As filed with the Securities and Exchange Commission on July 13, 2018
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: November 30
Date of reporting period: December 1, 2017 – May 31, 2018
ITEM 1. REPORT TO STOCKHOLDERS.
![](https://capedge.com/proxy/N-CSRS/0001435109-18-000415/fp0034457_01.jpg)
CVR DYNAMIC ALLOCATION FUND
Semi-Annual Report
May 31, 2018
(Unaudited)
CVR DYNAMIC ALLOCATION FUND
SCHEDULE OF INVESTMENTS
MAY 31, 2018
Shares | Security Description | Value | ||||
Common Stock - 90.7% | ||||||
Aerospace & Defense - 0.5% | ||||||
256 | Curtiss-Wright Corp. | $ | 32,576 | |||
457 | Esterline Technologies Corp. (a) | 33,338 | ||||
450 | Woodward, Inc. | 34,097 | ||||
100,011 | ||||||
Auto & Truck - 12.0% | ||||||
7,018 | BorgWarner, Inc. | 342,338 | �� | |||
15,595 | Cooper Tire & Rubber Co. | 400,791 | ||||
22,926 | Gentex Corp. | 550,912 | ||||
2,466 | Lear Corp. | 488,268 | ||||
11,504 | LKQ Corp. (a) | 365,482 | ||||
454 | Oshkosh Corp. | 33,029 | ||||
6,522 | PACCAR, Inc. | 405,864 | ||||
2,586,684 | ||||||
Banks - 4.4% | ||||||
1,514 | Associated Banc-Corp. | 41,786 | ||||
696 | Chemical Financial Corp. | 39,060 | ||||
630 | Commerce Bancshares, Inc. | 40,685 | ||||
370 | Cullen/Frost Bankers, Inc. | 42,265 | ||||
2,166 | First Horizon National Corp. | 40,158 | ||||
3,134 | FNB Corp. | 41,525 | ||||
2,333 | Fulton Financial Corp. | 40,711 | ||||
813 | Hancock Whitney Corp. | 40,853 | ||||
1,725 | Home BancShares, Inc. | 39,710 | ||||
984 | International Bancshares Corp. | 42,509 | ||||
782 | PacWest Bancorp | 41,493 | ||||
547 | Prosperity Bancshares, Inc. | 39,619 | ||||
316 | Signature Bank (a) | 40,287 | ||||
1,743 | Sterling Bancorp | 42,791 | ||||
1,622 | TCF Financial Corp. | 42,675 | ||||
1,256 | Trustmark Corp. | 40,406 | ||||
547 | UMB Financial Corp. | 42,146 | ||||
1,656 | Umpqua Holdings Corp. | 38,982 | ||||
1,148 | United Bankshares, Inc. | 41,845 | ||||
3,284 | Valley National Bancorp | 41,740 | ||||
1,238 | Washington Federal, Inc. | 40,173 | ||||
673 | Webster Financial Corp. | 43,139 | ||||
440 | Wintrust Financial Corp. | 40,528 | ||||
945,086 | ||||||
Building - 1.1% | ||||||
943 | AECOM (a) | 31,119 | ||||
436 | EMCOR Group, Inc. | 33,105 | ||||
592 | Granite Construction, Inc. | 33,667 | ||||
1,930 | KBR, Inc. | 35,551 | ||||
1,125 | Lennar Corp., Class A | 58,208 | ||||
22 | Lennar Corp., Class B | 910 | ||||
193 | Watsco, Inc. | 35,516 | ||||
228,076 | ||||||
Chemicals - 1.3% | ||||||
427 | Ashland Global Holdings, Inc. | 33,186 | ||||
554 | Cabot Corp. | 33,379 | ||||
443 | Compass Minerals International, Inc. | 28,972 | ||||
446 | Minerals Technologies, Inc. | 32,558 | ||||
84 | NewMarket Corp. | 32,280 | ||||
1,001 | Olin Corp. | 32,362 | ||||
739 | PolyOne Corp. | 30,979 | ||||
637 | RPM International, Inc. | 31,532 | ||||
1,534 | Valvoline, Inc. | 31,355 | ||||
286,603 | ||||||
Commercial Services - 3.2% | ||||||
2,619 | Convergys Corp. | 61,913 | ||||
477 | Deluxe Corp. | 31,740 | ||||
971 | Leidos Holdings, Inc. | 58,318 | ||||
336 | ManpowerGroup, Inc. | 30,240 |
Shares | Security Description | Value | ||||
Commercial Services - 3.2% (continued) | ||||||
2,613 | Sabre Corp. | $ | 64,045 | |||
19,354 | The Interpublic Group of Cos., Inc. | 437,400 | ||||
683,656 | ||||||
Communications - 2.1% | ||||||
17,573 | Cars.com, Inc. (a) | 451,275 | ||||
Computers - 4.3% | ||||||
2,641 | ACI Worldwide, Inc. (a) | 63,780 | ||||
18,040 | Juniper Networks, Inc. | 480,586 | ||||
1,444 | Manhattan Associates, Inc. (a) | 62,843 | ||||
2,242 | NCR Corp. (a) | 67,484 | ||||
2,268 | NetScout Systems, Inc. (a) | 61,236 | ||||
739 | PTC, Inc. (a) | 63,731 | ||||
721 | Science Applications International Corp. | 63,772 | ||||
1,502 | Teradata Corp. (a) | 59,885 | ||||
923,317 | ||||||
Construction Materials - 0.3% | ||||||
303 | Carlisle Cos., Inc. | 32,539 | ||||
778 | MDU Resources Group, Inc. | 21,629 | ||||
54,168 | ||||||
Consumer Products - 0.3% | ||||||
937 | Plantronics, Inc. | 68,260 | ||||
Consumer Services - 2.2% | ||||||
10,143 | Adtalem Global Education, Inc. (a) | 484,328 | ||||
Containers - 0.8% | ||||||
333 | AptarGroup, Inc. | 30,743 | ||||
720 | Bemis Co., Inc. | 30,456 | ||||
530 | Greif, Inc., Class A | 30,904 | ||||
1,556 | Owens-Illinois, Inc. (a) | 28,942 | ||||
1,111 | Silgan Holdings, Inc. | 30,241 | ||||
602 | Sonoco Products Co. | 30,780 | ||||
182,066 | ||||||
Electronics - 5.7% | ||||||
810 | Arrow Electronics, Inc. (a) | 60,037 | ||||
1,565 | Avnet, Inc. | 59,658 | ||||
315 | Hubbell, Inc. | 33,922 | ||||
6,145 | Itron, Inc. (a) | 350,880 | ||||
17,266 | Jabil, Inc. | 488,282 | ||||
1,198 | Keysight Technologies, Inc. (a) | 70,371 | ||||
4,884 | Knowles Corp. (a) | 70,818 | ||||
455 | Regal Beloit Corp. | 36,150 | ||||
3,417 | Vishay Intertechnology, Inc. | 72,440 | ||||
1,242,558 | ||||||
Financials - 0.4% | ||||||
1,081 | Legg Mason, Inc. | 40,289 | ||||
698 | Stifel Financial Corp. | 41,042 | ||||
81,331 | ||||||
Food - 2.4% | ||||||
13,350 | Hormel Foods Corp. | 479,131 | ||||
462 | Sensient Technologies Corp. | 31,070 | ||||
510,201 | ||||||
Hardware - 0.1% | ||||||
3,377 | Pitney Bowes, Inc. | 30,055 | ||||
Hotels - 0.2% | ||||||
1,307 | ILG, Inc. | 44,752 | ||||
Household - 2.6% | ||||||
972 | HNI Corp. | 36,071 | ||||
1,024 | Tempur Sealy International, Inc. (a) | 47,237 | ||||
388 | The Scotts Miracle-Gro Co. | 33,031 | ||||
1,019 | Tupperware Brands Corp. | 42,961 | ||||
2,775 | Whirlpool Corp. | 401,681 | ||||
560,981 |
See Notes to Financial Statements.
