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: June 30, 2022
Item 1. Report to Stockholders.
| (a) | The registrant’s 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)
ANNUAL REPORT
JUNE 30, 2022
Abraham Fortress Fund
A series of Investment Managers Series Trust II
Table of Contents
| Letter to Shareholders (unaudited) | 1 |
| Fund Performance (unaudited) | 5 |
| Consolidated Schedule of Investments | 7 |
| Consolidated Statement of Assets and Liabilities | 18 |
| Consolidated Statement of Operations | 19 |
| Consolidated Statement of Changes in Net Assets | 20 |
| Consolidated Financial Highlights | 21 |
| Notes to Consolidated Financial Statements | 23 |
| Report of Independent Registered Public Accounting Firm | 39 |
| Supplemental Information (unaudited) | 40 |
| Expense Example (unaudited) | 45 |
This report and the financial statements contained herein are provided for the general information of the shareholders of the Abraham Fortress Fund (the “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 Abraham Trading Company 2nd & Main St, Canadian, TX 79014 | July 1, 2022 |
Fellow Investors,
Our January letter to investors included the following: “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. 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.” (Read the full letter here.)
In many ways, that tells the tale of the first six months of 2022. As of June 30, 2022, Abraham Fortress Fund Class K Shares were down -3.86% YTD. The key factors that helped us outperform the market were (1) Lighter exposure to stocks than the average portfolio, (2) The inclusion of the diversifying strategies in the Fortress portfolio, and (3) Opportunistic hedges and active risk management.
(Letter continued on next page…)
| | MTD (as of 06/30/22) | QTD (as of 06/30/22) | YTD (as of 06/30/22) | 1 Year (through 06/30/22) | 3 Year (through 06/30/22) | Since Start of Performance (7/1/18 to 06/30/22) |
| Fortress Class K Shares1 | -3.48% | -5.72% | -3.86% | -0.54% | 8.54% | 6.21% |
| 70/30 Blended Index² | -6.37% | -12.44% | -17.26% | -13.99% | 4.34% | 4.92% |
| MSCI ACWI Index³ | -8.43% | -15.66% | -20.18% | -15.75% | 6.21% | 6.09% |
| U.S. Bond Index⁴ | -1.57% | -4.69% | -10.35% | -10.29% | -0.93% | 1.20% |
Past performance is no guarantee of future results. Investment return and principal value of an investment will fluctuate; therefore, you may have a gain or loss when you sell your shares. Current performance may be higher or lower than the performance data quoted. For the most recent month-end performance information, please visit our website at www.abrahamtrading.com.
Performance figures include the reinvestment of all dividends and any capital gains distributions. All returns are net of expenses. An investment of this nature is subject to a risk of loss. 1Performance between 07/01/2018 and 10/12/2021 is from the Abraham Fortress Fund, LP, a Delaware Limited Partnership (the “Predecessor Fund”). Performance beginning on 10/13/2021 is for the Abraham Fortress Fund, an SEC-registered open-end mutual fund (the “Fund”). The Fund’s objectives, policies, guidelines, and restrictions are materially equivalent to those of the Predecessor Fund. Fortress Class K performance reflects proprietary performance from 7/1/2018 through 4/30/2021, when Salem Abraham’s proprietary investments represented over half of the Predecessor Fund’s assets. ²70/30 Portfolio uses 70% MSCI ACWI Index and 30% Bloomberg US Aggregate Bond Index, and its statistics used in the tables above reflect no deductions for fees, expenses, or taxes. ³MSCI ACWI is MSCI’s global stock index, and its statistics used in the tables above reflect no deductions for fees, expenses, or taxes. ⁴US Aggregate Bond is the Bloomberg US Aggregate Bond Index, a broad-based flagship benchmark that measures the investment grade USD-denominated fixed-rate taxable bond market, and its statistics used in the tables above reflect no deductions for fees, expenses, or taxes. Gross expense ratio: 0.74%, Net expense ratio: 0.65%. Please review fees and expenses in the prospectus. Actual expenses may differ. You may pay fees, such as commissions, which are not reflected here. The Fund has contractually agreed to waive its fees and/or pay for operating expenses of the Fund to ensure that total annual fund operating expenses do not exceed 0.65% for K shares, effective until 10/13/23.
Factor #1: Anyone familiar with our investment philosophy knows that we believe portfolios with 70-80% stock exposure are risky and poorly diversified. The Fortress Fund will generally have 30-60% in equities, and its current exposure sits at 42.5%. Fixed income exposure is approximately 15%, and our diversifying strategies exposure is 20%, leaving 20.5% in short-term T bills. It’s important to remind everyone that the portfolio contains some leverage in the diversifying strategies bucket, and some of our equity exposure is achieved through treasuries combined with equity index futures¹, which also has leverage. When you read our semi-annual reports, you will see what appears to be high exposure to short-term T bills. However, those T-bills are often used to reduce leverage in other positions and can help fund stock index futures position¹. As ex hedge fund traders, we are familiar with the strategic use of derivatives, futures, and options.¹ The Fortress Fund benefits from that experience.
Given the discussion in the prior paragraph, I want to highlight the name of our firm. Abraham Trading Company is a peculiar name in the mutual fund space because of the word “trading.” Most groups use the term “investment management.” However, our team and investment philosophy grew out of trading skills and principles. We are proud of our company’s trading heritage, and we believe it is an asset for portfolio building and management. The first two quarters of this year have given us an opportunity to show why our background is well suited for the current market environment. During tumultuous markets, it’s important to have an experienced investment team who can be nimble when necessary.
This leads us to Key Factor #2. We could not be more pleased with the diversifying strategies portion of the Fortress portfolio. This third pillar of the Fortress portfolio is designed to behave independently from the stock and bond markets, especially during volatile market downturns. We were happy to see this group of investments produce profits and offset losses from our stock and bond allocations. The first six months of 2022 clearly demonstrated why we believe diversification should be the bedrock principle of every portfolio and why we feel traditional stock/bond portfolios with heavy stock weightings are particularly unwise in today’s markets.
Finally, we come to Key Factor #3. Risk management is in the DNA of our team and the Fortress Fund’s investment philosophy. The ocean floor is littered with the bodies of investors who did not respect risk, failing to trim their sails or change course in the face of a storm. You don’t drive the same speed when roads ice over. Why wouldn’t we make adjustments in dangerous markets? In late January, with Russia reassuring Ukraine that they were only conducting military exercises, we reduced the fund’s stock exposure from 50% down to 42.5%. Market volatility had picked up, and we felt it was prudent to have less equity exposure. In January, we also put on a small 5% long position in Brent Crude Oil futures. Our team has traded the crude oil market and almost every commodity market for over three decades. We liked the long position in crude oil. We also felt it could serve as an effective hedge that may profit if Russia invaded Ukraine, ideally offsetting some equity losses. Put options¹ on stock indexes were priced like flood insurance in New Orleans before a hurricane, so that was out of the question. We thought the crude oil position was a strategic and low cost partial hedge. That position was closed out and replaced with a long WTI Crude position in the December futures contract. We believe that this small position will continue to help counterbalance some equity exposure going forward. Also, longtime Fortress investors know that we typically have a long gold futures position of 0-10%. It has been at approximately 10% all year.
In short, this year has demanded trading agility and deep macro experience across all asset classes, particularly alternatives. Over the next 6 months, we believe investors will run the gauntlet in all asset classes amid sustained market volatility. Stock and bond portfolios were the golden goose for decades, but they are not always a recipe for steady profits, a smooth ride, or peaceful sleep. The answer to the puzzle before us is not in the rearview mirror. The market environment over the past three years shows how portfolios can potentially benefit from the broader diversification found in the Fortress Fund.
Past performance is no guarantee of future results, and diversification neither assures a profit nor guarantees against loss in a declining market. We have made missteps in the past, and our team knows we will make missteps again. However, the broad diversification of the Fortress Fund and the deep experience of our team means we can confidently embark on the journey ahead. We have not had any sleepless nights or upset stomachs thinking about our investments. In many ways, the team has enjoyed putting the portfolio to the test. Remember, our money is invested alongside yours. We appreciate your partnership and the confidence you have placed in us. Please call with any questions you may have.
Sincerely,
Salem Abraham, President
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. 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.
DEFINITIONS
Derivatives – Refers to a type of financial contract whose value is dependent on an underlying asset, group of assets, or benchmark.
Futures – Futures are derivative financial contracts that obligate parties to buy or sell an asset at a predetermined future date and price. The buyer must purchase or the seller must sell the underlying asset at the set price, regardless of the current market price at the expiration date. Underlying assets include physical commodities and financial instruments. Futures can be used for hedging or trade speculation.
Options – An option refers to a financial instrument that is based on the value of underlying securities such as stocks. An options contract offers the buyer the opportunity to buy or sell the underlying asset. Unlike futures, the holder is not required to buy or sell the asset if they decide against it. Options are used for hedging, income, or speculation.
Put Options – A put option is a contract giving the option buyer the right, but not the obligation, to sell a specified amount of an underlying security, at a predetermined price within a specified time frame.
| MAIN OFFICE | BRANCH OFFICE |
| 124 Main Street | 319 Main Suite |
| Moody Building, Suite 200 | Suite 300 |
| Canadian, Texas 79014 | Carbondale, Colorado 81623 |
| (806) 323-8000 | (970) 305-5000 |
Abraham Fortress Fund
FUND PERFORMANCE at June 30, 2022 (Unaudited)
The Fund’s current reporting period began on October 13, 2021. The Fund acquired the assets and liabilities of the Abraham Fortress Fund, LP (the “Predecessor Fund”), a Delaware limited partnership, on October 13, 2021.
This graph compares a hypothetical $25,000 investment in the Fund’s Class K shares on July 1, 2018, the Predecessor Fund’s start of performance, with a similar investment in the MSCI ACWI Index, the Bloomberg U.S. Aggregate Bond Index and the 70/30 Blended Index. The performance graph above is shown for the Fund’s Class K shares; Class I shares performance may vary. Results include the reinvestment of all dividends and capital gains.
