As filed with the Securities and Exchange Commission on May 28, 2021
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: September 30
Date of reporting period: October 1, 2020 – March 31, 2021
ITEM 1. REPORT TO STOCKHOLDERS.
Semi-Annual
Report
March
31,
2021
(Unaudited)
Advised
by:
SKBA
Capital
Management,
LLC
www.baywoodfunds.com
BAYWOOD
VALUE
PLUS
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
March
31,
2021
1
Dear
Shareholders,
We
are
pleased
to
report
our
economic
and
financial
market
perspectives
and
the
investment
activities
for
the
Baywood
Value
Plus
Fund
(the
“Fund”)
for
the
six
months
ended
March
31,
2021.
The
Fund
is
a
large
capitalization
value-oriented
portfolio
of
stock
holdings
selected
from
a
universe
of
dividend-paying
companies
traded
on
U.S.
exchanges.
SKBA
attempts
to
identify
candidates
for
purchase
that
appear
to
have
low
expectations
and
pessimism
already
reflected
in
their
current
valuations
by
using
its
Relative
Dividend
Yield
(RDY)
discipline,
which
compares
each
stock’s
yield
history
to
SKBA’s
own
yield
index
of
500
large
dividend-paying
companies.
A
high
RDY
compared
to
a
stock’s
own
history
that
captures
such
pessimism
provides
a
useful
starting
point
for
research
into
each
stock’s
underlying
fundamentals.
"I
am
optimistic
in
the
long
run.
A
great
man
once
said
the
true
symbol
of
the
United
States
is
not
the
bald
eagle,
it's
the
pendulum,
and
when
the
pendulum
swings
too
far
in
one
direction,
it
will
go
back."
Ruth
Bader
Ginsburg
-
Speaking
to
the
BBC
in
2017
Former
Supreme
Court
justice
Ruth
Bader
Ginsburg
was
referring
to
race
inequalities
in
making
her
pendulum
statement
yet
it
is
just
as
relevant
in
the
context
of
stock
markets.
During
market
extremes,
the
pendulum
analogy
is
also
applicable
with
respect
to
some
of
the
market’s
leading
constituents.
By
those,
we
mean
the
largest
market
capitalizations.
The
companies
themselves
are
not
as
important
as
their
capitalizations
because
size
has,
to
a
great
extent,
been
the
driver
behind
their
popularity.
Fund
flows
have
mattered
more
so
than
fundamentals.
That
phenomenon
appears
to
have
changed
and
while
stock
prices
do
not
progress
in
a
linear
fashion,
once
trends
are
broken,
they
tend
not
to
re-establish
themselves
in
short
order.
During
market
excesses,
the
current
environment
included,
indexation
tends
to
drive
investment
patterns.
We
have
written
about
this
pattern
in
prior
updates.
Without
going
into
too
much
detail,
the
majority
of
indices
are
market-capitalization-weighted
and,
when
they
are
in
favor,
the
bulk
of
assets
flow
to
the
largest
companies,
perpetuating
the
“virtuous”
cycle
of
the
large
getting
ever
larger.
This
is
what
US
markets
have
been
experiencing
for
nearly
a
decade.
Not
only
have
domestic
assets
been
funneled
into
US
indexes,
but
many
allocations
outside
of
the
US
have
also
favored
US
markets
for
fear
of
missing
out.
Additionally,
not
only
have
the
largest
companies
benefitted
from
this
tailwind,
but
they
have
been
advantaged
to
a
level
rarely,
if
ever,
experienced
before.
This
phenomenon
is
in
play
whether
one
invests
in
a
broad
market,
a
growth,
or
a
value
index.
We
have
also
previously
discussed
the
substantial
disappearance
of
historical
differences
between
growth
indexes
and
broad
market
indexes;
they
should
not
look
identical,
but
in
environments
like
the
current
one,
there
are
remarkably
few
differences
between
the
two.
As
they
are
currently
constructed,
for
most
intents
and
purposes,
they
should
be
classified
the
same.
Even
among
value-style
indexes,
most
of
the
assets
invested
in
that
category
also
go
to
the
largest
companies.
One
cannot
therefore
simply
state
that
one
is
invested
in
Value.
There
is
Passive
Value—the
majority
of
dollars
in
the
asset
class—and
then
there
is
Active
Value.
Value
Plus
is
not
Passive
Value—it
is
an
actively
managed
value
fund.
This
distinction
is
of
utmost
importance
because
today,
we
find
ourselves
among
a
very
small
and
shrinking
minority.
Paradoxically,
as
a
result
of
the
massive
flows
towards
fewer
and
fewer
companies
that
dominate
the
indexes,
the
universe
of
securities
attractive
to
us
has
expanded
significantly.
This
remaining
subset
which
has
become
generally
ignored
and
left
behind,
at
a
minimum,
warrants
our
attention
from
a
relative
valuation
standpoint.
We
have
therefore
been
in,
despite
the
perception,
one
of
the
best
environments
to
be
a
true
Value
investor—assuming
one
is
an
Active
investor.
As
we
enter
the
second
year
of
the
COVID-19
pandemic,
the
tone
has
gone
from
maximum
pessimism
to
euphoria
as
GDP
is
expected
to
post
a
record
increase
for
2021.
Treasury
Secretary
Yellen
suggested
that
by
2022
employment
could
reach
pre-pandemic
levels.
Considering
that
employment
hit
record
levels
before
the
downturn
just
over
a
year
ago,
her
suggestion
would
be
no
small
feat.
Nevertheless,
with
record
economic
growth
comes
a
period
of
record
profit
growth.
Subsequently,
cost
increases
tend
to
eat
away
at
revenue
benefits,
ultimately
leading
to
inflationary
forces—higher
prices
and
lower
margins.
Or
so
that
is
a
scenario
which
needs
to
be
considered
more
so
than
it
is
currently,
especially
given
the
supply
chain
disruptions
we’ve
already
witnessed.
This
possibility
continues
to
be
downplayed
and
therefore
not
discounted
in
valuations.
Change
is
afoot,
however.
BAYWOOD
VALUE
PLUS
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
March
31,
2021
2
As
investors,
we
think
about
outcomes
probabilistically,
considering
the
most
likely
scenario
as
well
as
those
less
likely,
albeit
not
impossible.
Thinking
about
“what
could
be”
helps
us
temper
our
enthusiasm
during
times
of
euphoria
and
helps
us
be
more
pro-active
in
times
of
distress.
Spring
of
2020
was
a
textbook
example
of
the
latter.
The
Fund’s
turnover
increased
in
March
and
April
of
last
year
due
to
the
rapidly
increasing
opportunity
set
with
which
we
were
presented.
The
ability
to
purchase
good
companies
at
bargain
basement
prices
presented
itself
over
and
over
again.
We
did
not
have
to
reach
for
companies
that
might
have
declared
bankruptcy,
like
airlines,
movie
chains,
or
certain
retailers
with
compromised
businesses.
We
purchased
companies
like
Genuine
Parts,
Parker
Hannifin,
Atlas
Corp;
companies
that
lead
their
respective
industries
and
may
even
thrive
in
such
an
environment.
After
having
been
opportunistic
for
most
of
last
year,
we
hope
to
see
these
companies
continue
to
increase
in
value,
if
not
on
an
absolute
basis,
then
at
least
on
a
relative
basis.
Last
winter
was
highly
unusual
in
that
expectations
of
“Value”
were
not
always
met.
Yet
no
two
crises
are
ever
alike.
Consecutive
crises
rarely
mimic
themselves
in
their
characteristics
and
early
2020
was
unique
in
many
ways.
As
markets
declined,
one
might
assume
that
“value”
would
outperform,
but
no
investor
alive
today
has
ever
experienced
a
pandemic-driven
bear
market.
A
pandemic
of
this
magnitude
was
new
for
all
of
us—there
was
no
precedent.
Assigning
similar
expectations
despite
a
lack
of
precedent
made
little
sense.
What
did
not
change
over
the
last
year
was
our
opportunity
set;
in
fact,
it
increased
markedly.
It
increased
markedly
at
the
end
of
2018
as
“value”
fell
out
of
favor,
and
we
purchased
aggressively.
It
did
so
again
last
year,
and,
once
again,
we
purchased
aggressively.
This
is
where
the
pendulum
comes
in.
We
purchase
companies
when
they
present
a
combination
of
fundamental
and
valuation
attraction.
The
rest
tends
to
take
care
of
itself.
It
takes
care
of
itself
as
investors
recognize
that
such
companies
are
similar
to
or
perhaps
even
more
attractive
than
prior
darlings
which
they
bid
up
to
unreasonable
levels.
We
are
not
responsible
for
the
timing
of
this
latter
component
of
the
equation
but
we
tend
to
benefit
from
it
nonetheless.
The
common
refrain
over
the
last
few
years
has
been
that
“Value
underperformed
Growth!
Therefore,
this
must
be
the
end
of
Value
investing.
And
it
must
also
be
the
end
of
Active
management.”
Yet
through
it
all,
we
stated
how
this
was
among
the
best
environments
we
had
seen
in
years,
and
it
was
so
precisely
because
the
prevailing
wisdom
was
that
Value
AND
Active
management
were
going
the
way
of
the
Dodo.
Yet,
the
pendulum
swings
both
ways,
changing
direction
at
extremes,
and
once
it
does,
it
continues
to
do
so
for
some
time.
Not
a
single
investor
with
graying
or
thinning
hair
can
claim
to
know
exactly
when
conditions
will
change,
but
one
should
be
able
to
recognize
that
an
extreme
has
been
reached
and
that
prudence
is
in
order.
Last
year
we
witnessed
a
significant
lack
of
prudence
on
the
part
of
many.
In
the
recently
ended
semi-annual
period,
sector
allocation
drove
the
outperformance
compared
with
all
of
our
benchmarks.
This
is
a
very
desirable
outcome;
unusual,
but
desirable.