1
CVR DYNAMIC ALLOCATION FUND
SCHEDULE OF INVESTMENTS
MAY 31, 2018
Shares | Security Description | Value | ||||
Insurance - 1.8% | ||||||
69 | Alleghany Corp. (a) | $ | 39,369 | |||
353 | American Financial Group, Inc. | 38,788 | ||||
908 | Aspen Insurance Holdings, Ltd. | 39,407 | ||||
1,529 | Brown & Brown, Inc. | 42,476 | ||||
741 | First American Financial Corp. | 38,591 | ||||
1,900 | Old Republic International Corp. | 39,862 | ||||
258 | Reinsurance Group of America, Inc. | 38,555 | ||||
295 | RenaissanceRe Holdings, Ltd. | 36,217 | ||||
339 | The Hanover Insurance Group, Inc. | 41,100 | ||||
521 | WR Berkley Corp. | 39,841 | ||||
394,206 | ||||||
Internet - 1.7% | ||||||
4,884 | Akamai Technologies, Inc. (a) | 368,156 | ||||
Leisure - 0.4% | ||||||
752 | Brunswick Corp. | 47,827 | ||||
1,172 | Cinemark Holdings, Inc. | 39,579 | ||||
87,406 | ||||||
Machinery - 2.5% | ||||||
6,579 | AGCO Corp. | 418,424 | ||||
386 | Crane Co. | 32,081 | ||||
658 | ITT, Inc. | 33,966 | ||||
866 | Kennametal, Inc. | 32,241 | ||||
386 | Lincoln Electric Holdings, Inc. | 34,586 | ||||
551,298 | ||||||
Media - 5.8% | ||||||
850 | AMC Networks, Inc., Class A (a) | 48,594 | ||||
75 | Graham Holdings Co., Class B | 43,564 | ||||
1,519 | John Wiley & Sons, Inc., Class A | 102,988 | ||||
15,557 | Lions Gate Entertainment Corp., Class A | 360,456 | ||||
877 | Meredith Corp. | 44,157 | ||||
5,415 | Scholastic Corp. | 243,621 | ||||
40,242 | TEGNA, Inc. | 417,309 | ||||
1,260,689 | ||||||
Medical - 7.9% | ||||||
18,046 | Patterson Cos., Inc. | 377,522 | ||||
4,328 | Quest Diagnostics, Inc. | 461,062 | ||||
11,972 | Varex Imaging Corp. (a) | 442,485 | ||||
3,620 | Varian Medical Systems, Inc. (a) | 426,690 | ||||
1,707,759 | ||||||
Metals - 0.8% | ||||||
1,468 | Commercial Metals Co. | 34,704 | ||||
351 | Reliance Steel & Aluminum Co. | 32,843 | ||||
719 | The Timken Co. | 34,009 | ||||
227 | Valmont Industries, Inc. | 33,176 | ||||
696 | Worthington Industries, Inc. | 33,373 | ||||
168,105 | ||||||
Oil & Gas - 4.0% | ||||||
2,242 | Callon Petroleum Co. (a) | 26,545 | ||||
2,065 | CNX Resources Corp. (a) | 33,370 | ||||
251 | Core Laboratories NV | 31,169 | ||||
1,716 | Diamond Offshore Drilling, Inc. (a) | 31,162 | ||||
471 | Energen Corp. (a) | 31,953 | ||||
482 | HollyFrontier Corp. | 37,201 | ||||
937 | Matador Resources Co. (a) | 26,302 | ||||
20,336 | McDermott International, Inc. (a) | 441,901 | ||||
1,025 | Murphy Oil Corp. | 31,519 | ||||
733 | Murphy USA, Inc. (a) | 48,935 | ||||
788 | PBF Energy, Inc. | 37,178 | ||||
2,256 | Rowan Cos. PLC, Class A (a) | 35,194 | ||||
457 | UGI Corp. | 23,065 | ||||
1,381 | World Fuel Services Corp. | 28,835 | ||||
864,329 |
Shares | Security Description | Value | ||||
Paper & Paper Products - 1.2% | ||||||
5,189 | Domtar Corp. | $ | 249,435 | |||
Pollution Control - 2.5% | ||||||
664 | Clean Harbors, Inc. (a) | 35,192 | ||||
10,858 | Donaldson Co., Inc. | 512,498 | ||||
547,690 | ||||||
Real Estate Development & Operations - 0.1% | ||||||
128 | Jones Lang LaSalle, Inc. | 20,961 | ||||
REIT - 2.9% | ||||||
964 | Alexander & Baldwin, Inc. REIT | 20,543 | ||||
562 | American Campus Communities, Inc. REIT | 22,536 | ||||
256 | Camden Property Trust REIT | 22,528 | ||||
1,085 | CoreCivic, Inc. REIT | 23,349 | ||||
799 | Corporate Office Properties Trust REIT | 22,292 | ||||
2,464 | Cousins Properties, Inc. REIT | 23,211 | ||||
406 | CyrusOne, Inc. REIT | 22,484 | ||||
588 | Douglas Emmett, Inc. REIT | 22,632 | ||||
659 | Education Realty Trust, Inc. REIT | 24,080 | ||||
398 | EPR Properties REIT | 24,433 | ||||
796 | Healthcare Realty Trust, Inc. REIT | 21,683 | ||||
496 | Highwoods Properties, Inc. REIT | 23,724 | ||||
883 | Hospitality Properties Trust REIT | 25,563 | ||||
603 | JBG SMITH Properties REIT | 22,245 | ||||
308 | Kilroy Realty Corp. REIT | 23,454 | ||||
745 | LaSalle Hotel Properties REIT | 25,554 | ||||
527 | Liberty Property Trust REIT | 23,299 | ||||
249 | Life Storage, Inc. REIT | 23,037 | ||||
1,281 | Mack-Cali Realty Corp. REIT | 25,325 | ||||
1,727 | Medical Properties Trust, Inc. REIT | 23,435 | ||||
571 | National Retail Properties, Inc. REIT | 23,657 | ||||
836 | Omega Healthcare Investors, Inc. REIT | 25,623 | ||||
588 | Rayonier, Inc. REIT | 22,856 | ||||
1,192 | Sabra Health Care REIT, Inc. | 24,710 | ||||
1,419 | Senior Housing Properties Trust REIT | 25,060 | ||||
399 | Taubman Centers, Inc. REIT | 21,781 | ||||
803 | Weingarten Realty Investors REIT | 23,544 | ||||
632,638 | ||||||
Renewable Energy - 0.2% | ||||||
467 | EnerSys | 37,318 | ||||
Retail - 3.9% | ||||||
1,117 | Aaron's, Inc. | 44,434 | ||||
2,208 | American Eagle Outfitters, Inc. | 49,018 | ||||
968 | AutoNation, Inc. (a) | 44,199 | ||||
2,612 | Bed Bath & Beyond, Inc. | 47,434 | ||||
1,077 | Big Lots, Inc. | 44,060 | ||||
985 | Brinker International, Inc. | 43,074 | ||||
450 | Carter's, Inc. | 49,055 | ||||
275 | Cracker Barrel Old Country Store, Inc. | 43,095 | ||||
1,373 | Dick's Sporting Goods, Inc. | 50,252 | ||||
610 | Dillard's, Inc., Class A | 49,672 | ||||
3,331 | GameStop Corp., Class A | 43,969 | ||||
512 | Jack in the Box, Inc. | 41,303 | ||||
375 | MSC Industrial Direct Co., Inc. | 34,436 | ||||
731 | Papa John's International, Inc. | 37,537 | ||||
2,642 | Sally Beauty Holdings, Inc. (a) | 40,000 | ||||
868 | The Cheesecake Factory, Inc. | 44,971 | ||||
2,416 | The Michaels Cos., Inc. (a) | 44,358 | ||||
1,146 | Urban Outfitters, Inc. (a) | 47,605 | ||||
947 | Williams-Sonoma, Inc. | 52,435 | ||||
850,907 | ||||||
Semiconductor - 0.3% | ||||||
4,079 | Cypress Semiconductor Corp. | 67,140 |
See Notes to Financial Statements.
