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 Parkway, 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: 877-244-6235
Date of fiscal year end: 04/30/2018
Date of reporting period: 04/30/2018
| ITEM 1. | REPORTS TO SHAREHOLDERS |
EAS Crow Point Alternatives Fund
Class A Shares (Ticker Symbol: EASAX) Class C Shares (Ticker Symbol: EASYX) Class I Shares (Ticker Symbol: EASIX)
A Series of the 360 Funds |
ANNUAL REPORT
April 30, 2018
Investment Adviser:
Crow Point Partners, LLC
25 Recreation Drive, Suite 206
Hingham, MA 02043
1-877-327-0757
www.crowpointfunds.com
Distributed by Matrix 360 Distributors, LLC
Member FINRA
This report is authorized for distribution only to shareholders and to others who have received a copy of the Fund’s prospectus.
TABLE OF CONTENTS
For the fiscal year ended April 30, 2018, your EAS Crow Point Alternatives Fund (the “Fund”) returned 7.20% vs (0.32)% for the Barclay’s U.S. Aggregate Bond Index and 3.51% for the HFRI Fund-of-Funds Conservative Index. The Fund continued a string of strong quarterly performances relative to its peer group, the Morningstar Multialternative category. The Fund has now outperformed its Morningstar peer group for four consecutive quarters. Most importantly, we are happy to report that Morningstar has awarded the Fund’s Class I shares its fourth star, recognizing its past strong performance.
In late 2016, in response to the US Presidential elections, our models suggested that growth would benefit the most from Trump’s election, and we moved aggressively to tilt the portfolio toward smaller cap growth stocks while cutting back on the Fund’s short exposure. We also owned many of the right growth stocks in 2017 including NVDA and NFLX. You will recall that the Fund was actually #2 in the Morningstar Multialternative category percentile rankings for 2Q17. This re-positioning was largely responsible for that.
Our broader asset allocation moves also yielded benefits in the last year. While many investors were concerned about the sharp uptick in volatility in February 2018, our models kept us overweight equities and that paid off. Furthermore, our models kept us in small caps and that has really paid off. Basically, for the past twelve months, we have favored small caps over large, growth stocks over value, the US over the Rest of World, cash and alternatives over bonds. Additionally, while we overallocated to growth, our small cap managers also outperformed their benchmarks by wide margins, which helped performance even more. We expect there to be a reversion to the mean soon, and we are adding value stocks to the Fund’s portfolio and will likely continue to do so.
We have also done well with shorts, however selectively we used them. Tesla remains the biggest short in the portfolio (5%), and we are short in it at an average cost of about $365/share. While we expect Tesla’s share price to collapse with its eroding fundamentals, the timing of these things is always uncertain and this is a volatile stock. To counter that uncertainty and volatility, we own call options as protection against unexpected upward price shocks. We were also short, at times, GE and ARII, and have been short the weak sisters in EM: Turkey, India, Mexico and South Africa. That short emerging market trade has paid off recently. We are shorting for directional alpha, not for hedging purposes, and many of our shorts are working at the moment. We will continue to approach shorts that way, as selective alpha generators.
Going forward, we are exploring adding a managed futures sleeve as we believe that is the best and most efficient way to hedge against broad market declines. While our models continue to tilt in favor of risk assets, we are as jumpy as everyone else now and are watching the data closely. So far, the correct positioning has been to stay with the risk trade.
As we indicated in the last quarterly letter, our proprietary risk tools identify three kinds of markets: (1) low-risk bull, characterized by low levels of market volatility and high returns (what we exited in 2017); (2) high-risk bull, where volatility spikes but return potential remains high, and (3) high-risk bear, where volatility and return potential works against the investor. A high-risk bull market, where we are now in our opinion, means that optimal portfolio positions be smaller than normal. With more names in the portfolio, diversification becomes an ally.
We continue to minimize long exposure to bonds (less than 10% of net Fund assets), and what bonds we do own are of a short duration, hedged in some manner, or highly credit sensitive where we have a high degree of confidence in the underlying credit. We will likely be rolling into more floating rate notes going forward. Right now, the Fund’s portfolio construction is as follows: approximately 60% of the Fund’s net assets are invested in various long/short strategies, primarily equity based; 21% in global macro; 19% in various arbitrage strategies (mostly through our investment in an outside limited partnership); and the remainder in other opportunistic situations.
That’s it for now. We thank you for being a shareholder. We are honored by the privilege. As always, please reach out to us at any time if you have questions.
Sincerely,
Peter J. DeCaprio
Crow Point Partners
1
See following for important disclosures.
Before investing in the EAS Crow Point Alternatives Fund, you should carefully consider the Fund’s investment objectives, risks, charges, and expenses. For a current Prospectus, which contains this and other important information, visit cppfunds.com. Please read the Prospectus carefully before investing.
Performance data quoted is for the Fund’s Class I shares and represents past performance. Please see Investment Highlights for performance information of the Class A and Class C shares. Past performance is no guarantee of future results and investment returns and principal value of the Fund will fluctuate so that shares, when redeemed, may be worth more or less than their original cost. Current performance may be higher or lower than the performance quoted. Call 1-877-244-6235 for current month end performance.
Positive performance of holdings does not indicate positive portfolio returns.
The Barclay’s US Aggregate Bond Index is a broad-based flagship benchmark that measures the investment grade, US dollar-denominated, fixed-rate taxable bond market. The index includes Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS and CMBS (agency and non-agency).
HFRI Fund of Funds Conservative Index (the “Index”) is an unmanaged index. Funds in the Index generally seek consistent returns by primarily investing in funds that generally engage in more conservative strategies such as equity market neutral, fixed income arbitrage and convertible arbitrage. Index returns assume reinvestment of dividends. Investors may not invest in the Index directly; unlike the Fund’s returns, the Index does not reflect any fees or expenses.
The Fund’s portfolio may differ significantly from the securities held in these indices. You cannot invest directly in an index, therefore its performance does not reflect the expenses associated with the active management of an actual portfolio.
As of April 30, 2018, the top ten holdings for the EAS Crow Point Alternatives Fund: ACA Master Select Fund LP, 19.33%; Crow Point Alternative Income Fund, 16.27%; E*TRADE Financial Corp, 1.83%; Worldpay, Inc., 1.43%; Raytheon Co., 1.33%; Dollar General Corp., 1.08%; ServiceNow, Inc., 1.08%; Twitter, Inc., 0.96%; Morgan Stanley, 0.87%; Palo Alto Networks, Inc, 0.87%. Fund holdings are subject to change and holding discussions are not recommendations to buy or sell any security. Current and future holdings are subject to risk.
Fund distributed by Matrix 360 Distributors, LLC.
2
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
April 30, 2018 (Unaudited)
(1) The Class A shares includes the deduction of the current maximum initial sales charge of 5.50%. The minimum initial investment for the Class I shares is $500,000.
Returns as of April 30, 2018 | One year ended April 30, 2018 | Five years ended April 30, 2018 | Since inception from August 14, 2008 through April 30, 2018 |
| EAS Crow Point Alternatives Fund Class A without sales charge | 6.99% | 1.50% | 1.25% |
| EAS Crow Point Alternatives Fund Class A with sales charge | 1.11% | 0.36% | 0.66% |
| EAS Crow Point Alternatives Fund Class C without CDSC | 6.24% | 0.77% | 0.54% |
| EAS Crow Point Alternatives Fund Class I | 7.20% | 1.81% | 1.51% |
| Barclay’s U.S. Aggregate Bond Index | (0.32)% | 1.47% | 3.76% |
| HFRI Fund-of-Funds Conservative Index | 3.51% | 2.91% | 1.48% |
The performance information quoted in this annual report assumes the reinvestment of all dividend and capital gain distributions, if any, and represents past performance, which is not a guarantee of future results. The returns shown do not reflect taxes that a shareholder would pay on Fund distributions or on the redemption of Fund shares. The investment return and principal value of an investment will fluctuate and, therefore, an investor’s shares, when redeemed, may be worth more or less than their original cost. Updated performance data current to the most recent month-end can be obtained by calling 1-877-244-6235.
3
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
INVESTMENT HIGHLIGHTS
April 30, 2018 (Unaudited)
The above graph depicts the performance of the EAS Crow Point Alternatives Fund versus the HFRI Fund-of-Funds Conservative Index. HFRI Fund of Funds Conservative Index (the “Index”) is an unmanaged index. Funds in the Index generally seek consistent returns by primarily investing in funds that generally engage in more conservative strategies such as equity market neutral, fixed income arbitrage and convertible arbitrage. Index returns assume reinvestment of dividends. Investors may not invest in the Index directly; unlike the Fund’s returns, the Index does not reflect any fees or expenses.
As with any fund, save an index fund, that commonly compares its performance to the Index, such a comparison may be said to be inappropriate because of the dissimilarity between the Fund’s investments and the securities comprising the Index; so too with the EAS Crow Point Alternatives Fund, which will generally not invest in all the securities comprising the Index.
The investment objective of the EAS Crow Point Alternatives Fund (the “Fund”) is preservation and growth of capital.
Crow Point Partners, LLC’s (the “Adviser”) investment philosophy centers on the preservation and growth of capital through both good and bad markets. The Adviser believes that for most shareholders, investment success is about growing capital over time while protecting it at all times, not about beating a market index which can frequently involve losses while still meeting the objective. Thus, the Adviser follows an absolute return approach in managing the Fund, as defined below. In executing its strategy, the Adviser attempts to generate consistent, positive returns regardless of market conditions by allocating the Fund’s investments among multiple alternative investment asset classes and strategies.
The Fund’s investments will be allocated among multiple alternative investment classes using primarily liquid instruments. The Fund may, generally, pursue investments among the following alternative investment classes or strategies: Arbitrage; Commodities; Convertibles; Floating Rate Debt; Currencies; Emerging Markets Bonds; Emerging Market Equities; High Yield; Long-Short Equity; Long-Short Credit; Managed Futures; Capital Structure Arbitrage; and Real Estate (primarily through real estate investment trusts (“REITs”). The Fund may invest in securities directly, or through other mutual funds, ETFs, closed-end funds, and private funds (“Underlying Funds”) across these alternative investment styles. An ETF is an investment company that typically seeks to track the performance of an index by holding in its portfolio either the contents of the index or a representative sample of the securities in the index. The Adviser may invest a portion of the Fund’s assets in other mutual funds that are also advised by the Adviser. Investments in private funds such as hedge funds will be limited to no more than 15% of the Fund’s net assets at the time of purchase. The Adviser will periodically adjust the asset allocation among each alternative investment class based on its assessment of market conditions and investment opportunities.
Allocation of Portfolio Holdings
| Asset Class/Industry Sector | Percentage of Net Assets | |
| Hedge Funds | 19.34% | |
| Mutual Funds | 17.28% | |
| Consumer, Non-cyclical | 12.97% | |
| Financials | 10.74% | |
| Technology | 6.01% | |
| Industrials | 5.73% | |
| Consumer, Cyclical | 5.70% | |
| Communications | 4.26% | |
| Basic Materials | 2.55% | |
| Energy | 2.17% | |
| Utilities | 0.57% | |
| Bonds & Notes | 0.35% | |
| Exchange-Traded Funds | (2.50)% | |
| Other, Cash and Cash Equivalents | 14.83% | |
| 100.00% |
The percentages in the above table are based on the portfolio holdings of the Fund as of April 30, 2018 and are subject to change. For a detailed break-out of holdings by industry and investment type, please refer to the Schedule of Investments.
