UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM 10-Q

 

☒Quarterly report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the quarterly period ended December 31, 2019.2020.

 

OR

 

☐Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

for the transition period from _______ to ._______.

 

Commission File Number: 001-36851

 

ETF Managers Group Commodity Trust I
(Exact Name of Registrant as Specified in Its Charter)

 

Delaware 36-4793446
(State or Other Jurisdiction of
Incorporation or Organization)		 (I.R.S. Employer
Identification No.)
   

30 Maple Street – Suite 2


Summit, NJ 07901

 07910
(Address of Principal Executive Offices) (Zip Code)

 

844-383-6477

(Registrant’s Telephone Number, Including Area Code)

 

N/A

(Former Name, Former Address and Former Fiscal Year, if Changed Since Last Report)

 

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. ☒ Yes     ☐ No

 

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§ 232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). ☒ Yes     ☐ No

 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

 

Large accelerated filer ☐☐Accelerated filer☐
Non-accelerated filer ☐☐Smaller reporting company☒
Emerging growth company ☒☐  

 

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided in Section 13(a) of the Exchange Act. ☐

 

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). ☐ Yes     ☒ No

 

Securities Registered Pursuant to Section 12(b) of the Act:

 

Title of Each Class Trading Symbol(s) Name Of Each Exchange
On Which Registered
Shares of Sit Rising Rate ETFRISENYSE Arca, Inc.
Shares of Breakwave Dry Bulk Shipping ETF BDRY NYSE Arca, Inc.

 

Indicate the number of Shares outstanding, as of February 3, 2020: 250,040/(RISE)

Indicate the number of Shares outstanding, as of February 3, 2020: 275,040/(BDRY) 1, 2021: 2,375,040

 

 

 

 

 

ETF MANAGERS GROUP COMMODITY TRUST I

 

Table of Contents

 

  Page
Part I. FINANCIAL INFORMATION 1
Item 1. Interim Combined Financial Statements 1
Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations 3640
Item 3. Quantitative and Qualitative Disclosures About Market Risk 6054
Item 4. Controls and Procedures 6054
Part II. OTHER INFORMATION 6155
Item 1. Legal Proceedings 6155
Item 2. Unregistered Sales of Equity Securities and Use of Proceeds 6155
Item 3. Defaults Upon Senior Securities 6255
Item 4. Mine Safety Disclosures 6255
Item 5. Other Information 6255
Item 6. Exhibits 6256

 

i

 

 

Part I.
INTERIM FINANCIAL INFORMATION

 

Item 1. Interim Combined Financial Statements.

 

Index to Interim Combined Financial Statements

 

Documents Page
Combined Statements of Assets and Liabilities at December 31, 20192020 (Unaudited) 2
   
Combined Statements of Assets and Liabilities at June 30, 20192020 3
   
Combined Schedules of Investments at December 31, 20192020 (Unaudited) 4
   
Combined Schedules of Investments at June 30, 20192020 5
   
Combined Statements of Operations (Unaudited) for the three months ended December 31, 20207
Combined Statements of Operations (Unaudited) for the three months ended December 31, 2019 68
   
Combined Statements of Operations (Unaudited) for the threesix months ended December 31, 20182020 79
   
Combined Statements of Operations (Unaudited) for the six months ended December 31, 2019 810
   
Combined Statements of OperationsChanges in Net Assets (Unaudited) for the sixthree months ended December 31, 20182020 911
   
Combined Statements of Changes in Net Assets (Unaudited) for the three months ended December 31, 2019 1012
   
Combined Statements of Changes in Net Assets (Unaudited) for the threesix months ended December 31, 20182020 1113
   
Combined Statements of Changes in Net Assets (Unaudited) for the six months ended December 31, 2019 1214
   
Combined Statements of Changes in Net AssetsCash Flows (Unaudited) for the six months ended December 31, 20182020 1315
   
Combined Statements of Cash Flows (Unaudited) for the six months ended December 31, 2019 1416
   
Combined Statements of Cash Flows (Unaudited) for the six months ended December 31, 201815
Notes to Interim Combined Financial Statements 1617


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Assets and Liabilities

December 31, 2019 (Unaudited)

  SIT RISING
RATE ETF		  BREAKWAVE DRY BULK
SHIPPING ETF		  COMBINED 
Assets            
Investment in securities, at fair value (cost $5,528,693 and $551,232 respectively) $5,533,113  $551,232  $6,084,345 
Interest receivable  182   1,828   2,010 
Segregated cash held by broker  202,475   1,866,980   2,069,455 
Receivable on open futures contracts  15,878   -   15,878 
Total assets  5,751,648   2,420,040   8,171,688 
Liabilities            
Options written, at fair value (premiums received $7,366and $-0-, respectively)  5,906   -   5,906 
Payable on open futures contracts  -   105,125   105,125 
Due to Sponsor  5,256   4,886   10,142 
Other liabilities  -   3,248   3,248 
Total liabilities  11,162   113,259   124,421 
             
Net Assets $5,740,486  $2,306,781  $8,047,267 
             
Shares outstanding (unlimited authorized)  250,040   150,040     
Net asset value per share $22.96  $15.37     
Market value per share $22.97  $15.45     

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Assets and Liabilities

June 30, 2019

  SIT RISING RATE ETF  BREAKWAVE DRY BULK
SHIPPING
ETF		  COMBINED 
Assets         
Investment in securities, at fair value (cost $11,928,143 and $1,095,625, respectively) $11,909,897  $1,095,625  $13,005,522 
Interest receivable  436   5,821   6,257 
Segregated cash held by broker  365,460   2,831,566   3,197,026 
Receivable on open futures contracts  -   391,415   391,415 
Total assets  12,275,793   4,324,427   16,600,220 
Liabilities            
Options written, at fair value (premiums received $16,128 and $-0-, respectively)  19,336   -   19,336 
Payable on open futures contracts  326,457   -   326,457 
Due to Sponsor  9,851   11,699   21,550 
Other liabilities  -   4,466   4,466 
Total liabilities  355,644   16,165   371,809 
             
Net Assets $11,920,149  $4,308,262  $16,228,411 
             
Shares outstanding (unlimited authorized)  525,040   325,040     
Net asset value per share $22.70  $13.25     
Market value per share $22.73   13.15     

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Schedules of Investments

December 31, 20192020 (Unaudited)

   

  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		    
  RATE ETF  ETF  COMBINED 
          
PURCHASED OPTIONS - 0.4% and 0.0%, respectively         
US Treasury 10 Year Note, Strike Price $129.50 Expiring 02/21/2020 (15 contracts) $21,797  $-  $21,797 
TOTAL PURCHASED OPTIONS (cost $17,862 and $-0-, respectively)  21,797   -   21,797 
             
SHORT-TERM INVESTMENTS - 93.1% and 0.0%, respectively            
US TREASURY BILLS - 93.1% and 0.0%, respectively            
United States Treasury Bills 1.453%, 01/28/2020 ($5,350,000 principal amount) (a)  5,344,368   -   5,344,368 
TOTAL US TREASURY BILLS (cost $5,343,883 and $-0-, respectively)  5,344,368   -   5,344,368 
             
MONEY MARKET FUNDS - 2.9% and 23.9%, respectively            
First American US Treasury Money Market Fund, Class Z, 1.41%* (166,948 shares)  166,948   -   166,948 
First American US Treasury Obligations Fund, Class X, 1.53%* (551,232 shares)  -   551,232   551,232 
TOTAL MONEY MARKET FUNDS (Cost $166,948 and $551,232, respectively)  166,948   551,232   718,180 
Total Investments (cost $5,528,693 and $551,232, respectively) - 96.4% and 23.9%, respectively  5,533,113   551,232   6,084,345 
Other Assets in Excess of Liabilities - 3.6% and 76.1%, respectively (b)  207,373   1,755,549   1,962,922 
TOTAL NET ASSETS - 100.0% and 100.0%, respectively $5,740,486  $2,306,781  $8,047,267 
 BREAKWAVE DRY BULK SHIPPING ETF  ETF MANAGERS GROUP COMMODITY TRUST I* 
Assets      
Investment in securities, at fair value (cost $7,803,092) $7,803,092  $7,803,092 
Segregated cash held by broker  13,545,258   13,545,258 
Receivable on open futures contracts  4,303,595   4,303,595 
Interest receivable  281   281 
Total assets  25,652,226   25,652,226 
         
Liabilities        
Payable for Fund shares redeemed  393,560   393,560 
Due to Sponsor  67,492   67,492 
Other liabilities  10,989   10,989 
Total liabilities  472,041   472,041 
         
Net Assets $25,180,185  $25,180,185 
         
Shares outstanding (unlimited authorized)  3,175,040     
Net asset value per share $7.93     
Market value per share $7.70     

*Annualized seven-day yield as of December 31, 2019
(a)All or a portion of this security is held as collateral for certain futures contracts and written options
(b)$202,475 and $1,866,980, respectively, of cash is pledged as collateral for futures contracts

BREAKWAVE DRY BULK SHIPPING ETF Unrealized  Unrealized  Unrealized 
Futures Contracts Appreciation/  Appreciation/  Appreciation/ 
December 31, 2019 (Depreciation)  (Depreciation)  (Depreciation) 
          
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring January 31, 2020  (Underlying Face Amount at Market Value - $245,520) (30 contracts) $-  $(31,980) $(31,980)
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring February 28, 2020  (Underlying Face Amount at Market Value - $257,640) (30 contracts)  -   (19,860)  (19,860)
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring March 31, 2020 (Underlying Face Amount at Market Value - $300,390) (30 contracts)  -   22,890   22,890 
Baltic Exchange Capesize Time Charter Expiring January 31, 2020 (Underlying Face Amount at Market Value - $452,165) (35 contracts)              -  10,915  10,915 
Baltic Exchange Capesize Time Charter Expiring February 28, 2020 (Underlying Face Amount at Market Value - $400,085) (35 contracts)  -   (41,165)  (41,165)
Baltic Exchange Capesize Time Charter Expiring  March 31, 2020 (Underlying Face Amount at Market Value - $404,040) (35 contracts)  -   (37,210)  (37,210)
Baltic Exchange Supramax Average Shipping Route Expiring  January 31, 2020 (Underlying Face Amount at Market Value - $37,250) (5 contracts)  -   (5,750)  (5,750)
Baltic Exchange Supramax Average Shipping Route Expiring  February 28, 2020 (Underlying Face Amount at Market Value - $38,910) (5 contracts)  -   (4,090)  (4,090)
Baltic Exchange Supramax Average Shipping Route Expiring  March 31, 2020 (Underlying Face Amount at Market Value - $44,125) (5 contracts)  -   1,125   1,125 
  $-  $(105,125) $(105,125)

SIT RISING RATE ETF         
Written Option Contracts         
December 31, 2019         
             
US 5 Year Note, Strike Price $118.50 Expiring 02/21/2020 (12 contracts) (Premiums received $7,366) $(5,906)  -  $(5,906)

 

SIT RISING RATE ETF         
Short Futures Contracts         
December 31, 2019         
          
US Treasury 2 Year Note            
Expiring March 2020 (Underlying Face Amount at Market Value - $11,852,500) (55 contracts) $4,657  $-  $4,657 
US Treasury 5 Year Note            
Expiring March 2020 (Underlying Face Amount at Market Value - $5,456,031) (46 contracts)  11,221   -   11,221 
  $15,878  $-  $15,878 

See accompanying notes to unaudited interim combined financial statements.


* SIT Rising Rate ETF, MANAGERS GROUP COMMODITY TRUST Iwhich had been a series of the Trust, Liquidated as of November 18, 2020

Combined Schedules of Investments

June 30, 2019

  SIT RISING  BREAKWAVE DRY BULK SHIPPING    
  RATE ETF  ETF  COMBINED 
PURCHASED OPTIONS - 0.3% and 0.0%, respectively            
US Treasury 10 Year Note, Strike Price $123.50 Expiring 08/23/19 (40 contracts) $35,625  $    -  $35,625 
TOTAL PURCHASED OPTIONS (Cost $58,883)  35,625   -   35,625 
             
SHORT-TERM INVESTMENTS - 97.2% and 0.0%, respectively            
US TREASURY BILLS - 97.2% and 0.0%, respectively            
United States Treasury Bills 2.082%, 12/12/2019 ($11,700,000 principal amount) (a)  11,591,734   -   11,591,734 
TOTAL US TREASURY BILLS (Cost $11,586,722)  11,591,734   -   11,591,734 
             
MONEY MARKET FUNDS - 1.4% and 25.4%, respectively            
First American US Treasury Money Market Fund, Class Z, 2.40% (b) (282,538 shares)  282,538   -   282,538 
First American US Treasury Obligations Fund, Class X, 2.27% (b) (1,095,625 shares)  -   1,095,625   1,095,625 
TOTAL MONEY MARKET FUNDS (Cost $282,538 and $1,095,625, respectively  282,538   1,095,625   1,378,163 
Total Investments (Cost $11,928,143 and $1,095,625, respectively) - 99.9% and 25.4%, respectively  11,909,897   1,095,625   13,005,522 
Other Assets in Excess of Liabilities - 0.1% and 74.6%, respectively (a)  10,252   3,212,637   3,222,889 
TOTAL NET ASSETS - 100.0% and 100.0%, respectively $11,920,149  $4,308,262  $16,228,411 

(a)All or a portion of this security is held as collateral for futures contracts and written options.

(b)Annualized seven-day yield as of June 30, 2019.

BREAKWAVE DRY BULK SHIPPING ETF Unrealized  Unrealized  Unrealized 
Futures Contracts Appreciation/  Appreciation/  Appreciation/ 
June 30, 2019 (Depreciation)  (Depreciation)  (Depreciation) 
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring July 26, 2019 (Underlying Face Amount at Market Value - $489,015) (45 contracts) $   -  $25,015  $25,015 
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring August 30, 2019 (Underlying Face Amount at Market Value - $497,835) (45 contracts)  -   33,835   33,835 
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring September 27, 2019 (Underlying Face Amount at Market Value - $495,945) (45 contracts)  -   31,945   31,945 
Baltic Exchange Supramax T/C Average Shipping Route Expiring July 26, 2019 (Underlying Face Amount at Market Value - $147,435) (15 contracts)  -   (5,565)  (5,565)
Baltic Exchange Supramax T/C Average Shipping Route Expiring August 30, 2019 (Underlying Face Amount at Market Value - $158,250) (15 contracts)  -   5,250   5,250 
Baltic Exchange Supramax T/C Average Shipping Route Expiring September 27, 2019 (Underlying Face Amount at Market Value - $161,505) (15 contracts)  -   8,505   8,505 
Baltic Capesize Time Charter Expiring July 26, 2019 (Underlying Face Amount at Market Value - $732,680) (40 contracts)  -   104,930   104,930 
Baltic Capesize Time Charter Expiring August 30, 2019 (Underlying Face Amount at Market Value - $719,840) (40 contracts)  -   92,090   92,090 
Baltic Capesize Time Charter Expiring September 27, 2019 (Underlying Face Amount at Market Value - $723,160) (40 contracts)  -   95,410   95,410 
  $-  $391,415  $391,415 
             
SIT RISING RATE ETF            
Written Option Contracts            
June 30, 2019            
             
US 5 Year Note, Strike Price $117.75 Expiring 08/23/2019 (25 contracts) (Premiums received $16,128) $19,336  $-  $19,336 
             
SIT RISING RATE ETF            
Short Futures Contracts            
June 30, 2019            
             
US Treasury 5 Year Note Expiring September 2019 (Underlying Face Amount at Market Value - $12,051,938) (102 contracts) $(182,361) $-  $(182,361)
US Treasury 2 Year Note Expiring September 2019 (Underlying Face Amount at Market Value - $22,809,047) (106 contracts)  (144,096)  -   (144,096)
  $(326,457) $-  $(326,457)

See accompanying notes to unaudited interim combined financial statements. 

5

ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Operations

Three Months Ended December 31, 2019 (Unaudited)

  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		    
  RATE ETF  ETF  COMBINED 
          
Investment Income            
      Interest $31,146  $6,346  $37,492 
             
Expenses            
      Sponsor fee  18,852   31,420   50,272 
      CTA fee  3,131   6,561   9,692 
      Audit fees  22,012   13,785   35,797 
      Tax preparation fees  12,568   12,568   25,136 
      Admin/accounting/custodian/transfer agent fees  14,479   15,548   30,027 
      Legal fees  8,797   11,311   20,108 
      Printing and postage expenses  2,639   2,665   5,304 
      Chief Compliance Officer fees  6,301   6,283   12,584 
      Principal Financial Officer fees  6,301   6,283   12,584 
      Regulatory reporting fees  6,301   6,283   12,584 
      Brokerage commissions  927   7,202   8,129 
      Distribution fees  3,906   3,977   7,883 
      Insurance expense  3,770   3,770   7,540 
      Listing & calculation agent fees  3,167   3,167   6,334 
      Other expenses  2,193   4,211   6,404 
      Wholesale support fees  1,566   6,827   8,393 
      Interest  14   -   14 
      Total Expenses  116,924   141,861   258,785 
      Less: Waiver of CTA fee  -   (6,561)  (6,561)
      Less: Expenses absorbed by Sponsor  (100,323)  (112,262)  (212,585)
           Net Expenses  16,601   23,038   39,639 
           Net Investment Income (Loss)  14,545   (16,692)  (2,147)
             
Net Realized and Unrealized Gain (Loss) on Investment Activity            
             
Net Realized Gain (Loss) on            
      Investments, futures and options contracts  (306,211)  (243,845)  (550,056)
             
Change in Unrealized Gain (Loss) on            
      Investments, futures and options contracts  391,106   (117,845)  273,261 
           Net realized and unrealized gain (loss)  84,895   (361,690)  (276,795)
      Net income (loss) $99,440  $(378,382) $(278,942)

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Operations

Three Months Ended December 31, 2018 (Unaudited)

  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		    
  RATE ETF  ETF  COMBINED 
          
Investment Income         
      Interest $371,146  $13,479  $384,625 
             
 Expenses            
      Sponsor fee  25,103   31,506   56,609 
      CTA fee  33,831   10,462   44,293 
      Audit fees  21,537   16,322   37,859 
      Tax preparation fees  25,205   32,393   57,598 
      Admin/accounting/custodian/transfer agent fees  14,191   15,476   29,667 
      Legal fees  8,823   11,343   20,166 
      Printing and postage expenses  6,553   6,553   13,106 
      Chief Compliance Officer fees  6,301   6,301   12,602 
      Principal Financial Officer fees  6,301   6,301   12,602 
      Regulatory reporting fees  6,301   6,301   12,602 
      Brokerage commissions  19,434   6,156   25,590 
      Distribution fees  4,410   4,158   8,568 
      Insurance expense  3,781   3,781   7,562 
      Listing & calculation agent fees  3,176   3,176   6,352 
      Other expenses  4,644   5,671   10,315 
      Wholesale support fees  16,915   7,167   24,082 
      Total Expenses  206,506   173,067   379,573 
      Less: Waiver of CTA fee  -   (10,462)  (10,462)
      Less: Expenses absorbed by Sponsor  (17,920)  (131,193)  (149,113)
           Net Expenses  188,586   31,412   219,998 
           Net Investment Income (Loss)  182,560   (17,933)  164,627 
             
 Net Realized and Unrealized Gain (Loss) on Investment Activity            
             
 Net Realized Gain (Loss) on            
      Investments, futures and options contracts  266,684   (737,508)  (470,824)
             
 Change in Unrealized Gain (Loss) on            
      Investments, futures and options contracts  (3,327,205)  137,005   (3,190,200)
           Net realized and unrealized gain (loss)  (3,060,521)  (600,503)  (3,661,024)
     Net income (loss) $(2,877,961) $(618,436) $(3,496,397)

 

See accompanying notes to unaudited interim combined financial statements.