2
CVR DYNAMIC ALLOCATION FUND
SCHEDULE OF INVESTMENTS
MAY 31, 2018
Shares | Security Description | Value | ||||
Software - 0.3% | ||||||
582 | Take-Two Interactive Software, Inc. (a) | $ | 65,231 | |||
Steel - 0.6% | ||||||
1,160 | Allegheny Technologies, Inc. (a) | 33,083 | ||||
576 | Carpenter Technology Corp. | 34,526 | ||||
690 | Steel Dynamics, Inc. | 34,107 | ||||
944 | United States Steel Corp. | 34,805 | ||||
136,521 | ||||||
Telecommunications - 0.7% | ||||||
2,239 | ARRIS International PLC (a) | 56,602 | ||||
930 | Belden, Inc. | 51,392 | ||||
2,352 | Ciena Corp. (a) | 54,213 | ||||
162,207 | ||||||
Transportation - 7.4% | ||||||
4,924 | CH Robinson Worldwide, Inc. | 428,388 | ||||
3,335 | Copa Holdings SA, Class A | 369,518 | ||||
445 | Genesee & Wyoming, Inc., Class A (a) | 34,759 | ||||
1,664 | JetBlue Airways Corp. (a) | 31,433 | ||||
831 | Knight-Swift Transportation Holdings, Inc. | 33,805 | ||||
317 | Landstar System, Inc. | 35,948 | ||||
1,048 | Trinity Industries, Inc. | 36,145 | ||||
366 | Wabtec Corp. | 35,689 | ||||
15,057 | Werner Enterprises, Inc. | 590,234 | ||||
1,595,919 | ||||||
Utilities - 1.2% | ||||||
621 | Aqua America, Inc. | 21,549 | ||||
253 | Atmos Energy Corp. | 22,570 | ||||
385 | Black Hills Corp. | 22,392 | ||||
671 | Great Plains Energy, Inc. | 22,774 | ||||
631 | Hawaiian Electric Industries, Inc. | 21,662 | ||||
426 | National Fuel Gas Co. | 22,425 | ||||
530 | New Jersey Resources Corp. | 23,532 | ||||
398 | NorthWestern Corp. | 21,683 | ||||
668 | OGE Energy Corp. | 23,393 | ||||
303 | ONE Gas, Inc. | 22,740 | ||||
406 | Westar Energy, Inc. | 23,020 | ||||
256 | WGL Holdings, Inc. | 22,579 | ||||
270,319 | ||||||
Wholesale Electronics - 0.6% | ||||||
587 | SYNNEX Corp. | 62,703 | ||||
779 | Tech Data Corp. (a) | 67,625 | ||||
130,328 | ||||||
Total Common Stock (Cost $19,490,602) | 19,631,970 |
Principal | Security Description | Rate | Maturity | Value | ||||||||
U.S. Government & Agency Obligations - 3.7% | ||||||||||||
U.S. Treasury Securities - 3.7% | ||||||||||||
$ | 810,000 | U.S. Treasury Bill (b) | ||||||||||
(Cost $806,564) | 1.85% | 08/23/18 | 806,538 | |||||||||
Investments, at value - 94.4% (Cost $20,297,166) | $ | 20,438,508 | ||||||||||
Other Assets & Liabilities, Net - 5.6% | 1,203,347 | |||||||||||
Net Assets - 100.0% | $ | 21,641,855 |
See Notes to Financial Statements.
3
CVR DYNAMIC ALLOCATION FUND
NOTES TO SCHEDULE OF INVESTMENTS
MAY 31, 2018
PLC | Public Limited Company |
REIT | Real Estate Investment Trust |
(a) | Non-income producing security. |
(b) | Zero coupon bond. Interest rate presented is yield to maturity. |
At May 31, 2018, the Fund held the following exchange traded futures contracts:
Contracts | Type | Expiration Date | Notional Contract Value | Value | Net Unrealized Appreciation (Depreciation) | ||||||||||||
5 | ASX SPI 200 Index Future | 06/21/18 | $ | 561,579 | $ | 568,700 | $ | 6,934 | |||||||||
9 | Australian-U.S. Dollar Currency Future | 06/18/18 | 679,997 | 681,030 | (1,108 | ) | |||||||||||
1 | Canadian Currency Future | 06/19/18 | 77,754 | 77,215 | (539 | ) | |||||||||||
23 | EURO-BOBL Future | 09/06/18 | 3,547,664 | 3,551,120 | 3,456 | ||||||||||||
7 | EURO-BUND Future | 09/06/18 | 1,325,689 | 1,326,358 | 669 | ||||||||||||
22 | EURO-STOXX 50 Future | 06/15/18 | 900,622 | 876,250 | (20,256 | ) | |||||||||||
5 | FTSE 100 Index Future | 06/15/18 | 515,937 | 509,806 | (1,651 | ) | |||||||||||
5 | Long Gilt Future | 09/26/18 | 812,274 | 820,608 | 14,420 | ||||||||||||
1 | NASDAQ 100 E-mini Future | 06/15/18 | 136,534 | 139,540 | 3,006 | ||||||||||||
1 | Norwegian Krone Future | 06/18/18 | 248,144 | 244,740 | (3,404 | ) | |||||||||||
5 | Russian Ruble Future | 06/15/18 | 202,271 | 199,813 | (2,458 | ) | |||||||||||
1 | Silver Future | 07/27/18 | 83,620 | 82,290 | (1,330 | ) | |||||||||||
3 | Swedish Krona Future | 06/18/18 | 694,032 | 681,900 | (12,132 | ) | |||||||||||
4 | Swiss Franc Currency Future | 06/18/18 | 505,279 | 508,200 | 2,921 | ||||||||||||
(16 | ) | Australian 3-year Bond Future | 06/15/18 | (1,360,075 | ) | (1,345,390 | ) | (4,585 | ) | ||||||||
(12 | ) | Brazilian Real Future | 06/29/18 | (327,496 | ) | (319,860 | ) | 7,636 | |||||||||
(4 | ) | British Pound Currency Future | 06/18/18 | (331,734 | ) | (332,475 | ) | (741 | ) | ||||||||
(5 | ) | Canadian 10-year Bond Future | 09/19/18 | (517,992 | ) | (524,217 | ) | (12,042 | ) | ||||||||
(3 | ) | Chilean Peso Future | 06/29/18 | (237,648 | ) | (238,035 | ) | (387 | ) | ||||||||
(9 | ) | Euro FX Currency Future | 06/18/18 | (1,331,757 | ) | (1,316,306 | ) | 15,450 | |||||||||
(9 | ) | Indian Rupee Currency Future | 06/27/18 | (657,593 | ) | (665,370 | ) | (7,746 | ) | ||||||||
(3 | ) | Japanese Yen Currency Future | 06/18/18 | (338,556 | ) | (345,563 | ) | (6,055 | ) | ||||||||
(11 | ) | Mexican Peso Future | 06/18/18 | (277,305 | ) | (274,890 | ) | 2,415 | |||||||||
(3 | ) | New Zealand Currency Future | 06/18/18 | (206,448 | ) | (210,090 | ) | (3,642 | ) | ||||||||
(2 | ) | S&P 500 E-mini Future | 06/15/18 | (271,742 | ) | (270,550 | ) | 1,192 | |||||||||
(3 | ) | South African Rand Currency Future | 06/18/18 | (118,863 | ) | (117,675 | ) | 1,188 | |||||||||
(7 | ) | U.S. 10-year Note Future | 09/19/18 | (830,382 | ) | (843,063 | ) | (12,680 | ) | ||||||||
(7 | ) | U.S. 2-year Note Future | 09/28/18 | (1,479,605 | ) | (1,485,641 | ) | (6,035 | ) | ||||||||
(12 | ) | U.S. 5-year Note Future | 09/28/18 | (1,353,633 | ) | (1,366,688 | ) | (13,083 | ) | ||||||||
$ | 650,567 | $ | 611,757 | $ | (50,587 | ) |
The following is a summary of the inputs used to value the Fund's investments and other financial instruments and liabilities as of May 31, 2018.