Unusual
since
over
time,
security
selection
has
accounted
for
a
greater
proportion
of
the
Fund’s
outperformance
than
sector
allocation.
Desirable
because
it
informs
us
that
as
we
look
forward,
those
positions
still
have
meaningful
room
to
potentially
outperform
their
peers.
As
primarily
bottom
up
investors,
our
opportunity
set
has
resulted
in
us
being
over-weight
energy
and
basic
materials,
sectors
almost
universally
ignored,
neglected,
if
not
despised
by
benchmarks,
passive
investing,
growth
but
also
by
many
value
investors.
Therefore,
our
positioning
seems
to
be
highly
controversial
and
non-consensus,
although
we
struggle
to
understand
why.
Whether
in
stocks
or
in
business
acquisitions,
doesn’t
one
find
opportunity
where
few
look
for
them?
Bernard
Baruch
famously
said—and
we
apologize
for
quoting
him
once
again—to
buy
when
there’s
blood
in
the
streets.
Where’s
the
blood
in
Apple?
Amazon?
Microsoft?
Tesla?
It
is
striking
to
us
that
these
truisms
are
so
often
ignored.
In
fact,
in
stock
markets,
the
exact
opposite
takes
place.
Funds
are
allocated
where
popularity
reigns.
But
doesn’t
popular,
by
this
definition,
mean
that
the
opportunity
for
profit
is
generally
absent?
That
is
why
we
do
not
believe
that
Active
Value
investing
will
ever
disappear.
It
provides
a
necessary
balance
to
trend
following.
A
perfect
example
of
blood
running
in
the
streets
took
place
when
the
price
of
oil
went
negative
last
year
as
demand
appeared
to
evaporate.
The
same
could
be
said
about
many
basic
materials,
which
witnessed
a
similar
decline
in
demand,
albeit
temporarily.
Today
we
find
ourselves
in
shortage
of
many
products
globally,
creating
positive
pricing
pressure
and
relatively
better
fundamentals,
yet
such
industries
continue
to
be
vastly
ignored
by
the
majority
of
investors.
During
the
last
six
months,
our
largest
contribution
to
excess
returns
resulted
from
Value
Plus
’
position
in
consumer
staples.
While
we
were
overweight
basic
materials
and
energy,
we
were
underweight
consumer
staples,
a
group
that
generally
lagged
the
powerful
BAYWOOD
VALUE
PLUS
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
March
31,
2021
3
increase
over
the
last
six
months.
In
addition,
our
holdings,
driven
primarily
by
MolsonCoors
and
Ingredion,
outperformed
those
of
the
benchmark.
Therefore,
both
sector
allocation
and
stock
selection
were
responsible
for
the
overall
contribution.
Materials
and
energy
contributed
to
outperformance
as
did
information
technology
and
consumer
discretionary
allocations.
Before
we
list
some
of
the
better
and
worse
performing
stocks
in
the
portfolio,
it
should
be
noted
that
despite
the
Fund’s
outperformance,
in
the
period,
Cash
was
the
single
largest
detractor
to
overall
returns
as
it
accounted
for
nearly
1%
of
drag
on
overall
returns.
We
do
not
view
this
negatively
as
we
believe
that
Cash
is
very
valuable
and
affords
us
opportunity
as
with
much
of
the
last
year.
In
such
a
strong
period
within
one
of
the
most
powerful
stock
market
recoveries,
where
does
one
draw
the
line
in
touting
good
performers?
We’ve
had
our
share,
as
have
others.
But
we’ve
also
owned
companies
that
have
underperformed.
The
relevant
question
should
revolve
around
whether
we
remain
attracted
to
those
that
have
significantly
outperformed
as
well
as
those
that
have
under-performed.
Kontoor
Brands
doubled
over
the
last
six
months
and
it
remains
attractive.
The
last
six
months
do
not
tell
the
complete
story
due
to
shares
having
declined
significantly
in
the
prior
six
months.
Citigroup
and
AIG
both
increased
approximately
70%
but
they
too
had
declined
meaningfully
prior
to
that.
We
remain
committed
to
both
holdings.
Met
Life,
Ameriprise,
Morgan
Stanley
and
Radian
all
increased
over
50%
in
value.
We
very
recently
exited
Morgan
Stanley
based
in
part
on
strength
in
the
capital
markets
and
we
exited
Radian
following
recent
(and
forthcoming)
strength
in
housing.
Strength
in
both
companies’
end-markets
appears
mostly
reflected
in
their
shares.
Recent
additions
Chubb
and
the
CME
“only”
increased
approximately
38%
which
enabled
us
to
add
to
positions.
Within
technology,
NetApp
increased
by
nearly
70%
and
remains
undervalued
in
our
opinion.
Within
basic
materials,
Corteva
increased
by
over
60%.
We
took
advantage
of
recent
strength
to
reduce
our
position
and
allocate
to
new
holdings
Newmont
Mining
and
International
Flavors
&
Fragrances,
both
of
which
significantly
lagged
the
group
average.
We
do
not
think
their
under-performance
will
continue
over
our
investment
horizon
and
they
could
very
likely
do
well
regardless
of
the
economic
outlook.
Westrock
increased
over
50%
in
the
six-month
period.
The
Industrials
sector
was
also
strong
driven
by
Atlas
and
Parker
Hannifin
both
increasing
over
50%.
Of
the
two,
Atlas
remains
significantly
undervalued.
Our
laggards
included
a
few
within
consumer
staples.
Mondelez,
Pepsico
and
WalMart
were
poor
relative
performers.
We
lowered
WalMart
and
exited
Mondelez
and
MolsonCoors,
the
latter
a
top
performer;
we
initiated
a
position
in
Kraft
Heinz
and
added
to
recently
purchased
Ingredion.
Within
communications,
Verizon
was
a
significant
laggard,
in
part
due
to
its
purchase
of
large
spectrum
purchases
and
increases
in
debt.
Due
to
its
perception
as
a
defensive
stock,
shares
also
underperformed
in
this
strong
market.
Healthcare,
another
sector
viewed
as
defensive,
also
lagged
and
our
pharmaceutical
holdings
did
not
keep
up
with
the
overall
market.
Healthcare
came
under
assault
primarily
due
to
the
possibility
of
continued
price
controls
from
the
executive
branch
of
government.
This
is
a
distinct
possibility,
yet,
as
with
other
looming
opportunities,
there
is
a
price
for
everything.
Should
pharmaceuticals
stocks
in
particular
continue
to
face
downward
price
pressure,
we
are
likely
to
add
to
our
positions.
None
of
these
patterns
are
surprising
and
they
do
not
shift
our
focus
away
from
focusing
on
fundamentals.
As
usual
with
declining
stock
prices,
we
are
likely
to
add
to
positions
barring
any
deterioration
in
fundamentals.
As
we
perhaps
are
prone
to
say
too
frequently,
we
expect
forthcoming
returns
to
be
more
muted
than
recent
ones.
Due
to
this
outlook,
we
will
continue
to
manage
in
a
prudent
fashion.
We
will
invest
in
companies
with
sound
financials
able
to
pay
us—as
shareholders—
directly
in
the
form
of
dividends
and
indirectly
in
the
form
of
improving
thru-cycle
earning
power.
When
we
are
able
to
purchase
such
securities
at
reasonable
if
not
downright
ridiculously
attractive
prices,
we
will
act.
We
look
forward
to
a
speedy
resolution
to
the
pandemic
and
a
recovery
in
everybody’s
life
balance
with
friends
and
loved
ones.
Current
and
future
portfolio
holdings
are
subject
to
change
and
risk.
Fund
holdings
and
sector
allocations
are
subject
to
change
at
any
time
and
are
not
recommendations
to
buy
or
sell
any
security.
Please
see
the
Schedule
of
Investments
in
this
report
for
a
complete
list
of
Fund
holdings.
Past
performance
is
no
guarantee
of
future
results.
Risk
Considerations:
Mutual
fund
investing
involves
risk,
including
the
possible
loss
of
principal.
The
Fund
primarily
invests
in
undervalued
securities,
which
may
not
appreciate
in
value
as
anticipated
by
the
Advisor
or
remain
undervalued
for
longer
than
anticipated.
The
Fund
may
invest
in
American
Depositary
Receipts
(ADRs),
which
involves
risks
relating
to
political,
economic
or
regulatory
conditions
in
foreign
countries
and
may
cause
greater
volatility
and
less
liquidity.
The
Fund
may
also
invest
in
convertible
securities
and
preferred
stock,
which
may
be
adversely
affected
as
interest
rates
rise.
BAYWOOD
VALUE
PLUS
FUND
SCHEDULE
OF
INVESTMENTS
March
31,
2021
4
See
Notes
to
Financial
Statements.
The
following
is
a
summary
of
the
inputs
used
to
value
the
Fund's instruments
as
of
March
31,
2021.
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.
The
Level
1
value
displayed
in
this
table
is
Common
Stock.
The
Level
2
value
displayed
in
this
table
is
a
Money
Market
Fund.
Refer
to
this
Schedule
of
Investments
for
a
further
breakout
of
each
security
by
industry.
Shares
Security
Description
Value
Common
Stock
-
97.5%
Basic
Materials
-
9.9%
1,066
Corteva,
Inc.
$
49,697
200
International
Flavors
&
Fragrances,
Inc.
27,922
800
Newmont
Corp.
48,216
1,460
Nutrien,
Ltd.
78,679
1,000
Rio
Tinto
PLC,
ADR
77,650
900
Westrock
Co.
46,845
329,009
Capital
Goods
/
Industrials
-
8.0%
200
3M
Co.
38,536
300
Cummins,
Inc.
77,733
500
ManpowerGroup,
Inc.
49,450
100
Parker-Hannifin
Corp.
31,543
900
Raytheon
Technologies
Corp.
