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 Number811-23089
M3Sixty Funds Trust |
(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:888-553-4233
Date of fiscal year end:06/30/2019
Date of reporting period:06/30/2019
ITEM 1. | REPORTS TO SHAREHOLDERS |
The Annual Report to Shareholders of the Cognios Large Cap Value Fund (the “Value Fund), Cognios Large Cap Growth Fund (the “Growth Fund”) and Cognios Market Neutral Fund (the “Market Neutral Fund”, together with the Value Fund and the Growth Fund, the “Funds”), each a series of the M3Sixty Funds Trust (the “registrant”), for the period ended June 30, 2019 pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “1940 Act”) (17 CFR 270.30e-1) is filed herewith.
COGNIOS LARGE CAP VALUE FUND
Investor ClassCOGLX
Institutional ClassCOGVX
COGNIOS LARGE CAP GROWTH FUND
Investor ClassCOGGX
Institutional ClassCOGEX
COGNIOS MARKET NEUTRAL LARGE CAP FUND
Investor ClassCOGMX
Institutional ClassCOGIX
ANNUAL
JUNE 30, 2019
Table of Contents
1-888-553-4233 | www.cogniosfunds.com
Shareholder Letter | 1 |
Portfolio Update | 9 |
Disclosure of Fund Expenses | 21 |
Schedules of Investments | 23 |
Statements of Assets and Liabilities | 37 |
Statements of Operations | 38 |
Statement of Cash Flows | 39 |
Statements of Changes in Net Assets | 41 |
Financial Highlights | 44 |
Notes to Financial Statements | 52 |
Report of Independent Registered Public Accounting Firm | 64 |
Additional Information | 66 |
Trustees and Officers | 67 |
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Cognios Funds
Shareholder LetterJune 30, 2019 (Unaudited)
Annual Report | June 30, 20191
Dear Shareholder,
Thank you for investing in Cognios Funds. This Annual Report covers the Cognios Large Cap Growth Fund (the“Growth Fund”), the Cognios Large Cap Value Fund (the“Value Fund”), and the Cognios Market Neutral Large Cap Fund (the“Market Neutral Fund”) for the fiscal year ending June 30, 2019. We appreciate this opportunity to offer insight into theFunds’investment strategies and to offer commentary on performance and evolving global market conditions.
The Growth Fund invests in companies that have accelerating revenue and earnings growth by combining proven quantitative and traditional investment practices into a rigorous framework that allows for highly systematic and adaptable alpha capture. Our investment process is focused on building a robust and tempered investment portfolio that may be comprised of traditional growth stocks or stocks that fall outside of the classic growth stock classification but are currently exhibiting growth characteristics. This allows us the flexibility to navigate all market environments, regardless of whether or not a particular style is in favor.
During the fiscal year ended June 30, 2019, the total return for the Institutional Class Shares (“COGEX”) was 9.64% and the total return for the Investor Class Shares (“COGGX”) was 9.42%.COGEXunderperformedboth the Russell 1000Total Return(“Russell 1000”)and Russell 1000 GrowthTotal Return(“Russell 1000 Growth”)Indices by 0.38% and 1.92%, respectively.
The investment process utilized in the Growth Fund is driven by our proprietaryQuantActive™ stock selection and portfolio construction methodology which has two main components: a quantitative foundation coupled with a discretionary overlay. The quantitative process is driven by two proprietary scores, a fundamental score that measures growth in company fundamentals and a technical score that measures price momentum.
The trailing twelve month period has been challenging for growth momentum despite the fact that equity markets as a whole have been hovering at record levels. Many of the strongest performing stocks have been defensive names thatwe believeare now overvalued and at risk for a price correction by the end of 2019. Defensive sectors such as Consumer Staples and Utilities do not have the same abundance of high-quality accelerating names as other sectors such as Information Technology which limits our opportunity set for investment. Due to themarket’scurrent preference for more defensive sectors, we expect the momentum factors (the quant layer) upon which the Growth Fund is built to continue facing challenges in the short term.
Consequentially, our quant factors are not in their preferred habitat. A major differentiator of ourQuantActive™ process relative to a purely quantitative strategy is its ability to better navigate periods when our quantitative factors are out of favor, potentially mitigating downside risk of the Growth Fund. This is critical for long term success. The active component of our investment process focuses on names that still fit the investment style, exhibit growth characteristics and provide the best opportunities given the current market conditions. By incorporating this active component into our process we are also able to better monitor the portfolio for macro risks, potentially insulating the portfolio from some of the effects of a full market correction. Basically, we are notas concerned about short periods of factor rotations as we expect to maintain strong relative performance by holding high quality companies that fit our growth style and based on our analysis, still have room for share price growth.
Cognios Funds
Shareholder Letter (continued)June 30, 2019 (Unaudited)
2www.cogniosfunds.com
From a macro perspective, recent weakness in U.S. economic data along with tame inflation have many speculating that theFederal Reservewill cut rates. What impact will a rate cut have on the Growth Fund? Over the long term, ourGrowth Fund tends to be independent of moves in monetary policy. If theFederal Reserveincreases rates, then we are investing in high growing companies that can compensate for the rising cost of capital.Overthe short term, we expect to follow the market down as it is dominated by sentiment. If theFederal Reserve lowers rates, then all boats float, and we expect the Growth Fund to flourish in that regime as well.
Thetradewaris by far the most negative of the forces that acted on the Growth Fund over the last 12 months and it still persists today. The trade dispute has negatively impacted the sectors that generate the greatest number of accelerating names (e.g., Technology and Industrials). Other sectors that are less impacted by thetradewarstill face pressure as well. Healthcare, for example, faces the possibility of government intervention to control the prices of drugs and health care providers. However, the proximity of the 2020 U.S. presidential election should provide incentives for some resolutions.
In periods of time where corporate earnings and revenues are decreasing, or decelerating, we expect the Growth Fund to underperform relative to its benchmark. Thetradewarhas made such a period even more interesting. This short-term relative underperformance is, of course, undesired but we strongly believe that over time our investment process can make up the small relative deficits.
As previously mentioned, the recent market conditions highlight the importance of the dual nature of ourQuantActive™ investment process and risk management framework which are adept at navigating unusual, or less favorable, market conditions for the Growth Fund. Despite the recent headwinds faced by the Growth Fund, performance is in line with expectations in the current market environment and we look forward to our quantitative factors coming back into favor by the market.
Since the Growth Fund’s inception, the Growth Fund has maintained an active exposure to Information Technology which continues to have the largest contribution to the Growth Fund’s performance over the period, as seen in the table below. This is consistent with our view of a well-built portfolio – the largest active weights contributing more meaningfully to a fund’s performance than sectors or positions with less active, or no active, weight.
Sector Contribution to Gross Profit of the Growth Fund | |
Industry Sector: | Contribution to |
Information Technology | 95.6% |
Financials | 11.6% |
Consumer Staples | 10.9% |
Consumer Discretionary | 9.8% |
Industrials | 3.2% |
Real Estate | 2.7% |
Utilities | 0.3% |
Materials | 0.0% |
Energy | -1.2% |
Health Care | -8.0% |
Communication Services | -24.9% |
Total | 100.0% |
Cognios Funds
Shareholder Letter (continued)June 30, 2019 (Unaudited)
Annual Report | June 30, 20193
Over the course of the last year, the Growth Fund maintained investment positions in one hundred twelve positions. Of those investment positions, one hundred nine were profitable resulting in a .973 batting average.
Top 5 Investment Positions by Contribution to Gross Profit | ||
Ticker | Company | Contribution to |
AMD | Advanced Micro Devices Inc. | 28.8% |
MSFT | Microsoft Corporation | 12.5% |
PGR | The Progressive Corporation | 11.1% |
KEYS | Keysight Technologies Inc. | 10.7% |
XLNX | Xilinx Inc. | 9.1% |
Total |
| 72.2% |
The Value Fund
Market Commentary
Total Return Performance | |||
June 30, 2018 – June 30, 2019 | |||
S&P 500 | Russell 1000 | Russell 1000 Growth | Russell 1000 Value |
10.42% | 10.02% | 11.56% | 8.46% |
As the table indicates, returns for large capitalization indices have been good over the past year, especially for growth-oriented companies. On a year-to-date(“YTD”) basis (January 2019 - June 30, 2019), there has again been a meaningful return divergence between the Russell 1000 Growthand the Russell 1000 ValueTotal ReturnIndex (“Russell 1000 Value”). As of June 30, 2019, as the Russell 1000 Growthhas gained 21.49% YTD on total return basis while the Russell 1000 Valuehas gained 16.24% YTD.
Since we wrote this letter in 2018, market volatility has meaningfully increased. The average daily close for the CBOE Volatility Index was 16.39 for the trailing twelve months ended June 30, 2019 versus 13.46 for the trailing twelve months ended June 30, 2018. In five of the last twelve months, all four of the indices listedin the tableabove had gains or losses greater than 5%. We expect this volatility to continue into the futures as uncertainties over trade disputes, economicandearnings growth and the movement of interest rates continue to grow.
The macroeconomic view upon which our value strategies are based is what we consider to be a straightforward model of market behavior over time. This model is based on the belief that corporate profits, market multiples, and interest rates drive stock price returns over very long periods of time. However,this is not to say that a market correction or crash will occur in the near future. Should an adverse market event occur, we believe the Large Cap Value and Market Neutral Funds are well positioned to mitigate volatility relative to their respective benchmarks.
Cognios Funds
Shareholder Letter (continued)June 30, 2019 (Unaudited)
4www.cogniosfunds.com
Performance Commentary
The Value Fund invests in high quality companies that trade at attractive valuations relative to the broader market. We utilize our proprietary ROTA/ROME® investment selection and portfolio construction methodology to execute this strategy. ROTA/ROME® focuses on a company’s Return on Tangible Assets (“ROTA”) and Return on Market Value of Equity (“ROME”) in order to identify companies whose per share intrinsic value has diverged significantly from the current market price of its stock. We believe that companies that exhibit sustainable long-term high ROTA are higher quality companies that most likely have a competitive advantage within the marketplace. ROME is a measure of profit yield, and like a yield on a bond, the higher the ROME, the more likely that shares in the company can be purchased at a better valuation compared to a company with a lower ROME.
During the fiscal year ended June 30, 2019, the total return for the Institutional Class Shares (COGVX) was 12.56% and the total return for the Investor Class Shares (COGLX) was 12.90%, bothclassesoutperforming the Russell 1000 Valuethe S&P 500Total Return Index (“S&P 500”)whose returns are noted in the table above. Over the course of the last fiscal year, the Value Fund maintained investment positions in one hundred sixty-two positions. Of those investment positions, one hundred twenty-three were profitable resulting in a .759 batting average.
The tables below display the sector contribution to gross profit as well as the top five positions that contributed to gross profit of the Value Fund:
Sector Contribution to Gross Profit of the Value Fund | |
Industry Sector: | Contribution to |
Consumer Staples | 29.9% |
Utilities | 29.1% |
Financials | 11.0% |
Healthcare | 8.7% |
Industrials | 6.6% |
Consumer Discretionary | 5.2% |
Information Technology | 3.8% |
Communication Services | 2.1% |
Materials | 1.4% |
Energy | 1.3% |
Real Estate | 0.9% |
Total | 100.0% |
Cognios Funds
Shareholder Letter (continued)June 30, 2019 (Unaudited)
Annual Report | June 30, 20195
Top 5 Investment Positions by Contribution to Gross Profit | ||
Ticker | Company | Contribution to |
CMG | Chipotle Mexican Grill Inc. | 7.7% |
CHD | Church & Dwight Company Inc. | 5.9% |
MKC | McCormick & Company Inc. | 5.4% |
HSY | The Hershey Company | 5.2% |
AEP | American Electric Power Company Inc. | 4.3% |
Total |
| 28.5% |
The Market Neutral Fund
TheMarket NeutralFund employs a beta-adjusted market neutral investment strategy that seeks to provide investors with returns that are non-correlated to, or independent of, the returns of the global equity and fixed income markets. By attempting to hedge out all of the marketBeta, the Fund’s returns over time should be essentially “pureAlpha” (i.e.,Alpha is the excess return of a portfolio after considering itsBeta exposure.) Additionally, by hedging out the general market movements in thisBeta-adjusted market neutral fashion, we believe that the total returns of the Fund will be independent of those broad “systemic” risk factors and macro events that move the entire stock market either positively or negatively over time.
Performance Commentary
The Market Neutral Fund investslong in high quality companies that trade at attractive valuations relative to the broader market. We utilize our proprietary ROTA/ROME® investment selection and portfolio construction methodology, very similar to the Value Fund. Conversely, The Market Neutral Fund sells short shares in companies that demonstrate poor qualities based on our proprietary ROTA/ROME® investment selection and portfolio construction methodology.
For the twelve months ended June 30, 2019, the total return for the Institutional Class Shares (“COGIX”) was(2.77)% and the total return for the Investor Class Shares (COGMX) was(3.01)%.COGIXunderperformed versusthe S&P 500 by 13.19% (“COGIX”) but only slightlyunderperformed versusthe Morningstar Market Neutral Category’s return of(0.33)%. The total return for the Market Neutral Fund shares is the amalgamation of gross returns from the long portfolio, the short portfolio and fees and expenses.
The table below shows the approximate gross returns for theMarket Neutral Fund’slong and short portfolios:
Gross Performance by Side | ||
June 30, 2018 – June 30, 2019 | ||
Long Positions | Short Positions | Cumulative |
11.2% | -12.7% | -1.5% |
Cognios Funds
Shareholder Letter (continued)June 30, 2019 (Unaudited)
6www.cogniosfunds.com
The tables below display the sector contribution to gross profit as well as the top five positions that contributed to gross profit for the long positions:
Sector Contribution to Gross Profit of the Long Positions of the Market Neutral Fund | |
Industry Sector: | Contribution to |
Consumer Staples | 3.8% |
Industrials | 2.6% |
Financials | 2.4% |
Healthcare | 1.1% |
Information Technology | 0.9% |
Materials | 0.4% |
Utilities | 0.2% |
Consumer Discretionary | 0.2% |
Real Estate | 0.2% |
Communication Services | -0.1% |
Energy | -0.5% |
Total | 11.2% |
Top 5 Long Positions by Contribution to Long Gross Profit of the Market Neutral Fund | ||
Ticker | Company | Contribution to |
COL | Rockwell Collins Inc. | 10.9% |
SBUX | Starbucks Corporation | 8.1% |
HSY | The Hershey Company | 5.7% |
WM | Waste Management Inc. | 5.4% |
PG | Proctor & Gamble Company | 5.3% |
Total |
| 35.4% |
Cognios Funds
Shareholder Letter (continued)June 30, 2019 (Unaudited)
Annual Report | June 30, 20197
The tables below display the sector contribution to gross profit as well as the top five positions that contributed to gross profit for the short positions:
Sector Contribution to Gross Profit of the Short Positions of the Market Neutral Fund | |
Industry Sector: | Contribution to |
Energy | 1.3% |
Communications Services | 0.3% |
Consumer Staples | -0.1% |
Consumer Discretionary | -0.7% |
Financials | -0.7% |
Industrials | -0.9% |
Materials | -1.2% |
Information Technology | -1.6% |
Utilities | -2.7% |
Real Estate | -2.9% |
Health Care | -3.5% |
Total | -12.7% |
Top 5 Short Positions by Contribution to Short Gross Profit of the Market Neutral Fund | ||
Ticker | Company | Contribution to |
HAL | Haliburton Company | -2.9% |
KHC | Kraft Heinz Company | -2.4% |
NOV | National Oilwell Varco Inc. | -2.3% |
MAC | Macerich Company | -2.1% |
PVH | PVH Corp. | -2.0% |
Total |
| -11.7% |
Cognios Funds
Shareholder Letter (continued)June 30, 2019 (Unaudited)
8www.cogniosfunds.com
We at Cognios look forward to future opportunities to connect with our shareholders. We strive to continuously add value to your investment experience by providing access toFundinformation, portfolio updates and straightforward commentary.
If you have any questions regarding the Cognios Funds, please contact your account manager or financial adviser, or call one of our shareholder associates at 888-553-4233. We also invite you to visit Cognios’ website atwww.cognios.com to learn more about our firm, our team and our values.
We thank you for investing with Cognios and for the trust you have placed in us.
Sincerely,
| | |||
Jonathan Angrist | | Brian Machtley | | Francisco Bido |
Portfolio Managers,
Cognios Capital, LLC
Annual Report | June 30, 20199
Cognios Large Cap Value Fund
Portfolio UpdateJune 30, 2019 (Unaudited)
Performance (as of June 30, 2019)
| One Year | Since |
Cognios Large Cap Value Fund Investor Class shares | 12.90% | 12.58% |
Cognios Large Cap Value Fund Institutional Class shares | 12.56% | 12.62% |
S&P 500® Total Return Index(b) | 10.42% | 14.21% |
Russell 1000® Value Total Return Index(c) | 8.46% | 10.00% |
(a)The Cognios Large Cap Value Fund (the “Value Fund”) commenced operations on October 3, 2016.
(b)The S&P 500® Total Return Index is a broad unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track and individuals cannot invest directly in any index.
(c)The Russell 1000® Value Total Return Index measures the performance of those Russell 1000 companies with lower price-to-book ratios and lower forecasted growth values. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track and individuals cannot invest directly in any index.
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 888-553-4233.
As with any fund, save an index fund, that commonly compares its performance to the S&P 500® Total Return Index and the Russell 1000® Value Total Return Index, such a comparison may be said to be inappropriate because of the dissimilarity between the Fund’s investments and the securities comprising the indices; so too with the Cognios Large Cap Value Fund, which will generally not invest in all the securities comprising each index.
