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 811-22894
INVESTMENT MANAGERS SERIES TRUST II
(Exact name of registrant as specified in charter)
235 W. Galena Street
Milwaukee, WI 53212
(Address of principal executive offices) (Zip code)
Diane J. Drake
Mutual Fund Administration, LLC
2220 E. Route 66, Suite 226
Glendora, CA 91740
(Name and address of agent for service)
(626) 385-5777
Registrant's telephone number, including area code
Date of fiscal year end: June 30
Date of reporting period: December 31, 2021
Item 1. Report to Stockholders.
The registrant’s semi-annual report transmitted to shareholders pursuant to Rule 30e-1 under the Investment Company Act of 1940, as amended (the “Investment Company Act”), is as follows:
ABRAHAM FORTRESS FUND
(Class I: FORTX)
(Class K: FORKX)
SEMI-ANNUAL REPORT
DECEMBER 31, 2021
Abraham Fortress Fund
A series of Investment Managers Series Trust II
Table of Contents
Letter to Shareholders | 1 |
Consolidated Schedule of Investments | 5 |
Consolidated Statement of Assets and Liabilities | 14 |
Consolidated Statement of Operations | 15 |
Consolidated Statement of Changes in Net Assets | 16 |
Consolidated Financial Highlights | 17 |
Notes to Consolidated Financial Statements | 19 |
Supplemental Information | 32 |
Expense Example | 35 |
This report and the financial statements contained herein are provided for the general information of the shareholders of the Abraham Fortress Fund. This report is not authorized for distribution to prospective investors in the Fund unless preceded or accompanied by an effective prospectus.
www.abrahamtrading.com
Salem Abraham, President | January 20, 2022 |
Abraham Trading Company
2nd & Main St, Canadian, TX 79014
Dear Investors,
Happy New Year from all of us at Abraham Trading. We are thankful for your partnership and friendship, and we look forward to the markets ahead of us this year.
The main highlight of 2021 was the conversion of the Abraham Fortress Fund from a hedge fund to an SEC-registered mutual fund in October. This conversion was the result of almost 5 months of diligent work by every member of our team. We believe the mutual fund structure is a positive change for our investors. With increased transparency, daily liquidity, and enhanced regulatory oversight, the structure provides our clients with greater flexibility, more information, and a standardized investment vehicle. We are happy with this new structure, and we hope our investors are as well. We realize that change can create questions or confusion. If you ever have any feedback or questions about the mutual fund, please call Russell Fry, our Director of Operations, at our Texas office.
Our team was pleased with the performance of the Fortress Fund over the 2021 calendar year. The fund’s equity exposure and diversifying strategies produced positive returns, with the fixed income allocation finishing down slightly for the year. Stock performance was clearly supported by fiscal and monetary policy in 2021. Recent inflation has placed the Federal Reserve in an interesting dilemma, especially after a decade of shying away from sustained interest rate hikes. With higher interest rates on the way, a less enthusiastic stock market seems inevitable. We also believe this year will bring more market volatility to portfolios versus last year. With a volatility of around 9% in 2021, stocks were roughly 60% of their normal volatility. It was a uniquely smooth and positive ride for equities. However, you cannot drive fast and push the brakes at the same time. The markets will have to adjust to the pain of rising interest rates.
During 2021, the Fortress Fund had approximately 45-50% exposure to stocks. It’s common to see both individual and institutional portfolios that have closer to 70-80% stock exposure, a weighting that our team believes is too high. We continue to agree with Nobel Prize winning economist Harry Markowitz that diversification is the one free lunch in investing. It is the bedrock principle of the Fortress Fund. We believe investors and advisors with 70-80% stock exposure are like motorcyclists driving at 100mph without helmets. Being on the open highway with the wind blowing through your hair is a lot of fun, until it’s not. Stocks can bite, and a portfolio overflowing with equity could drown investors that are not adjusting.
© 2022 Abraham Trading Company, LP. All rights reserved. Distributor: IMST Distributors, LLC. Investment Products: Not FDIC
Insured – No Bank Guarantee – May Lose Value. | PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. | www.abrahamtrading.com |
1 |
Low yields in the bond market have led investors to shift that exposure to more of what they know: equities and investments correlated with equities. What used to be a balanced investing meal is now a plateful of stocks, a spoonful of fixed income, and rarely any non-correlated investments. We agree that fixed income has become an asset class with little appeal, but we feel strongly that there are other options beyond the beloved stock/bond duo. Although interest rates and volatility present risks for equities, the diversifying strategies in the Fortress portfolio can benefit from market dislocation and may prove instrumental in navigating market turbulence. With our 30 plus years of experience in the alternatives space, we believe our team can provide insight and guidance to investors that want to diversify their investments beyond stocks and bonds.
Anytime you drive a car, you should be looking out the front windshield, not staring at the rearview mirror. Many investors and advisers are chasing investments and portfolio strategies that worked over the past two decades instead of adapting to this new market environment. Surrendering your portfolio to the stock/bond investment mantra is fighting the last investment war instead of the next one. The landscape is changing. Is your investing approach adapting?
It’s always a good time to be diversified, and any battle is fought more successfully with veterans. We appreciate your investment with us. We look forward to navigating the market opportunities and perils ahead.
Sincerely,
Salem Abraham, President
MAIN OFFICE | BRANCH OFFICE |
124 Main Street Moody Building, Suite 200 | 197 Prospector Road |
Canadian, Texas 79014 | Suite 2103 |
(806) 323-8000 | Aspen, Colorado 81611 |
(970) 305-5000 |
© 2022 Abraham Trading Company, LP. All rights reserved. Distributor: IMST Distributors, LLC. Investment Products: Not FDIC
Insured – No Bank Guarantee – May Lose Value. | PAST PERFORMANCE IS NOT INDICATIVE OF FUTURE RETURNS. | www.abrahamtrading.com |
2 |
RISKS OF INVESTING
The fund’s investment objectives, risks, charges, and expenses must be considered carefully before investing. The prospectus contains this and other important information about the investment company, and it may be obtained by calling (806) 323-8000, or visiting www.abrahamtrading.com. Read it carefully before investing.
There is no guarantee that any investment will achieve its goals and generate profits or avoid losses. Investors should carefully consider investment objectives, risks, charges, and expenses of the investment company and the Abraham Fortress Fund before investing. Diversification does not assure a profit nor protect against loss in a declining market.
Mutual fund investing involves risk; principal loss is possible. Investments in debt securities involve credit risk and typically decrease in value when interest rates rise. Investments in lower rated and non rated securities involve greater risk. Investments in foreign securities involve political, economic, and currency risks, greater volatility, and differences in accounting methods. Derivatives may involve certain costs and risks such as liquidity, interest rate, market, credit, management, and the risk that a position could not be closed when most advantageous. Investing in derivatives could lose more than the amount invested. The Fund may use leverage which may cause the effect of an increase or decrease in the value of the portfolio securities to be magnified and the Fund to be more volatile than if leverage was not used. The Fund invests in small and mid-cap companies, which involve additional risks such as limited liability and greater volatility than large-cap companies. Investments related to gold are considered speculative and are affected by a variety of worldwide economic, financial, and political factors. The price of gold may fluctuate sharply over short periods of time, even during periods of rising prices. Full descriptions of risk factors can be found in the fund’s prospectus at this link.
Shares of the Fund are only offered by current prospectus and are intended solely for persons to whom shares of the US registered funds may be sold. This document shall not constitute an offer to sell or the solicitation of an offer to buy nor shall there be any sale of shares of the Fund in any jurisdiction in which such offer, solicitation, or sale would be unlawful. The SEC and the Commodity Futures Trading Commission have not approved or disapproved these securities or passed upon the accuracy or adequacy of this information. Any representation to the contrary is a criminal offense. There can be no assurance that the Fund will achieve its investment objectives.
The Abraham Fortress Fund is distributed by IMST Distributors, LLC, a FINRA/SIPC member. Abraham Trading, LP, is not affiliated with IMST Distributors, LLC. The information presented in these materials is for general information purposes only and does not constitute an offer, subscription, recommendation, or solicitation to invest in either the Abraham Fortress Fund, LP (“Predecessor Fund”) or the Abraham Fortress Fund mutual fund (the “Fund”). The information in this document should not be relied upon independent of the Abraham Fortress Fund prospectus, which has important information regarding the Fund. While the information given is believed to be complete and accurate, we cannot guarantee their completeness or accuracy. As a term and condition of your use of this report, you expressly hold harmless and waive any claim you have or may have as a result of any of the information and statistics in this report provided by third parties being incomplete or inaccurate. The information may not in all cases be current, and it is subject to continuous change. Accordingly, you should not rely on any of the information contained in these materials as authoritative or a substitute for the exercise of your own skill and judgment in making any investment or other decision.
(CONTINUED ON NEXT PAGE)
3 |
RISKS OF INVESTING CONTINUED
Correlation in the investment industry, is a statistic that measures the degree to which two securities move in relation to each other. Before you decide to invest in the Fund, carefully consider these risk factors (described in the prospectus at this link), which may cause investors to lose money:
➢ | Government-sponsored entities risk | ||
➢ | Foreign sovereign risk | ➢ | Cybersecurity risk |
➢ | Interest rate risk | ➢ | Limited operating history |
➢ | Market risk | ➢ | Asset segregation risk |
➢ | Equity risk | ➢ | Subsidiary risk |
➢ | Fixed income securities risk | ➢ | Recent market events |
➢ | Indirect fees and expenses risk | ➢ | Currency risk |
➢ | Tax risk | ➢ | ETF risk |
➢ | Leveraging risk | ➢ | Gold risk |
➢ | Derivatives risk | ➢ | Government-sponsored entities risk |
The Abraham Fortress Fund is distributed by IMST Distributors, LLC, a FINRA/SIPC member. Abraham Trading, LP, is not affiliated with IMST Distributors, LLC. The information presented in these materials is for general information purposes only and does not constitute an offer, subscription, recommendation, or solicitation to invest in either the Abraham Fortress Fund, LP (“Predecessor Fund”) or the Abraham Fortress Fund mutual fund (the “Fund”). The information in this document should not be relied upon independent of the Abraham Fortress Fund prospectus, which has important information regarding the Fund. While the information given is believed to be complete and accurate, we cannot guarantee their completeness or accuracy. As a term and condition of your use of this report, you expressly hold harmless and waive any claim you have or may have as a result of any of the information and statistics in this report provided by third parties being incomplete or inaccurate. The information may not in all cases be current, and it is subject to continuous change. Accordingly, you should not rely on any of the information contained in these materials as authoritative or a substitute for the exercise of your own skill and judgment in making any investment or other decision.
