As filed with the Securities and Exchange Commission on November 29, 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– September 30, 2021
ITEM 1. REPORT TO STOCKHOLDERS.
Annual
Report
September
30,
2021
Advised
by:
SKBA
Capital
Management,
LLC
www.baywoodfunds.com
BAYWOOD
VALUE
PLUS
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
(Unaudited)
September
30,
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
year
ended
September
30,
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.
From
a
goldilocks
economy
with
unemployment
below
4%
to
the
worst
economic
contraction
in
a
century
three
months
later,
to
the
largest
global
coordinated
monetary
and
fiscal
stimuli
ever
produced,
it
is
no
surprise
that
stock
market
volatility
reached
historical
proportions
in
the
most
recent
fiscal
year.
That
volatility
results
in
lower
overall
valuations
is
an
investment
tenet
that
has
historically
proven
true
over
time
and
has
been
widely
taught
in
most
business
education.
That
is,
after
all,
why
companies
attempt
to
“manage”
their
earnings.
Volatility
is
simply
not
typically
associated
with
higher
valuations.
The
most
recently
ended
fiscal
year
has
seemed
like
one
with
a
number
of
tugs-of-war
between
opposing
investment
camps.
These
tugs-of-war
which
we
postulate
began
at
the
bottom
of
the
correction
in
March
of
2020
have
surfaced
between
inflation
beneficiaries
and
dis-inflation
beneficiaries,
otherwise
known
as
bond
proxies.
Inflation
beneficiaries
have
been
associated
with
cyclical
companies
while
bond
proxies
have
been
associated
with,
well,
bonds,
and
interest
rates
in
particular.
This
particular
tug-of-war
is
not
that
dissimilar
to
the
preceding
one
between
market
capitalizations
whereby
the
largest
companies
absorbed
the
vast
preponderance
of
flows
to
the
detriment
of
most
others.
Unfortunately,
due
to
a
number
of
non-fundamental
factors,
the
latter
has
been
anything
but
a
fair
contest,
not
just
in
its
magnitude
but
also
in
its
duration.
Until
last
year,
“Mega-Cap
Growth”
stocks
far
outperformed
“Value”
stocks.
Yet
all
investment
trends
exhaust
themselves
at
some
point
and
we
have
argued
for
some
time
that
the
prevailing
market
environment
of
the
2010’s
would
inevitably
end.
Our
belief
was
backed
up
by
simple
math
suggesting
that
prospective
flows
into
fewer
and
fewer
securities
would
be
unable
to
match
historical
levels
into
those
same
securities.
We
look
at
these
tugs-of-war
not
so
much
through
the
lens
of
inflation
versus
dis-inflation,
growth
versus
value,
large
versus
small,
bond
proxy
versus
cyclical
but
instead
via
the
lenses
of
valuation
attraction
and
fundamental
attraction.
The
combination
of
those
two
critical
components
has
informed
our
decision-making
process
since
the
inception
of
the
firm.
And
it
is
the
search
for
the
combination
of
these
two
elements
-
valuation
attraction
and
fundamental
attraction
-
that
has
resulted
in
the
portfolio’s
characteristics.
Value
Plus
is
decidedly
unlike
the
typical
large
cap
value
fund
or
strategy
in
the
marketplace.
Nowhere
has
this
disparity
been
more
evident
than
with
our
holdings
in
the
energy
sector.
We
will
keep
our
comments
brief
as
our
opinions
have
been
well
documented
in
prior
letters.
Our
position
remains
that
structural
imbalances
between
supply
and
demand
will
continue
in
the
foreseeable
future.
Disinvestment
on
the
part
of
energy
companies,
the
likes
of
which
are
both
unprecedented
and
which
defy
pragmatism
has
not
yet
reversed,
leading
to
a
massive
change
in
the
means
by
which
hydrocarbons
are
produced
Since
the
onset
of
the
pandemic,
the
global
demand
side
of
the
equation
has
almost
entirely
normalized
despite
significant
economic
headwinds
remaining
in
the
transportation
and
industrial
sectors.
Additionally,
many
of
today’s
production
basins
are
geologically
different
than
those
of
prior
decades
whereby
depletion
rates
are
much
higher
than
they
were
historically.
As
a
result,
it
takes
continuous
investment
in
order
to
maintain
production
levels.
Such
an
imbalance
will
undoubtedly
create
price
instability,
instability
which
has
already
begun.
To
add
to
this,
shareholder
activism
forcing
oil
companies
to
divest
of
their
legacy
operations
has
failed
to
suggest
alternatives
towards
a
viable
transition
away
from
fossil
fuels.
In
our
opinion,
there
exists
no
rational
substitution
to
hydrocarbons
in
sufficient
enough
quantities
for
there
not
to
be
supply
shocks.
These
are
our
opinions
based
on
current
observations.
They
say
nothing
about
our
desire
to
reduce
carbon
emissions
over
time
and
attempt
to
reduce
human-generated
greenhouse
gases.
This
is
a
worthy,
desirable,
achievable
and
some
might
say
necessary
objective.
But
it
cannot
happen
in
a
vacuum.
It
cannot
take
place
without
first
providing
sufficient
forms
of
renewable
energy
and
storage.
Infrastructure
needs
to
be
redundant
before
the
transition
can
take
place
seamlessly.
Yet
the
absence
of
redundancy
is
exactly
what
is
taking
place.
One
of
the
most
egregious
examples
of
such
misguided
policy
is
taking
place
both
in
the
United
Kingdom
and
in
mainland
Europe;
China
also
seems
to
be
experiencing
similar
issues.
Due
to
the
desire
to
reduce
overall
carbon
emissions
–
without
adequately
planning
for
it
–
countries
have
significantly
reduced
or
eliminated
many
gas
fired
plants,
storage
and
transportation
investments.
As
we
write,
the
lack
of
renewables
infrastructure
has
had
the
consequence
of
historically
high
power
prices.
Said
countries
now
find
themselves
using
coal
once
again
to
make
up
for
the
shortfall!
Yet
despite
coal
being
a
much
greater
pollution
emitter
than
natural
gas,
the
situation
is
so
dire
as
there
being
few
viable
alternatives.
Shortsightedness
is
prevalent
among
policy
makers
as
it
relates
to
the
global
energy
transition.
This
shortsightedness
has
only
added
to
the
current
energy
imbalances
which
we
see
continuing.
BAYWOOD
VALUE
PLUS
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
(Unaudited)
September
30,
2021
2
In
the
Baywood
Value
Plus
Fund,
we
have
been
overweight
energy
and
basic
materials
for
some
time.
With
respect
to
energy,
this
has
been
relatively
simple
to
accomplish
considering
the
absence
of
meaningful
exposure
in
most
widely-held
indexes.
The
S&P
500
had
a
mere
2.5%
or
so
in
the
sector
earlier
this
year
while
exposure
in
most
Value
indexes
was
not
much
higher.
The
same
can
be
said
of
basic
materials.
It
baffles
us
that
so
many
widely
followed
indexes
would
essentially
exclude
sectors
that
are
so
vital
to
the
functioning
of
the
global
economy.
Yet
that
is
an
advantage
we
feel
we
have
over
passive
investing
over
complete
cycles.
We
do
not
have
to
suffer
from
such
blatant
errors
of
omission
and
can
instead
invest
where
we
see
the
best
combination
of
valuation
and
fundamental
attraction.
These
two
sectors
have
had
the
two
characteristics
in
spades.
In
stark
contrast
to
these
same
indexes,
the
Baywood
Value
Plus
Fund
has
had
what
we
consider
to
be
prudent
and
reasonable
allocations
to
energy
and
basic
materials.
In
combination,
our
investments
in
those
two
sectors
resulted
in
approximately
300
basis
points
of
excess
return
over
our
benchmark
during
the
year.
We
meaningfully
increased
our
ConocoPhillips
position
during
the
year
based
on
the
combination
of
continued
valuation
attraction
and
improving
fundamentals.
Its
recent
acquisition
of
Concho
Resources
proved
to
be
astute,
growing
its
hydrocarbon
resources
at
very
attractive
prices
and
as
we
approached
the
end
of
the
most
recent
quarter,
Conoco
announced
another
astute
acquisition,
of
many
of
Shell’s
Permian
basin
assets.
Another
great
asset
at
another
great
price.
In
the
energy
complex,
those
that
thrive
demonstrate
the
wherewithal
to
take
advantage
of
downturns
by
either
increasing
output
or
acquiring
assets.
No
company
exemplifies
this
better
than
Conoco
in
our
opinion
and
it
is
our
largest
holding
in
the
Fund.
The
year
was
as
a
very
good
one
for
most
equity
investors
and
Baywood
Value
Plus
was
no
exception.
Four
of
our
largest
holdings
more
than
doubled
during
the
fiscal
year
while
another
ten
increased
between
50%
and
100%.
For
a
portfolio
that
typically
owns
between
forty
and
sixty
securities,
this
is
no
small
number.
Kontoor
Brands,
ConocoPhillips,
AIG
and
NetApp
all
doubled
in
value.
Despite
such
an
increase,
they
are
still
undervalued
in
our
opinion,
which
indicates
just
how
out-of-favor
perfectly
good
businesses
had
become
until
recently.
The
Fund’s
allocation
to
consumer
staples,
perhaps
more
accurately
defined
as
our
absence
of
allocation
to
consumer
staples,
was
responsible
for
over
200
basis
points
of
excess
return.
