Form N-CSR Investment Managers Seri For: Jun 30

 

 

(b) Not applicable.

 

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.

 

	Abraham Fortress Fund	FYE 6/30/24	FYE 6/30/24
(a)	Audit Fees	$28,000	$26,000
(b)	Audit-Related Fees	N/A	N/A
(c)	Tax Fees	$6,500	$6,500
(d)	All Other Fees	N/A	N/A

 

(e)(1) 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.

 

(e)(2) The percentage of fees billed by Cohen & Company, LTD applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:

Abraham Fortress Fund	FYE 6/30/2024	FYE 6/30/2023
Audit-Related Fees	0%	0%
Tax Fees	0%	0%
All Other Fees	0%	0%

 

(f)

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.

 

	Abraham Fortress Fund	FYE 6/30/2024	FYE6/30/2023
(g)	Registrant Non-Audit Related Fees	N/A	N/A
(h)	Registrant’s Investment Advisor	N/A	N/A

 

(i)

Not applicable.

(j)

Not applicable.

 

Item 5. Audit Committee of Listed Registrants.

 

(a)

Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).

 

(b)

Not applicable.

 

Item 6. Investments.

 

(a)

Schedule of Investments is included as part of the report to shareholders filed under Item 7 of this Form.

 

(b)

Not Applicable.

Item 7. Financial Statements and Financial Highlights for Open-End Management Investment Companies.

 

 

 

 

ABRAHAM FORTRESS FUND

(Class I: FORTX)

(Class K: FORKX)

 

ANNUAL FINANCIALS AND OTHER INFORMATION

JUNE 30, 2024

Abraham Fortress Fund

A series of Investment Managers Series Trust II

 

Table of Contents

 

Item 7. Financial Statements and Financial Highlights
Consolidated Schedule of Investments	1
Consolidated Statement of Assets and Liabilities	11
Consolidated Statement of Operations	12
Consolidated Statements of Changes in Net Assets	13
Consolidated Financial Highlights	14
Class I	14
Class K	15
Notes to Consolidated Financial Statements	16
Report of Independent Registered Public Accounting Firm	31
Supplemental Information	32

 

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

Abraham Fortress Fund

CONSOLIDATED SCHEDULE OF INVESTMENTS

As of June 30, 2024

 

Item 7: Financial Statements and Financial Highlights for Open-End Management Investment Companies.

 

Number of Shares						Value
				COMMON STOCKS — 29.1%1
				COMMUNICATIONS — 3.2%
	5,440			Alphabet, Inc. - Class A		$	990,896
	2,912			AT&T, Inc.			55,648
	17			Booking Holdings, Inc.			67,345
	83			Charter Communications, Inc. - Class A*			24,814
	1,863			Comcast Corp. - Class A			72,955
	1,134			Meta Platforms, Inc. - Class A			571,785
	181			Netflix, Inc.*			122,153
	509			T-Mobile US, Inc.			89,676
	1,712			Verizon Communications, Inc.			70,603
	741			Walt Disney Co.			73,574
	704			Warner Bros Discovery, Inc.*			5,238
							2,144,687
				CONSUMER DISCRETIONARY — 2.4%
	4,140			Amazon.com, Inc.*			800,055
	110			Aptiv PLC*2			7,746
	8			AutoZone, Inc.*			23,713
	550			Chipotle Mexican Grill, Inc.*			34,457
	255			eBay, Inc.			13,699
	1,629			Ford Motor Co.			20,428
	592			General Motors Co.			27,504
	426			Home Depot, Inc.			146,646
	275			Lowe’s Cos., Inc.			60,626
	133			Marriott International, Inc. - Class A			32,155
	305			McDonald’s Corp.			77,726
	645			NIKE, Inc. - Class B			48,614
	27			O’Reilly Automotive, Inc.*			28,514
	478			Starbucks Corp.			37,212
	1,169			Tesla, Inc.*			231,322
	486			TJX Cos., Inc.			53,509
							1,643,926
				CONSUMER STAPLES — 1.6%
	749			Altria Group, Inc.			34,117
	1,761			Coca-Cola Co.			112,088
	344			Colgate-Palmolive Co.			33,382
	77			Constellation Brands, Inc. - Class A			19,811
	181			Costco Wholesale Corp.			153,848
	94			Dollar General Corp.			12,430
	147			Estee Lauder Cos., Inc. - Class A			15,641
	137			Kimberly-Clark Corp.			18,933
	499			Kraft Heinz Co.			16,078
	569			Mondelez International, Inc. - Class A			37,235

Abraham Fortress Fund

CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024

 

Number of Shares						Value
				COMMON STOCKS 1 (Continued)
				CONSUMER STAPLES (Continued)
	432			Monster Beverage Corp.*		$	21,578
	564			PepsiCo, Inc.			93,020
	635			Philip Morris International, Inc.			64,345
	987			Procter & Gamble Co.			162,776
	195			Target Corp.			28,868
	352			Walgreens Boots Alliance, Inc.			4,257
	3,393			Walmart, Inc.			229,740
							1,058,147
				ENERGY — 0.7%
	786			Chevron Corp.			122,946
	538			ConocoPhillips			61,537
	239			EOG Resources, Inc.			30,083
	1,978			Exxon Mobil Corp.			227,707
	572			Schlumberger N.V.2			26,987
							469,260
				FINANCIALS — 3.3%
	316			American Express Co.			73,170
	339			American International Group, Inc.			25,167
	90			Aon PLC - Class A2			26,422
	3,337			Bank of America Corp.			132,713
	337			Bank of New York Mellon Corp.			20,183
	913			Berkshire Hathaway, Inc. - Class B*			371,408
	62			BlackRock, Inc.			48,814
	174			Capital One Financial Corp.			24,090
	771			Charles Schwab Corp.			56,815
	176			Chubb Ltd.2			44,894
	809			Citigroup, Inc.			51,339
	147			CME Group, Inc.			28,900
	248			Fidelity National Information Services, Inc.			18,689
	269			Fiserv, Inc.*			40,092
	142			Goldman Sachs Group, Inc.			64,230
	230			Intercontinental Exchange, Inc.			31,485
	1,205			JPMorgan Chase & Co.			243,723
	206			Marsh & McLennan Cos., Inc.			43,408
	401			Mastercard, Inc. - Class A			176,905
	343			MetLife, Inc.			24,075
	76			Moody’s Corp.			31,991
	732			Morgan Stanley			71,143
	34			MSCI, Inc.			16,380
	479			PayPal Holdings, Inc.*			27,796
	172			PNC Financial Services Group, Inc.			26,743

Abraham Fortress Fund

CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024

 

