment management firm) (2015–present); President and CEO, IMC Group, LLC (asset management firm consultant) (2010–2015).

 

Ten

 

None

Steven D. Poppen
YOB : 1968

 

Trustee

 

Since 2018

 

Executive Vice President and Chief Financial Officer, Minnesota Vikings (professional sports organization) (1998-present).

 

Ten

 

M3Sixty Trust (3)

Thomas J. Schmidt
YOB: 1963

 

Trustee

 

Since 2018

 

Principal, Tom Schmidt & Associates Consulting, LLC (financial services consulting practice) (2015-Present); Vice President, DST Systems, Inc. (financial services transfer agent) (1986-2014).

 

Ten

 

None

45 

 

TRUSTEES AND OFFICERS – (Unaudited) (continued)

 

Name, Address and
Year of Birth

 

Position(s)
Held with
Trust

 

Length of
Service

 

Principal Occupation(s)
During Past 5 Years

 

Number
of Series
Overseen

 

Other
Directorships
During Past
 5 Years

Interested Trustee*

Randall K. Linscott
YOB: 1971

 

President

 

Since 2013

 

Chief Executive Officer, M3Sixty Administration, LLC (2013 – present); Chief Operating Officer, M3Sixty Administration, LLC (2011–2013); Division Vice President, Boston Financial Data Services, (2005–2011).

 

Ten

 

N/A

Officers

Andras P. Teleki
YOB: 1971

 

Chief Compliance Officer and Secretary

 

Since 2015

 

Chief Legal Officer, M3Sixty Administration, LLC, M3Sixty Holdings, LLC, Matrix 360 Distributors, LLC and M3Sixty Advisors, LLC (2015–present); Chief Compliance Officer and Secretary, M3Sixty Funds Trust (2016– present); Chief Compliance Officer and Secretary, WP Trust (2016- present); Secretary and Assistant Treasurer, Capital Management Investment Trust (2015); Partner, K&L Gates, (2009–2015).

 

N/A

 

N/A

Brandon J. Byrd
YOB: 1981

 

Assistant Secretary and Anti-Money Laundering Officer;

Vice President

 

Since 2013

 

Since 2018

 

Chief Operating Officer, M3Sixty Administration, LLC (2013–present); Anti-Money Laundering Compliance Officer, Monteagle Funds (2015–2016); Division Manager - Client Service Officer, Boston Financial Data Services (mutual find service provider) (2010–2012).

 

N/A

 

N/A

* The Interested Trustee is an Interested Trustee because he is an officer and employee of the Administrator.

 

46 

 

TRUSTEES AND OFFICERS – (Unaudited) (continued)

 

Name, Address and
Year of Birth

 

Position(s)
Held with
Trust

 

Length of
Service

 

Principal Occupation(s)
During Past 5 Years

 

Number
of Series
Overseen

 

Other
Directorships
During Past
5 Years

Officers (continued)

Larry E. Beaver, Jr.**
YOB: 1969

 

Assistant Treasurer

 

Since 2017

 

Fund Accounting, Administration and Tax Officer, M3Sixty Administration, LLC (2017–Present); Director of Fund Accounting & Administration, M3Sixty Administration, LLC (2005-2017); Chief Accounting Officer, Amidex Funds, Inc. (2003–Present); Assistant Treasurer, Capital Management Investment Trust (July 2017–Present); Assistant Treasurer, M3Sixty Funds Trust (July 2017–Present; Assistant Treasurer, WP Funds Trust (July 2017–Present); Treasurer and Assistant Secretary, Capital Management Investment Trust (2008–-2017); Treasurer, 360 Funds (2007–2017); Treasurer, M3Sixty Funds Trust (2015–2017); Treasurer, WP Trust (2015–2017); Treasurer and Chief Financial Officer, Monteagle Funds (2008–2016).

 

N/A

 

N/A

John H. Lively
YOB: 1969

 

Assistant Secretary

 

Since 2017

 

Managing Partner, Practus, LLP (law firm) (May 2018-present); Attorney, The Law Offices of John H. Lively & Associates, Inc. (law firm) (May 2018).

 

N/A

 

N/A

Ted L. Akins
YOB: 1974

 

Assistant Secretary

 

Since 2018

 

Vice President of Operations, M3Sixty Administration, LLC (2012-present).

 

N/A

 

N/A

** Effective December 28, 2018, Larry E. Beaver, Jr. was assigned as Interim Treasurer until a new Treasurer is appointed by the Board.