69,543
266,805
Communication
Services
-
5.5%
1,800
Comcast
Corp.,
Class A
97,398
1,500
Verizon
Communications,
Inc.
87,225
184,623
Consumer
Discretionary
-
5.0%
400
Genuine
Parts
Co.
46,236
1,400
Kontoor
Brands,
Inc.
67,942
300
Lear
Corp.
54,375
168,553
Consumer
Staples
-
5.1%
600
Ingredion,
Inc.
53,952
300
PepsiCo.,
Inc.
42,435
800
The
Kraft
Heinz
Co.
32,000
300
Walmart,
Inc.
40,749
169,136
Energy
-
10.1%
500
Chevron
Corp.
52,395
1,900
ConocoPhillips
100,643
3,200
Equinor
ASA,
ADR
62,272
3,000
Kinder
Morgan,
Inc.
49,950
900
Phillips
66
73,386
338,646
Financials
-
18.1%
2,400
American
International
Group,
Inc.
110,904
300
Ameriprise
Financial,
Inc.
69,735
500
Chubb,
Ltd.
78,985
900
Citigroup,
Inc.
65,475
200
CME
Group,
Inc.
40,846
1,100
First
American
Financial
Corp.
62,315
1,300
MetLife,
Inc.
79,027
300
Northern
Trust
Corp.
31,533
900
Prosperity
Bancshares,
Inc.
67,401
606,221
Health
Care
-
17.0%
1,000
AbbVie,
Inc.
108,220
400
Amgen,
Inc.
99,524
1,000
AstraZeneca
PLC,
ADR
49,720
1,200
Cardinal
Health,
Inc.
72,900
816
Koninklijke
Philips
NV,
ADR
(a)
46,537
500
Medtronic
PLC
59,065
1,100
Merck
&
Co.,
Inc.
84,799
3,500
Viatris,
Inc.
(a)
48,895
569,660
Real
Estate
-
3.9%
1,666
VEREIT,
Inc.
REIT
64,341
2,300
VICI
Properties,
Inc.
REIT
64,952
129,293
Shares
Security
Description
Value
Technology
-
9.0%
1,600
Cisco
Systems,
Inc./Delaware
$
82,736
400
International
Business
Machines
Corp.
53,304
1,400
NetApp,
Inc.
101,738
200
TE
Connectivity,
Ltd.
25,822
200
Texas
Instruments,
Inc.
37,798
301,398
Transportation
-
4.7%
5,800
Atlas
Corp.
79,170
200
Union
Pacific
Corp.
44,082
200
United
Parcel
Service,
Inc.,
Class B
33,998
157,250
Utilities
-
1.2%
1,200
OGE
Energy
Corp.
38,832
Total
Common
Stock
(Cost
$2,617,557)
3,259,426
Shares
Security
Description
Value
Money
Market
Fund
-
2.3%
75,031
Federated
Government
Obligations
Fund,
Institutional
Class,
0.04%
(b)
(Cost
$75,031)
75,031
Investments,
at
value
-
99.8%
(Cost
$2,692,588)
$
3,334,457
Other
Assets
&
Liabilities,
Net
-
0.2%
8,295
Net
Assets
-
100.0%
$
3,342,752
ADR
American
Depositary
Receipt
PLC
Public
Limited
Company
REIT
Real
Estate
Investment
Trust
(a)
Non-income
producing
security.
(b)
Dividend
yield
changes
daily
to
reflect
current
market
conditions.
Rate
was
the
quoted
yield
as
of
March
31,
2021.
Valuation
Inputs
Investments
in
Securities
Level
1
-
Quoted
Prices
$
3,259,426
Level
2
-
Other
Significant
Observable
Inputs
75,031
Level
3
-
Significant
Unobservable
Inputs
–
Total
$
3,334,457
BAYWOOD
VALUE
PLUS
FUND
SCHEDULE
OF
INVESTMENTS
March
31,
2021
5
See
Notes
to
Financial
Statements.
PORTFOLIO
HOLDINGS
%
of
Total
Investments
Basic
Materials
9.9%
Capital
Goods
/
Industrials
8.0%
Communication
Services
5.5%
Consumer
Discretionary
5.0%
Consumer
Staples
5.1%
Energy
10.1%
Financials
18.2%
Health
Care
17.1%
Real
Estate
3.9%
Technology
9.0%
Transportation
4.7%
Utilities
1.2%
Money
Market
Fund
2.3%
100.0%
BAYWOOD
VALUE
PLUS
FUND
STATEMENT
OF
ASSETS
AND
LIABILITIES
March
31,
2021
6
See
Notes
to
Financial
Statements.
ASSETS
Investments,
at
value
(Cost
$2,692,588)
$
3,334,457
Receivables:
Fund
shares
sold
2,023
Investment
securities
sold
10,353
Dividends
9,457
From
investment
advisor
10,222
Trustees'
fees
and
expenses
45
Prepaid
expenses
13,886
Total
Assets
3,380,443
LIABILITIES
Payables:
Investment
securities
purchased
15,832
Accrued
Liabilities:
Fund
services
fees
6,687
Other
expenses
15,172
Total
Liabilities
37,691
NET
ASSETS
$
3,342,752
COMPONENTS
OF
NET
ASSETS
Paid-in
capital
$
2,505,239
Distributable
earnings
837,513
NET
ASSETS
$
3,342,752
SHARES
OF
BENEFICIAL
INTEREST
AT
NO
PAR
VALUE
(UNLIMITED
SHARES
AUTHORIZED)
171,601
NET
ASSET
VALUE,
OFFERING
AND
REDEMPTION
PRICE
PER
SHARE
$
19.48
BAYWOOD
VALUE
PLUS
FUND
STATEMENT
OF
OPERATIONS
SIX
MONTHS
ENDED
MARCH
31,
2021
7
See
Notes
to
Financial
Statements.
INVESTMENT
INCOME
Dividend
income
(Net
of
foreign
withholding
taxes
of
$370)
$
47,976
Total
Investment
Income
47,976
EXPENSES
Investment
advisor
fees
7,582
Fund
services
fees
31,130
Transfer
agent
fees
9,554
Custodian
fees
2,627
Registration
fees
10,802
Professional
fees
13,807
Trustees'
fees
and
expenses
2,088
Other
expenses
13,991
Total
Expenses
91,581
Fees
waived
and
expenses
reimbursed
(80,966)
Net
Expenses
10,615
NET
INVESTMENT
INCOME
37,361
NET
REALIZED
AND
UNREALIZED
GAIN
(LOSS)
Net
realized
gain
on
investments
216,980
Net
change
in
unrealized
appreciation
(depreciation)
on
investments
564,297
NET
REALIZED
AND
UNREALIZED
GAIN
781,277
INCREASE
IN
NET
ASSETS
RESULTING
FROM
OPERATIONS
$
818,638
BAYWOOD
VALUE
PLUS
FUND
STATEMENTS
OF
CHANGES
IN
NET
ASSETS
8
See
Notes
to
Financial
Statements.
For
the
Six
Months
Ended
March
31,
2021
For
the
Year
Ended
September
30,
2020
OPERATIONS
Net
investment
income
$
37,361
$
66,419
Net
realized
gain
(loss)
216,980
(19,145)
Net
change
in
unrealized
appreciation
(depreciation)
564,297
(289,212)
Increase
(Decrease)
in
Net
Assets
Resulting
from
Operations
818,638
(241,938)
DISTRIBUTIONS
TO
SHAREHOLDERS
Total
Distributions
Paid
(33,355)
(100,190)
CAPITAL
SHARE
TRANSACTIONS
Sale
of
shares
69,247
63,897
Reinvestment
of
distributions
33,331
99,997
Redemption
of
shares
(133,356)
(35,799)
Increase
(Decrease)
in
Net
Assets
from
Capital
Share
Transactions
(30,778)
128,095
Increase
(Decrease)
in
Net
Assets
754,505
(214,033)
NET
ASSETS
Beginning
of
Period
2,588,247
2,802,280
End
of
Period
$
3,342,752
$
2,588,247
SHARE
TRANSACTIONS
Sale
of
shares
3,750
4,328
Reinvestment
of
distributions
1,775
6,354
Redemption
of
shares
(6,938)
(2,174)
Increase
(Decrease)
in
Shares
(1,413)
8,508
BAYWOOD
VALUE
PLUS
FUND
FINANCIAL
HIGHLIGHTS
9
See
Notes
to
Financial
Statements.
These
financial
highlights
reflect
selected
data
for
a
share
outstanding
throughout
each
period.
For
the
Six
Months
Ended
March
31,
2021
For
the
Years
Ended
September
30,
2020
2019
2018
2017
2016(a)
INSTITUTIONAL
SHARES
NET
ASSET
VALUE,
Beginning
of
Period
$
14.96
$
17.03
$
18.63
$
17.36
$
15.59
$
17.00
INVESTMENT
OPERATIONS
Net
investment
income
(b)
0.22
0.39
0.44
0.38
0.38
0.29
Net
realized
and
unrealized
gain
(loss)
4.49
(1.86)
(0.84)
1.76
2.02
0.94
Total
from
Investment
Operations
4.71
(1.47)
(0.40)
2.14
2.40
1.23
DISTRIBUTIONS
TO
SHAREHOLDERS
FROM
Net
investment
income
(0.19)
(0.38)
(0.39)
(0.35)
(0.36)
(2.27)
Net
realized
gain
–
(0.22)
(0.81)
(0.52)
(0.27)
(0.37)
Total
Distributions
to
Shareholders
(0.19)
(0.60)
(1.20)
(0.87)
(0.63)
(2.64)
NET
ASSET
VALUE,
End
of
Period
$
19.48
$
14.96
$
17.03
$
18.63
$
17.36
$
15.59
TOTAL
RETURN
31.56%(c)
(8.77)%
(1.55)%
12.57%
15.60%
8.65%(c)
RATIOS/SUPPLEMENTARY
DATA
Net
Assets
at
End
of
Year
(000s
omitted)
$
3,343
$
2,588
$
2,802
$
936
$
711
$
536
Ratios
to
Average
Net
Assets:
Net
investment
income
2.46%(d)
2.51%
2.66%
2.10%
2.28%
2.30%(d)
Net
expenses
0.70%(d)
0.70%
0.70%
0.70%
0.70%
0.70%(d)
Gross
expenses
(e)
6.03%(d)
6.68%
8.13%
8.83%
11.16%
14.43%(d)
PORTFOLIO
TURNOVER
RATE
23%(c)
40%
49%
34%
48%
22%(c)
(a)
Effective
March
24,
2016,
the
Fund
changed
its
fiscal
year
end
from
November
30
to
September
30.