4
| EAS CROW POINT ALTERNATIVES FUND | |
| SCHEDULE OF INVESTMENTS | |
| April 30, 2018 | ANNUAL REPORT |
| COMMON STOCK - 55.89% | Shares | Value | ||||||
| Aerospace & Defense - 2.75% | ||||||||
| Boeing Co. | 158 | $ | 52,702 | |||||
| Lockheed Martin Corp. (b) | 523 | 167,799 | ||||||
| Northrop Grumman Corp. | 213 | 68,595 | ||||||
| Raytheon Co. (b) | 1,325 | 271,546 | ||||||
| 560,642 | ||||||||
| Apparel - 0.39% | ||||||||
| Under Armour, Inc. - Class A (a) | 4,465 | 79,298 | ||||||
| Auto Manufacturers - 0.47% | ||||||||
| General Motors Co. | 413 | 15,174 | ||||||
| PACCAR, Inc. | 1,263 | 80,415 | ||||||
| 95,589 | ||||||||
| Auto Parts & Equipment - 0.16% | ||||||||
| Cooper-Standard Holdings, Inc. (a) | 262 | 32,436 | ||||||
| Banks - 3.77% | ||||||||
| Allegiance Bancshares, Inc. (a) | 850 | 34,383 | ||||||
| CIT Group, Inc. | 2,718 | 143,918 | ||||||
| Citigroup, Inc. (b) | 1,114 | 76,053 | ||||||
| Comerica, Inc. | 1,843 | 174,311 | ||||||
| Goldman Sachs Group, Inc. | 690 | 164,448 | ||||||
| Morgan Stanley (b) | 3,433 | 177,211 | ||||||
| 770,324 | ||||||||
| Biotechnology - 1.15% | ||||||||
| BrainStorm Cell Therapeutics, Inc. (a) | 5,097 | 16,718 | ||||||
| Dynavax Technologies Corp. (a) | 3,128 | 53,020 | ||||||
| Exact Sciences Corp. (a) (b) | 1,340 | 67,013 | ||||||
| HTG Molecular Diagnostics, Inc. (a) | 14,096 | 56,243 | ||||||
| Myriad Genetics, Inc. (a) | 915 | 25,885 | ||||||
| PolarityTE, Inc. (a) | 969 | 16,735 | ||||||
| 235,614 | ||||||||
| Building Materials - 0.51% | ||||||||
| Louisiana-Pacific Corp. | 910 | 25,780 | ||||||
| USG Corp. (a) | 1,949 | 78,408 | ||||||
| 104,188 | ||||||||
| Chemicals - 1.59% | ||||||||
| CF Industries Holdings, Inc. (b) | 3,245 | 125,906 | ||||||
| Ingevity Corp. (a) | 406 | 31,193 | ||||||
| Mosaic Co./The | 873 | 23,527 | ||||||
| PPG Industries, Inc. | 1,351 | 143,044 | ||||||
| 323,670 | ||||||||
| Commercial Services - 3.87% | ||||||||
| Automatic Data Processing, Inc. (b) | 295 | 34,834 | ||||||
| MarketAxess Holdings, Inc. | 513 | 101,897 | ||||||
| Moody’s Corp. | 848 | 137,546 | ||||||
| PayPal Holdings, Inc. (a) | 208 | 15,519 | ||||||
| Quanta Services, Inc. (a) | 1,327 | 43,128 | ||||||
| Ritchie Bros Auctioneers, Inc. | 741 | 24,253 | ||||||
| Verisk Analytics, Inc. (a) | 1,332 | 141,791 | ||||||
| Worldpay, Inc. Class A (a) (b) | 3,586 | 291,255 | ||||||
| 790,223 | ||||||||
5
| EAS CROW POINT ALTERNATIVES FUND | |
| SCHEDULE OF INVESTMENTS | |
| April 30, 2018 | ANNUAL REPORT |
| COMMON STOCK - 55.89% (continued) | Shares | Value | ||||||
| Computers - 2.19% | ||||||||
| Apple, Inc. | 347 | $ | 57,345 | |||||
| CACI International, Inc. - Classs A (a) | 341 | 51,508 | ||||||
| Lumentum Holdings, Inc. (a) (b) | 1,010 | 50,954 | ||||||
| Nutanix, Inc. - Class A (a) | 1,388 | 70,219 | ||||||
| Seagate Technology PLC | 2,899 | 167,823 | ||||||
| Virtusa Corp. (a) | 1,020 | 49,103 | ||||||
| 446,952 | ||||||||
| Distribution & Wholesale - 0.74% | ||||||||
| HD Supply Holdings, Inc. (a) | 2,972 | 115,046 | ||||||
| Watsco, Inc. | 213 | 35,660 | ||||||
| 150,706 | ||||||||
| Diversified Financial Services - 6.14% | ||||||||
| Affiliated Managers Group, Inc. (b) | 348 | 57,371 | ||||||
| AllianceBernstein Holding LP (b) | 4,949 | 134,613 | ||||||
| Cboe Global Markets, Inc. | 541 | 57,768 | ||||||
| CME Group, Inc. (b) | 957 | 150,900 | ||||||
| E*TRADE Financial Corp. (a) (b) | 6,154 | 373,425 | ||||||
| Intercontinental Exchange, Inc. (b) | 1,753 | 127,022 | ||||||
| Mastercard, Inc. - Class A (b) | 897 | 159,908 | ||||||
| Nasdaq, Inc. (b) | 233 | 20,579 | ||||||
| Santander Consumer USA Holdings, Inc. | 1,072 | 19,778 | ||||||
| TD Ameritrade Holding Corp. | 1,857 | 107,873 | ||||||
| Visa, Inc. - Class A (b) | 129 | 16,368 | ||||||
| Waddell & Reed Financial, Inc. - Class A | 1,326 | 26,838 | ||||||
| 1,252,443 | ||||||||
| Electric - 0.57% | ||||||||
| NRG Energy, Inc. | 3,733 | 115,723 | ||||||
| Electronics - 0.21% | ||||||||
| Electro Scientific Industries, Inc. (a) | 2,344 | 42,192 | ||||||
| Engineering & Construction - 0.91% | ||||||||
| AECOM (a) | 2,191 | 75,458 | ||||||
| Dycom Industries, Inc. (a) | 632 | 65,640 | ||||||
| TopBuild Corp. (a) | 566 | 45,110 | ||||||
| 186,208 | ||||||||
| Entertainment - 0.24% | ||||||||
| IMAX Corp. (a) (b) | 2,114 | 49,045 | ||||||
| Food - 2.07% | ||||||||
| Conagra Brands, Inc. | 3,660 | 135,676 | ||||||
| Mondelez International, Inc. - Class A (b) | 3,644 | 143,938 | ||||||
| Post Holdings, Inc. (a) | 1,787 | 142,192 | ||||||
| 421,806 | ||||||||
6
| EAS CROW POINT ALTERNATIVES FUND | |
| SCHEDULE OF INVESTMENTS | |
| April 30, 2018 | ANNUAL REPORT |
| COMMON STOCK - 55.89% (continued) | Shares | Value | ||||||
| Healthcare - Products - 2.96% | ||||||||
| ABIOMED, Inc. (a) | 286 | $ | 86,072 | |||||
| Accelerate Diagnostics, Inc. (a) | 447 | 9,923 | ||||||
| Becton Dickinson and Co. | 304 | 70,488 | ||||||
| CytoSorbents Corp. (a) | 8,784 | 66,319 | ||||||
| ICU Medical, Inc. (a) | 300 | 75,510 | ||||||
| Intuitive Surgical, Inc. (a) | 305 | 134,438 | ||||||
| Nevro Corp. (a) (b) | 400 | 35,744 | ||||||
| Novocure Ltd. (a) (b) | 2,651 | 72,372 | ||||||
| Stryker Corp. | 318 | 53,876 | ||||||
| 604,742 | ||||||||
| Healthcare - Services - 0.91% | ||||||||
| Teladoc, Inc. (a) | 2,111 | 90,773 | ||||||
| Universal Health Services, Inc. - Class B | 827 | 94,443 | ||||||
| 185,216 | ||||||||
| Home Builders - 0.56% | ||||||||
| DR Horton, Inc. | 1,398 | 61,708 | ||||||
| Installed Building Products, Inc. (a) | 897 | 51,757 | ||||||
| 113,465 | ||||||||
| Insurance - 0.48% | ||||||||
| Brown & Brown, Inc. | 1,722 | 46,890 | ||||||
| WR Berkley Corp. | 681 | 50,775 | ||||||
| 97,665 | ||||||||
| Internet - 4.22% | ||||||||
| Amazon.com, Inc. (a) | 70 | 109,629 | ||||||
| F5 Networks, Inc. (a) | 100 | 16,309 | ||||||
| Mimecast Ltd. (a) (b) | 2,813 | 107,035 | ||||||
| Palo Alto Networks, Inc. (a) | 920 | 177,109 | ||||||
| Quotient Technology, Inc. (a) (b) | 3,312 | 44,381 | ||||||
| Rapid7, Inc. (a) | 3,256 | 91,949 | ||||||
| RingCentral, Inc. - Class A (a) | 1,185 | 79,454 | ||||||
| Twilio, Inc. - Class A (a) (b) | 928 | 39,171 | ||||||
| Twitter, Inc. (a) | 6,458 | 195,742 | ||||||
| 860,779 | ||||||||
| Iron & Steel - 0.79% | ||||||||
| AK Steel Holding Corp. (a) | 8,177 | 37,532 | ||||||
| ArcelorMittal - ADR (b) | 805 | 27,241 | ||||||
| Reliance Steel & Aluminum Co. | 1,109 | 97,503 | ||||||
| 162,276 | ||||||||
| Lodging - 0.64% | ||||||||
| Las Vegas Sands Corp. | 1,597 | 117,108 | ||||||
| MGM Resorts International | 441 | 13,856 | ||||||
| 130,964 | ||||||||
| Machinery - Construction & Mining - 0.47% | ||||||||
| Caterpillar, Inc. | 659 | 95,133 | ||||||
| Media - 0.32% | ||||||||
| World Wrestling Entertainment, Inc. - Class A | 1,663 | 66,171 | ||||||
| Metal Fabricate & Hardware - 0.34% | ||||||||
| TimkenSteel Corp. (a) (b) | 4,139 | 69,494 | ||||||
7
| EAS CROW POINT ALTERNATIVES FUND | |
| SCHEDULE OF INVESTMENTS | |
| April 30, 2018 | ANNUAL REPORT |
| COMMON STOCK - 55.89% (continued) | Shares | Value | ||||||
| Mining - 0.25% | ||||||||
| Southern Copper Corp. | 949 | $ | 50,117 | |||||
| Office Furnishings - 0.20% | ||||||||
| Interface, Inc. | 1,862 | 40,964 | ||||||
| Oil & Gas - 2.29% | ||||||||
| Abraxas Petroleum Corp. (a) | 13,738 | 39,291 | ||||||
| ConocoPhillips | 1,429 | 93,600 | ||||||
| EOG Resources, Inc. | 878 | 103,753 | ||||||
| Helmerich & Payne, Inc. (b) | 886 | 61,621 | ||||||
| Marathon Petroleum Corp. | 519 | 38,878 | ||||||
| Matador Resources Co. (a) | 1,665 | 54,512 | ||||||
| Occidental Petroleum Corp. | 980 | 75,715 | ||||||
| 467,370 | ||||||||
| Pharmaceuticals - 2.40% | ||||||||
| AbbVie, Inc. | 1,184 | 114,315 | ||||||
| Corcept Therapeutics, Inc. (a) | 2,744 | 45,770 | ||||||
| Eyenovia, Inc. (a) | 4,699 | 40,693 | ||||||
| Flexion Therapeutics, Inc. (a) | 1,163 | 28,982 | ||||||
| Heron Therapeutics, Inc. (a) | 1,429 | 43,299 | ||||||
| Immune Design Corp. (a) (b) | 6,584 | 24,361 | ||||||
| Intra-Cellular Therapies, Inc. (a) | 1,443 | 25,137 | ||||||
| Neurocrine Biosciences, Inc. (a) (b) | 1,862 | 150,971 | ||||||
| Sarepta Therapeutics, Inc. (a) | 222 | 16,952 | ||||||
| 490,480 | ||||||||
| Real Estate - 0.63% | ||||||||
| CBRE Group, Inc. - Class A (a) | 2,830 | 128,227 | ||||||
| REITS - 0.19% | ||||||||
| Mid-America Apartment Communities, Inc. (b) | 425 | 38,870 | ||||||
| Retail - 4.18% | ||||||||
| Big Lots, Inc. (b) | 1,187 | 50,388 | ||||||
| Boot Barn Holdings, Inc. (a) | 2,375 | 46,479 | ||||||
| Chipotle Mexican Grill, Inc. (a) | 47 | 19,897 | ||||||
| Costco Wholesale Corp. | 531 | 104,692 | ||||||
| Dave & Buster’s Entertainment, Inc. (a) | 544 | 23,115 | ||||||
| Dick’s Sporting Goods, Inc. | 754 | 24,950 | ||||||
| Dollar General Corp. | 2,293 | 221,343 | ||||||
| Duluth Holdings, Inc. Class B (a) | 5,235 | 90,827 | ||||||
| Five Below, Inc. (a) | 642 | 45,332 | ||||||
| Kohl’s Corp. | 1,537 | 95,478 | ||||||
| TJX Cos., Inc./The | 1,216 | 103,178 | ||||||
| Urban Outfitters, Inc. (a) | 699 | 28,149 | ||||||
| 853,828 | ||||||||
| Savings & Loans - 0.16% | ||||||||
| Sterling Bancorp | 1,398 | 33,203 | ||||||
8
| EAS CROW POINT ALTERNATIVES FUND | |
| SCHEDULE OF INVESTMENTS | |
| April 30, 2018 | ANNUAL REPORT |
| COMMON STOCK - 55.89% (continued) | Shares | Value | ||||||
| Semiconductors - 1.38% | ||||||||
| Analog Devices, Inc. | 309 | $ | 26,991 | |||||
| CEVA, Inc. (a) | 710 | 23,146 | ||||||