4 |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of December 31, 2021 (Unaudited)
Number of Shares | Value | |||||||
COMMON STOCKS - 33.5%1 | ||||||||
BASIC MATERIALS - 0.4% | ||||||||
90 | Air Products and Chemicals, Inc. | $ | 27,383 | |||||
211 | DuPont de Nemours, Inc. | 17,044 | ||||||
117 | Ecolab, Inc. | 27,447 | ||||||
599 | Freeport-McMoRan, Inc. | 24,996 | ||||||
208 | Linde PLC | 72,057 | ||||||
325 | Newmont Corp. | 20,157 | ||||||
107 | Sherwin-Williams Co. | 37,681 | ||||||
226,765 | ||||||||
COMMUNICATIONS - 5.2% | ||||||||
272 | Alphabet, Inc.* | 787,995 | ||||||
207 | Amazon.com, Inc.* | 690,208 | ||||||
125 | Arista Networks, Inc.* | 17,969 | ||||||
2,912 | AT&T, Inc. | 71,635 | ||||||
17 | Booking Holdings, Inc.* | 40,787 | ||||||
83 | Charter Co.mmunications, Inc.* | 54,113 | ||||||
1,720 | Cisco Systems, Inc. | 108,996 | ||||||
1,863 | Comcast Corp. | 93,765 | ||||||
255 | eBay, Inc. | 16,958 | ||||||
1,134 | Meta Platforms, Inc.* | 381,421 | ||||||
69 | Motorola Solutions, Inc. | 18,747 | ||||||
181 | Netflix, Inc.* | 109,042 | ||||||
509 | T-Mobile US, Inc.* | 59,034 | ||||||
1,712 | Verizon Co.mmunications, Inc. | 88,956 | ||||||
741 | Walt Disney Co.* | 114,773 | ||||||
2,654,399 | ||||||||
CONSUMER CYCLICAL - 2.8% | ||||||||
110 | Aptiv PLC* | 18,145 | ||||||
8 | AutoZone, Inc.* | 16,771 | ||||||
11 | Chipotle Mexican Grill, Inc.* | 19,231 | ||||||
181 | Costco Wholesale Corp. | 102,754 | ||||||
94 | Dollar General Corp. | 22,168 | ||||||
1,629 | Ford Motor Co. | 33,834 | ||||||
592 | General Motors Co.* | 34,709 | ||||||
426 | Home Depot, Inc. | 176,794 | ||||||
275 | Lowe's Cos., Inc. | 71,082 | ||||||
133 | Marriott International, Inc.* | 21,977 | ||||||
305 | McDonald's Corp. | 81,761 | ||||||
645 | NIKE, Inc. | 107,502 | ||||||
27 | O'Reilly Automotive, Inc.* | 19,068 | ||||||
478 | Starbucks Corp. | 55,912 | ||||||
195 | Target Corp. | 45,131 | ||||||
390 | Tesla, Inc.* | 412,144 | ||||||
486 | TJX Cos., Inc. | 36,897 | ||||||
352 | Walgreens Boots Alliance, Inc. | 18,360 | ||||||
1,131 | Walmart, Inc. | 163,644 | ||||||
1,457,884 | ||||||||
CONSUMER NON-CYCLICAL - 5.6% | ||||||||
721 | Abbott Laboratories | 101,473 | ||||||
721 | AbbVie, Inc. | 97,623 | ||||||
32 | Align Technology, Inc.* | 21,030 | ||||||
749 | Altria Group, Inc. | 35,495 | ||||||
230 | Amgen, Inc. | 51,743 | ||||||
99 | Anthem, Inc. | 45,890 |
5 |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS -Continued
As of December 31, 2021 (Unaudited)
Number of Shares | Value | |||||||
COMMON STOCKS (Continued) | ||||||||
CONSUMER NON-CYCLICAL (Continued) | ||||||||
172 | Automatic Data Processing, Inc. | $ | 42,412 | |||||
204 | Baxter International, Inc. | 17,511 | ||||||
116 | Becton Dickinson and Co. | 29,172 | ||||||
581 | Boston Scientific Corp.* | 24,681 | ||||||
905 | Bristol-Myers Squibb Co. | 56,427 | ||||||
238 | Centene Corp.* | 19,611 | ||||||
135 | Cigna Corp. | 31,000 | ||||||
42 | Cintas Corp. | 18,613 | ||||||
1,761 | Coca-Cola Co. | 104,269 | ||||||
344 | Colgate-Palmolive Co. | 29,357 | ||||||
77 | Constellation Brands, Inc. | 19,325 | ||||||
538 | CVS Health Corp. | 55,500 | ||||||
291 | Danaher Corp. | 95,742 | ||||||
40 | Dexcom, Inc.* | 21,478 | ||||||
255 | Edwards Lifesciences Corp.* | 33,035 | ||||||
390 | Eli Lilly & Co. | 107,726 | ||||||
147 | Estee Lauder Cos., Inc. | 54,419 | ||||||
511 | Gilead Sciences, Inc. | 37,104 | ||||||
127 | HCA Healthcare, Inc. | 32,629 | ||||||
52 | Humana, Inc. | 24,121 | ||||||
35 | IDEXX Laboratories, Inc.* | 23,046 | ||||||
163 | IHS Markit Ltd. | 21,666 | ||||||
64 | Illumina, Inc.* | 24,348 | ||||||
146 | Intuitive Surgical, Inc.* | 52,458 | ||||||
78 | IQVIA Holdings, Inc. | 22,007 | ||||||
1,073 | Johnson & Johnson | 183,558 | ||||||
137 | Kimberly-Clark Corp. | 19,580 | ||||||
499 | Kraft Heinz Co. | 17,914 | ||||||
548 | Medtronic PLC | 56,691 | ||||||
1,030 | Merck & Co., Inc. | 78,939 | ||||||
165 | Moderna, Inc.* | 41,907 | ||||||
569 | Mondelez International, Inc. | 37,730 | ||||||
216 | Monster Beverage Corp.* | 20,745 | ||||||
76 | Moody's Corp. | 29,684 | ||||||
479 | PayPal Holdings, Inc. | 90,330 | ||||||
564 | PepsiCo, Inc. | 97,972 | ||||||
2,288 | Pfizer, Inc. | 135,106 | ||||||
635 | Philip Morris International, Inc. | 60,325 | ||||||
987 | Procter & Gamble Co. | 161,453 | ||||||
44 | Regeneron Pharmaceuticals, Inc.* | 27,787 | ||||||
98 | S&P Global, Inc. | 46,249 | ||||||
154 | Stryker Corp. | 41,183 | ||||||
161 | Thermo Fisher Scientific, Inc. | 107,426 | ||||||
384 | UnitedHealth Group, Inc. | 192,822 | ||||||
104 | Vertex Pharmaceuticals, Inc.* | 22,838 | ||||||
193 | Zoetis, Inc. | 47,098 | ||||||
2,868,248 | ||||||||
ENERGY - 0.6% | ||||||||
786 | Chevron Corp. | 92,237 | ||||||
538 | ConocoPhillips | 38,833 | ||||||
239 | EOG Resources, Inc. | 21,230 | ||||||
1,726 | Exxon Mobil Corp. | 105,614 | ||||||
100 | Pioneer Natural Resources Co. | 18,188 | ||||||
572 | Schlumberger NV | 17,131 | ||||||
293,233 |
6 |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS -Continued
As of December 31, 2021 (Unaudited)
Number of Shares | Value | |||||||
COMMON STOCKS (Continued) | ||||||||
FINANCIAL - 3.9% | ||||||||
316 | American Express Co. | $ | 51,698 | |||||
339 | American International Group, Inc. | 19,275 | ||||||
186 | American Tower Corp. | 54,405 | ||||||
90 | Aon PLC | 27,050 | ||||||
3,337 | Bank of America Corp. | 148,463 | ||||||
337 | Bank of New York Mellon Corp. | 19,573 | ||||||
913 | Berkshire Hathaway, Inc.* | 272,987 | ||||||
62 | BlackRock, Inc. | 56,765 | ||||||
174 | Capital One Financial Corp. | 25,246 | ||||||
771 | Charles Schwab Corp. | 64,841 | ||||||
176 | Chubb Ltd. | 34,023 | ||||||
809 | Citigroup, Inc. | 48,855 | ||||||
147 | CME Group, Inc. | 33,584 | ||||||
176 | Crown Castle International Corp. | 36,738 | ||||||
119 | Digital Realty Trust, Inc. | 21,048 | ||||||
37 | Equinix, Inc. | 31,296 | ||||||
142 | Goldman Sachs Group, Inc. | 54,322 | ||||||
230 | Intercontinental Exchange, Inc. | 31,457 | ||||||
1,205 | JPMorgan Chase & Co. | 190,812 | ||||||
206 | Marsh & McLennan Co., Inc. | 35,807 | ||||||
401 | Mastercard, Inc. | 144,087 | ||||||
343 | MetLife, Inc. | 21,434 | ||||||
732 | Morgan Stanley | 71,853 | ||||||
172 | PNC Financial Services Group, Inc. | 34,489 | ||||||
238 | Progressive Corp. | 24,431 | ||||||
302 | Prologis, Inc. | 50,845 | ||||||
71 | Public Storage | 26,594 | ||||||
134 | Simon Property Group, Inc. | 21,409 | ||||||
92 | T Rowe Price Group, Inc. | 18,091 | ||||||
544 | Truist Financial Corp. | 31,851 | ||||||
605 | US BanCorp. | 33,983 | ||||||
888 | Visa, Inc. | 192,438 | ||||||
1,626 | Wells Fargo & Co. | 78,015 | ||||||
2,007,765 | ||||||||
INDUSTRIAL - 1.8% | ||||||||
235 | 3M Co. | 41,743 | ||||||
123 | Agilent Technologies, Inc. | 19,637 | ||||||
244 | Amphenol Corp. | 21,340 | ||||||
240 | Boeing Co.* | 48,317 | ||||||
353 | Carrier Global Corp. | 19,147 | ||||||
221 | Caterpillar, Inc. | 45,689 | ||||||
904 | CSX Corp. | 33,990 | ||||||
125 | Deere & Co. | 42,861 | ||||||
163 | Eaton Corp. PLC | 28,170 | ||||||
243 | Emerson Electric Co. | 22,592 | ||||||
108 | FedEx Corp. | 27,933 | ||||||
114 | General Dynamics Corp. | 23,766 | ||||||
448 | General Electric Co. | 42,323 | ||||||
281 | Honeywell International, Inc. | 58,591 | ||||||
128 | Illinois Tool Works, Inc. | 31,590 | ||||||
287 | Johnson Controls International plc | 23,336 | ||||||
80 | L3Harris Technologies, Inc. | 17,059 | ||||||
112 | Lockheed Martin Corp. | 39,806 | ||||||
99 | Norfolk Southern Corp. | 29,473 | ||||||
65 | Northrop Grumman Corp. | 25,160 | ||||||
47 | Old Dominion Freight Line, Inc. | 16,844 |
7 |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS -Continued
As of December 31, 2021 (Unaudited)
Number of Shares | Value | |||||||
COMMON STOCKS (Continued) | ||||||||
INDUSTRIAL (Continued) | ||||||||
610 | Raytheon Technologies Corp. | $ | 52,497 | |||||
129 | Republic Services, Inc. | 17,989 | ||||||
133 | TE Connectivity Ltd. | 21,458 | ||||||
97 | Trane Technologies PLC | 19,597 | ||||||
262 | Union Pacific Corp. | 66,006 | ||||||
354 | United Parcel Service, Inc. | 75,876 | ||||||
171 | Waste Management, Inc. | 28,540 | ||||||
941,330 | ||||||||
TECHNOLOGY - 7.9% | ||||||||
269 | Accenture PLC | 111,514 | ||||||
318 | Activision Blizzard, Inc. | 21,156 | ||||||
194 | Adobe, Inc.* | 110,010 | ||||||
492 | Advanced Micro Devices, Inc.* | 70,799 | ||||||
214 | Analog Devices, Inc. | 37,615 | ||||||
6,689 | Apple, Inc. | 1,187,766 | ||||||
362 | Applied Materials, Inc. | 56,964 | ||||||
90 | Autodesk, Inc.* | 25,307 | ||||||
168 | Broadcom, Inc. | 111,789 | ||||||
113 | Cadence Design Systems, Inc.* | 21,057 | ||||||
214 | Cognizant Technology Solutions Corp. | 18,986 | ||||||
248 | Fidelity National Information Services, Inc. | 27,069 | ||||||
269 | Fiserv, Inc.* | 27,920 | ||||||
67 | Fortinet, Inc.* | 24,080 | ||||||
1,658 | Intel Corp. | 85,387 | ||||||
366 | International Business Machines Corp. | 48,920 | ||||||
115 | Intuit, Inc. | 73,970 | ||||||
62 | KLA Corp. | 26,667 | ||||||
57 | Lam Research Corp. | 40,992 | ||||||
226 | Microchip Technology, Inc. | 19,676 | ||||||
457 | Micron Technology, Inc. | 42,570 | ||||||
3,061 | Microsoft Corp. | 1,029,476 | ||||||
34 | MSCI, Inc. | 20,831 | ||||||
1,019 | NVIDIA Corp. | 299,698 | ||||||
108 | NXP Semiconductors NV | 24,600 | ||||||
1,089 | Oracle Corp. | 94,972 | ||||||
147 | Paychex, Inc. | 20,066 | ||||||
457 | QUALCOMM, Inc. | 83,572 | ||||||
43 | Roper Technologies, Inc. | 21,150 | ||||||
402 | salesforce.com, Inc.* | 102,160 | ||||||
81 | ServiceNow, Inc.* | 52,578 | ||||||
63 | Synopsys, Inc.* | 23,216 | ||||||
377 | Texas Instruments, Inc. | 71,053 | ||||||
101 | Xilinx, Inc. | 21,415 | ||||||
4,055,001 | ||||||||
UTILITIES - 5.3% | ||||||||
2,283 | Alliant Energy Corp. | 140,336 | ||||||
1,565 | Ameren Corp. | 139,301 | ||||||
1,775 | American Electric Power Co., Inc. | 157,922 | ||||||
745 | American Water Works Co., Inc. | 140,701 | ||||||
1,315 | Atmos Energy Corp. | 137,772 | ||||||
2,144 | CMS Energy Corp. | 139,467 | ||||||
1,628 | Consolidated Edison, Inc. | 138,901 | ||||||
330 | Dominion Energy, Inc. | 25,925 | ||||||
1,158 | DTE Energy Co. | 138,427 | ||||||
314 | Duke Energy Corp. | 32,939 |
8 |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS -Continued
As of December 31, 2021 (Unaudited)
Number of Shares | Value | |||||||
COMMON STOCKS (Continued) | ||||||||
UTILITIES (Continued) | ||||||||
1,236 | Entergy Corp. | $ | 139,235 | |||||
2,031 | Evergy, Inc. | 139,347 | ||||||
1,522 | Eversource Energy | 138,472 | ||||||
2,888 | Exelon Corp. | 166,811 | ||||||
3,369 | FirstEnergy Corp. | 140,117 | ||||||
800 | NextEra Energy, Inc. | 74,688 | ||||||
4,624 | PPL Corp. | 138,997 | ||||||
2,100 | Public Service Enterprise Group, Inc. | 140,133 | ||||||
2,471 | Southern Co. | 169,461 | ||||||
1,438 | WEC Energy Group, Inc. | 139,587 | ||||||
2,043 | Xcel Energy, Inc. | 138,311 | ||||||
2,716,850 | ||||||||
TOTAL COMMON STOCKS | 17,221,475 | |||||||
(Cost $16,839,907) | ||||||||
Principal Amount | ||||||||
U.S. TREASURY BILLS - 39.9% | ||||||||
$ | 11,540,000 | United States Treasury Bill | ||||||
(0.052%, 1/6/2022) | 11,540,000 | |||||||
6,000,000 | United States Treasury Bill2 | |||||||
(0.048%, 2/10/2022) | 5,999,796 | |||||||
3,000,000 | United States Treasury Bill | |||||||
(0.044%, 6/30/2022) | 2,997,255 | |||||||
TOTAL U.S. TREASURY BILLS | 20,537,051 | |||||||
(Cost $20,536,838) | ||||||||
U.S. TREASURY NOTES - 13.5% | ||||||||
1,900,000 | United States Treasury Note | |||||||
(1.500%, 8/15/2026) | 1,922,637 | |||||||
4,900,000 | United States Treasury Note2 | |||||||
(1.750%, 11/15/2029) | 5,027,287 | |||||||
TOTAL U.S. TREASURY NOTES | 6,949,924 | |||||||
(Cost $6,958,078) | ||||||||
SHORT-TERM INVESTMENTS - 0.0% | ||||||||
10 | UMB Bank demand deposit, 0.01%3 | 10 | ||||||
TOTAL SHORT-TERM INVESTMENTS | 10 | |||||||
(Cost $10) | ||||||||
TOTAL INVESTMENTS - 86.9% (cost $44,334,833) | 44,708,460 | |||||||
Other Assets in Excess of Liabilities - 13.1% | 6,726,964 | |||||||
Total Net Assets - 100.0% | $ | 51,435,424 |
* | Non-income producing |
1 | See additional notional stock exposure value via stock index futures on page 10. |
2 | All or a portion of this security is segregated as collateral for derivatives. The market value of the securites pledged as collateral was $6,027,253, which represents 11.7% of total net assets of the Fund. |
3 | The rate is the annualized seven-day yield at period end. |
See accompanying Notes to Consolidated Financial Statements.