Number of Shares						Value
				COMMON STOCKS 1 (Continued)
				FINANCIALS (Continued)
	238			Progressive Corp.		$	49,435
	144			S&P Global, Inc.			64,224
	92			T. Rowe Price Group, Inc.			10,609
	544			Truist Financial Corp.			21,134
	605			U.S. Bancorp			24,019
	888			Visa, Inc. - Class A			233,073
	1,626			Wells Fargo & Co.			96,568
							2,219,637
				HEALTH CARE — 3.1%
	721			Abbott Laboratories			74,919
	721			AbbVie, Inc.			123,666
	123			Agilent Technologies, Inc.			15,944
	32			Align Technology, Inc.*			7,726
	230			Amgen, Inc.			71,864
	204			Baxter International, Inc.			6,824
	116			Becton Dickinson & Co.			27,110
	581			Boston Scientific Corp.*			44,743
	905			Bristol-Myers Squibb Co.			37,585
	238			Centene Corp.*			15,779
	135			Cigna Group			44,627
	538			CVS Health Corp.			31,774
	291			Danaher Corp.			72,706
	160			Dexcom, Inc.*			18,141
	255			Edwards Lifesciences Corp.*			23,554
	99			Elevance Health, Inc.			53,644
	390			Eli Lilly & Co.			353,098
	23			Embecta Corp.			288
	149			GE HealthCare Technologies, Inc.			11,610
	511			Gilead Sciences, Inc.			35,060
	11			GRAIL, Inc.*			164
	127			HCA Healthcare, Inc.			40,803
	52			Humana, Inc.			19,430
	35			IDEXX Laboratories, Inc.*			17,052
	64			Illumina, Inc.*			6,680
	146			Intuitive Surgical, Inc.*			64,948
	78			IQVIA Holdings, Inc.*			16,492
	1,073			Johnson & Johnson			156,830
	548			Medtronic PLC2			43,133
	1,030			Merck & Co., Inc.			127,514
	165			Moderna, Inc.*			19,594
	2,288			Pfizer, Inc.			64,018
	44			Regeneron Pharmaceuticals, Inc.*			46,245

Abraham Fortress Fund

CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024

 

Number of Shares						Value
				COMMON STOCKS 1 (Continued)
				HEALTH CARE (Continued)
	58			Solventum Corp.*		$	3,067
	154			Stryker Corp.			52,399
	161			Thermo Fisher Scientific, Inc.			89,033
	384			UnitedHealth Group, Inc.			195,556
	104			Vertex Pharmaceuticals, Inc.*			48,747
	193			Zoetis, Inc.			33,458
							2,115,825
				INDUSTRIALS — 1.7%
	235			3M Co.			24,015
	488			Amphenol Corp. - Class A			32,877
	172			Automatic Data Processing, Inc.			41,055
	240			Boeing Co.*			43,682
	353			Carrier Global Corp.			22,267
	221			Caterpillar, Inc.			73,615
	42			Cintas Corp.			29,411
	904			CSX Corp.			30,239
	125			Deere & Co.			46,704
	163			Eaton Corp. PLC2			51,109
	243			Emerson Electric Co.			26,769
	108			FedEx Corp.			32,383
	112			GE Vernova, Inc.*			19,209
	114			General Dynamics Corp.			33,076
	448			General Electric Co.			71,218
	281			Honeywell International, Inc.			60,005
	128			Illinois Tool Works, Inc.			30,331
	287			Johnson Controls International plc2			19,077
	80			L3Harris Technologies, Inc.			17,966
	112			Lockheed Martin Corp.			52,315
	99			Norfolk Southern Corp.			21,254
	65			Northrop Grumman Corp.			28,337
	94			Old Dominion Freight Line, Inc.			16,600
	147			Paychex, Inc.			17,428
	129			Republic Services, Inc.			25,070
	610			RTX Corp.			61,238
	133			TE Connectivity Ltd.2			20,007
	97			Trane Technologies PLC2			31,906
	262			Union Pacific Corp.			59,280
	354			United Parcel Service, Inc. - Class B			48,445
	97			Veralto Corp.			9,261
	171			Waste Management, Inc.			36,481
							1,132,630

Abraham Fortress Fund

CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024

 

Number of Shares						Value
				COMMON STOCKS 1 (Continued)
				MATERIALS — 0.3%
	90			Air Products and Chemicals, Inc.		$	23,225
	211			DuPont de Nemours, Inc.			16,983
	117			Ecolab, Inc.			27,846
	599			Freeport-McMoRan, Inc.			29,111
	208			Linde PLC2			91,273
	325			Newmont Corp.			13,608
	107			Sherwin-Williams Co.			31,932
							233,978
				REAL ESTATE — 0.3%
	186			American Tower Corp. - REIT			36,155
	176			Crown Castle, Inc. - REIT			17,195
	119			Digital Realty Trust, Inc. - REIT			18,094
	37			Equinix, Inc. - REIT			27,994
	302			Prologis, Inc. - REIT			33,918
	71			Public Storage - REIT			20,423
	134			Simon Property Group, Inc. - REIT			20,341
							174,120
				TECHNOLOGY — 8.8%
	269			Accenture PLC - Class A2			81,617
	194			Adobe, Inc.*			107,775
	666			Advanced Micro Devices, Inc.*			108,032
	214			Analog Devices, Inc.			48,848
	6,739			Apple, Inc.			1,419,368
	362			Applied Materials, Inc.			85,428
	125			Arista Networks, Inc.*			43,810
	90			Autodesk, Inc.*			22,271
	168			Broadcom, Inc.			269,729
	113			Cadence Design Systems, Inc.*			34,776
	1,720			Cisco Systems, Inc.			81,717
	214			Cognizant Technology Solutions Corp. - Class A			14,552
	335			Fortinet, Inc.*			20,190
	1,658			Intel Corp.			51,348
	366			International Business Machines Corp.			63,300
	115			Intuit, Inc.			75,579
	62			KLA Corp.			51,120
	57			Lam Research Corp.			60,697
	226			Microchip Technology, Inc.			20,679
	457			Micron Technology, Inc.			60,109
	3,061			Microsoft Corp.			1,368,114
	69			Motorola Solutions, Inc.			26,637
	10,190			NVIDIA Corp.			1,258,873

Abraham Fortress Fund

CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024

 