It
is
not
so
much
that
we
dislike
consumer
staples
but
rather
that
following
their
strong
performance,
we
failed
to
see
either
meaningful
valuation
or
fundamental
attraction.
The
market
seems
to
have
agreed
with
us
as
those
companies
underperformed
over
the
last
year.
Yet,
as
is
typical,
that
underperformance
is
once
again
leading
us
to
delve
deeper
to
discover
any
prospective
investments.
During
the
year
we
eliminated
three
stocks
from
the
sector
in
the
year,
MolsonCoors,
Mondelez
and
Kimberly
Clark
and
added
one,
Kraft
Heinz.
Kraft
Heinz
offers
a
combination
of
attractive
attributes
which
distinguish
it
from
many
of
its
peers.
The
company
has
gone
through
management
changes
in
order
to
execute
greater
capital
discipline,
it
is
exposed
to
areas
likely
to
benefit
from
a
re-opening
of
the
global
economy
and
yet
expectations
and
valuation
remain
depressed
while
shares
deliver
us
very
attractive
and
sustainable
dividend
income.
Low
expectations
priced
in
to
the
shares
combined
with
strong
cash
flows
to
sustain
its
dividend
are
all
attractive
characteristics,
characteristics
which
happen
to
be
consistent
across
most
of
our
holdings.
Our
exposure
to
Information
Technology
also
resulted
in
excess
return
of
approximately
300
basis
points.
NetApp
was
a
standout
performer
during
the
year
and
one
of
the
largest
contributors
due
to
the
doubling
of
its
shares.
It’s
extremely
depressed
valuation
combined
with
an
improvement
in
fundamentals
mostly
ignored
by
Wall
Street
were
important
reasons
for
the
increase
in
price.
At
current
prices,
shares
remain
attractive
yet
we
may
trim
on
continued
strength
as
we
find
more
depressed
securities
which
exhibit
desirable
fundamental
characteristics.
We
might
add
that
our
excess
return
within
technology
came
despite
not
owning
any
of
the
ever
so
popular
“mega
caps”,
Apple,
Microsoft,
etc.
There
are,
after
all,
thriving
technology
industries
outside
of
those
vaunted
few.
Our
exposure
to
consumer
discretionary
sector,
Kontoor
in
particular,
provided
another
100
basis
points
of
excess
return.
Similarly,
that
excess
return
was
achieved
despite
the
absence
of
Amazon.
Consumer
discretionary
sectors
are
fertile
grounds
for
us
and
we
need
not
limit
ourselves
to
Amazon,
which
while
very
well
run,
does
not
offer
us
the
attributes
we
seek.
Lastly,
our
exposure
to
Communications
also
provided
nearly
100
basis
points
of
excess
return.
And
to
hit
a
certain
point
home,
that
return
was
accomplished
despite
the
absence
of
Google
and
Facebook.
There
continues
to
be
a
significant
market
of
undervalued
opportunities
despite,
or
rather
because
of,
the
emphasis
on
so
few
companies.
Not
all
sectors
contributed,
however,
as
our
financial
and
healthcare
exposures
hindered
overall
returns
by
a
combined
300
basis
points
or
so.
All
of
our
financial
stocks
increased
meaningfully
in
value,
yet
they
did
not
keep
up
with
some
of
the
index
positions.
On
healthcare,
having
any
exposure
this
year
hurt
returns
as
the
sector
generally
underperformed
the
overall
market.
As
we
have
witnessed
many
times
in
years
past,
the
fear
of
price
controls
on
branded
pharmaceuticals
has
led
to
investors
fleeing
the
sector.
Yet
fear
provides
opportunity
and
we
believe
we
are
at
this
juncture
once
again.
Policy
and
pricing
issues
will
inevitably
resolve
themselves;
once
they
do,
we
expect
the
value
of
these
companies’
strong
franchises
to
once
again
be
recognized
by
the
marketplace.
BAYWOOD
VALUE
PLUS
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
(Unaudited)
September
30,
2021
3
Lastly,
cash
also
detracted
from
returns
during
the
year.
This
is
an
acceptable
risk
in
our
opinion
as
cash
enables
us
to
be
opportunistic.
We
do
not
maintain
high
cash
levels,
yet
any
exposure
whatsoever
in
a
strong
bull
market
hurts
returns.
The
effect
this
year
was
approximately
100
basis
points.
In
years
of
more
muted
returns
which
we
see
going
forward,
cash
will
stop
being
a
drag
on
overall
returns.
In
a
declining
environment
it
will
add
to
excess
returns.
Most
importantly,
it
enables
us
to
add
to
or
initiate
positions
in
what
we
find
to
be
out-of-favor,
misunderstood
and
improving
situations.
In
spite
of
markets
making
incessant
highs,
we
continue
to
fall
back
on
the
saying
that
this
is
a
market
of
stocks,
not
a
stock
market.
As
value
investors,
by
definition,
there
are
always
companies
that
end
up
being
neglected.
Being
active
value
investors
is
an
advantage
to
us
as
we
do
not
have
to
own
companies
which
we
feel
either
have
undesirable
prospects
or
sell
at
unattractive
valuations.
We
can
be
selective.
Over
complete
cycles,
such
a
strategy
has
provided
attractive
risk-adjusted
returns
and
we
aim
to
provide
long-term
attractive
risk-adjusted
returns.
Current
and
future
portfolio
holdings
are
subject
to
change
and
risk.
Please
see
the
schedule
of
investments
section
in
this
report
for
a
full
listing
of
the
Fund’s
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.
Diversification
does
not
assure
a
profit,
nor
does
it
protect
against
a
loss
in
a
declining
market
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
PERFORMANCE
CHART
AND
ANALYSIS
(Unuadited)
September
30,
2021
4
The
following
chart
reflects
the
change
in
the
value
of
a
hypothetical
$10,000
investment,
including
reinvested
dividends
and
distributions,
in
the
Baywood
Value
Plus
Fund
(the
“Fund”)
compared
with
the
performance
of
the
benchmark,
Morningstar
US
Large
Value
TR
Index,
since
inception.
The
Morningstar
US
Large
Value
TR
Index
measures
the
performance
of
large-cap
stocks
with
relatively
low
prices
given
anticipated
per
share
earnings,
book
value,
cash
flow,
sales
and
dividends.
The
total
return
of
the
index
includes
the
reinvestment
of
dividends
and
income.
The
total
return
of
the
Fund
includes
operating
expenses
that
reduce
returns,
while
the
total
return
of
the
index
does
not
include
expenses.
The
Fund
is
professionally
managed,
while
the
index
is
unmanaged
and
is
not
available
for
investment.
Comparison
of
Change
in
Value
of
a
$10,000
Investment
Baywood
Value
Plus
Fund
vs.
Morningstar
US
Large
Value
TR
Index
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.
For
the
most
recent
month-end
performance,
please
call
(855)
409-2297.
As
stated
in
the
Fund’s
prospectus,
the
annual
operating
expense
ratio
(gross)
is
6.68%.
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
0.70%,
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
year,
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.
Average
Annual
Total
Returns
Periods
Ended
September
30,
2021
One
Year
Five
Year
Ten
Year
Since
Inception
06/27/08
Baywood
Value
Plus
Fund
36.80%
9.84%
11.70%
9.32%
Morningstar
US
Large
Value
TR
Index
29.39%
10.47%
12.38%
8.25%
*
The
Fund’s
Institutional
Shares
performance
for
periods
prior
to
the
commencement
of
operations
(12/2/13)
is
that
of
a
collective
investment
trust
managed
by
the
Fund’s
Advisor
and
portfolio
management
team.
The
Institutional
Shares
of
the
collective
investment
trust
commenced
operations
on
June
27,
2008.
BAYWOOD
VALUE
PLUS
FUND
SCHEDULE
OF
INVESTMENTS
September
30,
2021
5
See
Notes
to
Financial
Statements.
The
following
is
a
summary
of
the
inputs
used
to
value
the
Fund's instruments
as
of
September
30,
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
-
97.4%
Basic
Materials
-
9.1%
200
International
Flavors
&
Fragrances,
Inc.
$
26,744
1,000
Newmont
Corp.
54,300
1,560
Nutrien,
Ltd.
101,135
1,200
Rio
Tinto
PLC,
ADR
80,184
900
Westrock
Co.
44,847
307,210
Capital
Goods
/
Industrials
-
6.0%
200
3M
Co.
35,084
500
ManpowerGroup,
Inc.
54,140
100
Parker-Hannifin
Corp.
27,962
1,000
Raytheon
Technologies
Corp.
85,960
203,146
Communication
Services
-
6.8%
1,800
AT&T,
Inc.
48,618
1,800
Comcast
Corp.,
Class A
100,674
1,500
Verizon
Communications,
Inc.
81,015
230,307
Consumer
Discretionary
-
5.0%
400
Genuine
Parts
Co.
48,492
1,500
Kontoor
Brands,
Inc.
74,925
300
Lear
Corp.
46,944
170,361
Consumer
Staples
-
4.9%
700
Ingredion,
Inc.
62,307
200
PepsiCo.,
Inc.
30,082
900
The
Kraft
Heinz
Co.
33,138
300
Walmart,
Inc.
41,814
167,341
Energy
-
11.1%
500
Chevron
Corp.
50,725
2,400
ConocoPhillips
162,648
3,200
Equinor
ASA,
ADR
81,600
3,200
Kinder
Morgan,
Inc.
53,536
400
Phillips
66
28,012
376,521
Financials
-
18.1%
2,200
American
International
Group,
Inc.