The
information
presented
is
for
the
period
December
1,
2015
to
March
31,
2016.
(b)
Calculated
based
on
average
shares
outstanding
during
each
period.
(c)
Not
annualized.
(d)
Annualized.
(e)
Reflects
the
expense
ratio
excluding
any
waivers
and/or
reimbursements.
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
March
31,
2021
10
Dear
Shareholder,
We
are
pleased
to
report
our
economic
and
financial
market
perspectives
and
the
investment
activities
for
the
Baywood
Socially
Responsible
Fund
(the
“Fund”)
for
the
six
months
ended
March
31,
2021.
The
Fund
is
a
mid-to-large
capitalization
value-oriented
portfolio
of
stock
holdings
selected
from
a
universe
of
stocks
created
through
the
application
of
inclusionary
and
exclusionary
social
screens
and
assessments
of
the
ESG
profile
of
each
company.
Among
these
stocks,
we
further
evaluate
and
assess
each
prospective
holding’s
valuation
and
fundamental
business
attraction
to
determine
the
current
portfolio
holdings.
In
selecting
investments,
we
consider
social
criteria
such
as
an
issuer’s
community
relations,
corporate
governance,
employee
diversity,
employee
relations,
environmental
impact
and
sustainability,
human
rights
record
and
product
safety.
What’s
in
your
ESG
fund?
As
active,
value,
ESG
(Environmental,
Social
and
Governance)
investors
we
have
seen
a
thing
or
two
during
our
many
decades
of
managing
to
our
clients’
diverse
and
changing
desires.
We
have
managed
client
portfolios
alongside
changes
in
the
ESG
industry,
which
began
by
using
SRI
(Socially
Responsible
Investing)
exclusionary
screens
to
remove
companies
with
undesirable
characteristics
according
to
our
clients’
needs
and
objectives.
This
was
and
still
is
a
worthy
approach.
Over
time,
SRI
progressed
towards
including
companies
with
desirable
characteristics
that
fit
within
an
ESG
framework
and
engaging
companies
with
our
proxy
voting
policies.
We
have
managed
through
several
wars,
market
cycles,
presidential
administrations,
high
inflation,
low
inflation,
and
volatile
interest
rates;
the
list
goes
on.
Our
philosophy
is
relatively
simple,
we
purchase
companies
that
consider
all
stakeholders,
including
improving
their
environmental
and
social
records
and
that
also
happen
to
be
out-of-favor
with
depressed
stock
valuations.
In
this
process,
we
give
little
to
no
consideration
of
how
we
might
look
compared
to
the
benchmark.
We
are
often
presented
with
questions
about
the
ways
in
which
value
investing
and
ESG
investing
seem
to
be
in
conflict.
While
we
can
only
guess
as
to
why
investors
might
come
to
these
conclusions,
it
would
seem
obvious
to
the
casual
observer
that
a
conflict
exists
if
one
were
to
look
at
a
current
lineup
of
some
of
the
more
popular
ESG
funds.
They
all
happen
to
be
growth-oriented
funds.
In
fact,
while
we
managed
to
specific
socially
responsible
desires
since
the
firm’s
inception,
our
composite
inception
in
2000
coincided
with
a
very
similar
environment
in
which
we
found
there
were
few,
if
any,
value
alternatives
to
the
popular,
tech-heavy
SRI
growth
funds
in
the
market.
At
that
point
we
had
already
been
managing
client
assets
for
over
10
years
with
SRI
desires
and
constraints
and
filled
a
giant
hole
in
investors’
diversification
tool-kit
by
offering
our
Socially
Responsible
Value
(SRV)
strategy
to
the
public.
Fast-forward
to
the
present,
more
than
20
years
later,
and
the
ESG
investing
market
appears
to
have
more
choices
than
ever.
Yet
more
choices
do
not
equate
to
better
diversification.
In
fact,
according
to
Morningstar,
the
top
10
largest
actively
managed
funds
(by
AUM)
with
an
ESG/SRI
mandate
are
all
classified
as
growth/core.
And
if
you
look
at
these
funds,
the
holdings,
characteristics,
returns
are
nearly
all
identical.
This
very
much
reminds
us
of
what
took
place
a
generation
ago.
Outcomes
are
therefore
unlikely
to
differ
materially.
In
our
view,
there
are
a
few
factors
which
contribute
to
our
cautious
outlook
for
funds
that
are
managed
in
this
manner.
One,
as
previously
mentioned,
is
diversification,
a
key
tenet
to
reducing
risk
in
a
portfolio
is
clearly
not
happening
from
an
ESG/SRI
perspective.
Two,
within
these
top
10
funds,
there
is
significant
overlap
in
the
holdings,
let’s
take
a
look
at
the
top
five.
Every
one
of
these
funds
has
an
average
of
16%
of
the
overall
portfolio
in
the
following
five
companies:
Microsoft,
Amazon,
Google,
Facebook,
and
Apple
with
several
funds
having
over
20%.
The
overlap
among
the
top
five
holdings
is
about
64%
when
considering
weights,
and
70%
when
considering
the
positions
only.
How
can
one
be
diversified
with
this
kind
of
overlap
and
concentration
in
the
top
five
holdings?
The
answer
is
one
cannot.
A
third
issue
with
overlap
is
the
positions
themselves.
One
might
say
that
ESG
considerations
are
often
in
the
eye
of
the
beholder,
but
how
can
a
fund
call
itself
ESG
if
nearly
all
of
these
companies
have
major
issues
with
the
‘S’
in
ESG,
or
the
social
aspect?
The
answer
is
it
cannot.
We
would
like
to
point
out
an
article
(take
your
pick
as
there
are
many
articles
about
this
topic)
posted
by
the
Australian
Strategic
Policy
Institute
on
March
1st,
2020
titled
“Uyghurs
For
Sale”
which
details
one
aspect
of
how
some
of
these
companies
enable
the
suppression
of
the
rights
of
the
Uyghur
population
in
China,
to
put
it
mildly.
Perhaps
“Big
Tech”
does
not
deserve
to
be
among
the
top
holding
in
ESG
funds.
It
doesn’t
take
much
sleuthing
to
find
the
plethora
of
articles
about
the
many
ways
in
which
‘Big
Tech’
often
violates
most
tenets
of
“good
social
relations”.
From
Facebook’s
inaction
against
foreign
election
interference
to
Apple’s
notorious
supply
chain
abuses
(anyone
remember
Foxconn?)
these
issues
appear
to
be
largely
ignored
in
the
ESG/SRI
investing
world
because
the
funds
are
loaded
with
these
companies.
The
fourth
issue
with
this
is
that
“good”
companies
are
not
always
“good”
investments.
Being
highly
concentrated
in
some
of
the
most
highly-valued
stocks
in
the
market
poses
risks
from
this
form
of
passive
management.
When
such
expensive
stocks
run
out
of
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
March
31,
2021
11
steam,
a
whole
group
of
funds
will
experience
poor
returns
simultaneously.
We
have
always
looked
at
valuation,
fundamentals,
and
diversification
among
ESG
companies
through
a
very
different
and
differentiated
and
non-consensus
lens.
It
is
a
shame
to
see
that
20
years
later
not
much
has
changed.
As
we
have
previously
expressed,
we
see
similarity
to
the
late
1990s
in
that
growth
outperformed
value
considerably
in
both
periods.
What
we
are
witnessing
now
in
the
market,
just
as
we
did
in
the
late
‘90s,
is
the
reversal
of
factors
that
contributed
to
the
relative
outperformance
of
growth
stocks.
The
market
has
recently
shown
its
preference
for
companies
that
have
been
ignored,
companies
that
we
believe
offer
desirable
fundamental,
valuation
and
improving
ESG
characteristics.
However,
we
don’t
believe
it
is
too
late
for
clients
to
achieve
better
diversification
in
their
portfolios
away
from
highly
correlated
growth
funds.
In
fact,
should
history
repeat
itself,
and
we
think
it
could,
we
believe
we
are
at
the
very
early
stages
of
a
long-term
change
in
preference
for
actively
managed
value
funds.
Since
the
market
hit
the
bottom
nearly
one
year
ago
in
late
March,
the
Socially
Responsible
Fund
has
outperformed
its
benchmark,
the
Morningstar
Large
Cap
Value
benchmark.
In
fact,
for
four
quarters
in
a
row,
the
Socially
Responsible
Fund
has
outperformed
its
benchmark.
The
driving
forces
behind
the
outperformance
are
mostly
related
to
the
repositioning
we
have
continued
to
make
in
the
Fund.
We
were
presented
with
the
opportunity
set
of
a
lifetime
when
the
market
panicked
and
sold
off
last
year
and
as
the
more
recent
phenomenon
of
a
preference
shift
towards
value
stocks
occurred,
we
found
ways
to
take
advantage
of
this
swing.
During
the
most
recently
ended
six-month
period,
the
largest
source
of
outperformance
can
be
attributed
to
sector
allocation,
specifically
being
underweight
consumer
staples
and
overweight
consumer
discretionary.