Number of Shares						Value
				COMMON STOCKS 1 (Continued)
				TECHNOLOGY (Continued)
	108			NXP Semiconductors N.V.2		$	29,062
	1,089			Oracle Corp.			153,767
	457			QUALCOMM, Inc.			91,025
	43			Roper Technologies, Inc.			24,237
	402			Salesforce, Inc.			103,354
	81			ServiceNow, Inc.*			63,720
	63			Synopsys, Inc.*			37,489
	377			Texas Instruments, Inc.			73,338
							5,950,561
				UTILITIES — 3.7%
	2,283			Alliant Energy Corp.			116,205
	1,565			Ameren Corp.			111,287
	1,775			American Electric Power Co., Inc.			155,738
	745			American Water Works Co., Inc.			96,224
	1,315			Atmos Energy Corp.			153,395
	2,144			CMS Energy Corp.			127,632
	1,628			Consolidated Edison, Inc.			145,576
	962			Constellation Energy Corp.			192,660
	330			Dominion Energy, Inc.			16,170
	1,158			DTE Energy Co.			128,549
	314			Duke Energy Corp.			31,472
	1,236			Entergy Corp.			132,252
	2,031			Evergy, Inc.			107,582
	1,522			Eversource Energy			86,313
	2,888			Exelon Corp.			99,954
	3,369			FirstEnergy Corp.			128,932
	800			NextEra Energy, Inc.			56,648
	4,624			PPL Corp.			127,854
	2,100			Public Service Enterprise Group, Inc.			154,770
	2,471			Southern Co.			191,675
	1,438			WEC Energy Group, Inc.			112,825
							2,473,713
				TOTAL COMMON STOCKS
				(Cost $16,667,388)			19,616,484

 

Principal Amount
				U.S. TREASURY BILLS — 51.5%
				United States Treasury Bill
$	4,100,000			5.174%, 7/11/20243,4,5			4,094,039
	4,100,000			5.170%, 7/25/20243,4			4,085,720
	11,500,000			5.196%, 8/20/20243,4,5			11,416,199
	5,600,000			5.175%, 9/26/20244			5,529,289

Abraham Fortress Fund

CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024

 

Principal Amount						Value
				U.S. TREASURY BILLS (Continued)
$	9,800,000			5.140%, 10/24/20243,4,5		$	9,637,555
				TOTAL U.S. TREASURY BILLS
				(Cost $34,766,053)			34,762,802
				U.S. TREASURY NOTES — 20.1%
				United States Treasury Note
	4,150,000			1.375%, 11/15/2031			3,380,304
	3,750,000			2.875%, 5/15/2032			3,384,082
	3,425,000			4.125%, 11/15/2032			3,372,957
	3,650,000			3.375%, 5/15/2033			3,389,368
				TOTAL U.S. TREASURY NOTES
				(Cost $13,668,001)			13,526,711
				SHORT-TERM INVESTMENTS — 0.0%
	10			UMB Bank, Money Market Fiduciary Deposit Investment, 0.01%3,5,6			10
				TOTAL SHORT-TERM INVESTMENTS
				(Cost $10)			10
				TOTAL INVESTMENTS — 100.7%
				(Cost $65,101,452)			67,906,007
				Liabilities in Excess of Other Assets — (0.7)%			(446,681	)
				TOTAL NET ASSETS — 100.0%		$	67,459,326

 

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 10.

2

Foreign security denominated in U.S. dollars.

3

All or a portion of this security is segregated as collateral for derivatives. The market value of the securities pledged as collateral was $16,814,697, which represents 24.93% of total net assets of the Fund.

4

The rate is the effective yield as of June 30, 2024.

5

All or a portion of this security is a holding of Abraham Fortress Fund, Ltd.

6

The rate is the annualized seven-day yield at period end.

 

See accompanying Notes to Consolidated Financial Statements.

Abraham Fortress Fund

CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024

 

																Unrealized
		Expiration		Number of				Notional				Value at				Appreciation
Long Contracts		Date		Contracts				Value				June 30, 2024				(Depreciation)
Commodity Futures
CMX Gold 1		August 2024			28			$	6,710,021			$	6,550,880			$	(159,141	)
NYMEX Natural Gas 1		August 2024			23				685,003				598,230				(86,773	)
Index Futures
CME E-mini S&P 500		September 2024			23				6,328,465				6,349,724				21,259
NYF MSCI EAFE Index		September 2024			79				9,183,964				9,255,640				71,676
Total Long Contracts								$	22,907,453			$	22,754,474			$	(152,979	)

 

																Unrealized
		Expiration		Number of				Notional				Value at				Appreciation
Short Contracts		Date		Contracts				Value				June 30, 2024				(Depreciation)
Foreign Exchange Futures
CME Japanese Yen		September 2024			(21	)			(1,709,455	)			(1,651,781	)			57,674
								$	(1,709,455	)		$	(1,651,781	)		$	57,674
TOTAL FUTURES CONTRACTS								$	21,197,998			$	21,102,693			$	(95,305	)

 

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, 2024

 

SWAP CONTRACTS

(OTC) TOTAL RETURN SWAP

 

Pay/Receive

Unrealized

Total Return on

Financing

Pay/Receive

Termination

Notional

Appreciation

Counterparty

Reference Entity

Reference Entity

Rate1

Frequency

Date

Value

(Depreciation)

Deutsche Bank

Abraham Fortress dbSelect Index 2

Receive

0.45% of Notional Value

Quarterly

June 13, 2029

$

39,362,551

$

(1,844,039

)

TOTAL SWAP CONTRACTS

$

(1,844,039

)

 

1

Financing rate is based upon notional trading amounts at period end.

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 Holdings ^

 

FUTURES CONTRACTS

 