 

47 

 

TRUSTEES AND OFFICERS – (Unaudited) (continued)

 

Remuneration Paid to Trustees and Officers - Officers of the Trust and Trustees who are “interested persons” of the Trust or the Adviser will receive no salary or fees from the Trust. Officers of the Trust and interested Trustees do receive compensation directly from certain service providers to the Trust, including Matrix 360 Distributors, LLC and M3Sixty Administration, LLC. Each Trustee who is not an “interested person” received a fee of $1,500 each year plus $200 per Board or committee meeting attended. Effective April 25, 2019, each Trustee who is not an “interested person” (an “Independent Trustee”) will receive a $5,000 annual retainer (paid quarterly). In addition, each Independent Trustee will receive, on a per fund basis: (i) a fee of $1,500 per fund each year (paid quarterly); (ii) a fee of $200 per Board meeting attended; and (iii) a fee of $200 per committee meeting attended. The Trust will also reimburse each Trustee for travel and other expenses incurred in connection with, and/or related to, the performance of their obligations as a Trustee. Officers of the Trust will also be reimbursed for travel and other expenses relating to their attendance at Board meetings.

 

Name of Trustee1

 

Aggregate
Compensation
From the IMS
Family of Funds2

 

 

Pension or Retirement
Benefits Accrued As Part
of Portfolio Expenses

 

 

Estimated
Annual Benefits
Upon
Retirement

 

 

Total Compensation
From the
IMS Family of Funds
 Paid to Trustees2

 

Independent Trustees

 

Arthur Q. Falk

 

$

7,212

 

 

 

None

 

 

 

None

 

 

$

7,212

 

Tom M. Wirtshafter

 

$

7,212

 

 

 

None

 

 

 

None

 

 

$

7,212

 

Gary W. DiCenzo

 

$

7,212

 

 

 

None

 

 

 

None

 

 

$

7,212

 

Steven D. Poppen

 

$

5,488

 

 

 

None

 

 

 

None

 

 

$

5,488

 

Thomas J. Schmidt

 

$

5,488

 

 

 

None

 

 

 

None

 

 

$

5,488

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

Interested Trustee

Randall K. Linscott

 

 

None

 

 

 

None

 

 

 

None

 

 

 

None

 

1 Each of the Trustees serves as a Trustee to three (3) IMS Family of Funds of the Trust. The Trust currently offers ten (10) series of shares.

2 Figures are for the year ended June 30, 2019.

 

48 

 

 

OTHER INFORMATION – (Unaudited)

 

The Funds’ Statement of Additional Information (“SAI”) includes additional information about the trustees and is available without charge, upon request. You may call toll-free at (800) 934-5550 to request a copy of the SAI or to make shareholder inquiries.

 

The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q are available on the Commission’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Commission’s Public Reference Room may be obtained by calling 1-800-SEC-0330.

 

A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling (800) 934-5550; and on the Commission’s website at http://www.sec.gov.

 

Information regarding how the Funds voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available without charge, upon request, by calling (800) 934-5550; and on the Commission’s website at http://www.sec.gov.

 

Shareholder Tax Information - The Funds are required to advise you within 60 days of the Fund’s fiscal year end regarding the federal tax status of distributions received by shareholders during the fiscal year. For the fiscal year ended June 30, 2019, certain distributions paid by the Funds may be subject to a maximum tax rate of 20%. The Value Fund, Income Fund and Dividend Growth Fund intend to designate up to a maximum amount of $3,206,262, $207,454 and $63,965, respectively, as taxed at a maximum rate of 20%.

 

Tax information is reported from the Funds’ fiscal year and not calendar year, therefore, shareholders should refer to their Form 1099-DIV or other tax information which will be mailed in 2020 to determine the calendar year amounts to be included on their 2019 tax returns. Shareholders should consult their own tax advisors.

 

49 

 

  

Approval of the Investment Advisory Agreement Renewal for the IMS Capital Value Fund, IMS

Strategic Income Fund and IMS Dividend Growth Fund (Unaudited)

 

At a meeting held on April 25, 2019, the Board of Trustees (the “Board”) considered the approval of the renewal of the Investment Advisory Agreement (the “Advisory Agreement”) between the Trust and Advisor in regard to the Value Fund, Income Fund and Dividend Growth Fund.

 

Legal Counsel to the Trust (“Counsel”) reviewed with the Board a memorandum from Counsel and addressed to the Trustees that summarized, among other things, the fiduciary duties and responsibilities of the Board in reviewing and approving the renewal of the Advisory Agreement between the Trust and the Advisor with respect to the Funds. A copy of this memorandum was circulated to the Trustees in advance of the Meeting. Counsel discussed with the Trustees the types of information and factors that should be considered by the Board in order to make an informed decision regarding the approval of the continuation of the Advisory Agreement, including the following material factors: (i) the nature, extent and quality of the services provided by the Advisor; (ii) the investment performance of the Funds; (iii) the costs of the services to be provided and profits to be realized by the Advisor from the relationship with the Funds; (iv) the extent to which economies of scale would be realized if the Funds grow and whether advisory fee levels reflect those economies of scale for the benefit of the Funds’ investors; and (v) the Advisor’s practices regarding possible conflicts of interest and other benefits derived by the Advisor.