  


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of OperationsAssets and Liabilities

Six Months Ended December 31, 2019 (Unaudited)June 30, 2020

 

  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		    
  RATE ETF  ETF  COMBINED 
          
Investment Income         
      Interest $75,132  $19,013  $94,145 
             
 Expenses            
      Sponsor fee  37,704   62,840   100,544 
      CTA fee  7,164   16,213   23,377 
      Audit fees  44,024   27,570   71,594 
      Tax preparation fees  25,136   25,136   50,272 
      Admin/accounting/custodian/transfer agent fees  28,958   31,096   60,054 
      Legal fees  17,594   22,622   40,216 
      Printing and postage expenses  5,278   5,330   10,608 
      Chief Compliance Officer fees  12,596   12,566   25,162 
      Principal Financial Officer fees  12,596   12,566   25,162 
      Regulatory reporting fees  12,596   12,566   25,162 
      Brokerage commissions  2,793   15,499   18,292 
      Distribution fees  7,812   7,954   15,766 
      Insurance expense  7,540   7,540   15,080 
      Listing & calculation agent fees  6,334   6,334   12,668 
      Other expenses  4,386   8,422   12,808 
     Wholesale support fees  3,583   13,910   17,493 
      Interest expense  14   -   14 
      Total Expenses  236,108   288,164   524,272 
      Less: Waiver of CTA fee  -   (16,213)  (16,213)
      Less: Expenses absorbed by Sponsor  (197,476)  (217,318)  (414,794)
           Net Expenses  38,632   54,633   93,265 
           Net Investment Income (Loss)  36,500   (35,620)  880 
             
 Net Realized and Unrealized Gain (Loss) on Investment Activity            
             
 Net Realized Gain (Loss) on            
      Investments, futures and options contracts  (252,728)  338,181   85,453 
             
 Change in Unrealized Gain (Loss) on           
      Investments, futures and options contracts  368,231   666,605   1,034,836 
           Net realized and unrealized gain (loss)  115,503   1,004,786   1,120,289 
      Net income (loss) $152,003  $969,166  $1,121,169 
  BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF		  COMBINED 
Assets            
Investment in securities, at fair value (cost $7,986,862 and $4,883,666, respectively) $7,986,862  $4,879,769  $12,866,631 
Interest receivable  545   -   545 
Receivable on open futures contracts  8,581,555   -   8,581,555 
Segregated cash held by broker  28,020,391   201,883   28,222,274 
Total assets  44,589,353   5,081,652   49,671,005 
             
Liabilities            
Options written, at fair value (premiums received $-0- and $3,204, respectively)  -   4,148   4,148 
Payable on open futures contracts  -   5,144   5,144 
Payable for Fund shares redeemed  192,533   -   192,533 
Due to Sponsor  84,280   4,179   88,459 
Other accrued expenses  37,053   -   37,053 
Total liabilities  313,866   13,471   327,337 
             
Net Assets $44,275,487  $5,068,181  $49,343,668 
             
Shares outstanding (unlimited authorized)  5,750,040   250,040     
Net asset value per share $7.70  $20.27     
Market value per share  7.39  $20.26     

 

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Schedules of Investments

December 31, 2020 (Unaudited)

  BREAKWAVE DRY BULK SHIPPING ETF  ETF MANAGERS GROUP COMMODITY TRUST I 
MONEY MARKET FUNDS - 31.0%        
First American US Treasury Obligations Fund, Class X, 0.04% (a)* (7,803,092 shares) $7,803,092  $7,803,092 
TOTAL MONEY MARKET FUNDS (Cost $7,803,092)  7,803,092   7,803,092 
         
Total Investments (cost $7,803,092) - 31.0%  7,803,092   7,803,092 
Other Assets in Excess of Liabilities - 69.0%, respectively (b)  17,377,093   17,377,093 
TOTAL NET ASSETS - 100.0% $25,180,185  $25,180,185 

(a)Annualized seven-day yield as of December 31, 2020
(b)$13,545,258 of cash is pledged as collateral for futures contracts

BREAKWAVE DRY BULK SHIPPING ETF
Futures Contracts
December 31, 2020		 Unrealized
Appreciation/
(Depreciation)		  ETF MANAGERS
GROUP COMMODITY
TRUST I		 
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring January 29, 2021 (Underlying Face Amount at Market Value - $3,304,460) (340 contracts) $389,075  $389,075 
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring February 26, 2021 (Underlying Face Amount at Market Value - $3,137,490) (355 contracts)  198,310   198,310 
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring March 31, 2021 (Underlying Face Amount at Market Value - $3,504,040) (340 contracts)  469,610   469,610 
Baltic Exchange Supramax Average Shipping Route Expiring January 29, 2021 (Underlying Face Amount at Market Value - $838,320) (80 contracts)  121,280   121,280 
Baltic Exchange Supramax Average Shipping Route Expiring February 26, 2021 (Underlying Face Amount at Market Value - $695,680) (80 contracts)  34,375   34,375 
Baltic Exchange Supramax Average Shipping Route Expiring March 31, 2021 (Underlying Face Amount at Market Value - $761,680) (80 contracts)  55,815   55,815 
Baltic Capesize Time Charter Expiring January 29, 2021 (Underlying Face Amount at Market Value - $4,797,420) (370 contracts)  1,491,755   1,491,755 
Baltic Capesize Time Charter Expiring February 26, 2021 (Underlying Face Amount at Market Value - $4,012,400) (400 contracts)  881,460   881,460 
Baltic Capesize Time Charter Expiring March 31, 2021 (Underlying Face Amount at Market Value - $3,740,330) (370 contracts)  661,915   661,915 
  $4,303,595  $4,303,595 

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined StatementsSchedules of OperationsInvestments

Six Months Ended December 31, 2018 (Unaudited)June 30, 2020

 

  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		    
  RATE ETF  ETF  COMBINED 
          
Investment Income         
      Interest $653,882  $26,608  $680,490 
             
 Expenses            
      Sponsor fee  47,237   63,012   110,249 
      CTA fee  63,343   23,499   86,842 
      Audit fees  43,074   32,644   75,718 
      Tax preparation fees  50,410   64,786   115,196 
      Admin/accounting/custodian/transfer agent fees  28,382   30,952   59,334 
      Legal fees  17,646   22,686   40,332 
      Printing and postage expenses  13,106   13,106   26,212 
      Chief Compliance Officer fees  12,602   12,602   25,204 
      Principal Financial Officer fees  12,602   12,602   25,204 
      Regulatory reporting fees  12,602   12,602   25,204 
      Brokerage commissions  35,862   15,093   50,955 
      Distribution fees  8,820   8,316   17,136 
      Insurance expense  7,562   7,562   15,124 
      Listing & calculation agent fees  6,352   6,352   12,704 
      Other expenses  9,288   11,342   20,630 
      Wholesale support fees  31,671   14,547   46,218 
      Total Expenses  400,559   351,703   752,262 
      Less: Waiver of CTA fee  -   (23,499)  (23,499)
      Less: Expenses absorbed by Sponsor  (47,986)  (256,383)  (304,369)
           Net Expenses  352,573   71,821   424,394 
           Net Investment Income (Loss)  301,309   (45,213)  256,096 
             
 Net Realized and Unrealized Gain (Loss) on Investment Activity            
             
 Net Realized Gain (Loss) on            
      Investments, futures and options contracts  (456,707)  (434,239)  (890,946)
             
 Change in Unrealized Gain (Loss) on            
      Investments, futures and options contracts  (1,611,508)  (33,580)  (1,645,088)
           Net realized and unrealized gain (loss)  (2,068,215)  (467,819)  (2,536,034)
      Net income (loss) $(1,766,906) $(513,032) $(2,279,938)
  BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF		  COMBINED 
PURCHASED PUT OPTIONS - 0.0% and 0.3%, respectively            
US Treasury 10 Year Note, Strike Price $139.50 Expiring 08/21/20 (15 contracts) $-  $14,296  $14,296 
TOTAL PURCHASED PUT OPTIONS (Cost $22,316)  -   14,296   14,296 
             
SHORT-TERM INVESTMENTS - 0.0% and 95.7%, respectively            
US TREASURY BILLS - 0.0% and 95.7%, respectively            
United States Treasury Bills 0.1200%, 07/23/2020 ($4,850,000 principal amount) (a)  -   4,849,667   4,849,667 
 TOTAL US TREASURY BILLS (Cost $4,845,544)  -   4,849,667   4,849,667 
             
MONEY MARKET FUNDS - 18.0% and 0.3%, respectively            
First American US Treasury Money Market Fund, Class Z, 0.04% (b) (15,806 shares)  -   15,806   15,806 
First American US Treasury Obligations Fund, Class X, 0.08% (b) (7,986,862 shares)  7,986,862   -   7,986,862 
TOTAL MONEY MARKET FUNDS (Cost $7,986,862 and $15,806, respectively)  7,986,862   15,806   8,002,668 
             
Total Investments (Cost $7,986,862 and $4,883,666, respectively) - 18.0% and 96.3%, respectively  7,986,862   4,879,769   12,866,631 
Other Assets in Excess of Liabilities - 82.0% and 3.7%, respectively (a)  36,288,625   188,412   36,477,037 
TOTAL NET ASSETS - 100.0% and 100.0%, respectively $44,275,487  $5,068,181  $49,343,668 

(a)$27,827,859 and $4,849,667, respectively, of cash is pledged as collateral for futures contracts and written options
(b)Annualized seven-day yield as of June 30, 2020.

BREAKWAVE DRY BULK SHIPPING ETF
Futures Contracts
June 30, 2020		 Unrealized
Appreciation/
(Depreciation)		  Unrealized
Appreciation/
(Depreciation)		  Unrealized
Appreciation/
(Depreciation)		 
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring July 31, 2020 (Underlying Face Amount at Market Value - $3,799,600) (350 contracts) $556,225  $             -  $556,225 
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring August 28, 2020 (Underlying Face Amount at Market Value - $3,768,100) (350 contracts)  512,475        -   512,475 
Baltic Exchange Panamax T/C Average Shipping Route Index Expiring September 25, 2020 (Underlying Face Amount at Market Value - $3,753,750) (350 contracts)  492,625   -   492,625 
Baltic Exchange Supramax T/C Average Shipping Route Expiring July 31, 2020 (Underlying Face Amount at Market Value - $1,536,480) (180 contracts)  (5,020)  -   (5,020)
Baltic Exchange Supramax T/C Average Shipping Route Expiring August 28, 2020 (Underlying Face Amount at Market Value - $1,746,000) (180 contracts)  199,250   -   199,250 
Baltic Exchange Supramax T/C Average Shipping Route Expiring September 25, 2020 (Underlying Face Amount at Market Value - $1,769,220) (180 contracts)  222,470   -   222,470 
Baltic Capesize Time Charter Expiring July 31, 2020 (Underlying Face Amount at Market Value - $9,431,220) (380 contracts)  3,644,720   -   3,644,720 
Baltic Capesize Time Charter Expiring August 28, 2020 (Underlying Face Amount at Market Value - $8,851,050) (450 contracts)  1,977,550   -   1,977,550 
Baltic Capesize Time Charter Expiring September 25, 2020 (Underlying Face Amount at Market Value - $9,041,760) (520 contracts)  981,260   -   981,260 
  $8,581,555  $-  $8,581,555 

ETF MANAGERS GROUP COMMODITY TRUST I

Combined Schedules of Investments – Continued

June 30, 2020

SIT RISING RATE ETF
Written Call Option Contracts
June 30, 2020		 Unrealized
Appreciation/
(Depreciation)		  Unrealized
Appreciation/
(Depreciation)		  Unrealized
Appreciation/
(Depreciation)		 
US 5 Year Note, Strike Price $125.50 Expiring 08/21/2020 (9 contracts)            
(Premiums received $3,204) $-  $(4,148) $(4,148)

SIT RISING RATE ETF         
Short Futures Contracts         
June 30, 2020         
US Treasury 5 Year Note Expiring September 2020 (Underlying Face Amount at Market Value - $4,652,461) (37 contracts) $-  $(5,899) $(5,899)
US Treasury 2 Year Note Expiring September 2020 (Underlying Face Amount at Market Value - $10,158,094) (46 contracts)  -   755   755 
  $-  $(5,144) $(5,144)

 

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Changes in Net AssetsOperations

Three Months Ended December 31, 20192020 (Unaudited)

 

  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		    
  RATE ETF  ETF  COMBINED 
          
Net Assets at Beginning of Period $6,218,812  $1,965,548  $8,184,360 
             
Increase (decrease) in Net Assets from share transactions            
      Addition of-0- and 75,000 shares, respectively  -   1,151,130   1,151,130 
      Redemption of 25,000 and 25,000 shares, respectively  (577,766)  (431,515)  (1,009,281)
Net Increase (decrease) in Net Assets from share transactions  (577,766)  719,615   141,849 
             
Increase (decrease) in Net Assets from operations            
      Net investment income (loss)  14,545   (16,692)  (2,147)
      Net realized gain (loss)  (306,211)  (243,845)  (550,056)
      Change in net unrealized gain (loss)  391,106   (117,845)  273,261 
             
Net Increase (decrease) in Net Assets from operations  99,440   (378,382)  (278,942)
             
Net Assets at End of Period $5,740,486  $2,306,781  $8,047,267 
  BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF*		  COMBINED 
Investment Income            
Interest $393  $181  $574 
             
Expenses            
Sponsor fee  31,165   6,164   37,329 
CTA fee  85,781   497   86,278 
Audit fees  22,042   28,357   50,399 
Tax preparation fees  6,428   4,225   10,653 
Admin/accounting/custodian/transfer agent fees  16,284   4,792   21,076 
Legal fees  11,343   12,877   24,220 
Chief Compliance Officer fees  6,301   2,055   8,356 
Principal Financial Officer fees  6,301   2,055   8,356 
Regulatory reporting fees  6,301   7,055   13,356 
Brokerage commissions  83,830   181   84,011 
Distribution fees  3,959   1,258   5,217 
Insurance expense  3,781   1,233   5,014 
Listing & calculation agent fees  2,571   1,200   3,771 
Other expenses  3,404   900   4,304 
Website Support and Marketing Materials  3,781   1,233   5,014 
Printing and Postage  2,647   892   3,539 
Wholesale support fees  13,400   249   13,649 
Interest expense  82   26   108 
Total Expenses  309,401   75,249   384,650 
Less: Waiver of CTA fee  (18,432)  -   (18,432)
Less: Expenses absorbed by Sponsor  -   (32,532)  (32,532)
Net Expenses  290,969   42,717   333,686 
Net Investment Income (Loss)  (290,576)  (42,536)  (333,112)
             
Net Realized and Unrealized Gain (Loss) on Investment Activity            
             
Net Realized Gain (Loss) on            
Investments, futures and options contracts  (3,591,274)  5,118   (3,586,156)
             
Change in Unrealized Gain (Loss) on            
Investments, futures and options contracts  2,788,440   8,841   2,797,281 
Net realized and unrealized gain (loss)  (802,834)  13,959   (788,875)
Net income (loss) $(1,093,410) $(28,577) $(1,121,987)

*Period from October 1, 2020 to October 30, 2020 - Sit Rising Rate ETF liquidated as of November 18, 2020.

 

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Operations

Three Months Ended December 31, 2019 (Unaudited)

  BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF		  COMBINED 
Investment Income            
Interest $6,346  $31,146  $37,492 
             
Expenses            
Sponsor fee  31,420   18,852   50,272 
CTA fee  6,561   3,131   9,692 
Audit fees  13,785   22,012   35,797 
Tax preparation fees  12,568   12,568   25,136 
Admin/accounting/custodian/transfer agent fees  15,548   14,479   30,027 
Legal fees  11,311   8,797   20,108 
Printing and postage expenses  2,665   2,639   5,304 
Chief Compliance Officer fees  6,283   6,301   12,584 
Principal Financial Officer fees  6,283   6,301   12,584 
Regulatory reporting fees  6,283   6,301   12,584 
Brokerage commissions  7,202   927   8,129 
Distribution fees  3,977   3,906   7,883 
Insurance expense  3,770   3,770   7,540 
Listing & calculation agent fees  3,167   3,167   6,334 
Other expenses  4,211   2,193   6,404 
Wholesale support fees  6,827   1,566   8,393 
Interest  -   14   14 
Total Expenses  141,861   116,924   258,785 
Less: Waiver of CTA fee  (6,561)  -   (6,561)
Less: Expenses absorbed by Sponsor  (112,262)  (100,323)  (212,585)
Net Expenses  23,038   16,601   39,639 
Net Investment Income (Loss)  (16,692)  14,545   (2,147)
             
Net Realized and Unrealized Gain (Loss) on Investment Activity            
             
Net Realized Gain (Loss) on            
Investments, futures and options contracts  (243,845)  (306,211)  (550,056)
           - 
Change in Unrealized Gain (Loss) on          - 
Investments, futures and options contracts  (117,845)  391,106   273,261 
Net realized and unrealized gain (loss)  (361,690)  84,895   (276,795)
Net income (loss) $(378,382) $99,440  $(278,942)

 See accompanying notes to unaudited interim combined financial statements. 


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Operations

Six Months Ended December 31, 2020 (Unaudited)

  BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF*		  COMBINED 
Investment Income            
Interest $1,067  $5,608  $6,675 
             
Expenses            
Sponsor fee  63,016   25,068   88,084 
CTA fee  214,994   3,042   218,036 
Audit fees  44,084   46,757   90,841 
Tax preparation fees  12,856   17,180   30,036 
Admin/accounting/custodian/transfer agent fees  32,568   19,486   52,054 
Legal fees  22,686   21,700   44,386 
Chief Compliance Officer fees  12,602   8,356   20,958 
Principal Financial Officer fees  12,602   8,356   20,958 
Regulatory reporting fees  12,602   13,356   25,958 
Brokerage commissions  159,042   1,424   160,466 
Distribution fees  7,918   5,116   13,034 
Insurance expense  7,562   5,014   12,576 
Listing & calculation agent fees  5,142   4,880   10,022 
Other expenses  6,808   3,749   10,557 
Website Support and Marketing Materials  7,562   5,014   12,576 
Printing and Postage  5,294   3,539   8,833 
Wholesale support fees  30,395   1,522   31,917 
Interest expense  82   220   302 
Total Expenses  657,815   193,779   851,594 
Less: Waiver of Sponsor fee            
Less: Waiver of CTA fee  (18,432)  -   (18,432)
Less: Expenses absorbed by Sponsor  -   (136,902)  (136,902)
Net Expenses  639,383   56,877   696,260 
Net Investment Income (Loss)  (638,316)  (51,269)  (689,585)
             
Net Realized and Unrealized Gain (Loss) on Investment Activity            
             
Net Realized Gain (Loss) on            
Investments, futures and options contracts  6,513,496   (29,138)  6,484,358 
             
Change in Unrealized Gain (Loss) on          - 
Investments, futures and options contracts  (4,277,960)  10,459   (4,267,501)
Net realized and unrealized gain (loss)  2,235,536   (18,679)  2,216,857 
Net income (loss) $1,597,220  $(69,948) $1,527,272 

*Period from July 1, 2020 to October 30, 2020 - Sit Rising Rate ETF liquidated as of November 18, 2020.

See accompanying notes to unaudited interim combined financial statements. 


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Operations

Six Months Ended December 31, 2019 (Unaudited)

  BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF		  COMBINED 
Investment Income            
Interest $19,013  $75,132  $94,145 
             
Expenses            
Sponsor fee  62,840   37,704   100,544 
CTA fee  16,213   7,164   23,377 
Audit fees  27,570   44,024   71,594 
Tax preparation fees  25,136   25,136   50,272 
Admin/accounting/custodian/transfer agent fees  31,096   28,958   60,054 
Legal fees  22,622   17,594   40,216 
Printing and postage expenses  5,330   5,278   10,608 
Chief Compliance Officer fees  12,566   12,596   25,162 
Principal Financial Officer fees  12,566   12,596   25,162 
Regulatory reporting fees  12,566   12,596   25,162 
Brokerage commissions  15,499   2,793   18,292 
Distribution fees  7,954   7,812   15,766 
Insurance expense  7,540   7,540   15,080 
Listing & calculation agent fees  6,334   6,334   12,668 
Other expenses  8,422   4,386   12,808 
Wholesale support fees  13,910   3,583   17,493 
Interest expense  -   14   14 
Total Expenses  288,164   236,108   524,272 
Less: Waiver of CTA fee  (16,213)  -   (16,213)
Less: Expenses absorbed by Sponsor  (217,318)  (197,476)  (414,794)
Net Expenses  54,633   38,632   93,265 
Net Investment Income (Loss)  (35,620)  36,500   880 
             
Net Realized and Unrealized Gain (Loss) on Investment Activity            
             
Net Realized Gain (Loss) on            
Investments, futures and options contracts  338,181   (252,728)  85,453 
             
Change in Unrealized Gain (Loss) on          - 
Investments, futures and options contracts  666,605   368,231   1,034,836 
Net realized and unrealized gain (loss)  1,004,786   115,503   1,120,289 
Net income (loss) $969,166  $152,003  $1,121,169 

See accompanying notes to unaudited interim combined financial statements. 


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Changes in Net Assets

Three Months Ended December 31, 20182020 (Unaudited)

 

 SIT RISING BREAKWAVE DRY BULK
SHIPPING		    
 RATE ETF  ETF  COMBINED 
        BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF*		  COMBINED 
Net Assets at Beginning of Period $62,196,525  $3,403,193  $65,599,718  $30,291,037  $3,018,360  $33,309,397 
                        
Increase (decrease) in Net Assets from share transactions                        
Addition of 500,000 and -0- shares, respectively  12,510,953   -   12,510,953 
Redemption of 475,000 and -0- shares, respectively  (11,687,830)  -   (11,687,830)
Net Increase in Net Assets from share transactions  823,123   -   823,123 
Addition of 100,000 and -0- shares, respectively  653,748   -   653,748 
Redemption of 600,000 and 150,040 shares, respectively  (4,671,190)  (2,989,783)  (7,660,973)
Net Increase (decrease) in Net Assets from share transactions  (4,017,442)  (2,989,783)  (7,007,225)
                        
Increase (decrease) in Net Assets from operations                        
Net investment income (loss)  182,560   (17,933)  164,627   (290,576)  (42,536)  (333,112)
Net realized gain (loss)  266,684   (737,508)  (470,824)  (3,591,274)  5,118   (3,586,156)
Change in net unrealized gain (loss)  (3,327,205)  137,005   (3,190,200)  2,788,440   8,841   2,797,281 
                        
Net Increase (decrease) in Net Assets from operations  (2,877,961)  (618,436)  (3,496,397)  (1,093,410)  (28,577)  (1,121,987)
                        
Net Assets at End of Period $60,141,687  $2,784,757  $62,926,444  $25,180,185  $-  $25,180,185 

*Period from October 1, 2020 to October 30, 2020 - Sit Rising Rate ETF liquidated as of November 18, 2020.

 

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Changes in Net Assets

SixThree Months Ended December 31, 2019 (Unaudited)

 

  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		    
  RATE ETF  ETF  COMBINED 
          
Net Assets at Beginning of Period $11,920,149  $4,308,262  $16,228,411 
             
Increase (decrease) in Net Assets from share transactions            
      Addition of  -0- and 75,000 shares, respectively  -   1,151,130   1,151,130 
      Redemption of 275,000 and 250,000 shares, respectively  (6,331,666)  (4,121,777)  (10,453,443)
Net Increase (decrease) in Net Assets from share transactions  (6,331,666)  (2,970,647)  (9,302,313)
             
Increase (decrease) in Net Assets from operations            
      Net investment income (loss)  36,500   (35,620)  880 
      Net realized gain (loss)  (252,728)  338,181   85,453 
      Change in net unrealized gain (loss)  368,231   666,605   1,034,836 
             
Net Increase (decrease) in Net Assets from operations  152,003   969,166   1,121,169 
             
Net Assets at End of Period $5,740,486  $2,306,781  $8,047,267 

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Changes in Net Assets

Six Months Ended December 31, 2018 (Unaudited)

  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		    
  RATE ETF  ETF  COMBINED 
          
Net Assets at Beginning of Period $51,774,988  $3,297,789  $55,072,777 
             
Increase (decrease) in Net Assets from share transactions            
      Addition of 775,000 and -0- shares, respectively  24,297,005   -   24,297,005 
      Redemption of 525,000 and -0- shares, respectively  (14,163,400)  -   (14,163,400)
Net increase (decrease) in Net Assets from share transactions  10,133,605   -   10,133,605 
             
Increase (decrease) in Net Assets from operations            
      Net investment gain (loss)  301,309   (45,213)  256,096 
      Net realized loss  (456,707)  (434,239)  (890,946)
      Change in net unrealized gain (loss)  (1,611,508)  (33,580)  (1,645,088)
             
Net Increase (Decrease) in Net Assets from operations  (1,766,906)  (513,032)  (2,279,938)
             
Net Assets at End of Period $60,141,687  $2,784,757  $62,926,444 

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Cash Flows

Six Months Ended December 31, 2019 (Unaudited)

  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		    
  RATE ETF  ETF  COMBINED 
          
Cash flows provided by (used in) operating activities         
Net income (loss) $152,003  $969,166  $1,121,169 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:            
Net realized loss (gain) on investments  252,728   (338,181)  (85,453)
Change in net unrealized loss (gain) on investments  (368,231)  (666,605)  (1,034,836)
Change in operating assets and liabilities:            
Sale (purchase) of investments, net  6,492,287   1,549,179   8,041,466 
Decrease in interest receivable  254   3,993   4,247 
Decrease in segregated cash held by broker  162,985   964,586   1,127,571 
Increase (decrease) in receivable on open futures contracts  (15,878)  391,415   375,537 
Decrease in options written, at fair value  (13,430)  -   (13,430)
Increase (decrease) in payable on open futures contracts  (326,457)  105,125   (221,332)
Decrease in due to Sponsor  (4,595)  (6,813)  (11,408)
Decrease in other liabilities  -   (1,218)  (1,218)
Net cash provided by (used in) operating activities  6,331,666   2,970,647   9,302,313 
Cash flows from financing activities            
Proceeds from sale of shares  -   1,151,130   1,151,130 
Paid on redemption of shares  (6,331,666)  (4,121,777)  (10,453,443)
Net cash provided by (used in) financing activities  (6,331,666)  (2,970,647)  (9,302,313)
Net increase (decrease) in cash  -   -   - 
Cash, beginning of period  -   -   - 
Cash, end of period $-  $-  $- 
  BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF		  COMBINED 
Net Assets at Beginning of Period $1,965,548  $6,218,812  $8,184,360 
             
Increase (decrease) in Net Assets from share transactions            
Addition of 75,000 and -0- shares, respectively  1,151,130   -   1,151,130 
Redemption of 25,000 and 25,000 shares, respectively  (431,515)  (577,766)  (1,009,281)
Net Increase (decrease) in Net Assets from share transactions  719,615   (577,766)  141,849 
             
Increase (decrease) in Net Assets from operations            
Net investment income (loss)  (16,692)  14,545   (2,147)
Net realized gain (loss)  (243,845)  (306,211)  (550,056)
Change in net unrealized gain (loss)  (117,845)  391,106   273,261 
             
Net Increase (decrease) in Net Assets from operations  (378,382)  99,440   (278,942)
             
Net Assets at End of Period $2,306,781  $5,740,486  $8,047,267 

 

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Cash FlowsChanges in Net Assets

Six Months Ended December 31, 20182020 (Unaudited)

 

  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		    
  RATE ETF  ETF  COMBINED 
          
Cash flows provided by (used in) operating activities         
Net income $(1,766,906) $(513,032) $(2,279,938)
Adjustments to reconcile net income to net cash provided by (used in) operating activities:            
Net realized loss (gain) on investments  456,707   434,239   890,946 
Change in net unrealized loss (gain) on investments  1,611,508   33,580   1,645,088 
Change in operating assets and liabilities:            
Sale (Purchase) of investments, net  (11,463,712)  85,736   (11,377,976)
Decrease (Increase) in interest receivable  (1,140)  3,122   1,982 
Increase in segregated cash held by broker  (571,594)  (106,007)  (677,601)
Decrease in options written, at fair value  180,930   -   180,930 
Decrease in receivable on open futures contracts  -   33,580   33,580 
Increase in payable on open futures contracts  1,406,708   -   1,406,708 
Increase (decrease) in due to Sponsor  13,894   (1,309)  12,585 
Decrease in other accrued expenses  -   (3,189)  (3,189)
Net cash provided by (used in) operating activities  (10,133,605)  (33,280)  (10,166,885)
Cash flows from financing activities            
Proceeds from sale of shares  24,297,005   -   24,297,005 
Paid on redemption of shares  (14,163,400)  -   (14,163,400)
Net cash provided by financing activities  10,133,605   -   10,133,605 
Net increase (decrease) in cash  -   (33,280)  (33,280)
Cash, beginning of period  -   33,280   33,280 
Cash, end of period $-  $-  $- 
  BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF*		  COMBINED 
Net Assets at Beginning of Period $44,275,487  $5,068,181  $49,343,668 
            
Increase (decrease) in Net Assets from share transactions            
Addition of 275,000 and -0- shares, respectively  2,101,301   -   2,101,301 
Redemption of 2,850,000 and 250,040 shares, respectively  (22,793,823)  (4,998,233)  (27,792,056)
Net increase (decrease) in Net Assets from share transactions  (20,692,522)  (4,998,233)  (25,690,755)
            
Increase (decrease) in Net Assets from operations            
Net investment gain (loss)  (638,316)  (51,269)  (689,585)
Net realized loss  6,513,496   (29,138)  6,484,358 
Change in net unrealized gain (loss)  (4,277,960)  10,459   (4,267,501)
            
Net Increase (Decrease) in Net Assets from operations  1,597,220   (69,948)  1,527,272 
            
Net Assets at End of Period $25,180,185  $-  $25,180,185 

*Period from July 1, 2020 to October 30, 2020 - Sit Rising Rate ETF liquidated as of November 18, 2020.