The inputs or methodology used for valuing securities are not necessarily an indication of the risks associated with investing in those securities. For more information on valuation inputs, and their aggregation into the levels used in the table below, please refer to the Security Valuation section in Note 2 of the accompanying Notes to Financial Statements.
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Assets | ||||||||||||||||
Investments at Value | ||||||||||||||||
Common Stock | ||||||||||||||||
Aerospace & Defense | $ | 100,011 | $ | – | $ | – | $ | 100,011 | ||||||||
Auto & Truck | 2,586,684 | – | – | 2,586,684 | ||||||||||||
Banks | 945,086 | – | – | 945,086 | ||||||||||||
Building | 228,076 | – | – | 228,076 | ||||||||||||
Chemicals | 286,603 | – | – | 286,603 | ||||||||||||
Commercial Services | 683,656 | – | – | 683,656 | ||||||||||||
Communications | 451,275 | – | – | 451,275 | ||||||||||||
Computers | 923,317 | – | – | 923,317 | ||||||||||||
Construction Materials | 54,168 | – | – | 54,168 | ||||||||||||
Consumer Products | 68,260 | – | – | 68,260 | ||||||||||||
Consumer Services | 484,328 | – | – | 484,328 | ||||||||||||
Containers | 182,066 | – | – | 182,066 | ||||||||||||
Electronics | 1,242,558 | – | – | 1,242,558 | ||||||||||||
Financials | 81,331 | – | – | 81,331 | ||||||||||||
Food | 510,201 | – | – | 510,201 | ||||||||||||
Hardware | 30,055 | – | – | 30,055 |
See Notes to Financial Statements.
4
CVR DYNAMIC ALLOCATION FUND
NOTES TO SCHEDULE OF INVESTMENTS
MAY 31, 2018
MAY 31, 2018
Level 1 | Level 2 | Level 3 | Total | |||||||||||||
Investments at Value | ||||||||||||||||
Hotels | $ | 44,752 | $ | – | $ | – | $ | 44,752 | ||||||||
Household | 560,981 | – | – | 560,981 | ||||||||||||
Insurance | 394,206 | – | – | 394,206 | ||||||||||||
Internet | 368,156 | – | – | 368,156 | ||||||||||||
Leisure | 87,406 | – | – | 87,406 | ||||||||||||
Machinery | 551,298 | – | – | 551,298 | ||||||||||||
Media | 1,260,689 | – | – | 1,260,689 | ||||||||||||
Medical | 1,707,759 | – | – | 1,707,759 | ||||||||||||
Metals | 168,105 | – | – | 168,105 | ||||||||||||
Oil & Gas | 864,329 | – | – | 864,329 | ||||||||||||
Paper & Paper Products | 249,435 | – | – | 249,435 | ||||||||||||
Pollution Control | 547,690 | – | – | 547,690 | ||||||||||||
Real Estate Development & Operations | 20,961 | – | – | 20,961 | ||||||||||||
REIT | 632,638 | – | – | 632,638 | ||||||||||||
Renewable Energy | 37,318 | – | – | 37,318 | ||||||||||||
Retail | 850,907 | – | – | 850,907 | ||||||||||||
Semiconductor | 67,140 | – | – | 67,140 | ||||||||||||
Software | 65,231 | – | – | 65,231 | ||||||||||||
Steel | 136,521 | – | – | 136,521 | ||||||||||||
Telecommunications | 162,207 | – | – | 162,207 | ||||||||||||
Transportation | 1,595,919 | – | – | 1,595,919 | ||||||||||||
Utilities | 270,319 | – | – | 270,319 | ||||||||||||
Wholesale Electronics | 130,328 | – | – | 130,328 | ||||||||||||
U.S. Government & Agency Obligations | – | 806,538 | – | 806,538 | ||||||||||||
Investments at Value | $ | 19,631,970 | $ | 806,538 | $ | – | $ | 20,438,508 | ||||||||
Other Financial Instruments* | ||||||||||||||||
Futures | 59,287 | – | – | 59,287 | ||||||||||||
Total Assets | $ | 19,691,257 | $ | 806,538 | $ | – | $ | 20,497,795 | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments* | ||||||||||||||||
Futures | (109,874 | ) | – | – | (109,874 | ) | ||||||||||
Total Liabilities | $ | (109,874 | ) | $ | – | $ | – | $ | (109,874 | ) |
* | Other Financial Instruments are derivatives not reflected in the Schedule of Investments, such as futures, which are valued at the unrealized appreciation (depreciation) at period end. |
The Fund utilizes the end of period methodology when determining transfers. There were no transfers among Level 1, Level 2 and Level 3 for the period ended May 31, 2018.
See Notes to Financial Statements.
5
CVR DYNAMIC ALLOCATION FUND
STATEMENT OF ASSETS AND LIABILITIES
MAY 31, 2018
ASSETS | ||||
Investments, at value (Cost $20,297,166) | $ | 20,438,508 | ||
Cash | 1,144,437 | |||
Deposits with broker | 31,222 | |||
Foreign currency (Cost $28,517) | 28,876 | |||
Receivables: | ||||
Dividends and interest | 30,431 | |||
Prepaid expenses | 10,976 | |||
Total Assets | 21,684,450 | |||
LIABILITIES | ||||
Payables: | ||||
Investment securities purchased | 9,958 | |||
Accrued Liabilities: | ||||
Investment adviser fees | 15,075 | |||
Trustees’ fees and expenses | 39 | |||
Fund services fees | 8,060 | |||
Other expenses | 9,463 | |||
Total Liabilities | 42,595 | |||
NET ASSETS | $ | 21,641,855 | ||
COMPONENTS OF NET ASSETS | ||||
Paid-in capital | $ | 20,424,325 | ||
Accumulated net investment loss | (83,161 | ) | ||
Accumulated net realized gain | 1,209,577 | |||
Net unrealized appreciation | 91,114 | |||
NET ASSETS | $ | 21,641,855 | ||
SHARES OF BENEFICIAL INTEREST AT NO PAR VALUE (UNLIMITED SHARES AUTHORIZED) | ||||
Institutional Shares | 1,968,258 | |||
NET ASSET VALUE, OFFERING AND REDEMPTION PRICE PER SHARE | ||||
Institutional Shares (based on net assets of $21,641,855) | $ | 11.00 |
See Notes to Financial Statements.