9 |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS -Continued
As of December 31, 2021 (Unaudited)
FUTURES CONTRACTS
Long Contracts | Expiration Date | Number of Contracts | Notional Value | Value at December 31, 2021 | Unrealized Appreciation (Depreciation) | |||||||||||||
Commodity Futures | ||||||||||||||||||
CMX Gold | February 2022 | 26 | $ | 4,845,453 | $ | 4,754,360 | $ | (91,093 | ) | |||||||||
Index Futures | ||||||||||||||||||
CME E-mini S&P 500 | March 2022 | 15 | 3,470,841 | 3,568,875 | 98,034 | |||||||||||||
NYF MSCI EAFE Index | March 2022 | 38 | 4,317,926 | 4,411,420 | 93,494 | |||||||||||||
Total Long Contracts | $ | 12,634,220 | $ | 12,734,655 | $ | 100,435 |
See accompanying Notes to Consolidated Financial Statements.
10 |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS -Continued
As of December 31, 2021 (Unaudited)
SWAP CONTRACTS
TOTAL RETURN SWAP
Counterparty | Reference Entity | Pay/Receive Total Return on Reference Entity | Financing Rate1 | Pay/Receive Frequency | Termination Date | Notional Value | Unrealized Appreciation (Depreciation) | |||||||||||||
Deutsche Bank | Abraham Fortress Fund Custom Basket Swap2 | Receive | 0.50% of Notional Value | Monthly | June 13, 2024 | $ | 31,608,787 | (35,772 | ) | |||||||||||
TOTAL SWAP CONTRACTS | $ | (35,772 | ) |
1 | Financing rate is based upon notional trading amounts. |
2 | This investment is a holding of the Abraham Fortress Fund, Ltd. and is comprised of a prorprietary basket of alternative programs investing in various futures contracts and forward foreign currency exchange contracts. |
Total Return Swap Top 50 Holdings^
FUTURES CONTRACTS | ||||||||||||||||||
Description | Expiration Date | Number of Long Contracts | Notional Value | Unrealized Appreciation (Depreciation) | Percentage of Custom Swap's Unrealized Appreciation (Depreciation) | |||||||||||||
ICE Brent Crude Monthly Future | February 2022 | 115 | $ | 9,020,676 | $ | 910,387 | 254.97 | % | ||||||||||
NYM Light Sweet Crude Oil (WTI) Future | May 2022 | 55 | 4,087,421 | 275,289 | 77.10 | % | ||||||||||||
CME Live Cattle Future | June 2022 | 56 | 3,123,087 | 84,101 | 23.55 | % | ||||||||||||
NYB Sugar No.11 Future | April 2022 | 119 | 2,470,431 | (22,992 | ) | -6.44 | % | |||||||||||
ICE Brent Crude Monthly Future | April 2022 | 28 | 2,180,767 | 2,986 | 0.84 | % | ||||||||||||
KCB Hard Red Winter Wheat Future | July 2022 | 52 | 2,092,937 | (18,102 | ) | -5.07 | % | |||||||||||
CME Live Cattle Future | April 2022 | 35 | 2,023,602 | 80,641 | 22.59 | % | ||||||||||||
NYB Coffee C Future | May 2022 | 19 | 1,576,247 | (54,308 | ) | -15.21 | % | |||||||||||
CBT Soybean Oil Future | May 2022 | 43 | 1,476,729 | 47,253 | 13.23 | % | ||||||||||||
CME E-Mini S&P 500 | March 2022 | 6 | 1,436,496 | 3,149 | 0.88 | % | ||||||||||||
CBT Corn Future | March 2022 | 45 | 1,339,257 | 1,101 | 0.31 | % | ||||||||||||
CBT 10 year US Treasury Notes | March 2022 | 9 | 1,124,960 | 375 | 0.10 | % | ||||||||||||
OSE 10 year Japanese Government Bond | March 2022 | 1 | 1,078,248 | (3,637 | ) | -1.02 | % | |||||||||||
CBT Corn Future | May 2022 | 35 | 1,053,460 | (25,771 | ) | -7.22 | % | |||||||||||
CBT Soybean Oil Future | July 2022 | 30 | 1,005,201 | 11,017 | 3.09 | % | ||||||||||||
NYM Platinum | April 2022 | 19 | 904,444 | (11,319 | ) | -3.17 | % | |||||||||||
NYM Gasoline RBOB Future | February 2022 | 9 | 903,169 | 10,652 | 2.98 | % | ||||||||||||
LIF 3 month Euro (EURIBOR) | September 2022 | 3 | 882,027 | (504 | ) | -0.14 | % | |||||||||||
NYM Gasoline RBOB Future | March 2022 | 9 | 854,844 | 11,899 | 3.33 | % | ||||||||||||
CME GBP/USD | March 2022 | 10 | 821,246 | 6,264 | 1.75 | % | ||||||||||||
CBT 30 year US Treasury Bonds | March 2022 | 5 | 816,650 | 5,902 | 1.65 | % | ||||||||||||
CME E-Mini Nasdaq-100 | March 2022 | 2 | 608,193 | 1,652 | 0.46 | % | ||||||||||||
LME Copper Grade A Future | March 2022 | 2 | 515,083 | 11,239 | 3.15 | % | ||||||||||||
SGX Mini Japanese Goverment Bond Future | March 2022 | 4 | 482,789 | (1,686 | ) | -0.47 | % | |||||||||||
NYB Coffee C Future | July 2022 | 5 | 425,591 | (15,848 | ) | -4.44 | % | |||||||||||
EUX 2 year Euro-Schatz | March 2022 | 3 | 408,711 | (431 | ) | -0.12 | % | |||||||||||
LIF FTSE 100 Index Future | March 2022 | 4 | 407,491 | 2,685 | 0.75 | % | ||||||||||||
OSE TOPIX Future | March 2022 | 2 | 353,534 | 6,334 | 1.77 | % | ||||||||||||
CMX Copper Future | July 2022 | 3 | 351,939 | 10,815 | 3.03 | % | ||||||||||||
CME Feeder Cattle Future | January 2022 | 4 | 350,786 | 10,135 | 2.84 | % | ||||||||||||
EUX EURO STOXX 50 Index Future | March 2022 | 7 | 325,110 | 5,621 | 1.57 | % | ||||||||||||
MGE Hard Red Spring Wheat Future | March 2022 | 6 | 320,191 | (4,107 | ) | -1.15 | % | |||||||||||
CME Lean Hog Future | June 2022 | 8 | 314,587 | 14,872 | 4.17 | % |
11 |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS -Continued
As of December 31, 2021 (Unaudited)
Description | Expiration Date | Number of Short Contracts | Notional Value | Unrealized Appreciation (Depreciation) | Percentage of Custom Swap's Unrealized Appreciation (Depreciation) | |||||||||||||
ICE Brent Crude Monthly Future | January 2022 | (140 | ) | $ | (11,060,700 | ) | $ | (443,155 | ) | -124.11 | % | |||||||
CME EUR/USD | March 2022 | (63 | ) | (8,983,596 | ) | (46,031 | ) | -12.89 | % | |||||||||
CME AUD/USD | March 2022 | (86 | ) | (6,256,367 | ) | (126,028 | ) | -35.30 | % | |||||||||
CME Live Cattle Future | February 2022 | (86 | ) | (4,777,534 | ) | (92,685 | ) | -25.96 | % | |||||||||
NYM Light Sweet Crude Oil (WTI) Future | January 2022 | (61 | ) | (4,624,443 | ) | (280,142 | ) | -78.46 | % | |||||||||
IFLL 3 Month SONIA Index Futures | March 2024 | (13 | ) | (4,486,880 | ) | 3,594 | 1.01 | % | ||||||||||
NYB Sugar No.11 Future | February 2022 | (118 | ) | (2,483,923 | ) | 28,324 | 7.93 | % | ||||||||||
CBT Soybean Oil Future | March 2022 | (66 | ) | (2,243,567 | ) | (31,662 | ) | -8.87 | % | |||||||||
NYB Coffee C Future | March 2022 | (24 | ) | (2,007,605 | ) | 72,409 | 20.28 | % | ||||||||||
KCB Hard Red Winter Wheat Future | March 2022 | (48 | ) | (1,951,305 | ) | 31,426 | 8.80 | % | ||||||||||
LIF 3 month Euro (EURIBOR) | June 2024 | (6 | ) | (1,623,376 | ) | 1,853 | 0.52 | % | ||||||||||
CBT Soybeans Future | May 2022 | (15 | ) | (1,030,549 | ) | 13,179 | 3.69 | % | ||||||||||
CBT Soybeans Future | March 2022 | (14 | ) | (974,781 | ) | (32,644 | ) | -9.14 | % | |||||||||
CME JPY/USD | March 2022 | (7 | ) | (718,788 | ) | 6,934 | 1.94 | % | ||||||||||
LIF 3 month Euro (EURIBOR) | March 2023 | (2 | ) | (674,521 | ) | 64 | 0.02 | % | ||||||||||
CME Eurodollar | December 2022 | (3 | ) | (634,011 | ) | 259 | 0.07 | % | ||||||||||
CME SOFR 3month Futures | December 2023 | (2 | ) | (613,352 | ) | (230 | ) | -0.06 | % | |||||||||
CME Eurodollar | March 2024 | (2 | ) | (597,842 | ) | 3 | 0.00 | % | ||||||||||
CMX Gold | April 2022 | (3 | ) | (586,338 | ) | (3,897 | ) | -1.09 | % | |||||||||
LIF 3 month Euro (EURIBOR) | December 2022 | (2 | ) | (534,299 | ) | 372 | 0.10 | % | ||||||||||
NYM Palladium | March 2022 | (3 | ) | (471,593 | ) | 12,160 | 3.41 | % | ||||||||||
CME Eurodollar | December 2023 | (2 | ) | (462,590 | ) | 26 | 0.01 | % | ||||||||||
CBT 2 year US Treasury Notes | March 2022 | (2 | ) | (455,159 | ) | (39 | ) | -0.01 | % | |||||||||
LIF 3 month Euro (EURIBOR) | December 2023 | (2 | ) | (452,061 | ) | 453 | 0.13 | % | ||||||||||
NYM NY Harbour ULSD Future | January 2022 | (4 | ) | (423,033 | ) | (10,495 | ) | -2.94 | % | |||||||||
CBT Wheat Future | May 2022 | (11 | ) | (417,005 | ) | 21,341 | 5.98 | % | ||||||||||
CME SOFR 3month Futures | June 2024 | (2 | ) | (408,463 | ) | (79 | ) | -0.02 | % | |||||||||
NYM NY Harbour ULSD Future | February 2022 | (4 | ) | (389,917 | ) | (3,294 | ) | -0.92 | % | |||||||||
NYM Henry Hub Natural Gas Future | February 2022 | (11 | ) | (387,371 | ) | (1,885 | ) | -0.53 | % | |||||||||
CME Feeder Cattle Future | March 2022 | (5 | ) | (386,277 | ) | (17,406 | ) | -4.87 | % | |||||||||
CME Eurodollar | June 2024 | (1 | ) | (360,512 | ) | 58 | 0.02 | % | ||||||||||
HKG Hang Seng Index | January 2022 | (2 | ) | (353,024 | ) | (2,541 | ) | -0.71 | % | |||||||||
CBT Wheat Future | March 2022 | (9 | ) | (351,962 | ) | 27,807 | 7.79 | % | ||||||||||
CME CHF/USD | March 2022 | (2 | ) | (330,114 | ) | (3,682 | ) | -1.03 | % |
FORWARD FOREIGN CURRENCY CONTRACTS
Settlement Date | Counterparty | Currency Units to Receive/(Deliver) | In Exchange For | Unrealized Appreciation (Depreciation) | Percentage of Custom Swap's Unrealized Appreciation (Depreciation) | |||||||||||||||||||
1/5/2022 | Deutsche Bank | (74,703,332 | ) | JPY | 827,000 | CAD | $ | 1,293 | 0.36 | % | ||||||||||||||
1/5/2022 | Deutsche Bank | (63,390,025 | ) | JPY | 409,193 | GBP | (489 | ) | -0.14 | % |
^ | These investments are not direct holdings of the Fund. The holdings were determined based on the absolute notional values of the positions within the underlying swap basket. |
See accompanying Notes to Consolidated Financial Statements.