 

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Changes in Net Assets

Six Months Ended December 31, 2019 (Unaudited)

  BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF		  COMBINED 
Net Assets at Beginning of Period $4,308,262  $11,920,149  $16,228,411 
            
Increase (decrease) in Net Assets from share transactions            
Addition of 75,000 and -0- shares, respectively  1,151,130   -   1,151,130 
Redemption of 250,000 and 275,000 shares, respectively  (4,121,777)  (6,331,666)  (10,453,443)
Net Increase (decrease) in Net Assets from share transactions  (2,970,647)  (6,331,666)  (9,302,313)
            
Increase (decrease) in Net Assets from operations            
Net investment income (loss)  (35,620)  36,500   880 
Net realized gain (loss)  338,181   (252,728)  85,453 
Change in net unrealized gain (loss)  666,605   368,231   1,034,836 
            
Net Increase (decrease) in Net Assets from operations  969,166   152,003   1,121,169 
            
Net Assets at End of Period $2,306,781  $5,740,486  $8,047,267 

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Cash Flows

Six Months Ended December 31, 2020 (Unaudited)

  BREAKWAVE DRY BULK SHIPPING ETF  SIT RISING RATE ETF*  COMBINED 
          
Cash flows provided by (used in) operating activities         
Net income (loss) $1,597,220  $(69,948) $1,527,272 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:            
Net realized loss (gain) on investments  (6,513,496)  29,138   (6,484,358)
Change in net unrealized loss (gain) on investments  4,277,960  (10,459)  4,267,501
Change in operating assets and liabilities:           
Sale (Purchase) of investments, net  2,419,306  4,861,090   7,280,396 
Decrease in interest receivable  264   -   264 
Decrease in options written, at fair value  -   (4,148)  (4,148)
Decrease in receivable on open futures contracts  4,277,960   -   4,277,960 
Decrease in payable on open futures contracts  -   (5,144)  (5,144)
Decrease in due to Sponsor  (16,788)  (4,179)  (20,967)
Decrease in other accrued expenses  (26,064)  -   (26,064)
Net cash provided by (used in) operating activities  6,016,362   4,796,350   10,812,712 
Cash flows from financing activities            
Proceeds from sale of shares  2,101,301   -   2,101,301 
Paid on redemption of shares  (22,793,823)  (4,998,233)  (27,792,056)
Increase in payable for Fund shares redeemed  201,027  -  201,027
Net cash provided by financing activities  (20,491,495)  (4,998,233)  (25,489,728)
Net increase (decrease) in cash and restricted cash  (14,475,133)  (201,883)  (14,677,016)
Cash and restricted cash, beginning of period  28,020,391   201,883   28,222,274 
Cash and restricted cash, end of period $13,545,258  $-  $13,545,258 
             
The following table provides a reconciliation of cash and restricted cash reported within the Combined Statement of Assets and Liabilities that sum to the total of such amounts shown on the Combined Statement of Cash Flows.            
             
Cash $-  $-  $- 
Segregated cash held by broker  13,545,258   -   13,545,258 
Total cash and restricted cash as shown on the statement of cash flows $13,545,258  $-  $13,545,258 

*Period from October 1, 2020 to October 30, 2020 - Sit Rising Rate ETF liquidated as of November 18, 2020.

See accompanying notes to unaudited interim combined financial statements.


ETF MANAGERS GROUP COMMODITY TRUST I

Combined Statements of Cash Flows

Six Months Ended December 31, 2019 (Unaudited)

  BREAKWAVE DRY BULK SHIPPING ETF  SIT
RISING RATE ETF		  COMBINED 
Cash flows provided by (used in) operating activities            
Net income (loss) $969,166  $152,003  $1,121,169 
Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:            
Net realized loss (gain) on investments  (338,181)  252,728   (85,453)
Change in net unrealized loss (gain) on investments  (666,605)  (368,231)  (1,034,836)
Change in operating assets and liabilities:            
Sale (purchase) of investments, net  1,549,179   6,492,287   8,041,466 
Decrease in interest receivable  3,993   254   4,247 
Increase (decrease) in receivable on open futures contracts  391,415   (15,878)  375,537 
Decrease in options written, at fair value  -   (13,430)  (13,430)
Increase (decrease) in payable on open futures contracts  105,125   (326,457)  (221,332)
Decrease in due to Sponsor  (6,813)  (4,595)  (11,408)
Decrease in other liabilities  (1,218)  -   (1,218)
Net cash provided by (used in) operating activities  2,006,061   6,331,666   9,302,313 
Cash flows from financing activities            
Proceeds from sale of shares  1,151,130   -   1,151,130 
Paid on redemption of shares  (4,121,777)  (6,331,666)  (10,453,443)
Net cash provided by (used in) financing activities  (2,970,647)  (6,331,666)  (9,302,313)
Net increase (decrease) in cash and restricted cash  (964,586)  (162,985)  (1,127,591)
Cash and restricted cash, beginning of period  2,831,566   365,460   3,197,026 
Cash and restricted cash, end of period $1,866,980  $202,475  $2,069,455 
             
The following table provides a reconciliation of cash and restricted cash reported within the Combined Statement of Assets and Liabilities that sum to the total of such amounts shown on the Combined Statement of Cash Flows.            
             
Cash $-  $-  $- 
Segregated cash held by broker  1,866,980   202,475   2,069,455 
Total cash and restricted cash as shown on the statement of cash flows $1,866,980  $202,475  $2,069,455 

See accompanying notes to unaudited interim combined financial statements.


ETF Managers Group Commodity Trust I

Notes to Interim Combined Financial Statements

December 31, 20192020 (unaudited)

 

(1) Organization

 

ETF Managers Group Commodity Trust I (the “Trust”) was organized as a Delaware statutory trust on July 23, 2014. The Trust is a series trust formed pursuant to the Delaware Statutory Trust Act and currently includes twoconsists of one separate series. SIT RISING RATE ETF (“RISE”) is the first series of the Trust and is a commodity pool that continuously issues common shares of beneficial interest that may be purchased and sold on the NYSE Arca, Inc. stock exchange (“NYSE Arca”). The second series of the Trust, BREAKWAVE DRY BULK SHIPPING ETF (“BDRY,” and together with RISE, the “Funds”“Fund”), is also a commodity pool that continuously issues shares of beneficial interest that may be purchased and sold on NYSE Arca. As described below, SIT RISING RATE ETF ("RISE") also operated as a series of the Trust, but was closed and liquidated prior to December 31, 2020. The Funds areFund is managed and controlled by ETF Managers Capital LLC (the “Sponsor”), a Delaware limited liability company. The Sponsor is registered with the Commodity Futures Trading Commission (“CFTC”) as a “commodity pool operator” (“CPO”) and is a member of the National Futures Trading Association (“NFA”). Sit Fixed IncomeBreakwave Advisors, II, LLC (“Sit”Breakwave”), a subsidiary of Sit Investment Associates, Inc., is registered as a “commodity trading advisor” (“CTA”) with the CFTC and serves as RISE’s commodity trading advisor. Breakwave Advisors, LLC (“Breakwave”) is registered as a CTA with the CFTC and serves as BDRY’s commodity trading advisor.

 

RISE commenced investment operationsClosure and Liquidation

On October 16, 2020, the Sponsor announced that it would close and liquidate the SIT RISING RATE ETF (“RISE”) because of current market conditions and the Fund’s asset size. The last day the liquidated fund accepted creation orders was on February 19, 2015.October 30, 2020. Trading in RISE commenced trading onwas suspended after the close of the NYSE Arca on February 19, 2015 and trades underOctober 30, 2020. Proceeds of the symbol “RISE.” liquidation were sent to shareholders on November 18, 2020 (the “Distribution Date”). From October 30, 2020 through the distribution date, shares of RISE did not trade on the NYSE Arca nor was there a secondary market for the shares. Any shareholders that remained in RISE on the Distribution Date automatically had their shares redeemed for cash at the current net asset value on November 18, 2020.

BDRY commenced investment operations on March 22, 2018. BDRY commenced trading on NYSE Arca on March 22, 2018 and trades under the symbol “BDRY.”

Effective January 1, 2018, Sit is paid a fee equal to 0.20% per annum of the value of RISE’s average daily net assets for Sit’s services as the commodity trading advisor to RISE.

RISE’s investment objective is to profit from rising interest rates by tracking the performance of a portfolio (the “RISE Benchmark Portfolio”) consisting of exchange traded futures contracts and options on futures on 2, 5 and 10 year U.S. Treasury securities (“Treasury Instruments”) weighted to achieve a targeted negative 10-year average effective portfolio duration (the “Benchmark Component Instruments”). RISE seeks to achieve its investment objective by investing in the Benchmark Component Instruments currently constituting the RISE Benchmark Portfolio. The RISE Benchmark Portfolio is maintained by Sit and will be rebalanced, reconstituted, or both, monthly (typically on the 15th of each month and on the next business day if the 15th is a holiday, weekend, or other day on which the national exchanges are closed) to maintain a negative 10-year average effective duration. The RISE Benchmark Portfolio and RISE will each maintain a short position in Treasury Instruments. RISE does not use futures contracts or options to obtain leveraged investment results. RISE will not invest in swaps or other over the counter derivative instruments.

The weighting of the Treasury Instruments constituting the Benchmark Component Instruments will be based on each maturity’s duration contribution. The expected range for the duration weighted percentage of the 2 year and 5 year maturity Treasury Instruments will be from 30% to 70%. The expected range for the duration weighted percentage of the 10-year maturity Treasury Instruments will be from 5% to 25%. The relative weightings of the Benchmark Component Instruments will be shifted between maturities when there are material changes in the shape of the yield curve, for example, if the Federal Reserve began raising short term interest rates more than long term interest rates. In such an instance, Sit, which maintains the RISE Benchmark Portfolio, will elect to increase the weightings of the 2 year and reduce the weighting in the 10-year maturity. Conversely, Sit will do the opposite if the Federal Reserve began raising long term interest rates more than short term interest rates. Reconstitution and rebalancing each will occur monthly, on the 15th, except for as noted above or if there are radical changes in the yield curve such that effective duration is outside of a range from negative nine to negative 11-year average effective duration, in which case Sit will adjust the maturities of the Treasury Instruments before the next expected monthly reconstitution.


The Sponsor anticipates that approximately 5% to 15% of RISE’s assets will be used as payment for or collateral for Treasury Instruments. In order to collateralize its Treasury Instrument positions, RISE will hold such assets, from which it will post margin to its futures commission merchant (“FCM”), SG Americas Securities, LLC, in an amount equal to the margin required by the relevant exchange, and transfer to its FCM any additional amounts that may be separately required by the FCM. When establishing positions in Treasury Instruments, RISE will be required to deposit initial margin with a value of approximately 3% to 10% of the value of each Treasury Instrument position at the time it is established. These margin requirements are subject to change from time to time by the exchange or the FCM. On a daily basis, RISE will be obligated to pay, or entitled to receive, variation margin in an amount equal to the change in the daily settlement level of its Treasury Instruments positions. Any assets not required to be posted as margin with the FCM will be held at RISE’s custodian in cash or cash equivalents, as discussed below.

The RISE Benchmark Portfolio will be invested in Benchmark Component Instruments and rebalanced, as noted above to maintain a negative average effective portfolio duration of approximately 10 years. Duration is a measure of estimated price sensitivity relative to changes in interest rates. Portfolios with longer durations are typically more sensitive to changes in interest rates. For example, if interest rates rise by 1%, the market value of a security with an effective duration of 5 years would decrease by 5%, with all other factors being constant, and likewise the market value of a security with an effective duration of negative 5 years would increase by 5%, with all other factors being constant. The correlation between duration and price sensitivity is greater for securities rated investment-grade than it is for securities rated below investment-grade.

Duration estimates are based on assumptions by Sit and are subject to a number of limitations. Effective duration is calculated based on historical price changes of U.S. Treasuries and Treasury Instruments held by the RISE Benchmark Portfolio, and therefore is a more accurate estimate of price sensitivity provided interest rates remain within their historical range. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities.

When RISE purchases an option that expires “out of the money,” RISE will realize a loss. RISE may not be able to invest its assets in futures and options contracts having an aggregate notional amount exactly equal to that which is required to achieve a negative 10-year average effective duration. For example, as standardized contracts, U.S. Treasury futures contracts are denominated in specific dollar amounts, and RISE’s NAV and the proceeds from the sale of a Creation Basket are unlikely to be an exact multiple of the amounts of those contracts. As a result, in such circumstances, RISE may be better able to achieve the exact amount of exposure desired through the use of other investments.

 

BDRY’s investment objective is to provide investors with exposure to the daily change in the price of dry bulk freight futures, before expenses and liabilities of BDRY, by tracking the performance of a portfolio (the “BDRY Benchmark Portfolio”, and together with the RISE Benchmark Portfolio, the “Benchmark Portfolios”) consisting of a three-month strip of the nearest calendar quarter of futures contracts on specified indexes (each a “Reference Index”) that measure rates for shipping dry bulk freight (“Freight Futures”). Each Reference Index is published each United Kingdom business day by the London-based Baltic Exchange Ltd. (the “Baltic Exchange”) and measures the charter rate for shipping dry bulk freight in a specific size category of cargo ship – Capesize, Panamax or Supramax. The three Reference Indexes are as follows:

 

 ●Capesize: the Capesize 5TC Index;

 

 ●Panamax: the Panamax 4TC Index; and

 

 ●Supramax: the Supramax 6TC Index.

 

The value of the Capesize 5TC Index is disseminated at 11:00 a.m., London Time and the value of the Panamax 4TC Index and the Supramax 6TC Index each is disseminated at 1:00 p.m., London Time. The Reference Index information disseminated by the Baltic Exchange also includes the components and value of each component in each Reference Index. Such Reference Index information also is widely disseminated by Reuters and/or other major market data vendors.

 

BDRY seeks to achieve its investment objective by investing substantially all of its assets in the Freight Futures currently constituting the BDRY Benchmark Portfolio. The BDRY Benchmark Portfolio includes all existing positions to maturity and settles them in cash. During any given calendar quarter, the BDRY Benchmark Portfolio progressively increases its positions to the next calendar quarter three-month strip, thus maintaining constant exposure to the Freight Futures market as positions mature.


The BDRY Benchmark Portfolio maintains long-only positions in Freight Futures. The BDRY Benchmark Portfolio includes a combination of Capesize, Panamax and Supramax Freight Futures. More specifically, the BDRY Benchmark Portfolio includes 50% exposure in Capesize Freight Futures contracts, 40% exposure in Panamax Freight Futures contracts and 10% exposure in Supramax Freight Futures contracts. The BDRY Benchmark Portfolio does not include and BDRY does not invest in swaps, non-cleared dry bulk freight forwards or other over-the-counter derivative instruments that are not cleared through exchanges or clearing houses. BDRY may hold exchange-traded options on Freight Futures. The BDRY Benchmark Portfolio is maintained by Breakwave and will be rebalanced annually. The Freight Futures currently constituting the BDRY Benchmark Portfolio, as well as the daily holdings of BDRY are available on BDRY’s website at www.drybulketf.com.

 

When establishing positions in Freight Futures, BDRY will be required to deposit initial margin with a value of approximately 10% to 40% of the notional value of each Freight Futures position at the time it is established. These margin requirements are established and subject to change from time to time by the relevant exchanges, clearing houses or BDRY’s FCM, MacQuarie Futures USA LLC.ED&F Man Capital Markets, Inc. On a daily basis, BDRY is obligated to pay, or entitled to receive, variation margin in an amount equal to the change in the daily settlement level of its Freight Futures positions. Any assets not required to be posted as margin with the FCM may be held at BDRY’s custodian or remain with the FCM in cash or cash equivalents, as discussed below.

 

BDRY was created to provide investors with a cost-effective and convenient way to gain exposure to daily changes in the price of Freight Futures. BDRY is intended to be used as a diversification opportunity as part of a complete portfolio, not a complete investment program.

 

The FundsFund will incur certain expenses in connection with their operations. The FundsFund will hold cash or cash equivalents such as U.S. Treasuries or other high credit quality, short-term fixed-income or similar securities for direct investment or as collateral for the Treasury Instruments and for other liquidity purposes and to meet redemptions that may be necessary on an ongoing basis. These expenses and income from the cash and cash equivalent holdings may cause imperfect correlation between changes in the Funds’Fund’s net asset value (“NAV”) and changes in the Benchmark Portfolios,Portfolio, because the Benchmark Portfolios doPortfolio does not reflect expenses or income.

 

The Funds seekFund seeks to trade theirits positions prior to maturity; accordingly, natural market forces may cost the FundsFund while rebalancing. Each time the Funds seekFund seeks to reconstitute theirits positions, barring movement in the underlying securities, the futures and option prices may be higher or lower. Such differences in price, barring a movement in the price of the underlying security, will constitute “roll yield” and may inhibit the Funds’Fund’s ability to achieve theirits respective investment objective.

 

Several factors determine the total return from investing in a futures contract position. One factor that impacts the total return that will result from investing in near month futures contracts and “rolling” those contracts forward each month is the price relationship between the current near month contract and the next month contract.

 

The CTA will close existing positions when it determines it would be appropriate to do so and reinvest the proceeds in other positions. Positions may also be closed out to meet orders for redemption baskets.

 

(2) Summary of Significant Accounting Policies

 

(a) Basis of Accounting

 

The accompanying interim combined financial statements of the FundsFund have been prepared in conformity with U.S. generally accepted accounting principles (“U.S. GAAP”). EachThe Fund qualifies as an investment company for financial reporting purposes under Topic 946 of the Accounting Standard Codification of U.S. GAAP.

 

The accompanying interim combined financial statements are unaudited, but in the opinion of management, contain all adjustments (which include normal recurring adjustments) considered necessary to present fairly the interim combined financial statements. These interim combined financial statements should be read in conjunction with RISE’s annual report on Form 10-K for the year ended June 30, 2019, RISE’s prospectus dated January 22, 2020 (the “RISE Prospectus”), BDRY’s annual report on Form 10-K for the year ended June 30, 20192020 and BDRY’s prospectus dated March 13, 20192020 (the “BDRY Prospectus,” and together with the RISE Prospectus, the “Prospectuses”). Interim period results are not necessarily indicative of results for a full-year period.


(b) Use of Estimates

 

The preparation of the interim combined financial statements in conformity with U.S. 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 of the interim combined financial statements and accompanying notes. Actual results could differ from those estimates. There were no significant estimates used in the preparation of the interim combined financial statements.

 

(c) Cash

 

Cash, when shown in the Combined Statements of Assets and Liabilities, represents non-segregated cash with the custodian and does not include short-term investments.

 

(d) Cash Held by Broker

 

Sit is registered as a “commodity trading advisor” and acts as such for RISE. Breakwave is registered as a “commodity trading advisor” and acts as such for BDRY. EachThe Fund’s arrangement with its respective FCM requires the Fund to meet its variation margin requirement related to the price movements, both positive and negative, on futures contracts held by the Fund by keeping cash on deposit with the Commodity BrokersBroker (as defined below). These amounts are shown as Segregated cash held by broker in the Combined Statements of Assets and Liabilities. The Funds depositFund deposits cash or United States Treasury Obligations, as applicable, with their respectiveits FCM subject to the CFTC regulations and various exchange and broker requirements. The combination of the Funds’Fund’s deposits with their respectiveits FCM of cash and United States Treasury Obligations, as applicable, and the unrealized gain or loss on open futures contracts (variation margin) represents the Funds’Fund’s overall equity in their respectiveits brokerage trading account. The Funds use theirFund uses its cash held by their respectiveits FCM to satisfy variation margin requirements. The Funds earnFund earns interest on theirits cash deposited with their respectiveits FCM and interest income is recorded on the accrual basis.

 

(e) Final Net Asset Value for Fiscal Period

 

The calculation time of eachthe Fund’s final net asset value for creation and redemption of Fund shares for the three and six months ended December 31, 20192020 and 20182019 was at 4:00 p.m. Eastern Time on December 31, 2020 and 2019, and December 31, 2018, respectively. RISE was liquidated on November 18, 2020 at its final net asset value as of that date.