| Integrated Device Technology, Inc. (a) | 1,642 | 45,697 | ||||||
| Micron Technology, Inc. (a) (b) | 3,024 | 139,044 | ||||||
| NVIDIA Corp. | 209 | 47,004 | ||||||
| 281,882 | ||||||||
| Software - 4.15% | ||||||||
| Box, Inc. - Class A (a) | 4,695 | 107,328 | ||||||
| CommVault Systems, Inc. (a) (b) | 789 | 55,191 | ||||||
| First Data Corp. - Class A (a) (b) | 1,661 | 30,064 | ||||||
| HubSpot, Inc. (a) | 468 | 49,561 | ||||||
| Jack Henry & Associates, Inc. | 248 | 29,631 | ||||||
| MobileIron, Inc. (a) (b) | 9,029 | 41,985 | ||||||
| New Relic, Inc. (a) | 996 | 69,610 | ||||||
| salesforce.com, Inc. (a) | 838 | 101,390 | ||||||
| ServiceNow, Inc. (a) | 1,331 | 221,132 | ||||||
| SS&C Technologies Holdings, Inc. | 1,071 | 53,175 | ||||||
| Tableau Software, Inc. - Class A (a) | 851 | 72,378 | ||||||
| Take-Two Interactive Software, Inc. (a) | 157 | 15,654 | ||||||
| 847,099 | ||||||||
| Transportation - 0.64% | ||||||||
| FedEx Corp. | 355 | 87,756 | ||||||
| Navigator Holdings Ltd. (a) | 3,739 | 42,812 | ||||||
| 130,568 | ||||||||
| TOTAL COMMON STOCK (Cost $10,798,839) | 11,405,572 | |||||||
| SHORT-TERM INVESTMENTS - 2.11% | ||||||||
| Federated Government Obligations Fund - Institutional Class, 1.56% (c) | 430,177 | 430,177 | ||||||
| TOTAL SHORT-TERM INVESTMENTS (Cost $430,177) | 430,177 | |||||||
| CLOSED-END FUND - 0.18% | ||||||||
| Royce Value Trust, Inc. | 2,270 | 36,547 | ||||||
| TOTAL CLOSED-END FUND (Cost $36,060) | 36,547 | |||||||
| EXCHANGE TRADED FUND - 0.13% | ||||||||
| Equity Fund - 0.13% | ||||||||
| Financial Select Sector SPDR Fund | 1,000 | 27,450 | ||||||
| TOTAL EXCHANGE TRADED FUND (Cost $28,245) | 27,450 | |||||||
| HEDGE FUND - 19.38% | ||||||||
| ACA Master Select Fund LP (a) (e) | 36,932 | 3,954,954 | ||||||
| TOTAL HEDGE FUND (Cost $3,771,057) | 3,954,954 | |||||||
9
| EAS CROW POINT ALTERNATIVES FUND | |
| SCHEDULE OF INVESTMENTS | |
| April 30, 2018 | ANNUAL REPORT |
| MUTUAL FUNDS - 17.27% | Shares | Value | ||||||
| Asset Allocation Funds - 16.77% | ||||||||
| Crow Point Alternative Income Fund - Investor Class * | 397,493 | $ | 3,319,068 | |||||
| Wells Fargo Utility and Telecommunications Fund - Class A | 4,921 | 103,248 | ||||||
| 3,422,316 | ||||||||
| Equity Fund - 0.50% | ||||||||
| Goodwood SMID Long/Short Fund (a) (f) | 12,500 | 100,875 | ||||||
| TOTAL MUTUAL FUNDS (Cost $3,518,914) | 3,523,191 | |||||||
| ASSET BACKED SECURITIES - 0.35% | Principal Amount | Value | ||||||
| Commercial MBS - 0.15% | ||||||||
| Morgan Stanley Capital I Trust 2006-IQ11, 6.253%, due 10/15/2042 (b) ^ | $ | 31,261 | $ | 31,183 | ||||
| Home Equity ABS - 0.01% | ||||||||
| RASC Series 2003-KS4 Trust, 3.87%, due 05/25/2033 (b) | 2,223 | 2,237 | ||||||
| Other ABS - 0.19% | ||||||||
| Diversified Asset Securitization Holdings II LP, 2.615%, due 09/15/2035 ^ # (b) | 38,020 | 38,020 | ||||||
| GSAMP Trust 2005-SEA2, 2.222%, due 01/25/2045 (b) ^ | 294 | 294 | ||||||
| 38,314 | ||||||||
| TOTAL ASSET BACKED SECURITIES (Cost $71,927) | 71,734 | |||||||
| OPTIONS PURCHASED (a) - 0.35% | ||||||||||||||||||||
| CALL OPTIONS PURCHASED - 0.05% | Contracts (d) | Notional Amount | Exercise Price | Expiration | Value | |||||||||||||||
| Tesla, Inc. | 6 | $ | 176,340 | $ | 295.00 | 5/18/2018 | $ | 8,994 | ||||||||||||
| TOTAL CALL OPTIONS PURCHASED (Cost $12,072) | 8,994 | |||||||||||||||||||
| PUT OPTIONS PURCHASED - 0.30% | ||||||||||||||||||||
| iShares Russell 2000 Growth ETF | 70 | $ | 1,336,930 | $ | 184.00 | 5/18/2018 | $ | 5,775 | ||||||||||||
| iShares Russell 2000 Growth ETF | 50 | $ | 954,950 | $ | 190.00 | 5/18/2018 | 10,500 | |||||||||||||
| SPDR S&P 500 ETF Trust | 135 | $ | 3,570,885 | $ | 265.00 | 5/18/2018 | 45,630 | |||||||||||||
| TOTAL PUT OPTIONS PURCHASED (Cost $121,248) | 61,905 | |||||||||||||||||||
| TOTAL OPTIONS PURCHASED (Cost $133,320) | 70,899 | |||||||||||||||||||
| TOTAL INVESTMENTS (Cost $18,788,539) - 95.66% | $ | 19,520,524 | ||||||||||||||||||
| SECURITIES SOLD SHORT (Proceeds $1,724,438) - (8.35%) | (1,704,948 | ) | ||||||||||||||||||
| OPTIONS WRITTEN (Proceeds $15,380) - (0.03%) | (5,410 | ) | ||||||||||||||||||
| OTHER ASSETS IN EXCESS OF LIABILITIES, NET - 12.72% | 2,595,165 | |||||||||||||||||||
| NET ASSETS - 100% | $ | 20,405,331 | ||||||||||||||||||
(a) Non-income producing security.
(b) All or a portion of the security is segregated as collateral for call options written and securities sold short.
(c) Rate shown represents the 7-day effective yield at April 30, 2018, is subject to change and resets daily.
(d) Each option contract is equivalent to 100 shares of the underlying common stock/exchange-traded fund.
(e) Private equity fund purchases on March 1, 2016 that invests in the DCM Multi-Manager Fund, LLC (Series A) and the DCM Multi-Manager Fund, LLC (Series D). Redemptions may be made monthly upon 30 days written notice. There were no unfunded commitments as of April 30, 2018. This investment is valued using the practical expedient. For more information on the practical expedient, please refer to the security valuation section on Note 3 of the accompanying notes to the financial statements.
(f) Became an affiliated company on May 14, 2018. Please see note 6 to the financial statements for more details.
* Affiliated investment company.
^ Variable or step coupon security - Interest rate shown represents the rate on April 30, 2018.
# The value of this security has been determined in good faith under the policies of the Board of Trustees. The value of such securities is $38,020 or 0.19% of net assets.
ADR - American Depositary Receipt.
ETF - Exchange Traded Fund
LP - Limited Partnership
PLC - Public Limited Company
The accompanying notes are an integral part of these financial statements.
10
| EAS CROW POINT ALTERNATIVES FUND | |
| SCHEDULE OF INVESTMENTS - SECURITIES SOLD SHORT | |
| April 30, 2018 | ANNUAL REPORT |
| SECURITIES SOLD SHORT (a) - (8.36)% | ||||||||
| COMMON STOCK - (5.45)% | Shares | Value | ||||||
| Auto Manufacturers - (1.59)% | ||||||||
| Tesla, Inc. | 1,100 | $ | 323,290 | |||||
| Auto Parts & Equipment - (0.08)% | ||||||||
| BorgWarner, Inc. | 353 | 17,276 | ||||||
| Chemicals - (0.08)% | ||||||||
| Olin Corp. | 552 | 16,665 | ||||||
| Commercial Services - (0.20)% | ||||||||
| Laureate Education, Inc. - Class A | 2,911 | 41,103 | ||||||
| Computers - (1.11)% | ||||||||
| Convergys Corp. | 9,692 | 226,405 | ||||||
| Diversified Financial Services - (0.72)% | ||||||||
| American Express Co. | 824 | 81,370 | ||||||
| Discover Financial Services | 358 | 25,507 | ||||||
| Navient Corp. | 2,949 | 39,104 | ||||||
| 145,981 | ||||||||
| Home Furnishings - (0.17)% | ||||||||
| Whirlpool Corp. | 221 | 34,244 | ||||||
| Household Products & Wares - (0.12)% | ||||||||
| Clorox Co. | 205 | 24,026 | ||||||
| Internet - (0.11)% | ||||||||
| SINA Corp. - China | 225 | 21,496 | ||||||
| Media - (0.18)% | ||||||||
| Houghton Mifflin Harcourt Co. | 5,391 | 36,659 | ||||||
| Miscellaneous Manufacturing - (0.09)% | ||||||||
| AZZ, Inc. | 429 | 19,112 | ||||||
| Oil & Gas - (0.12)% | ||||||||
| EQT Corp. | 508 | 25,497 | ||||||
| Pharmaceuticals - (0.08)% | ||||||||
| CVS Health Corp. | 239 | 16,689 | ||||||
| REITs - (0.11)% | ||||||||
| Lamar Advertising Co. - Class A | 339 | 21,598 | ||||||
| Retail - (0.09)% | ||||||||
| Barnes & Noble Education, Inc. | 2,444 | 17,572 | ||||||
| Semiconductors - (0.36)% | ||||||||
| Broadcom, Inc. | 323 | 74,103 | ||||||
11
| EAS CROW POINT ALTERNATIVES FUND | |
| SCHEDULE OF INVESTMENTS - SECURITIES SOLD SHORT | |
| April 30, 2018 | ANNUAL REPORT |
| SECURITIES SOLD SHORT - (8.36)% (continued) | ||||||||
| COMMON STOCK - (5.45)% (continued) | Shares | Value | ||||||
| Software - (0.24)% | ||||||||
| Cadence Design Systems, Inc. | 701 | $ | 28,082 | |||||
| NetEase, Inc. - ADR | 82 | 21,080 | ||||||
| 49,162 | ||||||||
| TOTAL COMMON STOCK (Proceeds $1,142,297) | 1,110,878 | |||||||
| EXCHANGE TRADED FUNDS - (2.91)% | ||||||||
| Equity Fund - (2.91)% | ||||||||
| iShares MSCI India ETF | 1,500 | 52,425 | ||||||
| iShares MSCI Mexico ETF | 1,532 | 79,051 | ||||||
| iShares MSCI Turkey ETF | 4,000 | 150,720 | ||||||
| iShares Russell 2000 Growth ETF | 1,359 | 259,555 | ||||||
| VanEck Vectors Russia ETF | 2,489 | 52,319 | ||||||
| 594,070 | ||||||||
| TOTAL EXCHANGE TRADED FUNDS (Proceeds $582,141) | 594,070 | |||||||
| TOTAL SECURITIES SOLD SHORT (Proceeds $1,724,438) – (8.36)% | $ | 1,704,948 | ||||||
(a) Non-income producing security.
ADR - American Depositary Receipt
ETF - Exchange Traded Fund
The accompanying notes are an integral part of these financial statements.
12
| EAS CROW POINT ALTERNATIVES FUND | |
| SCHEDULE OF INVESTMENTS - WRITTEN OPTIONS | |
| April 30, 2018 | ANNUAL REPORT |
| OPTIONS WRITTEN (a) - (0.03)% | ||||||||||||||||||||
| PUT OPTIONS WRITTEN - (0.03)% | Contracts 1 | Notional Amount | Exercise Price | Expiration | Value | |||||||||||||||
| iShares Russell 2000 Growth ETF | 70 | $ | 1,336,930 | $ | 177.00 | 5/18/2018 | $ | 1,750 | ||||||||||||
| SPDR S&P 500 ETF Trust | 60 | $ | 1,587,060 | $ | 252.00 | 5/18/2018 | 3,660 | |||||||||||||
| TOTAL PUT OPTIONS WRITTEN (Proceeds $15,380) | 5,410 | |||||||||||||||||||
| TOTAL OPTIONS WRITTEN (Proceeds $15,380) | $ | 5,410 | ||||||||||||||||||
(a) Non-income producing security.
1 Each option contract is equivalent to 100 units of the underlying exchange-traded fund.
ETF - Exchange Traded Fund
The accompanying notes are an integral part of these financial statements.