																Percentage
																of Custom Swap’s
				Number of								Unrealized				Unrealized
		Expiration		Long				Notional				Appreciation				Appreciation
Description		Date		Contracts				Value				(Depreciation)				(Depreciation)
ICE Gasoil Monthly Future		July 2024			61			$	4,820,551			$	165,753				67.05	%
CMX Copper Future		December 2024			39				4,296,371				(527	)			-0.21	%
NYM Light Sweet Crude Oil (WTI) Future		November 2024			47				3,671,983				7,939				3.21	%
ICE Brent Crude Monthly Future		September 2024			26				2,132,441				(2,590	)			-1.05	%
CMX Gold		August 2024			8				1,861,374				(7,054	)			-2.85	%
ICE Brent Crude Monthly Future		August 2024			22				1,833,036				63,609				25.73	%
CME Live Cattle Future		August 2024			20				1,517,122				26,515				10.73	%
CME E-Mini S&P 500		September 2024			5				1,478,842				5,966				2.41	%
NYB Sugar No.11 Future		February 2025			56				1,290,444				39,511				15.98	%
NYM Gasoline RBOB Future		July 2024			12				1,282,889				(21,233	)			-8.59	%
SGX FTSE China A50 Index Future		July 2024			105				1,254,311				(7,307	)			-2.96	%
LIF FTSE 100 Index Future		September 2024			11				1,185,550				(3,655	)			-1.48	%
EUX DAX Index Future		September 2024			2				1,158,813				5,085				2.06	%
SGX Nikkei 225 Index		September 2024			9				1,058,334				22,988				9.30	%
ICE Gasoil Monthly Future		September 2024			11				829,949				35,780				14.47	%
CME Feeder Cattle Future		October 2024			6				764,076				2,478				1.00	%
CMX Silver		September 2024			5				746,044				(5,411	)			-2.19	%
NYM Henry Hub Natural Gas Future		September 2024			27				738,546				(58,759	)			-23.77	%
CME E-Mini Nasdaq-100		September 2024			2				710,943				(253	)			-0.10	%
OSE TOPIX Future		September 2024			4				700,560				14,249				5.76	%
NYM Henry Hub Natural Gas Future		October 2024			22				690,453				(12,233	)			-4.95	%
LIF White Sugar Future		July 2024			23				668,016				24,325				9.84	%
LIF White Sugar Future		September 2024			22				630,729				28,661				11.59	%
ICE Gasoil Monthly Future		October 2024			7				554,404				2,639				1.07	%
LIF Long Gilt Future		September 2024			4				525,223				(2,955	)			-1.20	%
EOP CAC 40		July 2024			6				498,279				(9,367	)			-3.79	%
IFLL 3 Month SONIA Index		June 2027			2				482,163				(101	)			-0.04	%
LME Zinc Future		September 2024			6				468,115				4,484				1.81	%
KOFEX 3 Year Korean Treasury Bond Future		September 2024			6				457,112				1,287				0.52	%
KCB Hard Red Winter Wheat Future		December 2024			15				449,246				(68,515	)			-27.72	%
NYB Coffee C Future		September 2024			5				418,828				34,375				13.91	%
EUX EURO STOXX 50 Index Future		September 2024			8				410,829				(82	)			-0.03	%
KCB Hard Red Winter Wheat Future		September 2024			14				407,686				3,775				1.53	%
								$	39,993,262			$	289,377

 

See accompanying Notes to Consolidated Financial Statements.

Abraham Fortress Fund

CONSOLIDATED SCHEDULE OF INVESTMENTS - Continued

As of June 30, 2024

 

FUTURES CONTRACTS - Continued

 

																Percentage
																of Custom Swap’s
				Number of								Unrealized				Unrealized
		Expiration		Short				Notional				Appreciation				Appreciation
Description		Date		Contracts				Value				(Depreciation)				(Depreciation)
CME EUR/USD		September 2024			(108	)		$	(14,514,645	)		$	54,334				21.98	%
LIF 3 month Euro (EURIBOR)		March 2025			(43	)			(11,107,989	)			(18,770	)			-7.59	%
CME AUD/USD		September 2024			(118	)			(7,857,327	)			(65,158	)			-26.36	%
CME SOFR 3month		June 2025			(32	)			(7,586,240	)			(6,995	)			-2.83	%
ICE Gasoil Monthly Future		August 2024			(62	)			(4,821,857	)			(136,997	)			-55.42	%
CME JPY/USD		September 2024			(58	)			(4,528,352	)			100,560				40.68	%
NYM Light Sweet Crude Oil (WTI) Future		August 2024			(48	)			(3,860,965	)			(42,737	)			-17.29	%
CME CHF/USD		September 2024			(21	)			(2,885,051	)			14,180				5.74	%
NYB Sugar No.11 Future		September 2024			(109	)			(2,445,217	)			(93,305	)			-37.74	%
NYM Gasoline RBOB Future		August 2024			(23	)			(2,369,503	)			(6,385	)			-2.58	%
NYM NY Harbour ULSD Future		August 2024			(19	)			(2,051,262	)			(38,452	)			-15.56	%
CBT 2 year US Treasury Notes		September 2024			(9	)			(1,937,403	)			(4,466	)			-1.81	%
CME CAD/USD		September 2024			(26	)			(1,871,233	)			(8,649	)			-3.50	%
CMX Copper Future		September 2024			(16	)			(1,782,948	)			(159	)			-0.06	%
CME CME E-Mini Russell 2000 Index		September 2024			(16	)			(1,687,483	)			(20,494	)			-8.29	%
NYM Henry Hub Natural Gas Future		July 2024			(64	)			(1,682,357	)			80,318				32.49	%
CME SOFR 3month		March 2025			(7	)			(1,633,791	)			(591	)			-0.24	%
CME GBP/USD		September 2024			(21	)			(1,630,767	)			6,653				2.69	%
LIF 3 month Euro (EURIBOR)		December 2024			(6	)			(1,549,631	)			(542	)			-0.22	%
SFE 90 Day Bank Accepted Bill Future		March 2025			(9	)			(1,436,767	)			2,157				0.87	%
SFE 3 year Australian Treasury Bond		September 2024			(20	)			(1,381,568	)			1,490				0.60	%
LIF 3 month Euro (EURIBOR)		September 2024			(5	)			(1,374,088	)			286				0.12	%
LIF 3 month Euro (EURIBOR)		June 2025			(5	)			(1,277,684	)			(28	)			-0.01	%
CME Live Cattle Future		October 2024			(17	)			(1,263,585	)			(13,653	)			-5.52	%
EUX Euro-BUND		September 2024			(9	)			(1,249,416	)			(11,476	)			-4.64	%
CME SOFR 3month		December 2025			(5	)			(1,202,067	)			(605	)			-0.24	%
CME SOFR 3month		September 2025			(5	)			(1,136,187	)			(260	)			-0.11	%
ICE Mini MSCI Emerging Markets Index Future		September 2024			(20	)			(1,099,362	)			(2,465	)			-1.00	%
SFE SPI 200 Index		September 2024			(7	)			(919,322	)			(1,878	)			-0.76	%
EUX Euro-OAT Future		September 2024			(7	)			(910,038	)			6,486				2.62	%
OSE 10 year Japanese Government Bond		September 2024			(1	)			(824,670	)			3,647				1.48	%
CME Feeder Cattle Future		September 2024			(6	)			(795,862	)			5,146				2.08	%
CME SOFR 3month		June 2026			(3	)			(754,823	)			(509	)			-0.21	%
CBT 10 year US Treasury Notes		September 2024			(6	)			(690,260	)			(5,265	)			-2.13	%
CME SOFR 3month		December 2024			(3	)			(682,989	)			31				0.01	%
EUX 2 year Euro-Schatz		September 2024			(6	)			(681,713	)			(2,237	)			-0.91	%
CME Lean Hog Future		August 2024			(17	)			(615,639	)			20,421				8.26	%
CME SOFR 3month		March 2026			(2	)			(586,592	)			(708	)			-0.29	%
CBT Soybean Oil Future		December 2024			(22	)			(575,151	)			(243	)			-0.10	%
IFLL 3 Month SONIA Index		June 2025			(2	)			(547,456	)			(131	)			-0.05	%
EUX Euro-BOBL		September 2024			(4	)			(515,930	)			(2,658	)			-1.08	%
EUX Euro-BUXL		September 2024			(4	)			(512,085	)			(2,200	)			-0.89	%
LIF 3 month Euro (EURIBOR)		June 2026			(2	)			(508,130	)			(44	)			-0.02	%
MGE Hard Red Spring Wheat Future		September 2024			(15	)			(472,987	)			40,154				16.24	%
LIF 3 month Euro (EURIBOR)		September 2025			(2	)			(428,208	)			51				0.02	%
MGE Hard Red Spring Wheat Future		December 2024			(13	)			(427,221	)			36,644				14.82	%
NYM Light Sweet Crude Oil (WTI) Future		July 2024			(5	)			(401,210	)			(14,254	)			-5.77	%
								$	(101,075,031	)		$	(129,756	)