 

In assessing these factors and reaching its decisions, the Board took into consideration information furnished for the Board’s review and consideration throughout the year at regular Board meetings, as well as information specifically prepared and/or presented in connection with the annual renewal process, including information presented to the Board in the Advisor’s presentation earlier in the Meeting. The Board requested and was provided with information and reports relevant to the annual renewal of the Advisory Agreement, including: (i) reports regarding the services and support provided to the Funds and their shareholders by the Advisor; (ii) quarterly assessments of the investment performance of the Funds from the Advisor; (iii) periodic commentary on the reasons for the performance; (iv) presentations by the Funds’ management addressing the Advisor’s investment philosophy, investment strategy, personnel and operations; (v) compliance and audit reports concerning the Funds and the Advisor; (vi) disclosure information contained in the registration statement of the Trust with respect to the Funds and the Form ADV of the Advisor; and (vii) a memorandum from Counsel that summarized the fiduciary duties and responsibilities of the Board in reviewing and approving the Advisory Agreement, including the material factors set forth above and the types of information included in each factor that should be considered by the Board in order to make an informed decision.

 

The Board also requested and received various informational materials including, without limitation: (i) documents containing information about the Advisor, including financial information, a description of personnel and the services provided to the Funds, information on investment advice, performance, summaries of Funds’ expenses, compliance program, current legal matters and other general information; (ii) comparative expense and performance information for other mutual funds with strategies similar to the Funds; (iii) the anticipated effect of size on the Funds’ performance and expenses; and (iv) benefits to be realized by the Advisor from its relationship with the Funds. The Board did not identify any particular information that was most relevant to its consideration to approve the Advisory Agreement and each Trustee may have afforded different weight to the various factors.

 

50 

 

 

 

(1)

The nature, extent and quality of the services provided by the Advisor.

 

In this regard, the Board considered the responsibilities the Advisor would have under the Advisory Agreement with respect to each of the Funds. The Board reviewed the services to be provided by the Advisor to the Funds including, without limitation: the Advisor’s processes for formulating investment recommendations and assuring compliance with the Funds’ investment objectives and limitations; its coordination of services for the Funds among the Funds’ service providers; and the anticipated efforts to promote the Funds, grow assets and assist in the distribution of Funds’ shares. The Board considered: the Advisor’s staffing, personnel and methods of operating; the education and experience of the Advisor’s personnel; and the Advisor’s compliance program, policies and procedures. After reviewing the foregoing and further information provided by the Advisor, the Board concluded that the nature, extent and quality of the services to be provided by the Advisor were satisfactory and adequate for the Funds.

 

 

(2)

Investment Performance of the Funds and the Advisor.

 

In considering the investment performance of the Funds and the Advisor, the Trustees compared the short- and long-term performance of each Fund with the performance of its benchmark index, or indices, as applicable, comparable funds with similar objectives and size managed by other investment Advisors and comparable peer group indices (e.g., Morningstar category medians). The Trustees also considered the consistency of the Advisor’s management of each Fund with its investment objective and policies. With regard to the Value Fund, the Board noted that the Value Fund had underperformed its peer group median for the 1- year, 3-year, 5-year and 10-year periods ended March 31, 2019. The Board also considered recent performance for shorter periods of time. With regard to the Income Fund, the Board noted that the Income Fund had underperformed its peer group median for the 3-year, 5-year and 10-year periods ended March 31, 2019 but outperformed its peer group median for the 1-year period ended March 31, 2019. The Board also consider recent performance for shorter periods of time. With regard to the Dividend Growth Fund, the Board noted that the Dividend Growth Fund had underperformed its peer group median for the 1-year, 3-year, 5-year and 10-year periods ended March 31, 2019. The Board also consider recent performance for shorter periods of time. The Board considered the reasons for the underperformance of each of the Funds and extensively discussed the same with the Advisor’s management to understand the drivers of the performance. Based on the foregoing, the Board concluded that the investment performance information presented for each of the Funds was acceptable at this time although the Board noted that it was important for it to continue to closely monitor the Funds’ performance.

 

 

(3)

The costs of the services provided and profits realized by the Advisor from the relationship with the Funds.