6
CVR DYNAMIC ALLOCATION FUND
STATEMENT OF OPERATIONS
SIX MONTHS ENDED MAY 31, 2018
SIX MONTHS ENDED MAY 31, 2018
INVESTMENT INCOME | ||||
Dividend income (Net of foreign withholding taxes of $253) | $ | 147,302 | ||
Interest income | 10,015 | |||
Total Investment Income | 157,317 | |||
EXPENSES | ||||
Investment adviser fees | 129,728 | |||
Fund services fees | 67,868 | |||
Custodian fees | 3,786 | |||
Registration fees | 7,141 | |||
Professional fees | 7,158 | |||
Trustees' fees and expenses | 1,435 | |||
Other expenses | 24,274 | |||
Total Expenses | 241,390 | |||
Fees waived and expenses reimbursed | (47,340 | ) | ||
Net Expenses | 194,050 | |||
NET INVESTMENT LOSS | (36,733 | ) | ||
NET REALIZED AND UNREALIZED GAIN (LOSS) | ||||
Net realized gain on: | ||||
Investments | 1,187,732 | |||
Foreign currency transactions | 2,290 | |||
Futures | 123,035 | |||
Net realized gain | 1,313,057 | |||
Net change in unrealized appreciation (depreciation) on: | ||||
Investments | (1,758,403 | ) | ||
Foreign currency translations | (42 | ) | ||
Futures | (94,383 | ) | ||
Net change in unrealized appreciation (depreciation) | (1,852,828 | ) | ||
NET REALIZED AND UNREALIZED LOSS | (539,771 | ) | ||
DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (576,504 | ) |
See Notes to Financial Statements.
7
CVR DYNAMIC ALLOCATION FUND
STATEMENTS OF CHANGES IN NET ASSETS
For the Six Months Ended May 31, 2018 | For the Year Ended November 30, 2017 | |||||||
OPERATIONS | ||||||||
Net investment loss | $ | (36,733 | ) | $ | (63,188 | ) | ||
Net realized gain | 1,313,057 | 2,589,000 | ||||||
Net change in unrealized appreciation (depreciation) | (1,852,828 | ) | (359,201 | ) | ||||
Increase (Decrease) in Net Assets Resulting from Operations | (576,504 | ) | 2,166,611 | |||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||
Net realized gain: | ||||||||
Institutional Shares | (526,089 | ) | (11,174 | ) | ||||
Total Distributions to Shareholders | (526,089 | ) | (11,174 | ) | ||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Sale of shares: | ||||||||
Institutional Shares | 2,225,177 | 2,991,622 | ||||||
Reinvestment of distributions: | ||||||||
Institutional Shares | 526,089 | 11,174 | ||||||
Redemption of shares: | ||||||||
Institutional Shares | (3,736,079 | ) | (790,020 | ) | ||||
Increase (Decrease) in Net Assets from Capital Share Transactions | (984,813 | ) | 2,212,776 | |||||
Increase (Decrease) in Net Assets | (2,087,406 | ) | 4,368,213 | |||||
NET ASSETS | ||||||||
Beginning of Period | 23,729,261 | 19,361,048 | ||||||
End of Period (Including line (a)) | $ | 21,641,855 | $ | 23,729,261 | ||||
SHARE TRANSACTIONS | ||||||||
Sale of shares: | ||||||||
Institutional Shares | 197,935 | 272,815 | ||||||
Reinvestment of distributions: | ||||||||
Institutional Shares | 46,722 | 1,054 | ||||||
Redemption of shares: | ||||||||
Institutional Shares | (332,672 | ) | (72,101 | ) | ||||
Increase (Decrease) in Shares | (88,015 | ) | 201,768 | |||||
(a) Accumulated net investment loss | $ | (83,161 | ) | $ | (46,428 | ) |
See Notes to Financial Statements.
8
CVR DYNAMIC ALLOCATION FUND
FINANCIAL HIGHLIGHTS
For the Six Months Ended May 31, 2018 | For the Years Ended November 30, | December 30, 2013 (a)Through November 30, 2014 | ||||||||||||||||||
2017 | 2016 | 2015 | ||||||||||||||||||
INSTITUTIONAL SHARES | ||||||||||||||||||||
NET ASSET VALUE, Beginning of Period | $ | 11.54 | $ | 10.44 | $ | 10.07 | $ | 10.68 | $ | 10.00 | ||||||||||
INVESTMENT OPERATIONS | ||||||||||||||||||||
Net investment loss (b) | (0.02 | ) | (0.03 | ) | (0.02 | ) | (0.04 | ) | (0.07 | ) | ||||||||||
Net realized and unrealized gain (loss) | (0.26 | ) | 1.14 | 0.39 | (0.50 | ) | 0.68 | |||||||||||||
Net income from contribution by affiliate | – | – | – | – | 0.07 | |||||||||||||||
Total from Investment Operations | (0.28 | ) | 1.11 | 0.37 | (0.54 | ) | 0.68 | |||||||||||||
DISTRIBUTIONS TO SHAREHOLDERS FROM | ||||||||||||||||||||
Net realized gain | (0.26 | ) | (0.01 | ) | 0.00(c | ) | (0.07 | ) | – | |||||||||||
Total Distributions to Shareholders | (0.26 | ) | (0.01 | ) | 0.00 | (0.07 | ) | – | ||||||||||||
NET ASSET VALUE, End of Period | $ | 11.00 | $ | 11.54 | $ | 10.44 | $ | 10.07 | $ | 10.68 | ||||||||||
TOTAL RETURN | (2.51 | )%(d) | 10.60 | % | 3.71 | % | (5.11 | )% | 6.80 | %(d)(e) | ||||||||||
RATIOS/SUPPLEMENTARY DATA | ||||||||||||||||||||
Net Assets at End of Period (000s omitted) | $ | 21,642 | $ | 23,729 | $ | 19,361 | $ | 22,713 | $ | 19,492 | ||||||||||
Ratios to Average Net Assets: (f) | ||||||||||||||||||||
Net investment loss | (0.29 | )%(g) | (0.29 | )% | (0.21 | )% | (0.41 | )% | (0.70 | )%(g) | ||||||||||
Net expenses (h) | 1.65 | %(g) | 1.65 | % | 1.63 | % | 1.52 | % | 1.47 | %(g) | ||||||||||
Gross expenses (i) | 2.05 | %(g) | 2.24 | % | 2.33 | % | 2.26 | % | 3.14 | %(g) | ||||||||||
PORTFOLIO TURNOVER RATE | 64 | %(d) | 93 | % | 108 | % | 129 | % | 157 | %(d) |
(a) | Commencement of operations. |
(b) | Calculated based on average shares outstanding during each period. |
(c) | Less than $0.01 per share. |
(d) | Not annualized. |
(e) | Calculation includes affiliate reimbursements and gains incurred on the contribution of capital. Excluding the effect of the net reimbursements from the Fund’s ending net asset value per share, total return for the period ending November 30, 2014 would have been 6.10%. |
(f) | The ratios of expenses and net investment loss to average net assets do not reflect the Fund’s proportionate share of income and expenses of underlying investment companies in which the Fund invests. |
(g) | Annualized. |
(h) | Net expenses include reimbursement of indirect fees by the Adviser, such as acquired fund fees and expenses. |
(i) | Reflects the expense ratio excluding any waivers and/or reimbursements. |
See Notes to Financial Statements.