12 |
Abraham Fortress Fund
CONSOLIDATED SUMMARY OF INVESTMENTS
As of December 31, 2021 (Unaudited)
Security Type/Industry | Percent of Total Net Assets | |||
Common Stocks | ||||
Technology | 7.9 | % | ||
Consumer Non-Cyclical | 5.6 | % | ||
Utilities | 5.3 | % | ||
Communications | 5.2 | % | ||
Financial | 3.9 | % | ||
Consumer Cyclical | 2.8 | % | ||
Industrial | 1.8 | % | ||
Energy | 0.6 | % | ||
Basic Materials | 0.4 | % | ||
Total Common stocks | 33.5 | % | ||
U.S. Treasury Bills | 39.9 | % | ||
U.S. Treasury Notes | 13.5 | % | ||
Short-Term Investments | 0.0 | % | ||
Total Investments | 86.9 | % | ||
Other Assets in Excess of Liabilities | 13.1 | % | ||
Total Net Assets | 100.0 | % |
See accompanying Notes to Consolidated Financial Statements.
13 |
Abraham Fortress Fund
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
As of December 31, 2021 (Unaudited)
Assets: | ||||
Investments, at value (cost $44,334,833) | $ | 44,708,460 | ||
Cash | 2,469,779 | |||
Cash deposited with brokers for open futures contracts | 1,939,693 | |||
Cash deposited with brokers for open swap contract | 537,956 | |||
Receivables: | ||||
Fund shares sold | 1,673,038 | |||
Due from Advisor | 2,842 | |||
Variation margin on futures contracts | 100,435 | |||
Dividends and Interest | 25,589 | |||
Prepaid offering cost | 31,706 | |||
Other prepaid expenses | 34,219 | |||
Total Assets | 51,523,717 | |||
Liabilities: | ||||
Unrealized depreciation on total return swap contract | 35,772 | |||
Payables: | ||||
Shareholder servicing fees (Note 6) | 1,029 | |||
Fund administration and accounting fees | 18,812 | |||
Transfer agent fees and expenses | 11,633 | |||
Custody fees | 2,253 | |||
Auditing fees | 7,615 | |||
Chief Compliance Officer fees | 3,376 | |||
Offering costs payable | 1,835 | |||
Director's Fees payable | 1,631 | |||
Printing and Postage | 1,062 | |||
Legal fees | 624 | |||
Accrued other expenses | 2,651 | |||
Total liabilities | 88,293 | |||
Net Assets | $ | 51,435,424 | ||
Components of Net Assets: | ||||
Paid-in capital (par value of $0.01 per share with an unlimited number of shares authorized) | $ | 50,978,730 | ||
Total accumulated earnings | 456,694 | |||
Net Assets | $ | 51,435,424 | ||
Maximum Offering Price per Share: | ||||
Class I Shares: | ||||
Net assets applicable to shares outstanding | $ | 14,402,586 | ||
Shares of beneficial interest issued and outstanding | 1,425,129 | |||
Redemption price per share | $ | 10.11 | ||
Class K Shares: | ||||
Net assets applicable to shares outstanding | $ | 37,032,838 | ||
Shares of beneficial interest issued and outstanding | 3,663,785 | |||
Redemption price per share | $ | 10.11 |
See accompanying Notes to Consolidated Financial Statements.
14 |
Abraham Fortress Fund
CONSOLIDATED STATEMENT OF OPERATIONS
For the Period October 13, 2021* through December 31, 2021 (Unaudited)
Investment Income: | ||||
Dividends | $ | 3,691 | ||
Interest | 25,868 | |||
Total investment income | 29,559 | |||
Expenses: | ||||
Advisory fees | 52,080 | |||
Shareholder servicing fees- Class I (Note 6) | 2,655 | |||
Fund administration and accounting fees | 21,005 | |||
Transfer agent fees and expenses | 11,633 | |||
Custody fees | 2,425 | |||
Registration fees | 9,621 | |||
Auditing fees | 9,115 | |||
Offering cost expense | 8,758 | |||
Miscellaneous | 3,485 | |||
Legal fees | 3,463 | |||
Chief Compliance Officer fees | 3,376 | |||
Trustees' fees and expenses | 1,732 | |||
Shareholder reporting fees | 1,285 | |||
Insurance fees | 789 | |||
Total expenses | 131,422 | |||
Advisory fees waived | (52,080 | ) | ||
Other expenses absorbed | (8,719 | ) | ||
Net expenses | 70,623 | |||
Net investment loss | (41,064 | ) | ||
Realized and Unrealized Gain (Loss): | ||||
Net realized gain on: | ||||
Investments | 7,530 | |||
Futures contracts | 639,844 | |||
Swap contracts | 201,898 | |||
Net realized gain | 849,272 | |||
Net change in unrealized appreciation/depreciation on: | ||||
Investments | 373,627 | |||
Futures contracts | 100,435 | |||
Swap contracts | (35,772 | ) | ||
Net change in unrealized appreciation/depreciation | 438,290 | |||
Net realized and unrealized gain | 1,287,562 | |||
Net Increase in Net Assets from Operations | $ | 1,246,498 |
* | Commencement of operations |
See accompanying Notes to Consolidated Financial Statements.
15 |
Abraham Fortress Fund
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
For the Period October 13, 2021* through December 31, 2021 (Unaudited) | ||||
Increase (Decrease) in Net Assets from: | ||||
Operations: | ||||
Net investment loss | $ | (41,064 | ) | |
Net realized gain on investments, futures contracts, and swap contracts | 849,272 | |||
Net change in unrealized appreciation/depreciation on investments, futures contracts, and swap contracts | 438,290 | |||
Net increase in net assets resulting from operations | 1,246,498 | |||
Distributions to Shareholders: | ||||
Distributions: | ||||
Class I | (202,068 | ) | ||
Class K | (587,736 | ) | ||
Total distributions to shareholders | (789,804 | ) | ||
Capital Transactions: | ||||
Net proceeds from shares sold: | ||||
Class I | 3,172,745 | |||
Class K | 1,540,331 | |||
Capital issued in connection with reorganization of private fund (Note 1) | ||||
Class I | 11,339,731 | |||
Class K | 34,576,420 | |||
Reinvestment of distributions: | ||||
Class I | 202,052 | |||
Class K | 587,363 | |||
Cost of shares redeemed: | ||||
Class I | (415,906 | ) | ||
Class K | (24,006 | ) | ||
Net increase in net assets from capital transactions | 50,978,730 | |||
Total increase in net assets | 51,435,424 | |||
Net Assets: | ||||
Beginning of period | - | |||
End of period | $ | 51,435,424 | ||
Capital Share Transactions: | ||||
Shares sold: | ||||
Class I | 311,995 | |||
Class K | 150,454 | |||
Shares issued in connection with reorganization of private fund (Note 1) | ||||
Class I | 1,133,973 | |||
Class K | 3,457,642 | |||
Shares reinvested: | ||||
Class I | 19,966 | |||
Class K | 58,040 | |||
Shares redeemed: | ||||
Class I | (40,805 | ) | ||
Class K | (2,351 | ) | ||
Net increase in capital share transactions | 5,088,914 |
* | Commencement of operations |
See accompanying Notes to Consolidated Financial Statements.
16 |
Abraham Fortress Fund
CONSOLIDATED FINANCIAL HIGHLIGHTS
Class I
Per share operating performance.
For a capital share outstanding throughout the period.
For the Period October 13, 2021* through December 31, 2021 (Unaudited) | ||||
Net asset value, beginning of period | $ | 10.00 | ||
Income from Investment Operations: | ||||
Net investment loss1 | (0.01 | ) | ||
Net realized and unrealized gain | 0.28 | |||
Total from investment operations | 0.27 | |||
Less Distributions: | ||||
From net realized gain | (0.16 | ) | ||
Net asset value, end of period | $ | 10.11 | ||
Total return2 | 2.73 | %3 | ||
Ratios and Supplemental Data: | ||||
Net assets, end of period (in thousands) | $ | 14,403 | ||
Ratio of expenses to average net assets | ||||
Before fees waived and absorbed | 1.34 | %4 | ||
After fees waived and absorbed | 0.75 | %4 | ||
Ratio of net investment loss to average net assets | ||||
Before fees waived and absorbed | (1.05 | %)4 | ||
After fees waived and absorbed | (0.46 | %)4 | ||
Portfolio turnover rate | 25 | %3 |
* | Commencement of operations. |
1 | Based on average shares outstanding for the period. |
2 | Total returns would have been lower had expenses not been waived or absorbed by the Advisor. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
3 | Not Annualized. |
4 | Annualized. |
See accompanying Notes to Consolidated Financial Statements.
17 |
Abraham Fortress Fund
CONSOLIDATED FINANCIAL HIGHLIGHTS
Class K
Per share operating performance.