The MSCI ACWI Index captures large to mid-cap representation across 23 Developed Markets countries1 (as determined by MSCI) (including the United States) and 23 Emerging Markets countries1 (as determined by MSCI). The index covers approximately 85% of the global equity opportunity set. The Bloomberg U.S. Aggregate Bond Index is a measure of the performance of the U.S. dollar denominated investment grade bond market. The 70/30 Blended index is a blend of 70% MSCI ACWI Index and 30% Bloomberg U.S. Aggregate Bond Index. These indices do not reflect expenses, fees or sales charge, which would lower performance. The indices are unmanaged and it is not possible to invest in an index.
| Average Annual Total Returns as of June 30, 2022 | 1 Year* | 3 Years* | Since Start of Performance* | Start of Performance Date |
| Class I | -0.58% | 8.44% | 6.11% | 7/01/2018 |
| Class K | -0.54% | 8.54% | 6.21% | 7/01/2018 |
| MSCI ACWI Index | -15.75% | 6.21% | 6.09% | 7/01/2018 |
| Bloomberg U.S. Aggregate Bond Index | -10.29% | -0.93% | 1.20% | 7/01/2018 |
| 70/30 Blended Index | -13.99% | 4.34% | 4.92% | 7/01/2018 |
| * | The performance figures for Class I and Class K include the performance of the Predecessor Fund prior to October 13, 2021. For the performance from the beginning of the reporting period on October 13, 2021 through June 30, 2022, please refer to the Consolidated Financial Highlights section of this report. |
| 1 | Developed Market Countries include: Australia, Austria, Belguim, Canada, Denmark, Finland, France, Germany, Hong Kong, Ireland, Israel, Italy, Japan, Netherlands, New Zealand, Norway, Portugal, Singapore, Spain, Sweden, Switzerland, the UK and the U.S. Emerging Market countries include: Brazil, Chile, China, Colombia, Czech Republic, Egypt, Greece, Hungary, India, Indonesia, Korea, Kuwait, Malaysia, Mexico, Peru, Philippines, Poland, Qatar, Saudi Arabia, South Africa, Taiwan, Thailand, Turkey and United Arab Emirates. |
Abraham Fortress Fund
FUND PERFORMANCE at June 30, 2022 (Unaudited)
The performance data quoted here represents past performance and past performance is not a guarantee of future results. Investment return and principal value will fluctuate so that an investor's shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance information quoted. The most recent month end performance may be obtained by calling (844) 323-8200.
Gross and net expense ratios for Class I shares were 0.84% and 0.75%, respectively, and for Class K shares were 0.74% and 0.65%, respectively, which were the amounts stated in the current prospectus dated October 13, 2021. The Fund’s Advisor has contractually agreed to waive its fees and/or pay for operating expenses of the Fund to ensure that total annual fund operating expenses (excluding, as applicable, taxes, leverage interest, brokerage commissions, 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 Class I shares and Class K shares, respectively. This agreement is in effect until October 13, 2023, and it may be terminated before that date by the Trust’s Board of Trustees or it may be terminated by the Advisor, subject to consent of the Trust’s Board of Trustees. In the absence of such waivers, the Fund’s returns would be lower.
Returns reflect the reinvestment of distributions made by the Fund, if any. The graph and the performance table above do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS
As of June 30, 2022
| Number of Shares | | | | | Value | |
| | | | COMMON STOCKS — 27.2%1 | | |
| | | | COMMUNICATIONS — 2.5% | | | |
| | 318 | | | Activision Blizzard, Inc. | | $ | 24,759 | |
| | 272 | | | Alphabet, Inc. - Class A* | | | 592,759 | |
| | 2,912 | | | AT&T, Inc. | | | 61,036 | |
| | 17 | | | Booking Holdings, Inc.* | | | 29,733 | |
| | 83 | | | Charter Communications, Inc. - Class A* | | | 38,888 | |
| | 1,863 | | | Comcast Corp. - Class A | | | 73,104 | |
| | 1,134 | | | Meta Platforms, Inc. - Class A* | | | 182,858 | |
| | 181 | | | Netflix, Inc.* | | | 31,651 | |
| | 509 | | | T-Mobile US, Inc.* | | | 68,481 | |
| | 1,712 | | | Verizon Communications, Inc. | | | 86,884 | |
| | 741 | | | Walt Disney Co.* | | | 69,950 | |
| | 704 | | | Warner Bros Discovery, Inc.* | | | 9,448 | |
| | | | | | | | 1,269,551 | |
| | | | | CONSUMER DISCRETIONARY — 2.3% | | | | |
| | 4,140 | | | Amazon.com, Inc.* | | | 439,709 | |
| | 110 | | | Aptiv PLC*2 | | | 9,798 | |
| | 8 | | | AutoZone, Inc.* | | | 17,193 | |
| | 11 | | | Chipotle Mexican Grill, Inc.* | | | 14,380 | |
| | 255 | | | eBay, Inc. | | | 10,626 | |
| | 1,629 | | | Ford Motor Co. | | | 18,131 | |
| | 592 | | | General Motors Co.* | | | 18,802 | |
| | 426 | | | Home Depot, Inc. | | | 116,839 | |
| | 275 | | | Lowe's Cos., Inc. | | | 48,034 | |
| | 133 | | | Marriott International, Inc. - Class A | | | 18,089 | |
| | 305 | | | McDonald's Corp. | | | 75,298 | |
| | 645 | | | NIKE, Inc. - Class B | | | 65,919 | |
| | 27 | | | O'Reilly Automotive, Inc.* | | | 17,058 | |
| | 478 | | | Starbucks Corp. | | | 36,514 | |
| | 390 | | | Tesla, Inc.* | | | 262,634 | |
| | 486 | | | TJX Cos., Inc. | | | 27,143 | |
| | | | | | | | 1,196,167 | |
| | | | | CONSUMER STAPLES — 1.8% | | | | |
| | 749 | | | Altria Group, Inc. | | | 31,286 | |
| | 1,761 | | | Coca-Cola Co. | | | 110,784 | |
| | 344 | | | Colgate-Palmolive Co. | | | 27,568 | |
| | 77 | | | Constellation Brands, Inc. - Class A | | | 17,946 | |
| | 181 | | | Costco Wholesale Corp. | | | 86,750 | |
| | 94 | | | Dollar General Corp. | | | 23,071 | |
| | 147 | | | Estee Lauder Cos., Inc. - Class A | | | 37,436 | |
| | 137 | | | Kimberly-Clark Corp. | | | 18,516 | |
| | 499 | | | Kraft Heinz Co. | | | 19,032 | |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of June 30, 2022
| Number of Shares | | | | | Value | |
| | | | COMMON STOCKS 1 (Continued) | | | |
| | | | CONSUMER STAPLES (Continued) | | | |
| | 569 | | | Mondelez International, Inc. - Class A | | $ | 35,329 | |
| | 216 | | | Monster Beverage Corp.* | | | 20,023 | |
| | 564 | | | PepsiCo, Inc. | | | 93,996 | |
| | 635 | | | Philip Morris International, Inc. | | | 62,700 | |
| | 987 | | | Procter & Gamble Co. | | | 141,921 | |
| | 195 | | | Target Corp. | | | 27,540 | |
| | 352 | | | Walgreens Boots Alliance, Inc. | | | 13,341 | |
| | 1,131 | | | Walmart, Inc. | | | 137,507 | |
| | | | | | | | 904,746 | |
| | | | | ENERGY — 0.7% | | | | |
| | 786 | | | Chevron Corp. | | | 113,797 | |
| | 538 | | | ConocoPhillips | | | 48,318 | |
| | 239 | | | EOG Resources, Inc. | | | 26,395 | |
| | 1,726 | | | Exxon Mobil Corp. | | | 147,814 | |
| | 100 | | | Pioneer Natural Resources Co. | | | 22,308 | |
| | 572 | | | Schlumberger N.V.2 | | | 20,455 | |
| | | | | | | | 379,087 | |
| | | | | FINANCIALS — 2.2% | | | | |
| | 316 | | | American Express Co. | | | 43,804 | |
| | 339 | | | American International Group, Inc. | | | 17,333 | |
| | 90 | | | Aon PLC - Class A2 | | | 24,271 | |
| | 3,337 | | | Bank of America Corp. | | | 103,881 | |
| | 337 | | | Bank of New York Mellon Corp. | | | 14,056 | |
| | 913 | | | Berkshire Hathaway, Inc. - Class B* | | | 249,267 | |
| | 62 | | | BlackRock, Inc. | | | 37,761 | |
| | 174 | | | Capital One Financial Corp. | | | 18,129 | |
| | 771 | | | Charles Schwab Corp. | | | 48,712 | |
| | 176 | | | Chubb Ltd.2 | | | 34,598 | |
| | 809 | | | Citigroup, Inc. | | | 37,206 | |
| | 147 | | | CME Group, Inc. | | | 30,091 | |
| | 142 | | | Goldman Sachs Group, Inc. | | | 42,177 | |
| | 230 | | | Intercontinental Exchange, Inc. | | | 21,629 | |
| | 1,205 | | | JPMorgan Chase & Co. | | | 135,695 | |
| | 206 | | | Marsh & McLennan Cos., Inc. | | | 31,982 | |
| | 343 | | | MetLife, Inc. | | | 21,537 | |
| | 732 | | | Morgan Stanley | | | 55,676 | |
| | 172 | | | PNC Financial Services Group, Inc. | | | 27,137 | |
| | 238 | | | Progressive Corp. | | | 27,672 | |
| | 92 | | | T. Rowe Price Group, Inc. | | | 10,452 | |
| | 544 | | | Truist Financial Corp. | | | 25,802 | |
| | 605 | | | U.S. Bancorp | | | 27,842 | |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of June 30, 2022
| Number of Shares | | | | | Value | |
| | | | COMMON STOCKS 1 (Continued) | | | |
| | | | FINANCIALS (Continued) | | | |
| | 1,626 | | | Wells Fargo & Co. | | $ | 63,690 | |
| | | | | | | | 1,150,400 | |
| | | | | HEALTH CARE — 3.5% | | | | |
| | 721 | | | Abbott Laboratories | | | 78,337 | |
| | 721 | | | AbbVie, Inc. | | | 110,428 | |
| | 123 | | | Agilent Technologies, Inc. | | | 14,609 | |
| | 32 | | | Align Technology, Inc.* | | | 7,573 | |
| | 230 | | | Amgen, Inc. | | | 55,959 | |
| | 204 | | | Baxter International, Inc. | | | 13,103 | |
| | 116 | | | Becton, Dickinson and Co. | | | 28,597 | |
| | 581 | | | Boston Scientific Corp.* | | | 21,654 | |
| | 905 | | | Bristol-Myers Squibb Co. | | | 69,685 | |
| | 238 | | | Centene Corp.* | | | 20,137 | |
| | 135 | | | Cigna Corp. | | | 35,575 | |
| | 538 | | | CVS Health Corp. | | | 49,851 | |
| | 291 | | | Danaher Corp. | | | 73,774 | |
| | 160 | | | Dexcom, Inc.* | | | 11,925 | |
| | 255 | | | Edwards Lifesciences Corp.* | | | 24,248 | |
| | 99 | | | Elevance Health, Inc. | | | 47,775 | |
| | 390 | | | Eli Lilly & Co. | | | 126,450 | |
| | 23 | | | Embecta Corp.* | | | 582 | |
| | 511 | | | Gilead Sciences, Inc. | | | 31,585 | |
| | 127 | | | HCA Healthcare, Inc. | | | 21,344 | |
| | 52 | | | Humana, Inc. | | | 24,340 | |
| | 35 | | | IDEXX Laboratories, Inc.* | | | 12,276 | |
| | 64 | | | Illumina, Inc.* | | | 11,799 | |
| | 146 | | | Intuitive Surgical, Inc.* | | | 29,304 | |
| | 78 | | | IQVIA Holdings, Inc.* | | | 16,925 | |
| | 1,073 | | | Johnson & Johnson | | | 190,468 | |
| | 548 | | | Medtronic PLC2 | | | 49,183 | |
| | 1,030 | | | Merck & Co., Inc. | | | 93,905 | |