13
| EAS Crow Point Alternatives Fund | |
| STATEMENT OF ASSETS AND LIABILITIES | |
| April 30, 2018 | ANNUAL REPORT |
| Assets: | ||||
| Investment securities: | ||||
| Unaffiliated Securities at Cost | $ | 15,469,624 | ||
| Affiliated Securities at Cost | 3,318,915 | |||
| Total Securities at Cost | 18,788,539 | |||
| Unaffiliated Securities at Value | 16,201,456 | |||
| Affiliated Securities at Value | 3,319,068 | |||
| Deposits at broker | 1,764,885 | |||
| Due from adviser | 32,797 | |||
| Due from custodian | 13,253 | |||
| Depost for mutual fund share offering | 600,000 | |||
| Receivables: | ||||
| Interest | 444 | |||
| Dividends | 5,739 | |||
| Tax reclaims | 8,613 | |||
| Investment securities sold | 918,376 | |||
| Fund shares sold | 333,275 | |||
| Prepaid expenses and other assets | 55,677 | |||
| Total assets | 23,253,583 | |||
| Liabilities: | ||||
| Securities sold short and options written: | ||||
| Proceeds from securities sold short | 1,724,438 | |||
| Proceeds from options written | 15,380 | |||
| Total proceeds from securities sold short and options written | 1,739,818 | |||
| Securities sold short at value | 1,704,948 | |||
| Options written at value | 5,410 | |||
| Total securities sold short and options written at value | 1,710,358 | |||
| Payables: | �� | |||
| Investment securities purchased | 1,061,957 | |||
| Fund shares redeemed | 66,897 | |||
| Dividend expense from securities sold short | 692 | |||
| Accrued distribution (12b-1) fees | 4,631 | |||
| Accrued Trustee fees | 1,169 | |||
| Accrued expenses | 2,548 | |||
| Total liabilities | 2,848,252 | |||
| Net Assets | $ | 20,405,331 | ||
| Sources of Net Assets: | ||||
| Paid-in capital | $ | 21,726,699 | ||
| Accumulated net investment loss | (102,853 | ) | ||
| Accumulated net realized loss from investments, option contracts and securities sold short | (1,980,238 | ) | ||
| Net unrealized appreciation on investments, options, securities sold short and foreign currency translations | 761,723 | |||
| Total Net Assets (Unlimited shares of beneficial interest authorized) | $ | 20,405,331 | ||
| Class A Shares: | ||||
| Net assets | $ | 2,742,042 | ||
| Shares Outstanding ($0 par value, Unlimited shares of beneficial interest authorized) | 297,889 | |||
| Net Asset Value Per Share | $ | 9.20 | ||
| Maximum Offering Price Per Share (a) | $ | 9.74 | ||
| Minimum Redemption Price Per Share (b) (c) | $ | 8.92 | ||
| Class C Shares: | ||||
| Net assets | $ | 816,864 | ||
| Shares Outstanding ($0 par value, Unlimited shares of beneficial interest authorized) | 91,505 | |||
| Net Asset Value and Offering Price Per Share | $ | 8.93 | ||
| Minimum Redemption Price Per Share (c) (d) | $ | 8.66 | ||
| Class I Shares: | ||||
| Net assets | $ | 16,846,425 | ||
| Shares Outstanding (Unlimited shares of beneficial interest authorized) | 1,816,154 | |||
| Net Asset Value and Offering Price Per Share | $ | 9.28 | ||
| Minimum Redemption Price Per Share(c) | $ | 9.09 | ||
(a) A maximum sales charge of 5.50% is imposed on Class A shares.
(b) Investments in Class A shares made at or above the $1 million breakpoint are not subject to an initial sales charge and may be subject to a 1.00% contingent deferred sales charge (“CDSC”) on shares redeemed within one year from the date of purchase.
(c) A redemption fee of 2.00% is charged on redemptions of shares held less than 30 days.
(d) A contingent deferred sales charge (“CDSC”) of 1.00% is imposed in the event of certain redemption transactions made within one year from the date of purchase.
The accompanying notes are an integral part of these financial statements.
14
| EAS Crow Point Alternatives Fund | |
| STATEMENT OF OPERATIONS | |
| April 30, 2018 | ANNUAL REPORT |
| For the Year Ended April 30, 2018 | ||||
| Investment income: | ||||
| Dividends (net of foreign withholding taxes of $2) | $ | 162,114 | ||
| Dividends from affiliated funds | 63,043 | |||
| Interest | 24,975 | |||
| Total investment income | 250,132 | |||
| Expenses: | ||||
| Investment advisory fees | 231,659 | |||
| Distribution (12b-1) fees - Class A | 11,885 | |||
| Distribution (12b-1) fees - Class C | 8,461 | |||
| Accounting and transfer agent fees and expenses | 94,974 | |||
| Professional fees | 83,165 | |||
| Prior administrator fees | 65,867 | |||
| Dividends on securities sold short | 65,838 | |||
| Interest expense | 61,614 | |||
| Registration and filing fees | 51,004 | |||
| Custodian fees | 40,252 | |||
| Pricing fees | 12,950 | |||
| Trustee fees and expenses | 12,811 | |||
| Reports to shareholders | 8,302 | |||
| Compliance officer fees | 7,500 | |||
| Non-12b-1 shareholder servicing expense | 5,174 | |||
| Miscellaneous | 2,530 | |||
| Insurance | 1,533 | |||
| Total expenses | 765,519 | |||
| Less expense reimbursement: | ||||
| Fees waived by Adviser | (179,534 | ) | ||
| Fees waived by Adviser for affiliated holdings | (54,616 | ) | ||
| Fees waived by administrator | (44,660 | ) | ||
| Net expenses | 486,709 | |||
| Net investment loss | (236,577 | ) | ||
| Realized and unrealized gain (loss): | ||||
| Net realized gain (loss) on: | ||||
| Unaffiliated Investments | 1,742,373 | |||
| Affiliated Investments | 81,485 | |||
| Foreign currency transactions | 1,496 | |||
| Options written | (11,609 | ) | ||
| Securities sold short | (259,827 | ) | ||
| Net realized gain on investments, foreign currency transactions, options and securities sold short | 1,553,918 | |||
| Net change in unrealized appreciation (depreciation) on: | ||||
| Unaffiliated Investments | 245,233 | |||
| Affiliated Investments | 127,658 | |||
| Foreign currency transactions | (3,608 | ) | ||
| Options written | 4,641 | |||
| Securities sold short | (1,032 | ) | ||
| Net change in unrealized appreciation on investments, foreign currency transactions, options and securities sold short | 372,892 | |||
| Net gain | 1,926,810 | |||
| Net increase in net assets resulting from operations | $ | 1,690,233 | ||
The accompanying notes are an integral part of these financial statements.
15
| EAS Crow Point Alternatives Fund | |
| STATEMENTS OF CHANGES IN NET ASSETS | |
| April 30, 2018 | ANNUAL REPORT |
| For the Year Ended April 30, 2018 | For the Year Ended April 30, 2017 | |||||||
| Increase (decrease) in net assets from: | ||||||||
| Operations: | ||||||||
| Net investment loss | $ | (236,577 | ) | $ | (34,289 | ) | ||
| Net realized gain (loss) from investments, foreign currency transactions, options and securities sold short | 1,553,918 | (136,837 | ) | |||||
| Net change in unrealized appreciation on investments, foreign currency translations, options and securities sold short | 372,892 | 394,847 | ||||||
| Net increase in net assets resulting from operations | 1,690,233 | 223,721 | ||||||
| Distributions to shareholders from: | ||||||||
| Net investment income - Class A | (17,465 | ) | (37,351 | ) | ||||
| Net investment income - Class C | (458 | ) | — | |||||
| Net investment income - Class I | (113,800 | ) | (39,980 | ) | ||||
| Total distributions | (131,723 | ) | (77,331 | ) | ||||
| From shares of beneficial interest: | ||||||||
| Proceeds from shares sold: | ||||||||
| Class A | 134,893 | 2,515,557 | ||||||
| Class C | 4,000 | 56,128 | ||||||
| Class I | 9,960,572 | 10,067,605 | ||||||
| Net asset value of shares issued in reinvestment of distributions to shareholders: | ||||||||
| Class A | 15,347 | 33,593 | ||||||
| Class C | 428 | — | ||||||
| Class I | 111,539 | 36,651 | ||||||
| Redemption fee proceeds: | ||||||||
| Class A | — | 5,147 | ||||||
| Class C | — | 350 | ||||||
| Class I | — | 2,832 | ||||||
| Payments for shares redeemed: | ||||||||
| Class A | (10,107,175 | ) | (13,182,684 | ) | ||||
| Class C | (171,481 | ) | (699,001 | ) | ||||
| Class I | (9,310,754 | ) | (8,274,474 | ) | ||||
| Decrease in net assets from shares of beneficial interest | (9,362,631 | ) | (9,438,296 | ) | ||||
| Decrease in net assets | (7,804,121 | ) | (9,291,906 | ) | ||||
| Net Assets: | ||||||||
| Beginning of year | 28,209,452 | 37,501,358 | ||||||
| End of year | $ | 20,405,331 | $ | 28,209,452 | ||||
| (Accumulated) undistributed net investment income (loss) | $ | (102,853 | ) | $ | 21,737 | |||
| Capital share activity: | ||||||||
| Class A: | ||||||||
| Shares Sold | 14,767 | 292,404 | ||||||
| Shares Reinvested | 1,679 | 3,909 | ||||||
| Shares Redeemed | (1,136,016 | ) | (1,535,565 | ) | ||||
| Net decrease in shares of beneficial interest outstanding | (1,119,570 | ) | (1,239,252 | ) | ||||
| Class C: | ||||||||
| Shares Sold | 446 | 6,698 | ||||||
| Shares Reinvested | 48 | — | ||||||
| Shares Redeemed | (19,881 | ) | (83,298 | ) | ||||
| Net decrease in shares of beneficial interest outstanding | (19,387 | ) | (76,600 | ) | ||||
| Class I: | ||||||||
| Shares Sold | 1,090,024 | 1,160,329 | ||||||
| Shares Reinvested | 12,111 | 4,242 | ||||||
| Shares Redeemed | (1,009,516 | ) | (955,385 | ) | ||||
| Net increase in shares of beneficial interest outstanding | 92,619 | 209,186 | ||||||
The accompanying notes are an integral part of these financial statements.
16
| EAS CROW POINT ALTERNATIVES FUND | |
| FINANCIAL HIGHLIGHTS | |
| April 30, 2018 | ANNUAL REPORT |
The following tables set forth the per share operating performance data for a share of beneficial interest outstanding, total return ratios to average net assets and other supplemental data for the year indicated.
| Class A | ||||||||||||||||||||
| For the Year Ended April 30, 2018 | For the Year Ended April 30, 2017 | For the Year Ended April 30, 2016 | For the Year Ended April 30, 2015 | For the Year Ended April 30, 2014 | ||||||||||||||||
| Net Asset Value, Beginning of Year | $ | 8.64 | $ | 8.59 | $ | 9.18 | $ | 8.85 | $ | 8.80 | ||||||||||
| Investment Operations: | ||||||||||||||||||||
| Net investment income (loss) (1) | (0.11 | ) | (0.02 | ) | 0.08 | 0.09 | 0.04 | |||||||||||||
| Net realized and unrealized gain (loss) on investments | 0.71 | 0.09 | (0.62 | ) | 0.33 | 0.06 | ||||||||||||||
| Total from investment operations | 0.60 | 0.07 | (0.54 | ) | 0.42 | 0.10 | ||||||||||||||
| Distributions: | ||||||||||||||||||||
| From net investment income | (0.04 | ) | (0.02 | ) | (0.06 | ) | (0.09 | ) | (0.05 | ) | ||||||||||
| From net realized capital gains | — | — | — | — | — | |||||||||||||||
| Total distributions | (0.04 | ) | (0.02 | ) | (0.06 | ) | (0.09 | ) | (0.05 | ) | ||||||||||
| Paid in capital from redemption fees | — | 0.00 | (2) | 0.01 | 0.00 | (2) | 0.00 | (2) | ||||||||||||
| Net Asset Value, End of Year | $ | 9.20 | $ | 8.64 | $ | 8.59 | $ | 9.18 | $ | 8.85 | ||||||||||
| Total Return (3) | 6.99 | %(8) | 0.80 | % | (5.75 | )% | 4.78 | % | 1.18 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of year (in 000’s) | $ | 2,742 | $ | 12,253 | $ | 22,830 | $ | 11,122 | $ | 11,508 | ||||||||||
| Ratio of gross expenses to average net assets (4) (5): | 3.54 | % | 2.54 | % | 3.20 | % | 3.01 | % | 2.31 | % | ||||||||||
| Ratio of net expenses to average net assets (4) (6): | 2.26 | % | 2.18 | % | 2.62 | % | 2.83 | % | 2.14 | % | ||||||||||
| Ratio of net investment income (loss) to average net assets (7) | (1.27 | )% | (0.19 | )% | 0.86 | % | 1.02 | % | 0.42 | % | ||||||||||
| Portfolio turnover rate | 165 | % | 138 | % | 149 | % | 136 | % | 219 | % | ||||||||||
| (1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year. |
| (2) | Resulted in less than $0.01 per share. |
| (3) | Total Return represents the rate that the investor would have earned or lost on an investment in the Fund, assuming reinvestment of dividends. Total returns shown exclude the effect of applicable sales loads/redemption fees. |
| (4) | The ratios of expenses to average net assets do not reflect the Fund’s proportionate share of expenses of underlying investment companies in which the Fund invests. |
| (5) | Includes dividends from securities sold short and interest expense. Excluding dividends from securities sold short and interest expense, the ratio of gross expenses to average net assets would have been 2.11%, 2.12%, 2.53%, 2.31% and 3.00% for the years ended April 30, 2014, April 30, 2015, April 30, 2016, April 30, 2017 and April 30, 2018, respectively. |
| (6) | Includes dividends from securities sold short and interest expense. Excluding dividends from securities sold short and interest expense, the ratio of net expenses to average net assets would have been 1.95% for the years ended April 30, 2014, April 30, 2015, April 30, 2016 and April 30, 2017 and 1.71% for the year ended April 30, 2018. |
| (7) | Recognition of net investment income by the Fund is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests. |
| (8) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and, consequently, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset values and returns for shareholder transactions. |
The accompanying notes are an integral part of these financial statements.