For a capital share outstanding throughout the period.
For the Period October 13, 2021* through December 31, 2021 (Unaudited) | ||||
Net asset value, beginning of period | $ | 10.00 | ||
Income from Investment Operations: | ||||
Net investment loss1 | (0.01 | ) | ||
Net realized and unrealized gain | 0.28 | |||
Total from investment operations | 0.27 | |||
Less Distributions: | ||||
From net realized gain | (0.16 | ) | ||
Total distributions | (0.16 | ) | ||
Net asset value, end of period | $ | 10.11 | ||
Total return2 | 2.73 | %3 | ||
Ratios and Supplemental Data: | ||||
Net assets, end of period (in thousands) | $ | 37,033 | ||
Ratio of expenses to average net assets | ||||
Before fees waived and absorbed | 1.24 | %4 | ||
After fees waived and absorbed | 0.65 | %4 | ||
Ratio of net investment loss to average net assets | ||||
Before fees waived and absorbed | (0.95 | %)4 | ||
After fees waived and absorbed | (0.36 | %)4 | ||
Portfolio turnover rate | 25 | %3 |
* | Commencement of operations. |
1 | Based on average shares outstanding for the period. |
2 | Total returns would have been lower had expenses not been waived or absorbed by the Advisor. These returns do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. |
3 | Not Annualized. |
4 | Annualized. |
See accompanying Notes to Consolidated Financial Statements.
18 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2021 (Unaudited)
Note 1 – Organization
Abraham Fortress Fund (the “Fund”) is organized as a series of Investment Managers Series Trust, a Delaware statutory trust (the “Trust”) which is registered as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). The Fund is classified as a diversified Fund.
The Fund’s primary investment objective is to protect capital and achieve long-term capital appreciation. The Fund commenced investment operations on October 13, 2021, with two classes of shares, Class I and Class K . Class C shares have not yet commenced operations.
The Fund commenced operations on October 13, 2021 with $45,916,151 transfer of shares of the Fund in exchange for the net assets of the Abraham Fortress Fund, LP (“Private Fund”) a Delaware statutory limited partnership. This exchange was nontaxable, whereby the Fund issued 1,133,973 Class I shares and 3,457,642 Class K shares for the net assets of the Private Fund on October 13, 2021. Net assets with a fair market value of $45,916,151 consisting of cash, interest receivable and securities and derivative instruments of the Private Fund were the primary assets received by the Fund. For financial reporting purposes, assets received and shares issued by the Fund were recorded at fair value; however, the cost basis of the investments received from the Private Fund was carried forward to align ongoing reporting of the Fund’s realized and unrealized gains and losses with amount distributable to shareholders for tax purposes.
The shares of each class represent an interest in the same portfolio of investments of the Fund and have equal rights as to voting, redemptions, dividends and liquidation, subject to the approval of the Trustees. Income, expenses (other than expenses attributable to a specific class) and realized and unrealized gains and losses on investments are allocated to each class of shares in proportion to their relative net assets.
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 “Financial Services—Investment Companies”.
(a) Consolidation of Subsidiary
The Fund may invest up to 25% of its total assets in its subsidiary, Abraham Fortress Fund, Ltd., a wholly-owned and controlled subsidiary formed under the laws of the Cayman Islands (the “Subsidiary”). The consolidated Schedule of Investments, Statement of Assets and Liabilities, Statement of Operations, Statements of Changes in Net Assets and Financial Highlights of the Fund include the accounts of the Subsidiary. All inter-company accounts and transactions have been eliminated in the consolidation for the Fund. The Subsidiary is advised by Abraham Trading Company and acts as an investment vehicle in order to effect certain investments consistent with the Fund’s investment objectives and policies specified in the Fund’s prospectus and statement of additional information. The Subsidiary will generally invest in derivatives, including swaps, commodity interests and other investments intended to serve as margin or collateral for derivative positions. The inception date of the Subsidiary was October 13, 2021. As of December 31, 2021, total assets of the Fund were $51,523,717, of which $9,458,309, or approximately 18.36%, represented the Fund’s ownership of the shares of the Subsidiary.
Note 2 – Accounting Policies
The following is a summary of the significant accounting policies consistently followed by the Fund in the preparation of its financial statements. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (“GAAP”) requires management to make estimates and assumptions that affect the reported amounts and disclosures in the financial statements. Actual results could differ from these estimates.
19 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
(a) Valuation of Investments
The Fund values equity securities at the last reported sale price on the principal exchange or in the principal over the counter (“OTC”) market in which such securities are traded, as of the close of regular trading on the NYSE on the day the securities are being valued or, if the last-quoted sales price is not readily available, the securities will be valued at the last bid or the mean between the last available bid and ask price. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price (“NOCP”). Investments in open-end investment companies are valued at the daily closing net asset value of the respective investment company. Debt securities are valued by utilizing a price supplied by independent pricing service providers. The independent pricing service providers may use various valuation methodologies including matrix pricing and other analytical pricing models as well as market transactions and dealer quotations. These models generally consider such factors as yields or prices of bonds of comparable quality, type of issue, coupon, maturity, ratings and general market conditions. If a price is not readily available for a portfolio security, the security will be valued at fair value (the amount which the Fund might reasonably expect to receive for the security upon its current sale) as determined in good faith by the Fund’s advisor, subject to review and approval by the Valuation Committee, pursuant to procedures adopted by the Board of Trustees. The actions of the Valuation Committee are subsequently reviewed by the Board at its next regularly scheduled board meeting. The Valuation Committee meets as needed. The Valuation Committee is comprised of all the Trustees, but action may be taken by any one of the Trustees.
(b) Foreign Currency Translation
The Fund’s records are maintained in U.S. dollars. The value of securities, currencies and other assets and liabilities denominated in currencies other than U.S. dollars are translated into U.S. dollars based upon foreign exchange rates prevailing at the end of the reporting period. The currencies are translated into U.S. dollars by using the exchange rates quoted at the close of the London Stock Exchange prior to when the Fund’s NAV is next determined. Purchases and sales of investment securities, income and expenses are translated on the respective dates of such transactions.
The Fund does not isolate that portion of its net realized and unrealized gains and losses on investments resulting from changes in foreign exchange rates from the impact arising from changes in market prices. Such fluctuations are included with net realized and unrealized gain or loss from investments and foreign currency.
Net realized foreign currency transaction gains and losses arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on securities transactions, and the differences between the amounts of dividends, interest, and foreign withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign currency translation gains and losses arise from changes in the value of assets and liabilities, other than investments in securities, resulting from changes in the exchange rates.
(c) Forward Foreign Currency Exchange Contracts
The Fund may utilize forward foreign currency exchange contracts (“forward contracts”) under which they are obligated to exchange currencies on specified future dates at specified rates, and are subject to the translations of foreign exchange rates fluctuations. All contracts are “marked-to-market” daily and any resulting unrealized gains or losses are recorded as unrealized appreciation or depreciation on foreign currency translations. The Fund records realized gains or losses at the time the forward contract is settled. Counter parties to these forward contracts are major U.S. financial institutions.
(d) Futures Contracts
The Fund may use interest rate, foreign currency, index, commodity, and other futures contracts. The Fund may use options on futures contracts. A futures contract provides for the future sale by one party and purchase by another party of a specified quantity of the security or other financial instrument at a specified price and time. The Fund may invest in futures contracts and options on futures contracts through the Subsidiary. For example, a foreign currency futures contract provides for the future sale by one party and the purchase by the other party of a certain amount of a specified non-U.S. currency at a specified price, date, time and place. Similarly, an interest rate futures contract provides for the future sale by one party and the purchase by the other party of a certain amount of a specific interest rate sensitive financial instrument (e.g., a debt security) at a specified price, date, time and place. Securities, commodities and other financial indexes are capitalization weighted indexes that reflect the market value of the securities, commodities or other financial instruments respectively, represented in the indexes. A futures contract on an index is an agreement to be settled by delivery of an amount of cash equal to a specified multiplier times the difference between the value of the index at the close of the last trading day on the contract and the price at which the agreement is made. The clearing house of the exchange on which a futures contract is entered into becomes the counterparty to each purchaser and seller of the futures contract.
20 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
A futures contract held by a Fund is valued daily at the official settlement price on the exchange on which it is traded. Each day the Fund pays or receives cash, called “variation margin”, equal to the daily change in value of the futures contract. This process is known as “marking to market”. Variation margin does not represent borrowing or a loan by the Fund but is instead a settlement between the Fund and the broker of the amount one would owe the other if the futures contract expired. In computing daily net asset value, the Fund will mark to market its open futures positions. The Fund also is required to deposit and to maintain margin with respect to put and call options on futures contracts written by it. Such margin deposits will vary depending on the nature of the underlying futures contract (and the related initial margin requirements), the current market value of the option and other futures positions held by the Fund. Although some futures contracts call for making or taking delivery of the underlying assets, generally these obligations are closed out prior to delivery by offsetting purchases or sales of matching futures contracts (involving the same exchange, underlying security or index and delivery month). If an offsetting purchase price is less than the original sale price, a Fund realizes a capital gain, or if it is more, the Fund realizes a capital loss. Conversely, if an offsetting sale price is more than the original purchase price, a Fund realizes a capital gain, or if it is less, the Fund realizes a capital loss. The transaction costs also must be included in these calculations. As discussed below, however, the Fund may not always be able to make an offsetting purchase or sale. In the case of a physically settled futures contract, this could result in the Fund being required to deliver, or receive, the underlying physical commodity, which could be adverse to the Fund. The Subsidiary may enter into agreements with certain parties which may lower margin deposits and mitigate some of the risks of being required to deliver, or receive, the physical commodity.
At any time prior to the expiration of a futures contract, a Fund may seek to close the position by seeking to take an opposite position, which would terminate the Fund’s existing position in the contract. Positions in futures contracts and options on futures contracts may be closed out only on the exchange on which they were entered into (or through a linked exchange). No secondary market for such contracts exists. Although the Fund may enter into futures contracts only if there is an active market for such contracts, there is no assurance that an active market will exist at any particular time. Most futures exchanges limit the amount of fluctuation permitted in futures contract prices during a single trading day. Once the daily limit has been reached in a particular contract, no trades may be made that day at a price beyond that limit or trading may be suspended for specified periods during the day. It is possible that futures contract prices could move to the daily limit for several consecutive trading days with little or no trading, thereby preventing prompt liquidation of futures positions at an advantageous price and subjecting the Fund to substantial losses. In such event, and in the event of adverse price movements, the Fund would be required to make daily cash payments of variation margin. In such situations, if the Fund had insufficient cash, it might have to sell assets to meet daily variation margin requirements at a time when it would be disadvantageous to do so. In addition, if the transaction is entered into for hedging purposes, in such circumstances the Fund may realize a loss on a futures contract or option that is not offset by an increase in the value of the hedged position. Losses incurred in futures transactions and the costs of these transactions will affect the Fund’s performance.
21 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
Exposure to the commodities markets (including financial futures markets) through investments in futures may subject the Fund to greater volatility than cash market investments in securities. Prices of commodities and related contracts may fluctuate significantly and unpredictably over short periods for a variety of reasons, including changes in interest rates, overall market movements, supply and demand relationships and balances of payments and trade; weather and natural disasters; and governmental, agricultural, trade, fiscal, monetary and exchange control programs and policies. The commodity markets are subject to temporary distortions and other disruptions. U.S. futures exchanges and some foreign exchanges have regulations that limit the amount of fluctuation in futures contract prices which may occur during a single business day and the size of contract positions taken. Limit prices have the effect of precluding trading in a particular contract or forcing the liquidation of contracts at disadvantageous times or prices.
(e) Swap Transactions
The Fund may enter into interest rate, currency and index swaps and the purchase or sale of related caps, floors and collars. The Fund may enter into these transactions to preserve a return or spread on a particular investment or portion of its portfolio, to protect against currency fluctuations or to protect against any increase in the price of securities it anticipates purchasing at a later date. Swaps may be used in conjunction with other instruments to offset interest rate, currency or other underlying risks. For example, interest rate swaps may be offset with “caps,” “floors” or “collars”. A “cap” is essentially a call option which places a limit on the amount of floating rate interest that must be paid on a certain principal amount. A “floor” is essentially a put option which places a limit on the minimum amount that would be paid on a certain principal amount. A “collar” is essentially a combination of a long cap and a short floor where the limits are set at different levels.
