As filed with the Securities and Exchange Commission on August 22, 2017
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT
INVESTMENT COMPANIES
Investment Company Act file number 811-22842
FORUM FUNDS II
Three Canal Plaza, Suite 600
Portland, Maine 04101
Jessica Chase, Principal Executive Officer
Three Canal Plaza, Suite 600
Portland, Maine 04101
207-347-2000
Date of fiscal year end: December 31
Date of reporting period: January 1, 2017 – June 30, 2017
ITEM 1. REPORT TO STOCKHOLDERS.
![](https://capedge.com/proxy/N-CSRS/0001435109-17-000596/image0.jpg)
Phocas Real Estate Fund |
Semi-Annual Report
June 30, 2017
(Unaudited)
![]() | Shares | Security Description | Value | |||
Common Stock (REITs) - 96.4% | ||||||
Apartments - 14.4% | ||||||
3,997 | AvalonBay Communities, Inc. | $ | 768,103 | |||
2,772 | Camden Property Trust | 237,034 | ||||
2,027 | Essex Property Trust, Inc. | 521,486 | ||||
26,319 | Independence Realty Trust, Inc. | 259,769 | ||||
1,786,392 | ||||||
Commercial Financing - 1.9% | ||||||
10,711 | Jernigan Capital, Inc. | 235,642 | ||||
Data Centers - 8.0% | ||||||
5,855 | CoreSite Realty Corp. | 606,168 | ||||
7,364 | QTS Realty Trust, Inc., Class A | 385,358 | ||||
991,526 | ||||||
Diversified - 4.6% | ||||||
13,102 | Colony NorthStar, Inc., Class A | 184,607 | ||||
4,109 | Vornado Realty Trust | 385,835 | ||||
570,442 | ||||||
Freestanding - 2.6% | ||||||
7,672 | Seritage Growth Properties, Class A | 321,840 | ||||
Health Care - 3.3% | ||||||
5,461 | Welltower, Inc. | 408,756 | ||||
Industrial - 11.3% | ||||||
18,693 | First Industrial Realty Trust, Inc. | 534,994 | ||||
20,028 | Rexford Industrial Realty, Inc. | 549,568 | ||||
11,617 | STAG Industrial, Inc. | 320,629 | ||||
1,405,191 | ||||||
Infrastructure - 2.3% | ||||||
8,534 | CorEnergy Infrastructure Trust, Inc. | 286,657 | ||||
Lodging/Resorts - 4.7% | ||||||
7,664 | Chatham Lodging Trust | 153,970 | ||||
13,070 | Pebblebrook Hotel Trust | 421,377 | ||||
575,347 | ||||||
Manufactured Homes - 2.6% | ||||||
3,590 | Sun Communities, Inc. | 314,807 | ||||
Office - 20.3% | ||||||
4,803 | Alexandria Real Estate Equities, Inc. | 578,618 | ||||
2,824 | Boston Properties, Inc. | 347,409 | ||||
7,273 | Corporate Office Properties Trust | 254,773 | ||||
11,954 | Hudson Pacific Properties, Inc. | 408,707 | ||||
4,356 | Kilroy Realty Corp. | 327,353 | ||||
10,000 | NorthStar Realty Europe Corp. | 126,800 | ||||
4,470 | SL Green Realty Corp. | 472,926 | ||||
2,516,586 | ||||||
Regional Malls - 7.1% | ||||||
5,448 | Simon Property Group, Inc. | 881,269 | ||||
![]() | Shares | Security Description | Value | |||
Self Storage - 7.4% | ||||||
3,161 | Extra Space Storage, Inc. | $ | 246,558 | |||
28,708 | National Storage Affiliates Trust | 663,442 | ||||
910,000 | ||||||
Shopping Centers - 4.9% | ||||||
13,574 | Acadia Realty Trust | 377,357 | ||||
3,749 | Regency Centers Corp. | 234,838 | ||||
612,195 | ||||||
Single Family Homes - 1.0% | ||||||
5,780 | Invitation Homes, Inc. | 125,021 | ||||
Total Common Stock (REITs) (Cost $8,627,811) | 11,941,671 | |||||
Total Investments - 96.4% (Cost $8,627,811)* | $ | 11,941,671 | ||||
Other Assets & Liabilities, Net – 3.6% | 450,736 | |||||
Net Assets – 100.0% | $ | 12,392,407 |
REIT | Real Estate Investment Trust |
* Cost for federal income tax purposes is substantially the same as for financial statement purposes and net unrealized appreciation consists of:
PHOCAS REAL ESTATE FUND SCHEDULE OF INVESTMENTS JUNE 30, 2017 |
PORTFOLIO HOLDINGS | ||
% of Total Investments | ||