9
CVR DYNAMIC ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2018
MAY 31, 2018
Note 1. Organization
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 December 30, 2013. The Fund currently offers two classes of shares: Institutional Shares and Investor Shares. As of May 31, 2018, Investor Shares had not commenced operations. The Fund seeks long-term capital appreciation while preserving capital in declining markets.
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. Futures contracts are valued at the day’s settlement price on the exchange where the contract is traded. Forward currency contracts are generally valued based on interpolation of forward curve data points obtained from major banking institutions that deal in foreign currencies and currency dealers. Shares of non-exchange traded open-end mutual funds are valued at net asset value (“NAV”). Short-term investments that mature in sixty 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 Adviser, 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 Adviser 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. Adviser 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 - Prices determined using significant other observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). Short-term securities with maturities of sixty days or less are valued at amortized cost, which approximates market value, and are categorized as Level 2 in the hierarchy. Municipal securities, long-term U.S. government obligations and corporate debt securities are valued in accordance with the evaluated price supplied by the pricing service and generally categorized as Level 2 in the hierarchy. Other securities that are categorized as Level 2 in the hierarchy include, but are not limited to, warrants that do not trade on an exchange, securities valued at the mean between the last reported bid and ask quotation and international equity
10
CVR DYNAMIC ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2018
MAY 31, 2018
securities valued by an independent third party with adjustments for changes in value between the time of the securities respective local market closes and the close of the U.S. market.
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 May 31, 2018, for the Fund’s investments is included in 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 recorded on the ex-dividend date. Foreign dividend income 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.
Foreign Currency Translations – Foreign currency amounts are translated into U.S. dollars as follows: (1) assets and liabilities at the rate of exchange at the end of the respective period; and (2) purchases and sales of securities and income and expenses at the rate of exchange prevailing on the dates of such transactions. The portion of the results of operations arising from changes in the exchange rates and the portion due to fluctuations arising from changes in the market prices of securities are not isolated. Such fluctuations are included with the net realized and unrealized gain or loss on investments.
Foreign Currency Transactions – The Fund may enter into transactions to purchase or sell foreign currency contracts and options on foreign currency. Forward currency contracts are agreements to exchange one currency for another at a future date and at a specified price. A fund may use forward currency contracts to facilitate transactions in foreign securities, to manage a fund’s foreign currency exposure and to protect the U.S. dollar value of its underlying portfolio securities against the effect of possible adverse movements in foreign exchange rates. These contracts are intrinsically valued daily based on forward rates, and a fund’s net equity therein, representing unrealized gain or loss on the contracts as measured by the difference between the forward foreign exchange rates at the dates of entry into the contracts and the forward rates at the reporting date, is recorded as a component of NAV. These instruments involve market risk, credit risk, or both kinds of risks, in excess of the amount recognized in the Statement of Assets and Liabilities. Risks arise from the possible inability of counterparties to meet the terms of their contracts and from movement in currency and securities values and interest rates. Due to the risks associated with these transactions, a fund could incur losses up to the entire contract amount, which may exceed the net unrealized value included in its NAV. As of May 31, 2018, the Fund did not hold any forward currency contracts.
Futures Contracts – The Fund may purchase futures contracts to gain exposure to market changes, which may be more efficient or cost effective than actually buying the securities. A futures contract is an agreement between parties to buy or sell a security at a set price on a future date. Upon entering into such a contract, a fund is required to pledge to the broker an amount of cash, U.S. Government obligations or other high-quality debt securities equal to the minimum “initial margin” requirements of the exchange on which the futures contract is traded. Pursuant to the contract, the fund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in the value of the contract. Such receipts or payments are known as “variation margin” and are recorded by the fund as unrealized gains or losses. When the contract is closed, the fund records a realized gain or loss equal to the difference between the value of the contract at the time it was opened and value at the time it was closed. Risks of entering into futures contracts include the possibility that there may be an illiquid market and that a change in the value of the contract may not correlate with changes in the value of the underlying securities.
Notional amounts of each individual futures contract outstanding as of May 31, 2018, for the Fund, are disclosed in the Notes to Schedule of Investments.
Distributions to Shareholders – The Fund declares any dividends from net investment income and pays them annually. Any net capital gains and net foreign currency gains realized by the Fund are distributed 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
11
CVR DYNAMIC ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2018
MAY 31, 2018
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 May 31, 2018, there are no uncertain tax positions that would require financial statement recognition, de-recognition or disclosure.
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.
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. The Fund has determined that none of these arrangements requires disclosure on the Fund’s balance sheet.
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 May 31, 2018, the Fund had $894,437 at MUFG Union Bank, N.A. that exceeded the FDIC insurance limit.
Note 4. Fees and Expenses
Investment Adviser – CVR Portfolio Funds LLC (the “Adviser”) is the investment adviser to the Fund. Pursuant to an investment advisory agreement, the Adviser receives an advisory fee, payable monthly, from the Fund at an annual rate of 1.10% of the Fund’s average daily net assets.
The Adviser has employed a sub-adviser to manage a portion of the Fund’s assets. The sub-advisory fee, calculated as a percentage of the Fund’s average daily net assets managed by the sub-adviser, is paid by the Adviser.
Distribution – Foreside Fund Services, LLC serves as the Fund’s distributor (the “Distributor”). The Fund has adopted a Distribution Plan (the “Plan”) in accordance with Rule 12b-1 of the Act. Under the Plan, the Fund may pay the Distributor and/or any other entity as authorized by the Board a fee of up to 0.25% of the Fund’s average daily net assets of Investor Shares for providing distribution and/or shareholder services to the Fund. The Distributor is not affiliated with the Adviser or Atlantic Fund Administration, LLC (d/b/a Atlantic Fund Services) (“Atlantic”) or their affiliates.
Other Service Providers – Atlantic provides fund accounting, fund administration, compliance and transfer agency services to the Fund. The fees related to these services are included in Fund services fees within the Statement of Operations. Atlantic also provides certain shareholder report production and EDGAR conversion and filing services. Pursuant to an Atlantic services agreement, the Fund pays Atlantic customary fees for its services. Atlantic provides a Principal Executive Officer, a Principal Financial Officer, a Chief Compliance Officer and an Anti-Money Laundering Officer to the Fund, as well as certain additional compliance support functions.
Trustees and Officers – The Trust pays each Independent Trustee an annual fee of $16,000 ($21,000 for the Chairman) for service to the Trust. The Independent Trustees and Chairman may receive additional fees for special Board meetings. The Independent Trustees are also reimbursed for all reasonable out-of-pocket expenses incurred in connection with their duties as Trustees, including travel and related expenses incurred in attending Board meetings. The amount of Independent Trustees’ fees attributable to the Fund is disclosed in the Statement of Operations. Certain officers of the Trust are also officers or employees of the above named service providers, and during their terms of office received no compensation from the Fund.