As
the
economy
slowly
opened
up
from
the
lockdown,
investors
shifted
their
preference
from
sectors
typically
loaded
with
bond
substitutes
(staples
and
utilities)
and
towards
more
cyclical
companies
(consumer
discretionary,
financials,
materials,
and
energy).
Being
overweight
the
latter
and
underweight
the
former
contributed
about
75%
of
the
Fund’s
outperformance.
Stock
selection
accounted
for
the
remainder
of
the
outperformance,
particularly
in
communication
services,
energy,
and
information
technology.
In
communication
services,
the
Fund’s
holdings
in
Disney
and
Discovery
accounted
for
the
outperformance.
We
owned
Discovery
for
a
few
years
even
as
it
underperformed
some
of
its
larger
peers.
Nevertheless,
we
did
not
believe
the
market
was
assigning
proper
credit
to
its
content
library
and
differentiated
target
audience.
The
stay-at-home
push
to
create
streaming
services
for
content
finally
grabbed
the
market’s
attention
and
the
value
of
its
content
began
to
be
appreciated.
In
the
first
quarter
of
2021,
its
priced
rocketed
over
80%
and
we
made
the
decision
to
exit
as
we
could
not
understand
the
value
being
placed
on
this
stock
in
such
short
order.
It
was
simply
overvalued.
Now
that
the
“tiger”
is
out
of
the
bag,
so
to
speak,
we
understand
it
was
the
subject
of
a
manipulation
as
Archegos,
a
large
hedge
fund,
was
forced
to
liquidate.
Our
valuation
driven
approach
helped
us
avoid
the
ensuing
30%
decline
when
Archegos’
prime
brokers
liquidated
its
position
due
to
margin
calls,
and
locked
in
better-than
expected
returns
for
our
clients
and
investors.
In
the
information
technology
sector
our
holdings
in
NXP
Semiconductors,
NetApp
and
Arista
Networks
were
responsible
for
majority
of
the
relative
outperformance.
NXP
benefitted
from
an
economic
rebound
as
a
significant
portion
of
its
semiconductors
are
used
in
industrial
applications
as
well
as
the
global
semiconductor
shortage
which
helped
prices.
NetApp
and
Arista
benefitted
from
more
company-specific
cyclical
and
competitive
factors.
Both
companies
are
taking
market
share
at
their
competitor’s
expense
and
are
coming
out
of
a
cyclical
trough
that
began
before
the
pandemic
started.
The
market
took
an
extreme
pessimistic
view
of
these
temporary
conditions,
in
which
we
took
advantage
of
and
used
to
purchase
the
companies.
We
have
said
this
before,
but
it
bears
repeating:
we
believe
that
the
market
crash
that
occurred
last
year
due
to
the
pandemic
created
one
of
the
biggest
opportunity
sets
for
value
investing
in
over
a
decade.
The
stocks
we
purchased
continue
to
aid
overall
returns
on
both
an
absolute
and
relative
basis.
It
should
be
noted
that
despite
the
Fund’s
outperformance
in
the
period
Cash
was
the
single
largest
detractor
to
overall
returns
as
it
accounted
for
over
1%
of
drag
on
overall
returns.
We
do
not
view
this
negatively
as
we
believe
that
Cash
is
very
valuable
and
affords
us
opportunity
as
with
much
of
the
last
year.
The
second
largest
detractor
in
the
Fund
was
stock
selection
in
the
financial
sector.
Both
Brookfield
Asset
Management
and
Berkshire
Hathaway
underperformed
in
the
period
returning
only
35%
and
20%
respectively
compared
to
the
benchmark’s
return
of
more
than
60%.
As
interest
rates
increased
significantly
in
the
period,
companies
that
are
perceived
to
benefit
from
a
rise
in
interest
rates
outperformed
companies
those
that
don’t.
Berkshire
and
Brookfield
are
examples
of
the
latter
and
the
market
didn’t
ascribe
as
much
value
to
their
operations
as
those
that
tend
to
lend,
like
banks.
Both
companies
are
astute
operators
which
tend
to
get
stronger
during
periods
of
distress
by
purchasing
assets
that
are
out-of-favor,
similar
to
ourselves.
We
take
a
long-term
perspective
when
making
investment
decisions
and
it
is
our
belief
that
these
companies
will
have
stronger
fundamentals
for
years
due
to
the
distress.
We
continued
to
find
opportunities
in
companies
that
are
still
being
ignored
by
the
market.
During
the
period
we
added
Kraft
Heinz,
Manpower,
IBM,
Cardinal
Health,
International
Flavors
and
Fragrances
and
Steel
Dynamics.
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
March
31,
2021
12
After
years
of
disappointment,
both
IBM
and
Kraft
Heinz
appear
to
be
on
an
improving
fundamental
trajectory.
The
companies
have
both
high
relative
and
absolute
dividend
yields,
have
suffered
from
years
of
mismanagement
and
have
made
meaningful
changes
to
their
underlying
businesses
which
warrants
a
position
in
the
Socially
Responsible
Fund.
IBM
undertook
its
largest
acquisition
ever
two
years
ago
when
it
acquired
Red
Hat.
We
thought
it
would
take
the
company
at
least
three
and
more
likely
four
years
for
the
acquisition
to
be
accretive
given
the
steep
price
tag
on
a
small
revenue
base.
Two
years
later
and
the
acquisition
looks
to
be
accretive
well
before
our
initial
forecast
as
revenues
accelerated
and
IBM
used
all
of
its
excess
cash
to
reduce
debt.
Quite
remarkable
for
a
company
that
repurchased
over
$12B
in
its
own
shares
trying
to
make
earnings
targets
over
the
prior
four
years.
Later
this
year
it
is
expected
to
spin-
off
its
underperforming
services
division,
and
the
Red
Hat
acquisition
will
have
a
much
larger
effect
on
its
financials
than
we
thought
possible
within
this
time
frame.
When
investors
sold
IBM
during
its
most
recent
earnings
release,
we
considered
the
combination
of
its
high
dividend
yield,
attractive
fundamental
outlook
and
low
valuation
enough
to
warrant
a
position
in
the
portfolio.
Kraft
Heinz
has
a
very
similar
set
of
circumstances,
outlook,
and
valuation
despite
years
of
underperformance
under
unremarkable
stewardship.
Both
of
these
companies
fall
into
a
category
we
call
“reformers”.
As
value
investors,
we
don’t
generally
have
the
opportunity
to
own
the
darlings
of
the
ESG
world
as
they
tend
to
have
business
models
and
valuations
that
don’t
fit
our
criteria.
However,
it’s
usually
the
darlings
that
tend
to
fall
from
grace
(witness
Wells
Fargo,
a
former
ESG
favorite
and
largest
financial
holding
in
many
ESG
funds),
and
when
they
do
they
often
fall
hard.
It
can
take
years
to
fix
the
business
model,
the
governance
and
its
reputation
but
when
it
does
they
become
great
investments
as
their
governance,
reputation
and
valuation
all
revert
to
the
mean.
We
look
forward
to
seeing
the
continued
improvement
in
all
three
for
both
IBM
and
Kraft
Heinz.
In
favor
of
these
additions
we
exited
Discovery
Communications,
Albemarle,
First
American
Financial,
Radian,
Intel,
and
Gilead
Sciences.
We
consider
most
of
these
successful
investments
with
the
exception
of
Gilead
and
First
American,
which
we
exited
in
favor
of
alternatives
with
more
attractive
return
profiles.
While
we
are
not
overly
optimistic
about
the
level
of
absolute
returns
over
the
next
3-5
years
for
the
overall
market
(as
represented
by
the
S&P
500),
we
do
believe
returns
from
the
companies
we
own
in
the
Socially
Responsible
Fund
could
do
better
as
their
underlying
fundamentals
improve.
The
overall
stock
market
euphoria
has
already
priced
in
much
of
the
economic
recovery
and
in
some
cases
excessively
so.
We
would
temper
expectations
for
robust
returns
going
forward
and
in
some
cases
of
valuation
excess
we
urge
caution.
Our
mission
as
managers
of
the
Socially
Responsible
Fund
has
been
to
provide
our
clients
and
investors
with
attractive
risk-adjusted
returns
through
prudence,
care,
and
Social
Responsibility;
and
we
continue
on
with
that
same
mission
we
have
followed
for
decades.
____________________________________________________________________________
Current
and
future
portfolio
holdings
are
subject
to
change
and
risk.
Fund
holdings
and
sector
allocations
are
subject
to
change
at
any
time
and
are
not
recommendations
to
buy
or
sell
any
security.
Please
see
the
Schedule
of
Investments
in
this
report
for
a
complete
list
of
Fund
holdings
The
Morningstar
Category
is
used
to
compare
fund
performance
to
its
peers.
It
is
not
possible
to
invest
directly
into
an
index
or
category.
Past
performance
is
no
guarantee
of
future
results.
Risk
Considerations:
Mutual
fund
investing
involves
risk,
including
the
possible
loss
of
principal.
Socially
responsible
investment
criteria
may
limit
the
number
of
investment
opportunities
available
to
the
Fund
or
it
may
invest
a
larger
portion
of
its
assets
in
certain
sectors
which
could
be
more
sensitive
to
market
conditions,
economic,
regulatory
and
environmental
developments.
These
factors
could
negatively
impact
the
Fund’s
returns.
The
Fund
primarily
invests
in
undervalued
securities,
which
may
not
appreciate
in
value
as
anticipated
by
the
Advisor
or
remain
undervalued
for
longer
than
anticipated.
The
Fund
may
invest
in
American
Depositary
Receipts
(ADRs),
which
involves
risks
relating
to
political,
economic
or
regulatory
conditions
in
foreign
countries
and
may
cause
greater
volatility
and
less
liquidity.
The
Fund
may
also
invest
in
convertible
securities
and
preferred
stock,
which
may
be
adversely
affected
as
interest
rates
rise.
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
March
31,
2021
13
Performance
for
periods
greater
than
one
year
is
annualized.