Total Fund operating expense ratios as stated in the current Fund prospectus dated October 29, 2018 for the Fund were as follows:
Cognios Large Cap Value Fund Investor Class Shares, gross of fee waivers or | 1.62% |
Cognios Large Cap Value Fund Investor Class Shares, after fee waivers or | 1.10% |
Cognios Large Cap Value Fund Institutional Class Shares, gross of fee waivers or | 1.37% |
Cognios Large Cap Value Fund Institutional Class Shares, after fee waivers or | 0.85% |
10www.cogniosfunds.com
Cognios Large Cap Value Fund
Portfolio Update (continued)June 30, 2019 (Unaudited)
Cognios Capital, LLC (the “Adviser”) has entered into an Expense Limitation Agreement with the Value Fund under which it has agreed to waive or reduce its fees and to assume other expenses of the Value Fund, if necessary, in an amount that limits the Value Fund’s annual operating expenses (exclusive of interest, taxes, brokerage fees and commissions, acquired funds fees and expenses, extraordinary expenses, and amounts, if any, payable pursuant to a plan adopted in accordance with Rule 12b-1 under the 1940 Act) to not more than 0.85% through at least October 31, 2020. Subject to approval by the Value Fund’s Board, any waiver under the Expense Limitation Agreement is subject to repayment by the Value Fund within the three fiscal years following the year in which such waiver occurred, if the Value Fund is able to make the payment without exceeding the expense limitation in place at the time of the waiver. The current contractual agreement cannot be terminated prior to at least one year after the effective date of the Registration Statement without the Board of Trustees’ approval. Total Gross Operating Expenses (Annualized) during the year ended June 30, 2019 were 2.96% and 2.71% for the Value Fund’s Investor Class shares and Institutional Class shares, respectively. Please see the Disclosure of Fund Expenses, the Financial Highlights and Notes to Financial Statements (Note 5) sections of this report for expense related disclosures during the year ended June 30, 2019.
Annual Report | June 30, 201911
Cognios Large Cap Value Fund
Portfolio Update (continued)June 30, 2019 (Unaudited)
The graphs shown above represent historical performance of hypothetical investments of $10,000 in the Cognios Large Cap Value Fund’s Investor Shares and $100,000 in the Cognios Large Cap Value Fund’s Institutional Shares since inception. Past performance does not guarantee future results. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
The Value Fund’s principal investment objective is long-term growth of capital. The Value Fund seeks to achieve its investment objective by purchasing equity securities of U.S. companies that the Adviser believes are undervalued and likely to appreciate. The Value Fund generally seeks to purchase large capitalization U.S. equity common stocks of companies that are constituents of the S&P 500® Index. It may invest across different industries and sectors. Under normal circumstances, the Value Fund invests at least 80% of its assets in securities of large capitalization companies as defined by the S&P 500® Index. It may also invest up to 20% in issuers of any size.
12www.cogniosfunds.com
Cognios Large Cap Value Fund
Portfolio Update (continued)June 30, 2019 (Unaudited)
Sector Allocation of Portfolio Holdings(% of Net Assets)*
Basic Materials | 0.50% |
Communications | 4.19% |
Consumer, Cyclical | 28.19% |
Consumer, Non-Cyclical | 44.02% |
Energy | 0.92% |
Financials | 16.46% |
Industrials | 10.28% |
Technology | 4.67% |
Utilities | 21.02% |
Cash, Cash Equivalents, & Other Net Liabilities | (30.25)% |
TOTAL | 100.00% |
Top Ten Portfolio Holdings(% of Net Assets)*
Hershey Co. | 2.30% |
Procter & Gamble Co. | 2.25% |
Church & Dwight Co., Inc. | 2.20% |
Tyson Foods, Inc. - Class A | 2.19% |
McCormick & Co., Inc. | 2.17% |
Republic Services, Inc. | 2.15% |
American Electric Power Co., Inc. | 2.14% |
Walmart, Inc. | 2.10% |
Darden Restaurants, Inc. | 2.09% |
Public Storage | 2.09% |
*The percentages in the above tables are based on the portfolio holdings of the Value Fund as of June 30, 2019 and are subject to change. For a detailed break-out of holdings by industry, please refer to the Schedules of Investments.
Annual Report | June 30, 201913
Cognios Large Cap Growth Fund
Portfolio UpdateJune 30, 2019 (Unaudited)
Performance(as of June 30, 2019)
| One Year | Since |
Cognios Large Cap Growth Fund Investor Class shares | 9.42% | 17.33% |
Cognios Large Cap Growth Fund Institutional Class shares | 9.64% | 17.59% |
Russell 1000® Total Return Index(b) | 10.02% | 14.10% |
Russell 1000® Growth Total Return Index(c) | 11.56% | 18.15% |
(a)The Cognios Large Cap Growth Fund (the “Growth Fund”) commenced operations on
October 3, 2016.
(b)The Russell 1000® Total Return Index measures the performance of the large-cap segment of the U.S. equity universe and consists of the largest 1000 companies in the Russell 3000 Index. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track and individuals cannot invest directly in any index.
(c)The Russell 1000® Growth Total Return Index measures the performance of those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track and individuals cannot invest directly in any index.
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 888-553-4233.
As with any fund, save an index fund, that commonly compares its performance to the The Russell 1000® Total Return Index and the Russell 1000® Growth Total Return Index, such a comparison may be said to be inappropriate because of the dissimilarity between the Fund’s investments and the securities comprising the indices; so too with the Cognios Large Cap Growth Fund, which will generally not invest in all the securities comprising each index.
Total Fund operating expense ratios as stated in the current Fund prospectus dated October 29, 2018 for the Fund were as follows:
Cognios Large Cap Growth Fund Investor Class Shares, gross of fee waivers or | 1.76% |
Cognios Large Cap Growth Fund Investor Class Shares, after fee waivers or | 1.15% |
Cognios Large Cap Growth Fund Institutional Class Shares, gross of fee waivers or | 1.51% |
Cognios Large Cap Growth Fund Institutional Class Shares, after fee waivers or | 0.90% |
14www.cogniosfunds.com
Cognios Large Cap Growth Fund
Portfolio Update (continued)June 30, 2019 (Unaudited)
Cognios Capital, LLC (the “Adviser”) has entered into an Expense Limitation Agreement with the Growth Fund under which it has agreed to waive or reduce its fees and to assume other expenses of the Growth Fund, if necessary, in an amount that limits the Growth Fund’s annual operating expenses (exclusive of interest, taxes, brokerage fees and commissions, acquired funds fees and expenses, extraordinary expenses, and amounts, if any, payable pursuant to a plan adopted in accordance with Rule 12b-1 under the 1940 Act) to not more than 0.90% through at least October 31, 2020. Subject to approval by the Growth Fund’s Board, any waiver under the Expense Limitation Agreement is subject to repayment by the Growth Fund within the three fiscal years following the year in which such waiver occurred, if the Growth Fund is ableto make the payment without exceeding the expense limitation in place at the time of the waiver. The current contractual agreement cannot be terminated prior to at least one year after the effective date of the Registration Statement without the Board of Trustees’ approval. Total Gross Operating Expenses (Annualized) during the year ended June 30, 2019 were 1.49% and 1.24% for the Growth Fund’s Investor Class shares and Institutional Class shares, respectively. Please see the Disclosure of Fund Expenses, the Financial Highlights and Notes to Financial Statements (Note 5) sections of this report for expense related disclosures during the year ended June 30, 2019.
Annual Report | June 30, 201915
Cognios Large Cap Growth Fund
Portfolio Update (continued)June 30, 2019 (Unaudited)
The graphs shown above represent historical performance of hypothetical investments of $10,000 in the Cognios Large Cap Growth Fund’s Investor Shares and $100,000 in the Cognios Large Cap Growth Fund’s Institutional Shares since inception. Past performance does not guarantee future results. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
The Growth Fund’s principal investment objective is long-term growth of capital. The Growth Fund seeks to achieve its investment objective by purchasing equity securities that the Adviser believes are likely to appreciate. It generally seeks to purchase equity securities of large capitalization U.S. companies, and may purchase American Depositary Receipts (“ADR’s”) of international companies trading on U.S. exchanges, that exhibit accelerating growth in earnings and revenue. The Growth Fund may invest across different industries and sectors. The Growth Fund will invest at least 80% of its net assets in securities that have a market capitalization at the time of investment comparable to securities held in the Russell 1000® Index. The Growth Fund may also invest up to 20% in issuers of any size.
16www.cogniosfunds.com
Cognios Large Cap Growth Fund
Portfolio Update (continued)June 30, 2019 (Unaudited)
Sector Allocation of Portfolio Holdings(% of Net Assets)*
Communications | 22.66% |
Consumer, Cyclical | 9.76% |
Consumer, Non-Cyclical | 14.86% |
Financials | 12.47% |
Industrials | 6.40% |
Technology | 30.95% |
Cash, Cash Equivalents, & Other Net Assets | 2.90% |
TOTAL | 100.00% |
Top Ten Portfolio Holdings (% of Net Assets)*
Amazon.com, Inc. | 8.22% |
Advanced Micro Devices, Inc. | 5.66% |
Apple, Inc. | 5.19% |
Microsoft Corp. | 5.07% |
Walt Disney Co. | 4.55% |
Twilio, Inc. - Class A | 4.46% |
AT&T, Inc. | 3.63% |
Keysight Technologies, Inc. | 3.53% |
Procter & Gamble Co./The | 3.39% |
Adobe, Inc. | 2.89% |
*The percentages in the above tables are based on the portfolio holdings of the Growth Fund as of June 30, 2019 and are subject to change. For a detailed break-out of holdings by industry, please refer to the Schedules of Investments.
Annual Report | June 30, 201917
Cognios Market Neutral Large Cap Fund
Portfolio UpdateJune 30, 2019 (Unaudited)
Performance(as of June 30, 2019)
| One Year | Five Years | Since |
Cognios Market Neutral Large Cap Fund | (3.01)% | 2.82% | 3.20% |
Cognios Market Neutral Large Cap Fund | (2.77)% | 3.07% | 3.45% |
S&P 500® Total Return Index(b) | 10.42% | 10.72% | 14.13% |
(a)The Cognios Market Neutral Large Cap Fund (the “Market Neutral Fund”) commenced operations on December 31, 2012.
(b)The S&P 500® Total Return Index is a broad unmanaged index of 500 stocks, which is widely recognized as representative of the equity market in general. Please note that indices do not take into account any fees and expenses of investing in the individual securities that they track and individuals cannot invest directly in any index.
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 888-553-4233.
As with any fund, save an index fund, that commonly compares its performance to the S&P 500® Total Return 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 Market Neutral Fund, which will generally not invest in all the securities comprising the index.
Total Fund operating expense ratios as stated in the current Fund prospectus dated October 29, 2018 for the Fund were as follows:
Cognios Market Neutral Large Cap Fund Investor Class Shares, gross of fee waivers or | 3.94% |
Cognios Market Neutral Large Cap Fund Investor Class Shares, after fee waivers or | 3.49% |
Cognios Market Neutral Large Cap Fund Institutional Class Shares, gross of fee waivers or | 3.69% |
Cognios Market Neutral Large Cap Fund Institutional Class Shares, after fee waivers or | 3.24% |
Cognios Capital, LLC (the “Adviser”) has entered into an Expense Limitation Agreement with the Market Neutral Fund (the “Fund”) under which it has agreed to waive or reduce its fees and to assume other expenses of the Fund, if necessary, in an amount that limits the Fund’s annual operating expenses (exclusive of interest, borrowing expenses, distribution fees pursuant to Rule 12b-1 plans, taxes, acquired fund fees and expenses, brokerage fees and commissions, dividend
18www.cogniosfunds.com
Cognios Market Neutral Large Cap Fund
Portfolio Update (continued)June 30, 2019 (Unaudited)
expenses on short sales, litigation expenses, other expenditures which are capitalized in accordance with generally accepted accounting principles and other extraordinary expenses not incurred in the ordinary course of the Fund’s business) to not more than 1.45% of the Fund’s average daily net assets through at least October 31, 2020. Subject to approval by the Fund’s Board of Trustees, any waiver under the Expense Limitation Agreement is subject to repayment by the Fund within the three fiscal years following the year in which such waiver occurred, if the Fund is able to make the payment without exceeding the 1.45% expense limitation. Each waiver or reimbursement of an expense by the Adviser is subject to repayment by the Fund within three fiscal years following the fiscal year in which the expense was incurred, provided that the Fund is able to make the repayment without exceeding the expense limitation in place at the time of the waiver or reimbursement and at the time the waiver or reimbursement is recouped. Total Gross Operating Expenses (Annualized) during the year ended June 30, 2019 were 4.27% and 4.02% for the Fund’s Investor Class shares and Institutional Class shares, respectively. Please see the Disclosure of Fund Expenses, the Financial Highlights and Notes to Financial Statements (Note 5) sections of this report for expense related disclosures during the year ended June 30, 2019.
Annual Report | June 30, 201919
Cognios Market Neutral Large Cap Fund
Portfolio Update (continued)June 30, 2019 (Unaudited)
The graphs shown above represent historical performance of a hypothetical investments of $10,000 in the Cognios Market Neutral Large Cap Fund’s Investor Shares and $100,000 in the Cognios Market Neutral Large Cap Fund’s Institutional Shares since inception. Past performance does not guarantee future results. All returns reflect reinvested dividends, but do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
The Market Neutral Fund’s principal investment objective is long-term growth of capital independent of stock market direction. The Market Neutral Fund seeks to achieve its investment objective by balancing “long” and “short” positions. To do this, the Fund will buy (take long positions in) equity securities of U.S. companies that the Adviser believes are undervalued and more likely to appreciate and, at the same time, borrow and then sell (take short positions in) equity securities of U.S. companies that the Adviser believes are likely to underperform the long positions over time. The Fund generally seeks to purchase and sell short large capitalization U.S. equity common stocks of companies that are constituents of the S&P 500 Index.
20www.cogniosfunds.com
Cognios Market Neutral Large Cap Fund
Portfolio Update (continued)June 30, 2019 (Unaudited)
Sector Allocation of Portfolio Holdings(% of Net Assets)*
Basic Materials | (4.39)% |
Communications | 3.98% |
Consumer, Cyclical | 30.74% |
Consumer, Non-Cyclical | 14.25% |
Energy | (3.73)% |
Financials | (9.63)% |
Industrials | 0.65% |
Technology | 1.53% |
Utilities | (18.92)% |
Cash, Cash Equivalents, & Other Net Assets | 85.52% |
TOTAL | 100.00% |
Top Ten Portfolio Holdings(% of Net Assets)*
L Brands, Inc. | 1.86% |
CenturyLink, Inc. | 1.83% |
H&R Block, Inc. | 1.73% |
Walgreens Boots Alliance, Inc. | 1.73% |
HCA Healthcare, Inc. | 1.72% |
Tapestry, Inc. | 1.71% |
Cooper Cos., Inc. | 1.70% |
Intel Corp. | 1.70% |
Macy’s, Inc. | 1.70% |
Walmart, Inc. | 1.70% |
*The percentages in the above tables are based on the portfolio holdings of the Market Neutral Fund as of June 30, 2019 and are subject to change. For a detailed break-out of holdings by industry, please refer to the Schedules of Investments and Schedule of Securities Sold Short.
Annual Report | June 30, 201921
Cognios Funds
Disclosure of Fund ExpensesJune 30, 2019 (Unaudited)
As a shareholder of the Funds, you incur 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 Funds and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period 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 Funds’ actual expense ratio and an assumed rate of return of 5% per year before expenses, which are 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 Funds 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 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 Funds’ prospectus.
Expenses and Value of a $1,000 Investment for the Period from 01/01/19 through 06/30/19
| Beginning | Annualized | Ending | Expenses Paid |
Value Fund: | | | | |
Actual Fund Return (in parentheses) | | | | |
Investor Class Shares (+20.87%) | $ 1,000.00 | 2.55% | $ 1,208.70 | $ 13.96(a) |
Institutional Class Shares (+20.28%) | $ 1,000.00 | 2.30% | $ 1,202.80 | $ 12.56(a) |
Growth Fund: | | | | |
Actual Fund Return (in parentheses) | | | | |
Investor Class Shares (+19.61%) | $ 1,000.00 | 1.15% | $ 1,196.10 | $ 6.26(a) |
Institutional Class Shares (+19.73%) | $ 1,000.00 | 0.90% | $ 1,197.30 | $ 4.90(a) |
22www.cogniosfunds.com
Cognios Funds
Disclosure of Fund Expenses (continued)June 30, 2019 (Unaudited)
| Beginning | Annualized | Ending | Expenses Paid |
Market Neutral Fund: | | | | |
Actual Fund Return (in parentheses) | | | | |
Investor Class Shares (-3.20%) | $ 1,000.00 | 3.80% | $ 968.10 | $ 18.54(a) |
Institutional Class Shares (-3.05%) | $ 1,000.00 | 3.55% | $ 969.50 | $ 17.34(a) |
(a)Expenses are equal to the Funds’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.
Expenses and Value of a $1,000 Investment for the Period from 01/01/19 through 06/30/19
| Beginning | Annualized | Ending | Expenses Paid |
Value Fund: | | | | |
Hypothetical 5% Fund Return | | | | |
Investor Class Shares | $ 1,000.00 | 2.55% | $ 1,012.10 | $ 12.72(b) |
Institutional Class Shares | $ 1,000.00 | 2.30% | $ 1,013.40 | $ 11.48(b) |
Growth Fund: | | | | |
Hypothetical 5% Fund Return | | | | |
Investor Class Shares | $ 1,000.00 | 1.15% | $ 1,019.10 | $ 5.76(b) |
Institutional Class Shares | $ 1,000.00 | 0.90% | $ 1,020.30 | $ 4.51(b) |
Market Neutral Fund: | | | | |
Hypothetical 5% Fund Return | | | | |
Investor Class Shares | $ 1,000.00 | 3.80% | $ 1,006.00 | $ 18.90(b) |
Institutional Class Shares | $ 1,000.00 | 3.55% | $ 1,007.20 | $ 17.67(b) |
(b)Expenses are equal to the Funds’ annualized expense ratios, multiplied by the average account value over the period, multiplied by 181/365 to reflect the one-half year period.
For more information on the Funds’ expenses, please refer to the Funds’ prospectus, which can be obtained from your investment representative or by calling 888-553-4233. Please read it carefully before you invest or send money.