17
| EAS CROW POINT ALTERNATIVES FUND | |
| FINANCIAL HIGHLIGHTS | |
| April 30, 2018 | ANNUAL REPORT |
The following tables set forth the per share operating performance data for a share of beneficial interest outstanding, total return ratios to average net assets and other supplemental data for the year indicated.
| Class C | ||||||||||||||||||||
| For the | For the | For the | For the | For the | ||||||||||||||||
| Year Ended | Year Ended | Year Ended | Year Ended | Year Ended | ||||||||||||||||
| April 30, 2018 | April 30, 2017 | April 30, 2016 | April 30, 2015 | April 30, 2014 | ||||||||||||||||
| Net Asset Value, Beginning of Year | $ | 8.41 | $ | 8.41 | $ | 9.00 | $ | 8.69 | $ | 8.69 | ||||||||||
| Investment Operations: | ||||||||||||||||||||
| Net investment income (loss) (1) | (0.17 | ) | (0.07 | ) | 0.01 | 0.02 | (0.03 | ) | ||||||||||||
| Net realized and unrealized gain (loss) on investments | 0.69 | 0.07 | (0.57 | ) | 0.33 | 0.06 | ||||||||||||||
| Total from investment operations | 0.52 | — | (0.56 | ) | 0.35 | 0.03 | ||||||||||||||
| Distributions: | ||||||||||||||||||||
| From net investment income | 0.00 | (2) | — | (0.03 | ) | (0.04 | ) | (0.03 | ) | |||||||||||
| Total distributions | 0.00 | — | (0.03 | ) | (0.04 | ) | (0.03 | ) | ||||||||||||
| Paid in capital from redemption fees | — | 0.00 | (2) | 0.00 | (2) | 0.00 | (2) | 0.00 | (2) | |||||||||||
| Net Asset Value, End of Year | $ | 8.93 | $ | 8.41 | $ | 8.41 | $ | 9.00 | $ | 8.69 | ||||||||||
| Total Return (3) | 6.24 | %(8) | 0.00 | % | (6.40 | )% | 3.99 | % | 0.36 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of year (in 000’s) | $ | 817 | $ | 932 | $ | 1,576 | $ | 2,379 | $ | 2,282 | ||||||||||
| Ratio of gross expenses to average net assets (4) (5): | 4.21 | % | 3.31 | % | 4.13 | % | 3.76 | % | 3.06 | % | ||||||||||
| Ratio of net expenses to average net assets (4) (6): | 3.02 | % | 2.94 | % | 3.44 | % | 3.58 | % | 2.89 | % | ||||||||||
| Ratio of net investment income (loss) to average net assets (7) | (1.95 | )% | (0.84 | )% | 0.08 | % | 0.24 | % | (0.33 | )% | ||||||||||
| Portfolio turnover rate | 165 | % | 138 | % | 149 | % | 136 | % | 219 | % | ||||||||||
| (1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year. |
| (2) | Resulted in less than $0.01 per share. |
| (3) | Total Return represents the rate that the investor would have earned or lost on an investment in the Fund, assuming reinvestment of dividends. Total returns shown exclude the effect of applicable sales loads/redemption fees. |
| (4) | The ratios of expenses to average net assets do not reflect the Fund’s proportionate share of expenses of underlying investment companies in which the Fund invests. |
| (5) | Includes dividends from securities sold short and interest expense. Excluding dividends from securities sold short and interest expense, the ratio of gross expenses to average net assets would have been 2.86%, 2.88%, 3.40%, 3.07% and 3.67% for the years ended April 30, 2014, April 30, 2015, April 30, 2016, April 30, 2017 and April 30, 2018, respectively. |
| (6) | Includes dividends from securities sold short and interest expense. Excluding dividends from securities sold short and interest expense, the ratio of net expenses to average net assets would have been 2.70% for the years ended April 30, 2014, April 30, 2015, April 30, 2016 and April 30, 2017 and 2.46% for the year ended April 30, 2018. |
| (7) | Recognition of net investment income by the Fund is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests. |
| (8) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and, consequently, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset values and returns for shareholder transactions. |
The accompanying notes are an integral part of these financial statements.
18
| EAS CROW POINT ALTERNATIVES FUND | |
| FINANCIAL HIGHLIGHTS | |
| April 30, 2018 | ANNUAL REPORT |
The following tables set forth the per share operating performance data for a share of beneficial interest outstanding, total return ratios to average net assets and other supplemental data for the year indicated.
| Class I | ||||||||||||||||||||
| For the Year Ended April 30, 2018 | For the Year Ended April 30, 2017 | For the Year Ended April 30, 2016 | For the Year Ended April 30, 2015 | For the Year Ended April 30, 2014 | ||||||||||||||||
| Net Asset Value, Beginning of Year | $ | 8.72 | $ | 8.65 | $ | 9.24 | $ | 8.90 | $ | 8.84 | ||||||||||
| Investment Operations: | ||||||||||||||||||||
| Net investment income (loss) (1) | (0.08 | ) | 0.01 | 0.10 | 0.12 | 0.06 | ||||||||||||||
| Net realized and unrealized gain (loss) on investments | 0.71 | 0.10 | (0.61 | ) | 0.33 | 0.07 | ||||||||||||||
| Total from investment operations | 0.63 | 0.11 | (0.51 | ) | 0.45 | 0.13 | ||||||||||||||
| Distributions: | ||||||||||||||||||||
| From net investment income | (0.07 | ) | (0.04 | ) | (0.08 | ) | (0.11 | ) | (0.07 | ) | ||||||||||
| From net realized capital gains | — | — | — | — | — | |||||||||||||||
| Total distributions | (0.07 | ) | (0.04 | ) | (0.08 | ) | (0.11 | ) | (0.07 | ) | ||||||||||
| Paid in capital from redemption fees | — | 0.00 | (2) | 0.00 | (2) | 0.00 | (2) | 0.00 | (2) | |||||||||||
| Net Asset Value, End of Year | $ | 9.28 | $ | 8.72 | $ | 8.65 | $ | 9.24 | $ | 8.90 | ||||||||||
| Total Return (3) | 7.20 | %(8) | 1.25 | % | (5.50 | )% | 5.13 | % | 1.43 | % | ||||||||||
| Ratios/Supplemental Data | ||||||||||||||||||||
| Net assets, end of year (in 000’s) | $ | 16,846 | $ | 15,024 | $ | 13,095 | $ | 18,089 | $ | 22,063 | ||||||||||
| Ratio of gross expenses to average net assets (4) (5): | 3.19 | % | 2.32 | % | 3.13 | % | 2.75 | % | 2.06 | % | ||||||||||
| Ratio of net expenses to average net assets (4) (6): | 2.02 | % | 1.97 | % | 2.44 | % | 2.58 | % | 1.89 | % | ||||||||||
| Ratio of net investment income (loss) to average net assets (7) | (0.91 | )% | 0.07 | % | 1.07 | % | 1.28 | % | 0.67 | % | ||||||||||
| Portfolio turnover rate | 165 | % | 138 | % | 149 | % | 136 | % | 219 | % | ||||||||||
| (1) | Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year. |
| (2) | Resulted in less than $0.01 per share. |
| (3) | Total Return represents the rate that the investor would have earned or lost on an investment in the Fund, assuming reinvestment of dividends. Total returns shown exclude the effect of applicable sales loads/redemption fees. |
| (4) | The ratios of expenses to average net assets do not reflect the Fund’s proportionate share of expenses of underlying investment companies in which the Fund invests. |
| (5) | Includes dividends from securities sold short and interest expense. Excluding dividends from securities sold short and interest expense, the ratio of gross expenses to average net assets would have been 1.86%, 1.87%, 2.39%, 2.04% and 2.65% for the years ended April 30, 2014, April 30, 2015, April 30, 2016, April 30, 2017 and April 30, 2018, respectively. |
| (6) | Includes dividends from securities sold short and interest expense. Excluding dividends from securities sold short and interest expense, the ratio of net expenses to average net assets would have been 1.70% for the years ended April 30, 2014, April 30, 2015, April 30, 2016 and April 30, 2017 and 1.46% for the year ended April 30, 2018. |
| (7) | Recognition of net investment income by the Fund is affected by the timing and declaration of dividends by the underlying investment companies in which the Fund invests. |
| (8) | Includes adjustments in accordance with accounting principles generally accepted in the United States of America and, consequently, the net asset value for financial reporting purposes and the returns based upon those net asset values may differ from the net asset values and returns for shareholder transactions. |
The accompanying notes are an integral part of these financial statements.
19
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2018
| 1. | ORGANIZATION |
The EAS Crow Point Alternatives Fund (the “Fund”) was organized on October 13, 2017 as a diversified series of 360 Funds (the “Trust”). 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 Fund’s investment objective is preservation and growth of capital. The Fund’s investment adviser is Crow Point Partners, LLC (the “Adviser”). The Fund offers three classes of shares, Class A, Class C and Class I shares. Each class differs as to sales and redemption charges and ongoing fees. Income and realized/unrealized gains or losses are allocated to each class based on relative share balances.
Effective as of the close of business on October 13, 2017, pursuant to an Agreement and Plan of Reorganization (the “Reorganization”), the 360 Fund’s EAS Crow Point Alternatives Fund received all the assets and liabilities of the Northern Light Series Trust’s (the “Former Trust”) EAS Crow Point Alternatives Fund (the “Predecessor Fund”). The shareholders of the Predecessor Fund received shares of the Fund with aggregate net asset values equal to the aggregate net asset values of their shares in the Predecessor Fund immediately prior to the Reorganization. The Predecessor Fund’s investment objectives, policies and limitations were substantially identical to those of the Fund, which had no operations prior to the Reorganization. For financial reporting purposes, the Predecessor Fund’s operating history prior to the Reorganization is reflected in the financial statements and financial highlights. The Reorganization was treated as a tax-free reorganization for federal income tax purposes and, accordingly, the basis of the assets of the Fund reflected the historical basis of the assets of the Predecessor Fund as of the date of the Reorganization. The Reorganization is also considered tax-free based on accounting principles generally accepted in the United States of America (“GAAP”).
| 2. | SIGNIFICANT ACCOUNTING POLICIES |
The following is a summary of the significant accounting policies followed by the Fund in the preparation of its financial statements. The Fund is an investment company that follows the accounting and reporting guidance of Accounting Standards Codification Topic 946 applicable to investment companies.
a) Security Valuation – All investments in securities are recorded at their estimated fair value, as described in note 3.
b) Short Sales – The Fund may sell securities short. A short sale is a transaction in which the Fund sells a security it does not own or have the right to acquire (or that it owns but does not wish to deliver) in anticipation that the market price of that security will decline.
When the Fund makes a short sale, the broker-dealer through which the short sale is made must borrow the security sold short and deliver it to the party purchasing the security. The Fund is required to make a margin deposit in connection with such short sales; the Fund may have to pay a fee to borrow particular securities and will often be obligated to pay over any dividends and accrued interest on borrowed securities.
If the price of the security sold short increases between the time of the short sale and the time the Fund covers its short position, the Fund will incur a loss; conversely, if the price declines, the Fund will realize a capital gain. Any gain will be decreased, and any loss increased, by the transaction costs described above. The successful use of short selling may be adversely affected by imperfect correlation between movements in the price of the security sold short and the securities being hedged.
To the extent the Fund sells securities short, it will provide collateral to the broker-dealer and (except in the case of short sales “against the box”) will maintain additional asset coverage in the form of cash, U.S. government securities or other liquid securities with its Custodian in a segregated account in an amount at least equal to the difference between the current market value of the securities sold short and any amounts required to be deposited as collateral with the selling broker (not including the proceeds of the short sale).
c) Investment Companies – The Fund may invest in investment companies such as open-end funds (mutual funds), including exchange traded funds (“ETFs”) and closed-end funds (also referred to as “Underlying Funds”) subject to limitations as defined in the Investment Company Act of 1940. Your cost of investing in the Fund will generally be higher than the cost of investing directly in the Underlying Funds. By investing in the Fund, you will indirectly bear fees and expenses charged by the Underlying Funds in which the Fund invests in addition to the Fund’s direct fees and expenses. Also, with respect to dividends paid by the Underlying Funds, it is possible for these dividends to exceed the underlying investments’ taxable earnings and profits resulting in the excess portion of such dividends being designated as a return of capital. Distributions received from investments in securities that represent a return of capital or capital gains are recorded as a reduction of the cost of investments or as a realized gain, respectively.