The
returns
presented
for
the
Fund
reflect
the
performance
of
the
City
National
Rochdale
Socially
Responsible
Equity
Fund,
a
series
of
City
National
Rochdale
Funds
(the
“Predecessor
Fund”).
The
Fund
has
adopted
the
historical
performance
of
the
Predecessor
Fund
as
the
result
of
a
reorganization
in
which
the
Fund
acquired
all
of
the
assets,
subject
to
liabilities,
of
the
Predecessor
Fund,
effective
as
of
the
close
of
business
on
January
8,
2016.
Performance
data
quoted
represents
past
performance
and
is
no
guarantee
of
future
results.
Current
performance
may
be
lower
or
higher
than
the
performance
data
quoted.
Investment
return
and
principal
value
will
fluctuate
so
that
shares,
when
redeemed,
may
be
worth
more
or
less
than
original
cost.
As
stated
in
the
Fund’s
prospectus,
the
annual
operating
expense
ratio
(gross)
is
5.10%.
However,
the
Fund’s
advisor
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,
acquired
fund
fees
and
expenses,
proxy
expenses
and
extraordinary
expenses)
to
0.89%,
through
January
31,
2022
(the
“Expense
Cap”).
The
Expense
Cap
may
be
raised
or
eliminated
only
with
the
consent
of
the
Board
of
Trustees.
The
advisor
may
be
reimbursed
by
the
Fund
for
fees
waived
and
expenses
reimbursed
by
the
advisor
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
and
(ii)
the
Expense
Cap
in
place
at
the
time
the
fees/expenses
were
waived/reimbursed.
Total
Annual
Fund
Operating
Expenses
After
Fee
Waiver
and/or
Expense
Reimbursement
will
increase
if
exclusions
from
the
Expense
Cap
apply.
During
the
period,
certain
fees
were
waived
and/or
expenses
reimbursed;
otherwise,
returns
would
have
been
lower.
The
performance
table
and
graph
do
not
reflect
the
deduction
of
taxes
that
a
shareholder
would
pay
on
Fund
distributions
or
the
redemption
of
Fund
shares.
Returns
greater
than
one
year
are
annualized.
For
the
most
recent
month
end
performance,
please
call
(855)
409-2297.
The
Morningstar
US
Large
Value
Index
is
an
unmanaged
index.
Individuals
cannot
invest
in
an
index.
Average
Annual
Total
Returns
Periods
Ended
March
31,
2021
One
Year
Three
Year
Five
Year
Ten
Year
Since
Inception
01/03/05
Baywood
Socially
Responsible
Fund
70.39%
10.66%
12.00%
8.59%
6.21%
Morningstar
US
Large
Value
TR
Index
46.12%
10.15%
11.36%
10.18%
7.29%
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
SCHEDULE
OF
INVESTMENTS
March
31,
2021
14
See
Notes
to
Financial
Statements.
The
following
is
a
summary
of
the
inputs
used
to
value
the
Fund's instruments
as
of
March
31,
2021.
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.
The
Level
1
value
displayed
in
this
table
is
Common
Stock.
The
Level
2
value
displayed
in
this
table
is
a
Money
Market
Fund.
Refer
to
this
Schedule
of
Investments
for
a
further
breakout
of
each
security
by
industry.
Shares
Security
Description
Value
Common
Stock
-
91.8%
Basic
Materials
-
7.1%
800
International
Flavors
&
Fragrances,
Inc.
$
111,688
3,600
Nutrien,
Ltd.
194,004
500
Packaging
Corp.
of
America
67,240
1,300
Steel
Dynamics,
Inc.
65,988
438,920
Capital
Goods
/
Industrials
-
2.4%
350
Cummins,
Inc.
90,689
600
ManpowerGroup,
Inc.
59,340
150,029
Communication
Services
-
8.6%
3,000
Comcast
Corp.,
Class A
162,330
900
The
Walt
Disney
Co.
(a)
166,068
3,500
Verizon
Communications,
Inc.
203,525
531,923
Consumer
Discretionary
-
5.8%
500
Aptiv
PLC
(a)
68,950
1,000
Genuine
Parts
Co.
115,590
3,600
Kontoor
Brands,
Inc.
174,708
359,248
Consumer
Staples
-
4.7%
1,800
Mondelez
International,
Inc.,
Class A
105,354
500
PepsiCo.,
Inc.
70,725
2,900
The
Kraft
Heinz
Co.
116,000
292,079
Energy
-
6.4%
4,000
Devon
Energy
Corp.
87,400
5,500
Kinder
Morgan,
Inc.
91,575
2,100
Schlumberger
NV
57,099
100
Texas
Pacific
Land
Corp.
158,943
395,017
Financials
-
20.1%
3,300
Air
Lease
Corp.
161,700
1,400
American
Express
Co.
198,016
3,400
American
International
Group,
Inc.
157,114
2,100
Bank
of
America
Corp.
81,249
500
Berkshire
Hathaway,
Inc.,
Class B
(a)
127,735
1,300
BOK
Financial
Corp.
116,116
4,483
Brookfield
Asset
Management,
Inc.,
Class A
199,493
500
Chubb,
Ltd.
78,985
600
CME
Group,
Inc.
122,538
1,242,946
Health
Care
-
14.0%
400
Amgen,
Inc.
99,524
1,100
AstraZeneca
PLC,
ADR
54,692
750
Becton
Dickinson
and
Co.
182,362
2,200
Cardinal
Health,
Inc.
133,650
1,628
Koninklijke
Philips
NV,
ADR
(a)
92,845
450
Laboratory
Corp.
of
America
Holdings
(a)
114,764
800
Medtronic
PLC
94,504
200
Regeneron
Pharmaceuticals,
Inc.
(a)
94,628
866,969
Real
Estate
-
2.4%
3,820
VEREIT,
Inc.
REIT
147,528
Technology
-
12.5%
300
Arista
Networks,
Inc.
(a)
90,567
2,600
Cisco
Systems,
Inc./Delaware
134,446
3,300
Corning,
Inc.
143,583
700
International
Business
Machines
Corp.
93,282
1,300
NetApp,
Inc.
94,471
700
NXP
Semiconductors
NV
140,938
600
TE
Connectivity,
Ltd.
77,466
774,753
Shares
Security
Description
Value
Transportation
-
7.8%
3,300
AP
Moller
-
Maersk
A/S,
ADR
$
38,445
18,400
Atlas
Corp.
251,160
500
Union
Pacific
Corp.
110,205
500
United
Parcel
Service,
Inc.,
Class B
84,995
484,805
Total
Common
Stock
(Cost
$4,079,124)
5,684,217
Shares
Security
Description
Value
Money
Market
Fund
-
6.7%
417,162
Morgan
Stanley
Institutional
Liquidity
Funds
Government
Portfolio,
Institutional
Class,
0.03%
(b)
(Cost
$417,162)
417,162
Investments,
at
value
-
98.5%
(Cost
$4,496,286)
$
6,101,379
Other
Assets
&
Liabilities,
Net
-
1.5%
90,683
Net
Assets
-
100.0%
$
6,192,062
ADR
American
Depositary
Receipt
PLC
Public
Limited
Company
REIT
Real
Estate
Investment
Trust
(a)
Non-income
producing
security.
(b)
Dividend
yield
changes
daily
to
reflect
current
market
conditions.
Rate
was
the
quoted
yield
as
of
March
31,
2021.
Valuation
Inputs
Investments
in
Securities
Level
1
-
Quoted
Prices
$
5,684,217
Level
2
-
Other
Significant
Observable
Inputs
417,162
Level
3
-
Significant
Unobservable
Inputs
–
Total
$
6,101,379
PORTFOLIO
HOLDINGS
%
of
Total
Investments
Basic
Materials
7.2%
Capital
Goods
/
Industrials
2.5%
Communication
Services
8.7%
Consumer
Discretionary
5.9%
Consumer
Staples
4.8%
Energy
6.5%
Financials
20.4%
Health
Care
14.2%
Real
Estate
2.4%
Technology
12.7%
Transportation
7.9%
Money
Market
Fund
6.8%
100.0%
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
STATEMENT
OF
ASSETS
AND
LIABILITIES
March
31,
2021
15
See
Notes
to
Financial
Statements.
ASSETS
Investments,
at
value
(Cost
$4,496,286)
$
6,101,379
Receivables:
Fund
shares
sold
141,767
Dividends
10,879
From
investment
advisor
10,401
Prepaid
expenses
12,932
Total
Assets
6,277,358
LIABILITIES
Payables:
Investment
securities
purchased
57,319
Fund
shares
redeemed
12
Accrued
Liabilities:
Trustees’
fees
and
expenses
115
Fund
services
fees
9,294
Other
expenses
18,556
Total
Liabilities
85,296
NET
ASSETS
$
6,192,062
COMPONENTS
OF
NET
ASSETS
Paid-in
capital
$
4,481,202
Distributable
earnings
1,710,860
NET
ASSETS
$
6,192,062
SHARES
OF
BENEFICIAL
INTEREST
AT
NO
PAR
VALUE
(UNLIMITED
SHARES
AUTHORIZED)
449,610
NET
ASSET
VALUE,
OFFERING
AND
REDEMPTION
PRICE
PER
SHARE
$
13.77
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
STATEMENT
OF
OPERATIONS
SIX
MONTHS
ENDED
MARCH
31,
2021
16
See
Notes
to
Financial
Statements.