| | 165 | | | Moderna, Inc.* | | | 23,570 | |
| | 2,288 | | | Pfizer, Inc. | | | 119,960 | |
| | 44 | | | Regeneron Pharmaceuticals, Inc.* | | | 26,010 | |
| | 154 | | | Stryker Corp. | | | 30,635 | |
| | 161 | | | Thermo Fisher Scientific, Inc. | | | 87,468 | |
| | 384 | | | UnitedHealth Group, Inc. | | | 197,234 | |
| | 104 | | | Vertex Pharmaceuticals, Inc.* | | | 29,306 | |
| | 193 | | | Zoetis, Inc. | | | 33,175 | |
| | | | | | | | 1,818,749 | |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of June 30, 2022
| Number of Shares | | | | | Value | |
| | | | COMMON STOCKS 1 (Continued) | | | |
| | | | INDUSTRIALS — 1.5% | | | |
| | 235 | | | 3M Co. | | $ | 30,411 | |
| | 244 | | | Amphenol Corp. - Class A | | | 15,709 | |
| | 240 | | | Boeing Co.* | | | 32,813 | |
| | 353 | | | Carrier Global Corp. | | | 12,588 | |
| | 221 | | | Caterpillar, Inc. | | | 39,506 | |
| | 42 | | | Cintas Corp. | | | 15,688 | |
| | 904 | | | CSX Corp. | | | 26,270 | |
| | 125 | | | Deere & Co. | | | 37,434 | |
| | 163 | | | Eaton Corp. PLC2 | | | 20,536 | |
| | 243 | | | Emerson Electric Co. | | | 19,328 | |
| | 108 | | | FedEx Corp. | | | 24,485 | |
| | 114 | | | General Dynamics Corp. | | | 25,222 | |
| | 448 | | | General Electric Co. | | | 28,524 | |
| | 281 | | | Honeywell International, Inc. | | | 48,841 | |
| | 128 | | | Illinois Tool Works, Inc. | | | 23,328 | |
| | 287 | | | Johnson Controls International plc2 | | | 13,742 | |
| | 80 | | | L3Harris Technologies, Inc. | | | 19,336 | |
| | 112 | | | Lockheed Martin Corp. | | | 48,156 | |
| | 99 | | | Norfolk Southern Corp. | | | 22,502 | |
| | 65 | | | Northrop Grumman Corp. | | | 31,107 | |
| | 47 | | | Old Dominion Freight Line, Inc. | | | 12,045 | |
| | 610 | | | Raytheon Technologies Corp. | | | 58,627 | |
| | 129 | | | Republic Services, Inc. | | | 16,882 | |
| | 133 | | | TE Connectivity Ltd.2 | | | 15,049 | |
| | 97 | | | Trane Technologies PLC2 | | | 12,597 | |
| | 262 | | | Union Pacific Corp. | | | 55,879 | |
| | 354 | | | United Parcel Service, Inc. - Class B | | | 64,619 | |
| | 171 | | | Waste Management, Inc. | | | 26,160 | |
| | | | | | | | 797,384 | |
| | | | | MATERIALS — 0.3% | | | | |
| | 90 | | | Air Products and Chemicals, Inc. | | | 21,643 | |
| | 211 | | | DuPont de Nemours, Inc. | | | 11,728 | |
| | 117 | | | Ecolab, Inc. | | | 17,990 | |
| | 599 | | | Freeport-McMoRan, Inc. | | | 17,527 | |
| | 208 | | | Linde PLC2 | | | 59,806 | |
| | 325 | | | Newmont Corp. | | | 19,393 | |
| | 107 | | | Sherwin-Williams Co. | | | 23,958 | |
| | | | | | | | 172,045 | |
| | | | | REAL ESTATE — 0.4% | | | | |
| | 186 | | | American Tower Corp. - REIT | | | 47,540 | |
| | 176 | | | Crown Castle International Corp. - REIT | | | 29,635 | |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of June 30, 2022
| Number of Shares | | | | | Value | |
| | | | COMMON STOCKS 1 (Continued) | | | |
| | | | REAL ESTATE (Continued) | | | |
| | 119 | | | Digital Realty Trust, Inc. - REIT | | $ | 15,450 | |
| | 37 | | | Equinix, Inc. - REIT | | | 24,310 | |
| | 302 | | | Prologis, Inc. - REIT | | | 35,530 | |
| | 71 | | | Public Storage - REIT | | | 22,199 | |
| | 134 | | | Simon Property Group, Inc. - REIT | | | 12,719 | |
| | | | | | | | 187,383 | |
| | | | | TECHNOLOGY — 6.7% | | | | |
| | 269 | | | Accenture PLC - Class A2 | | | 74,688 | |
| | 194 | | | Adobe, Inc.* | | | 71,016 | |
| | 666 | | | Advanced Micro Devices, Inc.* | | | 50,929 | |
| | 214 | | | Analog Devices, Inc. | | | 31,263 | |
| | 6,689 | | | Apple, Inc. | | | 914,520 | |
| | 362 | | | Applied Materials, Inc. | | | 32,935 | |
| | 125 | | | Arista Networks, Inc.* | | | 11,718 | |
| | 90 | | | Autodesk, Inc.* | | | 15,476 | |
| | 172 | | | Automatic Data Processing, Inc. | | | 36,127 | |
| | 168 | | | Broadcom, Inc. | | | 81,616 | |
| | 113 | | | Cadence Design Systems, Inc.* | | | 16,953 | |
| | 1,720 | | | Cisco Systems, Inc. | | | 73,341 | |
| | 214 | | | Cognizant Technology Solutions Corp. - Class A | | | 14,443 | |
| | 248 | | | Fidelity National Information Services, Inc. | | | 22,734 | |
| | 269 | | | Fiserv, Inc.* | | | 23,933 | |
| | 335 | | | Fortinet, Inc.* | | | 18,954 | |
| | 1,658 | | | Intel Corp. | | | 62,026 | |
| | 366 | | | International Business Machines Corp. | | | 51,676 | |
| | 115 | | | Intuit, Inc. | | | 44,326 | |
| | 62 | | | KLA Corp. | | | 19,783 | |
| | 57 | | | Lam Research Corp. | | | 24,291 | |
| | 401 | | | Mastercard, Inc. - Class A | | | 126,507 | |
| | 226 | | | Microchip Technology, Inc. | | | 13,126 | |
| | 457 | | | Micron Technology, Inc. | | | 25,263 | |
| | 3,061 | | | Microsoft Corp. | | | 786,157 | |
| | 76 | | | Moody's Corp. | | | 20,670 | |
| | 69 | | | Motorola Solutions, Inc. | | | 14,462 | |
| | 34 | | | MSCI, Inc. | | | 14,013 | |
| | 1,019 | | | NVIDIA Corp. | | | 154,470 | |
| | 108 | | | NXP Semiconductors N.V.2 | | | 15,987 | |
| | 1,089 | | | Oracle Corp. | | | 76,088 | |
| | 147 | | | Paychex, Inc. | | | 16,739 | |
| | 479 | | | PayPal Holdings, Inc.* | | | 33,453 | |
| | 457 | | | QUALCOMM, Inc. | | | 58,377 | |
| | 43 | | | Roper Technologies, Inc. | | | 16,970 | |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of June 30, 2022
| Number of Shares | | | | | Value | |
| | | | COMMON STOCKS 1 (Continued) | | | |
| | | | TECHNOLOGY (Continued) | | | |
| | 144 | | | S&P Global, Inc. | | $ | 48,537 | |
| | 402 | | | Salesforce, Inc.* | | | 66,346 | |
| | 81 | | | ServiceNow, Inc.* | | | 38,517 | |
| | 63 | | | Synopsys, Inc.* | | | 19,133 | |
| | 377 | | | Texas Instruments, Inc. | | | 57,926 | |
| | 888 | | | Visa, Inc. - Class A | | | 174,838 | |
| | | | | | | | 3,470,327 | |
| | | | | UTILITIES — 5.3% | | | | |
| | 2,283 | | | Alliant Energy Corp. | | | 133,807 | |
| | 1,565 | | | Ameren Corp. | | | 141,413 | |
| | 1,775 | | | American Electric Power Co., Inc. | | | 170,293 | |
| | 745 | | | American Water Works Co., Inc. | | | 110,834 | |
| | 1,315 | | | Atmos Energy Corp. | | | 147,412 | |
| | 2,144 | | | CMS Energy Corp. | | | 144,720 | |
| | 1,628 | | | Consolidated Edison, Inc. | | | 154,823 | |
| | 962 | | | Constellation Energy Corp. | | | 55,084 | |
| | 330 | | | Dominion Energy, Inc. | | | 26,337 | |
| | 1,158 | | | DTE Energy Co. | | | 146,777 | |
| | 314 | | | Duke Energy Corp. | | | 33,664 | |
| | 1,236 | | | Entergy Corp. | | | 139,223 | |
| | 2,031 | | | Evergy, Inc. | | | 132,523 | |
| | 1,522 | | | Eversource Energy | | | 128,563 | |
| | 2,888 | | | Exelon Corp. | | | 130,884 | |
| | 3,369 | | | FirstEnergy Corp. | | | 129,336 | |
| | 800 | | | NextEra Energy, Inc. | | | 61,968 | |
| | 4,624 | | | PPL Corp. | | | 125,449 | |
| | 2,100 | | | Public Service Enterprise Group, Inc. | | | 132,888 | |
| | 2,471 | | | Southern Co. | | | 176,207 | |
| | 1,438 | | | WEC Energy Group, Inc. | | | 144,720 | |
| | 2,043 | | | Xcel Energy, Inc. | | | 144,563 | |
| | | | | | | | 2,711,488 | |
| | | | | TOTAL COMMON STOCKS | | | | |
| | | | | (Cost $16,834,391) | | | 14,057,327 | |
| Principal Amount | | | | | | |
| | | | U.S. TREASURY BILLS — 50.6% | | | |
| | | | United States Treasury Bill6 | | | |
| $ | 7,080,000 | | | 1.110%, 10/6/20223,5 | | | 7,046,908 | |
| | 850,000 | | | 1.270%, 10/20/20223 | | | 844,998 | |
| | 7,500,000 | | | 1.350%, 11/3/2022 | | | 7,448,565 | |
| | 5,750,000 | | | 1.450%, 11/17/20223,5 | | | 5,704,541 | |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued
As of June 30, 2022
| Principal Amount | | | | | Value | |
| | | | U.S. TREASURY BILLS (Continued) | | | |
| $ | 5,100,000 | | | 1.620%, 12/1/20223 | | $ | 5,052,233 | |
| | | | | TOTAL U.S. TREASURY BILLS | | | | |
| | | | | (Cost $26,153,066) | | | 26,097,245 | |
| | | | | U.S. TREASURY NOTES — 15.6% | | | | |
| | | | | United States Treasury Note | | | | |
| | 2,250,000 | | | 0.625%, 12/31/2027 | | | 1,974,989 | |
| | 2,250,000 | | | 1.250%, 6/30/2028 | | | 2,027,637 | |
| | 2,250,000 | | | 1.375%, 12/31/2028 | | | 2,031,768 | |
| | 2,000,000 | | | 3.250%, 6/30/2029 | | | 2,027,500 | |
| | | | | TOTAL U.S. TREASURY NOTES | | | | |
| | | | | (Cost $8,504,369) | | | 8,061,894 | |
| Number of Contracts | | | | | | |
| | | | PURCHASED OPTIONS CONTRACTS — 0.1% | | | |
| | | | PUT OPTION — 0.1% | | | |
| | 375 | | | OTC GBP versus USD
Exercise Price: $115.00, Notional Amount: $26,953,125,
Expiration Date: August 5, 2022 | | | 49,219 | |
| | | | | TOTAL PUT OPTION | | | | |
| | | | | (Cost $21,514) | | | 49,219 | |
| | | | | TOTAL PURCHASED OPTIONS CONTRACTS | | | | |
| | | | | (Cost $21,514) | | | 49,219 | |
| Principal Amount | | | | | | |
| | | | SHORT-TERM INVESTMENTS — 0.0% | | | |
| $ | 10 | | | UMB Bank Demand Deposit, 0.01%3,4,5 | | | 10 | |
| | | | | TOTAL SHORT-TERM INVESTMENTS | | | | |
| | | | | (Cost $10) | | | 10 | |
| | | | | TOTAL INVESTMENTS — 93.5% | | | | |
| | | | | (Cost $51,513,350) | | | 48,265,695 | |
| | | | | Other Assets in Excess of Liabilities — 6.5% | | | 3,365,257 | |
| | | | | TOTAL NET ASSETS — 100.0% | | $ | 51,630,952 | |
PLC – Public Limited Company
REIT – Real Estate Investment Trusts
| * | Non-income producing security. |
| 1 | See additional notional stock exposure value via stock index futures on page 14. |
| 2 | Foreign security denominated in U.S. dollars. |
| 3 | All or a portion of this security is segregated as collateral for derivatives. The value of the securities pledged as collateral was $18,648,680, which represents 36.12% of total net assets of the Fund. |
| 4 | The rate is the annualized seven-day yield at period end. |
| 5 | All or a portion of this security is a holding of Abraham Fortress Fund, Ltd. |
| 6 | The rate is the effective yield as of June 30, 2022. |
See accompanying Notes to Consolidated Financial Statements.