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201923
Cognios Large Cap Value Fund
Schedules of InvestmentsJune 30, 2019
| Shares | | Fair Value |
COMMON STOCK- 130.25% | | | | |
| | | | |
Basic Materials- 0.50% | | | | |
Linde PLC(b) | 508 | | $ | 102,006 |
| | | | |
Communications- 4.19% | | | | |
AT&T, Inc.(b) | 11,194 | | | 375,111 |
CenturyLink, Inc.(b) | 5,503 | | | 64,715 |
Facebook, Inc. - Class A(a)(b) | 981 | | | 189,333 |
Juniper Networks, Inc.(b) | 2,894 | | | 77,067 |
Omnicom Group, Inc.(b) | 1,874 | |
| 153,574 |
| | |
| 859,800 |
Consumer, Cyclical- 28.19% | | | | |
Alaska Air Group, Inc.(b) | 4,414 | | | 282,099 |
AutoZone, Inc.(a)(b) | 160 | | | 175,915 |
Capri Holdings Ltd.(a)(b) | 6,814 | | | 236,310 |
Chipotle Mexican Grill, Inc.(a)(b) | 405 | | | 296,816 |
Darden Restaurants, Inc.(b) | 3,511 | | | 427,394 |
Dollar General Corp.(b) | 1,240 | | | 167,598 |
Dollar Tree, Inc.(a)(b) | 1,454 | | | 156,145 |
Foot Locker, Inc.(b) | 2,546 | | | 106,728 |
Gap, Inc.(b) | 8,435 | | | 151,577 |
Hanesbrands, Inc.(b) | 9,630 | | | 165,829 |
Kohl’s Corp.(b) | 961 | | | 45,696 |
L Brands, Inc.(b) | 9,813 | | | 256,119 |
Macy’s, Inc.(b) | 8,249 | | | 177,024 |
McDonald’s Corp.(b) | 1,558 | | | 323,534 |
NIKE, Inc. - Class B(b) | 2,657 | | | 223,055 |
Nordstrom, Inc.(b) | 5,641 | | | 179,722 |
PulteGroup, Inc.(b) | 5,183 | | | 163,886 |
Ralph Lauren Corp.(b) | 2,196 | | | 249,444 |
Starbucks Corp.(b) | 4,392 | | | 368,181 |
Tapestry, Inc.(b) | 8,981 | | | 284,967 |
Target Corp.(b) | 3,538 | | | 306,426 |
TJX Cos., Inc.(b) | 4,097 | | | 216,649 |
Ulta Beauty, Inc.(a)(b) | 481 | | | 166,854 |
United Continental Holdings, Inc.(a)(b) | 788 | | | 68,989 |
Walmart, Inc.(b) | 3,896 | | | 430,469 |
Yum! Brands, Inc.(b) | 1,358 | |
| 150,290 |
| | |
| 5,777,716 |
The accompanying notes are an integral part of these financial statements.
24www.cogniosfunds.com
| Shares | | Fair Value |
Cognios Large Cap Value Fund
Schedules of Investments (continued)June 30, 2019
Consumer, Non-cyclical - 44.02% | | | | |
Altria Group, Inc.(b) | 5,115 | | $ | 242,195 |
Bristol-Myers Squibb Co.(b) | 1,452 | | | 65,848 |
Campbell Soup Co.(b) | 9,330 | | | 373,853 |
Church & Dwight Co., Inc.(b) | 6,178 | | | 451,365 |
Cigna Corp.(b) | 1,600 | | | 252,080 |
Clorox Co.(b) | 2,576 | | | 394,411 |
Colgate-Palmolive Co.(b) | 3,319 | | | 237,873 |
Conagra Brands, Inc.(b) | 11,873 | | | 314,872 |
Constellation Brands, Inc. - Class A(b) | 1,745 | | | 343,660 |
Cooper Cos., Inc.(b) | 257 | | | 86,581 |
Edwards Lifesciences Corp.(a)(b) | 1,023 | | | 188,989 |
Estee Lauder Cos., Inc.(b) | 1,574 | | | 288,215 |
General Mills, Inc.(b) | 3,097 | | | 162,654 |
H&R Block, Inc.(b) | 14,134 | | | 414,126 |
HCA Healthcare, Inc.(b) | 3,125 | | | 422,406 |
Hershey Co.(b) | 3,523 | | | 472,188 |
Hormel Foods Corp.(b) | 9,315 | | | 377,630 |
JM Smucker Co.(b) | 655 | | | 75,449 |
Johnson & Johnson(b) | 1,595 | | | 222,152 |
Kellogg Co.(b) | 5,719 | | | 306,367 |
Kimberly-Clark Corp.(b) | 2,277 | | | 303,479 |
Kroger Co.(b) | 2,593 | | | 56,294 |
Lamb Weston Holdings, Inc.(b) | 2,077 | | | 131,599 |
McCormick & Co., Inc.(b) | 2,872 | | | 445,189 |
Molson Coors Brewing Co. - Class B(b) | 3,443 | | | 192,808 |
PepsiCo, Inc.(b) | 2,393 | | | 313,794 |
Procter & Gamble Co.(b) | 4,198 | | | 460,311 |
Quest Diagnostics, Inc.(b) | 1,162 | | | 118,303 |
Sysco Corp.(b) | 5,504 | | | 389,243 |
Tyson Foods, Inc. - Class A(b) | 5,554 | | | 448,430 |
UnitedHealth Group, Inc.(b) | 554 | | | 135,182 |
Verisk Analytics, Inc.(b) | 2,270 | |
| 332,464 |
| | |
| 9,020,010 |
Energy- 0.92% | | | | |
Kinder Morgan, Inc.(b) | 9,013 | |
| 188,192 |
| | | | |
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201925
| Shares | | Fair Value |
Cognios Large Cap Value Fund
Schedules of Investments (continued)June 30, 2019
Financials- 16.46% | | | | |
Aflac, Inc.(b) | 3,058 | | $ | 167,609 |
Assurant, Inc.(b) | 2,423 | | | 257,759 |
Berkshire Hathaway, Inc. - Class B(a)(b) | 313 | | | 66,722 |
Cboe Global Markets, Inc.(b) | 3,560 | | | 368,923 |
Cincinnati Financial Corp.(b) | 1,025 | | | 106,262 |
CME Group, Inc.(b) | 2,118 | | | 411,125 |
Everest Re Group Ltd.(b) | 986 | | | 243,720 |
Hartford Financial Services Group, Inc.(b) | 1,296 | | | 72,213 |
Intercontinental Exchange, Inc.(b) | 3,579 | | | 307,579 |
Loews Corp.(b) | 4,331 | | | 236,776 |
Nasdaq, Inc.(b) | 3,179 | | | 305,724 |
Progressive Corp.(b) | 4,106 | | | 328,193 |
Public Storage(b) | 1,800 | | | 428,706 |
Willis Towers Watson PLC(b) | 370 | |
| 70,870 |
| | |
| 3,372,181 |
Industrials- 10.28% | | | | |
Ball Corp.(b) | 1,585 | | | 110,934 |
CH Robinson Worldwide, Inc.(b) | 3,036 | | | 256,087 |
Expeditors International of Washington, Inc.(b) | 2,614 | | | 198,298 |
FLIR Systems, Inc.(b) | 1,213 | | | 65,623 |
Fortive Corp.(b) | 1,615 | | | 131,655 |
Lockheed Martin Corp.(b) | 179 | | | 65,074 |
Northrop Grumman Corp.(b) | 522 | | | 168,663 |
Raytheon Co.(b) | 639 | | | 111,109 |
Republic Services, Inc.(b) | 5,087 | | | 440,738 |
Stericycle, Inc.(a)(b) | 3,672 | | | 175,338 |
United Technologies Corp.(b) | 346 | | | 45,049 |
Waste Management, Inc.(b) | 2,931 | |
| 338,150 |
| | |
| 2,106,718 |
Technology- 4.67% | | | | |
Activision Blizzard, Inc.(b) | 1,465 | | | 69,148 |
Akamai Technologies, Inc.(a)(b) | 3,864 | | | 309,661 |
Broadcom, Inc.(b) | 529 | | | 152,278 |
Electronic Arts, Inc.(a)(b) | 643 | | | 65,110 |
Fidelity National Information Services, Inc.(b) | 591 | | | 72,504 |
Fiserv, Inc.(a)(b) | 993 | | | 90,522 |
Fortinet, Inc.(a)(b) | 1,137 | | | 87,356 |
The accompanying notes are an integral part of these financial statements.
26www.cogniosfunds.com
Cognios Large Cap Value Fund
Schedules of Investments (continued)June 30, 2019
| Shares | | Fair Value | |
Technology- (continued) | | | | |
Intel Corp.(b) | 1,123 | | $ | 53,758 |
Skyworks Solutions, Inc.(b) | 740 | |
| 57,180 |
| | |
| 957,517 |
Utilities- 21.02% | | | | |
Ameren Corp.(b) | 2,560 | | | 192,282 |
American Electric Power Co., Inc.(b) | 4,977 | | | 438,026 |
American Water Works Co., Inc.(b) | 1,114 | | | 129,224 |
CMS Energy Corp.(b) | 6,215 | | | 359,911 |
Consolidated Edison, Inc.(b) | 1,908 | | | 167,293 |
Dominion Energy, Inc.(b) | 3,788 | | | 292,888 |
DTE Energy Co.(b) | 2,748 | | | 351,414 |
Edison International(b) | 2,339 | | | 157,672 |
Entergy Corp.(b) | 2,000 | | | 205,860 |
Evergy, Inc.(b) | 1,027 | | | 61,774 |
Eversource Energy(b) | 1,541 | | | 116,746 |
Exelon Corp.(b) | 6,650 | | | 318,801 |
FirstEnergy Corp.(b) | 2,660 | | | 113,875 |
PPL Corp.(b) | 12,393 | | | 384,307 |
Public Service Enterprise Group, Inc.(b) | 2,971 | | | 174,754 |
Sempra Energy(b) | 1,326 | | | 182,245 |
Southern Co.(b) | 4,824 | | | 266,671 |
WEC Energy Group, Inc.(b) | 2,360 | | | 196,753 |
Xcel Energy, Inc.(b) | 3,298 | |
| 196,198 |
| | |
| 4,306,694 |
| | | | |
TOTAL COMMON STOCK (Cost $24,713,385) | | | | 26,690,834 |
| | | | |
TOTAL INVESTMENTS (Cost $24,713,385) - 130.25% | | | $ | 26,690,834 |
LIABILITIES IN EXCESS OF OTHER ASSETS, NET - (30.25%) | | | | (6,198,894) |
NET ASSETS - 100% | | | $ | 20,491,940 |
| | | | |
Percentages are stated as a percent of net assets. | | | | |
| | | | |
(a)Non-income producing security | | | | |
(b)All or a portion of the security is segregated as collateral for line of credit borrowings. | ||||
| | | | |
The following abbreviations are used in this portfolio: | | | | |
Ltd. - Limited | | | | |
PLC - Public Limited Company | | | | |
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201927
Cognios Large Cap Growth Fund
Schedules of InvestmentsJune 30, 2019
| Shares | | Fair Value |
COMMON STOCK- 97.10% | | | | |
| | | | |
Communications- 22.66% | | | | |
Alphabet, Inc. - Class A(a) | 981 | | $ | 1,062,227 |
Amazon.com, Inc.(a) | 1,978 | | | 3,745,600 |
AT&T, Inc. | 49,428 | | | 1,656,332 |
Cisco Systems, Inc. | 18,706 | | | 1,023,779 |
Facebook, Inc. - Class A(a) | 3,988 | | | 769,684 |
Walt Disney Co. | 14,837 | |
| 2,071,839 |
| | |
| 10,329,461 |
Consumer, Cyclical- 9.76% | | | | |
Lululemon Athletica, Inc.(a) | 5,899 | | | 1,063,059 |
McDonald’s Corp. | 5,842 | | | 1,213,150 |
Target Corp. | 11,271 | | | 976,181 |
Walmart, Inc. | 10,819 | |
| 1,195,391 |
| | |
| 4,447,781 |
Consumer, Non-cyclical - 14.86% | | | | |
Coca-Cola Co. | 20,698 | | | 1,053,942 |
Incyte Corp.(a) | 11,188 | | | 950,532 |
Procter & Gamble Co. | 14,095 | | | 1,545,517 |
Quest Diagnostics, Inc. | 10,730 | | | 1,092,421 |
Square, Inc. - Class A(a) | 13,350 | | | 968,276 |
WellCare Health Plans, Inc.(a) | 4,088 | |
| 1,165,366 |
| | |
| 6,776,054 |
Financials- 12.47% | | | | |
ICICI Bank Ltd. - ADR | 78,600 | | | 989,574 |
MetLife, Inc. | 23,584 | | | 1,171,417 |
Morgan Stanley | 23,928 | | | 1,048,286 |
Progressive Corp. | 15,515 | | | 1,240,114 |
Synchrony Financial | 35,617 | |
| 1,234,841 |
| | |
| 5,684,232 |
Industrials- 6.40% | | | | |
Keysight Technologies, Inc.(a) | 17,932 | | | 1,610,473 |
L3Harris Technologies, Inc.(a) | 6,904 | |
| 1,305,754 |
| | |
| 2,916,227 |
Technology- 30.95% | | | | |
Adobe, Inc.(a) | 4,471 | | | 1,317,380 |
Advanced Micro Devices, Inc.(a) | 84,940 | | | 2,579,628 |
The accompanying notes are an integral part of these financial statements.
28www.cogniosfunds.com
Cognios Large Cap Growth Fund
Schedules of Investments (continued)June 30, 2019
| Shares | | Fair Value | |
Technology- (continued) | | | | |
Apple, Inc. | 11,945 | | $ | 2,364,154 |
Microsoft Corp. | 17,235 | | | 2,308,801 |
salesforce.com, Inc.(a) | 6,171 | | | 936,326 |
Splunk, Inc.(a) | 10,001 | | | 1,257,626 |
Twilio, Inc. - Class A(a) | 14,901 | | | 2,031,751 |
VMware, Inc. - Class A | 7,855 | |
| 1,313,435 |
| | |
| 14,109,101 |
| | | | |
TOTAL COMMON STOCK (Cost $38,773,596) | | | | 44,262,856 |
| | | | |
TOTAL INVESTMENTS (Cost $38,773,596)- 97.10% | | | $ | 44,262,856 |
OTHER ASSETS IN EXCESS OF LIABILITIES, NET- 2.90% | | | | 1,320,096 |
NET ASSETS- 100% | | | $ | 45,582,952 |
| | | | |
Percentages are stated as a percent of net assets. | | | | |
| | | | |
(a)Non-income producing security | | | | |
| | | | |
The following abbreviations are used in this portfolio: | | | | |
ADR - American Depositary Receipt | | | | |
Ltd. - Limited | | | | |
PLC - Public Limited Company | | | | |
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201929
Cognios Market Neutral Large Cap Fund
Schedules of InvestmentsJune 30, 2019
| Shares | | Fair Value |
COMMON STOCK- 121.87% | | | | |
| | | | |
Communications- 6.83% | | | | |
AT&T, Inc.(b) | 46,281 | | $ | 1,550,876 |
CenturyLink, Inc.(b) | 143,609 | | | 1,688,842 |
Motorola Solutions, Inc.(b) | 9,204 | | | 1,534,583 |
Omnicom Group, Inc.(b) | 18,813 | |
| 1,541,725 |
| | |
| 6,316,026 |
Consumer, Cyclical- 36.49% | | | | |
Alaska Air Group, Inc.(b) | 24,499 | | | 1,565,731 |
AutoZone, Inc.(a)(b) | 1,351 | | | 1,485,384 |
Capri Holdings Ltd.(a)(b) | 44,166 | | | 1,531,677 |
Copart, Inc.(a)(b) | 19,980 | | | 1,493,305 |
Darden Restaurants, Inc.(b) | 12,271 | | | 1,493,749 |
Dollar General Corp.(b) | 11,245 | | | 1,519,874 |
Dollar Tree, Inc.(a)(b) | 14,499 | | | 1,557,048 |
Gap, Inc.(b) | 83,648 | | | 1,503,155 |
L Brands, Inc.(b) | 65,887 | | | 1,719,651 |
Macy’s, Inc.(b) | 73,101 | | | 1,568,747 |
McDonald’s Corp. | 7,281 | | | 1,511,972 |
NIKE, Inc. - Class B(b) | 18,057 | | | 1,515,885 |
Nordstrom, Inc.(b) | 47,786 | | | 1,522,462 |
O’Reilly Automotive, Inc.(a)(b) | 3,903 | | | 1,441,456 |
PulteGroup, Inc.(b) | 46,279 | | | 1,463,342 |
Ralph Lauren Corp.(b) | 13,663 | | | 1,551,980 |
Starbucks Corp.(b) | 18,033 | | | 1,511,706 |
Tapestry, Inc.(b) | 49,836 | | | 1,581,296 |
TJX Cos., Inc.(b) | 28,836 | | | 1,524,848 |
Walgreens Boots Alliance, Inc.(b) | 29,184 | | | 1,595,489 |
Walmart, Inc.(b) | 14,204 | | | 1,569,400 |
Yum! Brands, Inc.(b) | 13,691 | |
| 1,515,183 |
| | |
| 33,743,340 |
Consumer, Non-cyclical - 46.20% | | | | |
Altria Group, Inc.(b) | 29,082 | | | 1,377,033 |
Bristol-Myers Squibb Co.(b) | 32,015 | | | 1,451,880 |
Campbell Soup Co.(b) | 34,459 | | | 1,380,772 |
Church & Dwight Co., Inc.(b) | 19,082 | | | 1,394,131 |
Clorox Co.(b) | 9,383 | | | 1,436,631 |
Colgate-Palmolive Co.(b) | 20,241 | | | 1,450,672 |
Conagra Brands, Inc.(b) | 50,254 | | | 1,332,736 |
The accompanying notes are an integral part of these financial statements.