INVESTMENT
INCOME
Dividend
income
(Net
of
foreign
withholding
taxes
of
$838)
$
55,394
Total
Investment
Income
55,394
EXPENSES
Investment
advisor
fees
16,763
Fund
services
fees
35,577
Transfer
agent
fees
10,279
Custodian
fees
2,828
Registration
fees
12,161
Professional
fees
15,323
Trustees'
fees
and
expenses
2,291
Other
expenses
15,409
Total
Expenses
110,631
Fees
waived
and
expenses
reimbursed
(89,318)
Net
Expenses
21,313
NET
INVESTMENT
INCOME
34,081
NET
REALIZED
AND
UNREALIZED
GAIN
(LOSS)
Net
realized
gain
on
investments
179,991
Net
change
in
unrealized
appreciation
(depreciation)
on
investments
1,225,025
NET
REALIZED
AND
UNREALIZED
GAIN
1,405,016
INCREASE
IN
NET
ASSETS
RESULTING
FROM
OPERATIONS
$
1,439,097
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
STATEMENTS
OF
CHANGES
IN
NET
ASSETS
17
See
Notes
to
Financial
Statements.
For
the
Six
Months
Ended
March
31,
2021
For
the
Year
Ended
September
30,
2020
OPERATIONS
Net
investment
income
$
34,081
$
55,976
Net
realized
gain
179,991
11,456
Net
change
in
unrealized
appreciation
(depreciation)
1,225,025
(382,593)
Increase
(Decrease)
in
Net
Assets
Resulting
from
Operations
1,439,097
(315,161)
DISTRIBUTIONS
TO
SHAREHOLDERS
Total
Distributions
Paid
(59,773)
(108,179)
CAPITAL
SHARE
TRANSACTIONS
Sale
of
shares
1,393,063
741,913
Reinvestment
of
distributions
59,334
105,418
Redemption
of
shares
(265,884)
(622,149)
Increase
in
Net
Assets
from
Capital
Share
Transactions
1,186,513
225,182
Increase
(Decrease)
in
Net
Assets
2,565,837
(198,158)
NET
ASSETS
Beginning
of
Period
3,626,225
3,824,383
End
of
Period
$
6,192,062
$
3,626,225
SHARE
TRANSACTIONS
Sale
of
shares
111,791
68,512
Reinvestment
of
distributions
4,783
10,013
Redemption
of
shares
(23,121)
(63,381)
Increase
in
Shares
93,453
15,144
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
FINANCIAL
HIGHLIGHTS
18
See
Notes
to
Financial
Statements.
These
financial
highlights
reflect
selected
data
for
a
share
outstanding
throughout
each
period.
For
the
Six
Months
Ended
March
31,
2021
For
the
Years
Ended
September
30,
2020
2019
2018
2017
2016
INSTITUTIONAL
SHARES
NET
ASSET
VALUE,
Beginning
of
Period
$
10.18
$
11.21
$
12.60
$
11.43
$
10.15
$
10.18
INVESTMENT
OPERATIONS
Net
investment
income
(a)
0.09
0.15
0.18
0.12
0.10
0.14
Net
realized
and
unrealized
gain
(loss)
3.65
(0.90)
(0.53)
1.31
1.33
0.66
Total
from
Investment
Operations
3.74
(0.75)
(0.35)
1.43
1.43
0.80
DISTRIBUTIONS
TO
SHAREHOLDERS
FROM
Net
investment
income
(0.06)
(0.15)
(0.16)
(0.10)
(0.15)
(0.30)
Net
realized
gain
(0.09)
(0.13)
(0.88)
(0.16)
–
(0.53)
Total
Distributions
to
Shareholders
(0.15)
(0.28)
(1.04)
(0.26)
(0.15)
(0.83)
NET
ASSET
VALUE,
End
of
Period
$
13.77
$
10.18
$
11.21
$
12.60
$
11.43
$
10.15
TOTAL
RETURN
36.90%(b)
(6.67)%
(1.79)%
12.66%
14.18%
8.40%
RATIOS/SUPPLEMENTARY
DATA
Net
Assets
at
End
of
Year
(000s
omitted)
$
6,192
$
3,626
$
3,824
$
1,699
$
5,404
$
5,555
Ratios
to
Average
Net
Assets:
Net
investment
income
1.42%(c)
1.45%
1.60%
1.01%
0.92%
1.35%
Net
expenses
0.89%(c)
0.89%
0.89%
0.89%
0.89%
0.89%
Gross
expenses
(d)
4.61%(c)
5.10%
5.78%
3.03%
2.64%
1.00%
PORTFOLIO
TURNOVER
RATE
14%(b)
30%
33%
31%
42%
57%
(a)
Calculated
based
on
average
shares
outstanding
during
each
period.
(b)
Not
annualized.
(c)
Annualized.
(d)
Reflects
the
expense
ratio
excluding
any
waivers
and/or
reimbursements.
BAYWOOD
FUNDS
NOTES
TO
FINANCIAL
STATEMENTS
March
31,
2021
19
Organization
Baywood
Value
Plus
Fund
and
Baywood
Socially
Responsible
Fund
(individually,
a
“Fund”
and
collectively,
the
“Funds”)
are
diversified
portfolios
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
each
Fund’s
shares
of
beneficial
interest
without
par
value.
The
Baywood
Value
Plus
Fund
commenced
operations
on
December
2,
2013,
through
a
reorganization
of
a
collective
investment
trust
into
the
Baywood
Value
Plus
Fund.
The
collective
investment
trust
was
previously
managed
by
the
Baywood
Value
Plus
Fund’s
Advisor
and
portfolio
management
team.
This
collective
investment
trust
was
organized
and
commenced
operations
on
June
27,
2008.
The
Baywood
Value
Plus
Fund
currently
offers
Institutional
Shares.
The
Baywood
Value
Plus
Fund
seeks
to
achieve
long-term
capital
appreciation
by
investing
in
undervalued
equity
securities.
The
Baywood
Socially
Responsible
Fund
commenced
operations
on
January
3,
2005.
The
Baywood
Socially
Responsible
Fund
currently
offers
Institutional
Shares.
The
Baywood
Socially
Responsible
Fund
seeks
to
provide
long-term
capital
growth.
On
December
7,
2015,
at
a
special
meeting
of
shareholders
of
Baywood
Socially
Responsible
Fund,
formerly
City
National
Rochdale
Socially
Responsible
Equity
Fund,
a
series
of
City
National
Rochdale
Funds
(the
"Predecessor
Fund"),
the
shareholders
approved
a
proposal
to
reorganize
the
Predecessor
Fund
into
the
Baywood
Socially
Responsible
Fund,
a
newly
created
series
of
the
Forum
Funds
II.
The
Predecessor
Fund
was
sub-advised
by
the
Fund's
Advisor,
SKBA
Capital
Management,
LLC,
with
the
same
portfolio
managers
as
the
Baywood
Socially
Responsible
Fund.
The
Baywood
Socially
Responsible
Fund
is
managed
in
a
manner
that
is
in
all
material
respects
equivalent
to
the
management
of
the
Predecessor
Fund,
including
the
investment
objective,
strategies,
guidelines
and
restrictions.
The
primary
purpose
of
the
reorganization
was
to
move
the
Predecessor
Fund
to
a
newly
created
series
of
Forum
Funds
II.
As
a
result
of
the
reorganization,
the
Baywood
Socially
Responsible
Fund
is
now
operating
under
the
supervision
of
the
Trust’s
board
of
trustees.
On
January
8,
2016,
the
Baywood
Socially
Responsible
Fund
acquired
all
of
the
assets,
subject
to
liabilities,
of
the
Predecessor
Fund.
The
shares
of
the
Predecessor
Fund
were,
in
effect,
exchanged
on
a
tax-free
basis
for
Shares
of
the
Baywood
Socially
Responsible
Fund
with
the
same
aggregate
value.
No
commission
or
other
transactional
fees
were
imposed
on
shareholders
in
connection
with
the
tax-free
exchange
of
their
shares.
On
June
14,
2019,
the
Trust’s
Board
of
Trustees
approved
the
conversion
of
the
outstanding
shares
of
the
Funds’
Investor
Shares,
in
a
tax-free
exchange
into
shares
of
the
Funds’
Institutional
Shares
and
the
closure
of
the
Investor
Shares
to
new
investments.
On
August
19,
2019,
each
shareholder
of
the
Funds’
Investor
Shares
received
Institutional
Shares
in
a
dollar
amount
equal
to
their
investment
in
the
Investor
Shares
as
of
that
date.
Summary
of
Significant
Accounting
Policies
The
Funds
are
investment
companies
and
follow
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
each
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
sixty
days
or
less
may
be
valued
at
amortized
cost.
Each
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
3,
believes
that
the
values
available
are
unreliable.
The
Trust’s
Valuation
Committee,
as
defined
in
each
Fund’s
registration
statement,
performs
certain
functions
as
they
relate
to
the
administration
and
oversight
of
each
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.
BAYWOOD
FUNDS
NOTES
TO
FINANCIAL
STATEMENTS
March
31,
2021
20
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
each
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
a
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
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
each
Fund’s
own
assumptions
in
determining
the
fair
value
of
investments).
The
aggregate
value
by
input
level,
as
of
March
31,
2021,
for
each
Fund’s
investments
is
included
at
the
end
of
each
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.
Interest
income
is
recorded
on
an
accrual
basis.
Premium
is
amortized
to
the
next
call
date
above
par
and
discount
is
accreted
to
maturity
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
at
least
annually.
Distributions
to
shareholders
of
net
capital
gains,
if
any,
are
declared
and
paid
at
least
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
each
Fund,
timing
differences
and
differing
characterizations
of
distributions
made
by
each
Fund.
Federal
Taxes
–
Each
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
Funds
will
not
be
subject
to
a
federal
excise
tax.
Therefore,
no
federal
income
or
excise
tax
provision
is
required.
Each
Fund
files
a
U.S.
federal
income
and
excise
tax
return
as
required.
Each
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
March
31,
2021,
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.
BAYWOOD
FUNDS
NOTES
TO
FINANCIAL
STATEMENTS
March
31,
2021
21
Commitments
and
Contingencies
–
In
the
normal
course
of
business,
each
Fund
enters
into
contracts
that
provide
general
indemnifications
by
each
Fund
to
the
counterparty
to
the
contract.