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS -Continued
As of June 30, 2022
| Long Contracts | | Expiration Date | | Number of Contracts | | | Notional Value | | | Value at June 30, 2022 | | | Unrealized Appreciation (Depreciation) | |
| Commodity Futures | | | | | | | | | | | | | | |
| CMX Gold1 | | August 2022 | | | 27 | | | $ | 4,917,067 | | | $ | 4,879,710 | | | $ | (37,357 | ) |
| NY Mercantile Crude Oil1 | | December 2022 | | | 22 | | | | 1,993,257 | | | | 2,102,320 | | | | 109,063 | |
| | | | | | | | | | | | | | | | | | | |
| Index Futures | | | | | | | | | | | | | | | | | | |
| CME E-mini S&P 500 | | September 2022 | | | 24 | | | | 4,593,449 | | | | 4,547,400 | | | | (46,049 | ) |
| NYF MSCI EAFE Index | | September 2022 | | | 42 | | | | 3,925,680 | | | | 3,898,860 | | | | (26,820 | ) |
| Total Long Contracts | | | | | | | | $ | 15,429,453 | | | $ | 15,428,290 | | | $ | (1,163 | ) |
| 1 | All or a portion of this security is a holding of Abraham Fortress Fund, Ltd. |
See accompanying Notes to Consolidated Financial Statements.
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS -Continued
As of June 30, 2022
SWAP CONTRACTS
(OTC) 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
dbSelect Index Basket Swap2 | | Receive | | | 0.50% of Notional Value | | | Monthly | | June 13, 2024 | | $ | 33,408,787 | | | | 2,338,650 | |
| TOTAL SWAP CONTRACTS | | | | | | | | | | | | | | | | | | $ | 2,338,650 | |
| 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 proprietary 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 | | | Percentage Unrealized Appreciation (Depreciation) | | | of Custom Swap's Unrealized Appreciation (Depreciation) | |
| CMX Copper Future | | December 2022 | | | 13 | | | $ | 1,191,152 | | | $ | (78,150 | ) | | | -17.14 | % |
| CME E-Mini S&P 500 | | September 2022 | | | 4 | | | | 719,393 | | | | (16,617 | ) | | | -3.65 | % |
| NYM NY Harbour ULSD Future | | August 2022 | | | 2 | | | | 379,898 | | | | (35,786 | ) | | | -7.85 | % |
| CBT 30 year US Treasury Bonds | | September 2022 | | | 3 | | | | 359,746 | | | | 1,373 | | | | 0.30 | % |
| CBT Soybean Oil Future | | March 2023 | | | 9 | | | | 344,792 | | | | (47,495 | ) | | | -10.42 | % |
| CME MXN/USD | | September 2022 | | | 14 | | | | 343,233 | | | | (6,634 | ) | | | -1.46 | % |
| LIF FTSE 100 Index Future | | September 2022 | | | 4 | | | | 320,599 | | | | (3,586 | ) | | | -0.79 | % |
| CBT Corn Future | | December 2022 | | | 10 | | | | 315,181 | | | | (32,638 | ) | | | -7.16 | % |
| | | | | | | | | | 3,973,994 | | | | (219,533 | ) | | | | |
| Description | | Expiration Date | | Number of Short Contracts | | | Notional Value | | | Unrealized Appreciation (Depreciation) | | | Percentage of Custom Swap's Unrealized Appreciation (Depreciation) | |
| CME EUR/USD | | September 2022 | | | (64 | ) | | $ | (8,388,270 | ) | | $ | 175,120 | | | | 38.42 | % |
| CME AUD/USD | | September 2022 | | | (58 | ) | | | (3,963,902 | ) | | | 163,423 | | | | 35.85 | % |
| CMX Copper Future | | September 2022 | | | (20 | ) | | | (1,844,942 | ) | | | 173,081 | | | | 37.97 | % |
| CME JPY/USD | | September 2022 | | | (19 | ) | | | (1,730,411 | ) | | | 28,556 | | | | 6.26 | % |
| EUX Euro-BUND | | September 2022 | | | (6 | ) | | | (932,293 | ) | | | (188 | ) | | | -0.04 | % |
| CME Lean Hog Future | | August 2022 | | | (17 | ) | | | (708,703 | ) | | | 7,478 | | | | 1.64 | % |
| EUX 2 year Euro-Schatz | | September 2022 | | | (6 | ) | | | (708,685 | ) | | | (1,919 | ) | | | -0.42 | % |
| IFLL 3 Month SONIA Index Futures | | June 2023 | | | (2 | ) | | | (674,377 | ) | | | (2,071 | ) | | | -0.45 | % |
Abraham Fortress Fund
CONSOLIDATED SCHEDULE OF INVESTMENTS -Continued
As of June 30, 2022
| Description | | Expiration Date | | Number of Short Contracts | | | Notional Value | | | Unrealized Appreciation (Depreciation) | | | Percentage of Custom Swap's Unrealized Appreciation (Depreciation) | |
| CME SOFR 3month Futures | | June 2023 | | | (3 | ) | | | (646,234 | ) | | | (1,551 | ) | | | -0.34 | % |
| EUX Euro-BOBL | | September 2022 | | | (5 | ) | | | (629,473 | ) | | | (2,859 | ) | | | -0.63 | % |
| CME E-Mini Nasdaq-100 | | September 2022 | | | (3 | ) | | | (602,213 | ) | | | 10,663 | | | | 2.34 | % |
| CBT 2 year US Treasury Notes | | September 2022 | | | (3 | ) | | | (593,216 | ) | | | 216 | | | | 0.05 | % |
| CME SOFR 3month Futures | | June 2024 | | | (2 | ) | | | (587,149 | ) | | | (3,300 | ) | | | -0.72 | % |
| IFLL 3 Month SONIA Index Futures | | March 2025 | | | (2 | ) | | | (522,110 | ) | | | 596 | | | | 0.13 | % |
| IFLL 3 Month SONIA Index Futures | | June 2024 | | | (2 | ) | | | (490,319 | ) | | | 69 | | | | 0.02 | % |
| LIF 3 month Euro (EURIBOR) | | December 2023 | | | (2 | ) | | | (488,976 | ) | | | (1,716 | ) | | | -0.38 | % |
| EUX DAX Index Future | | September 2022 | | | (1 | ) | | | (488,306 | ) | | | 13,079 | | | | 2.87 | % |
| IFLL 3 Month SONIA Index Futures | | September 2024 | | | (2 | ) | | | (485,644 | ) | | | 1,348 | | | | 0.30 | % |
| IFLL 3 Month SONIA Index Futures | | September 2023 | | | (2 | ) | | | (477,261 | ) | | | (1,684 | ) | | | -0.37 | % |
| CME SOFR 3month Futures | | June 2025 | | | (2 | ) | | | (462,898 | ) | | | (2,670 | ) | | | -0.59 | % |
| SFE 3 year Australian Treasury Bond | | September 2022 | | | (6 | ) | | | (462,379 | ) | | | (1,592 | ) | | | -0.35 | % |
| IFLL 3 Month SONIA Index Futures | | March 2024 | | | (1 | ) | | | (442,231 | ) | | | (1,662 | ) | | | -0.36 | % |
| LIF 3 month Euro (EURIBOR) | | June 2023 | | | (2 | ) | | | (432,985 | ) | | | (1,566 | ) | | | -0.34 | % |
| IFLL 3 Month SONIA Index Futures | | June 2025 | | | (1 | ) | | | (407,387 | ) | | | (881 | ) | | | -0.19 | % |
| NYM Light Sweet Crude Oil (WTI) Future | | July 2022 | | | (4 | ) | | | (397,845 | ) | | | 13,903 | | | | 3.05 | % |
| MSE Three Month Canadian Bankers Acceptance Future | | March 2023 | | | (2 | ) | | | (397,075 | ) | | | (1,481 | ) | | | -0.32 | % |
| LIF Long Gilt Future | | September 2022 | | | (3 | ) | | | (395,483 | ) | | | 3,722 | | | | 0.82 | % |
| CME SOFR 3month Futures | | December 2023 | | | (2 | ) | | | (386,711 | ) | | | (1,979 | ) | | | -0.43 | % |
| CME SOFR 3month Futures | | September 2023 | | | (2 | ) | | | (385,998 | ) | | | (654 | ) | | | -0.14 | % |
| CME CAD/USD | | September 2022 | | | (5 | ) | | | (354,014 | ) | | | 3,673 | | | | 0.81 | % |
| CME Eurodollar | | March 2024 | | | (1 | ) | | | (350,403 | ) | | | 934 | | | | 0.20 | % |
| CME Eurodollar | | December 2023 | | | (1 | ) | | | (349,990 | ) | | | 1,331 | | | | 0.29 | % |
| MSE Three Month Canadian Bankers Acceptance Future | | December 2022 | | | (2 | ) | | | (347,350 | ) | | | 1,167 | | | | 0.26 | % |
| EUX Euro-OAT Future | | September 2022 | | | (2 | ) | | | (339,178 | ) | | | (769 | ) | | | -0.17 | % |
| CME SOFR 3month Futures | | December 2025 | | | (1 | ) | | | (323,578 | ) | | | (809 | ) | | | -0.18 | % |
| CME SOFR 3month Futures | | December 2024 | | | (1 | ) | | | (323,577 | ) | | | (1,745 | ) | | | -0.38 | % |
| CME Eurodollar | | June 2024 | | | (1 | ) | | | (315,656 | ) | | | 1,228 | | | | 0.27 | % |
| LIF 3 month Euro (EURIBOR) | | December 2024 | | | (1 | ) | | | (315,647 | ) | | | 254 | | | | 0.06 | % |
| SGX Mini Japanese Goverment Bond Future | | September 2022 | | | (3 | ) | | | (308,625 | ) | | | (751 | ) | | | -0.16 | % |
| | | | | | | | | | (32,461,494 | ) | | | 567,994 | | | | | |
| 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) | |
| 7/5/2022 | | Deutsche Bank | | | (100,038,422 | ) | | | JPY | | | | 605,234 | | | | GBP | | | | (551 | ) | | | -0.12 | % |
| 7/5/2022 | | Deutsche Bank | | | (441,482 | ) | | | USD | | | | 419,008 | | | | EUR | | | | (3,622 | ) | | | -0.79 | % |
| 7/5/2022 | | Deutsche Bank | | | (48,947,236 | ) | | | JPY | | | | 521,432 | | | | AUD | | | | (1,052 | ) | | | -0.23 | % |
| ^ | 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.