30www.cogniosfunds.com
Cognios Market Neutral Large Cap Fund
Schedules of Investments (continued)June 30, 2019
| Shares | | Fair Value | |
Consumer, Non-cyclical - (continued) | | | | |
Constellation Brands, Inc. - Class A(b) | 7,955 | | $ | 1,566,658 |
Cooper Cos., Inc.(b) | 4,658 | | | 1,569,234 |
General Mills, Inc.(b) | 28,958 | | | 1,520,874 |
H&R Block, Inc.(b) | 54,673 | | | 1,601,919 |
HCA Healthcare, Inc.(b) | 11,779 | | | 1,592,167 |
Hershey Co.(b) | 10,801 | | | 1,447,658 |
Hormel Foods Corp.(b) | 35,681 | | | 1,446,508 |
Johnson & Johnson(b) | 10,740 | | | 1,495,867 |
Kellogg Co.(b) | 26,646 | | | 1,427,426 |
Kimberly-Clark Corp.(b) | 11,049 | | | 1,472,611 |
Kroger Co.(b) | 62,688 | | | 1,360,956 |
Lamb Weston Holdings, Inc.(b) | 24,125 | | | 1,528,560 |
McCormick & Co., Inc.(b) | 9,408 | | | 1,458,334 |
Molson Coors Brewing Co. - Class B(b) | 25,936 | | | 1,452,416 |
PepsiCo, Inc.(b) | 11,167 | | | 1,464,329 |
Procter & Gamble Co.(b) | 13,709 | | | 1,503,192 |
Quest Diagnostics, Inc.(b) | 15,086 | | | 1,535,906 |
Sysco Corp.(b) | 21,048 | | | 1,488,515 |
Total System Services, Inc.(b) | 11,707 | | | 1,501,657 |
Tyson Foods, Inc. - Class A(b) | 18,112 | | | 1,462,363 |
UnitedHealth Group, Inc.(b) | 6,125 | | | 1,494,561 |
Verisk Analytics, Inc.(b) | 10,218 | |
| 1,496,528 |
| | |
| 42,712,094 |
Energy- 1.46% | | | | |
Cabot Oil & Gas Corp.(b) | 58,722 | |
| 1,348,257 |
| | | | |
Financials- 17.70% | | | | |
Aflac, Inc.(b) | 27,463 | | | 1,505,247 |
Allstate Corp.(b) | 14,850 | | | 1,510,098 |
Berkshire Hathaway, Inc. - Class B(a)(b) | 7,271 | | | 1,549,959 |
Cboe Global Markets, Inc.(b) | 13,469 | | | 1,395,792 |
Hartford Financial Services Group, Inc.(b) | 27,066 | | | 1,508,118 |
Intercontinental Exchange, Inc.(b) | 17,481 | | | 1,502,317 |
Marsh & McLennan Cos., Inc.(b) | 14,970 | | | 1,493,259 |
Nasdaq, Inc.(b) | 15,565 | | | 1,496,886 |
Progressive Corp.(b) | 17,797 | | | 1,422,514 |
Public Storage(b) | 6,058 | | | 1,442,834 |
Willis Towers Watson PLC(b) | 8,016 | |
| 1,535,385 |
| | |
| 16,362,409 |
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201931
| Shares | | Fair Value |
Cognios Market Neutral Large Cap Fund
Schedules of Investments (continued)June 30, 2019
| Shares | | Fair Value |
Industrials- 6.57% | | | | |
CH Robinson Worldwide, Inc.(b) | 18,540 | | $ | 1,563,849 |
Northrop Grumman Corp.(b) | 4,721 | | | 1,525,402 |
Republic Services, Inc.(b) | 17,172 | | | 1,487,782 |
Waste Management, Inc.(b) | 13,017 | |
| 1,501,771 |
| | |
| 6,078,804 |
Technology- 6.62% | | | | |
Akamai Technologies, Inc.(a)(b) | 18,897 | | | 1,514,406 |
Fiserv, Inc.(a)(b) | 16,570 | | | 1,510,521 |
Intel Corp.(b) | 32,821 | | | 1,571,141 |
Take-Two Interactive Software, Inc.(a)(b) | 13,408 | |
| 1,522,210 |
| | |
| 6,118,278 |
| | | | |
TOTAL COMMON STOCK (Cost $107,448,504) | | | | 112,679,208 |
| | | | |
SHORT-TERM INVESTMENTS - 2.92% | | | | |
BlackRock Liquidity Funds T-Fund Portfolio - | 2,695,940 | | | 2,695,940 |
| | | | |
TOTAL SHORT-TERM INVESTMENTS (Cost $2,695,940) | | | | 2,695,940 |
| | | | |
TOTAL INVESTMENTS (Cost $110,144,444)- 124.79% | | | $ | 115,375,148 |
SECURITIES SOLD SHORT (Proceeds $89,159,508)- (107.39%) | | | | (99,288,240) |
OTHER ASSETS IN EXCESS OF LIABILITES, NET- 82.60% | | | | 76,368,820 |
NET ASSETS- 100% | | | $ | 92,455,728 |
| | | | |
Percentages are stated as a percent of net assets. | | | | |
| | | | |
(a)Non-income producing security | | | | |
(b)All or a portion of the security is segregated as collateral for securities sold short. | ||||
(c)Rate shown represents the 7-day effective yield at June 30, 2019, is subject to change andresets daily. | ||||
| | | | |
The following abbreviations are used in this portfolio: | | | | |
Ltd. - Limited | | | | |
PLC - Public Limited Company | | | | |
The accompanying notes are an integral part of these financial statements.
32www.cogniosfunds.com
| Shares | | Fair Value |
Cognios Market Neutral Large Cap Fund
Schedule of Investments: Securities Sold ShortJune 30, 2019
COMMON STOCK- 107.39% | | | | |
| | | | |
Basic Materials- 4.39% | | | | |
Air Products & Chemicals, Inc. | 2,941 | | $ | 665,754 |
CF Industries Holdings, Inc. | 15,840 | | | 739,886 |
Ecolab, Inc. | 3,300 | | | 651,552 |
International Flavors & Fragrances, Inc. | 4,355 | | | 631,867 |
Linde PLC | 3,294 | | | 661,435 |
Newmont Mining Corp. | 18,506 | |
| 711,926 |
| | |
| 4,062,420 |
Communications- 2.85% | | | | |
Comcast Corp. - Class A | 15,848 | | | 670,053 |
Corning, Inc. | 21,355 | | | 709,627 |
Twitter, Inc. | 17,331 | | | 604,852 |
Verizon Communications, Inc. | 11,345 | |
| 648,140 |
| | |
| 2,632,672 |
Consumer, Cyclical- 5.75% | | | | |
Advance Auto Parts, Inc. | 4,220 | | | 650,471 |
Chipotle Mexican Grill, Inc. | 933 | | | 683,777 |
Costco Wholesale Corp. | 2,590 | | | 684,433 |
DR Horton, Inc. | 14,315 | | | 617,406 |
Hanesbrands, Inc. | 40,688 | | | 700,647 |
Target Corp. | 7,524 | | | 651,654 |
Under Armour, Inc. - Class A | 25,525 | | | 647,059 |
VF Corp. | 7,775 | |
| 679,146 |
| | |
| 5,314,593 |
Consumer, Non-cyclical - 31.95% | | | | |
Abbott Laboratories | 8,121 | | | 682,976 |
ABIOMED, Inc. | 2,416 | | | 629,344 |
Anthem, Inc. | 2,372 | | | 669,402 |
Archer-Daniels-Midland Co. | 16,446 | | | 670,997 |
Automatic Data Processing, Inc. | 3,933 | | | 650,243 |
Baxter International, Inc. | 8,451 | | | 692,137 |
Becton Dickinson and Co. | 2,750 | | | 693,027 |
Boston Scientific Corp. | 15,859 | | | 681,620 |
Brown-Forman Corp. - Class B | 11,605 | | | 643,265 |
Centene Corp. | 12,169 | | | 638,142 |
Cigna Corp. | 4,206 | | | 662,655 |
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201933
Cognios Market Neutral Large Cap Fund
Schedule of Investments: Securities Sold Short (continued)June 30, 2019
| Shares | | Fair Value | |
Consumer, Non-cyclical - (continued) | | | | |
Cintas Corp. | 2,819 | | $ | 668,921 |
Coca-Cola Co. | 12,655 | | | 644,393 |
Danaher Corp. | 4,803 | | | 686,445 |
DENTSPLY SIRONA, Inc. | 11,752 | | | 685,847 |
Edwards Lifesciences Corp. | 3,560 | | | 657,674 |
Eli Lilly & Co. | 5,546 | | | 614,441 |
Estee Lauder Cos., Inc. | 3,728 | | | 682,634 |
Global Payments, Inc. | 4,127 | | | 660,856 |
Henry Schein, Inc. | 9,397 | | | 656,850 |
Hologic, Inc. | 14,080 | | | 676,122 |
Humana, Inc. | 2,647 | | | 702,249 |
IDEXX Laboratories, Inc. | 2,483 | | | 683,644 |
IHS Markit Ltd. | 11,015 | | | 701,876 |
Illumina, Inc. | 1,952 | | | 718,629 |
Incyte Corp. | 8,160 | | | 693,274 |
Intuitive Surgical, Inc. | 1,333 | | | 699,225 |
IQVIA Holdings, Inc. | 4,762 | | | 766,206 |
JM Smucker Co. | 5,293 | | | 609,701 |
Medtronic PLC | 6,762 | | | 658,551 |
Merck & Co., Inc. | 7,944 | | | 666,104 |
Mondelez International, Inc. - Class A | 12,118 | | | 653,160 |
PayPal Holdings, Inc. | 5,733 | | | 656,199 |
Pfizer, Inc. | 15,220 | | | 659,330 |
Quanta Services, Inc. | 17,652 | | | 674,130 |
ResMed, Inc. | 5,604 | | | 683,856 |
Rollins, Inc. | 17,157 | | | 615,422 |
Stryker Corp. | 3,390 | | | 696,916 |
Teleflex, Inc. | 2,156 | | | 713,959 |
Thermo Fisher Scientific, Inc. | 2,351 | | | 690,442 |
Varian Medical Systems, Inc. | 5,023 | | | 683,781 |
WellCare Health Plans, Inc. | 2,285 | | | 651,385 |
Zimmer Biomet Holdings, Inc. | 5,456 | | | 642,389 |
Zoetis, Inc. | 5,948 | |
| 675,039 |
| | |
| 29,543,458 |
Energy- 5.19% | | | | |
Chevron Corp. | 5,420 | | | 674,465 |
Concho Resources, Inc. | 6,598 | | | 680,782 |
The accompanying notes are an integral part of these financial statements.
34www.cogniosfunds.com
Cognios Market Neutral Large Cap Fund
Schedule of Investments: Securities Sold Short (continued)June 30, 2019
| Shares | | Fair Value | |
Energy- (continued) | | | | |
Diamondback Energy, Inc. | 6,732 | | $ | 733,586 |
Exxon Mobil Corp. | 8,813 | | | 675,340 |
Kinder Morgan, Inc. | 31,118 | | | 649,744 |
ONEOK, Inc. | 9,888 | | | 680,393 |
Pioneer Natural Resources Co. | 4,579 | |
| 704,525 |
| | |
| 4,798,835 |
Financials- 27.33% | | | | |
Alexandria Real Estate Equities, Inc. | 4,325 | | | 610,214 |
American Express Co. | 5,457 | | | 673,612 |
American Tower Corp. | 3,077 | | | 629,093 |
Aon PLC | 3,453 | | | 666,360 |
Apartment Investment & Management Co. | 12,713 | | | 637,176 |
Assurant, Inc. | 6,286 | | | 668,705 |
AvalonBay Communities, Inc. | 3,123 | | | 634,531 |
Boston Properties, Inc. | 4,782 | | | 616,878 |
Chubb Ltd. | 4,385 | | | 645,867 |
Cincinnati Financial Corp. | 6,402 | | | 663,695 |
CME Group, Inc. | 3,270 | | | 634,740 |
Crown Castle International Corp. | 4,832 | | | 629,851 |
Digital Realty Trust, Inc. | 5,611 | | | 660,920 |
Duke Realty Corp. | 20,716 | | | 654,833 |
Equinix, Inc. | 1,322 | | | 666,671 |
Equity Residential | 8,396 | | | 637,424 |
Essex Property Trust, Inc. | 2,199 | | | 641,954 |
Everest Re Group Ltd. | 2,604 | | | 643,657 |
Extra Space Storage, Inc. | 5,953 | | | 631,613 |
Federal Realty Investment Trust | 4,942 | | | 636,332 |
First Republic Bank | 6,699 | | | 654,157 |
HCP, Inc. | 20,471 | | | 654,663 |
Host Hotels & Resorts, Inc. | 36,007 | | | 656,048 |
Iron Mountain, Inc. | 21,054 | | | 658,990 |
Kimco Realty Corp. | 35,638 | | | 658,590 |
Loews Corp. | 12,192 | | | 666,537 |
Macerich Co. | 18,426 | | | 617,087 |
Mastercard, Inc. - Class A | 2,476 | | | 654,976 |
Mid-America Apartment Communities, Inc. | 5,543 | | | 652,744 |
People’s United Financial, Inc. | 41,069 | | | 689,138 |
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201935
Cognios Market Neutral Large Cap Fund
Schedule of Investments: Securities Sold Short (continued)June 30, 2019
| Shares | | Fair Value | |
Financials- (continued) | | | | |
Prologis, Inc. | 8,341 | | $ | 668,114 |
Realty Income Corp. | 8,960 | | | 617,971 |
Regency Centers Corp. | 9,640 | | | 643,374 |
SBA Communications Corp. | 2,967 | | | 667,100 |
Simon Property Group, Inc. | 3,998 | | | 638,720 |
UDR, Inc. | 14,137 | | | 634,610 |
Ventas, Inc. | 10,150 | | | 693,752 |
Vornado Realty Trust | 9,560 | | | 612,796 |
Welltower, Inc. | 7,852 | |
| 640,174 |
| | |
| 25,263,667 |
Industrials- 5.92% | | | | |
Ball Corp. | 9,936 | | | 695,421 |
Deere & Co. | 4,448 | | | 737,078 |
General Electric Co. | 65,717 | | | 690,028 |
Kansas City Southern | 5,562 | | | 677,563 |
Martin Marietta Materials, Inc. | 2,850 | | | 655,813 |
Roper Technologies, Inc. | 1,806 | | | 661,466 |
Vulcan Materials Co. | 4,857 | | | 666,915 |
Xylem, Inc. | 8,250 | |
| 690,030 |
| | |
| 5,474,314 |
Technology- 5.09% | | | | |
Adobe, Inc. | 2,333 | | | 687,418 |
Broadridge Financial Solutions, Inc. | 5,051 | | | 644,912 |
Cadence Design Systems, Inc. | 10,020 | | | 709,516 |
Fidelity National Information Services, Inc. | 5,372 | | | 659,037 |
MSCI, Inc. | 2,720 | | | 649,509 |
Qorvo, Inc. | 10,321 | | | 687,482 |
Red Hat, Inc. | 3,539 | |
| 664,483 |
| | |
| 4,702,357 |
Utilities- 18.92% | | | | |
Alliant Energy Corp. | 13,173 | | | 646,531 |
Ameren Corp. | 8,520 | | | 639,937 |
American Electric Power Co., Inc. | 7,224 | | | 635,784 |
American Water Works Co., Inc. | 5,552 | | | 644,032 |
Atmos Energy Corp. | 6,261 | | | 660,911 |
CenterPoint Energy, Inc. | 22,441 | | | 642,486 |
CMS Energy Corp. | 11,148 | | | 645,581 |
The accompanying notes are an integral part of these financial statements.
36www.cogniosfunds.com
Cognios Market Neutral Large Cap Fund
Schedule of Investments: Securities Sold Short (continued)June 30, 2019
| Shares | | Fair Value | |
Utilities- (continued) | | | | |
Consolidated Edison, Inc. | 7,300 | | $ | 640,064 |
Dominion Energy, Inc. | 8,499 | | | 657,143 |
DTE Energy Co. | 5,021 | | | 642,085 |
Duke Energy Corp. | 7,443 | | | 656,770 |
Edison International | 10,348 | | | 697,559 |
Entergy Corp. | 6,454 | | | 664,310 |
Evergy, Inc. | 10,741 | | | 646,071 |
Eversource Energy | 8,467 | | | 641,460 |
Exelon Corp. | 12,903 | | | 618,570 |
FirstEnergy Corp. | 14,927 | | | 639,025 |
NextEra Energy, Inc. | 3,160 | | | 647,358 |
NiSource, Inc. | 22,839 | | | 657,763 |
NRG Energy, Inc. | 18,792 | | | 659,975 |
Pinnacle West Capital Corp. | 6,593 | | | 620,335 |
PPL Corp. | 20,907 | | | 648,326 |
Public Service Enterprise Group, Inc. | 10,753 | | | 632,491 |
Sempra Energy | 4,838 | | | 664,935 |
Southern Co. | 11,767 | | | 650,480 |
WEC Energy Group, Inc. | 7,793 | | | 649,702 |
Xcel Energy, Inc. | 10,863 | |
| 646,240 |
| | |
| 17,495,924 |
| | | | |
TOTAL COMMON STOCK (Proceeds $89,159,508) | | | | 99,288,240 |
| | | | |
| | | | |
TOTAL SECURITIES SOLD SHORT (Proceeds $89,159,508) | | | $ | 99,288,240 |
| | | | |
Percentages are stated as a percent of net assets. | | | | |
| | | | |
| | | | |
The following abbreviations are used in this portfolio: | | | | |
Ltd. - Limited | | | | |
PLC - Public Limited Company | | | | |
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201937
Cognios Funds
Statements of Assets and LiabilitiesJune 30, 2019
| Cognios Large | | Cognios Large | | Cognios Market Neutral |
Assets: | | | | | |
Total Investments, at cost | $24,713,385 | | $38,773,596 | | $110,144,444 |
Investments, at value | $26,690,834 | | $44,262,856 | | $115,375,148 |
Cash and cash equivalents | 512,674 | | 1,306,574 | | — |
Segregated cash with broker | — | | — | | 2,763,381 |
Deposits at broker for securities sold short | — | | — | | 73,542,583 |
Due from adviser | 15,324 | | — | | — |
Receivables: | | | | | |
Interest | 158 | | 529 | | 73,970 |
Dividends | 33,697 | | 8,279 | | 181,555 |
Fund shares sold | 2,430 | | 45,000 | | 65,183 |
Prepaid expenses | 3,765 | | 3,589 | | 13,034 |
Total assets | 27,258,882 | | 45,626,827 | | 192,014,854 |
| | | | | |
Liabilities: | | | | | |
Securities sold short, at proceeds | — | | — | | 89,159,508 |
Securities sold short, at value | | | | | 99,288,240 |
Payables: | | | | | |
Dividends on securities sold short | — | | — | | 128,893 |
Due to broker | 6,735,227 | | — | | — |
Fund shares redeemed | — | | — | | 22,620 |
Due to adviser | — | | 9,651 | | 71,515 |
Accrued distribution (12b-1) fees | 101 | | 1,979 | | 3,705 |
Due to administrator | 8,439 | | 11,670 | | 17,206 |
Accrued expenses | 23,175 | | 20,575 | | 26,947 |
Total liabilities | 6,766,942 | | 43,875 | | 99,559,126 |
Net Assets | $20,491,940 | | $45,582,952 | | $92,455,728 |
| | | | | |
Sources of Net Assets: | | | | | |
Paid-in capital | $17,995,854 | | $39,457,264 | | $99,437,114 |
Total distributable earnings | 2,496,086 | | 6,125,688 | | (6,981,386) |
Total Net Assets | $20,491,940 | | $45,582,952 | | $92,455,728 |
| | | | | |
Investor Class Shares: | | | | | |
Net assets | $544,661 | | $9,787,969 | | $17,930,823 |
Shares Outstanding ($0 par value, unlimited shares of beneficial interest authorized) | 57,710 | | 729,598 | | 1,792,437 |
Net Asset Value, Offering and Redemption Price Per Share | $9.44 | | $13.42 | | $10.00 |
| | | | | |
Institutional Class Shares: | | | | | |
Net assets | $19,947,279 | | $35,794,983 | | $74,524,905 |
Shares Outstanding ($0 par value, unlimited shares of beneficial interest authorized) | 2,114,432 | | 2,658,325 | | 7,328,177 |
Net Asset Value, Offering and Redemption Price Per Share | $9.43 | | $13.47 | | $10.17 |
The accompanying notes are an integral part of these financial statements.