 

FORWARD FOREIGN CURRENCY CONTRACTS

 

																				Percentage
																				of Custom Swap’s
																Unrealized				Unrealized
				Currency Units to												Appreciation				Appreciation
Settlement Date		Counterparty		Receive/(Deliver)						In Exchange For						(Depreciation)				(Depreciation)
9/18/2024		Deutsche Bank			(786,499	)		CAD			571,702			USD			(4,341	)			-1.76	%
9/18/2024		Deutsche Bank			(739,974	)		SGO			548,537			USD			1,197				0.48	%
9/18/2024		Deutsche Bank			(84,957,433	)		JPY			548,053			USD			13,498				5.46	%
9/18/2024		Deutsche Bank			544,437			USD			(505,132	)		EUR			1,164				0.47	%
9/18/2024		Deutsche Bank			(61,515,957	)		JPY			602,614			AUD			15,907				6.44	%

 

^

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 STATEMENT OF ASSETS AND LIABILITIES

As of June 30, 2024

 

Assets:
Investments, at value (cost $65,101,452)		$	67,906,007
Cash			465,964
Cash deposited with brokers for open futures contracts			928,001
Cash held as collateral for open swap contract			183,731
Receivables:
Fund shares sold			4,000
Dividends and interest			64,059
Other prepaid expenses			6,436
Total Assets			69,558,198
Liabilities:
Unrealized depreciation on total return swap contract			1,844,039
Net unrealized depreciation on futures contracts			95,305
Payables:
Fund shares redeemed			41,889
Advisory fees, net			7,220
Shareholder servicing fees (Note 6)			7,432
Fund administration and accounting fees			24,230
Transfer agent fees and expenses			5,470
Custody fees			3,613
Auditing fees			36,000
Trustees’ deferred compensation (Note 3)			9,881
Legal fees			6,972
Printing and Postage			4,350
Chief Compliance Officer fees			3,565
Trustees’ Fees payable			710
Accrued other expenses			8,196
Total liabilities			2,098,872
Commitments and contingencies (Note 3)
Net Assets		$	67,459,326
Components of Net Assets:
Paid-in capital (par value of $0.01 per share with an unlimited number of shares authorized)		$	63,199,806
Total accumulated earnings (deficit)			4,259,520
Net Assets		$	67,459,326
Maximum Offering Price per Share:
Class I Shares:
Net assets applicable to shares outstanding		$	39,834,324
Shares of beneficial interest issued and outstanding			3,786,128
Net asset value, redemption, and offering price per share		$	10.52
Class K Shares:
Net assets applicable to shares outstanding		$	27,625,002
Shares of beneficial interest issued and outstanding			2,623,243
Net asset value, redemption, and offering price per share		$	10.53

 

See accompanying Notes to Consolidated Financial Statements.

Abraham Fortress Fund

CONSOLIDATED STATEMENT OF OPERATIONS

For the Year Ended June 30, 2024

 

Investment Income:
Dividends (net of withholding tax of $66)		$	282,311
Interest			2,206,257
Total investment income			2,488,568
Expenses:
Advisory fees			305,627
Shareholder servicing fees - Class I (Note 6)			31,472
Fund administration and accounting fees			136,751
Transfer agent fees and expenses			50,765
Custody fees			13,199
Registration fees			65,610
Auditing fees			36,000
Legal fees			23,304
Chief Compliance Officer fees			15,693
Trustees’ fees and expenses			11,439
Shareholder reporting fees			10,401
Insurance fees			3,802
Miscellaneous			9,902
Total expenses			713,965
Advisory fees waived			(278,649	)
Fees paid indirectly			(6,429	)
Net expenses			428,887
Net investment income (loss)			2,059,681
Realized and Unrealized Gain (Loss):
Net realized gain (loss) on:
Investments			(535,557	)
Futures contracts			2,440,873
Net realized gain (loss)			1,905,316
Net change in unrealized appreciation/depreciation on:
Investments			3,796,403
Futures contracts			89,349
Swap contracts			(451,682	)
Net change in unrealized appreciation/depreciation			3,434,070
Net realized and unrealized gain (loss)			5,339,386
Net Increase (Decrease) in Net Assets from Operations		$	7,399,067

 

See accompanying Notes to Consolidated Financial Statements.

Abraham Fortress Fund

CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS

 

		For the				For the
		Year Ended				Year Ended
		June 30, 2024				June 30, 2023
Increase (Decrease) in Net Assets from:
Operations:
Net investment income (loss)		$	2,059,681			$	1,157,986
Net realized gain (loss) on investments, purchased options contracts, futures contracts, and swap contracts			1,905,316				3,535,712
Net change in unrealized appreciation/depreciation on investments, purchased options contracts, futures contracts, and swap contracts			3,434,070				(1,658,692	)
Net increase (decrease) in net assets resulting from operations			7,399,067				3,035,006
Distributions to Shareholders:
Distributions from distributable earnings:
Class I			(683,724	)			(1,649,118	)
Class K			(507,674	)			(1,893,677	)
Total distributions to shareholders			(1,191,398	)			(3,542,795	)
Capital Transactions:
Net proceeds from shares sold:
Class I			17,505,179				15,677,695
Class K			1,771,879				936,391
Reinvestment of distributions:
Class I			683,575				1,645,160
Class K			493,148				1,892,098
Cost of shares redeemed:
Class I			(5,871,323	)			(8,606,379	)
Class K			(2,736,649	)			(13,262,280	)
Net increase (decrease) in net assets from capital transactions			11,845,809				(1,717,315	)
Total increase (decrease) in net assets			18,053,478				(2,225,104	)
Net Assets:
Beginning of year			49,405,848				51,630,952
End of year		$	67,459,326			$	49,405,848
Capital Share Transactions:
Shares sold:
Class I			1,830,505				1,627,205
Class K			183,306				99,927
Shares reinvested:
Class I			71,354				188,019
Class K			51,477				216,240
Shares redeemed:
Class I			(608,752	)			(899,805	)
Class K			(279,066	)			(1,382,745	)
Net increase (decrease) in capital shares			1,248,824				(151,159	)

 

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 each period.