Note 5. Expenses Reimbursed and Fees Waived
The Adviser has contractually agreed to waive its fee and/or reimburse Fund expenses to limit Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement (excluding all taxes, interest, portfolio transaction expenses, proxy expenses, and extraordinary expenses) to 1.65% of Institutional Shares, through at least April 1, 2019. Other Fund service providers have voluntarily agreed to waive and reimburse a portion of their fees. These voluntary fee waivers and reimbursements may be reduced or eliminated at any time. For the period ended May 31, 2018, fees waived and expenses reimbursed were as follows:
12
CVR DYNAMIC ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2018
MAY 31, 2018
Investment Adviser Fees Waived | Acquired Fund Fees and Expenses Reimbursed by Adviser | Other Waivers | Total Fees Waived and Expenses Reimbursed | ||||||||||
$ | 29,176 | $ | 273 | $ | 17,891 | $ | 47,340 |
The Adviser may be reimbursed by the Fund for fees waived and expenses reimbursed by the Adviser pursuant to the Expense Cap if such payment is approved by the Board, made within three years of the fee waiver or expense reimbursement, and does not cause the Total Annual Fund Operating Expenses After Fee Waiver and/or Expense Reimbursement to exceed the lesser of (i) the then-current expense cap, or (ii) the expense cap in place at the time the fees/expenses were waived/reimbursed. As of May 31, 2018, $277,201 is subject to recapture by the Adviser. Other Waivers are not eligible for recoupment.
Note 6. Security Transactions
The cost of purchases and proceeds from sales of investment securities (including maturities), other than short-term investments, during the period ended May 31, 2018, were $12,662,451 and $14,201,145, respectively.
Note 7. Summary of Derivative Activity
The volume of open derivative positions may vary on a daily basis as the Fund transacts derivative contracts in order to achieve the exposure desired by the Adviser. The notional value of activity for the period ended May 31, 2018, for any derivative type that was held during the year is as follows:
Futures Contracts | $ | 19,500,308 |
The Fund’s use of derivatives during the period ended May 31, 2018, was limited to forward currency contracts and futures contracts.
Realized and unrealized gains and losses on derivatives contracts during the period ended May 31, 2018, by the Fund are recorded in the following locations on the Statement of Operations:
Location: | Commodity Contracts | Currency Contracts | Equity Contracts | Interest Contracts | Total | |||||||||||||||
Net realized gain (loss) on: | ||||||||||||||||||||
Futures | $ | (5,721 | ) | $ | 48,879 | $ | 52,686 | $ | 27,191 | $ | 123,035 | |||||||||
Total net realized gain (loss) | $ | (5,721 | ) | $ | 48,879 | $ | 52,686 | $ | 27,191 | $ | 123,035 | |||||||||
Net change in unrealized appreciation (depreciation) on: | ||||||||||||||||||||
Futures | $ | (5,523 | ) | $ | (21,044 | ) | $ | (34,258 | ) | $ | (33,558 | ) | $ | (94,383 | ) | |||||
Total net change in unrealized appreciation (depreciation) | $ | (5,523 | ) | $ | (21,044 | ) | $ | (34,258 | ) | $ | (33,558 | ) | $ | (94,383 | ) |
Note 8. Federal Income Tax
As of May 31, 2018, cost of investments is substantially the same as for financial statement purposes and the components of net unrealized appreciation consists of:
Gross Unrealized Appreciation | $ | 1,377,066 | ||
Gross Unrealized Depreciation | (1,235,724 | ) | ||
Net Unrealized Appreciation | $ | 141,342 |
As of November 30, 2017, distributable earnings (accumulated loss) on a tax basis were as follows:
Undistributed Long-Term Gain | $ | 461,758 | ||
Capital and Other Losses | (49,157 | ) | ||
Unrealized Appreciation | 1,907,522 | |||
Total | $ | 2,320,123 |
The difference between components of distributable earnings on a tax basis and the amounts reflected in the Statement of Assets and Liabilities are primarily due to wash sales, equity return of capital, and MTM on 1256 contracts.
13
CVR DYNAMIC ALLOCATION FUND
NOTES TO FINANCIAL STATEMENTS
MAY 31, 2018
MAY 31, 2018
Note 9. Subsequent Events
Subsequent events occurring after the date of this report through the date these financial statements were issued have been evaluated for potential impact, and the Fund has had no such events.
14
CVR DYNAMIC ALLOCATION FUND
ADDITIONAL INFORMATION
MAY 31, 2018
Investment Advisory Agreement Approval
At the December 7, 2017 Board meeting (the “December meeting”), the Board, including the Independent Trustees, met in person and considered the approval of the continuance of the investment advisory agreement between the Adviser and the Trust pertaining to the Fund (the “Advisory Agreement”) and the subadvisory agreement between the Adviser and ROW Asset Management (the “Subadviser”) (the “Subadvisory Agreement”). In preparation for the December meeting, the Board was presented with a range of information to assist in its deliberations. The Board requested and reviewed written responses from the Adviser and Subadviser to a letter circulated on the Board's behalf concerning the personnel, operations, financial condition, performance, compensation, and services provided to the Fund by the Adviser and Subadviser. During its deliberations, the Board received an oral presentation from the Adviser and discussed the materials with the Adviser, independent legal counsel to the Independent Trustees (“Independent Legal Counsel”), and, as necessary, with the Trust's administrator, Atlantic Fund Services. The Independent Trustees also met in executive session with Independent Legal Counsel while deliberating.
At the December meeting, the Board reviewed, among other matters, the topics discussed below.
Nature, Extent and Quality of Services
Based on written materials received and the presentation from personnel of the Adviser regarding the operations of the Adviser and Subadviser, the Board considered the quality of services provided by the Adviser under the Advisory Agreement and by the Subadviser under the Subadvisory Agreement. In this regard, the Board considered information regarding the experience, qualifications and professional background of the portfolio managers and other personnel at the Adviser and Subadviser with principal responsibility for the Fund’s investments; the investment philosophy and decision-making process of the Adviser’s and Subadviser’s investment professionals; the quality of the Adviser’s and Subadviser’s services with respect to regulatory compliance; and the Adviser’s and Subadviser’s representations that each firm is in a stable financial condition to allow each firm to provide advisory services to the Fund. The Board also considered the Adviser’s analysis of and recommendation to approve the continuance of the agreement with the Subadviser. The Board concluded that, overall, it was satisfied with the nature, extent and quality of services provided to the Fund by the Adviser under the Advisory Agreement and by the Subadviser under the Subadvisory Agreement.
Performance
In connection with a presentation by the Adviser regarding its approach to managing the Fund, including the investment objective and strategy of the Fund and the Adviser’s discussion of the performance achieved by the Subadviser, the Board reviewed the performance of the Fund compared to its primary benchmark. The Board observed that the Fund outperformed its primary benchmark index, the HFRX Equity Hedge Index, for the one- and three-year periods ended September 30, 2017.
The Board also considered the Fund’s performance relative to an independent peer group of funds identified by Broadridge Financial Solutions, Inc. (“Broadridge”) believed to have characteristics similar to those of the Fund. The Board observed that the Fund outperformed the median of its Broadridge peer group for the one- and three-year periods ended September 30, 2017. The Board noted the Adviser’s representation that most of the Broadridge peers have lower exposure to equity securities in comparison with the Fund. At the request of the Adviser, the Board also reviewed the Fund’s performance compared to a group of funds identified by the Adviser and believed by the Adviser to represent a more meaningful comparison (“Comparable Funds”). The Board observed that, the Fund outperformed each of the Comparable Funds for the year ended September 30, 2017.