38www.cogniosfunds.com
Cognios Funds
Statements of OperationsJune 30, 2019
| Cognios Large | | Cognios Large | | Cognios Market Neutral | |||
| For the Year Ended | | For the Year Ended | | For the Year Ended | |||
Investment income: | | | | | | | | |
Dividends | $679,274 | | | $605,866 | | | $2,443,940 | |
Interest | 2,945 |
| | 10,075 |
| | 634,161 |
|
Total investment income | 682,219 |
| | 615,941 |
| | 3,078,101 |
|
| ||||||||
Expenses: | | | | | | | | |
Advisory fees (Note 5) | 128,060 | | | 287,652 | | | 1,188,411 | |
Distribution (12b-1) fees - Investor Class | 466 | | | 23,807 | | | 48,942 | |
Accounting and transfer agent fees and expenses | 82,608 | | | 117,375 | | | 179,474 | |
Dividend expense on securities sold short | — | | | — | | | 1,856,664 | |
Interest expense | 190,231 | | | — | | | — | |
Legal fees | 26,255 | | | 17,041 | | | 31,202 | |
Trustee fees and expenses | 22,154 | | | 22,154 | | | 20,752 | |
Compliance officer fees | 18,000 | | | 18,000 | | | 18,000 | |
Custodian fees | 16,969 | | | 9,039 | | | 19,715 | |
Miscellaneous | 16,417 | | | 15,784 | | | 32,566 | |
Audit fees | 15,167 | | | 15,167 | | | 16,917 | |
Pricing fees | 14,087 | | | 4,358 | | | 30,146 | |
Insurance | 2,568 | | | 1,583 | | | 1,910 | |
Registration and filing fees | 847 | | | 2,415 | | | 23,291 | |
Reports to shareholders | 203 |
| | 203 |
| | 503 |
|
Total expenses | 534,032 | | | 534,578 | | | 3,468,493 | |
Less: fees waived and expenses reimbursedby Adviser | (175,817 | ) | | (117,193 | ) | | (322,356 | ) |
Less: fees waived by administrator | — |
| | (25,000 | ) | | (11,250 | ) |
Net expenses | 358,215 |
| | 392,385 |
| | 3,134,887 |
|
| ||||||||
Net investment income (loss) | 324,004 |
| | 223,556 |
| | (56,786 | ) |
| | | | | | | | |
Realized and unrealized gain (loss): | | | | | | | | |
Net realized gain (loss) on: | | | | | | | | |
Investments | 1,430,020 | | | 2,152,141 | | | 3,993,541 | |
In-kind redemptions | 278,043 | | | — | | | — | |
Securities sold short | — |
| | — |
| | (715,312 | ) |
Net realized gain on investments and securities sold short | 1,708,063 |
| | 2,152,141 |
| | 3,278,229 |
|
| ||||||||
Net change in unrealized appreciation (depreciation) on: | | | | | | | | |
Investments | 283,029 | | | 1,933,783 | | | 1,776,227 | |
Securities sold short | — |
| | — |
| | (8,407,415 | ) |
Net change in unrealized appreciation (depreciation) on: | 283,029 |
| | 1,933,783 |
| | (6,631,188 | ) |
| ||||||||
Net realized and unrealized gain (loss) on investments and securities sold short | 1,991,092 |
| | 4,085,924 |
| | (3,352,959 | ) |
| ||||||||
Net increase (decrease) in net assets resulting from operations | $2,315,096 |
| | $4,309,480 |
| | $(3,409,745 | ) |
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201939
Cognios Funds
Statement of Cash FlowsFor the Year Ended June 30, 2019
| Cognios | |
Increase (decrease) in cash: | | |
Cash flows from operating activities: | | |
Net increase in net assets from operations | $2,315,096 | |
Adjustments to reconcile net increase in net assets from operations to net cash provided from operating activities: | | |
Purchase of investment securities | (21,355,633 | ) |
Proceeds from disposition of investment securities and proceeds from return of capital | 21,143,873 | |
Increase in due from advisor | (6,185 | ) |
Decrease in interest receivable | 30 | |
Increase in dividends receivable | (11,002 | ) |
Decrease in prepaid expenses | 442 | |
Increase in due to broker | 18,199 | |
Increase in accrued expenses | 7,955 | |
Net unrealized appreciation on investment securities | (283,029 | ) |
Net realized gain on investment securities | (1,708,063 | ) |
Net cash provided from operating activities | 121,683 |
|
| | |
Cash flows from financing activities: | | |
Proceeds from loan | 9,897,336 | |
Payments on loan | (3,180,308 | ) |
Proceeds from Fund shares sold | 4,833,655 | |
Payment on Fund shares redeemed | (11,698,147 | ) |
Net cash from financing activities | (147,464 | ) |
| | |
Net decrease in cash | $(25,781 | ) |
| | |
Cash: | | |
Beginning of year | $538,455 |
|
End of year | 512,674 |
|
| | |
Supplemental disclosure of cash flow information: | | |
Noncash financing activities not included herein consist of an increase in receivable | ||
| | |
Interest paid by the Fund for outstanding balances on the line of credit amounted |
The accompanying notes are an integral part of these financial statements.
40www.cogniosfunds.com
Cognios Funds
Statement of Cash FlowsFor the Year Ended June 30, 2019
| Cognios | |
Increase (decrease) in cash: | | |
Cash flows from operating activities: | | |
Net decrease in net assets from operations | $(3,409,745 | ) |
Adjustments to reconcile net decrease in net assets from operations to net cash used for operating activities: | | |
Purchase of investment securities | (190,637,536 | ) |
Proceeds from disposition of investment securities and proceeds from return of capital | 160,126,266 | |
Purchases of short-term investment securities, net | (1,435,038 | ) |
Increase in segregated cash with brokers | (2,574,630 | ) |
Increase in deposits with brokers for securities sold short | (42,734,658 | ) |
Increase in interest receivable | (68,102 | ) |
Increase in dividends receivable | (80,976 | ) |
Decrease in prepaid expenses | 7,339 | |
Proceeds from securities sold short | 135,510,909 | |
Payments to cover securities sold short | (90,095,477 | ) |
Increase in payable for dividends on securities sold short | 62,834 | |
Increase in accrued expenses | 37,203 | |
Net unrealized depreciation on investment securities and securities sold short | 6,631,188 | |
Net realized gain on investment securities and securities sold short | (3,278,229 | ) |
Net cash used for operating activities | (31,938,652 | ) |
| | |
Cash flows from financing activities: | | |
Proceeds from Fund shares sold | 57,676,256 | |
Payment on Fund shares redeemed | (25,737,604 | ) |
Net cash from financing activities | 31,938,652 |
|
| | |
Net increase in cash | $— | |
| ||
Cash: | | |
Beginning of year | $— |
|
End of year | — |
|
| ||
Supplemental disclosure of cash flow information: | | |
Noncash financing activities not included herein consist of an decrease in receivable for fund shares sold of $184,657 and an increase in payable for Fund shares redeemed of $22,597. |
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201941
Cognios Funds
Statements of Changes in Net AssetsJune 30, 2019
| | Cognios Large Cap Value Fund | |||
| | For the | | For the | |
Increase (decrease) in net assets from: | | | | | |
Operations: | | | | | |
Net investment income | | $324,004 | | $339,398 | |
Net realized gain on investments | | 1,708,063 | | 3,694,608 | |
Net change in unrealized appreciation (depreciation) on investments | | 283,029 | | (56,729 | ) |
Net increase in net assets resulting from operations | | 2,315,096 | | 3,977,277 |
|
| | | | | |
Distributions to shareholders from: | | | | | |
Total distributable earnings - Investor Class | | (70,793) | | (2,874 | )(a) |
Total distributable earnings - Institutional Class | | (3,532,653) | | (4,041,258 | )(b) |
Total distributions | | (3,603,446) | | (4,044,132 | ) |
| | | | | |
Capital share transactions (Note 3): | | | | | |
Decrease in net assets from capital share transactions | | (3,258,616) | | (15,420,158 | ) |
| | | | | |
Decrease in net assets | | (4,546,966) | | (15,487,013 | ) |
| | | | | |
Net Assets: | | | | | |
Beginning of year (Note 1) | | 25,038,906 | | 40,525,919 |
|
| | | | | |
End of year | | $20,491,940 | | $25,038,906 | (c) |
(a)Includes net investment income distributions of $256 and net realized capital gains distributions of $2,618.
(b)Includes net investment income distributions of $393,869 and net realized capital gainsdistributions of $3,647,389.
(c)Includes undistributed net investment income of $153,291.
The accompanying notes are an integral part of these financial statements.
42www.cogniosfunds.com
Cognios Funds
Statements of Changes in Net AssetsJune 30, 2019
| | Cognios Large Cap Growth Fund | |||
| | For the | | For the | |
Increase (decrease) in net assets from: | | | | | |
Operations: | | | | | |
Net investment income | | $223,556 | | $49,257 | |
Net realized gain on investments | | 2,152,141 | | 311,366 | |
Net change in unrealized appreciation on investments | | 1,933,783 | | 3,382,689 |
|
Net increase in net assets resulting from operations | | 4,309,480 | | 3,743,312 |
|
| | | | | |
Distributions to shareholders from: | | | | | |
Total distributable earnings - Investor Class | | (476,672) | | (9,839 | )(a) |
Total distributable earnings - Institutional Class | | (1,514,121) | | (483,871 | )(b) |
Total distributions | | (1,990,793) | | (493,710 | ) |
| | | | | |
Capital share transactions (Note 3): | | | | | |
Increase in net assets from capital share transactions | | 6,801,131 | | 28,255,598 |
|
| | | | | |
Increase in net assets | | 9,119,818 | | 31,505,200 |
|
| | | | | |
Net Assets: | | | | | |
Beginning of year (Note 1) | | 36,463,134 | | 4,957,934 |
|
| | | | | |
End of year | | $45,582,952 | | $36,463,134 | (c) |
(a)Includes net investment income distributions of $339 and net realized capital gains distributions of $9,500.
(b)Includes net investment income distributions of $20,271 and net realized capital gainsdistributions of $463,600.
(c)Includes undistributed net investment income of $40,287.
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201943
Cognios Funds
Statements of Changes in Net AssetsJune 30, 2019
| | Cognios Market Neutral Large Cap Fund | |||||||
| | For the | | For the | | For the | |||
Increase (decrease) in net assets from: | | | | | | | | | |
Operations: | | | | | | | | | |
Net investment loss | | $(56,786 | ) | | $(373,444 | ) | | $(1,400,289 | ) |
Net realized gain (loss) on investments and securities sold short | | 3,278,229 |
| | 4,744,946 |
| | (8,340,418 | ) |
Net change in unrealized appreciation (depreciation) on investments and securities sold short | | (6,631,188 | ) | | 1,972,680 |
| | 3,394,982 |
|
Net increase (decrease) in net assets resulting from operations | | (3,409,745 | ) | | 6,344,182 |
| | (6,345,725 | ) |
| | | | | | | | | |
Distributions to shareholders from: | | | | | | | | | |
Total distributable earnings - Investor Class | | — | | | — | | | (651,783 | )(b) |
Total distributable earnings - Institutional Class | | — |
| | — |
| | (1,426,049 | )(c) |
Total distributions | | — |
| | — |
| | (2,077,832 | ) |
| | | | | | | | | |
Capital share transactions (Note 3): | | | | | | | | | |
Increase (decrease) in net assets from capital share transactions | | 31,731,398 |
| | (4,063,331 | ) | | (87,001,769 | ) |
| | | | | | | | | |
Increase (decrease) in net assets | | 28,321,653 |
| | 2,280,851 |
| | (95,425,326 | ) |
| | | | | | | | | |
Net Assets: | | | | | | | | | |
Beginning of period (Note 1) | | 64,134,075 |
| | 61,853,224 |
| | 157,278,550 |
|
| | | | | | | | | |
End of period | | $92,455,728 |
| | $64,134,075 | (d) | | $61,853,224 | (d) |
(a)Represents the period from October 1, 2017 through June 30, 2018.
(b)Represents net realized capital gains distributions.
(c)Represents net realized capital gains distributions.
(d)Includes accumulated net investment losses of $81,501 for the period ended June 30, 2018 and$675,014 for the year ended September 30, 2017.
The accompanying notes are an integral part of these financial statements.
44www.cogniosfunds.com
Cognios Funds
Financial HighlightsJune 30, 2019
The following tables set forth the per share operating performance data for a share of beneficial interest outstanding, total returns and ratios to average net assets and other supplemental data for the year/periods indicated.
| | Cognios Large Cap Value Fund | | ||||
| | Investor Class | | ||||
For the | For the | For the | |||||
Net Asset Value, Beginning of Year/Period | | $10.23 | | $10.79 | | $10.00 | |
| |||||||
Investment Operations: | | | | | | | |
Net investment income | | 0.11 | | 0.12 | | 0.04 | |
Net realized and unrealized gain on investments | | 0.92 | | 1.29 | | 0.75 | |
Total from investment operations | | 1.03 | | 1.41 | | 0.79 | |
| |||||||
Distributions: | | | | | | | |
From net investment income | | (0.19 | ) | (0.18 | ) | 0.00 | (b) |
From net realized capital gains | | (1.63 | ) | (1.79 | ) | — | |
Total distributions | | (1.82 | ) | (1.97 | ) | 0.00 | |
| |||||||
Net Asset Value, End of Year/Period | | $9.44 | | $10.23 | | $10.79 | |
| |||||||
Total Return(c) | | 12.90% | | 13.58% | | 7.92% | (d) |
| |||||||
Ratios/Supplemental Data | | | | | | | |
Net assets, end of year/period (in 000’s) | | $545 | | $25 | | $11 | |
| |||||||
Ratios to average net assets (including interest expense and dividends on securities sold short): | | | | | | | |
Expenses before fees waived and expenses reimbursed | 2.96% | | 1.62% | | 1.52% | (e) | |
Expenses after fees waived and expenses reimbursed | 2.07% | | 1.10% | | 1.10% | (e) | |
Net investment income after fees waived and expenses reimbursed | | 1.39% | | 0.85% | | 0.79% | (e) |
| |||||||
Ratios to average net assets (excluding interest expense and dividends on securities sold short): | | | | | | | |
Expenses before fees waived and expenses reimbursed | | 1.99% | | 1.62% | | 1.52% | (e) |
Expenses after fees waived and expenses reimbursed | | 1.10% | | 1.10% | | 1.10% | (e) |
Net investment income after fees waived and expenses reimbursed | | 0.42% | | 0.85% | | 0.79% | (e) |
| |||||||
Portfolio turnover rate | | 64% | | 84% | | 24% | (d) |
(a)The Cognios Large Cap Value Fund commenced operations on October 3, 2016.
(b)Net investment income distributed by the Investor Class was less than $0.005 per share during the period endedJune 30, 2017.
(c)Total Return represents the rate that the investor would have earned or lost on an investment in the Fund’s Investor Class, assuming reinvestment of dividends, if any.
(d)Not annualized.
(e)Annualized.