Abraham Fortress Fund
CONSOLIDATED SUMMARY OF INVESTMENTS (Unaudited)
As of June 30, 2022
| Security Type/Industry | | Percent of Total Net Assets | |
| Common Stocks | | | |
| Technology | | | 6.7 | % |
| Utilities | | | 5.3 | % |
| Health Care | | | 3.5 | % |
| Communications | | | 2.5 | % |
| Consumer Discretionary | | | 2.3 | % |
| Financials | | | 2.2 | % |
| Consumer Staples | | | 1.8 | % |
| Industrials | | | 1.5 | % |
| Energy | | | 0.7 | % |
| Real Estate | | | 0.4 | % |
| Materials | | | 0.3 | % |
| Total Common Stocks | | | 27.2 | % |
| Purchased Options Contracts | | | 0.1 | % |
| U.S. Treasury Bills | | | 50.6 | % |
| U.S. Treasury Notes | | | 15.6 | % |
| Short-Term Investments | | | 0.0 | % |
| Total Investments | | | 93.5 | % |
| Other Assets in Excess of Liabilities | | | 6.5 | % |
| Total Net Assets | | | 100.0 | % |
See accompanying Notes to Consolidated Financial Statements.
Abraham Fortress Fund
CONSOLIDATED STATEMENT OF ASSETS AND LIABILITIES
As of June 30, 2022
| Assets: | | | |
| Investments, at value (cost $51,491,836) | | $ | 48,216,476 | |
| Purchased options contracts, at value (cost $21,514) | | | 49,219 | |
| Unrealized appreciation on total return swap contract | | | 2,338,650 | |
| Cash | | | 659,452 | |
| Cash deposited with brokers for open futures contracts | | | 396,491 | |
| Cash held as collateral for open swap contract | | | 605 | |
| Receivables: | | | | |
| Fund shares sold | | | 384 | |
| Due from Advisor | | | 4,964 | |
| Dividends and interest | | | 10,971 | |
| Prepaid offering cost | | | 11,190 | |
| Other prepaid expenses | | | 55,592 | |
| Total Assets | | | 51,743,994 | |
| | | | | |
| Liabilities: | | | | |
| Payables: | | | | |
| Shareholder servicing fees (Note 6) | | | 1,182 | |
| Fund administration and accounting fees | | | 34,639 | |
| Transfer agent fees and expenses | | | 20,158 | |
| Custody fees | | | 4,485 | |
| Auditing fees | | | 27,499 | |
| Chief Compliance Officer fees | | | 3,179 | |
| Trustees' deferred compensation (Note 3) | | | 2,194 | |
| Printing and Postage | | | 2,034 | |
| Legal fees | | | 1,800 | |
| Director's Fees payable | | | 1,395 | |
| Net unrealized depreciation on futures contracts | | | 1,163 | |
| Accrued other expenses | | | 13,314 | |
| Total liabilities | | | 113,042 | |
| | | | | |
| Net Assets | | $ | 51,630,952 | |
| | | | | |
| Components of Net Assets: | | | | |
| Paid-in capital (par value of $0.01 per share with an unlimited number of shares authorized) | | $ | 53,241,692 | |
| Total accumulated earnings (deficit) | | | (1,610,740 | ) |
| Net Assets | | $ | 51,630,952 | |
| | | | | |
| Maximum Offering Price per Share: | | | | |
| Class I Shares: | | | | |
| Net assets applicable to shares outstanding | | $ | 15,328,272 | |
| Shares of beneficial interest issued and outstanding | | | 1,577,602 | |
| Redemption price per share | | $ | 9.72 | |
| | | | | |
| Class K Shares: | | | | |
| Net assets applicable to shares outstanding | | $ | 36,302,680 | |
| Shares of beneficial interest issued and outstanding | | | 3,734,104 | |
| Redemption price per share | | $ | 9.72 | |
See accompanying Notes to Consolidated Financial Statements.
Abraham Fortress Fund
CONSOLIDATED STATEMENT OF OPERATIONS
For the Period October 13, 2021* through June 30, 2022
| Investment Income: | | | |
| Dividends (net of withholding tax of $27) | | $ | 129,367 | |
| Interest | | | 177,676 | |
| Total investment income | | | 307,043 | |
| | | | | |
| Expenses: | | | | |
| Advisory fees | | | 182,696 | |
| Shareholder servicing fees- Class I (Note 6) | | | 10,322 | |
| Fund administration and accounting fees | | | 82,940 | |
| Transfer agent fees and expenses | | | 42,785 | |
| Custody fees | | | 11,750 | |
| Registration fees | | | 39,743 | |
| Auditing fees | | | 28,999 | |
| Offering cost expense | | | 28,639 | |
| Legal fees | | | 20,398 | |
| Miscellaneous | | | 17,482 | |
| Chief Compliance Officer fees | | | 11,112 | |
| Trustees' fees and expenses | | | 8,969 | |
| Shareholder reporting fees | | | 5,228 | |
| Insurance fees | | | 2,597 | |
| Total expenses | | | 493,660 | |
| Advisory fees waived | | | (182,696 | ) |
| Other expenses absorbed | | | (29,766 | ) |
| Fees paid indirectly | | | (33,350 | ) |
| Net expenses | | | 247,848 | |
| Net investment income (loss) | | | 59,195 | |
| | | | | |
| Realized and Unrealized Gain (Loss): | | | | |
| Net realized gain on: | | | | |
| Investments | | | (290,525 | ) |
| Futures contracts | | | 172,294 | |
| Swap contracts | | | 201,898 | |
| Net realized gain (loss) | | | 83,667 | |
| Net change in unrealized appreciation/depreciation on: | | | | |
| Investments | | | (3,275,360 | ) |
| Futures contracts | | | (1,163 | ) |
| Swap contracts | | | 2,338,650 | |
| Purchased options contracts | | | 27,705 | |
| Net change in unrealized appreciation/depreciation | | | (910,168 | ) |
| Net realized and unrealized gain (loss) | | | (826,501 | ) |
| Net Increase (Decrease) in Net Assets from Operations | | $ | (767,306 | ) |
| * | Beginning of reporting period (See Note 1). |
See accompanying Notes to Consolidated Financial Statements.
Abraham Fortress Fund
CONSOLIDATED STATEMENT OF CHANGES IN NET ASSETS
| | | For the Period October 13, 2021* through June 30, 2022 | |
| Increase (Decrease) in Net Assets from: | | | |
| Operations: | | | |
| Net investment income (loss) | | $ | 59,195 | |
| Net realized gain (loss) on investments, futures contracts, and swap contracts | | | 83,667 | |
| Net change in unrealized appreciation/depreciation on investments, futurescontracts, swap contracts and purchased options contracts | | | (910,168 | ) |
| Net increase (decrease) in net assets resulting from operations | | | (767,306 | ) |
| | | | | |
| Distributions to Shareholders: | | | | |
| Distributions from distributable earnings: | | | | |
| Class I | | | (202,068 | ) |
| Class K | | | (587,736 | ) |
| Total distributions to shareholders | | | (789,804 | ) |
| | | | | |
| Capital Transactions: | | | | |
| Net proceeds from shares sold: | | | | |
| Class I | | | 10,517,046 | |
| Class K | | | 2,716,251 | |
| Cost of Shares issued in connection with reorganization of Predecessor 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 | | | (6,246,175 | ) |
| Class K | | | (504,626 | ) |
| Net increase (decrease) in net assets from capital transactions | | | 53,188,062 | |
| | | | | |
| Total increase (decrease) in net assets | | | 51,630,952 | |
| | | | | |
| Net Assets: | | | | |
| Beginning of period | | | - | |
| End of period | | $ | 51,630,952 | |
| | | | | |
| Capital Share Transactions: | | | | |
| Shares sold: | | | | |
| Class I | | | 1,041,214 | |
| Class K | | | 267,739 | |
| Shares issued in connection with reorganization of Predecessor Fund (Note 1) | | | | |
| Class I | | | 1,133,973 | |
| Class K | | | 3,457,642 | |
| Shares reinvested: | | | | |
| Class I | | | 19,965 | |
| Class K | | | 58,040 | |
| Shares redeemed: | | | | |
| Class I | | | (617,550 | ) |
| Class K | | | (49,317 | ) |
| Net increase (decrease) in capital shares | | | 5,311,706 | |
| * | Beginning of reporting period (See Note 1). |
See accompanying Notes to Consolidated Financial Statements.