 

Although the Funds’Fund’s shares may continue to trade on secondary markets subsequent to the calculation of the final NAV, the 4:00 p.m. Eastern Time represented the final opportunity to transact in creation or redemption baskets for the three and six months ended December 31, 20192020 and 2018.2019.

 

Fair value per share is determined at the close of the NYSE Arca.

 

For financial reporting purposes, eachthe Fund values its investment positions based upon the final closing price in their primary markets. Accordingly, the investment valuations in these interim combined financial statements differ from those used in the calculations of the Funds’Fund’s final creation/redemption NAVs at December 31, 20192020 and December 31, 2018.2019.

 

(f) Investment Valuation

 

Short-term investments, excluding U.S. Treasury Bills, are carried at amortized cost, which approximates fair value. U.S. Treasury Bills are valued as determined by an independent pricing service based on methods which include consideration of: yields or prices of securities of comparable quality, coupon, maturity and type; indications as to values from dealers; and general market conditions.

 

Futures and options contracts are valued at the last settled price on the applicable exchange on which that futures and/or options contract trades.


(g) Financial Instruments and Fair Value

 

EachThe Fund discloses the fair value of its investments in accordance with the Financial Accounting Standards Board (“FASB”) fair value measurement and disclosure guidance which requires a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The disclosure requirements establish a fair value hierarchy that distinguishes between: (1) market participant assumptions developed based on market data obtained from sources independent to the Fund (observable inputs); and (2) the Fund’s own assumptions about market participant assumptions developed based on the best information available under the circumstances (unobservable inputs). The three levels defined by the disclosure requirements hierarchy are as follows:

 

Level I: Quoted prices (unadjusted) in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

Level I:Quoted prices (unadjusted) in active markets for identical assets and liabilities that the reporting entity has the ability to access at the measurement date.

 

Level II: Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly. Level II inputs include the following: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

Level II:Inputs other than quoted prices included within Level I that are observable for the asset or liability, either directly or indirectly. Level II inputs include the following: quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in markets that are not active, inputs other than quoted prices that are observable for the asset or liability, and inputs that are derived principally from or corroborated by observable market data by correlation or other means (market-corroborated inputs).

 

Level III: Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.

Level III:Unobservable pricing input at the measurement date for the asset or liability. Unobservable inputs shall be used to measure fair value to the extent that observable inputs are not available.

 

In some instances, the inputs used to measure fair value might fall in different levels of the fair value hierarchy. The level in the fair value hierarchy within which the fair value measurement in its entirety falls shall be determined based on the lowest input level that is significant to the fair value measurement in its entirety.

 

Fair value measurements also require additional disclosure when the volume and level of activity for the asset or liability have significantly decreased, as well as when circumstances indicate that a transaction is not orderly.

 


The following tables summarize RISE’stable summarizes BDRY’s valuation of investments at December 31, 20192020 and at June 30, 20192020 using the fair value hierarchy:

 

  December 31, 2019 (unaudited) 
  Short-Term
Investments		  Purchased
Options
Contracts		  Written
Options
Contracts		 Futures
Contracts		 Total 
Level I – Quoted Prices $5,511,316a $21,797a $(5,906)b$15,878c$5,543,085 
  December 31, 2020 (unaudited) 
  Short-Term
Investments		Futures
Contracts		Total
Level I – Quoted Prices $7,803,092a$4,303,595b$12,106,687 

 

a – Included in Investments in securities in the Combined Statements of Assets and Liabilities.

b – Included in Options written, at fair value in the Combined Statements of Assets and Liabilities.

c – Included in Receivable on open futures contracts in the Combined Statements of Assets and Liabilities.

 

  June 30, 2019 (audited) 
  Short-Term
Investments		  Purchased
Options
Contracts		  Written
Options
Contracts		 Futures
Contracts		 Total 
Level I – Quoted Prices $11,874,272a $35,625a $(19,336)b$(326,457)c$11,564,104 

a – Included in Investments in securities in the Combined Statements of Assets and Liabilities. 

b – Included in Options written, at fair value in the Combined Statements of Assets and Liabilities. 

c – Included in Payable on open futures contracts in the Combined Statements of Assets and Liabilities.

Transfers between levels are recognized at the end of the reporting period. During the six months ended December 31, 2019 and the year ended June 30, 2019, RISE recognized no transfers from Level 1, Level 2 or Level 3.


The following table summarizes BDRY’s valuation of investments at December 31, 2019 and at June 30, 2019 using the fair value hierarchy:

  December 31, 2019 (unaudited) 
  Short-Term
Investments		  Futures
Contracts		  Total 
Level I – Quoted Prices $551,232a $(105,125)b $446,107 

a – Included in Investments in securities in the Combined Statements of Assets and Liabilities.

b – Included in Payable on open futures contracts in the Combined Statements of Assets and Liabilities.

  June 30, 2019 (audited) 
  Short-Term
Investments		  Futures
Contracts		  Total 
Level I – Quoted Prices $1,095,625a $391,415b $1,487,040 
  June 30, 2020 (audited) 
  Short-Term
Investments		Futures
Contracts		Total
Level I – Quoted Prices $7,986,862a$8,581,555b$16,568,417 

 

a – Included in Investments in securities in the Combined Statements of Assets and Liabilities.

b – Included in Receivable on open futures contracts in the Combined Statements of Assets and Liabilities.

 

Transfers between levels are recognized at the end of the reporting period. During the six months ended December 31, 20192020 and the year ended June 30, 2019,2020, BDRY recognized no transfers from Level 1, Level 2 or Level 3.

 

The inputs or methodology used for valuing investments are not necessarily an indication of the risk associated with investing in those securities.

The following tables summarize RISE’s valuation of investments at June 30, 2019 using the fair value hierarchy:

  June 30, 2020 (audited) 
  Short-Term
Investments		Purchased
Options
Contracts		Written
Options
Contracts		Futures
Contracts		Total
Level I – Quoted Prices $4,865,473a$14,296a$(4,148)b$(5,144)c$4,870,477 

a – Included in Investments in securities in the Combined Statements of Assets and Liabilities.

b – Included in Options written, at fair value in the Combined Statements of Assets and Liabilities.

c – Included in Payable on open futures contracts in the Combined Statements of Assets and Liabilities.

Transfers between levels are recognized at the end of the reporting period. During the year ended June 30, 2020, RISE recognized no transfers from Level 1, Level 2 or Level 3.

 

(h) Investment Transactions and Related Income

 

Investment transactions are recorded on the trade date. All such transactions are recorded on the identified cost basis, and marked to market daily. Unrealized gain/loss on open futures contracts is reflected in Receivable/Payable on open futures contracts in the Combined Statements of Assets and Liabilities and the change in the unrealized gain/loss between periods is reflected in the Combined Statements of Operations. RISE’s discounts on short-term securities purchased are accreted daily and reflected as Interest Income, when applicable, in the Combined Statements of Operations. BDRY’s interest earned on short-term securities and on cash deposited with MacQuarie Futures USA LLC areED & F Man Capital Markets Inc. is accrued daily and reflected as Interest Income, when applicable, in the Combined Statements of Operations.

 

(i) Federal Income Taxes

 

EachThe Fund is registered as a Delaware statutory trust and is treated as a partnership for U.S. federal income tax purposes. Accordingly, the Funds doFund does not expect to incur U.S. federal income tax liability; rather, each beneficial owner is required to take into account their allocable share of the Funds’Fund’s income, gain, loss, deductions and other items for the Funds’Fund’s taxable year ending with or within the beneficial owner’s taxable year.

 


Management of the FundsFund has reviewed the open tax years and major jurisdictions and concluded that there is no tax liability resulting from unrecognized tax benefits relating to uncertain income tax positions taken or expected to be taken in future tax returns at December 31, 20192020 and June 30, 2019.2020. The Funds areFund is also not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months. On an ongoing basis, management will monitor its tax positions taken to determine if adjustments to its conclusions are necessary based on factors including, but not limited to, further implementation of guidance expected from the FASB and on-going analysis of tax law, regulation, and interpretations thereof. The Funds’Fund’s federal tax returns are subject to examination by the Internal Revenue Service for a period of three years after they are filed.

 

(j) Reclassification and Changes in Presentation

Certain reclassifications and changes in presentation have been made to the prior unaudited interim combined financial statements to conform with the current period presentation.

(3) Investments

 

(a) Short-Term Investments

 

The FundsFund may purchase U.S. Treasury Bills, agency securities, and other high-credit quality short-term fixed income or similar securities with original maturities of one year or less. A portion of these investments may be used as margin for the Funds’Fund’s trading in futures contracts.

 

(b) Accounting for Derivative Instruments

 

In seeking to achieve eachthe Fund’s investment objective, the applicable commodity trading advisor uses a mathematical approach to investing. Using this approach, the applicable commodity trading advisor determines the type, quantity and mix of investment positions that it believes in combination should produce returns consistent with the Fund’s objective.


All open derivative positions at December 31, 20192020 and at June 30, 2019,2020, as applicable, are disclosed in the Combined Schedules of Investments and the notional value of these open positions relative to the shareholders’ capital of the FundsFund is generally representative of the notional value of open positions to shareholders’ capital throughout the reporting periods for the Funds.Fund. The volume associated with derivative positions varies on a daily basis as the Funds transactFund transacts in derivative contracts in order to achieve the appropriate exposure, as expressed in notional value, in comparison to shareholders’ capital consistent with the applicable Fund’s investment objective.

 

Following is a description of the derivative instruments used by the FundsFund during the reporting period, including the primary underlying risk exposures.

 

(c) Futures Contracts

 

The Funds enterFund enters into futures contracts to gain exposure to changes in the value of the Benchmark Portfolios.Portfolio. A futures contract obligates the seller to deliver (and the purchaser to accept) the future cash settlement of a specified quantity and type of a treasury futures contract at a specified time and place. The contractual obligations of a buyer or seller of a treasury futures contract may generally be satisfied by making an offsetting sale or purchase of an identical futures contract on the same or linked exchange before the designated date of delivery.

 


Upon entering into a futures contract, the Funds areFund is required to deposit and maintain as collateral at least such initial margin as required by the exchange on which the transaction is affected. The initial margin is segregated as Cash held by broker, as disclosed in the Combined Statements of Assets and Liabilities, and is restricted as to its use. Pursuant to the futures contract, the Funds agreeFund agrees to receive from or pay to the broker an amount of cash equal to the daily fluctuation in value of the futures contract. Such receipts or payments are known as variation margin and are recorded by the FundsFund as unrealized gains or losses. The FundsFund will realize a gain or loss upon closing a futures transaction.

 

Futures contracts involve, to varying degrees, elements of market risk (specifically treasury price risk) and exposure to loss in excess of the amount of variation margin. The face or contract amounts reflect the extent of the total exposure the Funds haveFund has in the particular classes of instruments. Additional risks associated with the use of futures contracts include imperfect correlation between movements in the price of the futures contracts and the market value of the underlying securities and the possibility of an illiquid market for a futures contract. With futures contracts, there is minimal counterparty risk to the FundsFund since futures contracts are exchange-traded and the exchange’s clearinghouse, as counterparty to all exchange-traded futures contracts, guarantees the futures contracts against default.

 

SIT RISING RATE ETF

Fair Value of Derivative Instruments, as of December 31, 2019

  Asset DerivativesLiability Derivatives 
Derivatives Combined Statements of
Assets and Liabilities		 Fair ValueCombined Statements of
Assets and Liabilities		 Fair Value
Interest Rate Risk Purchased options $21,797* —  —  
Interest Rate Risk Receivable on open futures contracts $15,878** —  —  
Interest Rate Risk —  —  Written options, at fair value $(5,906)*

*Represents fair value of options contracts as reported in the Combined Statements of Assets and Liabilities.

**Represents cumulative appreciation of futures contracts as reported in the Combined Statements of Assets and Liabilities.

SIT RISING RATE ETF

Fair Value of Derivative Instruments, as of June 30, 2019

  Asset DerivativesLiability Derivatives 
Derivatives Combined Statements of
Assets and Liabilities		 Fair ValueCombined Statements of
Assets and Liabilities		 Fair Value
Interest Rate Risk Purchased options $35,625* Payable on open futures contracts $(326,457)**
Interest Rate Risk —  —  Written options, at fair value $(19,336)*

*Represents fair value of options contracts as reported in the Combined Statements of Assets and Liabilities.

**Represents cumulative depreciation of futures contracts as reported in the Combined Statements of Assets and Liabilities.

SIT RISING RATE ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Three Months Ended December 31, 2019

Derivatives Location of Gain (Loss) on Derivatives 

Realized

Loss on
Derivatives
Recognized in
Income

  

Change in
Unrealized Gain

(Loss) on
Derivatives
Recognized
in Income

 

Interest Rate Risk

 Net realized loss on investments, futures and options contracts and/or Change in unrealized gain (loss) on investments, futures and options contracts $(306,211)  $391,106 

The futures and options contracts open at December 31, 2019 are indicative of the activity for the three months ended December 31, 2019.

SIT RISING RATE ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Three Months Ended December 31, 2018

Derivatives Location of Gain (Loss) on Derivatives Realized
Loss on
Derivatives
Recognized in
Income		  Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized
in Income		 

Interest Rate Risk

 Net realized gain on investments, futures and options contracts and/or Change in unrealized gain (loss) on investments, futures and options contracts $266,684  $(3,327,205) 

The futures and options contracts open at December 31, 2018 are indicative of the activity for the three months ended December 31, 2018.

SIT RISING RATE ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Six Months Ended December 31, 2019

Derivatives Location of Gain (Loss) on Derivatives 

Realized

Loss on
Derivatives
Recognized in
Income

  

Change in
Unrealized Gain

(Loss) on
Derivatives
Recognized
in Income

 

Interest Rate Risk

 Net realized loss on investments, futures and options contracts and/or Change in unrealized gain (loss) on investments, futures and options contracts $(252,728)  $368,231 

The futures and options contracts open at December 31, 2019 are indicative of the activity for the six months ended December 31, 2019.

SIT RISING RATE ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Six Months Ended December 31, 2018

Derivatives Location of Gain (Loss) on Derivatives Realized
Loss on
Derivatives
Recognized in
Income		  Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized
in Income		 

Interest Rate Risk

 Net realized loss on investments, futures and options contracts and/or Change in unrealized gain (loss) on investments, futures and options contracts $(456,707)  $(1,611,508) 

The futures and options contracts open at December 31, 2018 are indicative of the activity for the six months ended December 31, 2018.


BREAKWAVE DRY BULK SHIPPING ETF

Fair Value of Derivative Instruments, as of December 31, 20192020

 

  Asset Derivatives  Liability Derivatives 
Derivatives Combined Statements of
Assets and Liabilities		 Fair
Value		Combined
Statements of
Assets and Liabilities		Fair
Value
Interest Rate Risk 

—

$—PayableReceivable on open futures contracts  $(105,125) 4,303,595*——

 

*Represents cumulative depreciationappreciation of futures contracts as reported in the Combined Statements of Assets and Liabilities.

 

BREAKWAVE DRY BULK SHIPPING ETF

Fair Value of Derivative Instruments, as of June 30, 20192020

 

  Asset Derivatives  Liability Derivatives 
Derivatives Combined Statements of
Assets and Liabilities		 Fair
Value		  Combined Statements of
Assets and Liabilities		  Fair
Value		 
Interest Rate Risk Receivable on open futures contracts $391,415*  —   — 

Asset DerivativesLiability Derivatives
DerivativesCombined Statements of Assets and LiabilitiesFair
Value		Combined
Statements of
Assets and Liabilities		Fair
Value
Interest Rate RiskReceivable on open futures contracts $ 8,581,555*——

*Represents cumulative appreciation of futures contracts as reported in the Combined Statements of Assets and Liabilities.


BREAKWAVE DRY BULK SHIPPING ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Three Months Ended December 31, 2020

Derivatives Location of Gain (Loss) on Derivatives Realized
Loss on
Derivatives
Recognized in
Income		Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized in
Income
Interest Rate Risk Net realized loss on investments and futures and/or Change in unrealized gain (loss) on investments and futures contracts $(3,591,274) $2,788,440 

The futures contracts open at December 31, 2020 are indicative of the activity for the three months ended December 31, 2020.

 

BREAKWAVE DRY BULK SHIPPING ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Three Months Ended December 31, 2019

 

Derivatives Location of Gain (Loss) on Derivatives Realized
Loss on
Derivatives
Recognized
in Income		  Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized
in Income		  Location of Gain (Loss) on Derivatives Realized
Loss on
Derivatives
Recognized in
Income		Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized in
Income
Interest Rate Risk Net realized loss on investments and futures and/or Change in unrealized gain (loss) on investments and futures contracts $(243,845)  $(117,845)  Net realized loss on investments and futures and/or Change in unrealized gain (loss) on investments and futures contracts $(243,845)  $(117,845) 

 

The futures contracts open at December 31, 2019 are indicative of the activity for the three months ended December 31, 2019.

 


BREAKWAVE DRY BULK SHIPPING ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the ThreeSix Months Ended December 31, 20182020

 

Derivatives Location of Gain (Loss) on Derivatives Realized
Gain on
Derivatives
Recognized
in Income		  Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized
in Income		  Location of Gain (Loss) on Derivatives Realized
Gain on
Derivatives
Recognized in
Income		Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized in
Income
Interest Rate Risk Net realized loss on investments and futures and/or Change in unrealized gain (loss) on investments and futures contracts $(737,508)  $137,005  Net realized gain on investments and futures and/or Change in unrealized gain (loss) on investments and futures contracts $6,513,496  $(4,277,960) 

 

The futures contracts open at December 31, 20182020 are indicative of the activity for the threesix months ended December 31, 2018.2020.

 

BREAKWAVE DRY BULK SHIPPING ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Six Months Ended December 31, 2019

 

Derivatives Location of Gain (Loss) on Derivatives Realized
Gain on
Derivatives
Recognized
in Income		  Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized
in Income		  Location of Gain (Loss) on Derivatives Realized
Loss on
Derivatives
Recognized in
Income		Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized in
Income

Interest Rate Risk

 Net realized gain on investments and futures and/or Change in unrealized gain (loss) on investments and futures contracts $338,181  $666,605  Net realized loss on investments and futures and/or Change in unrealized gain (loss) on investments and futures contracts $338,181 $666,605 

 

The futures contracts open at December 31, 2019 are indicative of the activity for the six months ended December 31, 2019.


SIT RISING RATE ETF

Fair Value of Derivative Instruments, as of June 30, 2020

  Asset DerivativesLiability Derivatives
Derivatives Combined
Statements of
Assets and Liabilities		Fair ValueCombined
Statements of
Assets and Liabilities		Fair Value
Interest Rate Risk Purchased options $14,296*Payable on open futures contracts$(5,144)**
Interest Rate Risk —  — Written options, at fair value$(4,148)*

*Represents fair value of options contracts as reported in the Combined Statements of Assets and Liabilities.
**Represents cumulative depreciation of futures contracts as reported in the Combined Statements of Assets and Liabilities.

 

BREAKWAVE DRY BULK SHIPPINGSIT RISING RATE ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Three Months Ended December 31, 2020*

Derivatives Location of Gain (Loss) on Derivatives 

Realized

Gain on
Derivatives
Recognized in
Income

Change in
Unrealized Gain

(Loss) on
Derivatives
Recognized in
Income

Interest Rate Risk Net realized loss on investments, futures and options contracts and/or Change in unrealized gain (loss) on investments, futures and options contracts $5,118  $8,841 

*The operations include the activity of Sit Rising Rate ETF through November 18, 2020, the date of liquidation.

SIT RISING RATE ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Three Months Ended December 31, 2019

Derivatives Location of Gain (Loss) on Derivatives Realized
Loss on
Derivatives
Recognized in
Income		Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized in
Income
Interest Rate Risk Net realized loss on investments, futures and options contracts and/or Change in unrealized gain (loss) on investments, futures and options contracts $(306,211) $391,106 

The futures and options contracts open at December 31, 2019 are indicative of the activity for the three months ended December 31, 2019.


SIT RISING RATE ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Six Months Ended December 31, 20182020

 

Derivatives Location of Gain (Loss) on Derivatives Realized
Loss on
Derivatives
Recognized
in Income		  Change in
Unrealized Gain
(Loss) on
Derivatives
Recognized
in Income		  Location of Gain (Loss) on Derivatives 

Realized

Gain on
Derivatives
Recognized in
Income

Change in
Unrealized Gain

(Loss) on
Derivatives
Recognized in
Income

Interest Rate Risk

 Net realized loss on investments and futures and/or Change in unrealized gain (loss) on investments and futures contracts $(434,239)  $(33,580)  Net realized loss on investments, futures and options contracts and/or Change in unrealized gain (loss) on investments, futures and options contracts $(29,138) $10,459 

The operations include the activity of Sit Rising Rate ETF through November 18, 2020, the date of liquidation.

SIT RISING RATE ETF

The Effect of Derivative Instruments on the Combined Statements of Operations

For the Six Months Ended December 31, 2019

Derivatives Location of Gain (Loss) on Derivatives 

Realized

Loss on
Derivatives
Recognized in
Income

Change in
Unrealized Gain

(Loss) on
Derivatives
Recognized in
Income

Interest Rate Risk Net realized loss on investments, futures and options contracts and/or Change in unrealized gain (loss) on investments, futures and options contracts $(252,728) $368,231 

 

The futures and options contracts open at December 31, 20182019 are indicative of the activity for the six months ended December 31, 2018.2019.

  


(4) Agreements

 

(a) Management Fee

 

EachThe Fund pays the Sponsor a sponsor fee (the “Sponsor Fee”) in consideration of the Sponsor’s advisory services to the Funds.Fund. Additionally, eachthe Fund pays its respective commodity trading advisor a license and service fee (the “CTA fee”).


Effective January 1, 2018 and later extended, the Sponsor has agreed to waive receipt of the Sponsor Fee for RISE and/or assume RISE’s expenses (excluding brokerage fees, interest expense, and extraordinary expenses) so that RISE’s total annual expenses do not exceed 1.00% per annum through January 31, 2021.

Further, effective January 1, 2018, RISE’s CTA fee, calculated daily and paid monthly in arrears, was reduced from .50% per annum to .20% per annum of average daily net assets.

In addition to the reduction in the expense limit, effective January 1, 2018, RISE’s Sponsor Fee, calculated daily and paid monthly, became the greater of 0.15% of its average daily net assets, or $75,000, and the fees for Principal Financial Officer and Chief Compliance Officer services provided to RISE by the Sponsor were each increased to $25,000 per annum. Certain additional fees paid to the Sponsor for tax return preparation and regulatory reporting fees were also increased. Effective April 1, 2019, the fee paid to the Sponsor for tax return preparation was reduced from $100,000 per year to $50,000 per year.