 

In considering the costs of the services to be provided and profits to be realized by the Advisor from the relationship with the Funds, the Trustees considered: the Advisor’s staffing, personnel and methods of operating; the financial condition of the Advisor and the level of commitment to the Advisor by the Advisor and its principals; the expected asset levels of the Funds; and the projected overall expenses of the Funds. The Trustees considered financial statements of the Advisor and discussed the financial stability and productivity of the firm. The Trustees considered the fees and expenses of the Value Fund (including the management fee) relative to its category. The Trustees noted that the management fee for the Value Fund was above the peer group median, but well within the range for the category that was considered. The Trustees next considered the fees and expenses of the Income Fund (including the management fee) relative to its category. The Trustees noted that the management fee for the Income Fund was above the peer group median, but well within the range for the category that was considered. The Trustees then considered the fees and expenses of the Dividend Growth Fund (including the management fee) relative to its category. The Trustees noted that the management fee for the Dividend Growth Fund was above the peer group median, but well within the range for the category that was considered. Following this analysis and upon further consideration and discussion of the foregoing, the Board concluded that the fees paid to the Advisor by each of the Funds was fair and reasonable.

 

51 

 

 

(4)The extent to which economies of scale would be realized if the Funds grow and whether advisory fee levels reflect these economies of scale for the benefit of the Funds’ investors.

 

In this regard, the Board considered the Funds’ fee arrangements with the Advisor. The Trustees determined that although the management fee would stay the same as asset levels increased, the shareholders of the Dividend Growth Fund and the Income Fund would benefit from the expense limitation arrangement for such Funds. The Trustees noted that while a breakpoint schedule in an advisory agreement could be beneficial, such a feature to the fee schedule only had benefits if the particular fund’s assets were sufficient to realize the effect of the breakpoint. The Trustees noted that obtaining lower expenses for the shareholders of the Dividend Growth Fund and the Income Fund would be realized immediately with the expense limitation arrangements. The Trustees noted that the assurance that the expense limitation arrangements in place were of value to those Funds. The Trustees noted that the assets of the Dividend Growth Fund and of the Income Fund were at such levels that the expense limitation arrangements currently were providing benefits to the respective Fund’s shareholders. The Trustees noted that the Value Fund was currently operating at an expense level that was below the contractual cap and, as a result, that Fund did not actually enjoy similar benefits to the other Funds associated with the expense limitation arrangement; however, the Trustees noted that the assurance of having the expense arrangement in place provided value to the Value Fund. The Trustees also noted that the Funds would benefit from economies of scale under its agreements with some of its service providers other than the Advisor as fees that were in place with those other service providers were either fixed or essentially semi-fixed, and the Board considered the Advisor’s efforts to work with M3Sixty to secure such arrangements for the Funds. Following further discussion of the Funds’ expected asset levels, expectations for growth and levels of fees, the Board determined that the Funds’ fee arrangements, in light of all the facts and circumstances, were fair and reasonable and that the expense limitation arrangements provided potential savings or protection for the benefit of the Funds’ investors.

 

 

(5)

Possible conflicts of interest and benefits derived by the Advisor.

 

In considering the Advisor’s practices regarding conflicts of interest, the Trustees evaluated the potential for conflicts of interest and considered such matters as: the experience and ability of the advisory and compliance personnel assigned to the Funds; the basis of decisions to buy or sell securities for the Funds; and the substance and administration of the Advisor’s code of ethics. Based on the foregoing, the Board determined that the Advisor’s standards and practices relating to the identification and mitigation of possible conflicts of interest were satisfactory. The Trustees noted that there were no benefits identified by the Advisor to the Board other than the advisory fees received under the Advisory Agreement.

 

52 

 

 

 

 

360 FUNDS

4300 Shawnee Mission Parkway

Suite 100

Fairway, KS 66205

 

INVESTMENT ADVISOR

IMS Capital Management, Inc.

8995 S.E. Otty Road,

Portland, OR 97086

 

ADMINISTRATOR & TRANSFER AGENT

M3Sixty Administration, LLC

4300 Shawnee Mission Parkway

Suite 100

Fairway, KS 66205

 

DISTRIBUTOR

Matrix 360 Distributors, LLC

4300 Shawnee Mission Parkway

Suite 100

Fairway, KS 66205

 

INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

BBD, LLP

1835 Market Street

3rd Floor

Philadelphia, PA 19103

 

LEGAL COUNSEL

Practus, LLP

11300 Tomahawk Creek Parkway

Suite 310

Leawood, KS 66211

 

CUSTODIAN BANK

Huntington National Bank

41 South Street

Columbus, OH 43125

 

This report is intended only for the information of shareholders or those who have received the Funds’ prospectus which contains information about each Fund’s management fee and expenses. Please read the prospectus carefully before investing.

 


 

 

  

ITEM 2.CODE OF ETHICS.

 

(a)

The registrant has, as of the end of the period covered by this report, adopted a code of ethics that applies to the registrant’s principal executive officer, principal financial officer, and principal accounting officer or controller, or persons performing similar functions, regardless of whether these individuals are employed by the registrant or a third party.

 

(b)

During the period covered by this report, there were no amendments to any provision of the code of ethics.