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201945
Cognios Funds
Financial Highlights (continued)June 30, 2019
The following tables set forth the per share operating performance data for a share of beneficial interest outstanding, total returns and ratios to average net assets and other supplemental data for the year/periods indicated.
| | Cognios Large Cap Value Fund | | ||||
| | Institutional Class | | ||||
For the | For the | For the | |||||
Net Asset Value, Beginning of Year/Period | | $10.25 | | $10.80 | | $10.00 | |
| |||||||
Investment Operations: | | | | | | | |
Net investment income | | 0.18 | | 0.20 | | 0.06 | |
Net realized and unrealized gain on investments | | 0.82 | | 1.23 | | 0.75 | |
Total from investment operations | | 1.00 | | 1.43 | | 0.81 | |
| |||||||
Distributions: | | | | | | | |
From net investment income | | (0.19 | ) | (0.19 | ) | (0.01 | ) |
From net realized capital gains | | (1.63 | ) | (1.79 | ) | — | |
Total distributions | | (1.82 | ) | (1.98 | ) | (0.01 | ) |
| |||||||
Net Asset Value, End of Year/Period | | $9.43 | | $10.25 | | $10.80 | |
| |||||||
Total Return(b) | | 12.56% | | 13.87% | | 8.09% | (c) |
| |||||||
Ratios/Supplemental Data | | | | | | | |
Net assets, end of year/period (in 000’s) | | $19,947 | | $25,014 | | $40,514 | |
| |||||||
Ratios to average net assets (including interest expense and dividends on securities sold short): | | | | | | | |
Expenses before fees waived and expenses reimbursed | 2.71% | | 1.37% | | 1.27% | (d) | |
Expenses after fees waived and expenses reimbursed | 1.82% | | 0.85% | | 0.85% | (d) | |
Net investment income after fees waived and expenses reimbursed | | 1.64% | | 1.10% | | 1.04% | (d) |
| |||||||
Ratios to average net assets (excluding interest expense and dividends on securities sold short): | | | | | | | |
Expenses before fees waived and expenses reimbursed | | 1.74% | | 1.37% | | 1.27% | (d) |
Expenses after fees waived and expenses reimbursed | | 0.85% | | 0.85% | | 0.85% | (d) |
Net investment income after fees waived and expenses reimbursed | | 0.67% | | 1.10% | | 1.04% | (d) |
| |||||||
Portfolio turnover rate | | 64% | | 84% | | 24% | (c) |
(a)The Cognios Large Cap Value Fund commenced operations on October 3, 2016.
(b)Total Return represents the rate that the investor would have earned or lost on an investment in the Fund’s Institutional Class, assuming reinvestment of dividends, if any.
(c)Not annualized.
(d)Annualized.
The accompanying notes are an integral part of these financial statements.
46www.cogniosfunds.com
Cognios Funds
Financial Highlights (continued)June 30, 2019
The following tables set forth the per share operating performance data for a share of beneficial interest outstanding, total returns and ratios to average net assets and other supplemental data for the year/periods indicated.
| | Cognios Large Cap Growth Fund | | ||||
| | Investor Class | | ||||
| | For the | | For the | | For the | |
Net Asset Value, Beginning of Year/Period | | $12.98 | | $11.19 | | $10.00 | |
| |||||||
Investment Operations: | | | | | | | |
Net investment income | | 0.05 | | 0.03 | | 0.02 | |
Net realized and unrealized gain on investments | | 1.05 | | 2.83 | | 1.18 | |
Total from investment operations | | 1.10 | | 2.86 | | 1.20 | |
| |||||||
Distributions: | | | | | | | |
From net investment income | | — | | (0.04 | ) | (0.01 | ) |
From net realized capital gains | | (0.66 | ) | (1.03 | ) | — | |
Total distributions | | (0.66 | ) | (1.07 | ) | (0.01 | ) |
| |||||||
Net Asset Value, End of Year/Period | | $13.42 | | $12.98 | | $11.19 | |
| |||||||
Total Return(b) | | 9.42% | | 26.50% | | 11.98% | (c) |
| |||||||
Ratios/Supplemental Data | | | | | | | |
Net assets, end of year/period (in 000’s) | | $9,788 | | $9,462 | | $10 | |
| |||||||
Ratio of expenses to average net assets: | | | | | | | |
Before fees waived and expenses reimbursed | | 1.49% | | 1.76% | | 3.42% | (d) |
After fees waived and expenses reimbursed | | 1.15% | | 1.15% | | 1.15% | (d) |
| |||||||
Ratio of net investment income: | | | | | | | |
After fees waived and expenses reimbursed | | 0.36% | | 0.04% | | 0.30% | (d) |
| |||||||
Portfolio turnover rate | | 230% | | 221% | | 286% | (c) |
(a)The Cognios Large Cap Growth Fund commenced operations on October 3, 2016.
(b)Total Return represents the rate that the investor would have earned or lost on an investment in the Fund’s Investor Class, assuming reinvestment of dividends, if any.
(c)Not annualized.
(d)Annualized.
The accompanying notes are an integral part of these financial statements.
Annual Report | June 30, 201947
Cognios Funds
Financial Highlights (continued)June 30, 2019
The following tables set forth the per share operating performance data for a share of beneficial interest outstanding, total returns and ratios to average net assets and other supplemental data for the year/periods indicated.
| | Cognios Large Cap Growth Fund | | ||||
| | Institutional Class | | ||||
| | For the | | For the | | For the | |
Net Asset Value, Beginning of Year/Period | | $13.02 | | $11.20 | | $10.00 | |
| |||||||
Net investment income | | 0.07 | | 0.04 | | 0.04 | |
Net realized and unrealized gain on investments | | 1.06 | | 2.86 | | 1.17 | |
Total from investment operations | | 1.13 | | 2.90 | | 1.21 | |
| |||||||
Distributions: | | | | | | | |
From net investment income | | (0.02 | ) | (0.05 | ) | (0.01 | ) |
From net realized capital gains | | (0.66 | ) | (1.03 | ) | — | |
Total distributions | | (0.68 | ) | (1.08 | ) | (0.01 | ) |
| |||||||
Net Asset Value, End of Year/Period | | $13.47 | | $13.02 | | $11.20 | |
| |||||||
Total Return(b) | | 9.64% | | 26.84% | | 12.14% | (c) |
| |||||||
Ratios/Supplemental Data | | | | | | | |
Net assets, end of year/period (in 000’s) | | $35,795 | | $27,001 | | $4,948 | |
| |||||||
Ratio of expenses to average net assets: | | | | | | | |
Before fees waived and expenses reimbursed | | 1.24% | | 1.51% | | 3.17% | (d) |
After fees waived and expenses reimbursed | | 0.90% | | 0.90% | | 0.90% | (d) |
| |||||||
Ratio of net investment income: | | | | | | | |
After fees waived and expenses reimbursed | | 0.61% | | 0.29% | | 0.55% | (d) |
| |||||||
Portfolio turnover rate | | 230% | | 221% | | 286% | (c) |
(a)The Cognios Large Cap Growth Fund commenced operations on October 3, 2016.
(b)Total Return represents the rate that the investor would have earned or lost on an investment in the Fund’s Institutional Class, assuming reinvestment of dividends, if any.
(c)Not annualized.
(d)Annualized.
The accompanying notes are an integral part of these financial statements.
48www.cogniosfunds.com
Cognios Funds
Financial Highlights (continued)June 30, 2019
Annual Report | June 30, 201949
June 30, 2019
The following tables set forth the per share operating performance data for a share of beneficial interest outstanding, total returns and ratios to average net assets and other supplemental data for the years/period indicated.
| | Cognios Market Neutral Large Cap Fund | | |||||||||||
| | Investor Class | | |||||||||||
| | For the | | | For the | | For the | | For the | | For the | | For the | |
| ||||||||||||||
Net Asset Value, Beginning of Year/Period | | $10.31 | | | $9.32 | | $9.93 | | $9.68 | | $10.77 | | $9.93 | |
| ||||||||||||||
Investment Operations: | | | | | | | | | | | | | | |
Net investment loss(b) | | (0.05 | ) | | (0.08 | ) | (0.13 | ) | (0.15 | ) | (0.20 | ) | (0.17 | ) |
Net realized and unrealized gain (loss) on investments | | (0.26 | ) | | 1.07 | | (0.33 | ) | 0.45 | | 0.60 | | 1.35 | |
Total from investment operations | | (0.31 | ) | | 0.99 | | (0.46 | ) | 0.30 | | 0.40 | | 1.18 | |
| ||||||||||||||
Distributions: | | | | | | | | | | | | | | |
From net realized capital gains | | — | | | — | | (0.15 | ) | (0.05 | ) | (1.49 | ) | (0.34 | ) |
Total distributions | | — | | | — | | (0.15 | ) | (0.05 | ) | (1.49 | ) | (0.34 | ) |
| ||||||||||||||
Net Asset Value, End of Year/Period | | $10.00 | | | $10.31 | | $9.32 | | $9.93 | | $9.68 | | $10.77 | |
| ||||||||||||||
Total Return(c) | | (3.01)% | | | 10.62% | (d) | (4.65)% | | 3.15% | | 4.47% | (g) | 12.12% | |
| ||||||||||||||
Ratios/Supplemental Data | | | | | | | | | | | | | | |
Net assets, end of year/period (in 000’s) | | $17,931 | | | $19,771 | | $22,997 | | $43,779 | | $6,253 | | $5,699 | |
| ||||||||||||||
Ratios to average net assets (including interest expense and dividends on | | | | | | | | | | | | | | |
Expenses before fees waived and expenses reimbursed | | 4.27% | | | 4.09% | (e) | 3.87% | | 4.07% | | 6.06% | | 6.16% | |
Expenses after fees waived and expenses reimbursed | | 3.88% | | | 3.66% | (e)(h) | 3.72% | | 3.80% | | 4.12% | (f) | 4.26% | |
Net investment loss after fees waived and expenses reimbursed | (0.26)% | | | (0.98)% | (e) | (1.42)% | | (1.53)% | | (2.06)% | | (1.71)% | | |
| ||||||||||||||
Ratios to average net assets (excluding interest expense and dividends on | | | | | | | | | | | | | | |
Expenses before fees waived and expenses reimbursed | | 2.08% | | | 2.30% | (e) | 2.10% | | 2.22% | | 4.04% | | 4.15% | |
Expenses after fees waived and expenses reimbursed | | 1.69% | | | 1.87% | (e)(h) | 1.95% | | 1.95% | | 2.10% | (f) | 2.25% | |
Net investment income (loss) after fees waived and expenses reimbursed | 1.93% | | | 0.81% | (e) | 0.35% | | 0.32% | | (0.04)% | | 0.30% | | |
| ||||||||||||||
Portfolio turnover rate | | 159% | | | 104% | (d) | 277% | | 250% | | 291% | | 461% | |
(a)Represents the period from October 1, 2017 through June 30, 2018.
(b)Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year/period.
(c)Total Return represents the rate that the investor would have earned or lost on an investment in the Fund’s Investor Class, assuming reinvestment of dividends, if any.
(d)Not annualized.
(e)Annualized.
(f)Contractual expense limitation changed from 2.25% to 1.95% effective April 1, 2015.
(g)During the year ended September 30, 2015, 0.31% of the Fund’s total return consists of a voluntary reimbursement by the adviser for a realized investment loss. Excluding this item, total return would have been 4.16%.
(h)Contractual expense limitation changed from 1.95% to 1.70% effective May 5, 2018.The following tables set forth the per share operating performance data for a share of beneficial interest outstanding, total returns and ratios to average net assets and other supplemental data for the years/periods indicated.
The accompanying notes are an integral part of these financial statements.
50www.cogniosfunds.com
Cognios Funds
Financial Highlights (continued)June 30, 2019
Annual Report | June 30, 201951
June 30, 2019
The following tables set forth the per share operating performance data for a share of beneficial interest outstanding, total returns and ratios to average net assets and other supplemental data for the years/periods indicated.
| | Cognios Market Neutral Large Cap Fund | | |||||||||||
| | Institutional Class | | |||||||||||
| | For the | | | For the | | For the | | For the | | For the | | For the | |
| ||||||||||||||
Net Asset Value, Beginning of Year/Period | | $10.46 | | | $9.44 | | $10.02 | | $9.76 | | $10.82 | | $9.95 | |
| ||||||||||||||
Investment Operations: | | | | | | | | | | | | | | |
Net investment income (loss)(b) | | 0.01 | | | (0.05 | ) | (0.11 | ) | (0.13 | ) | (0.18 | ) | (0.14 | ) |
Net realized and unrealized gain (loss) on investments | | (0.30 | ) | | 1.07 | | (0.32 | ) | 0.44 | | 0.61 | | 1.35 | |
Total from investment operations | | (0.29 | ) | | 1.02 | | (0.43 | ) | 0.31 | | 0.43 | | 1.21 | |
| ||||||||||||||
Distributions: | | | | | | | | | | | | | | |
From net investment income | | — | | | — | | — | | — | | — | | — | |
From net realized capital gains | | — | | | — | | (0.15 | ) | (0.05 | ) | (1.49 | ) | (0.34 | ) |
Total distributions | | — | | | — | | (0.15 | ) | (0.05 | ) | (1.49 | ) | (0.34 | ) |
| ||||||||||||||
Net Asset Value, End of Year/Period | | $10.17 | | | $10.46 | | $9.44 | | $10.02 | | $9.76 | | $10.82 | |
| ||||||||||||||
Total Return(c) | | (2.77)% | | | 10.81% | (d) | (4.31)% | | 3.23% | | 4.77% | (g) | 12.41% | |
| ||||||||||||||
Ratios/Supplemental Data | | | | | | | | | | | | | | |
Net assets, end of year/period (in 000’s) | | $74,525 | | | $44,363 | | $38,856 | | $113,499 | | $10,402 | | $8,907 | |
| ||||||||||||||
Ratios to average net assets (including interest expense and dividends | | | | | | | | | | | | | | |
Expenses before fees waived and expenses reimbursed | | 4.02% | | | 3.84% | (e) | 3.62% | | 3.83% | | 5.81% | | 5.45% | |
Expenses after fees waived and expenses reimbursed | | 3.63% | | | 3.41% | (e)(h) | 3.47% | | 3.55% | | 3.86% | (f) | 4.01% | |
Net investment loss after fees waived and expenses reimbursed | (0.01)% | | | (0.73)% | (e) | (1.14)% | | (1.30)% | | (1.80)% | | (1.37)% | | |
| ||||||||||||||
Ratios to average net assets (excluding interest expense and dividends | | | | | | | | | | | | | | |
Expenses before fees waived and expenses reimbursed | | 1.83% | | | 2.05% | (e) | 1.85% | | 1.98% | | 3.79% | | 3.43% | |
Expenses after fees waived and expenses reimbursed | | 1.44% | | | 1.62% | (e)(h) | 1.70% | | 1.70% | | 1.84% | (f) | 2.00% | |
Net investment income after fees waived and expenses reimbursed | 2.18% | | | 1.06% | (e) | 0.63% | | 0.55% | | 0.21% | | 0.65% | | |
| ||||||||||||||
Portfolio turnover rate | | 159% | | | 104% | (d) | 277% | | 250% | | 291% | | 461% | |
(a)Represents the period from October 1, 2017 through June 30, 2018.
(b)Per share amounts calculated using the average shares method, which more appropriately presents the per share data for the year/period.
(c)Total Return represents the rate that the investor would have earned or lost on an investment in the Fund’s Institutional Class, assuming reinvestment of dividends, if any.
(d)Not annualized.
(e)Annualized.
(f)Contractual expense limitation changed from 2.00% to 1.70% effective April 1, 2015.
(g)During the year ended September 30, 2015, 0.33% of the Fund’s total return consists of a voluntary reimbursement by the adviser for a realized investment loss. Excluding this item, total return would have been 4.16%.
(h)Contractual expense limitation changed from 1.70% to 1.45% effective May 5, 2018.
52www.cogniosfunds.com
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The Cognios Large Cap Value Fund (the “Value Fund”), the Cognios Large Cap Growth Fund (the “Growth Fund”) and Cognios Market Neutral Large Cap Fund (the “Market Neutral Fund”), (collectively, the “Funds”) are each a series of M3Sixty Funds Trust (the “Trust”). The Trust was organized on May 29, 2015 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”). Pursuant to a reorganization that took place on May 7, 2018, the Market Neutral Fund is a successor by merger to a series of ALPS Series Trust (the “Predecessor Fund”).
The Value Fund’s and the Growth Fund’s investment objectives are long-term growth of capital. The investment objective of the Market Neutral Fund is long-term growth of capital independent of stock market direction. The Value Fund and the Growth Fund are non-diversified Funds. As non-diversified Funds, they may invest a significant portion of their assets in a small number of companies. The Market Neutral Fund is a diversified Fund. The Funds’ investment adviser is Cognios Capital, LLC(the “Adviser”).
The Funds each have two classes of shares, Investor Class Shares and Institutional Class Shares. The Value and the Growth Fund’s Investor Class Shares and Institutional Class Shares commenced operations on October 3, 2016. The Market Neutral Fund’s Investor Class Shares and Institutional Class Shares commenced operations on January 2, 2013.
Income and realized/unrealized gains or losses are allocated to each class of each Fund on the basis of the net asset value of each class in relation to the net asset value of its Fund.
The following is a summary of the significant accounting policies followed by the Funds in the preparation of their financial statements in accordance with accounting principles generally accepted in the United States of America (“GAAP”). The Funds are investment companies that follow the accounting and reporting guidance of FASB 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 2.
b)Federal Income Taxes – The Funds have qualified and intend to continue to qualify as regulated investment companies under Subchapter M of the Internal Revenue Code of 1986, as amended(the “Code”). It is the policy of the Funds to comply with the requirements of the Code applicableto regulated investment companies and to distribute substantially all of their net investment company taxable income and net capital gains. Therefore, no provision for federal income taxes is required. The Funds recognize tax benefits of uncertain tax positions only where the position is more-likely-than-not to be sustained assuming examination by tax authorities.
Management has analyzed each Fund’s tax positions taken on all open tax years (tax years endedJune 30, 2017 and June 30, 2018 for the Value Fund and Growth Fund and for the years ended September 30, 2017, September 30, 2018 and the period ended June 30, 2018 for the Market Neutral Fund) and expected to be taken as of and during the year ended June 30, 2019, and has concluded that the Funds did not have a liability for any unrecognized tax benefits. The Funds recognize interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the statements of operations. During the year ended June 30, 2019, the Funds did not incur any interest or penalties. The Funds identify their major tax jurisdictions as U.S. Federal and Delaware state.
Annual Report | June 30, 201953
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
c)Cash and Cash Equivalents – Cash is held with a financial institution. The assets of the Funds may be placed in deposit accounts at U.S. banks and such deposits generally exceed Federal Deposit Insurance Corporation (“FDIC”) insurance limits. The FDIC insures deposit accounts up to $250,000 for each account holder. The counterparty is generally a single bank rather than a group of financial institutions; thus there may be a greater counterparty credit risk. The Funds place deposits only with those counterparties which are believed to be creditworthy.
d)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. There were no reclassifications made during the year ended June 30, 2019.
e)Short Sales – The Market Neutral Fund may make short sales of securities consistent with its strategies. A short sale is a transaction in which the Fund sells a security it does not own in anticipation that the market price of that security will decline.