The Fund will usually enter into swaps on a net basis; that is, the two payment streams will be netted out in a cash settlement on the payment date or dates specified in the instrument, with the Fund receiving or paying, as the case may be, only the net amount of the two payments. To the extent obligations created thereby may be deemed to constitute senior securities, the Fund will maintain required collateral in a segregated account consisting of U.S. government securities or cash or cash equivalents.
Total Return Swaps. The Fund may enter into total return swap contracts for investment purposes. Total return swaps are contracts in which one party agrees to make periodic payments based on the change in market value of the underlying assets, which may include a specified security, basket of securities or security indexes during the specified period, in return for periodic payments based on a fixed or variable interest rate of the total return from other underlying assets. Total return swaps may be used to obtain exposure to a security or market without owning or taking physical custody of such security or market, including in cases in which there may be disadvantages associated with direct ownership of a particular security. In a typical total return swap, payments made by the Fund or the counterparty are based on the total return of a particular reference asset or assets (such as an equity security, a combination of such securities, or an index designed to replicate the aggregate returns of a trading strategy or basket of trading strategies). That is, one party agrees to pay another party the return on a security, basket of securities, or an index in return for a specified interest rate. By entering into an equity index swap, for example, the index receiver can gain exposure to stocks making up the index of securities without actually purchasing those stocks. Total return swaps involve not only the risk associated with the investment in the underlying securities, but also the risk of the counterparty not fulfilling its obligations under the agreement.
22 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
(f) Short Sales
The Fund may seek to hedge investments or realize additional gains through the use of short sales. Short sales are transactions under which the Fund sells a security it does not own in anticipation of a decline in the value of that security. To complete such a transaction, the Fund must borrow the security to make delivery to the buyer. The Fund then is obligated to replace the security borrowed by purchasing the security at market price at the time of replacement. The price at such time may be more or less than the price at which the security was sold by the Fund. When a security is sold short a decrease in the value of the security will be recognized as a gain and an increase in the value of the security will be recognized as a loss, which is potentially limitless. Until the security is replaced, the Fund is required to pay the lender amounts equal to dividend or interest that accrue during the period of the loan which is recorded as an expense. To borrow the security, the Fund also may be required to pay a premium or an interest fee, which are recorded as interest expense. Cash or securities are segregated for the broker to meet the necessary margin requirements. The Fund is subject to the risk that it may not always be able to close out a short position at a particular time or at an acceptable price.
(g) Investment Transactions, Investment Income and Expenses
Investment transactions are accounted for on the trade date. Realized gains and losses on investments are determined on the identified cost basis. Dividend income is recorded net of applicable withholding taxes on the ex-dividend date and interest income is recorded on an accrual basis. Withholding taxes on foreign dividends, if applicable, are paid (a portion of which may be reclaimable) or provided for in accordance with the applicable country’s tax rules and rates and are disclosed in the Statement of Operations. Withholding tax reclaims are filed in certain countries to recover a portion of the amounts previously withheld. The Fund records a reclaim receivable based on a number of factors, including a jurisdiction’s legal obligation to pay reclaims as well as payment history and market convention. Discounts or premiums on debt securities are accreted or amortized to interest income over the lives of the respective securities using the effective interest method. Income and expenses of a Fund are allocated on a pro rata basis to each class of shares relative net assets, except for distribution and service fees and certain transfer agent fees and expenses discussed below, which are unique to each class of shares. Expenses incurred by the Trust with respect to more than one fund are allocated in proportion to the net assets of each fund except where allocation of direct expenses to each fund or an alternative allocation method can be more appropriately made.
The Fund incurred offering costs of approximately $39,829, which are being amortized over a one-year period from October 13, 2021 (commencement of operations).
In conjunction with the use of futures contracts and swap contracts, the Fund may be required to maintain collateral in various forms. At December 31, 2021, such collateral is denoted in the Fund’s Consolidated Schedule of Investments and Consolidated Statement of Assets and Liabilities. Also in conjunction with the use of futures contracts and swap contracts, the Fund, when appropriate, utilize a segregated margin deposit account with the counterparty. At December 31, 2021, these segregated margin deposit accounts are denoted in the Fund’s Consolidated Statement of Assets and Liabilities.
(h) Federal Income Taxes
The Fund intends to comply with the requirements of Subchapter M of the Internal Revenue Code applicable to regulated investment companies and to distribute substantially all of its net investment income and any net realized gains to its shareholders. Therefore, no provision is made for federal income or excise taxes. Due to the timing of dividend distributions and the differences in accounting for income and realized gains and losses for financial statement and federal income tax purposes, the fiscal year in which amounts are distributed may differ from the year in which the income and realized gains and losses are recorded by the Fund.
23 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
Accounting for Uncertainty in Income Taxes (the “Income Tax Statement”) requires an evaluation of tax positions taken (or expected to be taken) in the course of preparing a Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits as income tax expense in the Statement of Operations.
The Income Tax Statement requires management of the Fund to analyze tax positions taken in the prior three open tax years, if any, and tax positions expected to be taken in the Fund’s current tax year, as defined by the IRS statute of limitations for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of and during period from the commencement of operations on October 13, 2021 through December 31, 2021, the Fund did not have a liability for any unrecognized tax benefits. The Fund has no examination in progress and is not aware of any tax positions for which they are reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
(i) Distributions to Shareholders
The Fund will make distributions of net investment income and net capital gains, if any, at least annually. Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from GAAP.
The character of distributions made during the year from net investment income or net realized gains may differ from the characterization for federal income tax purposes due to differences in the recognition of income, expense and gain (loss) items for financial statement and tax purposes.
(j) Illiquid Securities
Pursuant to Rule 22e-4 under the 1940 Act, the Fund has adopted a Liquidity Risk Management Program (“LRMP”) that requires, among other things, that the Fund limit its illiquid investments that are assets to no more than 15% of net assets. An illiquid investment is any security which may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. If the Advisor, at any time determines that the value of illiquid securities held by the Fund exceeds 15% of its net asset value, the Advisor will take such steps as it considers appropriate to reduce them as soon as reasonably practicable in accordance with the Fund’s written LRMP.
Note 3 – Investment Advisory and Other Agreements
The Trust, on behalf of the Fund, entered into an Investment Advisory Agreement (the “Agreement”) with Abraham Trading Company (the “Advisor”). Under the terms of the Agreement, the Fund pays a monthly investment advisory fee to the Advisor at the annual rate of 0.50% of the Fund’s respective average daily net assets. The Advisor has contractually agreed to waive its fees and/or pay for operating expenses of the Fund to ensure that total annual operating expenses (excluding any taxes, leverage interest, brokerage commissions, fees and costs associated with derivatives, dividend and interest expenses on short sales, acquired fund fees and expenses (as determined in accordance with Form N-1A), expenses incurred in connection with any merger or reorganization and extraordinary expenses such as litigation expenses) do not exceed 0.75% and 0.65% of the average daily net assets of the Fund’s Class I and Class K shares, respectively. This agreement is effective until October 13, 2023, and it may be terminated before that date only be the Trust’s Board of Trustees.
The Advisor is responsible for the Subsidiary’s day-to-day business pursuant to an advisory agreement with the Subsidiary. Under this agreement, the Advisor provides the Subsidiary with the same type of management services, under substantially the same terms, as are provided to the Fund. The Subsidiary advisory agreement provides for automatic termination upon the termination of the investment advisory agreement with respect to the Fund. The Advisor receives no compensation for the services it provides to the Subsidiary.
24 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
For the period from the commencement of operations on October 13, 2021 through December 31 2021, the Advisor waived all of its advisory fees and reimbursed other expenses totaling $60,799 for the Fund. The Advisor is permitted to seek reimbursement from the Fund, subject to certain limitations, of fees waived or payments made to the Fund for a period ending three full years after the date of the waiver or payment. This reimbursement may be requested from the Fund if the reimbursement will not cause the Fund’s annual expense ratio to exceed the lesser of (a) the expense limitation amount in effect at the time such fees were waived or payments made, or (b) the expense limitation amount in effect at the time of the reimbursement. At December 31, 2021, the amount of these potentially recoverable expenses was $60,799. The Advisor may recapture all or a portion of this amounts no later than June 30, 2025.
UMB Fund Services, Inc. (“UMBFS”) serves as the Fund’s fund accountant, transfer agent and co-administrator; and Mutual Fund Administration, LLC (“MFAC”) serves as the Fund’s other co-administrator. UMB Bank, n.a., an affiliate of UMBFS, serves as the Fund’s custodian. The Fund’s allocated fees incurred for fund accounting, fund administration, transfer agency and custody services for the period from the commencement of operations on October 13, 2021 through December 31 2021, are reported on the Consolidated Statement of Operations.
IMST Distributors, LLC serves as the Fund’s distributor (the “Distributor”). The Distributor does not receive compensation from the Fund for its distribution services; the Advisor pays the Distributor a fee for its distribution-related services.
Certain trustees and officers of the Trust are employees of UMBFS or MFAC. The Fund does not compensate trustees and officers affiliated with the Fund’s co-administrators. For the period from the commencement of operations on October 13, 2021 through December 31 2021, the Fund’s allocated fees incurred for Trustees who are not affiliated with the Fund’s co-administrators are reported on the Consolidated Statement of Operations.
Dziura Compliance Consulting, LLC provides Chief Compliance Officer (“CCO”) services to the Trust. The Fund’s allocated fees incurred for CCO services for the period from the commencement of operations on October 13, 2021 through December 31 2021, are reported on the Consolidated Statement of Operations.
Note 4 – Federal Income Taxes
At December 31, 2021, gross unrealized appreciation and depreciation on investments owned by the Fund based on cost for federal income tax purposes were as follows:
Cost of investments | $ | 44,334,833 | ||
Gross unrealized appreciation | $ | 427,482 | ||
Gross unrealized depreciation | (53,855 | ) | ||
Net unrealized appreciation on investments | $ | 373,627 |
Note 5 – Investment Transactions
For the period from the commencement of operations on October 13, 2021 through December 31, 2021, purchases and sales of investments, excluding short-term investments, futures contracts, and swap contracts, were $17,858,675 and $3,660,123, respectively.
25 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
Note 6 – Shareholder Servicing Plan
The Trust, on behalf of the Fund, has adopted a Shareholder Servicing Plan to pay a fee at an annual rate of up to 0.10% of the Fund’s average daily net assets of Class I shares serviced by shareholder servicing agents who provide administrative and support services to their customers.
For the period from the commencement of operations on October 13, 2021 through December 31, 2021, shareholder servicing fees incurred by the Fund is disclosed on the Consolidated Statement of Operations.
Note 7 – Indemnifications
In the normal course of business, the Fund enters into contracts that contain a variety of representations which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Fund that has not yet occurred. However, the Fund expects the risk of loss to be remote.
Note 8 – Fair Value Measurements and Disclosure
Fair Value Measurements and Disclosures defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and expands disclosure about fair value measurements. It also provides guidance on determining when there has been a significant decrease in the volume and level of activity for an asset or a liability, when a transaction is not orderly, and how that information must be incorporated into a fair value measurement.
Under Fair Value Measurements and Disclosures, various inputs are used in determining the value of the Fund’s investments. These inputs are summarized into three broad Levels as described below:
· | Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. |
· | Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
· | Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different Levels of the fair value hierarchy. In such cases, for disclosure purposes, the Level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest Level input that is significant to the fair value measurement in its entirety.