Apartments | 15.0 | % |
Commercial Financing | 2.0 | % |
Data Centers | 8.3 | % |
Diversified | 4.8 | % |
Freestanding | 2.7 | % |
Health Care | 3.4 | % |
Industrial | 11.8 | % |
Infrastructure | 2.4 | % |
Lodging/Resorts | 4.8 | % |
Manufactured Homes | 2.6 | % |
Office | 21.1 | % |
Regional Malls | 7.4 | % |
Self Storage | 7.6 | % |
Shopping Centers | 5.1 | % |
Single Family Homes | 1.0 | % |
100.0 | % |
See Notes to Financial Statements. | 2 |
PHOCAS REAL ESTATE FUND STATEMENT OF ASSETS AND LIABILITIES JUNE 30, 2017 |
ASSETS | ||||||
. | Total investments, at value (Cost $8,627,811) | $ | 11,941,671 | |||
Cash | 406,844 | |||||
Receivables: | ||||||
Dividends and interest | 63,884 | |||||
Prepaid expenses | 3,081 | |||||
Total Assets | 12,415,480 | |||||
LIABILITIES | ||||||
Accrued Liabilities: | ||||||
Investment advisor fees | 3,013 | |||||
Trustees' fees and expenses | 89 | |||||
Fund services fees | 6,295 | |||||
Other expenses | 13,676 | |||||
Total Liabilities | 23,073 | |||||
NET ASSETS | $ | 12,392,407 | ||||
COMPONENTS OF NET ASSETS | ||||||
Paid-in capital | $ | 8,613,252 | ||||
Undistributed net investment income | 127,848 | |||||
Accumulated net realized gain | 337,447 | |||||
Net unrealized appreciation | 3,313,860 | |||||
NET ASSETS | $ | 12,392,407 | ||||
SHARES OF BENEFICIAL INTEREST AT NO PAR VALUE (UNLIMITED SHARES AUTHORIZED) | 374,766 | |||||
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE* | $ | 33.07 | ||||
* | Shares redeemed or exchanged within 90 days of purchase are charged a 1.00% redemption fee. |
See Notes to Financial Statements. | 3 |
PHOCAS REAL ESTATE FUND STATEMENT OF OPERATIONS JUNE 30, 2017 |
INVESTMENT INCOME | |||||||
Dividend income | . | $ | 216,673 | ||||
Interest income | 709 | ||||||
Total Investment Income | 217,382 | ||||||
Advisor | |||||||
EXPENSES | |||||||
Investment advisor fees | 44,767 | ||||||
Fund services fees | 46,910 | ||||||
Custodian fees | 2,484 | ||||||
Registration fees | 1,095 | ||||||
Professional fees | 16,002 | ||||||
Trustees' fees and expenses | 1,344 | ||||||
Other expenses | 8,913 | ||||||
Total Expenses | 121,515 | ||||||
Fees waived and expenses reimbursed | (31,981 | ) | |||||
Net Expenses | 89,534 | ||||||
NET INVESTMENT INCOME | 127,848 | ||||||
NET REALIZED AND UNREALIZED GAIN (LOSS) | |||||||
Net realized gain on investments | 276,358 | ||||||
Net change in unrealized appreciation (depreciation) on investments | 18,562 | ||||||
NET REALIZED AND UNREALIZED GAIN | 294,920 | ||||||
INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 422,768 | |||||
See Notes to Financial Statements. | 4 |
PHOCAS REAL ESTATE FUND STATEMENTS OF CHANGES IN NET ASSETS |
For the Six Months Ended June 30, 2017 | For the Year Ended December 31, 2016 | |||||||||||
OPERATIONS | ||||||||||||
Net investment income | $ | 127,848 | $ | 301,744 | ||||||||
Net realized gain | 276,358 | 25,119 | ||||||||||
Net change in unrealized appreciation (depreciation) | 18,562 | 527,384 | ||||||||||
Increase in Net Assets Resulting from Operations | 422,768 | 854,247 | ||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||
Net investment income | - | (133,353 | ) | |||||||||
Net realized gain | - | (482,261 | ) | |||||||||
Total Distributions to Shareholders | - | (615,614 | ) | |||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||||||
Sale of shares | 452,551 | 1,686,936 | ||||||||||
Reinvestment of distributions | - | 615,614 | ||||||||||
Redemption of shares | (904,032 | ) | (1,171,733 | ) | ||||||||