 

(c)

During the period covered by this report, there were no waivers or implicit waivers of a provision of the code of ethics.

 

(d)

The registrant’s Code of Ethics is filed herewith.

 

ITEM 3.AUDIT COMMITTEE FINANCIAL EXPERT.

 

 

The registrant’s Board of Trustees has determined that Tom Wirtshafter serves on its audit committee as the “audit committee financial expert” as defined in Item 3.

 

ITEM 4.PRINCIPAL ACCOUNTANT FEES AND SERVICES.

 

(a)

 

Audit Fees.  The aggregate fees billed for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $33,000 and $30,000 with respect to the registrant’s fiscal years ended June 30, 2019 and June 30, 2018, respectively. The June 30, 2019 fees were paid to BBD, LLP.  The June 30, 2018 fees were paid to Sanville and Co.

 

 

(b)

Audit-Related Fees.    There were no fees billed during the last two fiscal years for assurances and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this item.

 

(c)

Tax Fees. The aggregate fees billed in the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning were $6,000 and $6,000 with respect to the registrant’s fiscal years ended June 30, 2019 and June 30, 2018, respectively.  The services comprising these fees are the preparation of the registrant’s federal income and excise tax returns. The June 30, 2019 fees were paid to BBD, LLP.  The June 30, 2018 fees were paid to Sanville and Co.

 

(d)

All Other Fees.   The aggregate fees billed in last fiscal year for products and services provided by the registrant’s principal accountant, other than the services reported in paragraphs (a) through (c) of this item were $0 for the fiscal year ended June 30, 2019 and $0 for the fiscal year ended June 30, 2018 for the IMS Family of Funds.

 

(e)(1)

The audit committee does not have pre-approval policies and procedures.  Instead, the audit committee or audit committee chairman approves on a case-by-case basis each audit or non-audit service before the principal accountant is engaged by the registrant.

 

(e)(2)

 

There were no services described in each of paragraphs (b) through (d) of this Item that were approved by the audit committee pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X. 

 

 

 

 

(f)

Not applicable. The percentage of hours expended on the principal accountant’s engagement to audit the registrant’s financial statements for the most recent fiscal year that were attributed to work performed by persons other than the principal accountant’s full-time permanent employees was zero percent (0%).

 

(g)

All non-audit fees billed by the registrant’s principal accountant for services rendered to the registrant for the last two fiscal years ended June 30, 2019 and June 30, 2018 are disclosed in (b)-(d) above. There were no audit or non-audit services performed by the registrant’s principal accountant for the registrant’s adviser.

 

(h)

There were no non-audit services rendered to the registrant’s investment adviser.

 

ITEM 5.AUDIT COMMITTEE OF LISTED REGISTRANTS.

 

Not applicable

 

ITEM 6.SCHEDULES OF INVESTMENTS

 

Included in annual report to shareholders filed under item 1 of this form.

 

ITEM 7.DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

Not applicable Fund is an open-end management investment company

 

ITEM 8.PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES

 

Not applicable Fund is an open-end management investment company

 

ITEM 9.PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.

 

Not applicable Fund is an open-end management investment company

 

ITEM 10.SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS.

 

Not applicable at this time.

 

ITEM 11.CONTROLS AND PROCEDURES.

 

 

(a)

The registrant’s principal executive and principal financial officers, or persons performing similar functions, have concluded that the registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the 1940 Act, are effective, as of a date within 90 days of the filing date of this report, based on the evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act and Rule 15d-15(b) under the Securities Exchange Act of 1934, as amended.

 

 

(b)

There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant’s internal control over financial reporting.

 

 

 

 

ITEM 12.DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.

 

Not applicable, Fund is an open-end management investment company

 

ITEM 13.EXHIBITS

 

(1)Code of Ethics for Principal Executive and Senior Financial Officers is attached hereto.

 

(2)Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 are filed herewith.

 

(3)Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002 are filed herewith.

 

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

360 Funds

 

By: Randy Linscott

/s/ Randy Linscott

 

Principal Executive Officer, 

 

 

Date:  September 6, 2019

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the date indicated.

 

By  Randy Linscott

/s/ Randy Linscott

 

Principal Executive Officer 

 

Date: September 6, 2019

 

 

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the date indicated.

 

By Larry E. Beaver, Jr.

/s/ Larry E. Beaver, Jr.

 

Assistant Treasurer and Acting Principal Financial Officer

 

Date: September 6, 2019

 

 

 

 

 

EX-99.CODE ETH 2 ex99-coe.htm CODE OF ETHICS FOR PRINCIPAL EXECUTIVE AND SENIOR FINANCIAL OFFICERS

 

360 FUNDS - N-CSR

Exhibit 99.Coe

 

360 FUNDS / M3Sixty Funds Trust

 

SUPPLEMENTAL CODE OF ETHICS FOR
PRINCIPAL EXECUTIVE AND PRINCIPAL FINANCIAL OFFICERS

 

A.