20
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2018
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
d) Options – The Fund may purchase and write (i.e., sell) put and call options. Such options may relate to particular securities or stock indices, and may or may not be listed on a domestic or foreign securities exchange and may or may not be issued by the Options Clearing Corporation. Options trading is a highly specialized activity that entails greater than ordinary investment risk. Options may be more volatile than the underlying instruments, and therefore, on a percentage basis, an investment in options may be subject to greater fluctuation than an investment in the underlying instruments themselves.
A call option for a particular security gives the purchaser of the option the right to buy, and the writer (seller) the obligation to sell, the underlying security at the stated exercise price at any time prior to the expiration of the option, regardless of the market price of the security. The premium paid to the writer is in consideration for undertaking the obligation under the option contract. A put option for a particular security gives the purchaser the right to sell, and the writer (seller) the obligation to buy the security at the stated exercise price at any time prior to the expiration date of the option, regardless of the market price of the security.
If an option purchased by the Fund expires unexercised, the Fund realizes a loss equal to the premium paid. If the Fund enters into a closing sale transaction on an option purchased by it, the Fund will realize a gain if the premium received by the Fund on the closing transaction is more than the premium paid to purchase the option or a loss if it is less. If an option written by the Fund expires on the stipulated expiration date or if the Fund enters into a closing purchase transaction, it will realize a gain (or loss if the cost of a closing purchase transaction exceeds the net premium received when the option is sold). If an option written by the Fund is exercised, the proceeds of the sale will be increased by the net premium originally received and the Fund will realize a gain or loss.
e) Federal Income Taxes – The Fund has qualified and intends to continue to qualify as a regulated investment company under Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”). It is the policy of the Fund to comply with the requirements of the Code applicable to regulated investment companies and to distribute substantially all of its net investment company taxable income and net capital gains. The Fund also intends to distribute sufficient net investment income and net capital gains, if any, so that it will not be subject to excise tax on undistributed income and gains. Therefore, no federal income tax or excise provision is required.
As of and during the year ended April 30, 2018, the Fund did not have a liability for any unrecognized tax expenses. The Fund recognizes interest and penalties, if any, related to unrecognized tax liability as income tax expense in the statement of operations. During the year ended April 30, 2018, the Fund did not incur any interest or penalties. The Fund identifies its major tax jurisdictions as U.S. Federal and Delaware state.
In addition, accounting principles generally accepted in the United States of America (“GAAP”) requires management of the Fund to analyze all open tax years, as defined by IRS statute of limitations for all major industries, including federal tax authorities and certain state tax authorities. As of and during the year ended April 30, 2018, the Fund did not have a liability for any unrecognized tax benefits. The Fund has no examinations in progress and is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
f) Distributions to Shareholders – Dividends from net investment income and distributions of net realized capital gains, if any, will be declared and paid at least annually. Income and capital gain distributions, which are determined in accordance with income tax regulations, are recorded on the ex-dividend date. GAAP requires that permanent financial reporting differences relating to shareholder distributions be reclassified to paid-in capital or net realized gains.
g) Use of Estimates – The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
h) Other – Investment and shareholder transactions are recorded on trade date. The Fund determines the gain or loss realized from the investment transactions by comparing the original cost of the security lot sold with the net sales proceeds. Dividend income is recognized on the ex-dividend date or as soon as information is available to the Fund and interest income is recognized on an accrual basis. Withholding taxes on foreign dividends have been provided for in accordance with the Fund’s understanding of the applicable country’s tax rules and rates.
21
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2018
| 2. | SIGNIFICANT ACCOUNTING POLICIES (continued) |
i) Sales Charges and Redemption Fees – A maximum sales charge of 5.50% is imposed on certain purchases of Class A shares. A contingent deferred sales charge (“CDSC”) is imposed upon certain redemptions of Class A shares purchased at net asset value in amounts totaling $1 million or more if the dealer’s commission was paid by the underwriter and the shares are redeemed within one year from the date of purchase. The CDSC will be paid to the Distributor and will be equal to 1.00% of the lesser of (1) the net asset value at the time of purchase of the Class A shares being redeemed; or (2) the net asset value of such shares at the time of redemption. A CDSC of 1.00% will be imposed on redemptions of Class C shares made within one year of their purchase. The CDSC will be a percentage of the dollar amount of shares redeemed and will be assessed on an amount equal to the net asset value at the time of purchase of the Class C shares being redeemed. There were no CDSC Fees paid to the Distributor during the year ended April 30, 2018. A redemption fee of 2.00% of the amount redeemed is charged on all classes of shares held less than 30 days. During the year ended April 30, 2018, there were no redemption fees paid to the Fund.
| 3. | SECURITIES VALUATIONS |
Processes and Structure
The Fund’s Board of Trustees has adopted guidelines for valuing securities and other derivative instruments including in circumstances in which market quotes are not readily available, and has delegated authority to the Adviser to apply those guidelines in determining fair value prices, subject to review by the Board of Trustees.
Hierarchy of Fair Value Inputs
The Fund utilizes various methods to measure the fair value of its investments on a recurring basis. GAAP establishes a hierarchy that prioritizes inputs to valuation techniques used to measure fair value. The three levels of inputs are as follows:
| ● | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. |
| ● | Level 2 – Observable inputs other than quoted prices included in level 1 that are observable for the asset or liability either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates, and similar data. |
| ● | Level 3 – Unobservable inputs for the asset or liability to the extent that relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions that a market participant would use in valuing the asset or liability, and that would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
Fair Value Measurements
A description of the valuation techniques applied to the Trust’s major categories of assets and liabilities measured at fair value on a recurring basis follows.
Equity securities (common stock, ETFs and mutual funds) – Securities traded on a national securities exchange (or reported on the NASDAQ national market) are stated at the last reported sales price on the day of valuation. To the extent these securities are actively traded, and valuation adjustments are not applied, they are categorized in level 1 of the fair value hierarchy. Certain foreign securities may be fair valued using a pricing service that considers the correlation of the trading patterns of the foreign security to the intraday trading in the U.S. markets for investments such as American Depositary Receipts, financial futures, Exchange Traded Funds, and the movement of the certain indexes of securities based on a statistical analysis of the historical relationship and that are categorized in level 2. Preferred stock and other equities traded on inactive markets or valued by reference to similar instruments are also categorized in level 2.
22
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2018
| 3. | SECURITIES VALUATIONS (continued) |
Money market funds – Money market funds are valued at their net asset value per share and are categorized as level 1.
Derivative instruments – Listed derivatives, including options, that are actively traded, are valued based on quoted prices from the exchange and categorized in level 1 of the fair value hierarchy. Options held by the Fund for which no current quotations are readily available and which are not traded on the valuation date are valued at the mean price and are categorized within level 2 of the fair value hierarchy. Over-the-counter (OTC) derivative contracts include forward, swap, and option contracts related to interest rates; foreign currencies; credit standing of reference entities; equity prices; or commodity prices, and warrants on exchange-traded securities. Depending on the product and terms of the transaction, the fair value of the OTC derivative products can be modeled taking into account the counterparties’ creditworthiness and using a series of techniques, including simulation models. Many pricing models do not entail material subjectivity because the methodologies employed do not necessitate significant judgments, and the pricing inputs are observed from actively quoted markets, as is the case of interest rate swap and option contracts. OTC derivative products valued using pricing models are categorized within level 2 of the fair value hierarchy.
In accordance with the Trust’s good faith pricing guidelines, the Adviser 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 Adviser 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 Adviser’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 the Fund’s NAV calculation that may affect a security’s value, or the Adviser 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 Fund invests may default or otherwise cease to have market quotations readily available.
The Trustees of the 360 Funds adopted the M3Sixty Consolidated Valuation Procedures, which established a Valuation Committee to work with the Adviser and report to the Board of Trustees (the “Board”) on securities being fair valued or manually priced. The Lead Chairman and Trustee of the 360 Funds, along with the Trust’s 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 Adviser 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.
If the Adviser 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 Adviser, 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.
23
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2018
| 3. | SECURITIES VALUATIONS (continued) |
The following tables summarize the inputs used to value the Fund’s assets and liabilities measured at fair value as of April 30, 2018.
Financial Instruments – Assets
| Security Classification | Level 1 | Level 2 | Level 3 | Totals | ||||||||||||
| Common Stock (1) | $ | 11,405,572 | $ | — | $ | — | $ | 11,405,572 | ||||||||
| Closed-End Fund (1) | 36,547 | — | — | 36,547 | ||||||||||||
| Exchange-Traded Fund (1) | 27,450 | — | — | 27,450 | ||||||||||||
| Hedge Fund measured at net asset value (2) | — | — | — | 3,954,954 | ||||||||||||
| Mutual Funds (1) | 3,319,068 | 204,123 | — | 3,523,191 | ||||||||||||
| Asset Backed Securities | — | 33,714 | 38,020 | 71,734 | ||||||||||||
| Call Options Purchased | 8,994 | — | — | 8,994 | ||||||||||||
| Put Options Purchased | 56,130 | 5,775 | — | 61,905 | ||||||||||||
| Short-Term Investments | 430,177 | — | — | 430,177 | ||||||||||||
| Total Assets | $ | 15,283,938 | $ | 243,612 | $ | 38,020 | $ | 19,520,524 | ||||||||
Financial Instruments – Liabilities
| Securities Sold Short Classification | Level 1 | Level 2 | Level 3 | Totals | ||||||||||||
| Common Stock (1) | $ | 1,110,878 | $ | — | $ | — | $ | 1,110,878 | ||||||||
| Exchange-Traded Funds (1) | 594,070 | — | — | 594,070 | ||||||||||||
| Put Options Written | 3,660 | 1,750 | — | 5,410 | ||||||||||||
| Total Liabilities | $ | 1,708,608 | $ | 1,750 | $ | — | $ | 1,710,358 | ||||||||
(1) All common stock, ETFs, closed-end funds and mutual funds held in the Fund are level 1 securities. For a detailed break-out of common stock, ETFs, closed-end funds and mutual funds by industry or asset class, please refer to the Schedule of Investments.
(2) In accordance with Subtopic 820-10, certain investments that are measured at fair value using the net asset value per share (or its equivalent) practical expedient have not been classified in the fair value hierarchy. The fair value amounts presented in this table are intended to permit reconciliation of the fair value hierarchy to the amounts presented in the schedule of investments.
There were no transfers into and out of any level during the year ended April 30, 2018. It is the Fund’s policy to recognize transfers between levels at the end of the reporting period.
Following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value for the Fund:
| Balance as of April 30, 2017 | Realized gain (loss) | Amortization | Change in unrealized appreciation (depreciation) | Purchases | Sales | Transfers into Level 3 | Transfers out of Level 3 | Balance as of April 30, 2018 | ||||||||||||||||||||||||||||
| Bonds & Notes | $ | 166,402 | $ | 1,847 | $ | 53 | $ | (1,901 | ) | $ | — | $ | (128,381 | ) | $ | — | $ | — | $ | 38,020 | ||||||||||||||||
| Total | $ | 166,402 | $ | 1,847 | $ | 53 | $ | (1,901 | ) | $ | — | $ | (128,381 | ) | $ | — | $ | — | $ | 38,020 | ||||||||||||||||
24
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2018
| 4. | DERIVATIVES TRANSACTIONS |
As of April 30, 2018, portfolio securities valued at $2,856,591 were held in escrow by the custodian as collateral for securities sold short and options written by the Fund.
As of April 30, 2018 the value of options written and options purchased were $5,410 and $70,899, respectively. The figures for options written can be found included within the line item options written at value on the Statement of Assets and Liabilities. The figures for options purchased can be found included within the line item unaffiliated securities at value on the Statement of Assets and Liabilities.
For the year ended April 30, 2018, the change in net unrealized appreciation and amount of net realized loss on written options subject to equity price risk amounted to $4,641 and $11,609, respectively. The figures for written options can be found in the Statement of Operations under the line items net change in unrealized appreciation (depreciation) on options written and net realized gain (loss) from options written. For the year ended April 30, 2018, the change in net unrealized depreciation and amount of net realized loss on purchased options subject to equity price risk amounted to $(63,397) and $(45,350), respectively. The figures for purchased options can be found in the Statement of Operations included within the line items net change in unrealized appreciation (depreciation) on unaffiliated investments and net realized gain (loss) on unaffiliated investments.
The amounts realized and changes in unrealized gains and losses on derivative instruments during the year as disclosed above and within the Statement of Operations serve as indicators of the volume of derivative activity for the Fund.
| 5. | INVESTMENT TRANSACTIONS |
For the year ended April 30, 2018, aggregate purchases and sales of investment securities (excluding short-term investments) for the Fund were as follows:
| Purchases | Sales | |||||
| $ | 37,075,208 | $ | 48,046,131 | |||
There were no Government securities purchased or sold during the period.
| 6. | INVESTMENTS IN AFFILIATED COMPANIES |
An affiliated company is a company in which the Fund has ownership of at least 5% of the voting securities or of common management. Companies which are affiliates of the Fund at April 30, 2018, are noted in the Fund’s Schedule of Investments. Crow Point Alternative Income Fund (the “Alternative Income Fund”) and Crow Point Defined Risk Global Equity Income Fund (the “Defined Risk Fund”) are mutual funds which are considered affiliates because they are also of common management of the Adviser.