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 June 30, 2022 | |
| Net asset value, beginning of period | | $ | 10.00 | |
| Income from Investment Operations: | | | | |
| Net investment income (loss)1 | | | 0.01 | |
| Net realized and unrealized gain (loss) | | | (0.13 | ) |
| Total from investment operations | | | (0.12 | ) |
| | | | | |
| Less Distributions: | | | | |
| From net realized gain | | | (0.16 | ) |
| Total distributions | | | (0.16 | ) |
| | | | | |
| Net asset value, end of period | | $ | 9.72 | |
| | | | | |
| Total return2 | | | (1.23)% 3 | |
| | | | | |
| Ratios and Supplemental Data: | | | | |
| Net assets, end of period (in thousands) | | $ | 15,328 | |
| | | | | |
| Ratio of expenses to average net assets | | | | |
| Before fees waived and absorbed | | | 1.42% 4 | |
| After fees waived and absorbed | | | 0.75% 4 | |
| Ratio of net investment income (loss) to average net assets | | | | |
| Before fees waived and absorbed | | | (0.58%) 4 | |
| After fees waived and absorbed | | | 0.09% 4 | |
| | | | | |
| Portfolio turnover rate | | | 61% 3,5 | |
| * | Beginning of reporting period (See Note 1). |
| 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. |
| 5 | Calculated at the Fund level. |
See accompanying Notes to Consolidated Financial Statements.
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 June 30, 2022 | |
| Net asset value, beginning of period | | $ | 10.00 | |
| Income from Investment Operations: | | | | |
| Net investment income (loss)1 | | | 0.01 | |
| Net realized and unrealized gain (loss) | | | (0.13 | ) |
| Total from investment operations | | | (0.12 | ) |
| | | | | |
| Less Distributions: | | | | |
| From net realized gain | | | (0.16 | ) |
| Total distributions | | | (0.16 | ) |
| | | | | |
| Net asset value, end of period | | $ | 9.72 | |
| | | | | |
| Total return2 | | | (1.23)% 3 | |
| | | | | |
| Ratios and Supplemental Data: | | | | |
| Net assets, end of period (in thousands) | | $ | 36,303 | |
| | | | | |
| Ratio of expenses to average net assets | | | | |
| Before fees waived and absorbed | | | 1.32% 4 | |
| After fees waived and absorbed | | | 0.65% 4 | |
| Ratio of net investment income (loss) to average net assets | | | | |
| Before fees waived and absorbed | | | (0.48%) 4 | |
| After fees waived and absorbed | | | 0.19% 4 | |
| | | | | |
| Portfolio turnover rate | | | 61% 3,5 | |
| * | Beginning of reporting period (See Note 1). |
| 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. |
| 5 | Calculated at the Fund level. |
See accompanying Notes to Consolidated Financial Statements.
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
June 30, 2022
Note 1 – Organization
Abraham Fortress Fund (the “Fund”) is organized as a series of Investment Managers Series Trust II, 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’s current reporting period began on October 13, 2021, following the reorganization of the Predecessor Fund. The Fund currently has two classes of shares, Class I and Class K. Class C shares have not yet commenced operations.
The Fund’s current reporting period begins on October 13, 2021 with a $45,916,151 transfer of shares of the Fund in exchange for the net assets of the Predecessor 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 Predecessor Fund on October 13, 2021. Net assets with a fair market value of $45,916,151 (including net unrealized depreciation on securities and derivatives of $2,741,533) consisting of cash, interest receivable and securities and derivative instruments of the Predecessor 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 Predecessor 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.
From July 18, 2018 until October 12, 2021 the Predecessor Fund was registered with the CFTC and NFA as a Commodity Pool, and over that entire time period, Abraham Trading Co. was the registered Commodity Pool Operator of the Predecessor Fund. Abraham Trading Co. has been continuously registered with the CFTC and NFA as a Commodity Trading Advisor and Commodity Pool Operator since 1990. Cohen & Company, Ltd. served as the auditor of the Predecessor Fund from July 31, 2018 through October 12, 2021. After the conversion of the Predecessor Fund to a 40 Act open ended mutual fund on October 13, 2021, Cohen & Company Ltd. has continued to serve as the auditor of the Fund. As a hedge fund registered with the CFTC and NFA, the Predecessor Fund was required to have audited financial statements, including the reporting of investments, filed annually with both the CFTC and NFA. Over the entire life of the Predecessor Fund, a third-party administrator has performed the accounting for the Predecessor Fund, including compiling of its track records. UMB Fund Services was the administrator of the Predecessor Fund prior to its conversion to the Fund, and currently UMB Fund Services is the co-administrator of the Fund.
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 Standards Codification (“ASC”) 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 (the “Subsidiary”) formed under the laws of the Cayman Islands. The Consolidated Schedule of Investments, Consolidated Statement of Assets and Liabilities, Consolidated Statement of Operations, Consolidated Statement of Changes in Net Assets and Consolidated 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 June 30, 2022, total assets of the Fund were $51,743,994, of which $10,552,200, or 20.39%, represented the Fund’s ownership of the shares of the Subsidiary.
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of increases and decreases in net assets from operating during the reporting period. The preparation of the financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities at the date reported in the financial statements and the reported amounts of increases and decreases in net assets from operations during the period.
(a) Valuation of Investments
The Fund records investments at fair value. 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.
Financial derivative instruments, such as forward currency contracts, futures contracts, options contracts or swap agreements, derive their value from underlying asset prices, indices, reference rates and other inputs or a combination of these factors. These contracts are normally valued on the basis of broker- dealer quotations or a pricing service at the settlement price determined by the relevant exchange. Depending on the product and the terms of the transaction, the value of the derivative contracts can be estimated by a pricing service provider using a series of techniques, including simulation pricing models. The pricing models use inputs that are observed from actively quoted markets such as issuer details, indices, spreads, interest rates, curves, dividends and exchange rates. Forward currency contracts represent the purchase or sale of a specific quantity of a foreign currency at the current or spot price, with delivery and settlement at a specified future date. Forward currency contracts are presented at fair value using spot currency rates and are adjusted for the time value of money (forward points) and contractual prices of the underlying financial instruments.
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
Forward currency contracts are generally categorized in Level 2. Futures contracts are carried at fair value using the primary exchange’s closing (settlement) price and are generally categorized in Level 1.
Options contracts are carried at fair value using the primary exchange's closing (settlement) price and are generally categorized as Level 1. In the absence of a closing price, options contracts will be valued at the last bid or the mean between the last available bid and ask price, and categorized in Level 2.
The Fund’s total return swap contract tracks the performance of various underlying investment managers trading programs through a Deutsche Bank AG, London Branch proprietary index. The fair value of the total return swap contract is valued on each index business day as set out in the index description utilizing market data as of 4:15 pm London time and trade data as of 5:00 pm London time.
Please refer to Note 8 for more information on valuation.
(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.
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. Counterparties 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.
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
During the period the futures contracts are open, changes in the value of the contracts are recognized as unrealized gains or losses by “marking to market” on a daily basis to reflect the market value of the contracts at the end of each day’s trading. When the contracts are closed or expire, the Fund recognizes a realized gain or loss equal to the difference between the proceeds from, or cost of, the closing transactions and the Fund’s basis in the contract. Cash equal to the proceeds is settled in the broker account when the contracts are closed. 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, the 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, the 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, the 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.
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
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 Partnership’s total return swap contract tracks the performance of various underlying investment managers trading programs through a Deutsche Bank AG, London Branch proprietary index. The fair value of the total return swap contract is valued on each index business day as set out in the index description utilizing market data as of 4:15 pm London time and trade data as of 5:00 pm London time.
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.
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.
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
(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 Consolidated 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 the 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 may invest in real estate investments trusts ("REITs"). REITs are pooled investment vehicles that invest primarily in income producing real estate or real estate related loans or interests. REITs are generally classified as equity REITs, mortgage REITs, or a combination of equity and mortgage REITs. Equity REITs invest the majority of their assets directly in real property and derive income primarily from the collection of rents. Equity REITs can also realize capital gains by selling properties that have appreciated in value. Mortgage REITs invest the majority of their assets in real estate mortgages and derive income from the collection of principal and interest payments. Similar to regulated investment companies such as the Fund, REITs are not taxed on income distributed to shareholders provided they comply with certain requirements of the Internal Revenue Code. The Fund will indirectly bear its proportionate share of expenses incurred by REITs in which the Fund invests in addition to the expenses incurred directly by the Fund.
The Fund incurred offering costs of $39,829, which are being amortized over a one-year period from October 13, 2021 (the beginning of the of reporting period). Abraham Trading Company (the “Advisor”) paid all costs associated with the reorganization of the Predecessor Fund such costs are not subject to repayment by the Fund to the Advisor.
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
In conjunction with the use of futures contracts and swap contracts, the Fund may be required to maintain collateral in various forms. At June 30, 2022, 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, may utilize a segregated margin deposit account with the counterparty. At June 30, 2022, 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.
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 the 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 Consolidated 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 the period from the beginning of the reporting period on October 13, 2021 through June 30, 2022, 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.
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
Note 3 – Investment Advisory and Other Agreements
The Trust, on behalf of the Fund, entered into an Investment Advisory Agreement (the “Agreement”) with 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, 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 by the Trust’s Board of Trustees on behalf of the Fund, upon sixty (60) days’ written notice to the Advisor. This agreement may also be terminated by the Advisor with respect to the Fund, effective at the end of its then current term, without payment of any penalty upon at least sixty (60) days’ written notice prior to expense limitation period of the Fund, subject to the consent of the Board of Trustees of the Trust, which consent will not be unreasonably withheld.
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.
For the period from the beginning of the reporting period on October 13, 2021 through June 30, 2022, the Advisor waived all of its advisory fees and reimbursed other expenses totaling $212,462 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 June 30, 2022, the amount of these potentially recoverable expenses was $212,462. 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 beginning of the reporting period on October 13, 2021 through June 30, 2022, are reported on the Consolidated Statement of Operations. The terms of the Consolidated Fee Agreement between the Fund and UMBFS stipulate a contractual waiver of fees for the first two years of operation. For the period from the beginning of the reporting period on October 13, 2021 through June 30, 2022, the fees waived were $21,809 of Fund administration and accounting fees, $8,500 of Transfer agent fees, and $1,771 of Custody fees. These amounts are shown as a reduction of expenses, “Fees paid indirectly” on 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 beginning of the reporting period on October 13, 2021 through June 30, 2022, 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. A portion of the fees, $1,270, were paid by the Trust's Co-Administrators. Such amount is shown as a reduction of expenses, "Fees paid indirectly", on the Consolidated Statement of Operations.
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
Employees of the Advisor, and other accounts under their control, constituted approximately 48% and 23% of the outstanding Class I Shares and Class K Shares, respectively of the Fund as of June 30, 2022.
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 beginning of the reporting period on October 13, 2021 through June 30, 2022, are reported on the Consolidated Statement of Operations.
Note 4 – Federal Income Taxes
At June 30, 2022, gross unrealized appreciation and (depreciation) of investments, based on cost for federal income tax purposes were as follows:
| Cost of investments | | $ | 51,541,055 | |
| | | | | |
| Gross unrealized appreciation | | $ | 438,198 | |
| Gross unrealized depreciation | | | (3,713,558 | ) |
| Net unrealized appreciation/(depreciation) | | $ | (3,275,360 | ) |
The difference between cost amounts for financial statement and federal income tax purposes is due primarily to timing differences in recognizing certain gains and losses in security transactions.