Increase (Decrease) in Net Assets from Capital Share Transactions | (451,481 | ) | 1,130,817 | |||||||||
Increase (Decrease) in Net Assets | (28,713 | ) | 1,369,450 | |||||||||
NET ASSETS | ||||||||||||
Beginning of Period | 12,421,120 | 11,051,670 | ||||||||||
End of Period (Including line (a)) | $ | 12,392,407 | $ | 12,421,120 | ||||||||
SHARE TRANSACTIONS | ||||||||||||
Sale of shares | 14,088 | 51,662 | ||||||||||
Reinvestment of distributions | - | 19,647 | ||||||||||
Redemption of shares | (28,080 | ) | (36,450 | ) | ||||||||
Increase (Decrease) in Shares | (13,992 | ) | 34,859 | |||||||||
(a) | Undistributed net investment income | $ | 127,848 | $ | - |
See Notes to Financial Statements. | 6 |
PHOCAS REAL ESTATE FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 |
Note 1. Organization
The Phocas Real Estate Fund (the "Fund") is a non-diversified portfolio of Forum Funds II (the "Trust"). The Trust is a Delaware statutory trust that is registered as an open-end, management investment company under the Investment Company Act of 1940, as amended (the "Act"). Under its Trust Instrument, the Trust is authorized to issue an unlimited number of the Fund's shares of beneficial interest without par value. The Fund commenced operations on September 29, 2006. The Fund seeks long-term total investment return through a combination of capital appreciation and current income.
On July 19, 2013, at a Special Meeting of Shareholders of the Phocas Real Estate Fund (the "Predecessor Fund"), a series of the Advisor Series Trust, the shareholders approved a proposal to reorganize the Predecessor Fund into the Fund, a newly created series of the Trust. The Fund is designed to be substantially similar from an investment perspective to the Predecessor Fund, and is managed by the same investment advisor. As a result of the reorganization, the Fund is now operating under the supervision of a different board of trustees. On August 1, 2013, the shares of the Predecessor Fund were, in effect, exchanged on a tax-free basis for shares of the Fund with the same aggregate value. No sales load, commission or other transactional fees were imposed on shareholders in connection with the tax-free exchange of their shares.
Note 2. Summary of Significant Accounting Policies
The Fund is an investment company and follows accounting and reporting guidance under Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") Topic 946, "Financial Services-Investment Companies". These financial statements are prepared in accordance with accounting principles generally accepted in the United States of America ("GAAP"), which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent liabilities at the date of the financial statements, and the reported amounts of increases and decreases in net assets from operations during the fiscal period. Actual amounts could differ from those estimates. The following summarizes the significant accounting policies of the Fund:
Security Valuation – Securities are valued at market prices using the last quoted trade or official closing price from the principal exchange where the security is traded, as provided by independent pricing services on each Fund business day. In the absence of a last trade, securities are valued at the mean of the last bid and ask price provided by the pricing service. Shares of non-exchange traded open-end mutual funds are valued at net asset value ("NAV"). Short-term investments that mature in 60 days or less may be valued at amortized cost.