Covered Officers/Purpose of the Code

 

This Code of Ethics for Principal Executive and Principal Financial Officers (the “Code”) for each Trust (each, a “Company”) applies to the Trust’s Principal Executive Officer, Principal Financial Officer and Principal Accounting Officer(s) (the “Covered Officers” each of whom are set forth in Exhibit A) for the purpose of promoting:

 

 

honest and ethical conduct, including the ethical handling of actual or apparent conflicts of interest between personal and professional relationships;

 

 

full, fair, accurate, timely and understandable disclosure in reports and documents that a registrant files with, or submits to, the Securities and Exchange Commission (“SEC”) and in other public communications made by the Company;

 

 

compliance with applicable laws and governmental rules and regulations;

 

 

the prompt internal reporting of violations of the Code to an appropriate person or persons identified in the Code; and

 

 

accountability for adherence to the Code.

 

B.

Covered Officers Should Handle Ethically Actual and Apparent Conflicts of Interest

 

Overview.  A “conflict of interest” occurs when a Covered Officer’s private interest in any material respect interferes with the interests of, or his service to, the Company.  For example, a conflict of interest would arise if a Covered Officer, or a member of his family, receives improper personal benefits as a result of his position with the Company.

 

Certain conflicts of interest arise out of the relationships between Covered Officers and the Company and already are subject to conflict of interest provisions in the Investment Company Act of 1940 (“Investment Company Act”) and the Investment Advisers Act of 1940 (“Investment Advisers Act”).  For example, Covered Officers may not individually engage in certain transactions (such as the purchase or sale of securities or other property, other than shares of beneficial interest of the Company) with the Company because of their status as “affiliated persons” of the Company.  The Company’s and the investment adviser’s compliance programs and procedures are designed to prevent, or identify and correct, violations of these provisions.  This Code does not, and is not intended to, repeat or replace these programs and procedures, and such conflicts fall outside of the parameters of this Code.

 

Although typically not presenting an opportunity for improper personal benefit, conflicts arise from, or as a result of, the contractual relationship between the Company and the investment adviser/administrator of which the Covered Officers are also officers or employees.  As a result, this Code recognizes that the Covered Officers will, in the normal course of their duties (whether formally for the Company or for the adviser/administrator, or for both), be involved in establishing policies and implementing decisions that may have different effects on the adviser/administrator and the Company.  The participation of the Covered Officers in such activities is inherent in the contractual relationship between the Company and the adviser/administrator and is consistent with the performance by the Covered Officers of their duties as officers of the Company.  Thus, if performed in conformity with the provisions of the Investment Company Act and the Investment Advisers Act, such activities will be deemed to have been handled ethically.  In addition, it is recognized by the Company’s Board of Directors (“Board”) that the Covered Officers may also be officers or employees of one or more investment companies covered by other codes. 

 

 

 

 

Other conflicts of interest are covered by the Code, even if such conflicts of interest are not subject to provisions in the Investment Company Act and the Investment Advisers Act.  The following list provides examples of conflicts of interest under the Code, but Covered Officers should keep in mind that these examples are not exhaustive.  The overarching principle is that the personal interest of a Covered Officer should not be placed improperly before the interest of the Company.

 

Each Covered Officer must:

 

 

not use his personal influence or personal relationships improperly to influence investment decisions or financial reporting by the Company whereby the Covered Officer would benefit personally to the detriment of the Company;

 

 

not cause the Company to take action, or fail to take action, for the individual personal benefit of the Covered Officer to the detriment of the Company;

 

 

not use material non-public knowledge of portfolio transactions made or contemplated for the Company to trade personally or cause others to trade personally in contemplation of the market effect of such transactions;

 

 

report at least annually any affiliations or other relationships related to conflicts of interest that the Company’s Directors and Officers Questionnaire covers.

 

There are some conflict of interest situations that should always be discussed with the Audit Committee of the Company if such situations might have a material adverse effect on the Company.  Examples of these include:

 

 

service as a director on the board of any public company;

 

 

the receipt of non-nominal gifts;

 

 

the receipt of entertainment from any company with which the Company has current or prospective business dealings, including investments in such companies, unless such entertainment is business-related, reasonable in cost, appropriate as to time and place, and not so frequent as to raise any questions of impropriety;

 

 

any ownership interest in, or any consulting or employment relationship with, any of the Company’s service providers, other than its investment adviser, principal underwriter, administrator or any affiliated person thereof;

 

 

a direct or indirect financial interest in commissions, transaction charges or spreads paid by the Company for effecting portfolio transactions, including but not limited to certain soft dollar arrangements, or for selling or redeeming shares other than an interest arising from the Covered Officer’s employment, such as compensation or equity ownership.