GAAP requires that certain components of net assets be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or net asset value per share. For the period ended June 30, 2022, permanent differences in book and tax accounting primarily due book to tax basis differences upon conversion and non-deductible organizational costs have been reclassified to paid in capital and total accumulated earnings (deficit) as follows:
| | Increase (Decrease) | |
| | Paid-in Capital | | | Total Accumulated Earnings (Deficit) | |
| | $ | 53,630 | | | $ | (53,630 | ) |
As of June 30, 2022, the components of accumulated earnings/(deficit) on a tax basis were as follows:
| Undistributed ordinary income | | $ | 3,285,193 | |
| Undistributed long-term capital gains | | | - | |
| Tax accumulated earnings | | | 3,285,193 | |
| | | | | |
| Accumulated capital and other losses | | | (1,620,573 | ) |
| Unrealized appreciation/(depreciation) on investments | | | (3,275,360 | ) |
| Total accumulated earnings/(deficit) | | $ | (1,610,740 | ) |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
The tax character of distributions paid during the period October 13, 2021 (beginning of the reporting period) through June 30, 2022 was as follows:
| Distributions paid from: | | 2022 | |
| Ordinary income | | $ | 308,866 | |
| Net long-term capital gains | | | 480,938 | |
| Total distributions paid | | $ | 789,804 | |
As of June 30, 2022, the Fund had qualified short-term and long-term post-October losses of $850,739 and $757,741, respectively. Captial losses incurred after October 31, and within the year are deemed to arise on the first day of the Fund's next taxable year.
Note 5 – Investment Transactions
For the period from the beginning of the reporting period on October 13, 2021 through June 30, 2022, purchases and sales of investments, excluding short-term investments, futures contracts, and swap contracts, were $28,460,584 and $12,475,217, respectively. For the period from the beginning of the reporting period on October 13, 2021 through June 30, 2022, purchases and sales of U.S. Treasury Notes, were $11,620,677 and $12,475,056, respectively.
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 beginning of the reporting period on October 13, 2021 through June 30, 2022, shareholder servicing fees incurred by the Fund are 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
FASB ASC 820, Fair Value Measurements 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. |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
| · | 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.
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 June 30, 2022, in valuing the Fund’s assets carried at fair value:
| | | Level 1 | | | Level 2 | | | Level 3** | | | Total | |
| Assets | | | | | | |
| Investments | | | | | | | | | | | | |
| Common Stocks1 | | $ | 14,057,327 | | | $ | - | | | $ | - | | | $ | 14,057,327 | |
| U.S. Treasury Bills | | | - | | | | 26,097,245 | | | | - | | | | 26,097,245 | |
| U.S. Treasury Notes | | | - | | | | 8,061,894 | | | | - | | | | 8,061,894 | |
| Short-Term Investments | | | 10 | | | | - | | | | - | | | | 10 | |
| Total Investments | | | 14,057,337 | | | | 34,159,139 | | | | - | | | | 48,216,476 | |
| Other Financial Instruments* | | | | | | | | | | | | | | | | |
| Futures Contracts | | | 109,063 | | | | - | | | | - | | | | 109,063 | |
| Purchased Options Contracts | | | 49,219 | | | | - | | | | - | | | | 49,219 | |
| Swap Contracts | | | - | | | | 2,338,650 | | | | - | | | | 2,338,650 | |
| Total Assets | | $ | 14,215,619 | | | $ | 36,497,789 | | | $ | - | | | $ | 50,713,408 | |
| | | | | | | | | | | | | | | | | |
| Liabilities | | | | | | | | | | | | | | | | |
| Other Financial Instruments* | | | | | | | | | | | | | | | | |
| Futures Contracts | | $ | 110,226 | | | $ | - | | | $ | - | | | $ | 110,226 | |
| Total Liabilities | | $ | 110,226 | | | $ | - | | | $ | - | | | $ | 110,226 | |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
| 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 swap contracts are valued at the unrealized appreciation (depreciation) on the instrument. |
| ** | The Fund did not hold any Level 3 securities during the period or at period end. |
Note 9 – Derivatives and Hedging Disclosures
FASB ASC 815, 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, purchased options contracts and swap contracts during the period from the beginning of the reporting period on October 13, 2021 through June 30, 2022.
The effects of these derivative instruments on the Fund’s financial position and financial performance as reflected in the Consolidated Statement of Assets and Liabilities and Consolidated Statement of Operations are presented in the tables below. The fair values of derivative instruments held by the Fund as of June 30, 2022 by risk category are as follows:
| | | 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 | | Unrealized appreciation on futures contracts | | $ | 71,706 | | | Unrealized depreciation on futures contracts | | $ | - | |
| Currency contracts | | Purchased options contracts, at value | | | 49,219 | | | Written options contracts, at value | | | N/A | |
| Index contracts | | Unrealized appreciation on futures contracts | | | - | | | Unrealized depreciation on futures contracts | | | 72,869 | |
Mixed: Commodity, interest rate,
equity and foreign
exchange contracts | | Unrealized appreciation
on total return swap contract | | | 2,338,650 | | | Unrealized depreciation
on total return swap contract | | | N/A | |
| Total | | | | $ | 2,459,575 | | | | | $ | 72,869 | |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
The effects of the Fund’s derivative instruments on the Consolidated Statement of Operations for the period from the beginning of the reporting period on October 13, 2021 through June 30, 2022 are as follows:
Amount of Realized Gain or (Loss) on Derivatives Recognized in Income
| Derivatives not designated as hedging instruments | | Futures Contracts | | | Swap contracts | | | Purchased Options Contracts | | | Total | |
| Commodity contracts | | $ | 561,514 | | | $ | - | | | $ | - | | | $ | 561,514 | |
Mixed: Commodity, interest rate,
equity and foreign
exchange contracts | | | - | | | | 201,898 | | | | - | | | | 201,898 | |
| Index contracts | | | (389,220 | ) | | | - | | | | - | | | | (389,220 | ) |
| Total | | $ | 172,294 | | | $ | 201,898 | | | $ | - | | | $ | 374,192 | |
Change in Unrealized Appreciation/Depreciation on Derivatives Recognized in Income
| Derivatives not designated as hedging instruments | | Futures Contracts | | | Swap contracts | | | Purchased Options Contracts | | | Total | |
| Commodity contracts | | $ | 71,706 | | | $ | - | | | $ | - | | | $ | 71,706 | |
| Index contracts | | | (72,869 | ) | | | - | | | | - | | | | (72,869 | ) |
Mixed: Commodity, interest rate,
equity and foreign
exchange contracts | | | - | | | | 2,338,650 | | | | - | | | | 2,338,650 | |
| Currency contracts | | | - | | | | - | | | | 27,705 | | | | 27,705 | |
| Total | | $ | (1,163 | ) | | $ | 2,338,650 | | | $ | 27,705 | | | $ | 2,365,192 | |
| | | | | | | | | | | | | | | | | |
The quarterly average volumes of derivative instruments in the Fund for the period ended June 30, 2022 are as follows:
| Derivatives not designated as hedging instruments | | | | Notional Value | |
| Commodity contracts | | Long futures contracts | | $ | 5,749,292 | |
| Index contracts | | Long futures contracts | | | 8,054,510 | |
| Currency contracts | | Purchased Option Contracts | | | 16,406 | * |
Mixed: Interest rate,
equity and foreign
exchange contracts | | Swap contracts | | | 32,196,863 | |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
Note 10 - Disclosures about Offsetting Assets and Liabilities
FASB ASC 210-20, Disclosures about Offsetting Assets and Liabilities requires 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 net 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:
| | | | | | | | | | | | | | 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 Consolidated Statement of Assets and Liabilities | | | Net Amounts of Assets Presented in the Consolidated Statement of Assets and Liabilities | | | Financial Instruments* | | | Cash Collateral** | | | Net Amount | |
Unrealized
appreciation on total
return swap contract-
asset | | Deutsche Bank | | $ | 2,338,650 | | | $ | - | | | $ | 2,338,650 | | | $ | - | | | $ | - | | | $ | 2,338,650 | |
Unrealized
appreciation on futures
contracts-asset | | RJO’Brien | | $ | 109,063 | | | $ | (109,063 | ) | | $ | - | | | $ | - | | | $ | - | | | $ | - | |
Unrealized
depreciation on futures
contracts-liability | | RJO’Brien | | $ | (110,226 | ) | | $ | 109,063 | | | $ | (1,163 | ) | | $ | - | | | $ | 1,163 | | | $ | - | |
| Purchased options contracts, at value | | RJO’Brien | | $ | 49,219 | | | $ | - | | | $ | 49,219 | | | $ | - | | | $ | - | | | $ | 49,219 | |
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 2022
| * | 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 – Market Disruption and Geopolitical Risks
Certain local, regional or global events such as war, acts of terrorism, the spread of infectious illness or other public health issues, or other events could have a significant impact on a security or instrument. Since 2020, the novel strain of coronavirus (COVID-19) 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. Following Russia’s large-scale invasion of Ukraine, the President of the United States signed an Executive Order in February 2022 prohibiting U.S. persons from entering transactions with the Central Bank of Russia and Executive Orders in March 2022 prohibiting U.S. persons from importing oil and gas from Russia as well as other popular Russian exports, such as diamonds, seafood and vodka. There may also be restrictions on investments in Chinese companies. For example, the President of the United States of America signed an Executive Order in June 2021 affirming and expanding the U.S. policy prohibiting U.S. persons from purchasing or investing in publicly-traded securities of companies identified by the U.S. Government as “Chinese Military-Industrial Complex Companies.” The list of such companies can change from time to time, and as a result of forced selling or an inability to participate in an investment the Advisor otherwise believes is attractive, the Fund may incur losses. The duration of the coronavirus outbreak and the Russian-Ukraine conflict could adversely affect the Fund’s performance, the performance of the securities in which the Fund invest and may lead to losses on your investment. The ultimate impact of COVID-19 and Russia Invasion on the financial performance of the Fund’s investments is not reasonably estimable at this time. Management is actively monitoring these events.
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 the 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 the 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.
Abraham Fortress Fund
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued
June 30, 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.
REPORT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM
To the Shareholders of Abraham Fortress Fund
and Board of Trustees of Investment Managers Series Trust II
Opinion on the Financial Statements
We have audited the accompanying consolidated statement of assets and liabilities, including the consolidated schedule of investments, of Abraham Fortress Fund (the “Fund”), a series of Investment Managers Series Trust II, as of June 30, 2022, the related consolidated statements of operations and changes in net assets, the related notes, and the financial highlights for the period October 13, 2021 (beginning of reporting period) through June 30, 2022 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of June 30, 2022, the results of its operations, the changes in net assets, and the financial highlights for the period October 13, 2021 (beginning of reporting period) through June 30, 2022, in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud.
Our audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of June 30, 2022, by correspondence with the custodian and brokers. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
We have served as the Fund’s auditor since 2021.
COHEN & COMPANY, LTD.