120,758
300
Ameriprise
Financial,
Inc.
79,236
500
Chubb,
Ltd.
86,740
900
Citigroup,
Inc.
63,162
200
CME
Group,
Inc.
38,676
900
First
American
Financial
Corp.
60,345
1,300
MetLife,
Inc.
80,249
300
Northern
Trust
Corp.
32,343
700
Prosperity
Bancshares,
Inc.
49,791
611,300
Health
Care
-
16.1%
1,000
AbbVie,
Inc.
107,870
400
Amgen,
Inc.
85,060
1,000
AstraZeneca
PLC,
ADR
60,060
1,300
Cardinal
Health,
Inc.
64,298
816
Koninklijke
Philips
NV,
ADR
36,263
500
Medtronic
PLC
62,675
1,100
Merck
&
Co.,
Inc.
82,621
3,500
Viatris,
Inc.
47,425
546,272
Real
Estate
-
4.0%
1,566
VEREIT,
Inc.
REIT
70,830
2,300
VICI
Properties,
Inc.
REIT
65,343
136,173
Shares
Security
Description
Value
Technology
-
11.5%
1,500
Cisco
Systems,
Inc./Delaware
$
81,645
1,300
Corning,
Inc.
47,437
500
International
Business
Machines
Corp.
69,465
1,400
NetApp,
Inc.
125,664
200
TE
Connectivity,
Ltd.
27,444
200
Texas
Instruments,
Inc.
38,442
390,097
Transportation
-
3.8%
5,800
Atlas
Corp.
88,102
200
Union
Pacific
Corp.
39,202
127,304
Utilities
-
1.0%
1,000
OGE
Energy
Corp.
32,960
Total
Common
Stock
(Cost
$2,628,463)
3,298,992
Shares
Security
Description
Value
Money
Market
Fund
-
2.6%
88,410
First
American
Government
Obligations
Fund,
Class X,
0.04%
(a)
(Cost
$88,410)
88,410
Investments,
at
value
-
100.0%
(Cost
$2,716,873)
$
3,387,402
Other
Assets
&
Liabilities,
Net
-
0.0%
1,166
Net
Assets
-
100.0%
$
3,388,568
ADR
American
Depositary
Receipt
PLC
Public
Limited
Company
REIT
Real
Estate
Investment
Trust
(a)
Dividend
yield
changes
daily
to
reflect
current
market
conditions.
Rate
was
the
quoted
yield
as
of
September
30,
2021.
Valuation
Inputs
Investments
in
Securities
Level
1
-
Quoted
Prices
$
3,298,992
Level
2
-
Other
Significant
Observable
Inputs
88,410
Level
3
-
Significant
Unobservable
Inputs
–
Total
$
3,387,402
BAYWOOD
VALUE
PLUS
FUND
SCHEDULE
OF
INVESTMENTS
September
30,
2021
6
See
Notes
to
Financial
Statements.
PORTFOLIO
HOLDINGS
(Unaudited)
%
of
Total
Investments
Basic
Materials
9.1%
Capital
Goods
/
Industrials
6.0%
Communication
Services
6.8%
Consumer
Discretionary
5.0%
Consumer
Staples
4.9%
Energy
11.1%
Financials
18.1%
Health
Care
16.1%
Real
Estate
4.0%
Technology
11.5%
Transportation
3.8%
Utilities
1.0%
Money
Market
Fund
2.6%
100.0%
BAYWOOD
VALUE
PLUS
FUND
STATEMENT
OF
ASSETS
AND
LIABILITIES
September
30,
2021
7
See
Notes
to
Financial
Statements.
ASSETS
Investments,
at
value
(Cost
$2,716,873)
$
3,387,402
Receivables:
Fund
shares
sold
1,740
Dividends
5,267
From
investment
advisor
15,113
Prepaid
expenses
11,412
Total
Assets
3,420,934
LIABILITIES
Accrued
Liabilities:
Fund
services
fees
4,605
Other
expenses
27,761
Total
Liabilities
32,366
NET
ASSETS
$
3,388,568
COMPONENTS
OF
NET
ASSETS
Paid-in
capital
$
2,453,104
Distributable
earnings
935,464
NET
ASSETS
$
3,388,568
SHARES
OF
BENEFICIAL
INTEREST
AT
NO
PAR
VALUE
(UNLIMITED
SHARES
AUTHORIZED)
169,148
NET
ASSET
VALUE,
OFFERING
AND
REDEMPTION
PRICE
PER
SHARE
$
20.03
BAYWOOD
VALUE
PLUS
FUND
STATEMENT
OF
OPERATIONS
YEAR
ENDED
SEPTEMBER
30,
2021
8
See
Notes
to
Financial
Statements.
INVESTMENT
INCOME
Dividend
income
(Net
of
foreign
withholding
taxes
of
$931)
$
101,329
Total
Investment
Income
101,329
EXPENSES
Investment
advisor
fees
16,387
Fund
services
fees
58,214
Transfer
agent
fees
18,180
Custodian
fees
5,000
Registration
fees
20,032
Professional
fees
32,946
Trustees'
fees
and
expenses
4,409
Other
expenses
30,383
Total
Expenses
185,551
Fees
waived
and
expenses
reimbursed
(162,608)
Net
Expenses
22,943
NET
INVESTMENT
INCOME
78,386
NET
REALIZED
AND
UNREALIZED
GAIN
(LOSS)
Net
realized
gain
on
investments
281,849
Net
change
in
unrealized
appreciation
(depreciation)
on
investments
592,957
NET
REALIZED
AND
UNREALIZED
GAIN
874,806
INCREASE
IN
NET
ASSETS
RESULTING
FROM
OPERATIONS
$
953,192
BAYWOOD
VALUE
PLUS
FUND
STATEMENTS
OF
CHANGES
IN
NET
ASSETS
9
See
Notes
to
Financial
Statements.
For
the
Years
Ended
September
30,
2021
2020
OPERATIONS
Net
investment
income
$
78,386
$
66,419
Net
realized
gain
(loss)
281,849
(19,145)
Net
change
in
unrealized
appreciation
(depreciation)
592,957
(289,212)
Increase
(Decrease)
in
Net
Assets
Resulting
from
Operations
953,192
(241,938)
DISTRIBUTIONS
TO
SHAREHOLDERS
Total
Distributions
Paid
(71,909)
(100,190)
CAPITAL
SHARE
TRANSACTIONS
Sale
of
shares
97,772
63,897
Reinvestment
of
distributions
71,883
99,997
Redemption
of
shares
(250,617)
(35,799)
Increase
(Decrease)
in
Net
Assets
from
Capital
Share
Transactions
(80,962)
128,095
Increase
(Decrease)
in
Net
Assets
800,321
(214,033)
NET
ASSETS
Beginning
of
Year
2,588,247
2,802,280
End
of
Year
$
3,388,568
$
2,588,247
SHARE
TRANSACTIONS
Sale
of
shares
5,147
4,328
Reinvestment
of
distributions
3,675
6,354
Redemption
of
shares
(12,688)
(2,174)
Increase
(Decrease)
in
Shares
(3,866)
8,508
BAYWOOD
VALUE
PLUS
FUND
FINANCIAL
HIGHLIGHTS
10
See
Notes
to
Financial
Statements.
These
financial
highlights
reflect
selected
data
for
a
share
outstanding
throughout
each
year.
For
the
Years
Ended
September
30,
2021
2020
2019
2018
2017
INSTITUTIONAL
SHARES
NET
ASSET
VALUE,
Beginning
of
Year
$
14.96
$
17.03
$
18.63
$
17.36
$
15.59
INVESTMENT
OPERATIONS
Net
investment
income
(a)
0.45
0.39
0.44
0.38
0.38
Net
realized
and
unrealized
gain
(loss)
5.04
(1.86)
(0.84)
1.76
2.02
Total
from
Investment
Operations
5.49
(1.47)
(0.40)
2.14
2.40
DISTRIBUTIONS
TO
SHAREHOLDERS
FROM
Net
investment
income
(0.42)
(0.38)
(0.39)
(0.35)
(0.36)
Net
realized
gain
–
(0.22)
(0.81)
(0.52)
(0.27)
Total
Distributions
to
Shareholders
(0.42)
(0.60)
(1.20)
(0.87)
(0.63)
NET
ASSET
VALUE,
End
of
Year
$
20.03
$
14.96
$
17.03
$
18.63
$
17.36
TOTAL
RETURN
36.80%
(8.77)%
(1.55)%
12.57%
15.60%
RATIOS/SUPPLEMENTARY
DATA
Net
Assets
at
End
of
Year
(000s
omitted)
$
3,389
$
2,588
$
2,802
$
936
$
711
Ratios
to
Average
Net
Assets:
Net
investment
income
2.39%
2.51%
2.66%
2.10%
2.28%
Net
expenses
0.70%
0.70%
0.70%
0.70%
0.70%
Gross
expenses
(b)
5.66%
6.68%
8.13%
8.83%
11.16%
PORTFOLIO
TURNOVER
RATE
35%
40%
49%
34%
48%
(a)
Calculated
based
on
average
shares
outstanding
during
each
year.
(b)
Reflects
the
expense
ratio
excluding
any
waivers
and/or
reimbursements.
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
(Unaudited)
September
30,
2021
11
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
twelve
months
ended
September
30,
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
30+
years
of
managing
to
our
clients’
diverse
and
changing
desires.
We
have
managed
client
portfolios
alongside
changes
in
the
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
a
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
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.
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.