 

										For the
		For the				For the				Period October 13, 2021*
		Year Ended				Year Ended				through
		June 30, 2024				June 30, 2023				June 30, 2022
Net asset value, beginning of period		$	9.57			$	9.72			$	10.00
Income from Investment Operations:
Net investment income (loss)1			0.33				0.21				0.01
Net realized and unrealized gain (loss)			0.80				0.32				(0.13	)
Total from investment operations			1.13				0.53				(0.12	)
Less Distributions:
From net investment income			(0.18	)			(0.68	)			-
From net realized gain			-				-				(0.16	)
Total distributions			(0.18	)			(0.68	)			(0.16	)
Net asset value, end of period		$	10.52			$	9.57			$	9.72
Total return2			12.04	%			6.13	%			(1.23	)%3
Ratios and Supplemental Data:
Net assets, end of period (in thousands)		$	39,834			$	23,857			$	15,328
Ratio of expenses to average net assets
Before fees waived and absorbed			1.21	%			1.41	%			1.42	%4
After fees waived and absorbed			0.74	%			0.75	%			0.75	%4
Ratio of net investment income (loss) to average net assets
Before fees waived and absorbed			2.86	%			1.60	%			(0.58	%)4
After fees waived and absorbed			3.33	%			2.26	%			0.09	%4
Portfolio turnover rate5			20	%			54	%			61	%3

 

*	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.
3	Not Annualized.
4	Annualized.
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 each period.

 

										For the
		For the				For the				Period October 13, 2021*
		Year Ended				Year Ended				through
		June 30, 2024				June 30, 2023				June 30, 2022
Net asset value, beginning of period		$	9.58			$	9.72			$	10.00
Income from Investment Operations:
Net investment income (loss)1			0.33				0.22				0.01
Net realized and unrealized gain (loss)			0.81				0.33				(0.13	)
Total from investment operations			1.14				0.55				(0.12	)
Less Distributions:
From net investment income			(0.19	)			(0.69	)			-
From net realized gain			-				-				(0.16	)
Total distributions			(0.19	)			(0.69	)			(0.16	)
Net asset value, end of period		$	10.53			$	9.58			$	9.72
Total return2			12.11	%			6.32	%			(1.23	)%3
Ratios and Supplemental Data:
Net assets, end of period (in thousands)		$	27,625			$	25,548			$	36,303
Ratio of expenses to average net assets
Before fees waived and absorbed			1.12	%			1.31	%			1.32	%4
After fees waived and absorbed			0.65	%			0.65	%			0.65	%4
Ratio of net investment income (loss) to average net assets
Before fees waived and absorbed			2.95	%			1.70	%			(0.48	%)4
After fees waived and absorbed			3.42	%			2.36	%			0.19	%4
Portfolio turnover rate5			20	%			54	%			61	%3

 

*	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.
3	Not Annualized.
4	Annualized.
5	Calculated at the Fund level.

 

See accompanying Notes to Consolidated Financial Statements.

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

June 30, 2024

 

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 currently has two classes of shares, Class I and Class K. Class C shares have not yet commenced operations.

 

The Fund began reporting as a registered open-end management investment company 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.

 

The inception date of the Predecessor Fund was July 26, 2018. From July 26, 2018 until October 12, 2021, the Predecessor Fund was regulated by the Commodity Futures Trading Commission (“the CFTC”) and National Futures Association (“NFA”) as a Commodity Pool, and over that entire time period, Abraham Trading Company (the “Advisor”) was the registered Commodity Pool Operator of the Predecessor Fund. The Advisor 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 1940 Act open ended mutual fund on October 13, 2021, Cohen & Company, Ltd. has continued to serve as the auditor of the Fund. The Predecessor Fund was required to have audited financial statements, including the reporting of investments, filed annually with both the CFTC and NFA. UMB Fund Services (“UMBFS”) was the administrator of the Predecessor Fund prior to its conversion to the Fund, and currently UMBFS 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 Statements 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, 2024, total assets of the Fund were $69,558,198, of which $10,979,218, or 15.78%, represented the Fund’s ownership of the shares of the Subsidiary.

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

June 30, 2024

 

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). The Board of Trustees has designated the Advisor as the Fund’s valuation designee (the “Valuation Designee”) to make all fair value determinations with respect to the Fund’s portfolio investments, subject to the Board’s oversight. As the Valuation Designee, the Advisor has adopted and implemented policies and procedures to be followed when the Fund must utilize fair value pricing.

 

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, 2024

 

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 forward foreign currency exchange contracts. 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, 2024

 

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. 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, 2024

 

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 Subsidiary’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, 2024

 

(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.

 

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, 2024, 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, 2024, these segregated margin deposit accounts are denoted in the Fund’s Consolidated Statement of Assets and Liabilities.

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

June 30, 2024

 

(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 for the year ended June 30, 2024, the Fund did not have a liability for any unrecognized tax benefits. The Fund has no examination in progress and is not aware of any tax positions for which they are reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.

 

(i) Distributions to Shareholders

The Fund will make distributions of net investment income and net capital gains, if any, at least annually. Distributions to shareholders are recorded on the ex-dividend date. The amount and timing of distributions are determined in accordance with federal income tax regulations, which may differ from GAAP.

 

The character of distributions made during the year from net investment income or net realized gains may differ from the characterization for federal income tax purposes due to differences in the recognition of income, expense and gain (loss) items for financial statement and tax purposes.

 

(j) Illiquid Securities

Pursuant to Rule 22e-4 under the 1940 Act, the Fund has adopted a Liquidity Risk Management Program (“LRMP”) that requires, among other things, that the Fund limit its illiquid investments that are assets to no more than 15% of net assets. An illiquid investment is any security which may not reasonably be expected to be sold or disposed of in current market conditions in seven calendar days or less without the sale or disposition significantly changing the market value of the investment. If the Advisor, at any time determines that the value of illiquid securities held by the Fund exceeds 15% of its net asset value, the Advisor will take such steps as it considers appropriate to reduce them as soon as reasonably practicable in accordance with the Fund’s written LRMP.