The Fund values its investments at fair value pursuant to procedures adopted by the Trust's Board of Trustees (the "Board") if (1) market quotations are not readily available or (2) the Advisor, as defined in Note 4, believes that the values available are unreliable. The Trust's Valuation Committee, as defined in the Fund's registration statement, performs certain functions as they relate to the administration and oversight of the Fund's valuation procedures. Under these procedures, the Valuation Committee convenes on a regular and ad hoc basis to review such investments and considers a number of factors, including valuation methodologies and significant unobservable inputs, when arriving at fair value.
The Valuation Committee may work with the Advisor to provide valuation inputs. In determining fair valuations, inputs may include market-based analytics that may consider related or comparable assets or liabilities, recent transactions, market multiples, book values and other relevant investment information. Advisor inputs may include an income-based approach in which the anticipated future cash flows of the investment are discounted in determining fair value. Discounts may also be applied based on the nature or duration of any restrictions on the disposition of the investments. The Valuation Committee performs regular reviews of valuation methodologies, key inputs and assumptions, disposition analysis and market activity.
Fair valuation is based on subjective factors and, as a result, the fair value price of an investment may differ from the security's market price and may not be the price at which the asset may be sold. Fair valuation could result in a different NAV than a NAV determined by using market quotes.
GAAP has a three-tier fair value hierarchy. The basis of the tiers is dependent upon the various "inputs" used to determine the value of the Fund's investments. These inputs are summarized in the three broad levels listed below:
Level 1 — quoted prices in active markets for identical assets and liabilities
Level 2 — other significant observable inputs (including quoted prices of similar securities, interest rates, prepayment speeds, credit risk, etc.)
7 |
PHOCAS REAL ESTATE FUND NOTES TO FINANCIAL STATEMENTS JUNE 30, 2017 |
Level 3 — significant unobservable inputs (including the Fund's own assumptions in determining the fair value of investments)
The aggregate value by input level, as of June 30, 2017, for the Fund's investments is included at the end of the Fund's Schedule of Investments.
Security Transactions, Investment Income and Realized Gain and Loss – Investment transactions are accounted for on the trade date. Dividend income is recorded on the ex-dividend date. Foreign dividend income is recorded on the ex-dividend date or as soon as possible after determining the existence of a dividend declaration after exercising reasonable due diligence. Income and capital gains on some foreign securities may be subject to foreign withholding taxes, which are accrued as applicable. Interest income is recorded on an accrual basis. Premium is amortized and discount is accreted using the effective interest method. Identified cost of investments sold is used to determine the gain and loss for both financial statement and federal income tax purposes.
Distributions to Shareholders – Distributions to shareholders of net investment income, if any, are declared and paid annually. Distributions to shareholders of net capital gains , if any, are declared and paid at least annually. Distributions to shareholders are recorded on the ex-dividend date. Distributions are based on amounts calculated in accordance with applicable federal income tax regulations, which may differ from GAAP. These differences are due primarily to differing treatments of income and gain on various investment securities held by the Fund, timing differences and differing characterizations of distributions made by the Fund.
Federal Taxes – The Fund intends to continue to qualify each year as a regulated investment company under Subchapter M of Chapter 1, Subtitle A, of the Internal Revenue Code of 1986, as amended ("Code"), and to distribute all of its taxable income to shareholders. In addition, by distributing in each calendar year substantially all of its net investment income and capital gains, if any, the Fund will not be subject to a federal excise tax. Therefore, no federal income or excise tax provision is required. The Fund files a U.S. federal income and excise tax return as required. The Fund's federal income tax returns are subject to examination by the Internal Revenue Service for a period of three fiscal years after they are filed. As of June 30, 2017, there are no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure.
REITs – The Fund has made certain investments in real estate investment trusts ("REITs") which pay dividends to their shareholders based upon funds available from operations. It is quite common for these dividends to exceed the REIT's taxable earnings and profits resulting in the excess portion of such dividends being designated as a return of capital. The Fund may include the gross dividends from such REITs in income or may utilize estimates of any potential REIT dividend reclassifications in the Fund's annual distributions to shareholders and, accordingly, a portion of the Fund's distributions may be designated as a return of capital, require reclassification, or be under distributed on an excise basis and subject to excise tax.