In
our
view,
this
sets
a
few
dangerous
conditions.
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
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.
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
(Unaudited)
September
30,
2021
12
As
we
have
previously
expressed,
we
see
similarity
to
the
late
1990s
in
that
growth
outperformed
value
considerably
in
both
periods.
What
we
witnessed
until
recently
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
more
recently
shown
its
preference
for
companies
previously
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
considerably,
in
particular
the
year-ending
September
30,
2021.
The
driving
force
behind
the
outperformance
are
mostly
related
to
the
repositioning
we
have
continued
to
make
in
the
Fund
since
the
pandemic
began.
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
fiscal
year,
the
largest
source
of
outperformance
can
be
attributed
to
stock
selection.
Stock
selection
in
IT,
basic
materials,
energy
and
communication
services
and
consumer
discretionary
were
responsible
for
the
majority
of
the
outperformance.
The
largest
contributors
were
Kontoor
Brands
and
AIG,
both
of
which
more
than
doubled
over
the
past
year,
as
well
as
Atlas
Corp.
All
three
positions
we
added
to
substantially
over
the
year.
Other
top
performing
stocks
were
Devon,
NetApp,
Discovery
and
Texas
Pacific
Land
Corp,
all
of
which
more
than
doubled
in
the
time
period.
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.
Since
then
we
have
continued
to
find
opportunities
in
the
market
for
companies
that
are
still
mostly
ignored
by
the
market.
During
the
year
we
added
Kraft
Heinz,
Manpower,
IBM,
Steel
Dynamics,
Chubb,
CME,
NVent,
International
Flavors
and
Fragrances
and
Cardinal
Health.
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
portfolio
of
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.
Nvent
is
a
recent
spin-off
of
Pentair,
which
itself
was
a
spin-off
of
Tyco.
Like
most
of
the
pieces
spun
out
of
Tyco
over
the
last
decade,
it
is
a
market
leader
in
each
of
its
segments.
It
supplies
mostly
passive
electrical
components
to
the
industrial
and
technology
complex.
It
has
market-leading
margins
and
a
post-pandemic
growth
profile
that
we
believe
is
not
fully
priced
in.
While
the
prices
of
most
stocks
in
the
industrial
sector
have
rebounded
from
the
lows
of
the
pandemic
and
are
now
trading
near
all-time
highs,
there
are
still
companies
like
Nvent
whose
price
still
remains
depressed
despite
having
an
earnings
growth
profile
at
or
better
than
many
of
its
peers.
That
it
has
top
market
share
and
higher-than-average
margins
has
made
it
all
the
more
attractive.
In
favor
of
these
additions
we
exited
Discovery
Communications,
Albemarle,
Radian,
First
American
Financial,
Intel
and
Gilead
Sciences.
The
first
three
were
successful
investments
by
any
metric.
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
year,
its
priced
rocketed
nearly
150%
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,
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
A
MESSAGE
TO
OUR
SHAREHOLDERS
(Unaudited)
September
30,
2021
13
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.
We
exited
the
remainder
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
began
in
2000.
____________________________________________________________________________
Current
and
future
portfolio
holdings
are
subject
to
change
and
risk.
Please
see
the
schedule
of
investments
section
in
this
report
for
a
full
listing
of
the
Fund’s
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
PERFORMANCE
CHART
AND
ANALYSIS
(Unaudited)
September
30,
2021
14
The
following
chart
reflects
the
change
in
the
value
of
a
hypothetical
$10,000
investment,
including
reinvested
dividends
and
distributions,
in
the
Baywood
Socially
Responsible
Fund
(the
“Fund”)
compared
with
the
performance
of
the
benchmark,
Morningstar
U.S.
Large
Value
TR
Index,
since
inception.
The
Morningstar
US
Large
Value
TR
Index
measures
the
performance
of
large-cap
stocks
with
relatively
low
prices
given
anticipated
per
share
earnings,
book
value,
cash
flow,
sales
and
dividends.
The
total
return
of
the
index
includes
the
reinvestment
of
dividends
and
income.
The
total
return
of
the
Fund
includes
operating
expenses
that
reduce
returns,
while
the
total
return
of
the
index
does
not
include
expenses.
The
Fund
is
professionally
managed,
while
the
index
is
unmanaged
and
is
not
available
for
investment.
Comparison
of
Change
in
Value
of
a
$10,000
Investment
Baywood
Socially
Responsible
Fund
vs.
Morningstar
US
Large
Value
TR
Index
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.
For
the
most
recent
month-end
performance,
please
call
(855)
409-2297.
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
year,
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.
Average
Annual
Total
Returns
Periods
Ended
September
30,
2021
One
Year
Five
Year
Ten
Year
Since
Inception
01/03/05
Baywood
Socially
Responsible
Fund
43.10%
11.03%
11.04%
6.30%
Morningstar
US
Large
Value
TR
Index
29.39%
10.47%
12.38%
7.22%
*
Performance
for
Institutional
Shares
for
periods
prior
to
January
8,
2016,
reflects
the
performance
and
expenses
of
City
National
Rochdale
Socially
Responsible
Equity
Fund,
a
series
of
City
National
Rochdale
Funds
(the
“Predecessor
Fund”).
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
SCHEDULE
OF
INVESTMENTS
September
30,
2021
15
See
Notes
to
Financial
Statements.
The
following
is
a
summary
of
the
inputs
used
to
value
the
Fund's instruments
as
of
September
30,
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
-
96.0%
Basic
Materials
-
7.2%
1,000
International
Flavors
&
Fragrances,
Inc.
$
133,720
3,400
Nutrien,
Ltd.
220,422
500
Packaging
Corp.
of
America
68,720
1,100
Steel
Dynamics,
Inc.
64,328
487,190
Capital
Goods
/
Industrials
-
4.9%
450
Cummins,
Inc.
101,052
900
ManpowerGroup,
Inc.
97,452
4,200
nVent
Electric
PLC
135,786
334,290
Communication
Services
-
7.6%
3,100
Comcast
Corp.,
Class A
173,383
900
The
Walt
Disney
Co.
(a)
152,253
3,500
Verizon
Communications,
Inc.
189,035
514,671
Consumer
Discretionary
-
6.1%
500
Aptiv
PLC
(a)
74,485
1,000
Genuine
Parts
Co.
121,230
4,300
Kontoor
Brands,
Inc.
214,785
410,500
Consumer
Staples
-
4.0%
1,800
Mondelez
International,
Inc.,
Class A
104,724
500
PepsiCo.,
Inc.
75,205
2,400
The
Kraft
Heinz
Co.
88,368
268,297
Energy
-
7.0%
4,500
Devon
Energy
Corp.
159,795
5,500
Kinder
Morgan,
Inc.
92,015
2,100
Schlumberger
NV
62,244
130
Texas
Pacific
Land
Corp.
157,217
471,271
Financials
-
21.3%
3,300
Air
Lease
Corp.
129,822
1,400
American
Express
Co.
234,542
4,300
American
International
Group,
Inc.
236,027
2,100
Bank
of
America
Corp.
89,145
500
Berkshire
Hathaway,
Inc.,
Class B
(a)
136,470
1,600
BOK
Financial
Corp.
143,280
4,683
Brookfield
Asset
Management,
Inc.,
Class A
250,587
500
Chubb,
Ltd.
86,740
700
CME
Group,
Inc.
135,366
1,441,979
Health
Care
-
15.1%
700
Amgen,
Inc.
148,855
1,200
AstraZeneca
PLC,
ADR
72,072
850
Becton
Dickinson
and
Co.
208,947
2,200
Cardinal
Health,
Inc.
108,812
1,628
Koninklijke
Philips
NV,
ADR
72,348
450
Laboratory
Corp.
of
America
Holdings
(a)
126,648
800
Medtronic
PLC
100,280
300
Regeneron
Pharmaceuticals,
Inc.
(a)
181,554
1,019,516
Real
Estate
-
2.7%
4,020
VEREIT,
Inc.
REIT
181,825
Technology
-
12.7%
300
Arista
Networks,
Inc.
(a)
103,092
2,600
Cisco
Systems,
Inc./Delaware
141,518
4,300
Corning,
Inc.
156,907
900
International
Business
Machines
Corp.
125,037
1,300
NetApp,
Inc.
116,688
700
NXP
Semiconductors
NV
137,109
Shares
Security
Description
Value
Technology
-
12.7%
(continued)
600
TE
Connectivity,
Ltd.
$
82,332
862,683
Transportation
-
7.4%
2,000
AP
Moller
-
Maersk
A/S,
ADR
27,080
21,100
Atlas
Corp.
320,509
500
Union
Pacific
Corp.
98,005
300
United
Parcel
Service,
Inc.,
Class B
54,630
500,224
Total
Common
Stock
(Cost
$4,684,677)
6,492,446
Shares
Security
Description
Value
Money
Market
Fund
-
4.9%
332,657
First
American
Government
Obligations
Fund,
Class X,
0.04%
(b)
(Cost
$332,657)
332,657
Investments,
at
value
-
100.9%
(Cost
$5,017,334)
$
6,825,103
Other
Assets
&
Liabilities,
Net
-
(0.9)%
(58,784)
Net
Assets
-
100.0%
$
6,766,319
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
September
30,
2021.