 

BDRY pays the Sponsor an annual Sponsor Fee, monthly in arrears, in an amount calculated as the greater of 0.15% of its average daily net assets, or $125,000. BDRY also paid an annual fee to Breakwave, monthly in arrears, in an amount equal to 1.45% of BDRY’s average daily net assets. As of March 22, 2018, Breakwave has agreed to waive its CTA fee to the extent necessary, and the Sponsor has voluntarily agreed to correspondingly assume the remaining expenses of BDRY such that Fund expenses do not exceed an annual rate of 3.50%, excluding brokerage commissions and interest expense, of the value of BDRY’s average daily net assets through February 28, 2022 (the “BDRY Expense Cap,” and together with the RISE Expense Cap, the “Expense Caps”). The assumption of expenses by the Sponsor and waiver of BDRY’s CTA fee are contractual on the part of the Sponsor and Breakwave, respectively.

 

The waiver of BDRY’s CTA fees, pursuant to the undertaking, amounted to $6,561$18,432 and $10,462,$6,561, for the three months ended December 31, 20192020 and 2018,2019, respectively, and $16,213$18,432 and $23,499, respectively,$16,213 for the six months ended December 31, 2020 and 2019, and 2018,respectively, as disclosed in the Combined Statements of Operations.

 

The FundsFund currently accrue theiraccrues its daily expenses up to the applicable Expense Cap.Cap, or if less, at accrual estimates established by the Sponsor. At the end of each month, the accrued amount is remitted to the Sponsor as the Sponsor has assumed, and is responsible for the payment of the routine operational, administrative and other ordinary expenses of the FundsFund in excess of the Funds’ respectiveFund’s Expense Cap, which in the case of RISE, aggregated $100,323$32,532 and $17,920$100,323 for the three months ended December 31, 20192020 and 2018,2019, respectively, and $197,476$136,902 and $47,986$197,476 for the six months ended December 31, 2018,2020 and 2019, respectively, and in the case of BDRY, aggregated $112,262$-0- and $131,193$112,262 for the three months ended December 31, 20192020 and 2018,2019, respectively, and $217,318$-0- and $256,383$217,318 for the six months ended December 31, 20192020 and 2018,2019, respectively, as disclosed in the Combined Statements of Operations.

 

(b) The Administrator, Custodian, Fund Accountant and Transfer Agent

 

EachThe Fund has appointed U.S. Bank, a national banking association, with its principal office in Milwaukee, Wisconsin, as the custodian (the “Custodian”). Its affiliate, U.S. Bancorp Fund Services, is the Fund accountant (“the Fund accountant”) of the Funds,Fund, transfer agent (the “Transfer Agent”) for Fund shares and administrator for the FundsFund (the “Administrator”). It performs certain administrative and accounting services for the FundsFund and prepares certain SEC, NFA and CFTC reports on behalf of the Funds.Fund. (U.S. Bank and U.S. Bancorp Fund Services are referred to collectively hereinafter as “U.S. Bank”).


RISE has agreed to pay U.S. Bank 0.05% of assets under management (“AUM”), with a $50,000 minimum annual fee payable for its administrative, accounting and transfer agent services and 0.01% of AUM, with an annual minimum of $4,800 for custody services. RISE paid U.S. Bank $14,479 and $14,191 for the three months ended December 31, 2019 and 2018, respectively, and $28,958 and $28,382 for the six months ended December 31, 2019 and 2018, respectively, as disclosed in the Combined Statements of Operations.

 

Effective March 22, 2018, BDRY has agreed to pay U.S. Bank 0.05% of AUM, with a $45,000 minimum annual fee payable for its administrative, accounting and transfer agent services and 0.01% of AUM, with an annual minimum of $4,800 for custody services. BDRY paid U.S. Bank $15,548$16,284 and $15,476$15,548 for the three months ended December 31, 20192020 and 2018,2019, respectively, and $31,096$32,568 and $30,952$31,096 for the six months ended December 31, 20192020 and 2018,2019, respectively, as disclosed in the Combined Statements of Operations.

 

Prior to its liquidation RISE paid U.S. Bank $4,792 and $14,479 for the three months ended December 31, 2020 and 2019, respectively, and $19,486 and $28,958 for the six months ended December 31, 2019, respectively, as disclosed in the Combined Statements of Operations.


(c) The Distributor

 

The Funds payFund pays ETFMG Financial LLC. (the “Distributor”), an affiliate of the Sponsor, an annual fee for statutory and wholesaling distribution services and related administrative services equal to the greater of $15,000 or 0.02% of the Funds’Fund’s average daily net assets, payable monthly. Pursuant to the respective Marketing Agent Agreement between the Sponsor, eachthe Fund and the Distributor, the Distributor assists the Sponsor and the applicable Fund with certain functions and duties relating to distribution and marketing services to the applicable Fund, including reviewing and approving marketing materials and certain regulatory compliance matters. The Distributor also assists with the processing of creation and redemption orders.

 

BDRY incurred $3,959 and $3,977 for the three months ended December 31, 2020 and 2019, respectively, and $7,918 and $7,954 for the six months ended December 31, 2020 and 2019, respectively, as disclosed in the Combined Statements of Operations.

Prior to its liquidation, RISE incurred $3,906$1,258 and $4,410$3,906 in distribution and related administrative services for the three months ended December 31, 20192020 and 2018,2019, respectively, and $7,812$5,116 and $8,820$7,812 for the six months ended December 31, 20192020 and 2018, respectively, as disclosed in the Combined Statements of Operations. BDRY incurred $3,977 and $4,158 for the three months ended December 31, 2019, and 2018, respectively, and $7,954 and $8,316 for the six months ended December 31, 2019 and 2018, respectively, as disclosed in the Combined Statements of Operations.

 

RISE also pays the Sponsor an annual fee for wholesale support services equalPrior to 0.1% of RISE’s average daily net assets, payable monthly.its liquidation, BDRY pays the Sponsor an annual fee for wholesale support services of $25,000 plus 0.12% of BDRY’s average daily net assets, payable monthly.

 

Prior to its liquidation, RISE also paid the Sponsor an annual fee for wholesale support services equal to 0.1% of RISE’s average daily net assets, payable monthly.

BDRY incurred $1,566$13,400 and $16,915$6,827 in wholesale support fees for the three months ended December 31, 20192020 and 2018,2019, respectively, and $3,583$30,395 and $31,671$13,910 for the six months ended December 31, 20192020 and 2018,2019, respectively, as disclosed in the Combined Statements of Operations. BDRY

Prior to its liquidation, RISE incurred $6,827$249 and $7,167$1,566 in wholesale support fees for the three months ended December 31, 20192020 and 2018,2019, respectively, and $13,910$1,522 and $14,547$3,583 for the six months ended December 31, 20192020 and 2018,2019, respectively, as disclosed in the Combined Statements of Operations.

 

(d) The Commodity Broker

 

SG Americas Securities, LLC, a Delaware limited liability company, serves as RISE’s clearing broker. MacQuarie Futures USA LLC,ED&F Man Capital Inc., a Delaware limited liability company, serves as BDRY’s clearing broker (such clearing broker, together with SG Americas Securities, LLC, the(the “Commodity Brokers”Broker”). In theirits capacity as clearing broker, the Commodity Brokers executeBroker executes and clear the Funds’ futures transactions and performperforms certain administrative services for the Funds. Prior to November 6, 2020, MacQuarie Futures USA LLC served as BDRY’s clearing broker.


The Funds payFund pays respective brokerage commissions, including applicable exchange fees, National Futures Association (“NFA”) fees, give–up fees, pit brokerage fees and other transaction related fees and expenses charged in connection with trading activities in CFTC regulated investments. Brokerage commissions on futures contracts are recognized on a half-turn basis.

 

The Sponsor does not expect brokerage commissions and fees to exceed 0.08% for RISE, and 0.76%0.40% (excluding the impact on the Fund of creation and/or redemption activity) for BDRY of the net asset value of the applicable Fund for execution and clearing services on behalf of the applicable Fund, although the actual amount of brokerage commissions and fees in any year or any part of any year may be greater. The effects of trading spreads, financing costs associated with financial instruments, and costs relating to the purchase of U.S. Treasury Securities or similar high credit quality short-term fixed-income or similar securities are not included in the foregoing analysis. RISEBDRY incurred $927$83,830 and $19,434$7,202 in brokerage commissions and fees for the three months ended December 31, 20192020 and 2018,2019, respectively, and $2,793$159,042 and $35,862$15,499 for the six months ended December 31, 20192020 and 2018,2019, respectively, as disclosed in the Combined Statements of Operations. BDRY

Prior to its liquidation, RISE incurred $7,202$181 and $6,156$927 in brokerage commissions and fees for the three months ended December 31, 20192020 and 2018,2019, respectively, and $15,499$1,424 and $15,093$2,793 for the six months ended December 31, 20192020 and 2018,2019, respectively, as disclosed in the Combined Statements of Operations.

 


(e) The Trustee

 

Under the respective Amended and Restated Declaration of Trust and Trust Agreement (the “Trust Agreement”) for eachthe Fund, Wilmington Trust Company, the Trustee of each of the FundsFund (the “Trustee”) serves as the sole trustee of eachthe Fund in the State of Delaware. The Trustee will accept service of legal process on the FundsFund in the State of Delaware and will make certain filings under the Delaware Statutory Trust Act. Under the respective Trust Agreement for eachthe Fund, the Sponsor has the exclusive management and control of all aspects of the business of the Fund. The Trustee does not owe any other duties to the Fund, the Sponsor or the Shareholders of the Fund. The Trustee has no duty or liability to supervise or monitor the performance of the Sponsor, nor does the Trustee have any liability for the acts or omissions of the Sponsor. RISEBDRY incurred $628$630 and $630,$628 in trustee fees for the three months ended December 31, 20192020 and 2018,2019, respectively, and $1,256$1,260 and $1,260$1,256 for the six months ended December 31, 20192020 and 2018,2019, respectively, which is included in Other Expenses in the Combined Statements of Operations. BDRY

Prior to its liquidation, RISE incurred $628$418 and $630$628, in trustee fees for the three months ended December 31, 20192020 and 2018,2019, respectively, and $1,256$843 and $1,260$1,256 for the six months ended December 31, 20192020 and 2018,2019, respectively, which is included in Other Expenses in the Combined Statements of Operations.

 

(f) Routine Offering, Operational, Administrative and Other Ordinary Expenses

 

Effective January 1, 2018, the Sponsor, in accordance with the RISE Expense Cap limitation, paid all of the routine offering, operational, administrative and other ordinary expenses of RISE in excess of 1.00% (excluding brokerage commissions and interest expense) of RISE’s average daily net assets, including, but not limited to, accounting and computer services, the fees and expenses of the Trustee, Administrator, Custodian, Transfer Agent and Distributor, legal and accounting fees and expenses, tax return preparation expenses, filing fees, and printing, mailing and duplication costs. RISE incurred $116,924 and $206,506 for the three months ended December 31, 2019 and 2018, respectively, and $236,108 and $400,559 for the six months ended December 31, 2019 and 2018, respectively, in routine offering, operational, administrative or other ordinary expenses.

The assumption of Fund expenses above the RISE Expense Cap by the Sponsor, pursuant to the undertaking (as discussed in Note 4a), amounted to $100,323 and $17,920 for the three months ended December 31, 2019 and 2018, respectively, and $197,476 and $47,986 for the six months ended December 31, 2019 and 2018, respectively.


The Sponsor, in accordance with the BDRY Expense Cap limitation paid, after the waiver of the CTA fee for BDRY by Breakwave, all of the routine offering, operational, administrative and other ordinary expenses of BDRY in excess of 3.50% (excluding brokerage commissions and interest expense) of BDRY’s average daily net assets, including, but not limited to, accounting and computer services, the fees and expenses of the Trustee, Administrator, Custodian, Transfer Agent and Distributor, legal and accounting fees and expenses, tax return preparation expenses, filing fees, and printing, mailing and duplication costs. BDRY incurred $141,861$309,401 and $173,067$141,861 for the three months ended December 31, 20192020 and 2018,2019, respectively, and $288,164$657,815 and $351,703$288,164 for the six months ended December 31, 20192020 and 2018,2019, respectively, in routine offering, operational, administrative or other ordinary expenses.

 

The CTA fee waiver for BDRY by Breakwave was $6,561$18,432 and $10,462$6,561 for the three months ended December 31, 20192020 and 2018,2019, respectively, and $16,213$18,432 and $23,499$16,213 for the six months ended December 31, 20192020 and 2018,2019, respectively.

 

In addition, the assumption of Fund expenses above the BDRY Expense Cap by the Sponsor, pursuant to the undertaking (as discussed in Note 4a), amounted to $112,262$-0- and $131,193$112,262 for the three months ended December 31, 20192020 and 2018,2019, respectively, and $217,318$-0- and $256,383$217,318 for the six months ended December 31, 20192020 and 2018,2019, respectively.

 

Prior to its liquidation, RISE incurred $75,249 (including $26 in interest expense) and $116,924 (including $14 in interest expense) for the three months ended December 31, 2020 and 2019, respectively, and $193,779 and $236,108 for the six months ended December 31, 2020 and 2019, respectively, in routine offering, operational, administrative or other ordinary expenses.

Prior to its liquidation, the assumption of Fund expenses above the RISE Expense Cap by the Sponsor, pursuant to the undertaking (as discussed in Note 4a), amounted to $32,532 and $100,323 for the three months ended December 31, 2020 and 2019, respectively, and $136,902 and $197,476 for the six months ended December 31, 2020 and 2019, respectively.


(g) Organizational and Offering Costs

 

Expenses incurred in connection with organizing RISE and up to the offering of its Shares upon commencement of its investment operations on February 19, 2015, were paid by the Sponsor and Sit without reimbursement. Expenses incurred in connection with organizing BDRY and up to the offering of its Shares upon commencement of its investment operations on March 22, 2018, were paid by the Sponsor and Breakwave without reimbursement.

 

Accordingly, all such expenses are not reflected in the Statements of Operations. The FundsFund will bear the costs of theirits continuous offeringsoffering of Shares and ongoing offering expenses. Such ongoing offering costs will be included as a portion of the Routine Offering, Operational, Administrative and Other Ordinary Expenses. These costs will include registration fees for regulatory agencies and all legal, accounting, printing and other expenses associated therewith. These costs will be accounted for as a deferred charge and thereafter amortized to expense over twelve months on a straight-line basis or a shorter period if warranted. For the three and six months ended December 31, 20192020 and 2018, neither RISE nor2019, BDRY incurred no such expenses.

 

(h) Extraordinary Fees and Expenses

 

The Fund will pay all extraordinary fees and expenses, if any. Extraordinary fees and expenses are fees and expenses which are nonrecurring and unusual in nature, such as legal claims and liabilities, litigation costs or indemnification or other unanticipated expenses. Such extraordinary fees and expenses, by their nature, are unpredictable in terms of timing and amount. For the three and six months ended December 31, 2020 and 2019, and 2018, respectively, nether RISE nor BDRY incurred no such expenses.

 

(5) Creations and Redemptions

 

EachThe Fund issues and redeems Shares from time to time, but only in one or more Creation Baskets. A Creation Basket is a block of 25,000 Shares (50,000 Shares prior to August 17, 2018) of each Fund. Baskets may be created or redeemed only by Authorized Participants.

 

Except when aggregated in Creation Baskets, the Shares are not redeemable securities. Retail investors, therefore, generally will not be able to purchase or redeem Shares directly from or with eachthe Fund. Rather, most retail investors will purchase or sell Shares in the secondary market with the assistance of a broker. Thus, some of the information contained in these Notes to Interim Combined Financial Statements – such as references to the Transaction Fee imposed on creations and redemptions – is not relevant to retail investors.


(a) Transaction Fees on Creation and Redemption Transactions

 

In connection with orders to create and redeem one or more Creation Baskets, an Authorized Participant is required to pay a transaction fee, or AP Transaction Fee, of $500$250 ($500 prior to May 18, 2020) per order, which goes directly to the Custodian. The AP Transaction Fees are paid by the Authorized Participants and not by the Funds.Fund.

 


(b) Share Transactions

SIT RISING RATE ETF

Summary of Share Transactions for the Three Months Ended December 31, 2019
  Shares  Net Assets
Decrease		 
Shares Sold  —  $— 
Shares Redeemed  (25,000)  (577,766)
Net Decrease  (25,000) $(577,766)

Summary of Share Transactions for the Three Months Ended December 31, 2018
  Shares  Net Assets
Increase		 
Shares Sold  500,000  $12,510,953 
Shares Redeemed  (475,000)  (11,687,830)
Net Increase  25,000  $823,123 

Summary of Share Transactions for the Six Months Ended December 31, 2019
  Shares  Net Assets
Decrease		 
Shares Sold  —  $— 
Shares Redeemed  (275,000)  (6,331,666)
Net Decrease  (275,000) $(6,331,666)

Summary of Share Transactions for the Six Months Ended December 31, 2018
  Shares  Net Assets
Increase		 
Shares Sold  775,000  $24,297,005 
Shares Redeemed  (525,000)  (14,163,400) 
Net Increase  250,000  $10,133,605 

30

 

BREAKWAVE DRY BULK SHIPPING ETF

 

Summary of Share Transactions for the Three Months Ended December 31, 2020
  Shares Net Assets
Decrease		 
Shares Sold  100,000  $653,748 
Shares Redeemed  (600,000)  (4,671,190)
Net Decrease  (500,000) $(4,017,442)

Summary of Share Transactions for the Three Months Ended December 31, 2019
  Shares Net Assets
Increase		 
Shares Sold  75,000  $1,151,130 
Shares Redeemed  (25,000)  (431,515)
Net Increase  50,000  $719,615 

 

Summary of Share Transactions for the Three Months Ended December 31, 2018
SharesNet Assets
Increase
Shares Sold—$        —
Shares Redeemed——
Net Increase—$—
Summary of Share Transactions for the Six Months Ended December 31, 2020
  Shares Net Assets
Decrease		 
Shares Sold  275,000  $2,101,301 
Shares Redeemed  (2,850,000)  (22,793,823)
Net Decrease  (2,575,000) $(20,692,522)

 

Summary of Share Transactions for the Six Months Ended December 31, 2019
  Shares Net Assets
Decrease		 
Shares Sold  75,000  $1,151,130 
Shares Redeemed  (250,000)  (4,121,777)
Net Decrease  (175,000) $(2,970,647)

 

Summary of Share Transactions for the Six Months Ended December 31, 2018
SharesNet Assets
Increase
Shares Sold—$    —
Shares Redeemed——
Net Increase—$—

SIT RISING RATE ETF (PRIOR TO LIQUIDATION)

Summary of Share Transactions for the Three Months Ended December 31, 2020
  Shares Net Assets
Increase		 
Shares Sold  —  $— 
Shares Redeemed In Liquidation  (150,040)  (2,989,783)
Net Decrease  (150,040) $(2,989,783)

Summary of Share Transactions for the Three Months Ended December 31, 2019
  Shares Net Assets
Decrease		 
Shares Sold  —  $— 
Shares Redeemed  (25,000)  (577,766)
Net Decrease  (25,000) $(577,766)

Summary of Share Transactions for the Six Months Ended December 31, 2020
  Shares Net Assets
Decrease		 
Shares Sold  —  $— 
Shares Redeemed (Including in Liquidation)  (250,040)  (4,998,233)
Net Decrease  (250,040) $(4,998,233)

Summary of Share Transactions for the Six Months Ended December 31, 2019
  Shares Net Assets
Decrease		 
Shares Sold  —  $— 
Shares Redeemed  (275,000)  (6,331,666)
Net Decrease  (275,000) $(6,331,666)

 


(6) Risk

 

(a) Investment Related Risk

The NAV of RISE’s shares relates directly to the value of the U.S. treasuries, cash and cash equivalents held by RISE and the portfolio’s negative effective duration established and maintained through RISE’s investment in Treasury Instruments. Fluctuations in the prices of these assets could materially adversely affect the value and performance of an investment in RISE’s shares. Past performance is not necessarily indicative of future results; all or substantially all of an investment in RISE could be lost.

Investments in debt securities typically decrease in value when interest rates rise, however, RISE attempts to maintain a portfolio with a negative effective duration and therefore anticipates that an increase in interest rates may increase RISE’s value, and a decrease in rates may lower RISE’s value. The NAV of RISE’s shares relates directly to the value of U.S. Treasuries and Treasury Instruments held by RISE which are materially impacted by interest rate movements. The magnitude of the impact on value from a change in interest rates is often greater for longer-term fixed income than shorter-term securities. Interest rates have remained near historic lows since the market events of 2008 and may remain low.

Interest rate movements are heavily influenced by the action of the Board of Governors of the Federal Reserve System and other central banks. Their actions are based on judgments and policies which involve numerous political and economic factors which are unpredictable. Recent interest rate and monetary policies have been unprecedented and may continue to be so.

RISE attempts to track a portfolio benchmark. The performance of RISE may not closely track the performance of the RISE Benchmark Portfolio for a variety of reasons. For example, RISE incurs operating expenses and portfolio transaction costs not incurred by the benchmark. RISE is also required to manage cash flows and may experience operational inefficiencies the benchmark does not. In addition, RISE may not be fully invested in the contents of its benchmark at all times or may hold securities not included in its benchmark.

RISE invests in Treasury Instruments and U.S. treasuries with exposure to different maturity dates. Generally, RISE’s exposure to securities with maturities of 2 and 5 years will be greater than its exposure to securities with maturities of 10 years. Interest rates do not change uniformly for U.S. Treasuries of different maturities and therefore if interest rates rise, the investment performance of RISE will be impacted by RISE’s current maturity exposure which may be different from the expectations of the Sponsor and investors in RISE. At any time, RISE’s maturity exposure may not be optimal with respect to a movement in interest rates which would negatively impact performance.

 

The NAV of BDRY’s shares relates directly to the value of the futures portfolio, cash and cash equivalents held by BDRY. Fluctuations in the prices of these assets could materially adversely affect the value and performance of an investment in BDRY’s shares. Past performance is not necessarily indicative of future results; all or substantially all of an investment in BDRY could be lost.

 

The NAV of BDRY’s shares relates directly to the value of futures investments held by BDRY which are materially impacted by fluctuations in changes in spot charter rates. Charter rates for dry bulk vessels are volatile and have declined significantly since their historic highs and may remain at low levels or decrease further in the future.

 

Futures and options contracts have expiration dates. Before or upon the expiration of a contract, BDRY may be required to enter into a replacement contract that is priced higher or that have less favorable terms than the contract being replaced (see “Negative Roll Risk,” below). The Freight Futures market settles in cash against published indices, so there is no physical delivery against the futures contracts.

 

Similar to other futures contracts, the Freight Futures curve shape could be either in “contango” (where the futures curve is upward sloping with next futures price higher than the current one) or “backwardation” (where each the next futures price is lower than the current one). Contango curves are generally characterized by negative roll cost, as the expiring contract value is lower that the next prompt contract value, assuming the same lot size. That means there could be losses incurred when the contracts are rolled each period and such losses are independent of the Freight Futures price level.


(b) Liquidity Risk

 

In certain circumstances, such as the disruption of the orderly markets for the futures contracts or Financial Instruments in which the Funds invest,Fund invests, the FundsFund might not be able to dispose of certain holdings quickly or at prices that represent what the market value may have been in an orderly market. Futures and option positions cannot always be liquidated at the desired price. It is difficult to execute a trade at a specific price when there is a relatively small volume of buy and sell orders in a market. A market disruption can also make it difficult to liquidate a position. The large size of the positions that the FundsFund may acquire increases the risk of illiquidity both by making its positions more difficult to liquidate and by potentially increasing losses while trying to do so. Such a situation may prevent the FundsFund from limiting losses, realizing gains or achieving a high correlation with the applicable Benchmark Portfolio.