Income and Expense Allocation – The Trust accounts separately for the assets, liabilities and operations of each of its investment portfolios. Expenses that are directly attributable to more than one investment portfolio are allocated among the respective investment portfolios in an equitable manner.
Redemption Fees – A shareholder who redeems or exchanges shares within 90 days of purchase will incur a redemption fee of 1.00% of the current NAV of shares redeemed or exchanged, subject to certain limitations. The fee is charged for the benefit of the remaining shareholders and will be paid to the Fund to help offset transaction costs. The fee is accounted for as an addition to paid-in capital. The Fund reserves the right to modify the terms of or terminate the fee at any time. There are limited exceptions to the imposition of the redemption fee. Redemption fees incurred for the Fund, if any, are reflected on the Statements of Changes in Net Assets.
Commitments and Contingencies – In the normal course of business, the Fund enters into contracts that provide general indemnifications by the Fund to the counterparty to the contract. The Fund's maximum exposure under these arrangements is dependent on future claims that may be made against the Fund and, therefore, cannot be estimated; however, based on experience, the risk of loss from such claims is considered remote.
Note 3. Cash – Concentration in Uninsured Account
For cash management purposes, the Fund may concentrate cash with the Fund's custodian. This typically results in cash balances exceeding the Federal Deposit Insurance Corporation ("FDIC") insurance limits. As of June 30, 2017, the Fund had $156,844 at MUFG Union Bank, N.A. that exceeded the FDIC insurance limit.
Note 4. Fees and Expenses
Investment Advisor – Phocas Financial Corporation (the "Advisor") is the investment advisor to the Fund. Pursuant to an
PHOCAS REAL ESTATE FUND
FOR MORE INFORMATION:
P.O. Box 588
Portland, ME 04112
(866) 746-2271 (toll free)
INVESTMENT ADVISOR
Phocas Financial Corporation
980 Atlantic Avenue, Suite 106
Alameda, CA 94501
TRANSFER AGENT
Atlantic Fund Services
P.O. Box 588
Portland, ME 04112
www.atlanticfundservices.com
DISTRIBUTOR
Foreside Fund Services, LLC
Three Canal Plaza, Suite 100
Portland, Maine 04101
www.foreside.com
This report is submitted for the general information of the shareholders of the Fund. It is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus, which includes information regarding the Fund's risks, objectives, fees and expenses, experience of its management, and other information.
215-SAR-0617
ITEM 2. CODE OF ETHICS.
Not applicable.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable
ITEM 6. INVESTMENTS.
(a) | Included as part of report to shareholders under Item 1. |
(b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END
MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 8. PORTFOLIO MANAGERS OF CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 9. PURCHASES OF EQUITY SECURITIES BY CLOSED-END MANAGEMENT INVESTMENT COMPANY AND AFFILIATED PURCHASERS.
Not applicable.
ITEM 10. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
The Registrant does not accept nominees to the board of trustees from shareholders.
ITEM 11. CONTROLS AND PROCEDURES
(a) The Registrant's Principal Executive Officer and Principal Financial Officer have concluded that the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the "Act")) are effective, based on their evaluation of the controls and procedures required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as of a date within 90 days of the filing date of this report.
(b) There were no changes in the Registrant's internal control over financial reporting (as defined in
Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of 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. EXHIBITS.
(a)(1) Not applicable.
(a)(2) Certifications pursuant to Rule 30a-2(a) of the Act, and Section 302 of the Sarbanes-Oxley Act of 2002. (Exhibits filed herewith)
(a)(3) Not applicable.
(b) Certifications pursuant to Rule 30a-2(b) of the Act, and Section 906 of the Sarbanes-Oxley Act of 2002. (Exhibit 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.
Registrant Forum Funds II
By | /s/ Jessica Chase | |
Jessica Chase, Principal Executive Officer | ||
Date | August 17, 2017 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the Registrant and in the capacities and on the dates indicated.
By | /s/ Jessica Chase | |
Jessica Chase, Principal Executive Officer | ||
Date | August 17, 2017 |
By | /s/ Karen Shaw | |
Karen Shaw, Principal Financial Officer | ||
Date | August 17, 2017 |