Valuation
Inputs
Investments
in
Securities
Level
1
-
Quoted
Prices
$
6,492,446
Level
2
-
Other
Significant
Observable
Inputs
332,657
Level
3
-
Significant
Unobservable
Inputs
–
Total
$
6,825,103��
PORTFOLIO
HOLDINGS
(Unaudited)
%
of
Total
Investments
Basic
Materials
7.1%
Capital
Goods
/
Industrials
4.9%
Communication
Services
7.6%
Consumer
Discretionary
6.0%
Consumer
Staples
3.9%
Energy
6.9%
Financials
21.1%
Health
Care
14.9%
Real
Estate
2.7%
Technology
12.7%
Transportation
7.3%
Money
Market
Fund
4.9%
100.0%
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
STATEMENT
OF
ASSETS
AND
LIABILITIES
September
30,
2021
16
See
Notes
to
Financial
Statements.
ASSETS
Investments,
at
value
(Cost
$5,017,334)
$
6,825,103
Receivables:
Fund
shares
sold
1,343
Dividends
9,906
From
investment
advisor
8,813
Prepaid
expenses
8,617
Total
Assets
6,853,782
LIABILITIES
Payables:
Investment
securities
purchased
53,518
Fund
shares
redeemed
270
Accrued
Liabilities:
Fund
services
fees
5,175
Other
expenses
28,500
Total
Liabilities
87,463
NET
ASSETS
$
6,766,319
COMPONENTS
OF
NET
ASSETS
Paid-in
capital
$
4,823,191
Distributable
earnings
1,943,128
NET
ASSETS
$
6,766,319
SHARES
OF
BENEFICIAL
INTEREST
AT
NO
PAR
VALUE
(UNLIMITED
SHARES
AUTHORIZED)
472,575
NET
ASSET
VALUE,
OFFERING
AND
REDEMPTION
PRICE
PER
SHARE
$
14.32
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
STATEMENT
OF
OPERATIONS
YEAR
ENDED
SEPTEMBER
30,
2021
17
See
Notes
to
Financial
Statements.
INVESTMENT
INCOME
Dividend
income
(Net
of
foreign
withholding
taxes
of
$2,216)
$
126,711
Total
Investment
Income
126,711
EXPENSES
Investment
advisor
fees
40,343
Fund
services
fees
63,536
Transfer
agent
fees
18,180
Custodian
fees
5,000
Registration
fees
21,312
Professional
fees
32,670
Trustees'
fees
and
expenses
4,514
Other
expenses
31,465
Total
Expenses
217,020
Fees
waived
and
expenses
reimbursed
(165,727)
Net
Expenses
51,293
NET
INVESTMENT
INCOME
75,418
NET
REALIZED
AND
UNREALIZED
GAIN
(LOSS)
Net
realized
gain
on
investments
202,985
Net
change
in
unrealized
appreciation
(depreciation)
on
investments
1,427,701
NET
REALIZED
AND
UNREALIZED
GAIN
1,630,686
INCREASE
IN
NET
ASSETS
RESULTING
FROM
OPERATIONS
$
1,706,104
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
STATEMENTS
OF
CHANGES
IN
NET
ASSETS
18
See
Notes
to
Financial
Statements.
For
the
Years
Ended
September
30,
2021
2020
OPERATIONS
Net
investment
income
$
75,418
$
55,976
Net
realized
gain
202,985
11,456
Net
change
in
unrealized
appreciation
(depreciation)
1,427,701
(382,593)
Increase
(Decrease)
in
Net
Assets
Resulting
from
Operations
1,706,104
(315,161)
DISTRIBUTIONS
TO
SHAREHOLDERS
Total
Distributions
Paid
(94,786)
(108,179)
CAPITAL
SHARE
TRANSACTIONS
Sale
of
shares
2,056,628
741,913
Reinvestment
of
distributions
94,123
105,418
Redemption
of
shares
(621,975)
(622,149)
Increase
in
Net
Assets
from
Capital
Share
Transactions
1,528,776
225,182
Increase
(Decrease)
in
Net
Assets
3,140,094
(198,158)
NET
ASSETS
Beginning
of
Year
3,626,225
3,824,383
End
of
Year
$
6,766,319
$
3,626,225
SHARE
TRANSACTIONS
Sale
of
shares
157,203
68,512
Reinvestment
of
distributions
7,174
10,013
Redemption
of
shares
(47,959)
(63,381)
Increase
in
Shares
116,418
15,144
BAYWOOD
SOCIALLY
RESPONSIBLE
FUND
FINANCIAL
HIGHLIGHTS
19
See
Notes
to
Financial
Statements.
These
financial
highlights
reflect
selected
data
for
a
share
outstanding
throughout
each
year.
For
the
Years
Ended
September
30,
2021
2020
2019
2018
2017
INSTITUTIONAL
SHARES
NET
ASSET
VALUE,
Beginning
of
Year
$
10.18
$
11.21
$
12.60
$
11.43
$
10.15
INVESTMENT
OPERATIONS
Net
investment
income
(a)
0.18
0.15
0.18
0.12
0.10
Net
realized
and
unrealized
gain
(loss)
4.19
(0.90)
(0.53)
1.31
1.33
Total
from
Investment
Operations
4.37
(0.75)
(0.35)
1.43
1.43
DISTRIBUTIONS
TO
SHAREHOLDERS
FROM
Net
investment
income
(0.14)
(0.15)
(0.16)
(0.10)
(0.15)
Net
realized
gain
(0.09)
(0.13)
(0.88)
(0.16)
–
Total
Distributions
to
Shareholders
(0.23)
(0.28)
(1.04)
(0.26)
(0.15)
NET
ASSET
VALUE,
End
of
Year
$
14.32
$
10.18
$
11.21
$
12.60
$
11.43
TOTAL
RETURN
43.10%
(6.67)%
(1.79)%
12.66%
14.18%
RATIOS/SUPPLEMENTARY
DATA
Net
Assets
at
End
of
Year
(000s
omitted)
$
6,766
$
3,626
$
3,824
$
1,699
$
5,404
Ratios
to
Average
Net
Assets:
Net
investment
income
1.31%
1.45%
1.60%
1.01%
0.92%
Net
expenses
0.89%
0.89%
0.89%
0.89%
0.89%
Gross
expenses
(b)
3.76%
5.10%
5.78%
3.03%
2.64%
PORTFOLIO
TURNOVER
RATE
15%
30%
33%
31%
42%
(a)
Calculated
based
on
average
shares
outstanding
during
each
year.
(b)
Reflects
the
expense
ratio
excluding
any
waivers
and/or
reimbursements.
BAYWOOD
FUNDS
NOTES
TO
FINANCIAL
STATEMENTS
September
30,
2021
20
Note
1.
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.
Note
2.
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
year.
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
September
30,
2021
21
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
September
30,
2021,
for
each
Fund’s
investments
is
included
at
the
end
of
each
Fund’s
Schedule
of
Investments.
REITs
–
Each
Fund
has
made
certain
investments
in
real
estate
investment
trusts
(“REITs”)
which
pay
dividends
to
their
shareholders
based
upon
funds
available
from
operations.
It
is
quite
common
for
these
dividends
to
exceed
the
REIT’s
taxable
earnings
and
profits
resulting
in
the
excess
portion
of
such
dividends
being
designated
as
a
return
of
capital.
Each
Fund
may
include
the
gross
dividends
from
such
REITs
in
income
or
may
utilize
estimates
of
any
potential
REIT
dividend
reclassifications
in
each
Fund’s
annual
distributions
to
shareholders
and,
accordingly,
a
portion
of
each
Fund’s
distributions
may
be
designated
as
a
return
of
capital,
require
reclassification,
or
be
under
distributed
on
an
excise
basis
and
subject
to
excise
tax.
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
BAYWOOD
FUNDS
NOTES
TO
FINANCIAL
STATEMENTS
September
30,
2021
22
for
a
period
of
three
fiscal
years
after
they
are
filed.
As
of
September
30,
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.
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.
Note
3.
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.
Note
4.
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
year
ended
September
30,
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
Investment
Adviser
Fees
Waived
Investment
Adviser
Expenses
Reimbursed
Other
Waivers
Total
Fees
Waived
and
Expenses
Reimbursed
Baywood
Value
Plus
Fund
$
16,387
$
124,096
$
22,125
$
162,608
Baywood
Socially
Responsible
Fund
40,343
103,259
22,125
165,727
BAYWOOD
FUNDS
NOTES
TO
FINANCIAL
STATEMENTS
September
30,
2021
23
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
September
30,
2021,
$410,254
and
$420,175
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.
Note
5.
Security
Transactions
The
cost
of
purchases
and
proceeds
from
sales
of
investment
securities
(including
maturities),
other
than
short-term
investments
during
the
year
ended
September
30,
2021
were
as
follows:
Note
6.
Federal
Income
Tax
As
of
September
30,
2021
,
the
cost
for
federal
income
tax
purposes
and
the
components
of
net
unrealized
appreciation
were
as
follows:
Distributions
paid
during
the
fiscal
years
ended
as
noted
were
characterized
for
tax
purposes
as
follows:
As
of
September
30,
2021,
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.
On
the
Statements
of
Assets
and
Liabilities,
as
a
result
of
permanent
book
to
tax
differences,
certain
amounts
have
been
reclassified
for
the
year
ended
September
30,
2021.
The
following
reclassifications
were
the
result
of
equity
return
of
capital,
REITS,
distribution
classifications
and
QEF
income
and
have
no
impact
on
the
net
assets
of
each
Fund.
Note
7.