 

Note 3 – Investment Advisory and Other Agreements

The Trust, on behalf of the Fund, entered into an Investment Advisory Agreement (the “Agreement”) with 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 average daily net assets. The Advisor has contractually agreed to waive its fees and/or pay for operating expenses of the Fund to ensure that total annual operating expenses  (excluding any taxes, leverage interest, brokerage commissions, fees and costs associated with derivatives, dividend and interest expenses on short sales, acquired fund fees and expenses (as determined in accordance with Form N-1A), expenses incurred in connection with any merger or reorganization and extraordinary expenses such as litigation expenses) do not exceed 0.75% and 0.65% of the average daily net assets of the Fund’s Class I and Class K shares, respectively. This agreement is effective until October 31, 2033, 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. 

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

June 30, 2024

 

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 year ended June 30, 2024, the Advisor waived a portion of its advisory fees totaling $278,649 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, 2024, the amount of these potentially recoverable expenses was $789,807. The potential recoverable amount is noted as “Commitments and contingencies” as reported on the Consolidated Statements of Assets and Liabilities. The Advisor may recapture all or a portion of the following amounts no later than June 30, of the years stated below:

 

2025		$	212,462
2026			298,696
2027			278,649
Total		$	789,807

 

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 year ended June 30, 2024, are reported on the Consolidated Statement of Operations. For the year ended June 30, 2024, the fees waived were $6,429 of Custody fees. These amounts are shown as a reduction of expenses, “Fees paid indirectly” on Consolidated Statement of Operations.

 

IMST Distributors, LLC, a wholly owned subsidiary of Foreside Financial Group, LLC (d/b/a ACA Group), 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 year ended June 30, 2024, 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. 

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

June 30, 2024

 

Employees of the Advisor, and other accounts under their control, constituted approximately 21% and 9% of the outstanding Class I Shares and Class K Shares, respectively of the Fund as of June 30, 2024.

 

The Fund’s Board of Trustees has adopted a Deferred Compensation Plan (the “Plan”) for the Independent Trustees that enables Trustees to elect to receive payment in cash or the option to select various fund(s) in the Trust in which their deferred accounts shall be deemed to be invested. If a trustee elects to defer payment, the Plan provides for the creation of a deferred payment account. The Fund’s liability for these amounts is adjusted for market value changes in the invested fund(s) and remains a liability to the Fund until distributed in accordance with the Plan. The Trustees Deferred compensation liability under the Plan constitutes a general unsecured obligation of the Fund and is disclosed in the Consolidated Statement of Assets and Liabilities. Contributions made under the plan and the change in unrealized appreciation/depreciation and income are included in the Trustees’ fees and expenses in the Consolidated Statement of Operations.

 

Dziura Compliance Consulting, LLC provides Chief Compliance Officer (“CCO”) services to the Trust. The Fund’s allocated fees incurred for CCO services for the year ended June 30, 2024, are reported on the Consolidated Statement of Operations.

 

Note 4 – Federal Income Taxes

At June 30, 2024, gross unrealized appreciation and (depreciation) of investments, based on cost for federal income tax purposes were as follows:

 

Cost of investments		$	65,101,452
Gross unrealized appreciation		$	4,535,160
Gross unrealized depreciation			(1,730,605	)
Net unrealized appreciation/(depreciation)		$	2,804,555

 

As of June 30, 2024, there was no difference between cost amounts for financial statement and federal income tax purposes.

 

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 year ended June 30, 2024, there were no permanent differences in book and tax accounting.

 

As of June 30, 2024, the components of accumulated earnings/(deficit) on a tax basis were as follows:

 

Undistributed ordinary income		$	1,602,922
Undistributed long-term capital gains			-
Tax accumulated earnings			1,602,922
Accumulated capital and other losses			(147,957	)
Unrealized appreciation/(depreciation) on investments			2,804,555
Total accumulated earnings/(deficit)		$	4,259,520

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

June 30, 2024

 

The tax character of distributions paid during the fiscal years ended June 30, 2024 and June 30, 2023 were as follows:

 

Distributions paid from:		2024				2023
Ordinary income		$	1,191,398			$	3,542,795
Net long-term capital gains			-				-
Total distributions paid		$	1,191,398			$	3,542,795

 

At June 30, 2024, the Fund had accumulated capital loss carry forwards as follows:

 

Not subject to expiration:
Short-term		$	129,567
Long-term			-
		$	129,567

 

During the year ended June 30, 2024, the Fund utilized $1,310,762 of capital loss carry forwards.

 

Note 5 – Investment Transactions

For the year ended June 30, 2024, purchases and sales of investments, excluding short-term investments, futures contracts, and swap contracts, were $9,584,819 and $5,976,514, respectively. For the year ended June 30, 2024, purchases and sales of U.S. Treasury Notes, were $9,573,855 and $5,841,995, 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 year ended June 30, 2024, 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.

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

June 30, 2024

 

Under Fair Value Measurements and Disclosures, various inputs are used in determining the value of the Fund’s investments. These inputs are summarized into three broad Levels as described below:

 

●

Level 1 – Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.

 

●

Level 2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.

 

●

Level 3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

 

The inputs used to measure fair value may fall into different Levels of the fair value hierarchy. In such cases, for disclosure purposes, the Level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest Level input that is significant to the fair value measurement in its entirety.

 

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, 2024, in valuing the Fund’s assets carried at fair value:

 

		Level 1				Level 2				Level 3**				Total
Assets
Investments
Common Stocks1		$	19,616,484			$	-			$	-			$	19,616,484
U.S. Treasury Bills			-				34,762,802				-				34,762,802
U.S. Treasury Notes			-				13,526,711				-				13,526,711
Short-Term Investments			10				-				-				10
Total Investments			19,616,494				48,289,513				-				67,906,007
Other Financial Instruments*
Futures Contracts			150,609				-				-				150,609
Total Assets		$	19,767,103			$	48,289,513			$	-			$	68,056,616

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

June 30, 2024

 

		Level 1				Level 2				Level 3**				Total
Liabilities
Other Financial Instruments*
Futures Contracts		$	245,914			$	-			$	-			$	245,914
Swap Contracts			-				1,844,039				-				1,844,039
Total Liabilities		$	245,914			$	1,844,039			$	-			$	2,089,953

 

1

For a detailed break-out of common stock sectors, 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 year ended June 30, 2024.

 

Note 9 – Derivatives and Hedging Disclosures

FASB ASC Topic 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 and swap contracts during the year ended June 30, 2024.