26 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
The inputs or methodology used for valuing securities are not an indication of the risk associated with investing in those securities. The following is a summary of the inputs used, as of December 31, 2021, in valuing the Fund’s assets carried at fair value:
Level 1 | Level 2 | Level 3** | Total | |||||||||||||
Assets | ||||||||||||||||
Investments | ||||||||||||||||
Common Stocks1 | $ | 17,221,475 | $ | - | $ | - | $ | 17,221,475 | ||||||||
U.S. Government and Agencies | - | 27,486,975 | - | 27,486,975 | ||||||||||||
Short-Term Investments | 10 | - | - | 10 | ||||||||||||
Total Investments | 17,221,485 | 27,486,975 | - | 44,708,460 | ||||||||||||
Other Financial Instruments* | ||||||||||||||||
Futures Contracts | 191,528 | - | - | 191,528 | ||||||||||||
Total Assets | $ | 17,413,013 | $ | 27,486,975 | $ | - | $ | 44,899,988 | ||||||||
Liabilities | ||||||||||||||||
Other Financial Instruments* | ||||||||||||||||
Futures Contracts | $ | 91,093 | $ | - | $ | - | $ | 91,093 | ||||||||
Swap Contracts | - | 35,772 | - | 35,772 | ||||||||||||
Total Liabilities | $ | 91,093 | $ | 35,772 | $ | - | $ | 126,865 |
1 | For a detailed break-out of common stocks, please refer to Consolidated Schedule of Investments. |
* | Other financial instruments are derivative instruments such as futures contracts and swap contracts. Futures contracts and forward contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
** | The Fund did not hold any Level 3 securities at period end. |
Note 9 – Derivatives and Hedging Disclosures
Derivatives and Hedging requires enhanced disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effects on the Fund’s financial position, performance and cash flows. The Fund invested in futures contracts and swap contracts during the period from the commencement of operations on October 13, 2021 through December 31, 2021.
The effects of these derivative instruments on the Fund’s financial position and financial performance as reflected in the Statement of Assets and Liabilities and Statement of Operations are presented in the tables below. The fair values of derivative instruments held by the Fund as of December 31, 2021 by risk category are as follows:
27 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
Asset Derivatives | Liability Derivatives | |||||||||||
Derivatives not designated as hedging instruments | Consolidated Statement of Asset and Liabilities Location | Value | Consolidated Statement of Asset and Liabilities Location | Value | ||||||||
Commodity Contracts | Variation Margin | $ | - | Variation Margin | $ | 91,093 | ||||||
Index contracts | Variation Margin | 191,528 | Variation Margin | - | ||||||||
Mixed: Commodity, interest rate, equity and foreign exchange contracts | Unrealized appreciation on total return swap contract | - | Unrealized depreciation on total return swap contract | 35,772 | ||||||||
Total | $ | 191,528 | $ | 126,865 |
The effects of the Fund’s derivative instruments on the Consolidated Statement of Operations for the period from the commencement of operations on October 13, 2021 through December 31, 2021 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income
Derivatives not designated as hedging instruments | Futures Contracts | Swap contracts | Total | |||||||||
Commodity contracts | $ | 80,436 | $ | - | $ | 80,436 | ||||||
Mixed: Commodity, interest rate, equity and foreign exchange contracts | - | 201,898 | 201,898 | |||||||||
Index contracts | 559,408 | - | 559,408 | |||||||||
Total | $ | 639,844 | $ | 201,898 | $ | 841,742 |
Change in Unrealized Appreciation/Depreciation on Derivatives Recognized in Income
Derivatives not designated as hedging instruments | Futures Contracts | Swap contracts | Total | |||||||||
Commodity contracts | $ | (91,093 | ) | $ | - | $ | (91,093 | ) | ||||
Index contracts | 191,528 | - | 191,528 | |||||||||
Mixed: Commodity, interest rate, equity and foreign exchange contracts | - | (35,772 | ) | (35,772 | ) | |||||||
Total | $ | 100,435 | $ | (35,772 | ) | $ | 64,663 |
28 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
The quarterly average volumes of derivative instruments in the Fund as of December 31, 2021 are as follows:
Derivatives not designated as hedging instruments | Notional Value | |||||
Commodity contracts | Long futures contracts | $ | 4,845,453 | |||
Index contracts | Long futures contracts | 7,788,767 | ||||
Mixed: Interest rate, equity and foreign exchange contracts | Swap contracts | 31,573,015 |
Note 10 - Disclosures about Offsetting Assets and Liabilities
Disclosures about Offsetting Assets and Liabilities require an entity to disclose information about offsetting and related arrangements to enable users of its financial statements to understand the effect of those arrangements on its financial position. The guidance requires retrospective application for all comparative periods presented for the Fund.
The Fund mitigates credit risk with respect to OTC derivative counterparties through credit support annexes included with International Swaps and Derivatives Association, Inc. (“ISDA”) which are the standard contracts governing most derivative transactions between the Fund and each of its counterparties. These agreements allow the Fund and each counterparty to offset certain derivative financial instruments’ payables and/or receivables against each other and/or with collateral, which is generally held by the Fund’s custodian. The amount of collateral moved to/from applicable counterparties is based upon minimum transfer amounts specified in the agreement. To the extent amounts due to the Fund from its counterparties are not fully collateralized contractually or otherwise, the Fund bears the risk of loss from counterparty non-performance.
The Fund’s Consolidated Statement of Assets and Liabilities presents financial instruments on a gross basis, therefore there are no net amounts and no offset amounts within the Consolidated Statement of Assets and Liabilities to present below. Gross amounts of the financial instruments, amounts related to financial instruments/cash collateral not offset in the Consolidated Statement of Assets and Liabilities and net amounts are presented below:
29 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
Amounts Not Offset in Consolidated Statement of Assets and Liabilities | ||||||||||||||||||||||||
Description/Financial Instrument/Statement of Assets and Liabilities Category | Counterparty | Gross Amounts of Recognized Assets & Liabilities | Gross Amounts Offset in Statement of Assets and Liabilities | Net Amounts of Assets Presented in the Statement of Assets and Liabilities | Financial Instruments* | Cash Collateral** | Net Amount | |||||||||||||||||
Unrealized depreciation on total return swap contract – liability payable | Deutsche Bank | $ | (35,772 | ) | $ | - | $ | - | $- | $ | 35,772 | $ | - |
* | Amounts relate to master netting agreements and collateral agreements (for example, ISDA) which have been determined by the Advisor to be legally enforceable in the event of default and where certain other criteria are met in accordance with applicable offsetting accounting guidance. |
** | Amounts relate to master netting agreements and collateral agreements which have been determined by the Advisor to be legally enforceable in the event of default but where certain other criteria are not met in accordance with applicable offsetting accounting guidance. The collateral amounts may exceed the related net amounts of financial assets and liabilities presented in the Consolidated Statement of Assets and Liabilities. Where this is the case, the total amount reported is limited to the net amounts of financial assets and liabilities with that counterparty. |
Note 11 – COVID-19 Risks
In early 2020, an outbreak of a novel strain of coronavirus (COVID-19) emerged globally. This coronavirus has resulted in closing international borders, enhanced health screenings, healthcare service preparation and delivery, quarantines, cancellations, disruptions to supply chains and customer activity, as well as general public concern and uncertainty. The impact of this outbreak has negatively affected the worldwide economy, as well as the economies of individual countries, the financial health of individual companies and the market in general in significant and unforeseen ways. The future impact of COVID-19 is currently unknown, and it may exacerbate other risks that apply to the Fund, including political, social and economic risks. Any such impact could adversely affect the Fund’s performance, the performance of the securities in which the Fund invests and may lead to losses on your investment in the Fund. The ultimate impact of COVID-19 on the financial performance of the Fund’s investments is not reasonably estimable at this time.
30 |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
December 31, 2021 (Unaudited)
Note 12- New Accounting Pronouncements
In October 2020, the SEC adopted new regulations governing the use of derivatives by registered investment companies (“Rule 18f-4”). Rule 18f-4 will impose limits on the amount of derivatives a Fund can enter into, eliminate the asset segregation framework currently used by funds to comply with Section 18 of the 1940 Act, and require funds whose use of derivatives is greater than a limited specified amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager. Funds will be required to comply with Rule 18f-4 by August 19, 2022. It is not currently clear what impact, if any, Rule 18f-4 will have on the availability, liquidity or performance of derivatives. Management is currently evaluating the potential impact of Rule 18f-4 on the Fund(s). When fully implemented, Rule 18f-4 may require changes in how a Fund uses derivatives, adversely affect the Fund’s performance and increase costs related to the Fund’s use of derivatives.
In December 2020, the SEC adopted a new rule providing a framework for fund valuation practices (“Rule 2a-5”). Rule 2a-5 establishes requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 will permit fund boards to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions. Rule 2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a fund must fair value a security. In connection with Rule 2a-5, the SEC also adopted related recordkeeping requirements and is rescinding previously issued guidance, including with respect to the role of a board in determining fair value and the accounting and auditing of fund investments. The Fund will be required to comply with the rules by September 8, 2022. Management is currently assessing the potential impact of the new rules on the Fund’s financial statements.
The SEC adopted new Rule 12d1-4, which will allow registered investment companies (including business development companies (“BDCs”), unit investment trusts (“UITs”), closed-end funds, exchange-traded funds (“ETFs”), and exchange-traded managed funds (“ETMFs”) (an “acquiring” fund), to invest in other investment companies (an “acquired fund”), including private funds under a specific exception, beyond the limits of Section 12(d)(1), subject to the conditions of the rule. Rule 12d1-4 became effective January 19, 2021. Funds electing to rely on Rule 12d1-4 will have to comply with the rules by January 19, 2022.
In March 2020, FASB issued ASU 2020-04, Reference Rate Reform: Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The main objective of the new guidance is to provide relief to companies that will be impacted by the expected change in benchmark interest rates at the end of 2021, when participating banks will no longer be required to submit London Interbank Offered Rate (“LIBOR”) quotes by the UK Financial Conduct Authority. The new guidance allows companies to, provided the only change to existing contracts are a change to an approved benchmark interest rate, account for modifications as a continuance of the existing contract without additional analysis. In addition, derivative contracts that qualified for hedge accounting prior to modification, will be allowed to continue to receive such treatment, even if critical terms change due to a change in the benchmark interest rate. For new and existing contracts, the Fund may elect to apply the amendments as of March 12, 2020 through December 31, 2022. Management is currently assessing the impact of the ASU’s adoption to the Fund’s financial statements and various filings.
Note 13 – Events Subsequent to the Fiscal Period End
The Fund has adopted financial reporting rules regarding subsequent events which require an entity to recognize in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the balance sheet. Management has evaluated the Fund’s related events and transactions that occurred through the date of issuance of the Fund’s financial statements. There were no events or transactions that occurred during this period that materially impacted the amounts or disclosures in the Fund’s financial statements.
31 |
Abraham Fortress Fund
SUPPLEMENTAL INFORMATION (Unaudited)
Board Consideration of Investment Advisory and Sub-Advisory Agreements
At an in-person meeting held on July 21, 2021, the Board of Trustees (the “Board”) of Investment Managers Series Trust II (the “Trust”), including the trustees who are not “interested persons” of the Trust (the “Independent Trustees”) as defined in the Investment Company Act of 1940, as amended (the “1940 Act”), reviewed and unanimously approved the investment advisory agreement (the “Fund Advisory Agreement”) between the Trust and Abraham Trading Company (the “Investment Advisor”) with respect to the Abraham Fortress Fund series of the Trust (the “Fund”) for an initial two-year term. At the same meeting, the Board and the Independent Trustees reviewed and unanimously approved the investment advisory agreement (the “Subsidiary Advisory Agreement”) between the Investment Advisor and Abraham Fortress Fund Limited, a wholly owned subsidiary of the Fund organized under the laws of the Cayman Islands (the “Subsidiary”), for an initial two-year term. The Fund Advisory Agreement and the Subsidiary Advisory Agreement are collectively referred to below as the “Advisory Agreements.” In approving each Advisory Agreement, the Board, including the Independent Trustees, determined that such approval was in the best interests of the Fund, the Subsidiary, and the shareholders of the Fund and the Subsidiary.