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
$1,092,029
$
1,171,762
Baywood
Socially
Responsible
Fund
2,132,413
829,334
Tax
Cost
of
Investments
Gross
Unrealized
Appreciation
Gross
Unrealized
Depreciation
Net
Unrealized
Appreciation
Baywood
Value
Plus
Fund
$
2,711,684
$
716,189
$
(40,471)
$
675,718
Baywood
Socially
Responsible
Fund
5,069,571
1,823,457
(67,925)
1,755,532
Ordinary
Income
Long-Term
Capital
Gain
Total
Baywood
Value
Plus
Fund
2021
$
71,909
$
–
$
71,909
2020
63,833
36,357
100,190
Baywood
Socially
Responsible
Fund
2021
62,096
32,690
94,786
2020
50,356
57,823
108,179
Undistributed
Ordinary
Income
Undistributed
Long-Term
Gain
Unrealized
Appreciation
Total
Baywood
Value
Plus
Fund
$
2,591
$
257,155
$
675,718
$
935,464
Baywood
Socially
Responsible
Fund
86,049
101,547
1,755,532
1,943,128
For
the
year
ended
September
30,
2021
Distributable
Earnings
Paid-in-Capital
Baywood
Value
Plus
Fund
$
1,951
$
(1,951)
Baywood
Socially
Responsible
Fund
274
(274)
REPORT
OF
INDEPENDENT
REGISTERED
PUBLIC
ACCOUNTING
FIRM
24
To
the
Shareholders
of
Baywood
Value
Plus
Fund
and
Baywood
Socially
Responsible
Fund
and
the
Board
of
Trustees
of
Forum
Funds
II
Opinion
on
the
Financial
Statements
We
have
audited
the
accompanying
statements
of
assets
and
liabilities
of
Baywood
Value
Plus
Fund
and
Baywood
Socially
Responsible
Fund,
each
a
series
of
shares
of
beneficial
interest
in
Forum
Funds
II
(the
“Funds”),
including
the
schedules
of
investments,
as
of
September
30,
2021,
and
the
related
statements
of
operations
for
the
year
then
ended,
the
statements
of
changes
in
net
assets
for
each
of
the
years
in
the
two-year
period
then
ended,
the
financial
highlights
for
each
of
the
years
in
the
five-year
period
then
ended,
and
the
related
notes
(collectively
referred
to
as
the
“financial
statements”).
In
our
opinion,
the
financial
statements
present
fairly,
in
all
material
respects,
the
financial
position
of
the
Funds
as
of
September
30,
2021,
and
the
results
of
their
operations
for
the
year
then
ended,
the
changes
in
their
net
assets
for
each
of
the
years
in
the
two-year
period
then
ended
and
their
financial
highlights
for
each
of
the
years
in
the
five-year
period
then
ended,
in
conformity
with
accounting
principles
generally
accepted
in
the
United
States
of
America.
Basis
for
Opinion
These
financial
statements
are
the
responsibility
of
the
Funds'
management.
Our
responsibility
is
to
express
an
opinion
on
the
Funds’
financial
statements
based
on
our
audits.
We
are
a
public
accounting
firm
registered
with
the
Public
Company
Accounting
Oversight
Board
(United
States)
(“PCAOB”)
and
are
required
to
be
independent
with
respect
to
the
Funds
in
accordance
with
the
U.S.
federal
securities
law
and
the
applicable
rules
and
regulations
of
the
Securities
and
Exchange
Commission
and
the
PCAOB.
We
conducted
our
audits
in
accordance
with
the
standards
of
the
PCAOB.
Those
standards
require
that
we
plan
and
perform
the
audits
to
obtain
reasonable
assurance
about
whether
the
financial
statements
are
free
of
material
misstatement,
whether
due
to
error
or
fraud.
The
Funds
are
not
required
to
have,
nor
were
we
engaged
to
perform,
an
audit
of
their
internal
control
over
financial
reporting.
As
part
of
our
audits
we
are
required
to
obtain
an
understanding
of
internal
control
over
financial
reporting
but
not
for
the
purpose
of
expressing
an
opinion
on
the
effectiveness
of
the
Funds’
internal
control
over
financial
reporting.
Accordingly,
we
express
no
such
opinion.
Our
audits
included
performing
procedures
to
assess
the
risk
of
material
misstatement
of
the
financial
statements,
whether
due
to
error
or
fraud,
and
performing
procedures
that
respond
to
those
risks.
Such
procedures
included
examining,
on
a
test
basis,
evidence
regarding
the
amounts
and
disclosures
in
the
financial
statements.
Our
procedures
included
confirmation
of
securities
owned
as
of
September
30,
2021
by
correspondence
with
the
custodian
and
brokers.
Our
audits
also
included
evaluating
the
accounting
principles
used
and
significant
estimates
made
by
management,
as
well
as
evaluating
the
overall
presentation
of
the
financial
statements.
We
believe
that
our
audits
provide
a
reasonable
basis
for
our
opinion.
BBD,
LLP
We
have
served
as
the
auditor
of
one
or
more
of
the
Funds
in
the
Forum
Funds
II
since
2013.
Philadelphia,
Pennsylvania
November
24,
2021
Baywood
Funds
ADDITIONAL
INFORMATION
(Unaudited)
September
30,
2021
25
Investment
Advisory
Agreement
Approval
At
the
September
10,
2021
Board
meeting
(“September
meeting”),
the
Board,
including
the
Independent
Trustees,
met
in
person
and
considered
the
approval
of
the
continuance
of
the
investment
advisory
agreement
between
the
Advisor
and
the
Trust
pertaining
to
the
Funds
(the
“Advisory
Agreement”).
In
preparation
for
the
September
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
to
a
letter
circulated
on
the
Board's
behalf
concerning
the
Adviser’s
personnel,
operations,
financial
condition,
performance,
and
services
provided
to
the
Funds
by
the
Adviser.
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.
The
Independent
Trustees
also
met
in
executive
session
with
Independent
Legal
Counsel
while
deliberating.
At
the
September
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
senior
representatives
of
the
Adviser
regarding
the
personnel,
operations,
and
financial
condition
of
the
Adviser,
the
Board
considered
the
quality
of
services
provided
by
the
Adviser
under
the
Advisory
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
with
principal
responsibility
for
the
Funds,
as
well
as
the
investment
philosophy
and
decision-making
process
of
those
professionals
and
the
capability
of
the
Adviser’s
senior
management
and
staff.
The
Board
considered
also
the
adequacy
of
the
Adviser’s
resources
and
noted
the
Adviser’s
representations
that
the
firm
is
in
stable
financial
condition
and
has
the
operational
capability
and
the
necessary
staffing
and
experience
to
continue
providing
high-quality
investment
advisory
services
to
the
Funds.
Based
on
the
presentation
and
the
materials
provided
by
the
Adviser
in
connection
with
the
Board’s
consideration
of
the
renewal
of
the
Advisory
Agreement,
among
other
relevant
factors,
the
Board
concluded
that,
overall,
it
was
satisfied
with
the
nature,
extent
and
quality
of
services
provided
to
the
Funds
under
the
Advisory
Agreement.
Performance
In
connection
with
a
presentation
by
the
Adviser
regarding
its
approach
to
managing
the
Funds,
including
the
investment
objective
and
strategy
of
each
Fund,
the
Board
reviewed
the
performance
of
each
Fund
compared
to
their
respective
primary
benchmarks
and
compared
to
independent
peer
groups
of
funds
identified
by
a
third-party,
independent
service
provider,
Strategic
Insight,
Inc.
(“Strategic
Insight”),
believed
to
have
characteristics
similar
to
those
of
the
Funds.
The
Board
observed
that
the
Value
Plus
Fund
outperformed
its
primary
benchmark
index,
the
Morningstar
US
Large
Value
Total
Return
Index,
for
the
one-year
period
ended
June
30,
2021
and
for
the
period
since
the
Value
Plus
Fund’s
inception
on
June
27,
2008,
and
underperformed
the
primary
benchmark
index
for
the
three-,
five-,
and
10-year
periods
ended
June
30,
2021.
The
Board
also
observed
that,
based
on
the
information
provided
by
Strategic
Insight,
the
Value
Plus
Fund
underperformed
the
median
of
its
Strategic
Insight
peers
for
the
one-,
three-,
and
five-year
periods
ended
June
30,
2021.
The
Board
noted
the
Adviser’s
representation
that
the
Value
Plus
Fund’s
relative
underperformance
could
be
attributed,
at
least
in
part,
to
the
Value
Plus
Fund’s
active
management
style
and
value
bias,
which
remained
out
of
favor
in
the
market
relative
to
passive
investment
and
growth-oriented
strategies.
The
Board
also
noted
the
Adviser’s
representation
that
the
Value
Plus
Fund’s
emphasis
on
dividend-paying
and
general
“high
quality”
investments
will
tend
to
underperform
in
periods
of
high
absolute
benchmark
returns,
such
as
the
market
environment
of
the
last
10
years,
and
outperform
in
periods
of
low/negative
benchmark
returns
and,
as
such,
the
Adviser
tends
to
evaluate
performance
over
a
full
market
cycle.
The
Board
observed
that
the
Socially
Responsible
Fund
outperformed
its
primary
benchmark
index,
the
Morningstar
US
Large
Value
Total
Return
Index,
for
the
one-,
three-,
and
five-year
periods
ended
June
30,
2021,
and
underperformed
its
primary
benchmark
index
for
the
ten-year
period
ended
June
30,
2021,
as
well
as
for
the
period
since
the
Socially
Responsible
Fund’s
inception
on
January
3,
2005.