Each
Fund’s
maximum
exposure
under
these
arrangements
is
dependent
on
future
claims
that
may
be
made
against
each
Fund
and,
therefore,
cannot
be
estimated;
however,
based
on
experience,
the
risk
of
loss
from
such
claims
is
considered
remote.
Each
Fund
has
determined
that
none
of
these
arrangements
requires
disclosure
on
each
Fund’s
balance
sheet.
Fees
and
Expenses
Investment
Advisor
–
SKBA
Capital
Management,
LLC
(the
“Advisor”)
is
the
investment
adviser
to
the
Funds.
Pursuant
to
an
investment
advisory
agreement,
the
Advisor
receives
an
advisory
fee,
payable
monthly,
at
an
annual
rate
of
0.50%
and
0.70%
of
the
average
daily
net
assets
of
Baywood
Value
Plus
Fund
and
Baywood
Socially
Responsible
Fund,
respectively.
Distribution
–
Foreside
Fund
Services,
LLC
serves
as
each
Fund’s
distributor
(the
“Distributor”).
The
Funds
do
not
have
a
distribution
(12b-1)
plan;
accordingly,
the
Distributor
does
not
receive
compensation
from
the
Funds
for
its
distribution
services.
The
Advisor
compensates
the
Distributor
directly
for
its
services.
The
Distributor
is
not
affiliated
with
the
Advisor
or
Atlantic
Fund
Administration,
LLC,
a
wholly
owned
subsidiary
of
Apex
US
Holdings,
LLC
(d/b/a
Apex
Fund
Services)
(“Apex”)
or
their
affiliates.
Other
Service
Providers
–
Apex
provides
fund
accounting,
fund
administration,
compliance
and
transfer
agency
services
to
each
Fund.
The
fees
related
to
these
services
are
included
in
Fund
services
fees
within
the
Statements
of
Operations.
Apex
also
provides
certain
shareholder
report
production
and
EDGAR
conversion
and
filing
services.
Pursuant
to
an
Apex
Services
Agreement,
each
Fund
pays
Apex
customary
fees
for
its
services.
Apex
provides
a
Principal
Executive
Officer,
a
Principal
Financial
Officer,
a
Chief
Compliance
Officer
and
an
Anti-Money
Laundering
Officer
to
each
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
each
Fund
is
disclosed
in
the
Statements
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
each
Fund.
Expense
Reimbursement
and
Fees
Waived
The
Advisor
has
contractually
agreed
to
waive
its
fee
and/or
reimburse
certain
expenses
to
limit
total
operating
expenses
(excluding
all
taxes,
interest,
portfolio
transaction
expenses,
acquired
fund
fees
and
expenses,
proxy
expenses
and
extraordinary
expenses)
to
0.70%
through
January
31,
2022,
for
Baywood
Value
Plus
Fund.
The
Advisor
also
has
contractually
agreed
to
waive
its
fees
and/or
reimburse
certain
expenses
to
limit
total
operating
expenses
(excluding
all
taxes,
interest,
portfolio
transaction
expenses,
acquired
fund
fees
and
expenses,
proxy
expenses
and
extraordinary
expenses)
to
0.89%
through
January
31,
2022,
for
Baywood
Socially
Responsible
Fund.
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
March
31,
2021,
fees
waived
and
expenses
reimbursed
were
as
follows:
The
Advisor
may
be
reimbursed
by
each
Fund
for
fees
waived
and
expenses
reimbursed
by
the
Advisor
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
March
31,
2021,
$401,938
and
$418,767
in
the
Baywood
Value
Plus
Fund
and
Baywood
Socially
Responsible
Fund,
respectively,
is
subject
to
recapture
by
the
Advisor.
Other
Waivers
are
not
eligible
for
recoupment.
Investment
Adviser
Fees
Waived
Investment
Adviser
Expenses
Reimbursed
Other
Waivers
Total
Fees
Waived
and
Expenses
Reimbursed
Baywood
Value
Plus
Fund
$
7,582
$
61,223
$
12,161
$
80,966
Baywood
Socially
Responsible
Fund
16,763
59,556
12,999
89,318
BAYWOOD
FUNDS
NOTES
TO
FINANCIAL
STATEMENTS
March
31,
2021
22
Security
Transactions
The
cost
of
purchases
and
proceeds
from
sales
of
investment
securities
(including
maturities),
other
than
short-term
investments
during
the
period
ended
March
31,
2021
were
as
follows:
Federal
Income
Tax
As
of
March
31,
2021
,
the
cost
for
federal
income
tax
purposes
is
substantially
the
same
as
for
financial
statement
purposes
and
the
components
of
net
unrealized
appreciation
were
as
follows:
As
of
September
30,
2020,
distributable
earnings
(accumulated
loss)
on
a
tax
basis
were
as
follows:
The
difference
between
components
of
distributable
earnings
on
a
tax
basis
and
the
amounts
reflected
in
the
Statements
of
Assets
and
Liabilities
are
primarily
due
to
wash
sales,
REITS
and
equity
return
of
capital.
For
tax
purposes,
the
prior
year
post-October
loss
for
the
Baywood
Value
Plus
Fund
was
$26,712.
This
loss
was
recognized
for
tax
purposes
on
the
first
business
day
of
the
Fund’s
current
fiscal
year,
October
1,
2020
.
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
each
Fund
has
had
no
such
events.
Management
has
evaluated
the
need
for
additional
disclosures
and/or
adjustments
resulting
from
subsequent
events.
Based
on
this
evaluation,
no
additional
disclosures
or
adjustments
were
required
to
the
financial
statements
as
of
the
date
the
financial
statements
were
issued.
Purchases
Sales
Baywood
Value
Plus
Fund
$
676,855
$
702,627
Baywood
Socially
Responsible
Fund
1,345,527
623,296
Gross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Net
Unrealized
Appreciation
Baywood
Value
Plus
Fund
$
659,627
$
(17,758)
$
641,869
Baywood
Socially
Responsible
Fund
1,632,700
(27,607)
1,605,093
Undistributed
Long-Term
Gain
Capital
and
Other
Losses
Unrealized
Appreciation
Total
Baywood
Value
Plus
Fund
$
–
$
(26,712)
$
78,942
$
52,230
Baywood
Socially
Responsible
Fund
17,529
–
314,007
331,536
Baywood
Funds
ADDITIONAL
INFORMATION
March
31,
2021
23
Proxy
Voting
Information
A
description
of
the
policies
and
procedures
that
each
Fund
uses
to
determine
how
to
vote
proxies
relating
to
securities
held
in
each
Fund’s
portfolio
is
available,
without
charge
and
upon
request,
by
calling
(855)
409-2297
and
on
the
SEC’s
website
at
www.sec.gov.
Each
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)
409-2297
and
on
the
SEC’s
website
at
www.sec.gov.
Availability
of
Quarterly
Portfolio
Schedules
Each
Fund
files
its
complete
schedule
of
portfolio
holdings
with
the
SEC
for
the
first
and
third
quarters
of
each
fiscal
year
on
Form
N-PORT.
Forms
N-PORT
are
available
free
of
charge
on
the
SEC’s
website
at
www.sec.gov.
Shareholder
Expense
Example
As
a
shareholder
of
the
funds
,
you
incur
ongoing
costs,
including
management
fees,
and
other
Fund
expenses.
This
example
is
intended
to
help
you
understand
your
ongoing
costs
(in
dollars)
of
investing
in
the
funds
and
to
compare
these
costs
with
the
ongoing
costs
of
investing
in
other
mutual
funds.
The
example
is
based
on
an
investment
of
$1,000
invested
at
the
beginning
of
the
period
and
held
for
the
entire
period
from
October
1,
2020
through
March
31,
2021.
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
each
Fund’s
actual
expense
ratio
and
an
assumed
rate
of
return
of
5%
per
year
before
expenses,
which
is
not
each
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
each
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
October
1,
2020
Ending
Account
Value
March
31,
2021
Expenses
Paid
During
Period*
Annualized
Expense
Ratio*
Baywood
Value
Plus
Fund
Actual
$
1,000.00
$
1,315.64
$
4.04
0.70%
Hypothetical
(5%
return
before
expenses)
$
1,000.00
$
1,021.44
$
3.53
0.70%
Baywood
Socially
Responsible
Fund
Actual
$
1,000.00
$
1,368.97
$
5.26
0.89%
Hypothetical
(5%
return
before
expenses)
$
1,000.00
$
1,020.49
$
4.48
0.89%
*
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.
FOR
MORE
INFORMATION:
P.O.
Box
588
Portland,
ME
04112
(855)
409-2297
(toll
free)
INVESTMENT
ADVISOR
SKBA
Capital
Management,
LLC
44
Montgomery
Street,
Suite
3500
San
Francisco,
CA
94104
TRANSFER
AGENT
Apex
Fund
Services
P.O.
Box
588
Portland,
ME
04112
www.theapexgroup.com
DISTRIBUTOR
Foreside
Fund
Services,
LLC
Three
Canal
Plaza,
Suite
100
Portland,
ME
04101
www.foreside.com
This
report
is
submitted
for
the
general
information
of
the
shareholders
of
the
Funds.
It
is
not
authorized
for
distribution
to
prospective
investors
unless
preceded
or
accompanied
by
an
effective
prospectus,
which
includes
information
regarding
the
Funds’
risks,
objectives,
fees
and
expenses,
experience
of
its
management,
and
other
information.
217-SAR-0321
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 CLOSED-END MANAGEMENT INVESTMENT COMPANIES
Not applicable.
ITEM 13. EXHIBITS.
(a)(1) Not applicable.
(a)(3) Not applicable.
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: | May 26, 2021 |
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: | May 26, 2021 |
By: | /s/ Karen Shaw | |
Karen Shaw, Principal Financial Officer | ||
Date: | May 26, 2021 |