Background
In advance of the meeting, the Board received information about the Fund, the Subsidiary, and the Advisory Agreements from the Investment Advisor and from Mutual Fund Administration, LLC and UMB Fund Services, Inc., the Trust’s co-administrators, certain portions of which are discussed below. The materials, among other things, included information about the organization and financial condition of the Investment Advisor; information regarding the background, experience, and compensation structure of relevant personnel who would be providing services to the Fund and the Subsidiary; information about the Investment Advisor’s compliance policies and procedures, disaster recovery and contingency planning, and policies with respect to portfolio execution and trading; information regarding the estimated profitability of the Investment Advisor’s overall relationship with the Fund; information regarding the performance of the Investment Advisor’s Fortress Strategy, which consisted of performance of (i) the Abraham Fortress Fund, LP (the “Predecessor Fund”), a private fund which would be reorganizing into the Fund, and (ii) the Investment Advisor’s portion of the Pickens-Abraham Foundation account, which was managed using a strategy that was substantially similar to the strategy used to manage the Predecessor Fund and that would be used to manage the Fund, for the one-, three-, five- and ten-year and since inception (January 1, 2008) periods ended April 30, 2021; and a report prepared by Broadridge Financial Solutions, Inc. (“Broadridge”) comparing the proposed advisory fee and estimated total expenses of the Fund with those of a group of comparable funds selected by Broadridge (the “Peer Group”) from Morningstar, Inc.’s Allocation-50% to 70% Equity fund universe (the “Fund Universe”). The Board also received a memorandum from legal counsel to the Trust and the Independent Trustees discussing the legal standards under the 1940 Act and other applicable law for their consideration of the proposed approval of the Advisory Agreements. No representatives of the Investment Advisor were present during the Board’s consideration of the Advisory Agreements, and the Independent Trustees were represented by their legal counsel with respect to the matters considered.
In approving the Advisory Agreements, the Board and the Independent Trustees considered a variety of factors, including those discussed below. In their deliberations, the Board and the Independent Trustees did not identify any particular factor that was controlling, and each Trustee may have attributed different weights to the various factors.
Nature, Extent and Quality of Services
With respect to relevant performance information, the meeting materials indicated that the Fortress Strategy’s cumulative total return since inception was higher than the cumulative total return of a blended index consisting of 70% MSCI All Country World Index and 30% Bloomberg U.S. Aggregate Bond Index (the “70/30 Blended Index”), but that the Fortress Strategy’s cumulative total returns for the one-, three-, five-, and ten-year periods were lower than the 70/30 Blended Index’s cumulative total returns by 17.76%, 8.88%, 16.71%, and 9.52%, respectively. The Board considered the Investment Advisor’s explanation that most of the Fortress Strategy’s underperformance was attributable to the one-year period, and that the 70/30 Blended Index outperformed the Fortress Strategy because the Index included more stocks than the Fortress Strategy over that period. The Board also noted the Investment Advisor’s observation that the Fortress Strategy performed well over each of those periods with lower volatility than the 70/30 Blended Index.
32 |
Abraham Fortress Fund
SUPPLEMENTAL INFORMATION (Unaudited) - Continued
The Board also considered the services to be provided by the Investment Advisor to the Fund and the Subsidiary. In doing so, the Board considered the Investment Advisor’s specific responsibilities in day-to-day management and oversight of the Fund and the Subsidiary, as well as the qualifications, experience, and responsibilities of the personnel who would be involved in the activities of the Fund and the Subsidiary. The Board also considered the overall quality of the organization and operations, and the compliance structure and compliance procedures, of the Investment Advisor.
The Board and the Independent Trustees concluded that based on the various factors they had reviewed, the Investment Advisor would have the capabilities, resources, and personnel necessary to manage the Fund and the Subsidiary, and that the Investment Advisor would provide the Fund and the Subsidiary with a reasonable potential for good investment results.
Advisory Fee and Expense Ratio
The Board reviewed information regarding the Fund’s proposed advisory fee and estimated total expenses. The meeting materials indicated that the Fund’s proposed annual investment advisory fee (gross of fee waivers) was lower than the Peer Group and Fund Universe medians. The Board noted that the proposed advisory fee for the Fund was lower than that of the Predecessor Fund. The Board also considered that other than the Predecessor Fund, the Investment Advisor does not manage any other accounts with the same objectives and policies as the Fund, and therefore they did not have a good basis for comparing the Fund’s proposed advisory fee with those of other similar accounts of the Investment Advisor. The Board also observed that no advisory fee would be paid by the Subsidiary to the Investment Advisor under the Subsidiary Advisory Agreement.
The meeting materials indicated that the estimated annual total expenses (net of fee waivers) of the Fund were lower than the Peer Group and Fund Universe medians.
The Board and the Independent Trustees concluded that the proposed compensation payable to the Investment Advisor under the Fund Advisory Agreement would be fair and reasonable in light of the nature and quality of the services proposed to be provided by the Investment Advisor to the Fund and the Subsidiary.
Profitability and Economies of Scale
The Board next reviewed the estimated profitability to the Investment Advisor of its relationship with the Fund in the Fund’s first year of operations, taking into account assets of $100 million. The Board observed that the Investment Advisor anticipated waiving a portion of its advisory fee for the Fund, and that the Investment Advisor did not anticipate that it would realize a profit with respect to the Fund in its first year of operations. The Board noted that the potential benefits received by the Investment Advisor as a result of its relationship with the Fund and the Subsidiary, other than the receipt of its advisory fee, would include the usual types of “fall out” benefits received by advisors to the Trust, including any research received from broker-dealers providing execution services to the Fund and the Subsidiary, the beneficial effects from the review by the Trust’s Chief Compliance Officer of the Investment Advisor’s compliance program, and the intangible benefits of its association with the Fund and the Subsidiary generally and any favorable publicity arising in connection with the Fund’s performance. The Board also noted that although the Fund Advisory Agreement does not provide for any advisory fee breakpoints, the Fund’s asset level would likely be too low to achieve significant economies of scale after the reorganization and during the Fund’s startup period, and that any such economies would be considered in the future as the Fund’s assets grow.
33 |
Abraham Fortress Fund
SUPPLEMENTAL INFORMATION (Unaudited) - Continued
Conclusion
Based on these and other factors, the Board and the Independent Trustees concluded that approval of each Advisory Agreement was in the best interests of the Fund, the Subsidiary, and the shareholders of the Fund and the Subsidiary and, accordingly, approved each Advisory Agreement with respect to the Fund and the Subsidiary, as applicable.
34 |
Abraham Fortress Fund
EXPENSE EXAMPLE
For the Periods Ended December 31, 2021 (Unaudited)
Expense Examples
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, and (2) ongoing costs, including management fees; shareholder servicing fees (Advisor Class shares only) and other Fund expenses. The examples below are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other mutual funds.
These examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period from July 1, 2021 to December 31, 2021.
The Actual Performance example of the Fund is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from October 13, 2021* to December 31, 2021.
Actual Expenses
The information in the row titled “Actual Performance” of the table below provides actual account values and actual expenses. You may use the information in these columns, 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 appropriate row under the column titled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The information in the row titled “Hypothetical (5% annual return before expenses)” of the table below provides hypothetical account values and hypothetical expenses based on the Fund’s actual expense ratios and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare these 5% hypothetical examples with the 5% hypothetical examples that appear in the shareholder reports of the other funds.
Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as sales charges (load) or contingent deferred sales charges. Therefore, the information in the row titled “Hypothetical (5% annual return before expenses)” is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
Beginning Account Value | Ending Account Value | Expenses Paid During Period | ||
10/13/2021* | 12/31/2021 | 10/13/2021* - 12/31/2021 | ||
Class I | Actual Performance** | $ 1,000.00 | $ 1,027.30 | $ 1.65 |
7/1/2021 | 12/31/2021 | 7/1/2021-12/31/2021 | ||
Hypothetical (5% annual return before expenses)*** | 1,000.00 | 1,021.42 | 3.82 | |
10/13/2021* | 12/31/2021 | 10/13/2021*-12/31/2021 | ||
Class K | Actual Performance** | 1,000.00 | 1,027.30 | 1.43 |
7/1/21 | 12/31/21 | 7/1/21 – 12/31/21 | ||
Hypothetical (5% annual return before expenses)*** | 1,000.00 | 1,021.93 | 3.31 |
35 |
Abraham Fortress Fund
EXPENSE EXAMPLE - Continued
For the Periods Ended December 31, 2021 (Unaudited)
* | Commencement of operations. |
** | Expenses are equal to the Fund’s annualized expense ratios of 0.75% and 0.65% for Class I and Class K, respectively, multiplied by the average account values over the period, multiplied by 79/365 (to reflect the since inception period). The expense ratios reflect an expense waiver. Assumes all dividends and distributions were reinvested. |
*** | Expenses are equal to the Fund’s annualized expense ratios of 0.75% and 0.65% for Class I and Class K, respectively, multiplied by the average account values over the period, multiplied by 184/365. The expense ratios reflect an expense waiver. Assumes all dividends and distributions were reinvested. |
36 |
Abraham Fortress Fund
A series of Investment Managers Series Trust II
Investment Advisor
Abraham Trading Company
124 Main Street, Suite 200
Canadian, Texas 79014
Custodian
UMB Bank, n.a.
928 Grand Boulevard, 5th Floor
Kansas City, Missouri 64106
Fund Co-Administrator
Mutual Fund Administration, LLC
2220 East Route 66, Suite 226
Glendora, California 91740
Fund Co-Administrator, Transfer Agent and Fund Accountant
UMB Fund Services, Inc.
235 West Galena Street
Milwaukee, Wisconsin 53212
Distributor
IMST Distributors, LLC
Three Canal Plaza, Suite 100
Portland, Maine 04101
www.foreside.com
FUND INFORMATION
TICKER | CUSIP | |
Abraham Fortress Fund – Class I | FORTX | 46141T 166 |
Abraham Fortress Fund – Class K | FORKX | 46141T 158 |
Privacy Principles of the Abraham Fortress Fund for Shareholders
The Fund is committed to maintaining the privacy of its shareholders and to safeguarding its non-public personal information. The following information is provided to help you understand what personal information the Fund collects, how we protect that information and why, in certain cases, we may share information with select other parties.
Generally, the Fund does not receive any non-public personal information relating to its shareholders, although certain non-public personal information of its shareholders may become available to the Fund. The Fund does not disclose any non-public personal information about its shareholders or former shareholders to anyone, except as permitted by law or as is necessary in order to service shareholder accounts (for example, to a transfer agent or third party administrator).
This report is sent to shareholders of the Abraham Fortress Fund for their information. It is not a Prospectus, circular or representation intended for use in the purchase or sale of shares of the Fund or of any securities mentioned in this report.
Proxy Voting Policies and Procedures
A description of the Fund’s proxy voting policies and procedures related to portfolio securities is available without charge, upon request, by calling the Fund at (844) 323-8200 or on the U.S. Securities and Exchange Commission’s (“SEC”) website at www.sec.gov.
Proxy Voting Record
Information regarding how the Fund voted proxies for portfolio securities, if applicable, during the most recent 12-month period ended June 30, is also available, without charge and upon request by calling the Fund at (844) 323-8200 or by accessing the Fund’s Form N-PX on the SEC’s website at www.sec.gov.
Fund Portfolio Holdings
The Fund files a complete schedule of its portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form N-PORT within 60 days of the end of such fiscal quarter. Shareholders may obtain the Fund’s Form N-PORT on the SEC’s website at www.sec.gov.
Prior to the use of Form N-PORT, the Fund filed its complete schedule of portfolio holdings with the SEC on Form N-Q, which is available online at www.sec.gov
Householding
The Fund will mail only one copy of shareholder documents, including prospectuses and notice of annual and semi-annual reports availability and proxy statements, to shareholders with multiple accounts at the same address. This practice is commonly called “householding” and is intended to reduce expenses and eliminate duplicate mailings of shareholder documents. Mailings of your shareholder documents may be householded indefinitely unless you instruct us otherwise. If you do not want the mailing of these documents to be combined with those for other members of your household, please call the Fund at (844) 323-8200.
Abraham Fortress Fund
P.O. Box 2175
Milwaukee, WI 53201
Toll Free: (844) 323-8200
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
(a) | Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934). |
(b) | Not applicable. |
Item 6. Schedule of Investments.
(a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) | The Registrant’s President/Chief Executive Officer and Treasurer/Chief Financial Officer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as 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. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(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 period covered by this report that has materially affected, or is 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 to open-end investment companies.
Item 13. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not applicable. |
(2) Certifications pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(4) Change in the registrant’s independent public accountant. There was no change in the registrant’s independent public accountant for the period covered by this report.
(b) | Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | Investment Managers Series Trust II | |
By (Signature and Title) | /s/ Terrance Gallagher | |
Terrance Gallagher, President/Chief Executive Officer | ||
Date | 03/11/2022 |
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 (Signature and Title) | /s/ Terrance Gallagher | |
Terrance Gallagher, President/Chief Executive Officer | ||
Date | 03/11/2022 | |
By (Signature and Title) | /s/ Rita Dam | |
Rita Dam, Treasurer/Chief Financial Officer | ||
Date | 03/11/2022 |