The
Board
observed
that
the
Socially
Responsible
Fund
outperformed
the
median
of
its
Strategic
Insight
peers
for
the
one-,
three-,
and
five-year
periods
ended
June
30,
2021.
The
Board
noted
the
Adviser’s
representation
that
the
Socially
Responsible
Fund’s
relative
outperformance
during
the
short
term
could
be
attributed,
at
least
in
part,
to
style
specialization,
as
the
market
favored
environmental,
social,
and
governance
(“ESG”)
investing
during
the
period.
The
Board
also
noted
the
Adviser’s
representation
that
the
Socially
Responsible
Fund’s
underperformance
over
the
longer
term
could
be
attributed,
at
least
in
part,
to
a
significant
shareholder
redemption
that
occurred
prior
to
the
Socially
Responsible
Fund’s
reorganization
into
the
Trust
at
the
beginning
of
2016,
which
disproportionately
impacted
the
Socially
Responsible
Fund’s
long-term
performance.
The
Board
further
noted
the
Adviser’s
representation
that
the
Morningstar
US
Large
Baywood
Funds
ADDITIONAL
INFORMATION
(Unaudited)
September
30,
2021
26
Value
Total
Return
Index
did
not
have
the
same
socially
responsible
investment
constraints
as
those
of
the
Socially
Responsible
Fund,
which
could
result
in
performance
variance
versus
the
index.
In
consideration
of
the
Funds’
investment
strategies
and
the
foregoing
performance
information,
among
other
considerations,
the
Board
determined
that
the
Funds
could
benefit
from
the
Adviser’s
continued
management
of
each
Fund.
Compensation
The
Board
evaluated
the
Adviser’s
compensation
for
providing
advisory
services
to
the
Funds
and
analyzed
comparative
information
on
actual
advisory
fee
rates
and
actual
total
expense
ratios
of
the
Funds
as
compared
to
those
of
their
respective
Strategic
Insight
peer
groups.
The
Board
observed
that
the
Adviser’s
net
management
fee
rates
and
net
total
expense
ratios
for
each
of
the
Funds
were
less
than
the
medians
of
their
respective
Strategic
Insight
peer
groups.
Based
on
the
foregoing,
and
other
relevant
considerations,
the
Board
concluded
that
the
Adviser’s
advisory
fee
rates
charged
to
the
Funds
were
reasonable.
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
Funds.
In
this
regard,
the
Board
considered
the
Adviser’s
resources
devoted
to
the
Funds,
as
well
as
the
information
provided
by
the
Adviser
regarding
the
costs
and
profitability
of
its
Fund
activities.
The
Board
noted
the
Adviser’s
representation
that,
as
a
result
of
the
contractual
expense
limitation
arrangement
in
place
for
each
of
the
Funds,
the
Adviser
was
not
earning
any
profit
from
its
mutual
fund
operations
but
that
the
Adviser
was
willing
to
continue
subsidizing
the
Funds
in
an
effort
to
support
growth
initiatives.
Based
on
these
and
other
applicable
considerations,
including
financial
statements
from
the
Adviser
indicating
its
profitability
and
expenses
from
overall
operations,
the
Board
concluded
that
the
Adviser’s
costs
of
services
and
profits
attributable
to
management
of
the
Funds
appeared
to
be
reasonable
in
light
of
the
nature,
extent
and
quality
of
the
services
provided
by
the
Adviser.
Economies
of
Scale
The
Board
evaluated
whether
the
Funds
were
benefitting,
or
may
benefit
in
the
future,
from
any
economies
of
scale.
In
this
respect,
the
Board
considered
the
Funds’
fee
structures,
asset
sizes,
and
net
expense
ratios.
The
Board
noted
the
Adviser’s
representation
that
economies
of
scale
could
be
experienced
if
the
Funds
were
to
reach
significantly
higher
asset
levels
but
that,
in
light
of
the
Funds’
current
asset
levels
and
the
Adviser’s
ongoing
subsidization
of
the
Funds,
breakpoints
in
the
advisory
fee
were
not
believed
by
the
Adviser
to
be
appropriate
at
this
time.
Based
on
the
foregoing
information
and
other
applicable
considerations,
the
Board
concluded
that
the
asset
levels
of
the
Funds
were
not
consistent
with
the
existence
of
economies
of
scale
and
that
economies
of
scale
were
not
a
material
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
Funds.
Based
on
the
foregoing
representation
and
the
materials
presented,
the
Board
concluded
that
other
benefits
received
by
the
Adviser
from
its
relationship
with
the
Funds
were
not
a
material
factor
to
consider
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.
The
Board
reviewed
a
memorandum
from
Fund
counsel
discussing
the
legal
standards
applicable
to
its
consideration
of
the
Advisory
Agreement.
Based
on
its
review,
including
consideration
of
each
of
the
factors
referenced
above,
the
Board
determined,
in
the
exercise
of
its
reasonable
business
judgment,
that
the
advisory
arrangement,
as
outlined
in
the
Advisory
Agreement,
was
fair
and
reasonable
in
light
of
the
services
performed
or
to
be
performed,
expenses
incurred
or
to
be
incurred
and
such
other
matters
as
the
Board
considered
relevant.
Liquidity
Risk
Management
Program
The
Funds
have
adopted
and
implemented
a
written
liquidity
risk
management
program,
as
required
by
Rule
22e-4
(the
“Liquidity
Rule”)
under
the
Investment
Company
Act
of
1940,
as
amended.
The
liquidity
risk
management
program
is
reasonably
designed
to
Baywood
Funds
ADDITIONAL
INFORMATION
(Unaudited)
September
30,
2021
27
assess
and
manage
the
Fund’s
liquidity
risk,
taking
into
consideration,
among
other
factors,
the
Funds'
investment
strategy
and
the
liquidity
of
the
portfolio
investments
during
normal
and
reasonably
foreseeable
stressed
conditions;
its
short
and
long-term
cash
flow
projections
and
its
cash
holdings
and
access
to
other
funding
sources.
The
Board
approved
the
designation
of
the
Trust’s
Valuation
Committee
as
the
administrator
of
the
liquidity
risk
management
program
(the
“Program
Administrator”).
The
Program
Administrator
is
responsible
for
the
administration
and
oversight
of
the
program
and
for
reporting
to
the
Board
on
at
least
an
annual
basis
regarding,
among
other
things,
the
program’s
operation,
adequacy,
and
effectiveness.
The
Program
Administrator
assessed
the
Fund’s
liquidity
risk
profile
based
on
information
gathered
for
the
period
July
1,
2020
through
June
30,
2021
in
order
to
prepare
a
written
report
to
the
Board
for
review
at
its
meeting
held
on
September
10,
2021.
The
Program
Administrator’s
written
report
stated
that:
(i)
the
Funds
are
able
to
meet
redemptions
in
normal
and
reasonably
foreseeable
stressed
conditions
and
without
significant
dilution
of
remaining
shareholders’
interests
in
the
Funds;
(ii)
the
Funds'
strategy
is
appropriate
for
an
open-end
mutual
fund;
(iii)
the
liquidity
classification
determinations
regarding
the
Funds'
portfolio
investments,
which
take
into
account
a
variety
of
factors
and
may
incorporate
analysis
from
one
or
more
third-party
data
vendors,
remained
appropriate;
(iv)
the
Funds
did
not
approach
the
internal
triggers
set
forth
in
the
liquidity
risk
management
program
or
the
regulatory
percentage
limitation
(15%)
on
holdings
in
illiquid
investments;
(v)
it
continues
to
be
appropriate
to
not
set
a
“highly
liquid
investment
minimum”
for
the
Funds
because
the
Funds
primarily
hold
“highly
liquid
investments”;
and
(vi)
the
liquidity
risk
management
program
remains
reasonably
designed
and
adequately
implemented
to
prevent
violations
of
the
Liquidity
Rule.
No
significant
liquidity
events
impacting
the
Funds
or
proposed
changes
to
the
Program
were
noted
in
the
report.
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
April
1,
2021
through
September
30,
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.
Baywood
Funds
ADDITIONAL
INFORMATION
(Unaudited)
September
30,
2021
28
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.
Federal
Tax
Status
of
Dividends
Declared
during
the
Fiscal
Year
For
federal
income
tax
purposes,
dividends
from
short-term
capital
gains
are
classified
as
ordinary
income.
Baywood
Valu
ePlus
Fund
and
Baywood
Sociall
yResponsible
Fund
designate
98.13%
and
60.13
%
of
its
income
dividend
distributed
as
qualifying
for
the
corporate
dividends-received
deduction
(DRD)
and
100.00%
and
76.16
%
for
the
qualified
dividend
rate
(QDI)
as
defined
in
Section
1(h)(11)
of
the
Internal
Revenue
Code,
respectively.
Pursuant
to
Section
852(b)(3)
of
the
Internal
Revenue
Code,
Baywood
Sociall
yResponsible
Fund
designated
$32,690
as
long-term
capital
gain
dividends.
Trustees
and
Officers
of
the
Trust
The
Board
is
responsible
for
oversight
of
the
management
of
the
Trust’s
business
affairs
and
of
the
exercise
of
all
the
Trust’s
powers
except
those
reserved
for
the
shareholders.
The
following
table
provides
information
about
each
Trustee
and
certain
officers
of
the
Trust.
Each
Trustee
and
officer
holds
office
until
the
person
resigns,
is
removed,
or
is
replaced.
Unless
otherwise
noted,
the
persons
have
held
their
principal
occupations
for
more
than
five
years.