 

C.

Disclosure and Compliance

 

 

each Covered Officer should familiarize himself with the disclosure requirements generally applicable to the Company;

 

 

 

  

 

each Covered Officer should not knowingly misrepresent, or cause others to misrepresent, facts about the Company to others, whether within or outside the Company, including to the Company’s directors and auditors, and to governmental regulators and self-regulatory organizations;

 

 

each Covered Officer should, to the extent appropriate within his area of responsibility, consult with other officers and employees of the Company and the adviser/administrator with the goal of promoting full, fair, accurate, timely and understandable disclosure in the reports and documents the Company files with, or submits to, the SEC and in other public communications made by the Company; and

 

 

it is the responsibility of each Covered Officer to promote compliance with the standards and restrictions imposed by applicable laws, rules and regulations. 

 

D.

Reporting and Accountability

 

Each Covered Officer must:

 

 

upon adoption of the Code (or thereafter as applicable, upon becoming a Covered Officer), affirm in writing to the Board that he has received, read, and understands the Code;

 

 

annually thereafter affirm to the Board that he has complied with the requirements of the Code;

 

 

not retaliate against any other Covered Officer or any employee of the Company or their affiliated persons for reports of potential violations that are made in good faith; and

 

 

notify the Audit Committee for the Company promptly if he knows of any material violation of this Code. 

 

The Audit Committee is responsible for applying this Code to specific situations in which questions are presented under it and has the authority to interpret this Code in any particular situation.  However, any approvals or waivers sought by a Covered Officer will be considered by the Audit Committee.

 

The Company will follow these procedures in investigating and enforcing this Code:

 

 

the Chief Compliance Officer of the Company (or such other Company officer or other investigator as the Audit Committee may from time to time designate) (the “Investigator”), shall take appropriate action to investigate any potential violations reported to him; if, after such investigation, the Investigator believes that no violation has occurred, the Investigator is not required to take any further action;

 

 

any matter that the Investigator believes is a violation will be reported to the Audit Committee;

 

 

if the Audit Committee concurs that a violation has occurred, it will inform and make a recommendation to the Board, which will consider appropriate action, which may include review of, and appropriate modifications to, applicable policies and procedures; notification to appropriate personnel of the investment adviser/administrator or its board; or a recommendation to dismiss the Covered Officer;

 

 

the Board will be responsible for granting waivers, as appropriate; and

 

 

any changes to or waivers of this Code will, to the extent required, be disclosed as provided by SEC rules.

 

 

 

 

Any potential violation of this Code by the Investigator shall be reported to the Audit Committee and the Audit Committee shall appoint an alternative Company officer or other investigator to investigate the matter.

 

E.

Other Policies and Procedures

 

This Code shall be the sole code of ethics adopted by the Company for purposes of Section 406 of the Sarbanes-Oxley Act and the rules and forms applicable to registered investment companies thereunder.  Insofar as other policies or procedures of the Company, the Company’s adviser, principal underwriter, or other service providers govern or purport to govern the behavior or activities of the Covered Officers who are subject to this Code, they are superseded by this Code to the extent that they overlap or conflict with the provisions of this Code.  The Company’s and its investment adviser’s and principal underwriter’s codes of ethics under Rule 17j-1 under the Investment Company Act are separate requirements applying to the Covered Officers and others, and are not part of this Code.

 

F.

Amendments

 

Any amendments to this Code, other than amendments to Exhibit A, must be approved or ratified by a majority vote of the Board, including a majority of independent directors.

 

G.

Confidentiality

 

All reports and records prepared or maintained pursuant to this Code will be considered confidential and shall be maintained and protected accordingly.  Except as otherwise required by law or regulation or this Code, such matters shall not be disclosed to anyone other than the Board and the Audit Committee.

 

H.

Internal Use

 

The Code is intended solely for the internal use by the Company and does not constitute an admission, by or on behalf of the Company, as to any fact, circumstance, or legal conclusion.

 

 

 

 

Exhibit A

 

Persons Covered by this Code of Ethics

 

Randy Linscott, Principal Executive Officer, M3Sixty Funds Trust and 360 Funds 

Larry E. Beaver, Jr. Assistant Treasurer and Acting Principal Financial Officer, 

M3Sixty Funds Trust and 360 Funds

 

 

 

 

Exhibit B

 

Covered Officer Affirmation of Understanding

 

In accordance with Section D of the Code of Ethics for Principal Executive and Senior Financial Officers (the “Code”), the undersigned Covered Officer of the Company (as defined in the Code) hereby affirms to the Board that the Covered Officer has received, read, and understands the Code.