When the Market Neutral Fund makes a short sale, it must borrow the security sold short and deliver a security equal in value to the security sold short to the broker-dealer through which it made the short sale as collateral for its obligation to deliver the security upon conclusion of the sale. The Market Neutral Fund may have to pay a fee to borrow particular securities and is often obligated to pay over any accrued interest and dividends on such borrowed securities.
If the price of the security sold short increases between the time of the short sale and the time that the Market Neutral Fund replaces the borrowed security, the Market Neutral Fund will incur a loss; conversely, if the price declines, the Market Neutral 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 that the Market Neutral Fund engages in short sales, 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 segregated or “earmarked” assets that the Adviser determines to be liquid in accordance with procedures established by the Board and that is equal to the current market value of the securities sold short until the Market Neutral Fund replaces the borrowed security.A short sale is “against the box” to the extent that the Market Neutral Fund contemporaneously owns, or has the right to obtain at no added cost, securities identical to those sold short. The Market Neutral Fund may engage in short selling to the extent permitted by the federal securities laws and rules and interpretations thereunder. To the extent the Market Neutral Fund engages in short selling in foreign (non-U.S.) jurisdictions, the Market Neutral Fund will do so to the extent permitted by the laws and regulations of such jurisdiction.
g)Expenses – Expenses incurred by the Trust that do not relate to a specific Fund of the Trust may be allocated equally across the Funds, or to the individual Funds based on each Fund’s relative net assets or another basis (as determined by the Board), whichever method is deemed appropriate as stated in the Trust’s expense allocation policy. Expenses incurred specific to a particular Fund are allocated entirely to that Fund.
h)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
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Cognios Funds
Notes to the Financial StatementsJune 30, 2019
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.
i)Other – Investment and shareholder transactions are recorded on trade date. The Funds determine the gain or loss realized from the investment transactions by comparing the identified 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 Funds and interest income is recognized on an accrual basis. Withholding taxes on foreign dividends have been provided for in accordance with the Funds’ understanding of the applicable country’s tax rules and rates.
2. INVESTMENT VALUATIONS
Processes and Structure
The Funds’ Board of Trustees has adopted guidelines for valuing investments 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 Funds utilize various methods to measure the fair value of most of their 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 Funds have 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 Funds’ 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.
Annual Report | June 30, 201955
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
Fair Value Measurements
A description of the valuation techniques applied to the Funds’ major categories of assets and liabilities measured at fair value on a recurring basis follows.
Equity securities (common stock) – 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 certain indexes of securities based on a statistical analysis of the historical relationship and 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.
Money market funds – Money market funds are valued at their net asset value of $1.00 per share and are categorized as Level 1.
The following table summarizes the inputs used to value the Funds’ assets and liabilities measured at fair value as of June 30, 2019:
Categories(a) |
| Level 1 | | Level 2 | | Level 3 | | Total |
Value Fund: Assets: | |
|
|
|
|
|
|
|
Common Stocks(b) | | $26,690,834 |
| — |
| — |
| $26,690,834 |
Total Investments in Securities | | $26,690,834 |
| — |
| — |
| $26,690,834 |
Growth Fund: Assets: | |
|
|
|
|
|
|
|
Common Stocks(b) | | $44,262,856 |
| — |
| — |
| $44,262,856 |
Total Investments in Securities | | $44,262,856 |
| — |
| — |
| $44,262,856 |
Market Neutral Fund: Assets: | |
|
|
|
|
|
|
|
Common Stocks(b) | | $112,679,208 |
| — |
| — |
| $112,679,208 |
Short-Term Investment | | 2,695,940 |
| — |
| — |
| 2,695,940 |
Total Investments in Securities | | 115,375,148 |
| — |
| — |
| 115,375,148 |
Liabilities: | |
|
|
|
|
|
|
|
Common Stocks(b) | | $99,288,240 |
| — |
| — |
| $99,288,240 |
Total Securities Sold Short(b) | | $99,288,240 |
| — |
| — |
| $99,288,240 |
(a)As of and during the year ended June 30, 2019, the Funds held no securities that were considered to be “Level 3” securities (those valued using significant unobservable inputs). Therefore, a reconciliation of assets in which significant unobservable inputs (Level 3) were used in determining fair value is not applicable.
(b)All common stock held in the Funds are Level 1 securities. For a detailed break-out of common stock by industry, please refer to the Schedules of Investments and Schedule of Investments: Securities Sold Short.
The Funds recognize transfers, if any, between fair value hierarchy levels at the reporting period end. There were no transfers between levels during the year ended June 30, 2019.
56www.cogniosfunds.com
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
3. CAPITAL SHARE TRANSACTIONS
Transactions in shares of capital stock during the year ended June 30, 2019 for the Funds wereas follows:
Value Fund: |
| Sold |
| Redeemed |
| Reinvested |
| Net Increase |
|
Investor Class Shares |
|
|
|
|
|
| |
|
|
Shares |
| 100,444 |
| (53,888 | ) | 8,729 | | 55,285 |
|
Value |
| $991,420 |
| $(466,314 | ) | $70,793 | | $595,899 |
|
Institutional Class Shares |
|
|
|
|
|
| |
|
|
Shares |
| 378,723 |
| (1,139,973 | )(a) | 434,522 | | (326,728 | ) |
Value |
| $3,844,665 |
| $(11,231,833 | )(a) | $3,532,653 | | $(3,854,515 | ) |
| |||||||||
Growth Fund: |
| Sold |
| Redeemed |
| Reinvested |
| Net Increase |
|
Investor Class Shares |
|
|
|
|
|
| |
|
|
Shares |
| 40,042 |
| (81,460 | ) | 41,960 | | 542 |
|
Value |
| $526,774 |
| $(1,061,868 | ) | $476,672 | | $(58,422 | ) |
Institutional Class Shares |
|
|
|
|
|
| |
|
|
Shares |
| 1,025,355 |
| (574,154 | ) | 132,934 | | 584,135 |
|
Value |
| $13,153,465 |
| $(7,808,033 | ) | $1,514,121 | | $6,859,553 |
|
| |||||||||
Market Neutral Fund: |
| Sold |
| Redeemed |
| Reinvested |
| Net Increase |
|
Investor Class Shares |
|
|
|
|
|
| |
|
|
Shares |
| 513,453 |
| (638,747 | ) | — | | (125,294 | ) |
Value |
| $5,411,670 |
| $(6,635,939 | ) | $— | | $(1,224,269 | ) |
Institutional Class Shares |
|
|
|
|
|
| |
|
|
Shares |
| 4,908,075 |
| (1,822,261 | ) | — | | 3,085,814 |
|
Value |
| $52,079,929 |
| $(19,124,262 | ) | $— | | $32,955,667 |
|
(a)Includes an in-kind redemption of 474,843 shares at a value of $5,042,833 paid on August 7, 2018, which represented 19.43% of the Value Fund’s net assets. A pro-rata portion of the Value Fund’s portfolio investments were transferred as payment of the in-kind redemption per procedures adopted by the Trust’s Board of Trustees.
Annual Report | June 30, 201957
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
Transactions in shares of capital stock during the year ended June 30, 2018 for the Value Fund and the Growth Fund, and during the nine-month period ended June 30, 2018 for the Market Neutral Fund were as follows:
Value Fund: |
| Sold |
| Redeemed |
| Reinvested |
| Net Increase | |
Investor Class Shares | |
|
|
|
|
|
|
|
|
Shares | | 1,270 |
| (184 | ) | 279 |
| 1,365 |
|
Value | | $13,350 |
| $(2,028 | ) | $2,775 |
| $14,097 |
|
Institutional Class Shares | |
|
|
|
|
|
|
|
|
Shares | | 30,211 |
| (1,748,424 | )(b) | 406,565 |
| (1,311,648 | ) |
Value | | $334,137 |
| $(19,809,651 | )(b) | $4,041,259 |
| $(15,434,255 | ) |
| |||||||||
Growth Fund: |
| Sold |
| Redeemed |
| Reinvested |
| Net Increase |
|
Investor Class Shares | |
|
|
|
|
|
|
|
|
Shares | | 786,139 |
| (58,604 | ) | 657 |
| 728,192 |
|
Value | | $9,591,017 |
| $(731,930 | ) | $7,747 |
| $8,866,834 |
|
Institutional Class Shares | |
|
|
|
|
|
|
|
|
Shares | | 1,603,413 |
| (11,755 | ) | 40,760 |
| 1,632,418 |
|
Value | | $19,049,787 |
| $(142,392 | ) | $481,369 |
| $19,388,764 |
|
| |||||||||
Market Neutral Fund: |
| Sold |
| Redeemed |
| Reinvested |
| Net Increase | |
Investor Class Shares | |
|
|
|
|
|
|
|
|
Shares | | 331,568 |
| (881,260 | ) | — |
| (549,692 | ) |
Value | | $3,262,766 |
| $(8,737,347 | ) | $— |
| $(5,474,581 | ) |
Institutional Class Shares | |
|
|
|
|
|
|
|
|
Shares | | 849,123 |
| (724,243 | ) | — |
| 124,880 |
|
Value | | $8,615,555 |
| $(7,204,305 | ) | $— |
| $1,411,250 |
|
(b)Represents an in-kind redemption paid on November 13, 2017, which represented 46.21% of the Value Fund’s net assets. A pro-rata portion of the Value Fund’s portfolio investments were transferred as payment of the in-kind redemption per procedures adopted by the Trust’s Board of Trustees.
58www.cogniosfunds.com
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
Transactions in shares of capital stock for the Market Neutral Fund during the year endedSeptember 30, 2017 were as follows:
Market Neutral Fund: |
| Contributions |
| Sold |
| Redeemed |
| Reinvested* |
| Net Decrease | |
Investor Class Shares | | | | | | | | | | | |
Shares | | — | | 1,444,959 | | (3,454,438 | ) | 66,044 | | (1,943,435 | ) |
Value | | $— | | $13,810,913 | | $(32,642,780 | ) | $630,723 | | $(18,201,144 | ) |
Institutional Class Shares | | | | | | | | | | | |
Shares | | — | | 2,715,596 | | (10,064,766 | ) | 140,000 | | (7,209,170 | ) |
Value | | $— | | $26,032,387 | | $(96,184,014 | ) | $1,351,002 | | $(68,800,625 | ) |
4. INVESTMENT TRANSACTIONS
For the year ended June 30, 2019 aggregate purchases and sales of investment securities (excluding short-term investments) were as follows:
Fund |
| Purchases |
| Sales |
| In-Kind | |
Value Fund | | $21,355,633 | | $15,880,479 | | $5,023,716 | |
Growth Fund | | 96,815,228 | | 91,978,045 | | – | |
Market Neutral Fund | | 190,637,536 | | 159,137,817 | | – | |
There were no government securities purchased or sold during the year.
5. ADVISORY FEES AND OTHER RELATED PARTY TRANSACTIONS
The Funds have entered into an Investment Advisory Agreement (the “Advisory Agreement”) with the Adviser. Pursuant to the Advisory Agreement, the Adviser manages the operations of the Funds and manages the Funds’ investments in accordance with the stated policies of the Funds.As compensation for the investment advisory services provided to the Funds, the Adviser receives a monthly management fee equal to an annual rate of each Fund’s net assets as follows:
Fund |
| Management |
| Management | |
Value Fund | | 0.65% | | $128,060 | |
Growth Fund | | 0.70% | | 287,652 | |
Market Neutral Fund | | 1.40% | | 1,188,411 | |
The Adviser has entered into an Expense Limitation Agreement (“Expense Agreements”) with the Funds under which it has agreed to waive or reduce its fees and to assume other expenses of the Funds, if necessary, in an amount that limits the Funds’ annual operating expenses (exclusive of interest, borrowing expenses, distribution fees pursuant to Rule 12b-1 plans, taxes, acquired fund
Annual Report | June 30, 201959
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
fees and expenses, brokerage fees and commissions, dividend expenses on short sales, litigation expenses, other expenditures which are capitalized in accordance with generally accepted accounting principles and other extraordinary expenses not incurred in the ordinary course of the Funds’ business) to not more than the following percentages of average daily net assets of each of the Funds through October 31, 2020:
Fund |
| Expense |
| Management |
| Expenses | |
Value Fund | | 0.85% |
| $128,060 |
| $47,757 |
|
Growth Fund | | 0.90% |
| 117,193 |
| — |
|
Market Neutral Fund | | 1.45% |
| 322,356 |
| — |
|
Subject to approval by the Funds’ Board of Trustees, any waiver or reimbursement under the Expense Limitation Agreement is subject to repayment by the Funds within the three fiscal years following the date of such waiver provided that the Funds are able to make the repayment without exceeding the expense limitation in place at the time of the waiver or reimbursement and at the time the waiver or reimbursement is recouped.
At June 30, 2019, the cumulative unreimbursed amounts paid and/or waived by the Adviser on behalf of the Funds that may be recouped no later than the dates stated below are as follows:
Fund |
| June 30, 2020 |
| June 30, 2021 |
| June 30, 2022 |
| Totals | |
Value Fund | | $97,135 | | $158,243 | | $175,817 | | $431,195 | |
Growth Fund | | 61,862 | | 99,798 | | 117,193 | | 278,853 | |
Market Neutral Fund | | — | | 62,226 | | 322,356 | | 384,582 | |
The Funds have entered into an Investment Company Services Agreement (“Services Agreement”) with M3Sixty Administration, LLC (“M3Sixty”). Under the Services Agreement, M3Sixty is responsible for a wide variety of functions, including but not limited to: (a) Fund accounting services; (b) financial statement preparation; (c) valuation of the Funds’ portfolio investments; (d) pricing the Funds’ shares; (e) assistance in preparing tax returns; (f) preparation and filing of required regulatory reports; (g) communications with shareholders; (h) coordination of Board and shareholder meetings; (i) monitoring the Funds’ legal compliance; (j) maintaining shareholder account records; and,(k) Chief Compliance Officer services.
For the year ended June 30, 2019 the Funds accrued fees pursuant to the Services Agreementas follows:
Fund |
| Services |
Value Fund | | $100,608 |
Growth Fund | | 135,375 |
Market Neutral Fund | | 197,474 |
60www.cogniosfunds.com
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
M3Sixty has also agreed to voluntarily waive certain fees until certain thresholds are met by the Funds. During the year ended June 30, 2019, M3Sixty waived fees as follows:
Fund |
| Services |
Value Fund | | $— |
Growth Fund | | 25,000 |
Market Neutral Fund | | 11,250 |
Certain officers and an Interested Trustee of the Trust are also employees or officers of M3Sixty.
The Funds have entered into a Distribution Agreement with ALPS Distributors, Inc. (the “Distributor”). Pursuant to the Distribution Agreement, the Distributor will provide distribution services to the Funds. The Distributor serves as underwriter/distributor of the Funds.
The Funds have adopted a Distribution and Services Plan (the “Plan”) pursuant to Rule 12b-1 of the 1940 Act for its Investor Class shares. Under the Plan, the Funds may use 12b-1 fees to compensate broker-dealers (including, without limitation, the Distributor) for sales of the Funds’ shares, or for other expenses associated with distributing the Funds’ shares. The Funds may expend up to 0.25% for Investor Class shares of a Fund’s average daily net assets annually to pay for any activity primarily intended to result in the sale of shares of the Funds and the servicing of shareholder accounts, provided that the Trustees have approved the category of expenses for which payment is being made.
For the year ended June 30, 2019 the Funds accrued 12b-1 expenses attributable to Investor Class shares as follows:
Fund |
| 12b-1 |
Value Fund | | $466 |
Growth Fund | | 23,807 |
Market Neutral Fund | | 48,942 |
6. SPECIAL CUSTODY AND PLEDGE AGREEMENT
The Value Fund may use borrowings for investment purposes. In determining when and to what extent to employ borrowing (i.e., leverage), the Adviser will consider factors such as the relative risks and returns expected from the portfolio as a whole and the costs of such transactions. These loans may be structured as secured or unsecured loans, and may have fixed or variable interest rates. The Value Fund may borrow an amount equal to as much as one-third of the value of its total assets (which includes the amount borrowed). The Value Fund will only engage in borrowing when the Adviser believes the return from the additional investments will be greater than the costs associated with the borrowing.
Annual Report | June 30, 201961
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
Effective May 7, 2018, the Value Fund entered into a Special Custody and Pledge Agreement (the “Pledge Agreement”) with BNP Paribas Securities Corp. and MUFG Union Bank, N.A. to facilitate extensions of credit. As of June 30, 2019, cash and portfolio securities valued at $26,694,336 were held in escrow by the custodian as collateral for extensions of credit made to the Fund. Borrowings under the Pledge Agreement bear interest at the bank’s prime rate plus 1.25%. The rate in effect at June 30, 2019 was 3.61%. For the year ended June 30, 2019, the average borrowings and interest rate under the Pledge Agreement were $5,365,086 and 3.27%, respectively. As of June 30, 2019, the amount due to the broker was $6,735,227 which consisted of a borrowing balance of $6,717,028, which represented 24.66% of the Value Fund’s total assets, and $18,199 of interest expense.
7. TAX MATTERS
For U.S. Federal income tax purposes, the cost of securities owned, gross appreciation, gross depreciation, and net unrealized appreciation/(depreciation) of investments and securities sold short at June 30, 2019 were as follows:
Fund |
| Tax Cost |
| Gross |
| Gross |
| Net | |
Value Fund | | $25,001,837 | | $3,018,524 | | $(1,329,527 | ) | $1,688,997 | |
Growth Fund | | 38,876,149 | | 5,563,472 | | (176,765 | ) | 5,386,707 | |
Market Neutral Fund | | 22,942,170 | | 12,458,842 | | (19,314,104 | ) | (6,855,262 | ) |
The difference between book basis unrealized appreciation and tax-basis unrealized appreciation for the Funds is attributable primarily to the tax deferral of losses on wash sales, tax classifications of certain investments and the tax treatment of the cost of securities received as in-kind subscriptions and distributed as in-kind redemptions.