 

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, 2024 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		$	-			Unrealized depreciation on futures contracts		$	245,914
Foreign exchange contracts		Unrealized appreciation on futures contracts			57,674			Unrealized depreciation on futures contracts			-
Index contracts		Unrealized appreciation on futures contracts			92,935			Unrealized depreciation on futures contracts			-
Mixed: Commodity, interest rate, equity and foreign exchange contracts		Unrealized appreciation on total return swap contract			-			Unrealized depreciation on total return swap contract			1,844,039
Total				$	150,609					$	2,089,953

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

June 30, 2024

 

The effects of the Fund’s derivative instruments on the Consolidated Statement of Operations for the year ended June 30, 2024 are as follows:

 

Amount of Realized Gain or (Loss) on Derivatives Recognized in Income

Derivatives not designated as hedging instruments		Futures Contracts				Total
Commodity Contracts		$	588,787			$	588,787
Index contracts			1,852,086				1,852,086
Total		$	2,440,873			$	2,440,873

 

Change in Unrealized Appreciation/Depreciation on Derivatives Recognized in Income

Derivatives not designated as hedging instruments		Futures Contracts				Swap Contracts				Total
Commodity contracts		$	42,045			$	-			$	42,045
Index contracts			(10,370	)			-				(10,370	)
Foreign exchange contracts			57,674				-				57,674
Mixed: Commodity, interest rate, equity and foreign exchange contracts			-				(451,682	)			(451,682	)
Total		$	89,349			$	(451,682	)		$	(362,333	)

 

The quarterly average volumes of derivative instruments in the Fund for the year ended June 30, 2024 are as follows:

 

Derivatives not designated as hedging instruments				Notional Value
Commodity contracts		Long futures contracts		$	7,464,665
Foreign exchange contracts		Short futures contracts			(341,891	)
Index contracts		Long futures contracts			12,287,285
Mixed: Interest rate, equity and foreign exchange contracts		Swap contracts			34,738,227

 

Note 10 - Disclosures about Offsetting Assets and Liabilities

FASB ASC Topic 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.

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

June 30, 2024

 

The Fund’s Consolidated Statement of Assets and Liabilities presents financial instruments on a net basis. 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/Consolidated Statement of Assets and Liabilities Location		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 depreciation on total return swap contract- asset		Deutsche Bank		$	(1,844,039	)		$	-			$	(1,844,039	)		$	1,844,039		$	-			$	-

 

*

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, financial statement instability or other events could have a significant impact on a security or instrument. These types of events and other like them are collectively referred to as “Market Disruptions and Geopolitical Risks” and they may have adverse impacts on 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. Some of the impacts noted in recent times include but are not limited to embargos, political actions, supply chain disruptions, bank failures, restrictions to investment and/or monetary movement including the forced selling of securities or the inability to participate impacted markets. The duration of these events could adversely affect the Fund’s performance, the performance of the securities in which the Fund invests and may lead to losses on your investment. The ultimate impact of “Market Disruptions and Geopolitical Risks” on the financial performance of the Fund’s investments is not reasonably estimable at this time. Management is actively monitoring these events.

Abraham Fortress Fund

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - Continued

June 30, 2024

 

Note 12- New Accounting Pronouncements

Effective January 24, 2023, the SEC adopted rule and form amendments to require mutual funds and ETFs to transmit concise and visually engaging streamlined annual and semiannual reports to shareholders that highlight key information deemed important for retail investors to assess and monitor their fund investments. Other information, including financial statements, will no longer appear in the Fund’s streamlined shareholder reports but must be available online, delivered free of charge upon request, and filed on a semiannual basis on Form N-CSR. The rule and form amendments have a compliance date of July 24, 2024. The Fund has adopted procedures in accordance with the SEC’s rules and form amendments.

 

In March 2020, the FASB issued Accounting Standards Update (ASU) No. 2020-04, Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in the ASU provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the London Interbank Offered Rate and other interbank-offered based reference rates as of the end of 2021. The ASU is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2022. In December 2022, the FASB issued ASU No. 2022-06, Reference Rate Reform (Topic 848) - Deferral of the Sunset Date of Topic 848, which extends the period through December 31, 2024. Management has reviewed the requirements and believes the adoption of these ASUs will not have a material impact on the financial statements.

 

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, 2024, the related consolidated statement of operations for the year then ended, the consolidated statements of changes in net assets for each of the two years in the period then ended, the consolidated financial highlights for the years ended June 30, 2024 and 2023, and for the period from October 13, 2021 (beginning of reporting period) through June 30, 2022, and the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of June 30, 2024, the results of its operations for the year then ended, the changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the three periods in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the 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 audits 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 audits 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, 2024, by correspondence with the custodian and brokers. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

We have served as the Fund’s auditor since 2021.

 

 

COHEN & COMPANY, LTD.

Milwaukee, Wisconsin

August 28, 2024

Abraham Fortress Fund

SUPPLEMENTAL INFORMATION (Unaudited)

 

Qualified Dividend Income

For the period ended June 30, 2024, 11.85% 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, 2024, 11.14% 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.

Item 8. Changes in and Disagreements with Accountants for Open-End Management Investment Companies.

 

Not Applicable.

 

Item 9. Proxy Disclosures for Open-End Management Investment Companies.

 

Not Applicable.

 

Item 10. Remuneration Paid to Directors, Officers, and Others of Open-End Management Investment Companies.

 

This information is included in Item 7, as part of the financial statements.

 

Item 11. Statement Regarding Basis for Approval of Investment Advisory Contract.

 

Not applicable.

Item 12. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

Not applicable to open-end investment companies.

 

Item 13. Portfolio Managers of Closed-End Management Investment Companies.

 

Not applicable to open-end investment companies.

 

Item 14. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

Not applicable to open-end investment companies.

 

Item 15. 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 16. Controls and Procedures.

 

(a)

The Registrant’s Principal Executive Officer and Principal 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 17. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

 

Not applicable to open-end investment companies.

 

Item 18. Recovery of Erroneously Awarded Compensation.

 

(a) Not Applicable.

 

(b) Not Applicable.

 

Item 19. Exhibits.

 

(a)

(1) Any code of ethics or amendment thereto, that is subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Incorporated by reference to the Registrant’s Form N-CSR filed June 8, 2018.

 

(a)

(2) Any policy required by the listing standards adopted pursuant to Rule 10D-1 under the Exchange Act (17 CFR 240.10D-1) by the registered national securities exchange or registered national securities association upon which the registrant’s securities are listed. Instruction to paragraph (a)(2). Not Applicable.

 

(a)

(3) A separate certification for each principal executive and principal financial officer of the registrant as required by Rule 30a-2(a) under the Act (17 CFR 270.30a-2(a)). Filed herewith.

 

(b)

Certification pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Filed herewith.

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant)	Investment Managers Series Trust II
By (Signature and Title)	/s/ Terrance Gallagher
	Terrance Gallagher, President and Principal Executive Officer
Date	9/9/2024

 

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 and Principal Executive Officer
Date	9/9/2024
By (Signature and Title)	/s/ Rita Dam
	Rita Dam, Treasurer and Principal Financial Officer
Date	9/9/2024

 

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