(c) Natural Disaster/Epidemic Risk

Natural or environmental disasters, such as earthquakes, fires, floods, hurricanes, tsunamis and other severe weather-related phenomena generally, and widespread disease, including pandemics and epidemics (for example, the novel coronavirus COVID-19), have been and can be highly disruptive to economies and markets and have recently led, and may continue to lead, to increased market volatility and significant market losses. Such natural disaster and health crises could exacerbate political, social, and economic risks previously mentioned, and result in significant breakdowns, delays, shutdowns, social isolation, and other disruptions to important global, local and regional supply chains affected, with potential corresponding results on the operating performance of the Fund and its investments. A climate of uncertainty and panic, including the contagion of infectious viruses or diseases, may adversely affect global, regional, and local economies and reduce the availability of potential investment opportunities, and increases the difficulty of performing due diligence and modeling market conditions, potentially reducing the accuracy of financial projections. Under these circumstances, the Fund may have difficulty achieving its investment objective which may adversely impact performance. Further, such events can be highly disruptive to economies and markets, significantly disrupt the operations of individual companies (including, but not limited to, the Fund’s Sponsor and third party service providers), sectors, industries, markets, securities and commodity exchanges, currencies, interest and inflation rates, credit ratings, investor sentiment, and other factors affecting the value of the Fund’s investments. These factors can cause substantial market volatility, exchange trading suspensions and closures and can impact the ability of the Fund to complete redemptions and otherwise affect Fund performance and Fund trading in the secondary market. A widespread crisis may also affect the global economy in ways that cannot necessarily be foreseen at the present time. How long such events will last and whether they will continue or recur cannot be predicted. Impacts from these events could have significant impact on the Fund’s performance, resulting in losses to the Fund.


(d) Risk that Current Assumptions and Expectations Could Become Outdated as a result of Global Economic Shocks

The onset of the novel coronavirus (COVID-19) has caused significant shocks to global financial markets and economies, with many governments taking extreme actions to slow and contain the spread of COVID-19. These actions have had, and likely will continue to have, a severe economic impact on global economies as economic activity in some instances has essentially ceased at times. Financial markets across the globe have experienced, and may continue to experience, severe distress at least equal to what was experienced during the global financial crisis in 2008.

The global economic shocks being experienced as of the date hereof may cause the underlying assumptions and expectations of the Fund to become outdated quickly or inaccurate, resulting in significant losses.

 

(7) Profit and Loss Allocations and Distributions

 

Pursuant to the Trust Agreement, income and expenses are allocatedpro rata among the Shareholders monthly based on their respective percentage interests as of the close of the last trading day of the preceding month. Any losses allocated to the Sponsor which are in excess of the Sponsor’s capital balance are allocated to the Shareholders in accordance with their respective interest in the FundsFund as a percentage of total Shareholders’ capital. Distributions (other than redemption of units) may be made at the sole discretion of the Sponsor on apro rata basis in accordance with the respective interests of the Shareholders.

 

(8) Indemnifications

 

The Sponsor, either in its own capacity or in its capacity as the Sponsor and on behalf of the Funds,Fund, has entered into various service agreements that contain a variety of representations, or provide indemnification provisions related to certain risks service providers undertake in performing services which are in the best interests of the Funds.Fund. As of December 31, 2019,2020, the FundsFund had not received any claims or incurred any losses pursuant to these agreements and expects the risk of such losses to be remote.

 

(9) Termination

 

The term of eachthe Fund is perpetual unless terminated earlier in certain circumstances as described in the applicable Prospectus.

On October 16, 2020, the Sponsor announced that it would close and liquidate the SIT RISING RATE ETF (“RISE”) because of current market conditions and the Fund’s asset size. The last day the liquidated fund accepted creation orders was on October 30, 2020. Trading in RISE was suspended after the close of the NYSE Arca on October 30, 2020. Proceeds of the liquidation were sent to shareholders on November 18, 2020 (the “Distribution Date”). From October 30, 2020 through the distribution date, shares of RISE did not trade on the NYSE Arca nor was there a secondary market for the shares. Any shareholders that remained in RISE on the Distribution Date automatically had their shares redeemed for cash at the current net asset value on November 18, 2020.


(10) Net Asset Value and Financial Highlights

 

The Funds are presenting, as applicable, the following net asset value and financial highlights related to investment performance for a Share outstanding throughout the three months ended December 31,September 30, 2020 and September 30, 2019, and December 31, 2018, respectively, and the six months ended December 31, 2019 and 2018, respectively. The net investment income and total expense ratios are calculated using average net assets. The net asset value presentation is calculated by dividing each Fund’s net assets by the average daily number of Shares outstanding. The net investment income (loss) and expense ratios have been annualized. The total return is based on the change in net asset value and market value of the Shares during the period. An individual investor’s return and ratios may vary based on the timing of their transactions in Fund Shares.

 

 THREE MONTHS ENDED THREE MONTHS ENDED 
 DECEMBER 31, 2019  DECEMBER 31, 2018 
 SIT RISING BREAKWAVE DRY BULK
SHIPPING		 SIT RISING  BREAKWAVE DRY BULK
SHIPPING		  THREE MONTHS ENDED   
 RATE ETF  ETF  RATE ETF  ETF  DECEMBER 31,
2020		  THREE MONTHS ENDED
DECEMBER 31, 2019		 
           BREAKWAVE DRY BULK SHIPPING
ETF		  SIT
RISING RATE ETF		  BREAKWAVE DRY BULK SHIPPING ETF 
Net Asset Value                 
Net asset value per Share, beginning of period $22.61  $   19.65  $25.13  $  22.68  $8.24  $22.61  $19.65 
Net investment income (loss)  0.05   (0.17)  0.07   (0.12)  (0.09)  0.05   (0.17)
Net realized and unrealized gain (loss)  0.30   (4.11)  (1.14)  (4.00)  (0.22)  0.30   (4.11)
Net Income (Loss)  0.35   (4.28)  (1.07)  (4.12)  (0.31)  0.35   (4.28)
Net Asset Value per Share, end of period $22.96  $15.37  $24.06  $18.56  $7.93  $22.96  $15.37 
Market Value per Share, end of period $22.97  $15.45  $24.09  $17.92(a) $7.70  $22.97  $15.45 
            
Ratios to Average Net Assets*                            
Expense Ratio***  1.06%  5.09%  1.11%  4.35%  4.93%  1.06%  5.09%
Expense Ratio*** before Waiver/Assumption  7.47%  31.35%  1.22%  23.98%  5.24%  7.47%  31.35%
Net Investment Income (Loss)  0.93%  (3.69%)  1.08%  (2.49%)  (4.93%)  0.93%  (3.69%)
Total Return, at Net Asset Value**  1.55%  (21.78%)  (4.26%)  (18.17%)  (3.76%)  1.55%  (21.78%)
Total Return, at Market Value**  1.50%  (21.61%)  (4.10%)  (21.88%)  (6.55%)  1.50%  (21.61%)

 

(a)Represents the closing bid/ask mean as of December 31, 2018
*Percentages are annualized
**Percentages are not annualized
***For Sit Rising Rate ETF, effective January 1, 2018, Fund expenses have been capped at 1.00% of average daily net assets, plus brokerage commissions and interest expense. For Breakwave Dry Bulk Shipping ETF, as of inception (March 22, 2018), Fund expenses have been capped at 3.50% of average daily net assets, plus brokerage commissions, interest expense, and interest expense.

34

  SIX MONTHS ENDED  SIX MONTHS ENDED 
  DECEMBER 31, 2019  DECEMBER 31, 2018 
  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		  SIT RISING  BREAKWAVE DRY BULK
SHIPPING		 
  RATE ETF  ETF  RATE ETF  ETF 
             
Net Asset Value            
Net asset value per Share, beginning of period $22.70  $13.25  $24.65  $21.98 
Net investment income (loss)  0.12   (0.28)  0.12   (0.30)
Net realized and unrealized gain (loss)  0.14   2.40   (0.71)  (3.12)
Net Income (Loss)  0.26   2.12   (0.59)  (3.42)
Net Asset Value per Share, end of period $22.96  $15.37  $24.06   18.56 
Market Value per Share, end of period $22.97  $15.45  $24.09   17.92(a)
Ratios to Average Net Assets*                
Expense Ratio***  1.08%  4.89%  1.19%  4.43%
Expense Ratio*** before Waiver/Assumption  6.59%  25.77%  1.36%  21.70%
Net Investment Income (Loss)  1.02%  (3.19%)  1.02%  (2.79%)
Total Return, at Net Asset Value**  1.15%  16.00%  (2.39%)  (15.56%)
Total Return, at Market Value**  1.06%  17.49%  (2.31%)  (18.69%)

(a)Representsextraordinary expenses, if any. Prior to the closing bid/ask mean asliquidation of December 31, 2018
*Percentages are annualized
**Percentages are not annualized
***For Sit Rising Rate ETF, effective January 1, 2018, Fund expenses havehad been capped at 1.00% of average daily net assets, plus brokerage commissions, interest expense, and interest expense. extraordinary expenses.


  SIX MONTHS ENDED    
  DECEMBER 31,
2020		  SIX MONTHS ENDED
DECEMBER 31, 2019		 
  BREAKWAVE DRY BULK SHIPPING
ETF		  SIT
RISING RATE ETF		  BREAKWAVE DRY BULK SHIPPING ETF 
Net Asset Value         
Net asset value per Share, beginning of period $7.70  $22.70  $13.25 
Net investment income (loss)  (0.17)  0.12   (0.28)
Net realized and unrealized gain (loss)  0.40   0.14   2.40 
Net Income (Loss)  0.23   0.26   2.12 
Net Asset Value per Share, end of period $7.93  $22.96  $15.37 
Market Value per Share, end of period $7.70  $22.97  $15.45 
             
Ratios to Average Net Assets*            
Expense Ratio***  4.32%  1.08%  4.89%
Expense Ratio*** before Waiver/Assumption  4.45%  6.59%  25.77%
Net Investment Income (Loss)  (4.32%)  1.02%  (3.19%)
Total Return, at Net Asset Value**  2.99%  1.15%  16.00%
Total Return, at Market Value**  4.19%  1.06%  17.49%

*Percentages are annualized
**Percentages are not annualized
***For Breakwave Dry Bulk Shipping ETF, as of inception (March 22, 2018), Fund expenses have been capped at 3.50% of average daily net assets, plus brokerage commissions, interest expense, and extraordinary expenses, if any. Prior to the liquidation of Sit Rising Rate ETF, Fund expenses had been capped at 1.00% of average daily net assets, plus brokerage commissions, interest expense.expense, and extraordinary expenses.

 


(11) Legal Proceedings

Samuel Masucci III and Bernard Karol, principals of the Sponsor, are defendants, along with certain affiliates of the Sponsor, in an action filed May 2, 2017 in the Superior Court of New Jersey captionedPureShares, LLC d/b/a PureFunds et al. v. ETF Managers Group, LLC et al., Docket No. C-63-17 (the “PureShares Action”). The PureShares Action alleges claims based ondisputesarising out of contractual relationships with ETF Managers Group LLC, an affiliate of the Sponsor. The action seeks damages in unspecified amounts and injunctive relief based on breach of contract, wrongful termination, and several other theories.

Samuel Masucci III, a principal of the Sponsor, was a defendant, along with certain affiliates of the Sponsor, in a case filed on October 26, 2017 in the United States District Court for the Southern District of New York by NASDAQ, Inc. captionedNasdaq, Inc. v. Exchange Traded Managers Group, LLC et al., Case 1:17-cv-08252 (the “Nasdaq Action”). This action arose out of the same facts and circumstances as the PureShares Action and asserts claims for breach of contract, conversion and certain other claims with respect to the same exchange traded funds as in thePureShares Action. Mr. Masucci was dismissed as a defendant pursuant to a motion to dismiss in August 2018. The matter was the subject of a bench trial in May 2019, and on December 20, 2019, the Court issued an Opinion and Order awarding compensatory damages to Plaintiff in the amount of $78,403,172.36, plus prejudgment interest. The Court also denied Plaintiff’s requests for punitive damages and equitable relief. The Adviser filed a notice of appeal from the judgment on January 19, 2020. The Sponsor believes that this judgment will not affect its ability to continue to act as CPO and Sponsor for the Funds.

(12) Subsequent Events

 

In preparing these financial statements, the Funds haveFund has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued. This evaluation did not result in any subsequent events that necessitated disclosures and/or adjustments to the financial statements.


Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

 

This information should be read in conjunction with the financial statements and notes included in Item 1 of Part I of this Quarterly Report (the “Report”). The discussion and analysis which follows may contain trend analysis and other forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934 which reflect our current views with respect to future events and financial results. Words such as “anticipate,” “expect,” “intend,” “plan,” “believe,” “seek,” “outlook” and “estimate,” as well as similar words and phrases, signify forward-looking statements. ETF Managers Group Commodity Trust I’s forward-looking statements are not guarantees of future results and conditions, and important factors, risks and uncertainties may cause our actual results to differ materially from those expressed in our forward-looking statements.

 

You should not place undue reliance on any forward-looking statements. Except as expressly required by the Federal securities laws, ETF Managers Capital, LLC undertakes no obligation to publicly update or revise any forward-looking statements or the risks, uncertainties or other factors described in this Report, as a result of new information, future events or changed circumstances or for any other reason after the date of this Report.

 

Overview

 

The Trust is a Delaware statutory trust formed on July 23, 2014. The Trust is a series trust formed pursuant to the Delaware Statutory Trust Act and currently includes two separateone series: Sit Rising Rate ETF (“RISE”) is the first series of the Trust and is a commodity pool that continuously issues common shares of beneficial interest that may be purchased and sold on the NYSE Arca, Inc. stock exchange (“NYSE Arca”). The second series of the Trust, Breakwave Dry Bulk Shipping ETF (“BDRY,” and together with RISE, each, aor the “Fund” and collectively, the “Funds”), is also a commodity pool that continuously issues shares of beneficial interest that may be purchased and sold on the NYSE Arca.

 

The Funds are eachFund is managed and controlled by ETF Managers Capital LLC (the “Sponsor”), a single member limited liability company that was formed in the state of Delaware on June 12, 2014. EachThe Fund pays the Sponsor a management fee. The Sponsor, the Trust, and the FundsFund maintain their main business offices at 30 Maple Street, Suite 2, Summit, NJ 07901. The Sponsor’s telephone number is (908) 897-0518.

 

The Sponsor is a wholly-owned subsidiary of Exchange Traded Managers Group LLC (“ETFMG”), a limited liability company domiciled and headquartered in New Jersey.

 

The Sponsor has the power and authority to establish and designate one or more series and to issue shares thereof, from time to time as it deems necessary or desirable. The Sponsor has exclusive power to fix and determine the relative rights and preferences as between the shares of any series as to the right of redemption, special and relative rights as to dividends and other distributions and on liquidation, conversion rights, and conditions under which the series shall have separate voting rights or no voting rights. The term for which the Trust is to exist commenced on the date of the filing of the Certificate of Trust, and the Trust, the Funds,Fund, and any additional series created in the future will exist in perpetuity, unless earlier terminated in accordance with the provisions of the Trust Agreement. Separate and distinct records shall be maintained for each Fund and the assets associated with a Fund shall be held in such separate and distinct records (directly or indirectly, including a nominee or otherwise) and accounted for in such separate and distinct records separately from the assets of any other series. The FundsFund and each future series will be separate from all such series in respect of the assets and liabilities allocated to a Fund and each separate series and will represent a separate investment portfolio of the Trust.

 

The Funds are eachFund is a “commodity pool” as defined by the Commodity Exchange Act (“CEA”). Consequently, the Sponsor has registered as a commodity pool operator (“CPO”) with the Commodity Futures Trading Commission (“CFTC”) and is a member of the National Futures Association (“NFA”).

 

The sole Trustee of the Trust is Wilmington Trust, N.A. (the “Trustee”), and the Trustee serves as the Trust’s corporate trustee as required under the Delaware Statutory Trust Act (“DSTA”). The Trustee’s principal offices are located at 1100 North Market Street, Wilmington, Delaware 19890. The Trustee is unaffiliated with the Sponsor. The rights and duties of the Trustee and the Sponsor with respect to the offering of the Shares and Fund management and the shareholders are governed by the provisions of the DSTA and by the Trust Agreement.

 

RISE commenced investment operations on February 19, 2015. RISE commenced trading on NYSE Arca on February 19, 2015 and trades under the symbol “RISE”. BDRY commenced investment operations on March 22, 2018. BDRY commenced trading on NYSE Arca on March 22, 2018. BDRY commenced trading on NYSE Arca on March 22, 2018 and trades under the symbol “BDRY”.  

 

EachThe Fund is designed and managed to track the performance of a portfolio (a “Benchmark Portfolio”) consisting of futures contracts and options on futures contracts (the “Benchmark Component Instruments”).

 


Sit Rising RateBreakwave Dry Bulk Shipping ETF

 

The Investment Objective of the Fund

RISE’s investment objective is to profit from rising interest rates by tracking the performance of a portfolio (“the Benchmark Portfolio”) consisting of exchange traded futures contracts and options on futures on 2, 5 and 10 year U.S. Treasury securities (“Treasury Instruments”) weighted to achieve a targeted negative 10 year average effective portfolio duration (the “RISE Benchmark Component Instruments”). RISE seeks to achieve its investment objective by investing in the RISE Benchmark Component Instruments currently constituting the RISE Benchmark Portfolio.

The Benchmark Portfolio

The RISE Benchmark Portfolio is maintained by Sit Fixed Income Advisors II, LLC (“Sit”), which also serves as the Fund’s commodity trading advisor (“CTA”). The RISE Benchmark Portfolio will be rebalanced, reconstituted, or both, monthly (typically on the 15th of each month or on the next business day if the 15th is a holiday, weekend, or other day on which the national stock exchanges are closed) to maintain a negative 10 year average effective duration. The RISE Benchmark Portfolio and RISE will each maintain a short position in Treasury Instruments. RISE does not use futures contracts or options to obtain leveraged investment results.

The Fund will not invest in swaps or other over-the-counter derivative instruments.

The RISE Benchmark Component Instruments currently constituting the RISE Benchmark Portfolio as of December 31, 2019 include:

Name Ticker Market
Value USD		 
US 10YR FUT OPTN FEB 20P 129.50 TYH0P129.5 $21,797 
UNITED STATES TREAS BILLS 912796WQ8  5,344,368 
US 5YR NOTE MAR20 FVH0  (5,456,031)
US 2 YR NOTE MAR20 TUH0  (11,852,500)
US 5YR FUTR OPTN FEB19C 118.50 FVH0C118.5  (5,906)

The RISE Benchmark Component Instruments currently constituting the RISE Benchmark Portfolio and anticipated rebalancing dates, as well as the daily holdings of the Fund, are available on the Fund’s website at www.risingrateetf.com.

The weighting of the Treasury Instruments constituting the RISE Benchmark Component Instruments will be based on each maturity’s duration contribution. The expected range for the duration weighted percentage of the 2 year and 5 year maturity Treasury Instruments will be from 30% to 70%. The expected range for the duration weighted percentage of the 10 year maturity Treasury Instruments will be from 5% to 25%. The relative weightings of the RISE Benchmark Component Instruments will be shifted between maturities when there are material changes in the shape of the yield curve, for example, if the Federal Reserve began raising short term interest rates more than long term interest rates. In such an instance, Sit, which maintains the RISE Benchmark Portfolio, will increase the weightings of the 2 year and reduce the weighting in the 10 year maturity Treasury Instruments. Conversely, Sit will do the opposite if the Federal Reserve began raising long term interest rates more than short term interest rates. Reconstitution and rebalancing each will occur monthly, on the 15th, except for as noted above or if there are radical changes in the yield curve such that effective duration is outside of a range from negative nine to negative 11 year average effective duration, in which case Sit will adjust the maturities of the Treasury Instruments before the next expected monthly reconstitution.

The Sponsor anticipates that approximately 5% to 15% of the Fund’s assets will be used as payment for or collateral for Treasury Instruments. In order to collateralize its Treasury Instrument positions, the Fund will hold such assets, from which it will post margin to its FCM, in an amount equal to the margin required by the relevant exchange, and transfer to its FCM any additional amounts that may be separately required by the FCM. When establishing positions in Treasury Instruments, the Fund will be required to deposit initial margin with a value of approximately 3% to 10% of the value of each Treasury Instrument position at the time it is established. These margin requirements are subject to change from time to time by the exchange or the FCM. On a daily basis, the Fund will be obligated to pay, or entitled to receive, variation margin in an amount equal to the change in the daily settlement level of its Treasury Instruments positions. Any assets not required to be posted as margin with the FCM will be held at the Fund’s administrator in cash or cash equivalents as discussed below.


The RISE Benchmark Portfolio will be invested in RISE Benchmark Component Instruments and rebalanced, as noted above, to maintain a negative average effective portfolio duration of approximately 10 years. Duration is a measure of estimated price sensitivity relative to changes in interest rates. Portfolios with longer durations are typically more sensitive to changes in interest rates. For example, if interest rates rise by 1%, the market value of a security with an effective duration of 5 years would decrease by 5%, with all other factors being constant, and likewise the market value of a security with an effective duration of negative 5 years would increase by 5%, with all other factors being constant. Duration estimates are based on assumptions by Sit and are subject to a number of limitations. Duration is a more accurate estimate of price sensitivity provided interest rate changes are small and occur equally in short-term and long-term securities. Investments in debt securities typically decrease in value when interest rates rise. The risk is usually greater for longer-term debt securities.

The Fund will incur certain expenses in connection with its operations. The Fund will hold cash or cash equivalents such as U.S. Treasuries or other high credit quality, short-term fixed-income or similar securities for direct investment or as collateral for the Treasury Instruments and for other liquidity purposes and to meet redemptions that may be necessary on an ongoing basis. These expenses and income from the cash and cash equivalent holdings may cause imperfect correlation between changes in the Fund’s NAV and changes in the RISE Benchmark Portfolio, because the RISE Benchmark Portfolio does not reflect expenses or income.

Breakwave Dry Bulk Shipping ETF

The Investment Objective of the Fund

 

BDRY’s investment objective is to provide investors with exposure to the daily change in the price of dry bulk freight futures by tracking the performance of a portfolio (the “BDRY Benchmark Portfolio” and consisting of exchange-cleared futures contracts on the cost of shipping dry bulk freight (“Freight Futures”). BDRY seeks to achieve its investment objective by investing substantially all of its assets in the Freight Futures currently constituting the BDRY Benchmark Portfolio.

 

The Benchmark Portfolio

 

The BDRY Benchmark Portfolio is maintained by Breakwave Advisors LLC (“Breakwave”), which also serves as BDRY’s CTA. The BDRY Benchmark Portfolio consists of the Freight Futures, which are a three-month strip of the nearest calendar quarter of futures contracts on specified indexes (each a “Reference Index”) that measure rates for shipping dry bulk freight. Each Reference Index is published each United Kingdom business day by the London-based Baltic Exchange Ltd. (the “Baltic Exchange”) and measures the charter rate for shipping dry bulk freight in a specific size category of cargo ship – Capesize, Panamax or Supramax. The three Reference Indexes are as follows:

 

 ●Capesize: the Capesize 5TC Index;

 

 ●Panamax: the Panamax 4TC Index; and

 

 ●Supramax: the Supramax 6TC Index.