 

 

Date:

10/24/2018

/s/ Randy Linscott

 

 

 

Covered Officer – Randy Linscott, Principal Executive Officer

 

 

 

 

Date:

2/8/2019

/s/ Larry E. Beaver, Jr.

 

 

 

Covered Officer – Larry E. Beaver, Jr., Assistant Treasurer and

 

 

Acting Principal Financial Officer

 

 

 

EX-99.CERT 3 ex99-cert.htm CERTIFICATIONS PURSUANT TO SECTION 302

 

 

360 FUNDS - N-CSR

Exhibit 99.Cert

 

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act

 

I, Randy Linscott, certify that:

 

 

1.

I have reviewed this report on Form N-CSR of the IMS Family of Funds, series of the 360 Funds (the “registrant”);

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal period  for which the report is filed;

 

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3 (d) under the Investment Company Act of 1940) for the registrant and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such  disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles:

 

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting 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; and

 

 

5.

The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of Directors (or persons performing the equivalent functions):

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are  reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: September 6, 2019

/s/ Randy Linscott

 

 

Randy Linscott

 

 

Principal Executive Officer

 

 

 

 

 

Certification Pursuant to Section 302 of the Sarbanes-Oxley Act

 

I, Larry E. Beaver, Jr. certify that:

 

 

1.

I have reviewed this report on Form N-CSR of the IMS Family of Funds, series of the 360 Funds (the “registrant”);

 

 

2.

Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

 

 

3.

Based on my knowledge, the financial statements, and other financial information included in this report fairly present in all material respects the investments of the registrant as of the end of the fiscal period  for which the report is filed;

 

 

4.

The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) and internal control over financial reporting (as defined in Rule 30a-3 (d) under the Investment Company Act of 1940) for the registrant and have:

 

 

(a)

Designed such disclosure controls and procedures, or caused such  disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

 

 

(b)

Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles:

 

 

(c)

Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of a date within 90 days prior to the filing date of this report based on such evaluation; and

 

 

(d)

Disclosed in this report any change in the registrant’s internal control over financial reporting 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; and

 

 

5.

The registrant’s other certifying officer(s) and I have disclosed to the registrant’s auditors and the audit committee of the registrant’s board of Directors (or persons performing the equivalent functions):

 

 

(a)

All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are  reasonably likely to adversely affect the registrant’s ability to record, process, summarize, and report financial information; and

 

 

(b)

Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

 

Date: September 6, 2019

/s/ Larry E. Beaver, Jr.

 

 

Larry E. Beaver, Jr.

 

 

Assistant Treasurer and Acting Principal Financial Officer

 

 

EX-99.906 CERT 4 ex99-906cert.htm CERTIFICATIONS PURSUANT TO SECTION 906

 

 

360 FUNDS - N-CSR

Exhibit 99.906.Cert

 

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT

 

I, Randy Linscott, Principal Executive Officer of the 360 Funds (the “Registrant”), certify that:

 

 

1.

The N-CSR of the IMS Family of Funds for the period ended June 30, 2019 (the  “Report”) fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934; and

 

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

By:

/s/ Randy Linscott

 

 

Randy Linscott

 

 

Principal Executive Officer

 

 

 

 

Date: 

September 6, 2019

 

 

A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN THE ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO M3SIXTY ADMINISTRATION, LLC AND WILL BE RETAINED BY M3SIXTY ADMINISTRATION LLC. AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.

 

 

 

 

CERTIFICATION PURSUANT TO SECTION 906 OF THE SARBANES-OXLEY ACT

 

I, Larry E. Beaver, Jr., Assistant Treasurer and Acting Principal Financial Officer of the 360 Funds, (the “Registrant”), certify that:

 

 

1.

The N-CSR of the IMS Family of Funds for the period ended June 30, 2019 (the  “Report”) fully complies with the requirements of Section 15(d) of the Securities Exchange Act of 1934; and

 

 

2.

The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Registrant.

 

By:

/s/ Larry E. Beaver, Jr.

 

 

Larry E. Beaver, Jr.

 

 

Assistant Treasurer and Acting Principal Financial Officer

 

 

 

Date: 

September 6, 2019

 

 

A SIGNED ORIGINAL OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, OR OTHER DOCUMENT AUTHENTICATING, ACKNOWLEDGING, OR OTHERWISE ADOPTING THE SIGNATURE THAT APPEARS IN TYPED FORM WITHIN THE ELECTRONIC VERSION OF THIS WRITTEN STATEMENT REQUIRED BY SECTION 906, HAS BEEN PROVIDED TO M3SIXTY ADMINISTRATION, LLC. AND WILL BE RETAINED BY M3SIXTY ADMINISTRATION, LLC AND FURNISHED TO THE SECURITIES AND EXCHANGE COMMISSION OR ITS STAFF UPON REQUEST.

 

 

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