The Board also evaluated the Adviser's assessment of the Subadviser’s performance, noting that the Adviser had expressed satisfaction with the performance of the Subadviser and that the Adviser had recommended the continuance of the Subadvisory Agreement. The Board also considered the Adviser’s explanation that, standing alone, the Subadviser should not necessarily be expected to perform in line with broader market indices or benchmarks. In this regard, the Board noted that the Adviser emphasized its responsibility for allocating the Fund’s assets to the Subadviser in a manner intended to best achieve the Fund’s investment objective. In view of the respective roles of the Adviser and Subadviser, the Board determined that it was appropriate to evaluate the individual performance achieved by the Subadviser as it contributed to the performance of the Fund as a whole. Based on the foregoing and other applicable considerations, the Board concluded that the Fund and its shareholders could benefit from the Adviser’s management under the Advisory Agreement and the Subadviser’s management under the Subadvisory Agreement.
15
CVR DYNAMIC ALLOCATION FUND
ADDITIONAL INFORMATION
MAY 31, 2018
Compensation
The Board evaluated the Adviser’s compensation for providing advisory services to the Fund and analyzed comparative information on actual advisory fee rates and actual total expenses of the Fund’s Broadridge peers. The Board noted that both the Adviser’s actual advisory fee and actual total expenses were less than the median of the Broadridge peers. The Board observed that the advisory fee and total expense ratio for the Fund were each higher than the average for the Comparable Funds. The Board recognized that the Adviser pays the Subadviser out of its advisory fee. In this regard, the Board observed that the Fund does not directly pay any subadvisory fees. The Board also recognized that the Adviser had contractually agreed and continued to contractually agree to waive fees or reimburse expenses to the extent necessary to keep the total expenses of the Fund at lower levels. Based on the foregoing and other applicable considerations, the Board concluded that the advisory fees paid to the Adviser by the Fund appeared to be reasonable in light of the nature, extent and quality of services provided by the Adviser.
Cost of Services and Profitability
The Board considered information provided by the Adviser regarding the costs of services and its profitability with respect to the Fund. In this regard, the Board considered the Adviser’s resources devoted to the Fund, as well as the Adviser’s discussion of the aggregate costs and profitability of its mutual fund activity, including the percentage and amount of the Adviser’s fee that the Adviser retained and the percentage and amount of the Adviser’s fee that was paid to the Subadviser. Based on these and other applicable considerations, the Board concluded that the Adviser’s profits attributable to management of the Fund did not appear unreasonably high in light of the nature, extent and quality of the services provided by the Adviser.
The Board did not consider information regarding the costs of services provided or profits realized by the Subadviser from its relationship with the Fund, noting instead the arms-length nature of the relationship between the Adviser and the Subadviser with respect to the negotiation of the subadvisory fee rate on behalf of the Fund and that the Adviser, and not the Fund, was responsible for paying the subadvisory fee due under the Subadvisory Agreement. Under these circumstances, the Board concluded that the Subadviser’s profitability was not a material factor in determining whether to approve the continuance of the Subadvisory Agreement.
Economies of Scale
The Board considered whether the Fund would benefit from any economies of scale. In this respect, the Board noted the Adviser’s representation that the Fund could benefit from economies of scale at higher asset levels, but that the Adviser had not identified economies of scale at current asset levels that would warrant proposing breakpoints in fees at this time. Based on the foregoing information and other applicable considerations, the Board concluded that economies of scale were not a factor in approving the continuation of the Advisory Agreement.
Other Benefits
The Board noted the Adviser’s representation that, aside from its contractual advisory fees, it does not benefit in a material way from its relationship with the Fund. Based on the foregoing representation, the Board concluded that other benefits received by the Adviser from its relationship with the Fund were not a factor in approving the continuation of the Advisory Agreement.
Conclusion
The Board did not identify any single factor as being of paramount importance, and different Trustees may have given different weight to different factors. In addition, various materials provided to and discussed with the Board throughout the year, including with respect to performance and compliance, also informed the Board’s decision. In light of the fact that the Fund is a multi-manager Fund, however, for which the Adviser identifies a Subadviser whose strategy it seeks to combine to achieve the Fund’s investment objective, when considering the renewal of the Subadvisory Agreement, the Board gave significant weight to the Adviser’s recommendation that the Subadvisory Agreement be renewed and to the Adviser’s representation that the reappointment of the Subadviser would positively contribute to the Adviser’s successful execution of the Fund’s overall strategy. The Board reviewed a memorandum from Independent Legal Counsel discussing the legal standards applicable to its consideration of the Advisory Agreement and Subadvisory Agreement. Based on its review, including consideration of each of the factors referenced above, the Board, in the exercise of its reasonable business judgment, approved the continuation of the Advisory Agreement and Subadvisory Agreement.
16
CVR DYNAMIC ALLOCATION FUND
ADDITIONAL INFORMATION
MAY 31, 2018
Proxy Voting Information
A description of the policies and procedures that the Fund uses to determine how to vote proxies relating to securities held in the Fund’s portfolio is available, without charge and upon request, by calling (855) 328-7691 and on the U.S. Securities and Exchange Commission’s (“SEC”) website at www.sec.gov. The Fund’s proxy voting record for the most recent twelve-month period ended June 30 is available, without charge and upon request, by calling (855) 328-7691 and on the SEC’s website at www.sec.gov.
Availability of Quarterly Portfolio Schedules
The Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-Q. These filings are available, without charge and upon request on the SEC’s website at www.sec.gov or may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling (800) SEC-0330.
Shareholder Expense Example
As a shareholder of the Fund, you incur ongoing costs, including management fees, distribution and/or service (12b-1) fees (for Investor Shares only), and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from December 1, 2017 through May 31, 2018.
Actual Expenses – The first line of the table below provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during the period.
Hypothetical Example for Comparison Purposes – The second line of the table below provides information about hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds.
Beginning Account Value December 1, 2017 | Ending Account Value May 31, 2018 | Expenses Paid During Period* | Annualized Expense Ratio* | ||||
Institutional Shares | |||||||
Actual | $1,000.00 | $974.89 | $8.12 | 1.65% | |||
Hypothetical (5% return before expenses) | $1,000.00 | $1,016.70 | $8.30 | 1.65% |
* | Expenses are equal to the Fund’s annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half-year (182) divided by 365 to reflect the half-year period. |
17
CVR DYNAMIC ALLOCATION FUND
FOR MORE INFORMATION:
P.O. Box 588
Portland, ME 04112
(855) 328-7691 (toll free)
(855) 328-7691 (toll free)
INVESTMENT ADVISER
CVR Portfolio Funds LLC
One Bromfield Street, Suite 5100
Boston, MA 02108
Boston, MA 02108
TRANSFER AGENT
Atlantic Fund Services
P.O. Box 588
P.O. Box 588
Portland, ME 04112
www.atlanticfundservices.com
DISTRIBUTOR
Foreside Fund Services, LLC
Three Canal Plaza, Suite 100
Portland, Maine 04101
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.
219-SAR-0518
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. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSE-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 13. 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 | June 28, 2018 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following 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 | June 28, 2018 |
By | /s/ Karen Shaw | |
Karen Shaw, Principal Financial Officer | ||
Date | June 28, 2018 |