Transactions during the year with affiliated companies were as follows:
Value as of | Realized gain | Amortization | Change in unrealized appreciation (depreciation) | Purchases | Sales | Value as of | Income received | ||||||||||||||||||||||||||
| Alternative Income Fund | $ | 5,413,279 | $ | 48,915 | $ | — | $ | 66,874 | $ | 300,000 | $ | (2,510,000 | ) | $ | 3,319,068 | $ | 34,515 | ||||||||||||||||
| Defined Risk Fund | 1,342,792 | 32,570 | — | 60,784 | 300,000 | (1,736,146 | ) | — | 28,528 | ||||||||||||||||||||||||
| Total | $ | 6,756,071 | $ | 81,485 | $ | — | $ | 127,658 | $ | 600,000 | $ | (4,246,146 | ) | $ | 3,319,068 | $ | 63,043 | ||||||||||||||||
On May 14, 2018, the Adviser also became the investment adviser of the Goodwood SMID Long/Short Fund (“Goodwood”). As of April 30, 2018, the Fund owned 12,500 shares of Goodwood valued at $100,875. Accordingly, subsequent to April 30, 2018, Goodwood became an affiliated company to the Fund.
25
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2018
| 7. | ADVISORY FEES AND OTHER RELATED PARTY TRANSACTIONS |
Pursuant to the Reorganization on October 13, 2017, the Fund has entered into an Investment Advisory Agreement (the “Advisory Agreement”) with the Adviser. Under the Advisory Agreement, the Adviser, under the supervision of the Board, agrees to invest the assets of the Fund in accordance with applicable law and the investment objective, policies and restrictions set forth in the Fund’s current Prospectus and Statement of Additional Information, and subject to such further limitations as the Trust may from time to time impose by written notice to the Adviser. The Adviser shall act as the investment advisor to the Fund and, as such shall (i) obtain and evaluate such information relating to the economy, industries, business, securities markets and securities as it may deem necessary or useful in discharging its responsibilities here under, (ii) formulate a continuing program for the investment of the assets of the Fund in a manner consistent with its investment objective, policies and restrictions, and (iii) determine from time to time securities to be purchased, sold, retained or lent by the Fund, and implement those decisions, including the selection of entities with or through which such purchases, sales or loans are to be effected; provided, that the Adviser will place orders pursuant to its investment determinations either directly with the issuer or with a broker or dealer, and if with a broker or dealer, (a) will attempt to obtain the best price and execution of its orders, and (b) may nevertheless in its discretion purchase and sell portfolio securities from and to brokers who provide the Adviser with research, analysis, advice and similar services and pay such brokers in return a higher commission or spread than may be charged by other brokers.
Prior to the Reorganization, the Former Trust was party to advisory agreement (the “Former Agreement”) with the Adviser, pursuant to which the Adviser served as investment adviser to the Predecessor Fund. Pursuant to the Former Agreement between the Adviser and the Former Trust, on behalf of the Former Fund, the Adviser, under the oversight of the Former Board of Trustees, directed the daily operations of the Fund and supervised the performance of administrative and professional services provided by others.
Under the terms of the Advisory Agreement with the Fund and the Former Agreement with the Predecessor Fund, the Adviser receives a monthly management fee equal to an annual rate of 1.00% of the Fund’s net assets. For the year ended April 30, 2018, the Adviser earned $231,659 of management fees.
The Adviser has contractually agreed to reduce its fees and/or absorb expenses of the Fund, through at least August 31, 2019, to ensure that total annual fund operating expenses after fee waiver and/or reimbursement (excluding any front-end or contingent deferred loads, brokerage fees and commissions, acquired fund fees and expenses, fees and expenses associated with instruments in other collective investment vehicles or derivative instruments (including for example options and swap fees and expenses), borrowing costs (such as interest and dividend expense on securities sold short), taxes and extraordinary expenses, such as litigation expenses (which may include indemnification of Fund officers and Trustees and contractual indemnification of Fund service providers (other than the Adviser)) will not exceed 1.95%, 2.70%, and 1.70% of net assets for Class A, Class C and Class I shares, respectively. This agreement may be terminated only by the Fund’s Board of Trustees, on 60 days written notice to the Adviser.
For the year ended April 30, 2018, the Adviser waived advisory fees of $179,534.
The Fund invested a portion of its assets in the Alternative Income Fund and the Defined Risk Fund, which are affiliated Funds (Note 6). As such, the Advisor has agreed to waive its advisory fees on the portion of the Fund’s assets that are invested in the Alternative Income Fund and the Defined Risk Fund. For the year ended April 30, 2018, the Adviser waived $54,616 in advisory fees related to assets invested in the affiliated funds. This waiver is in addition to amounts waived pursuant to the contractual expense limitations detailed in the above paragraphs and are not recoupable.
Expense waivers and reimbursements are subject to possible recoupment from the Fund in future years on a rolling three year basis (within the three years after the fees have been waived or reimbursed) if such recoupment can be achieved within the foregoing expense limits. Expense waivers and reimbursements made by the Predecessor Fund were also subject to possible recoupment from the Predecessor Fund under the same terms. As of April 30, 2018, the total amount of expenses waived/reimbursed subject to recapture, pursuant to the waiver agreements was $453,129, of which $177,286 will expire on April 30, 2019, $100,591 will expire on April 30, 2020 and $175,252 will expire on April 30, 2021.
26
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2018
| 7. | ADVISORY FEES AND OTHER RELATED PARTY TRANSACTIONS (continued) |
Pursuant to the Reorganization, the Fund has entered into an Investment Company Services Agreement (“ICSA”) with M3Sixty Administration, LLC (“M3Sixty”). Pursuant to the ICSA, 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 Fund’s portfolio securities; (d) pricing the Fund’s 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 Fund’s legal compliance; and (j) maintaining shareholder account records.
For the period from October 14, 2017 through April 30, 2018, M3Sixty earned $94,974.
M3Sixty has also agreed to voluntarily waive certain fees until certain thresholds are met by the Fund. During the period from October 14, 2017 through April 30, 2018, M3Sixty waived $44,660 of fees.
Certain officers of the Fund are also employees or officers of M3Sixty.
Prior to the Reorganization, Gemini Fund Services, LLC (“GFS”), an affiliate of Northern Lights Distributors, LLC (the “Predecessor Distributor”), provided administration, fund accounting, and transfer agent services to the Trust. Pursuant to separate servicing agreements with GFS, the Predecessor Fund paid GFS customary fees for providing administration, fund accounting and transfer agency services to the Predecessor Fund.
Pursuant to the Reorganization, Matrix 360 Distributors, LLC (the “Distributor”) acts as the principal underwriter and distributor (the “Distributor”) of the Fund’s shares for the purpose of facilitating the registration of shares of the Fund under state securities laws and to assist in sales of the Fund’s shares pursuant to a Distribution Agreement (the “Distribution Agreement”) approved by the Trustees. The Distribution Agreement between the Fund and the Distributor requires the Distributor to use all reasonable efforts in connection with the distribution of the Fund’s shares. However, the Distributor has no obligation to sell any specific number of shares and will only sell shares for orders it receives. The Distributor may receive commissions from the sale of Class A shares. During the period from October 14, 2017 through April 30, 2018, there were no commissions paid to the Distributor.
The Distributor is an affiliate of M3Sixty.
Prior to the Reorganization, the Predecessor Distributor served as the principal underwriter and national distributor for shares of the Predecessor Fund. The Predecessor Distributor was obligated to sell the shares of the Predecessor Fund on a best efforts basis only against purchase orders for the shares. Shares of the Predecessor Fund were offered to the public on a continuous basis.
Pursuant to the Reorganization, the Fund has adopted a Distribution Plan (“Plan”) pursuant to Rule 12b-1 under the Investment Company Act of 1940 for its Class A and Class C shares. Under the Plan, the Fund may use 12b-1 fees to compensate broker-dealers (including, without limitation, the Distributor) for sales of Fund shares, or for other expenses associated with distributing Fund shares. The Fund may expend up to 1.00% for Class C shares and up to 0.25% for Class A shares of the Fund’s average daily net assets annually to pay for any activity primarily intended to result in the sale of shares of the Fund and the servicing of shareholder accounts, provided that the Trustees have approved the category of expenses for which payment is being made.
The Plan took effect October 14, 2017. For the period from October 14, 2017 through April 30, 2018, the Fund accrued $4,760 and $4,507 in 12b-1 expenses attributable to Class A and Class C shares, respectively.
Prior to the Reorganization, the Predecessor Trust had adopted a Master Distribution and Shareholder Servicing Plan (the “Predecessor Plan”), pursuant to Rule 12b-1 under the 1940 Act, to pay for certain distribution activities and shareholder services. Under the Predecessor Plan, the Predecessor Fund paid 0.25% per year of the average daily net assets of Class A shares and 1.00% per year of the average daily net assets of Class C shares for such distribution and shareholder service activities. During the period from May 1, 2017 through October 13, 2017, pursuant to the Predecessor Plan, Class A shares paid $7,125 and Class C shares paid $3,954.
27
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2018
| 8. | DISTRIBUTIONS TO SHAREHOLDERS AND TAX MATTERS |
The tax character of distributions during the year ended April 30, 2018 and during the fiscal year ended April 30, 2017 was as follows:
Fiscal Year Ended April 30, 2018 | Fiscal Year Ended April 30, 2017 | |||||||
| Ordinary Income | $ | 131,723 | $ | 77,331 | ||||
| Long-Term Capital Gain | — | — | ||||||
| $ | 131,723 | $ | 77,331 | |||||
The Fund’s tax basis distributable earnings are determined only at the end of each fiscal year. The tax character of distributable earnings (deficit) at April 30, 2018, the Fund’s most recent fiscal year end, was as follows:
Undistributed Ordinary Income | Post-October Loss and Late Year Loss | Capital Loss Carry Forwards | Other Book/Tax Differences | Unrealized Appreciatiion/ (Depreciation) | Total Distributable Earnings/(Deficit) | |||||||||||||||||
| $ | — | $ | — | $ | (1,637,710 | ) | $ | (13,278 | ) | $ | 329,620 | $ | (1,321,368 | ) | ||||||||
The difference between book basis and tax basis undistributed net investment income (loss), accumulated net realized loss, and unrealized appreciation from investments is primarily attributable to the tax deferral of losses on wash sales and straddles, and adjustments for partnerships, real estate investment trusts, grantor trusts and C-Corporation return of capital distributions. In addition, the amount listed under other book/tax differences for the Fund is primarily attributable to the tax deferral of losses on straddles and adjustments for constructive sales of securities held short.
Capital losses incurred after October 31 within the fiscal year are deemed to arise on the first business day of the following fiscal year for tax purposes. The Fund did not defer any capital losses.
At April 30, 2018, the Fund had capital loss carry forwards for federal income tax purposes available to offset future capital gains as follows:
| Expiring FYE | Non-Expiring Short-Term | Non-Expiring Long-Term | Total | |||||||||||
| $ | — | $ | 1,637,710 | $ | — | $ | 1,637,710 | |||||||
Permanent book and tax differences, primarily attributable to the book/tax basis treatment of foreign currency gains/(losses), and adjustments for paydowns, C-Corporation return of capital distributions, real estate investment trusts, grantor trusts, partnerships, and the capitalization of in lieu dividend payments, resulted in reclassifications for the year ended April 30, 2018 as follows:
| Paid-in Capital | Undistributed Net Investment Income (Loss) | Accumulated Net Realized Gain (Loss) | ||||||||
| $ | (228,196 | ) | $ | 243,710 | $ | (15,514 | ) | |||
For U.S. Federal income tax purposes, the cost of securities owned, gross appreciation, gross depreciation, and net unrealized appreciation/(depreciation) of investments at April 30, 2018 were as follows:
| Cost | Gross Appreciation | Gross Depreciation | Net Appreciation | |||||||||||
| $ | 17,480,824 | $ | 728,686 | $ | (399,344 | ) | $ | 329,342 | ||||||
The difference between book basis and tax basis undistributed net investment income (loss), accumulated net realized loss, and unrealized appreciation from investments is primarily attributable to the tax deferral of losses on wash sales and straddles, and adjustments for partnerships, real estate investment trusts, grantor trusts and C-Corporation return of capital distributions.