Milwaukee, Wisconsin
August 29, 2022
Abraham Fortress Fund
SUPPLEMENTAL INFORMATION (Unaudited)
Qualified Dividend Income
For the period ended June 30, 2022, 3.54% of dividends to be paid from net investment income, including short-term capital gains from the Fund (if any), is designated as qualified dividend income.
Corporate Dividends Received Deduction
For the period ended June 30, 2022, 3.42% of the dividends to be paid from net investment income, including short-term capital gains from the Fund (if any), is designated as dividends received deduction available to corporate shareholders.
Long-Term Capital Gain Designation
For the period ended June 30, 2022, the Fund designates $480,938 as a 20% rate gain distribution for purposes of the dividends paid deduction.
Trustees and Officers Information
Additional information about the Trustees is included in the Fund’s Statement of Additional Information which is available, without charge, upon request by calling (844) 323-8200. The Trustees and officers of the Fund and their principal occupations during the past five years are as follows:
| Name, Address, Year of Birth and Position(s) held with Trust | Term of Officec and Length of Time Served | Principal Occupation During the Past Five Years and Other Affiliations | Number of Portfolios in the Fund Complex Overseen by Trusteed | Other Directorships Held by Trusteee |
| “Independent” Trustees: | | | |
Thomas Knipper, CPA a (Born 1957) Trustee | Since September 2013 | Retired (April 2022 – present); Independent Consulting, financial services organizations (March 2021 – March 2022); Vice President and Chief Compliance Officer, Ameritas Investment Partners, a registered investment advisor (1995 – March 2021). | 1 | Monachil Credit Income Fund, a closed-end investment company. |
Kathleen K. Shkuda a (born 1951) Trustee | Since September 2013 | Zigzag Consulting, a financial services consulting firm (2008 – present); Director, Managed Accounts, Merrill Lynch (2007 – 2008). | 1 | None. |
Larry D. Tashjian a (born 1953) Trustee and Chairman of the Board | Since September 2013 | Principal, CAM Capital Advisors, a family office (2001 – present). | 1 | General Finance Corporation. |
Abraham Fortress Fund
SUPPLEMENTAL INFORMATION (Unaudited) - Continued
| Name, Address, Year of Birth and Position(s) held with Trust | Term of Officec and Length of Time Served | Principal Occupation During the Past Five Years and Other Affiliations | Number of Portfolios in the Fund Complex Overseen by Trusteed | Other Directorships Held by Trusteee |
| “Independent” Trustee: | | | | |
John P. Zader a (born 1961) Trustee | Since September 2013 | Retired (June 2014 – present); CEO, UMB Fund Services, Inc., a mutual fund and hedge fund service provider, and the transfer agent, fund accountant, and co-administrator for the Fund(s) (December 2006 – June 2014); President, Investment Managers Series Trust (December 2007 – June 2014). | 1 | Investment Managers Series Trust, a registered investment company (includes 54 portfolios). |
| Interested Trustees: | | | |
Eric M. Banhazl b† (born 1957) Trustee | Since September 2013 | Chairman, Foothill Capital Management, LLC, a registered investment advisor (2018 – present); Chairman (2016 – present), and President (2006 – 2015), Mutual Fund Administration, LLC, co-administrator for the Fund. | 1 | Investment Managers Series Trust, a registered investment company (includes 54 portfolios). |
Terrance P. Gallagher a* (born 1958) Trustee and President | Since July 2019 | President, Investment Managers Series Trust II (September 2013 – present); Executive Vice President, UMB Fund Services, Inc. (2007 – present); Director of Compliance, Unified Fund Services Inc. (now Huntington Fund Services), a mutual fund service provider (2004 – 2007). | 1 | Cliffwater Corporate Lending Fund, Agility Multi-Asset Income Fund, Corbin Multi-Strategy Fund, LLC, Aspiriant Risk-Managed Real Asset Fund, Aspiriant Risk-Managed Capital Appreciation Fund, AFA Multi-Manager Credit Fund, The Optima Dynamic Alternatives Fund, Infinity Core Alternative Fund, Infinity Long/Short Equity Fund, LLC, Keystone Private Income Fund, First Trust Alternative Opportunities Fund, Variant Alternative Income Fund, Variant Impact Fund, First Trust Private Assets Fund, First Trust Private Credit Fund, First Trust Real Assets Fund, Destiny Alternative Fund LLC, Destiny Alternative Fund (Tax Exempt) LLC, and Pender Real Estate Credit Fund, each a closed-end investment company. |
Abraham Fortress Fund
SUPPLEMENTAL INFORMATION (Unaudited) - Continued
| Name, Address, Year of Birth and Position(s) held with Trust | Term of Officec and Length of Time Served | Principal Occupation During the Past Five Years and Other Affiliations | Number of Portfolios in the Fund Complex Overseen by Trusteed | Other Directorships Held by Trusteee |
| Officers of the Trust: | | |
Rita Dam b (born 1966) Treasurer and Assistant Secretary | Since September 2013 | Co-Chief Executive Officer (2016 – present), and Vice President (2006 – 2015), Mutual Fund Administration, LLC; Co-President, Foothill Capital Management, LLC, a registered investment advisor (2018 – present). | N/A | N/A |
Joy Ausili b (born 1966) Vice President and Assistant Secretary | Since January 2016 | Co-Chief Executive Officer (2016 – present), and Vice President (2006 – 2015), Mutual Fund Administration, LLC; Co-President, Foothill Capital Management, LLC, a registered investment advisor (2018 – present); Secretary and Assistant Treasurer, Investment Managers Series Trust (September 2013 – January 2016). | N/A | N/A |
Diane Drake b (born 1967) Secretary | Since January 2016 | Senior Counsel, Mutual Fund Administration, LLC (October 2015 – present); Chief Compliance Officer, Foothill Capital Management, LLC, a registered investment advisor (2018 – 2019). | N/A | N/A |
Martin Dziura b (born 1959) Chief Compliance Officer | Since September 2013 | Principal, Dziura Compliance Consulting, LLC (October 2014 – present); Managing Director, Cipperman Compliance Services (2010 – September 2014); Chief Compliance Officer, Hanlon Investment Management (2009 – 2010); Vice President − Compliance, Morgan Stanley Investment Management (2000 − 2009). | N/A | N/A |
| a | Address for certain Trustees and certain officers: 235 West Galena Street, Milwaukee, Wisconsin 53212. |
| b | Address for Mr. Banhazl, Ms. Ausili, Ms. Dam and Ms. Drake: 2220 E. Route 66, Suite 226, Glendora, California 91740. |
Address for Mr. Dziura: 309 Woodridge Lane, Media, Pennsylvania 19063.
| c | Trustees and officers serve until their successors have been duly elected. |
Abraham Fortress Fund
SUPPLEMENTAL INFORMATION (Unaudited) - Continued
| d | The Trust is comprised of 60 series managed by unaffiliated investment advisors. Each Trustee serves as Trustee of each series of the Trust. The term “Fund Complex” applies only to the Fund(s) managed by the same investment advisor. The Fund does not hold itself out as related to any other series within the Trust, for purposes of investment and investor services, nor does it share the same investment advisor with any other series. |
| e | “Other Directorships Held” includes only directorships of companies required to register or file reports with the SEC under the Securities Exchange Act of 1934, as amended (that is, “public companies”), or other investment companies registered under the 1940 Act. |
| † | Mr. Banhazl is an “interested person” of the Trust by virtue of his position with Mutual Fund Administration, LLC and Foothill Capital Management, LLC. |
| * | Mr. Gallagher is an “interested person” of the Trust by virtue of his position with UMB Fund Services, Inc. |
Abraham Fortress Fund
EXPENSE EXAMPLE
For the Six Months Ended June 30, 2022 (Unaudited)
Expense Example
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 (Class I 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 January 1, 2022 to June 30, 2022.
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* |
| | 1/1/2022 | 6/30/2022 | 1/1/2022-6/30/2022 |
| Class I | Actual Performance | $ 1,000.00 | $ 961.40 | $ 3.64 |
| | Hypothetical (5% annual return before expenses) | 1,000.00 | 1,042.50 | 3.79 |
| Class K | Actual Performance | 1,000.00 | 961.40 | 3.16 |
| | Hypothetical (5% annual return before expenses) | 1,000.00 | 1,043.50 | 3.29 |
| * | 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 181/365 (to reflect the six-months period). The expense ratios reflect an expense waiver. Assumes all dividends and distributions were reinvested. |
Abraham Fortress Fund
A series of Investment Managers Series Trust II
Investment Advisor
Abraham Trading Company
124 Main Street, Suite 200
Canadian, Texas 79014
Independent Registered Public Accounting Firm
Cohen & Company, Ltd.
342 North Water Street, Suite 830
Milwaukee, Wisconsin 53202
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.acaglobal.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.
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 1. Report to Stockholders (Continued).
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant's principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
The registrant undertakes to provide to any person without charge, upon request, a copy of its code of ethics by mail when they call the registrant at 1-844-323-8200.
Item 3. Audit Committee Financial Expert.
The Board of Trustees of the Registrant has determined that the Registrant has the following “audit committee financial experts” as defined in Item 3(b) of Form N-CSR serving on its Audit Committee: Messrs. Thomas Knipper and John P. Zader. The audit committee financial experts are “independent” as that term is defined in Item 3(a)(2) of Form N-CSR.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. "Audit services" refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. "Audit-related services" refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. "Tax services" refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no "other services" provided by the principal accountant. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
| | FYE 06/30/22 | FYE 06/30/21 |
| Audit Fees | $23,500 | N/A |
| Audit-Related Fees | N/A | N/A |
| Tax Fees | $6,500 | N/A |
| All Other Fees | N/A | N/A |
The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.
The percentage of fees billed by Cohen & Company, Ltd. applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:
| | FYE 06/30/22 | FYE 06/30/2021 |
| Audit-Related Fees | 0% | 0% |
| Tax Fees | 0% | 0% |
| All Other Fees | 0% | 0% |
All of the principal accountant's hours spent on auditing the registrant's financial statements were attributed to work performed by full-time permanent employees of the principal accountant.
The following table indicates the non-audit fees billed or expected to be billed by the registrant's accountant for services to the registrant and to the registrant's investment advisor (and any other controlling entity, etc.—not sub-advisor) for the last two years. The audit committee of the Board of Trustees has considered whether the provision of non-audit services that were rendered to the registrant's investment advisor is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant's independence.
| Non-Audit Related Fees | FYE 06/30/2022 | FYE 06/30/2021 |
| Registrant | N/A | N/A |
| Registrant’s Investment Advisor | N/A | N/A |
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). |
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. |
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.
Item 10. Submission of Matters to a Vote of Security Holders.
The registrant has not made any 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.
(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.
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 | 09/08/22 | |
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 | 09/08/22 | |
| | | |
| By (Signature and Title) | /s/ Rita Dam | |
| | Rita Dam, Treasurer/Chief Financial Officer | |
| | | |
| Date | 09/08/22 | |