As of June 30, 2019, the components of distributable earnings presented on an income tax basis were as follows:
Fund |
| Deferred |
| Capital Loss |
| Undistributed |
| Undistributed |
| Net |
| Total | |
Value Fund | | $— | | $— | | $97,621 | | $709,468 | | $1,688,997 | | $2,496,086 | |
Growth Fund | | — | | — | | 223,361 | | 515,620 | | 5,386,707 | | 6,125,688 | |
Market Neutral Fund | | (126,124 | ) | — | | — | | — | | (6,855,262 | ) | (6,981,386 | ) |
As of June 30, 2019, the Funds had no capital loss carryforwards for federal income tax purposes available to offset future capital gains.
In accordance with GAAP, the Funds have recorded reclassifications in the capital accounts. These reclassifications have no impact on the net asset value of the Funds and are designed generally to present total distributable earnings and paid-in capital on a tax basis which is considered to be more informative to the shareholder. The reclassifications listed below are as a result of differing book/tax
62www.cogniosfunds.com
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
treatment of capital gains from sales of investments received from in-kind subscriptions, net operating loss, REIT adjustments and dividends on securities sold short. As of June 30, 2019, the Funds recorded reclassifications to increase (decrease) the capital accounts as follows:
Fund |
| Total |
| Paid-in | |
Value Fund | | $(320,217 | ) | $320,217 | |
Growth Fund | | — | | — | |
Market Neutral Fund | | 99,194 | | (99,194 | ) |
The tax character of distributions paid by the Funds during the year ended June 30, 2019 wereas follows.
Fund |
| Long-Term |
| Ordinary | |
Value Fund | | $2,740,586 | | $862,860 | |
Growth Fund | | 840,860 | | 1,149,933 | |
Market Neutral Fund | | — | | — | |
The tax character of distributions paid by the Value Fund and the Growth Fund during the year ended June 30, 2018, and for the Market Neutral Fund during the nine-month period ended June 30, 2018, were as follows.
Fund |
| Long-Term |
| Ordinary | |
Value Fund | | $3,538,592 | | $505,540 | |
Growth Fund | | 3,241 | | 490,469 | |
Market Neutral Fund | | — | | — | |
The tax character of distributions paid by the Market Neutral Fund during the year endedSeptember 30,2017 were $481,884 of long-term capital gains and $1,595,948 of ordinary income.
8. NON-DIVERSIFIED FUNDS
The Value Fund and the Growth Fund are non-diversified Funds. Non-diversified Funds may or may not have a diversified portfolio of investments at any given time, and may have large amounts of assets invested in a very small number of companies, industries or securities. Such lack of diversification substantially increases market risks and the risk of loss associated with an investment in the Funds, because the value of each security will have a greater impact on the Funds’ performance and the value of each shareholder’s investment. When the value of a security in a non-diversified fund falls, it may have a greater impact on the Funds than it would have in a diversified fund.
Annual Report | June 30, 201963
Cognios Funds
Notes to the Financial StatementsJune 30, 2019
9. BENEFICIAL OWNERSHIP
The beneficial ownership, either directly or indirectly, of more than 25% of a fund’s voting interest creates a presumption of control of the fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of June 30, 2019, the Value Fund, Growth Fund and Market Neutral Fund had omnibus shareholder accounts which amounted to more than 25% of the total shares outstanding of each respective Fund. Shareholders with a controlling interest could affect the outcome of proxy voting or direction of management of the Funds.
10. 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 Funds’ maximum exposure under these arrangements is dependent on future claims that may be made against the Funds and, therefore, cannot be estimated; however, management considers the risk of loss from such claims to be remote.
11. SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events of the Funds through the date the financial statements were issued, and has determined that there were no subsequent events requiring recognition or disclosure in the financial statements.
64www.cogniosfunds.com
Cognios Funds
Report of Independent Registered Public Accounting FirmJune 30, 2019
To the Board of Trustees of M3Sixty Funds Trust and the Shareholders of Cognios Large Cap Value Fund, Cognios Large Cap Growth Fund, and Cognios Market Neutral Large Cap Fund
Opinion on the Financial Statements
We have audited the accompanying statements of assets and liabilities of Cognios Large Cap Value Fund, Cognios Large Cap Growth Fund and Cognios Market Neutral Large Cap Fund, each a series of beneficial interest in the M3Sixty Funds Trust (the “Funds”), including the schedules of investments, as of June 30, 2019, and the related statements of operations for the year then ended, and the statement of changes in net assets, cash flows and financial highlights as noted in the table below, and the related notes to the financial statements (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Funds as of June 30, 2019, and the results of their operations for the year then ended, and the changes in their net assets, cash flows and financial highlights as noted in the table below, in conformity with accounting principles generally accepted in the United States of America. For Cognios Large Cap Value Fund and Cognios Large Cap Growth Fund, the financial highlights for the period October 3, 2016 through June 30, 2017 were audited by other auditors, whose report dated August 29, 2017, expressed an unqualified opinion on such financial highlights. For Cognios Market Neutral Large Cap Fund, the statement of changes in net assets for the year ended September 30, 2017 and financial highlights for each of the years in the four-year period then ended were audited by other auditors, whose report dated November 29, 2017, expressed an unqualified opinion on such financial statement and financial highlights.
Basis for Opinion
These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Funds in accordance with the U.S. federal securities law and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. The Funds are not required to have, nor were we engaged to perform, an audit of their internal control over financial reporting. As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Funds’ internal control over financial reporting. Accordingly, we express no such opinion.
Annual Report | June 30, 201965
Cognios Funds
Report of Independent Registered Public Accounting FirmJune 30, 2019
Our audits included performing procedures to assess the risk of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2019 by correspondence with the custodian and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.
BBD, LLP
We have served as the auditor of one or more of the Funds in the M3Sixty Funds Trust since 2018.
Philadelphia, Pennsylvania
August 29, 2019
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Cognios Funds
Additional InformationJune 30, 2019
1. PROXY VOTING POLICIES AND VOTING RECORD
A description of the policies and procedures that the Funds use to determine how to vote proxies relating to portfolio securities is available without charge, upon request, by calling 1-888-553-4233; and on the Commission’s website at http://www.sec.gov.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent period ended June 30 is available without charge, upon request, by calling 1-888-553-4233; and on the Commission’s website at http://www.sec.gov.
2. PORTFOLIO HOLDINGS
The Funds file their complete schedules of portfolio holdings with the Securities and Exchange Commission (the “Commission”) for the first and third quarters of each fiscal year on Form N-Q. The Funds’ Forms N-Q will be available on the Commission’s website at http://www.sec.gov. The Funds’ Forms N-Q may be reviewed and copied at the Commission’s Public Reference Room in Washington, DC. Information on the operation of the Commission’s Public Reference Room may be obtained by calling 1-800-SEC-0330.
3. SHAREHOLDER TAX INFORMATION
The tax character of distributions paid by the Value Fund and the Growth Fund during the year ended June 30, 2019, were as follows.
Fund |
| Long-Term |
| Ordinary | |
Value Fund | | $2,740,586 |
| $862,860 | |
Growth Fund | | 840,860 |
| 1,149,933 | |
There were no distributions paid by the Market Neutral Fund during the year ended June 30, 2019.
Complete information will be computed and reported in conjunction with your 2019 Form 1099-DIV.
Shareholders should refer to their Form 1099-DIV or other tax information which will be mailed in 2020 to determine the calendar year amounts to be included on their 2019 tax returns. Shareholders should consult their own tax advisors.
Annual Report | June 30, 201967
Cognios Funds
Trustees and OfficersJune 30, 2019 (Unaudited)
The Trustees are responsible for the management and supervision of the Funds. The Trustees approve all significant agreements between the Trust, on behalf of the Funds, and those companies that furnish services to the Funds; review performance of the Funds; and oversee activities of the Funds. The Statement of Additional Information of the Trust includes additional information about the Funds’ Trustees and is available upon request, without charge, by calling 888-553-4233.
Following are the Trustees and Officers of the Trust, their year of birth and address, their present position with the Trust, and their principal occupation during the past five years. As described above under “Description of the Trust”, each of the Trustees of the Trust will generally hold office indefinitely. The Officers of the Trust will hold office indefinitely, except that: (1) any Officer may resign or retire and (2) any Officer may be removed any time by written instrument signed by at least two-thirds of the number of Trustees prior to such removal. In case a vacancy or an anticipated vacancy on the Board of Trustees shall for any reason exist, the vacancy shall be filled by the affirmative vote of a majority of the remaining Trustees, subject to certain restrictions under the 1940 Act. Those Trustees who are “interested persons” (as defined in the 1940 Act) by virtue of their affiliation with either the Trust or the Adviser, are indicated in the table. The address of each trustee and officer is 4300 Shawnee Parkway, Suite 100, Fairway, KS 66205.
Name | Position(s) | Length of | Principal Occupation(s) | Number | Other |
Independent Trustees | |||||
Kelley J. Brennan - 1942 | Trustee | Since 2015 | Retired; Partner, PricewaterhouseCoopers LLP (an accounting firm) | Three | PNC Funds (30 Portfolios) PNC Advantage Fund |
Steven D. Poppen - 1968 | Trustee | Since 2015 | Executive Vice President | Three | None |
Tobias Caldwell - 1967 | Trustee | Since 2016 | Managing Member, Genovese Family Enterprises, LLC (familyoffice) (1999-present); ManagingMember, PTL Real Estate LLC (real estate/investment firm) (2000-present); Manager Member, Bear Properties, LLC(real estate firm) (2006-present). | Three | Strategy Shares (2016– present) (4 funds); Mutual Fund & Variable Insurance Trust (2010–present) (9 funds); Mutual Fund Series Trust (2006-present) (40 funds) |
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Cognios Funds
Trustees and OfficersJune 30, 2019 (Unaudited)
Name | Position(s) | Length of | Principal Occupation(s) | Number | Other |
Interested Trustee* | |||||
Randall K. Linscott - 1971 | Trustee and President | Since 2015 | Chief Executive Officer, M3Sixty Administration, LLC (2013- | Three | 360 Funds |
*The Interested Trustee is an Interested Trustee because he is an officer and employee of the Administrator.
Name | Position(s) | Length of | Principal Occupation(s) | Number | Other |
Officers | |||||
András P. Teleki - 1971 | Chief | Since 2016 | Chief Legal Officer, M3Sixty Administration, LLC, M3Sixty Holdings, LLC, Matrix 360 Distributors, LLC, and M3Sixty Advisors, LLC (2015-present); Chief Compliance Officer and Secretary, 360 Funds (2015- | N/A | N/A |
Annual Report | June 30, 201969
Cognios Funds
Trustees and OfficersJune 30, 2019 (Unaudited)
Name | Position(s) | Length of | Principal Occupation(s) | Number | Other |
Officers | | | | | |
Larry E. Beaver, Jr. - 1969 | Assistant Treasurer | Since 2017 | Fund Accounting, Administrationand 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-July 2019); Assistant Treasurer, 360 Funds (July 2017-Present); Assistant Treasurer, WP Funds Trust (July 2017-Present); Treasurer and Assistant Secretary, Capital Management Investment Trust (2008-July 2017); Treasurer, 360 Funds (2007-July 2017); Treasurer, M3Sixty Funds Trust (2015-July 2017); Treasurer, WP Trust (2015-July 2017); Treasurer and Chief Financial Officer, Monteagle Funds (2008-2016). | N/A | N/A |
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Cognios Funds
Trustees and OfficersJune 30, 2019 (Unaudited)
Name | Position(s) | Length of | Principal Occupation(s) | Number | Other |
Officers | |||||
Brandon J. Byrd - 1981 | Assistant Secretary and Anti-Money Laundering (“AML”) Officer Vice President | Since 2015 Since 2018 | Chief Operating Officer, M3Sixty Administration LLC (2012-present); Chief Operations Officer, Matrix Capital Group, Inc. (2015-present); Assistant Secretary and Assistant Treasurer, WP Trust (2016-present); Assistant Secretary and AML Compliance Officer, 360 Funds (2013-present); Assistant Secretary and AML Compliance Officer, Monteagle Funds (2013-2016); Assistant Secretary and AML Compliance Officer, Division Manager – Client Service Officer, Boston Financial Data Services (mutual fund service provider) (2010-2012). | N/A | |
John H. Lively - 1969 | Assistant Secretary | Since 2017 | Managing Partner, Practus, LLP (formerly, The Law Offices of John H. Lively & Associates, Inc.) (law firm) (2010-present). | N/A | N/A |
Ted L. Akins- 1974 | Assistant Secretary | Since 2018 | Vice President of Operations, M3Sixty Administration, LLC (2012-present). | N/A | N/A |
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. Effective April 25, 2019, each Trustee who is not an “interested person” (an “Independent Trustee”) will receive a $5,000 annual retainer (paid quarterly). In addition, each Independent Trustee will receive (i) an annual retainer fee of $5,000 each year (paid quarterly); (ii) a $375 fee per Board meeting per fund plus $200 per Board meeting attended in person and (iii) a fee of $200 per audit committee meeting attended. The Trust will also reimburse each Trustee for travel and other expenses incurred in connection with, and/or related to, the performance of their obligations as a Trustee. Officers of the Trust will also be reimbursed for travel and other expenses relating to their attendance at Board meetings.
Annual Report | June 30, 201971
Cognios Funds
Trustees and OfficersJune 30, 2019 (Unaudited)
Name of Trustee1 |
| Aggregate |
| Pension or |
| Estimated |
| Total |
Independent Trustees | ||||||||
Kelley Brennan | | $3,292 | | None | | None | | $9,301 |
Steve Poppen | | 3,292 | | None | | None | | 9,301 |
Tobias Caldwell | | 3,292 | | None | | None | | 9,301 |
Interested Trustees and Officers | ||||||||
Randall K. Linscott | | None | | Not Applicable | | Not Applicable | | None |
1Each of the Trustees serves as a Trustee to each Series of the Trust. The Trust currently offers three (3) series of shares.
2Amounts presented were paid by the Value Fund and the Growth Fund. The amount paidto each Trusteeby the Market Neutral Fund was $2,717. Figures are for the year endedJune 30, 2019.
M3SIXTY FUNDS TRUST
4300 Shawnee Mission Pkwy
Suite 100
Fairway, KS 66205
INVESTMENT ADVISER
Cognios Capital, LLC
11250 Tomahawk Creek Parkway
Leawood, KS 66211
ADMINISTRATOR & TRANSFER AGENT
M3Sixty Administration, LLC
4300 Shawnee Mission Pkwy
Suite 100
Fairway, KS 66205
DISTRIBUTOR
ALPS Distributors, Inc.
1290 Broadway
Suite 1100
Denver, CO 80203
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
MUFG Union Bank®, N.A.
350 California Street
20th Floor
San Francisco, CA 94104
Must be accompanied or preceded by a prospectus.
The Cognios Funds are distributed by ALPS Distributors, Inc.
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 Kelley J. Brennan serves on its audit committee as the "audit committee financial expert" as defined in Item 3 of Form N-CSR. |
ITEM 4. | PRINCIPAL ACCOUNTANT FEES AND SERVICES. |
(a)
| Audit Fees. The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for the audit of the registrant’s annual financial statements or for services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements were $34,000 with respect to each of the Funds’ fiscal year ended June 30, 2019 and $34,000 with respect to each of the Funds’ fiscal year ended June 30, 2018. The June 30, 2019 and June 30, 2018 fees were paid to BBD, LLP. |
(b) | Audit-Related Fees. There were no fees billed in each of the last two fiscal years for assurances and related services by the principal accountant that are reasonably related to the performance of the audit of the registrant’s financial statements and are not reported under paragraph (a) of this item. |
(c) | Tax Fees. The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal accountant for tax compliance, tax advice and tax planning were $6,500 with respect to each of the Funds’ fiscal year ended June 30, 2019 and $6,500 with respect to each of the Funds’ fiscal year ended June 30, 2018. The services comprising these fees are the preparation of the registrant’s federal income and excise tax returns. The June 30, 2019 and June 30, 2018 fees were paid to BBD, LLP. |
(d) | All Other Fees. The aggregate fees billed in each of the 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 $1,500 with respect to each of the Fund’s fiscal year ended June 30, 2018. There were no fees billed for the fiscal year ended June 30, 2019. The fees were for the review of the semi-annual report and review of prior audit firms’ tax workpapers. The June 30, 2018 fees were paid to Cohen & Co. Ltd. |
(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 for the fiscal years ended June 30, 2019 and June 30, 2018 respectively are disclosed in (b)-(d) above. There were no audit or non-audit services performed by the registrant's principal accountant for the registrant's adviser.
|
(h) | The registrant’s audit committee has considered whether the provision of non-audit services that were rendered to the registrant’s investment adviser (not including any sub-adviser whose role is primarily portfolio management and is subcontracted with or overseen by another investment adviser), and any entity controlling, controlled by, or under common control with the investment adviser that provides ongoing services to the registrant that were not pre-approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X, is compatible with maintaining the principal accountant’s independence and has determined that the provision of such non-audit services is compatible with maintaining the principal accountant’s independence |
ITEM 5. | AUDIT COMMITTEE OF LISTED REGISTRANTS. |
Not applicable to the registrant.
ITEM 6. | SCHEDULES OF INVESTMENTS |
Included in Annual Report to shareholders filed under Item 1 of this Form N-CSR.
ITEM 7. | DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES. |
Not applicable as the Funds are open-end management investment companies.
ITEM 8. | PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES |
Not applicable as the Funds are open-end management investment companies.
ITEM 9. | PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS. |
Not applicable as the Funds are open-end management investment companies.
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 as the Funds are open-end management investment companies.
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.
M3Sixty Funds Trust
/s/ Randy Linscott | |
By: Randy Linscott | |
Principal Executive Officer, | |
Date: September 6, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the date indicated.
/s/ Randy Linscott | |
By: Randy Linscott | |
Principal Executive Officer, | |
Date: September 6, 2019 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following person on behalf of the registrant and in the capacities and on the date indicated.
/s/ Larry E. Beaver, Jr. | |
By Larry E. Beaver, Jr. | |
Assistant Treasurer and Acting Principal Financial Officer | |
Date: September 6, 2019 |