  

The BDRY Benchmark Component Instruments currently constituting the BDRY Benchmark Portfolio as of December 31, 20192020 include:

 

Name Ticker Market
Value USD		 
Baltic Panamax Time Charter Jan 20 BFFAP F20 Index $245,520 
Baltic Panamax Time Charter Feb 20 BFFAP G20 Index  257,640 
Baltic Panamax Time Charter Mar 20 BFFAP H20 Index  300,390 
Baltic Capesize Time Charter Jan 20 BFFATC F20 Index  452,165 
Baltic Capesize Time Charter Feb 20 BFFATC G20 Index  400,085 
Baltic Capesize Time Charter Mar 20 BFFATC H20 Index  404,040 
Baltic Supramax T/C Average Shipping Route Jan 20 BFFAS F20 Index  37,250 
Baltic Supramax T/C Average Shipping Route Feb 20 BFFAS G20 Index  38,910 
Baltic Supramax T/C Average Shipping Route Mar 20 BFFAS H20 Index  44,125 
Name Ticker Market
Value USD		 
Baltic Panamax T/C Average Shipping Route Jan 21 BFFAP F21 Index $3,304,460 
Baltic Panamax T/C Average Shipping Route Feb 21 BFFAP G21 Index  3,137,490 
Baltic Panamax T/C Average Shipping Route Mar 21 BFFAP H21 Index  3,504,040 
Baltic Supramax Average Shipping Route Jan 21 S58FM F21 Index  838,320 
Baltic Supramax Average Shipping Route Feb 21 S58FM G21 Index  695,680 
Baltic Supramax Average Shipping Route Mar 21 S58FM H21 Index  761,680 
Baltic Capesize Time Charter Jan 21 BFFATC F21 Index  4,797,420 
Baltic Capesize Time Charter Feb 21 BFFATC G21 Index  4,012,400 
Baltic Capesize Time Charter Mar 21 BFFATC H21 Index  3,740,330 

   

The value of the Capesize 5TC Index is disseminated at 11:00 a.m., London Time and the value of the Panamax 4TC Index and the Supramax 6TC Index each is disseminated at 1:00 p.m., London Time. The Reference Index information disseminated by the Baltic Exchange also includes the components and value of each component in each Reference Index. Such Reference Index information also is widely disseminated by Reuters and/or other major market data vendors.

 

BDRY seeks to achieve its investment objective by investing substantially all of its assets in the Freight Futures currently constituting the BDRY Benchmark Portfolio. The BDRY Benchmark Portfolio will include all existing positions to maturity and settle them in cash. During any given calendar quarter, the BDRY Benchmark Portfolio will progressively increase its position to the next calendar quarter three-month strip, thus maintaining constant exposure to the Freight Futures market as positions mature. 

 


The BDRY Benchmark Portfolio will maintain long-only positions in Freight Futures. The BDRY Benchmark Portfolio will include a combination of Capesize, Panamax and Supramax Freight Futures. More specifically, the BDRY Benchmark Portfolio will include 50% exposure in Capesize Freight Futures contracts, 40% exposure in Panamax Freight Futures contracts and 10% exposure in Supramax Freight Futures contracts. The BDRY Benchmark Portfolio will not include and the Fund will not invest in swaps, non-cleared dry bulk freight forwards or other over-the-counter derivative instruments that are not cleared through exchanges or clearing houses. The Fund may hold exchange-traded options on Freight Futures. The BDRY Benchmark Portfolio is maintained by Breakwave and will be rebalanced annually. The Freight Futures currently constituting the Benchmark Portfolio, as well as the daily holdings of the Fund will be available on the Fund’s website at www.drybulketf.com.

 

When establishing positions in Freight Futures, BDRY will be required to deposit initial margin with a value of approximately 10% to 40% of the notional value of each Freight Futures position at the time it is established. These margin requirements are established and subject to change from time to time by the relevant exchanges, clearing houses or the Fund’s futures commission merchant (“FCM”). On a daily basis, the Fund will be obligated to pay, or entitled to receive, variation margin in an amount equal to the change in the daily settlement level of its Freight Futures positions. Any assets not required to be posted as margin with the FCM will be held at the Fund’s custodian in cash or cash equivalents.

 

BDRY will hold cash or cash equivalents such as U.S. Treasuries or other high credit quality, short-term fixed-income or similar securities for direct investment or as collateral for the U.S. Treasuries and for other liquidity purposes and to meet redemptions that may be necessary on an ongoing basis. The Fund may also realize interest income from its holdings in U.S. Treasuries or other market rate instruments.

  

The Sponsor

 

ETF Managers Capital, LLC is the sponsor of the Trust and the Funds.Fund. The Sponsor is a Delaware limited liability company, formed on June 12, 2014. The principal office is located at 30 Maple Street, Suite 2, Summit, NJ 07901. The Sponsor is registered as a commodity pool operator (“CPO”) with the Commodity Futures Trading Commission (“CFTC”) and became a member of the National Futures Association (“NFA”) on September 23, 2014. The Trust and the FundsFund operate pursuant to the Trust Agreement.

 

The Sponsor is a wholly-owned subsidiary of Exchange Traded Managers Group LLC (“ETFMG”), a limited liability company domiciled and headquartered in New Jersey. The Sponsor maintains its main business office at 30 Maple Street, Suite 2, Summit, NJ 07901.

 

Under the Trust Agreement, the Sponsor has exclusive management and control of all aspects of the Trust’s business. The Trustee has no duty or liability to supervise the performance of the Sponsor, nor will the Trustee have any liability for the acts or omissions of the Sponsor. The shareholders have no voice in the day to day management of the business and operations of the FundsFund and the Trust, other than certain limited voting rights as set forth in the Trust Agreement. In the course of its management of the business and affairs of the FundsFund and the Trust, the Sponsor may, in its sole and absolute discretion, appoint an affiliate or affiliates of the Sponsor as additional sponsors and retain such persons, including affiliates of the Sponsor, as it deems necessary to effectuate and carry out the purposes, business and objectives of the Trust.

 


Results of Operations

Sit Rising RateBreakwave Dry Bulk Shipping ETF

 

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

The per Share market value of RISE and its NAV tracked closely for the three months ended December 31, 2019.

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

The per Share market value of RISE and its NAV tracked closely for the three months ended December 31, 2018.


NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

The per Share market value of RISE and its NAV tracked closely for the six months ended December 31, 2019.

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

The per Share market value of RISE and its NAV tracked closely for the six months ended December 31, 2018.

41

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

The graph above compares the return of RISE with the benchmark portfolio returns for the three months ended December 31, 2019. The difference in the NAV price and the benchmark value often results in the appearance of a NAV premium or discount to the benchmark. The difference is related to the cumulative impact on NAV of the Fund’s income and expenses during the period presented in the chart above.

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

The graph above compares the return of RISE with the benchmark portfolio returns for the three months ended December 31, 2018. The difference in the NAV price and the benchmark value often results in the appearance of a NAV premium or discount to the benchmark. The difference is related to the cumulative impact on NAV of the Fund’s income and expenses during the period presented in the chart above.

42

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

The graph above compares the return of RISE with the benchmark portfolio returns for the six months ended December 31, 2019. The difference in the NAV price and the benchmark value often results in the appearance of a NAV premium or discount to the benchmark. The difference is related to the cumulative impact on NAV of the Fund’s income and expenses during the period presented in the chart above.

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR INDEX LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

The graph above compares the return of RISE with the benchmark portfolio returns for the six months ended December 31, 2018. The difference in the NAV price and the benchmark value often results in the appearance of a NAV premium or discount to the benchmark. The difference is related to the cumulative impact on NAV of the Fund’s income and expenses during the period presented in the chart above.


FOR THE THREE MONTHS ENDED DECEMBER 31, 2019

Fund Share Price Performance

 

During the three months ended December 31, 2019,2020, freight rate volatility gradually declined as the NYSE Arca market value of each Share increased (+1.50%) from $22.63 per Share, representing the closing trade on September 30, 2019, to $22.97 per Share, representing the closing price on December 31, 2019.supply and demand balance found an equilibrium following a volatile third quarter. The Share price high and lowBaltic Dry Index, an index that tracks global spot rates for the three months ended December 31, 2019 and related changedry bulk, dropped rapidly in early October from the closing Share price onhigh late September 30, 2019 were as follows: Shares traded from a high of $23.10 per Share (+2.08%) on December 18, 2019levels caused due to a low of $22.17 per Share (-2.03%) on October 8, 2019.

Fund Share Net Asset Performance

For the three months ended December 31, 2019, the net asset value of each Share increased (+1.55%) from $22.61 per Share, representing the closing net asset value per Share on September 30, 2019, to $22.96 per Share. The realized and unrealized net gainspositional tightness in the investments, futuresmarket, and options contractsremained in a tight range until the end of the year when a small uptick in freight rates materialized. Export activity out of Brazil did not experience the seasonal boost, and net investment income resultedthus, Capesize rates failed to rally to a similar degree as in previous years. Panamax and Supramax rates were well supported due to higher grains activity but also very strong coal demand from China. Overall, dry bulk rates exited the overall increase inyear relatively strong, an unusual development as the NAV per Share during the three months ended December 31, 2019.

Net income for the three months ended December 31, 2019, was $99,440, resulting from net realized losses on investments, futures and options contractshistorical pattern usually points to end of $306,211, net unrealized gains on investments, futures and options contracts of $391,106 and the net investment income of $14,545.

FOR THE THREE MONTHS ENDED DECEMBER 31, 2018

Fund Share Price Performanceyear weakness.

 

During the three months ended December 31, 2018,2020, freight futures also followed spot rates closely, as sentiment improved and expectations for both short term as well as long term rates increased towards the NYSE Arca market valueend of each Share decreased (-4.10%) from $25.12 per Share, representing the closing trade on September 28, 2018, to $24.09 per Share, representing the closing price on December 31, 2018. The Share price high and low for the three months ended December 31, 2018 and related change from the closing Share price on September 28, 2018 were as follows: Shares traded from a high of $25.50 per Share (+1.51%) on October 5, 2018 to a low of $24.00 per Share (-4.46%) on December 31, 2018.

Fund Share Net Asset Performance

For the three months ended December 31, 2018, the net asset value of each Share decreased (-4.26%) from $25.13 per Share, representing the closing net asset value per Share on September 28, 2018, to $24.06 per Share. Net losses in the investments, futures and options contracts more than offset Fund net investment income which resulted in the overall decrease in the NAV per Share during the three months ended December 31, 2018.

Net loss for the three months ended December 31, 2018, was $2,877,961, resulting from net unrealized losses on investments, futures and options contracts of $3,327,205, net realized gains on investments, futures and options contracts of $266,684 and the net investment income of $182,560.


FOR THE SIX MONTHS ENDED DECEMBER 31, 2019

Fund Share Price Performance

During the six months ended December 31, 2019, the NYSE Arca market value of each Share increased (+1.06%) from $22.73 per Share, representing the closing trade on June 28, 2019, to $22.97 per Share, representing the closing price on December 31, 2019. The Share price high and low for the six months ended December 31, 2019 and related change from the closing Share price on June 28, 2019 were as follows: Shares traded from a high of $23.10 per Share (+1.63%) on December 18, 2019 to a low of $22.07 per Share (-2.90%) on September 3, 2019.

Fund Share Net Asset Performance

For the six months ended December 31, 2019, the net asset value of each Share increased (+1.15%) from $22.70 per Share, representing the closing net asset value per Share on June 28, 2019, to $22.96 per Share. The realized and unrealized net gain in the investments, futures and options contracts and net investment income resulted in the overall increase in the NAV per Share during the six months ended December 31, 2019.

Net income for the six months ended December 31, 2019, was $152,003, resulting from net realized losses on investments, futures and options contracts of $252,728, offset by net unrealized gains on investments, futures and options contracts of $368,231 and the net investment income of $36,500.

FOR THE SIX MONTHS ENDED DECEMBER 31, 2018

Fund Share Price Performance

During the six months ended December 31, 2018, the NYSE Arca market value of each Share decreased (-2.31%) from $24.66 per Share, representing the closing trade on June 29, 2018, to $24.09 per Share, representing the closing price on December 31, 2018. The Share price high and low for the six months ended December 31, 2018 and related change from the closing Share price on June 29, 2018 were as follows: Shares traded from a high of $25.50 per Share (+3.41%) on October 5, 2018 to a low of $24.00 per Share (-2.68%) on December 31, 2018.

Fund Share Net Asset Performance

For the six months ended December 31, 2018, the net asset value of each Share decreased (-2.39%) from $24.65 per Share, representing the closing net asset value per Share on June 29, 2018, to $24.06 per Share. Net losses in the investments, futures and options contracts more than offset Fund net investment income which resulted in the overall decrease in the NAV per Share during the six months ended December 31, 2018.

Net loss for the six months ended December 31, 2018, was $1,766,906, resulting from net realized losses on investments, futures and options contracts of $1,611,508, net unrealized losses on investments, futures and options contracts of $456,707 and the net investment income of $301,309.

Breakwave Dry Bulk Shipping ETF

During the three months ended December 31, 2019, freight rates experienced weakness relative to the previous quarter, with the Baltic Dry Index declining approximately 40% during the period. The relatively elevated level of rates duringHowever, the previous calendar quarter combined with lower demand for iron ore from China, werefutures curve exited the main reasons for such performance. Furthermore, with the IMO 2020 fuel regulations starting on January 1, 2020, uncertainty over availability of fuelyear in sharp backwardation and pricing weighed on the dry bulk freight market during the period. Partly offsetting those factors was stronger overall coal and grain volumes asat a result of seasonality which usually has a positive impact on dry bulk shipping during the last quarter of the year.

During the three months ended December 31, 2019, freight futures declined compared to the previous quarter, following the declining trajectory of spot rates. As a result,steeper than usual level. BDRY’s performance closely tracked the performance of short-term dry bulk freight futures, withleading to lower volatility of the Fund’s NAV steadily decliningper share during the period. Such decline accelerated towardBDRY ended up 4% lower for the end of the quarter, with the holidays negatively impacting liquidity as most market participants were away.quarter.

 


NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR BENCHMARK PORTFOLIO LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

 

The per Share market value of BDRY and its NAV tracked closely for the three months ended December 31, 2019.2020.

 

 

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR BENCHMARK PORTFOLIO LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

 

The per Share market value of BDRY and its NAV tracked closely for the three months ended December 31, 2018.2019.

 


 

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR BENCHMARK PORTFOLIO LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

 

 The per Share market value of BDRY and its NAV tracked closely for the six months ended December 31, 2020.

 

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR BENCHMARK PORTFOLIO LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE. 


NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR BENCHMARK PORTFOLIO LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

 

The per Share market value of BDRY and its NAV tracked closely for the six months ended December 31, 2019.

 


NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR BENCHMARK PORTFOLIO LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

 

The per Share market value of BDRY and its NAV tracked closely for the six months ended December 31, 2018.

 

48

 

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR BENCHMARK PORTFOLIO LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

 

45

 

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR BENCHMARK PORTFOLIO LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

NEITHER THE PAST PERFORMANCE OF THE FUND NOR THE PRIOR BENCHMARK PORTFOLIO LEVELS AND CHANGES, POSITIVE OR NEGATIVE, SHOULD BE TAKEN AS AN INDICATION OF THE FUND’S FUTURE PERFORMANCE.

 


The graphs above compare the returns of BDRY with the benchmark portfolio returns for the three months ended December 31, 20192020 and 2018,2019, and the six months ended December 31, 20192020 and 2018.2019. The difference in the NAV price and the benchmark value often results in the appearance of a NAV premium or discount to the benchmark. Differences in the benchmark return and the BDRY net asset value per share are due primarily to the following factors:

 

 ○●Benchmark portfolio uses settlement prices of freight futures vs. BDRY closing Share price,

 

 ○●Benchmark portfolio roll methodology assumes rolls that can happen even at fractions of lots vs. BDRY that uses the real minimum market lot available (5 days per months),

 

 ○●Benchmark portfolio assumes rolls are happening at the settlement price of the day vs. that buys at a transaction price during the day that might or might not be equal to the settlement price,

 

 ○●Benchmark portfolio assumes no trading commissions vs. BDRY that pays 10bps for each transaction,

 

 ○●Benchmark portfolio assumes no clearing fees vs. BDRY that pays approximately 3-5bps of total clearing fees for each trade,

 

 ○●Benchmark portfolio assumes no management fees vs. BDRY fee structure of 3.5% of average net assets on an annualized basis, and

 

 ○●Creations and redemptions that lead to transactions that occur at prices that might be different than the settlement prices

 

There are no competitors. BDRY is the only Freight futures ETF globally.

 


FOR THE THREE MONTHS ENDED DECEMBER 31, 20192020

 

Fund Share Price Performance

 

During the three months ended December 31, 2020, the NYSE Arca market value of each Share decreased (-6.55%) from $8.24 per Share, representing the closing trade on September 30, 2020, to $7.70 per Share, representing the closing price on December 31, 2020. The Share price high and low for the three months ended December 31, 2020 and related change from the closing Share price on September 30, 2020 were as follows: Shares traded from a high of $8.85 per Share (+7.40%) on October 5, 2020 to a low of $6.10 per Share (-25.97%) on December 3, 2020.

Fund Share Net Asset Performance

For the three months ended December 31, 2020, the net asset value of each Share decreased (-3.76%) from $8.24 per Share to $7.93 per Share. Losses in the investments and futures contracts and the net investment loss resulted in the overall decrease in the NAV per Share during the three months ended December 31, 2020.

Net loss for the three months ended December 31, 2020, was $1,093,410, resulting from net realized losses on investments and futures contracts of $3,591,274, unrealized gains on futures contracts of $2,788,440 and the net investment loss of $290,576.


FOR THE THREE MONTHS ENDED DECEMBER 31, 2019

Fund Share Price Performance

During the three months ended September 30, 2019, the NYSE Arca market value of each Share decreased (-21.61%) from $19.71 per Share, representing the closing trade on September 30, 2019, to $15.45 per Share, representing the closing price on December 31, 2019. The Share price high and low for the three months ended December 31, 2019 and related change from the closing Share price on September 30, 2019 were as follows: Shares traded from a high of $22.19 per Share (+12.58%) on October 9, 2019 to a low of $15.10 per Share (-23.39%) on December 30, 2019.

 

Fund Share Net Asset Performance

 

For the three months ended December 31, 2019, the net asset value of each Share decreased (-21.78%) from $19.65 per Share to $15.37 per Share. Losses in the investments and futures contracts and the net investment loss resulted in the overall decrease in the NAV per Share during the three months ended December 31, 2019.

 

Net loss for the three months ended December 31, 2019, was $378,382, resulting from net realized losses on investments and futures contracts of $243,845, unrealized losses on futures contracts of $117,845 and the net investment loss of $16,692.

 

FOR THE THREESIX MONTHS ENDED DECEMBER 31, 20182020

 

Fund Share Price Performance

 

During the threesix months ended December 31, 2018,2020, the NYSE Arca market value of each Share decreased (-21.88%increased (+4.19%) from $22.94$7.39 per Share, representing the closing trade on June 29, 2018,30, 2020, to $17.92$7.70 per Share, representing the closing price on December 31, 2018.2020. The Share price high and low for the threesix months ended December 31, 20182020 and related change from the closing Share price on June 29, 201830, 2020 were as follows: Shares traded from a high of $23.20$9.48 per Share (+1.13%28.28%) on October 12, 2018July 6, 2020 to a low of $14.45$6.10 per Share (-37.01%(-17.46%) on November 14, 2018.December 3, 2020.

 

Fund Share Net Asset Performance

 

For the threesix months ended December 31, 2018,2020, the net asset value of each Share decreased (-18.17%increased (+2.99%) from $22.68$7.70 per Share to $18.56$7.93 per Share. LossesGains in the investments and futures contracts andmore than offset the net investment loss resultedresulting in the overall decreaseincrease in the NAV per Share during the threesix months ended December 31, 2018.2020.

 

Net lossincome for the threesix months ended December 31, 2018,2020, was $618,436,$1,597,220, resulting from net realized lossesgains on investments and futures contracts of $737,508,$6,513,496, unrealized gainslosses on futures contracts of $137,005$4,277,960 and the net investment loss of $17,933.$638,316. 

 

FOR THE SIX MONTHS ENDED DECEMBER 31, 2019

 

Fund Share Price Performance

 

During the six months ended December 31, 2019, the NYSE Arca market value of each Share increased (+17.49%) from $13.15 per Share, representing the closing trade on June 30, 2019, to $15.45 per Share, representing the closing price on December 31, 2019. The Share price high and low for the six months ended December 31, 2019 and related change from the closing Share price on SeptemberJune 30, 2019 were as follows: Shares traded from a high of $22.19 per Share (+68.75%) on October 9, 2019 to a low of $13.35 per Share (+1.52%) on July 1, 2019.

 

Fund Share Net Asset Performance

 

For the six months ended December 31, 2019, the net asset value of each Share increased (+16.00%) from $13.25 per Share to $15.37 per Share. Gains in the investments and futures contracts more than offset the net investment loss resulting in the overall increase in the NAV per Share during the six months ended December 31, 2019.

 

Net income for the six months ended December 31, 2019, was $969,166, resulting from net realized gains on investments and futures contracts of $338,181, unrealized gains on futures contracts of $666,605 and the net investment loss of $35,620. 

 


FOR THE SIX MONTHS ENDED DECEMBER 31, 2018

Fund Share Price Performance

During the six months ended December 31, 2018, the NYSE Arca market value of each Share decreased (-18.69%) from $22.04 per Share, representing the closing trade on June 29, 2018, to $17.92 per Share, representing the closing price on December 31, 2018. The Share price high and low for the six months ended December 31, 2018 and related change from the closing Share price on June 29, 2018 were as follows: Shares traded from a high of $25.60 per Share (+16.15%) on August 21, 2018 to a low of $14.45 per Share (-34.44%) on November 14, 2018.

Fund Share Net Asset Performance

For the six months ended December 31, 2018, the net asset value of each Share decreased (-15.56%) from $21.98 per Share to $18.56 per Share. Losses in the investments and futures contracts and the net investment loss resulted in the overall decrease in the NAV per Share during the six months ended December 31, 2018.

Net loss for the six months ended December 31, 2019, was $513,032, resulting from net realized gains on investments and futures contracts of $434,239, unrealized losses on futures contracts of $33,580 and the net investment loss of $45,213.

Calculating NAV

 

The Fund’s NAV is calculated by:

 

 ●Taking the current market value of its total assets;

 

 ●Subtracting any liabilities; and

 

 ●Dividing that total by the total number of outstanding shares.