28
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
NOTES TO THE FINANCIAL STATEMENTS
April 30, 2018
| 9. | COMMITMENTS AND CONTINGENCIES |
In the normal course of business, the Trust may enter into contracts that may contain a variety of representations and warranties and provide general indemnifications. The Trust’s maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated; however, management considers the risk of loss from such claims to be remote.
| 10. | CHANGE IN INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM |
The Board of Trustees (the “Board”), with the approval and recommendation of the Audit Committee, selected BBD, LLP (“BBD”) to replace Tait, Weller & Baker, LLP (“Tait”), as the Fund’s independent registered public accounting firm for the Fund’s fiscal year ending April 30, 2018. Throughout the past two fiscal years through the date of Tait’s dismissal as auditor of the Fund, the Fund had no disagreements with Tait on any matter of accounting principles or practices, financial statement disclosure or auditing scope or procedures, which, if not resolved to the satisfaction of Tait would have caused Tait to make reference to the disagreement in a Tait 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 Fund, Tait audit opinions, including the past two fiscal years, 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 two fiscal years of the Fund, neither the Fund 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 Fund’s 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.
| 11. | SUBSEQUENT EVENTS |
In accordance with GAAP, Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued, and has determined that there were no other subsequent events requiring recognition or disclosure in the financial statements.
29
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Board of Trustees of 360 Funds
and the Shareholders of EAS Crow Point Alternatives Fund
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities of EAS Crow Point Alternatives Fund, a series of shares of beneficial interest in 360 Funds (the “Fund”), including the schedule of investments, as of April 30, 2018, and the related statement of operations, the statement of changes in net assets and the financial highlights for the year then ended, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of April 30, 2018, and the results of its operations, the changes in it’s net assets and the 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 April 30, 2017 and the financial highlights for each of the years in the four year period then ended were audited by other auditors, whose report dated June 29, 2017, expressed an unqualified opinion on such financial statement and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. 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 Fund 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 audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audit 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 Fund’s internal control over financial reporting. Accordingly, we express no such opinion.
30
Our audit 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 include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of April 30, 2018 by correspondence with the custodian and brokers, or by other appropriate auditing procedures where replies from brokers were not received. Our audit 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 audit provides a reasonable basis for our opinion.
BBD, LLP
We have served as the auditor of one or more of the Funds in the 360 Funds since 2018.
Philadelphia, Pennsylvania
June 29, 2018
31
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
April 30, 2018 (Unaudited)
The Fund files its 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 Fund’s Forms N-Q are available on the Commission’s website at http://www.sec.gov. The Fund’s 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 Fund uses to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-877-244-6235; and on the Commission’s website at http://www.sec.gov.
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30th is available without charge, upon request, by calling 1-877-244-6235; and on the Commission’s website at http://www.sec.gov.
Shareholder Tax Information - The Fund is 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. The Fund paid $96,737 of ordinary income distributions during the year ended April 30, 2018.
Tax information is reported from the Fund’s fiscal year and not calendar year, therefore, shareholders should refer to their Form 1099-DIV or other tax information which will be mailed in 2019 to determine the calendar year amounts to be included on their 2018 tax returns. Shareholders should consult their own tax advisors.
32
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
ADDITIONAL INFORMATION
April 30, 2018 (Unaudited)
BOARD OF TRUSTEES, OFFICERS AND PRINCIPAL SHAREHOLDERS - (Unaudited)
The Trustees are responsible for the management and supervision of the Fund. The Trustees approve all significant agreements between the Trust, on behalf of the Fund, and those companies that furnish services to the Fund; review performance of the Fund; and oversee activities of the Fund. The Statement of Additional Information of the Trust includes additional information about the Fund’s Trustees and is available upon request, without charge, by calling (877) 244-6235.
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. 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, Address and Year of Birth (“YOB”) | 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 | |||||
Art Falk YOB : 1937 | Trustee and Independent Chairman | Since 2011 | Retired. President, Murray Hill Financial Marketing, (financial marketing consultant) (1990–2012). | Twelve | None |
Thomas Krausz YOB : 1944 | Trustee | Since 2011 | Mr. Krausz has been an independent management consultant to private enterprises since 2007. | Twelve | 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). | Twelve | None |
Gary DiCenzo YOB : 1962 | Trustee | Since 2014 | Chief Executive Officer, Cognios Capital (investment management firm) (2015–present); President and CEO, IMC Group, LLC (asset management firm consultant) (2010–2015). | Twelve | None |
| 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). | Twelve | N/A |
* The Interested Trustee is an Interested Trustee because he is an officer and employee of the Administrator.
33
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
ADDITIONAL INFORMATION
April 30, 2018 (Unaudited)
BOARD OF TRUSTEES, OFFICERS AND PRINCIPAL SHAREHOLDERS - (Unaudited) (continued)
| Name, Address and Year of Birth (“YOB”) | Position(s) Held with Trust | Length of Service | Principal Occupation(s) | Number of Series Overseen | Other Directorships |
Officers | |||||
Andras P. Teleki YOB: 1971
| Chief
| 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 Byrd YOB: 1981 | Assistant Secretary | Since 2013 | 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 |
Justin Thompson YOB: 1983 | Treasurer | Since September 2017 | Director of Fund Accounting & Administration, M3Sixty Administration, LLC (September 2017–present); Fund Accountant, M3Sixty Administration, LLC (June 2016–September 2017); Core Accounting Officer, State Street Bank (2014–June 2016); Client Operations and Core Accounting Manager. State Street Bank (2012–2014). | N/A | N/A |
Larry Beaver YOB: 1969 | Assistant Treasurer | Since July 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 |
34
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
ADDITIONAL INFORMATION
April 30, 2018 (Unaudited)
BOARD OF TRUSTEES, OFFICERS AND PRINCIPAL SHAREHOLDERS - (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” receives a fee of $1,500 each year plus $200 per Board or committee meeting attended. The Trust reimburses each Trustee and officer for his or her travel and other expenses relating to attendance at such meetings.
| Name of Trustee1 | Aggregate Compensation From each Fund2 | Pension or Retirement Benefits Accrued As Part of Portfolio Expenses | Estimated Annual Benefits Upon Retirement | Total Compensation From the Funds Paid to Trustees2 | ||||||||
| Independent Trustees | ||||||||||||
| Art Falk | $ | 1,725 | None | None | $ | 1,775 | ||||||
| Thomas Krausz | $ | 1,725 | None | None | $ | 1,775 | ||||||
| Tom M. Wirtshafter | $ | 1,725 | None | None | $ | 1,775 | ||||||
| Gary DiCenzo | $ | 1,725 | None | None | $ | 1,775 | ||||||
| Interested Trustees and Officers | ||||||||||||
| Randall K. Linscott | None | Not Applicable | Not Applicable | None | ||||||||
1 Each of the Trustees serves as a Trustee to each Series of the Trust. The Trust currently offers twelve (12) series of shares.
2 Figures are for the period from October 14, 2017 through April 30, 2018.
35
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
Information About Your Fund’s Expenses – (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, such as the sales charge (load) imposed on certain subscriptions and the contingent deferred sales charge (“CDSC”) and redemption fees imposed on certain short-term redemptions; and (2) ongoing costs, including management fees, distribution and/or service (12b-1) fees; and other Fund expenses. The example below is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period as indicated below.
Actual Expenses – The first section of the table provides information about actual account values and actual expenses (relating to the example $1,000 investment made at the beginning of the period). You may use the information in this section, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first section 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 section of the table provides information about the hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund to other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as sales charges (loads), CDSC fees, or exchange fees. Therefore, the second section of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher. For more information on transactional costs, please refer to the Fund’s prospectus.
Expenses and Value of a $1,000 Investment for the period since inception from 11/01/17 through 04/30/18
| Beginning Account Value (11/01/2017) | Annualized Expense Ratio for the Period | Ending Account Value (04/30/2018) | Expenses Paid During Period (a) | |||||||||||||
| Actual Fund Return (in parentheses) | ||||||||||||||||
| Class A (+1.25%) | $ | 1,000.00 | 1.73 | % | $ | 1,012.50 | $ | 8.63 | ||||||||
| Class C (+0.85%) | $ | 1,000.00 | 2.48 | % | $ | 1,008.50 | $ | 12.35 | ||||||||
| Class I (+1.49%) | $ | 1,000.00 | 1.48 | % | $ | 1,014.90 | $ | 7.39 | ||||||||
| Hypothetical 5% Return | ||||||||||||||||
| Class A | $ | 1,000.00 | 1.73 | % | $ | 1,016.20 | $ | 8.65 | ||||||||
| Class C | $ | 1,000.00 | 2.48 | % | $ | 1,012.50 | $ | 12.37 | ||||||||
| Class I | $ | 1,000.00 | 1.48 | % | $ | 1,017.50 | $ | 7.40 | ||||||||
| (a) | Expenses are equal to the Fund’s annualized expense ratios, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period. |
For more information on Fund expenses, please refer to the Fund’s prospectus, which can be obtained from your investment representative or by calling 1-877-244-6235. Please read it carefully before you invest or send money.
36
| EAS Crow Point Alternatives Fund | ANNUAL REPORT |
Information About Your Fund’s Expenses – (Unaudited) (continued)
Total Fund operating expense ratios as stated in the current Fund prospectus dated October 13, 2017 for the Fund were as follows:
| |
| EAS Crow Point Alternatives Fund Class A, gross of fee waivers or expense reimbursements | 5.07% |
| EAS Crow Point Alternatives Fund Class A, after waiver and reimbursement* | 4.74% |
| EAS Crow Point Alternatives Fund Class C, gross of fee waivers or expense reimbursements | 5.84% |
| EAS Crow Point Alternatives Fund Class C, after waiver and reimbursement* | 5.50% |
| EAS Crow Point Alternatives Fund Class I, gross of fee waivers or expense reimbursements | 4.85% |
| EAS Crow Point Alternatives Fund Class I, after waiver and reimbursement* | 4.53% |
Crow Point Partners, LLC (the “Adviser”) has contractually agreed to reduce its fees and/or absorb expenses of the Fund, through at least August 31, 2019, to ensure that total annual fund operating expenses after fee waiver and/or reimbursement (excluding any front-end or contingent deferred loads, brokerage fees and commissions, acquired fund fees and expenses, fees and expenses associated with instruments in other collective investment vehicles or derivative instruments (including for example options and swap fees and expenses), borrowing costs (such as interest and dividend expense on securities sold short), taxes and extraordinary expenses, such as litigation expenses (which may include indemnification of Fund officers and Trustees and contractual indemnification of Fund service providers (other than the adviser)) will not exceed 1.95%, 2.70%, and 1.70% of each class’s net assets, respectively, for Class A, Class C and Class I shares. Expense waivers and reimbursements are subject to possible recoupment from the Fund in future years on a rolling three year basis (within the three years after the fees have been waived or reimbursed) if such recoupment can be achieved within the foregoing expense limits. This agreement may be terminated only by the Fund’s Board of Trustees, on 60 days written notice to the adviser. Total Gross Operating Expenses during the year ended April 30, 2018 were 3.54%, 4.21% and 3.19% for the EAS Crow Point Alternatives Fund Class A, Class C and Class I shares, respectively. Please see the Information About Your Fund’s Expenses, the Financial Highlights and Notes to Financial Statements (Note 7) sections of this report for expense related disclosures during the year ended April 30, 2018. | |
37
360 FUNDS
4300 Shawnee Mission Pkwy
Suite 100
Fairway, KS 66205
INVESTMENT ADVISER
Crow Point Partners, LLC
25 Recreation Drive
Suite 206
Hingham, MA 02043
ADMINISTRATOR & TRANSFER AGENT
M3Sixty Administration, LLC
4300 Shawnee Mission Pkwy
Suite 100
Fairway, KS 66205
DISTRIBUTOR
Matrix 360 Distributors, LLC
4300 Shawnee Mission Pkwy
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
| ITEM 1. | REPORTS TO SHAREHOLDERS |
The Annual report to Shareholders of the EAS Crow Point Alternatives Fund, a series of the 360 Funds (the “registrant”), for the fiscal year ended April 30, 2018 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. | |
| 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 each of the last two fiscal years for professional services rendered by the principal accountants 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 $12,700 with respect to the registrant’s fiscal year ended April 30, 2018 and $14,200 with respect to the registrant’s fiscal year ended April 30, 2017. |
| (b) | Audit-Related Fees. There were no fees billed during the last two fiscal years for assurances and related services by the principal accountants 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 each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning were $3,000 with respect to the registrant’s fiscal year ended April 30, 2018 and $3,100 with respect to the registrant’s fiscal year ended April 30, 2017. The services comprising these fees are the preparation of the registrant’s federal and state income tax returns, review of calculations of required excise distributions and preparation of federal excise tax returns. |
| (d) | All Other Fees. The aggregate fees billed in last two fiscal years 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 April 30, 2018 and $0 for the fiscal year ended April 30, 2017. |
| (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 April 30, 2018 and April 30, 2017 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 during the last two fiscal years.
|
| (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
| /s/ Randy Linscott | |
| By Randy Linscott | |
| Principal Executive Officer, | |
| Date: July 6, 2018 | |
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.
| /s/ Randy Linscott | |
| By Randy Linscott | |
| Principal Executive Officer, | |
| Date: July 6, 2018 | |
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.
| /s/ Justin Thompson | |
| By Justin Thompson | |
| Principal Financial Officer | |
| Date: July 6, 2018 | |