The
address
for
all
Trustees
and
officers
is
Three
Canal
Plaza,
Suite
600,
Portland,
Maine
04101.
Each
Fund’s
Statement
of
Additional
Information
includes
additional
information
about
the
Trustees
and
is
available,
without
charge
and
upon
request,
by
calling
(855)
409-2297.
Beginning
Account
Value
April
1,
2021
Ending
Account
Value
September
30,
2021
Expenses
Paid
During
Period*
Annualized
Expense
Ratio*
Baywood
Value
Plus
Fund
Actual
$
1,000.00
$
1,039.80
$
3.58
0.70%
Hypothetical
(5%
return
before
expenses)
$
1,000.00
$
1,021.56
$
3.55
0.70%
Baywood
Socially
Responsible
Fund
Actual
$
1,000.00
$
1,045.30
$
4.56
0.89%
Hypothetical
(5%
return
before
expenses)
$
1,000.00
$
1,020.61
$
4.51
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
(183)
divided
by
365
to
reflect
the
half-year
period.
Name
and
Year
of
Birth
Position
with
the
Trust
Length
of
Time
Served
Principal
Occupation(s)
During
Past
Five
Years
Number
of
Series
in
Fund
Complex
Overseen
By
Trustee
Other
Directorships
Held
By
Trustee
During
Past
Five
Years
Independent
Trustees
David
Tucker
Born:
1958
Chairman
of
the
Board;
Trustee;
Chairman,
Nominating
Committee
and
Qualified
Legal
Compliance
Committee
Since
2013
Director,
Blue
Sky
Experience
(a
charitable
endeavor),
since
2008;
Senior
Vice
President
&
General
Counsel,
American
Century
Companies
(an
investment
management
firm),
1998-
2008.
2
Trustee,
Forum
Funds;
Trustee,
U.S.
Global
Investors
Funds.
Baywood
Funds
ADDITIONAL
INFORMATION
(Unaudited)
September
30,
2021
29
(1)
Jessica
Chase
is
currently
an
interested
person
of
the
Trust,
as
defined
in
the
1940
Act,
due
to
her
affiliation
with
Apex
Fund
Services
and
her
role
as
President
of
the
Trust.
Apex
Fund
Services
is
a
wholly
owned
subsidiary
of
Apex
US
Holdings
LLC.
Name
and
Year
of
Birth
Position
with
the
Trust
Length
of
Time
Served
Principal
Occupation(s)
During
Past
Five
Years
Number
of
Series
in
Fund
Complex
Overseen
By
Trustee
Other
Directorships
Held
By
Trustee
During
Past
Five
Years
Mark
D.
Moyer
Born:
1959
Trustee;
Chairman
Audit
Committee
Since
2013
Chief
Financial
Officer,
Freedom
House
(a
NGO
advocating
political
freedom
and
democracy),
since
2017;
independent
consultant
providing
interim
CFO
services,
principally
to
non-profit
organizations,
2011-2017.
2
Trustee,
Forum
Funds;
Trustee,
U.S.
Global
Investors
Funds.
Jennifer
Brown-Strabley
Born:
1964
Trustee
Since
2013
Principal,
Portland
Global
Advisors
(a
registered
investment
adviser),
1996-
2010.
2
Trustee,
Forum
Funds;
Trustee,
U.S.
Global
Investors
Funds.
Interested
Trustees
(1)
Jessica
Chase
Born:
1970
Trustee
Since
2019
Director,
Apex
Fund
Services
since
2019;
Senior
Vice
President,
Atlantic
Fund
Services
2008-2019.
2
Trustee,
Forum
Funds,
Trustee,
U.S.
Global
Investors
Funds.
Name
and
Year
of
Birth
Position
with
the
Trust
Length
of
Time
Served
Principal
Occupation(s)
During
Past
5
Years
Officers
Jessica
Chase
Born:
1970
President;
Principal
Executive
Officer
Since
2015
Director,
Apex
Fund
Services
since
2019;
Senior
Vice
President,
Atlantic
Fund
Services
2008-2019.
Karen
Shaw
Born:
1972
Treasurer;
Principal
Financial
Officer
Since
2013
Senior
Vice
President,
Apex
Fund
Services
since
2019;
Senior
Vice
President,
Atlantic
Fund
Services
2008-2019.
Zachary
Tackett
Born:
1988
Vice
President;
Secretary
and
Anti-
Money
Laundering
Compliance
Officer
Since
2014
Senior
Counsel,
Apex
Fund
Services
since
2019;
Counsel,
Atlantic
Fund
Services
2014-
2019.
Timothy
Bowden
Born:
1969
Vice
President
Since
2013
Manager,
Apex
Fund
Services
since
2019;
Manager,
Atlantic
Fund
Services
2008-2019.
Michael
J.
McKeen
Born:
1971
Vice
President
Since
2013
Senior
Vice
President,
Apex
Fund
Services
since
2019;
Senior
Vice
President,
Atlantic
Fund
Services
2008-2019.
Geoffrey
Ney
Born:
1975
Vice
President
Since
2013
Manager,
Apex
Fund
Services
since
2019;
Manager,
Atlantic
Fund
Services
2013-2019.
Todd
Proulx
Born:
1978
Vice
President
Since
2013
Manager,
Apex
Fund
Services
since
2019;
Manager,
Atlantic
Fund
Services
2013-2019.
Carlyn
Edgar
Born:
1963
Chief
Compliance
Officer
Since
2013
Senior
Vice
President,
Apex
Fund
Services
since
2019;
Senior
Vice
President,
Atlantic
Fund
Services
2008-2019.
FOR
MORE
INFORMATION:
P.O.
Box
588
Portland,
ME
04112
(855)
409-2297
(toll
free)
INVESTMENT
ADVISOR
SKBA
Capital
Management,
LLC
601
California
Street,
Suite
1500
San
Francisco,
CA
94108
TRANSFER
AGENT
Apex
Fund
Services
P.O.
Box
588
Portland,
ME
04112
www.apexgroup.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-ANR-0921
ITEM 2. CODE OF ETHICS.
(a) As of the end of the period covered by this report, Forum Funds II (the “Registrant”) has adopted a code of ethics, which applies to its Principal Executive Officer and Principal Financial Officer (the “Code of Ethics”).
(c) There have been no amendments to the Registrant’s Code of Ethics during the period covered by this report.
(d) There have been no waivers to the Registrant’s Code of Ethics during the period covered by this report.
(e) Not applicable.
(f) (1) A copy of the Code of Ethics is being filed under Item 13(a) hereto.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
The Board of Trustees has determined that Mr. Mark Moyer is an "audit committee financial expert" as that term is defined under applicable regulatory guidelines. Mr. Moyer is a non- “interested” Trustee (as defined in Section 2(a)(19) under the Investment Company Act of 1940, as amended (the “Act”)), and serves as Chairman of the Audit Committee.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
(a) Audit Fees - The aggregate fees billed for each of the last two fiscal years (the “Reporting Periods”) for professional services rendered by the Registrant’s principal accountant for the audit of the Registrant’s annual financial statements, or services that are normally provided by the principal accountant in connection with the statutory and regulatory filings or engagements for the Reporting Periods, were $26,800 in 2020 and $26,800 in 2021.
(b) Audit-Related Fees – The aggregate fees billed in the Reporting Periods for assurance and related services rendered by the principal accountant that were reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported under paragraph (a) of this Item 4 were $0 in 2020 and $0 in 2021.
(c) Tax Fees - The aggregate fees billed in the Reporting Periods for professional services rendered by the principal accountant to the Registrant for tax compliance, tax advice and tax planning were $6,000 in 2020 and $6,000 in 2021. These services consisted of review or preparation of U.S. federal, state, local and excise tax returns.
(d) All Other Fees - The aggregate fees billed in the Reporting Periods for products and services provided by the principal accountant to the Registrant, other than the services reported in paragraphs (a) through (c) of this Item, were $0 in 2020 and $0 in 2021.
(e) (1) The Audit Committee reviews and approves in advance all audit and “permissible non-audit services” (as that term is defined by the rules and regulations of the Securities and Exchange Commission) to be rendered to a series of the Registrant (each, a “Series”). In addition, the Audit Committee reviews and approves in advance all “permissible non-audit services” to be provided to an investment adviser (not including any sub-adviser) of a Series, or an affiliate of such investment adviser, that is controlling, controlled by or under common control with the investment adviser and provides on-going services to the Registrant (“Affiliate”), by the Series’ principal accountant if the engagement relates directly to the operations and financial reporting of the Series. The Audit Committee considers whether fees paid by a Series’ investment adviser or an Affiliate to the Series’ principal accountant for audit and permissible non-audit services are consistent with the principal accountant’s independence.
(e) (2) No services included in (b) - (d) above were approved pursuant to paragraph (c)(7)(i)(C) of Rule 2-01 of Regulation S-X.
(f) Not applicable
(g) The aggregate non-audit fees billed by the principal accountant for services rendered to the Registrant for the Reporting Periods were $0 in 2020 and $0 in 2021. There were no fees billed in either of the Reporting Periods for non-audit services rendered by the principal accountant to the Registrant’s investment adviser or any Affiliate.
(h) During the Reporting Period, the Registrant's principal accountant provided no non-audit services to the investment advisers or any entity controlling, controlled by or under common control with the investment advisers to the series of the Registrant to which this report relates.
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 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)(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: | November 17, 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: | November 17, 2021 |
By: | /s/ Karen Shaw | |
Karen Shaw, Principal Financial Officer | ||
Date: | November 17, 2021 |