 

The Administrator calculates the NAV of the Fund once each NYSE Arca trading day. The NAV for a particular trading day is released after 4:00 p.m. E.T. Trading during the core trading session on the NYSE Arca typically closes at 4:00 p.m. E.T. The Administrator uses CME closing price (determined at the earlier of the close of the CME or 2:30 p.m. E.T.) for the contracts traded on the CME, with respect to RISE, and the Baltic Exchange settlement price for the Freight Futures and option contracts, with respect to BDRY.contracts. The Administrator calculates or determines the value of all other Fund investments using market quotations, if available, or other information customarily used to determine the fair value of such investments as of the close of the NYSE Arca (normally 4:00 p.m. E.T.), in accordance with the current Administrative Agency Agreement among U.S. Bancorp Fund Services, the Fund and the Sponsor. For purposes of calculating the NAV of RISE, “other information” customarily used in determining fair value includes information consisting of market data in the relevant market supplied by one or more third parties including, without limitation, relevant rates, prices, yields, yield curves, volatilities, spreads, correlations or other market data in the relevant market; or information of the types described above from internal sources if that information is of the same type used by the Fund in the regular course of its business for the valuation of similar transactions. The information may include costs of funding, to the extent costs of funding are not and would not be a component of the other information being utilized. Third parties supplying quotations or market data may include, without limitation, dealers in the relevant markets, end-users of the relevant product, information vendors, brokers and other sources of market information.

 

In addition, in order to provide updated information relating to the Fund for use by investors and market professionals, an updated indicative fund value (“IFV”) is made available through on-line information services throughout the core trading session hours of 9:30 a.m. E.T. to 4:00 p.m. E.T. on each trading day. The IFV is calculated by using the prior day’s closing NAV per share of the Fund as a base and updating that value throughout the trading day to reflect changes in the most recently reported trade price for the futures and/or options held by the Fund. For BDRY, certainCertain Freight Futures brokers provide real time pricing information to the general public either through their websites or through data vendors such as Bloomberg or Reuters. The IFV disseminated during NYSE Arca core trading session hours should not be viewed as an actual real time update of the NAV, because the NAV is calculated only once at the end of each trading day based upon the relevant end of day values of the Fund’s investments.

 

The IFV is disseminated on a per share basis every 15 seconds during regular NYSE Arca core trading session hours. The normal trading hours of the CME are 10:00 a.m. E.T. to 2:30 p.m. E.T. The customary trading hours of the Freight Futures trading are 3:00 a.m. E.T. to 12:00 p.m. E.T. This means that there is a gap in time at the beginning and/or the end of each day during which a Fund’s shares are traded on the NYSE Arca, but real-time trading prices for contracts are not available. During such gaps in time the IFV will be calculated based on the end of day price of such contracts from the CMR’s or Baltic Exchange’s, as applicable,Exchange immediately preceding the trading session. In addition, other investments and U.S. Treasuries held by the Fund will be valued by the Administrator, using rates and points received from client-approved third party vendors (such as Reuters and WM Company) and advisor or broker-dealer quotes. These investments will not be included in the IFV.

 

The NYSE Arca disseminates the IFV through the facilities of CTA/CQ High Speed Lines. In addition, the IFV is published on the NYSE Arca’s website and is available through on-line information services such as Bloomberg and Reuters.

 


Dissemination of the IFV provides additional information that is not otherwise available to the public and is useful to investors and market professionals in connection with the trading of athe Fund’s shares on the NYSE Arca. Investors and market professionals are able throughout the trading day to compare the market price of athe Fund’s shares and the IFV. If the market price of athe Fund’s shares diverges significantly from the IFV, market professionals will have an incentive to execute arbitrage trades. For example, if athe Fund’s shares appear to be trading at a discount compared to the IFV, a market professional could buy the Fund shares on the NYSE Arca and take the opposite position in Treasury Instruments or Freight Futures, as applicable.Futures. Such arbitrage trades can tighten the tracking between the market price of athe Fund’s shares and the IFV and thus can be beneficial to all market participants.

 

Critical Accounting Policies

 

EachThe Fund’s critical accounting policies are as follows:

 

Preparation of the financial statements and related disclosures in accordance with U.S. generally accepted accounting principles requires the application of appropriate accounting rules and guidance, as well as the use of estimates. The Funds’ application of these policies involves judgments and the use of estimates. Actual results may differ from the estimates used and such differences could be material. EachThe Fund holds a significant portion of its assets in futures contracts and money market funds, which are held at fair value.

 

EachThe Fund calculates its net asset value as of the NAV Calculation Time as described above.

 

The values which are used by the FundsFund for their Treasury Instruments andits Freight Futures as applicable, are provided by the applicable Fund’s commodity broker, which uses market prices when available. In addition, the Funds estimateFund estimates interest income on a daily basis using prevailing rates earned on theirits cash and cash equivalents. These estimates are adjusted to the actual amount received on a monthly basis and the difference, if any, is not considered material.

 


Credit Risk

 

When athe Fund enters into Benchmark Component Instruments, it will be exposed to the credit risk that the counterparty will not be able to meet its obligations. For purposes of credit risk, the counterparty for the Benchmark Component Instruments traded on or cleared by the CMEBaltic Exchange and other futures exchanges is the clearinghouse associated with those exchanges. In general, clearinghouses are backed by their members who may be required to share in the financial burden resulting from the nonperformance of one of their members, which should significantly reduce credit risk. There can be no assurance that any counterparty, clearinghouse, or their financial backers will satisfy their obligations to the Funds.Fund.

 

The Sponsor will attempt to minimize certain of these market and credit risks by normally:

 

 ●executing and clearing trades with creditworthy counterparties, as determined by the Sponsor;

 

 ●limiting the outstanding amounts due from counterparties of the Funds;

 

 ●not posting margin directly with a counterparty;

 

 ●limiting the amount of margin or premium posted at the FCM; and

 

 ●ensuring that deliverable contracts are not held to such a date when delivery of an underlying asset could be called for.

 

The Commodity Exchange Act (“CEA”) requires all FCMs, such as the Fund’s clearing brokers, to meet and maintain specified fitness and financial requirements, to segregate customer funds from proprietary funds and account separately for all customers’ funds and positions, and to maintain specified books and records open to inspection by the staff of the CFTC. The CFTC has similar authority over introducing brokers, or persons who solicit or accept orders for commodity interest trades but who do not accept margin deposits for the execution of trades. The CEA authorizes the CFTC to regulate trading by FCMs and by their officers and directors, permits the CFTC to require action by exchanges in the event of market emergencies, and establishes an administrative procedure under which customers may institute complaints for damages arising from alleged violations of the CEA. The CEA also gives the states powers to enforce its provisions and the regulations of the CFTC.

 


On November 14, 2013, the CFTC published final regulations that require enhanced customer protections, risk management programs, internal monitoring and controls, capital and liquidity standards, customer disclosures and auditing and examination programs for FCMs. The rules are intended to afford greater assurances to market participants that customer segregated funds and secured amounts are protected, customers are provided with appropriate notice of the risks of futures trading and of the FCMs with which they may choose to do business, FCMs are monitoring and managing risks in a robust manner, the capital and liquidity of FCMs are strengthened to safeguard the continued operations and the auditing and examination programs of the CFTC and the self-regulatory organizations are monitoring the activities of FCMs in a thorough manner.

 

Liquidity and Capital Resources

 

The Funds doFund does not anticipate making use of borrowings or other lines of credit to meet theirits obligations. The FundsFund meets theirits liquidity needs in the normal course of business from the proceeds of the sale of theirits investments or from the cash, cash equivalents and/or the collateralizing Treasury Securities that they hold.it holds. The Funds’Fund’s liquidity needs include: redeeming theirits shares, providing margin deposits for existing Benchmark Component Instruments, the purchase of additional Benchmark Component Instruments, and paying expenses.

 

The Funds generateFund generates cash primarily from (i) the sale of Creation Baskets and (ii) interest earned on cash, cash equivalents and theirits investments in collateralizing Treasury Securities. Generally, all of the net assets of the Funds areFund is allocated to trading in Benchmark Component Instruments. Most of the assets of the FundsFund are held in Treasury Instruments, cash and/or cash equivalents that could or are used as margin or collateral for trading in Benchmark Component Instruments. The percentage that such assets bear to the total net assets will vary from period to period as the market values of the Benchmark Component Instruments change. InterestsInterest earned on interest-bearing assets of the FundsFund are paid to the Funds.Fund. Due to the economic uncertainty due to the impact of the COVID-19 pandemic, the Fund has experienced a significant decrease in interest rates, and as such the Fund is experiencing a higher breakeven year over year.

 

The investments of the FundsFund in Benchmark Component Instruments could be subject to periods of illiquidity because of market conditions, regulatory considerations and other reasons. Such conditions could prevent the FundsFund from promptly liquidating a position in Benchmark Component Instruments.

 

Market Risk

 

Trading in Benchmark Component Instruments such as futures contracts will involve the FundsFund entering into contractual commitments to purchase or sell specific amounts of instruments at a specified date in the future. The gross or face amount of the contracts is expected to significantly exceed the future cash requirements of the FundsFund as the Funds intendFund intends to close out any open positions prior to the contractual expiration date. As a result, the Funds’Fund’s market risk is the risk of loss arising from the decline in value of the contracts, not from the need to make delivery under the contracts. The Funds considerFund considers the “fair value” of derivative instruments to be the unrealized gain or loss on the contracts. The market risk associated with the commitment by the FundsFund to purchase a specific contract will be limited to the aggregate face amount of the contracts held.

 

The exposure of the FundsFund to market risk will depend on a number of factors including the markets for the specific instrument, the volatility of interest rates and foreign exchange rates, the liquidity of the instrument-specific market and the relationships among the contracts held by the Funds.Fund.

 


Regulatory Environment

 

The regulation of futures markets, futures contracts, and futures exchanges has historically been comprehensive. The CFTC and the exchanges are authorized to take extraordinary actions in the event of a market emergency including, for example, the retroactive implementation of speculative position limits, increased margin requirements, the establishment of daily price limits and the suspension of trading.

 

The regulation of commodity interest transactions in the United States is an evolving area of law and is subject to ongoing modification by governmental and judicial action. Considerable regulatory attention has been focused on non-traditional investment pools that are publicly distributed in the United States. There is a possibility of future regulatory changes within the United States altering, perhaps to a material extent, the nature of an investment in the Funds,Fund, or the ability of the FundsFund to continue to implement its investment strategy.strategies. In addition, various national governments outside of the United States have expressed concern regarding the disruptive effects of speculative trading in the commodities markets and the need to regulate the derivatives markets in general. The effect of any future regulatory change on the FundsFund is impossible to predict but could be substantial and adverse.

 


The CFTC possesses exclusive jurisdiction to regulate the activities of commodity pool operators and commodity trading advisors with respect “commodity interests,” such as futures, swaps and options, and has adopted regulations with respect to the activities of those persons and/or entities. Under the CEA, a registered CPO, such as the Sponsor, is required to make annual filings with the CFTC and NFA describing its organization, capital structure, management and controlling persons. In addition, the CEA authorizes the CFTC to require and review books and records of, and documents prepared by, registered CPOs. Pursuant to this authority, the CFTC requires CPOs to keep accurate, current and orderly records for each pool that they operate. The CFTC may suspend the registration of a commodity pool operator (1) if the CFTC finds that the operator’s trading practices tend to disrupt orderly market conditions, (2) if any controlling person of the operator is subject to an order of the CFTC denying such person trading privileges on any exchange, and (3) in certain other circumstances. Suspension, restriction or termination of the Sponsor’s registration as a commodity pool operator would prevent it, until that registration were to be reinstated, from managing the Funds,Fund, and might result in the termination of the FundsFund if a successor sponsor is not elected pursuant to the Trust Agreement.

 

The Funds’Fund’s investors are afforded prescribed rights for reparations under the CEA. Investors may also be able to maintain a private right of action for violations of the CEA. The CFTC has adopted rules implementing the reparation provisions of the CEA, which provide that any person may file a complaint for a reparations award with the CFTC for violation of the CEA against a floor broker or an FCM, introducing broker, commodity trading advisor, CPO, and their respective associated persons.

 

Pursuant to authority in the CEA, the NFA has been formed and registered with the CFTC as a registered futures association. At the present time, the NFA is the only self-regulatory organization for commodity interest professionals, other than futures exchanges. The CFTC has delegated to the NFA responsibility for the registration of CPOs and FCMs and their respective associated persons. The Sponsor and the Funds’Fund’s clearing broker are members of the NFA. As such, theyit will be subject to NFA standards relating to fair trade practices, financial condition and consumer protection. The NFA also arbitrates disputes between members and their customers and conducts registration and fitness screening of applicants for membership and audits of its existing members. Neither the Trust nor the FundsFund are required to become a member of the NFA.

 

The regulations of the CFTC and the NFA prohibit any representation by a person registered with the CFTC or by any member of the NFA, that registration with the CFTC, or membership in the NFA, in any respect indicates that the CFTC or the NFA has approved or endorsed that person or that person’s trading program or objectives. The registrations and memberships of the parties described in this summary must not be considered as constituting any such approval or endorsement. Likewise, no futures exchange has given or will give any similar approval or endorsement.

 

Futures exchanges in the United States are subject to varying degrees of regulation under the CEA depending on whether such exchange is a designated contract market, exempt board of trade or electronic trading facility. Clearing organizations are also subject to the CEA and the rules and regulations adopted thereunder as administered by the CFTC. The CFTC’s function is to implement the CEA’s objectives of preventing price manipulation and excessive speculation and promoting orderly and efficient commodity interest markets. In addition, the various exchanges and clearing organizations themselves exercise regulatory and supervisory authority over their member firms.

 


The Dodd-Frank Wall Street Reform and Consumer Protection Act (the “Dodd-Frank Act”) was enacted in response to the economic crisis of 2008 and 2009 and it significantly altered the regulatory regime to which the securities and commodities markets are subject. To date, the CFTC has issued proposed or final versions of almost all of the rules it is required to promulgate under the Dodd-Frank Act. The provisions of the new law include the requirement that position limits be established on a wide range of commodity interests, including agricultural, energy, and metal-based commodity futures contracts, options on such futures contracts and cleared and uncleared swaps that are economically equivalent to such futures contracts and options; new registration and recordkeeping requirements for swap market participants; capital and margin requirements for “swap dealers” and “major swap participants,” as determined by the new law and applicable regulations; reporting of all swaps transactions to swap data repositories; and the mandatory use of clearinghouse mechanisms for sufficiently standardized swap transactions that were historically entered into in the over-the-counter market, but are now designated as subject to the clearing requirement; and margin requirements for over-the counter swaps that are not subject to the clearing requirements.

 


The Dodd-Frank Act was intended to reduce systemic risks that may have contributed to the 2008/2009 financial crisis. Since the first draft of what became the Dodd-Frank Act, supporters and opponents have criticizeddebated the broad scope of the legislation and, in particular,legislation. As the regulations implemented by federal agencies as a result. Since 2010, and most notably in 2015 and 2016, Republicans have proposed comprehensive legislation both in the House and the Senate of the US Congress. These bills are intended to pare back some of the provisions of the Dodd-Frank Act of 2010 that critics view as overly broad, unnecessary to the stabilityadministrations of the U.S. financial system,change, the interpretation and inhibiting the growth of the U.S. economy. Further, the administration has promised and issued several executive orders intended to relieve the financial burden created by the Dodd-Frank Act, although these executive orders only set forth several general principles to be followed by the federal agencies and do not mandate the wholesale repeal of the Dodd-Frank Act. The scope of the effect that passage of new financial reform legislation could have on U.S. securities, derivatives and commodities markets is not clear at this time because each federal regulatory agency would have to promulgate new regulations to implement such legislation.implementation will change with them. Nevertheless, regulatory reform of any kind may have a significant impact on U.S. regulated entities.

 

Current rules and regulations under the Dodd-Frank Act require enhanced customer protections, risk management programs, internal monitoring and controls, capital and liquidity standards, customer disclosures and auditing and examination programs for FCMs. The rules are intended to afford greater assurances to market participants that customer segregated funds and secured amounts are protected, customers are provided with appropriate notice of the risks of futures trading and of the FCMs with which they may choose to do business, FCMs are monitoring and managing risks in a robust manner, the capital and liquidity of FCMs are strengthened to safeguard the continued operations and the auditing and examination programs of the CFTC and the self-regulatory organizations are monitoring the activities of FCMs in a thorough manner.

 

Regulatory bodies outside the U.S. have also passed or proposed, or may propose in the future, legislation similar to that proposed by the Dodd-Frank Act or other legislation containing other restrictions that could adversely impact the liquidity of and increase costs of participating in the commodities markets. For example, the European Union (“EU”) Markets in Financial Instruments Directive (Directive 2014/65/EU) and Markets in Financial Instruments Regulation (Regulation (EU) No 600/2014) (together “MiFID II”), which has applied since January 3, 2018, governs the provision of investment services and activities in relation to, as well as the organized trading of, financial instruments such as shares, bonds, units in collective investment schemes and derivatives. In particular, MiFID II requires EU Member States to apply position limits to the size of a net position which a person can hold at any time in commodity derivatives traded on trading EU trading venues and in “economically equivalent” over-the-counter (“OTC”) contracts. By way of further example, the European Market Infrastructure Regulation (Regulation (EU) No 648/2012)2012, as amended) (“EMIR”) introduced certain requirements in respect of OTC derivatives including: (i) the mandatory clearing of OTC derivative contracts declared subject to the clearing obligation; (ii) risk mitigation techniques in respect of un-cleared OTC derivative contracts, including the mandatory margining of un-cleared OTC derivative contracts; and (iii) reporting and recordkeeping requirements in respect of all derivatives contracts. In the event that the requirements under EMIR and MiFID II apply, these are expected to increase the cost of transacting derivatives.

 

In addition, considerable regulatory attention has been focused on non-traditional publicly distributed investment pools such as the Funds.Fund. Furthermore, various national governments have expressed concern regarding the disruptive effects of speculative trading in certain commodity markets and the need to regulate the derivatives markets in general. The effect of any future regulatory change on the FundsFund is impossible to predict, but could be substantial and adverse.

 

Management believes that as of December 31, 2019,2020, it had fulfilled in a timely manner all Dodd-Frank or other regulatory requirements to which it is subject.

 


Off Balance Sheet Financing

 

As of December 31, 2019,2020, neither the Trust nor the FundsFund have any loan guarantees, credit support or other off-balance sheet arrangements of any kind other than agreements entered into in the normal course of business, which may include indemnification provisions relating to certain risks service providers undertake in performing services which are in the best interests of the Funds.Fund. While the exposure of the FundsFund under these indemnification provisions cannot be estimated, they are not expected to have a material impact on the financial position of the Funds.Fund.

 


Redemption Basket Obligation

 

Other than as necessary to meet the investment objective of the Fund and pay the contractual obligations described below, the Fund will require liquidity to redeem Redemption Baskets. The Fund intends to satisfy this obligation through the transfer of cash of the Fund (generated, if necessary, through the sale of Treasury Instruments) in an amount proportionate to the number of Shares being redeemed.

 

Contractual Obligations

 

The primary contractual obligations of eachthe Fund will be with the Sponsor and certain other service providers.

 

Management and CTA Fees

 

RISE and BDRY each paypays the Sponsor a management fee (the “Sponsor Fee”) in consideration of the Sponsor’s advisory services to the Funds.Fund. Additionally, RISE and BDRY each pays its respective commodity trading advisor a license and service fee (the “CTA Fee”).

RISE pays the Sponsor Fee monthly in arrears, in an amount equal to the greater of 0.15% per annum of the value of RISE’s average daily net assets or $75,000 effective January 1, 2018. The Sponsor Fee is paid in consideration of the Sponsor’s management services to RISE. RISE also pays Sit a CTA Fee monthly in arrears, for the use of the RISE Benchmark Portfolio in an amount equal to 0.20% effective January 1, 2018 (0.50% prior to January 1, 2018) per annum of RISE’s average daily net assets.

The Sponsor has contractually agreed to waive RISE’s Sponsor Fee and/or assume RISE’s remaining expenses so that RISE’s expenses do not exceed an annual rate of 1.00%, excluding brokerage commissions, interest expense, and extraordinary expenses, of the value of RISE’s average daily net assets (the “RISE Expense Cap”). The assumption of expenses and waiver of RISE’s Sponsor fee are contractual on the part of the Sponsor, through January 31, 2021. If after that date, the Sponsor no longer assumed expenses or waived RISE’s Sponsor Fee, RISE could be adversely impacted, including in its ability to achieve its investment objective.


RISE currently accrues its daily expenses up to the RISE Expense Cap. At the end of each month, the accrued amount is remitted to the Sponsor as the Sponsor is responsible for the payment of the routine operational, administrative and other ordinary expenses of RISE. RISE’s total expenses amounted to $116,924 and $206,506, for the three months ended December 31, 2019 and 2018, respectively, and $236,108 and $400,559 for the six months ended December 31, 2019 and 2018, respectively, of which $100,323 and $17,920 for the three months ended December 31, 2019 and 2018, respectively, and $197,476 and $47,986 for the six months ended December 31, 2019 and 2018, respectively, was absorbed by the Sponsor pursuant to the RISE Expense Cap.

 

BDRY pays the Sponsor Fee, monthly in arrears, in an amount equal to the greater of 0.15% per year of BDRY’s average daily net assets; or $125,000. BDRY’s Sponsor Fee is paid in consideration of the Sponsor’s management services to BDRY. BDRY also pays Breakwave the CTA Fee monthly in arrears, for the use of BDRY’s Benchmark Portfolio in an amount equal to 1.45% per annum of BDRY’s average daily net assets.

 

Breakwave has agreed to waive its CTA Fee and the Sponsor has agreed to correspondingly assume the remaining expenses of BDRY so that BDRY’s expenses do not exceed an annual rate of 3.50%, excluding brokerage commissions, interest expense, and extraordinary expenses, of the value of BDRY’s average daily net assets (the “BDRY Expense Cap”). The assumption of expenses and waiver of BDRY’s CTA Fee are contractual on the part of the Sponsor and Breakwave, respectively, through September 30, 2020.February 28, 2022. If after that date, the Sponsor and/or Breakwave no longer assumed expenses or waived the CTA Fee, respectively, BDRY could be adversely impacted, including in its ability to achieve its investment objective.

 

The assumption of expenses by the Sponsor for BDRY, pursuant to the BDRY Expense Cap, amounted to $112,262$-0- and $131,193$112,262 for the three months ended December 31, 20192020 and 2018,2019, respectively, and $217,318$-0- and $256,383,$217,318 for the six months ended December 31, 20192020 and 2018, 2019,respectively, as disclosed in the Combined Statements of Operations. The waiver of Breakwave’s CTA fees, pursuant to the undertaking, amounted to $6,561$18,432 and $10,462$6,561 for the three months ended December 31, 20192020 and 2018,2019, respectively, and $16,213$18,432 and $23,499$16,213 for the six months ended December 31, 20192020 and 2018,2019, respectively, as disclosed in the Combined Statements of Operations. BDRY currently accrues its daily expenses up tobased upon established individual expense amounts or the BDRY Expense Cap.Cap, whichever aggregate amount is less. At the end of each month, the accrued amount is remitted to the Sponsor as the Sponsor is responsible for the payment of the routine operational, administrative and other ordinary expenses of the Fund. BDRY’s total expenses amounted to $141,861$309,401 and $173,067$141,861 for the three months ended December 31, 20192020 and 2018,2019, respectively, and $657,815 and $288,164, and $351,703 forrespectively, as disclosed in the six months ended December 31, 2019 and 2018, respectively.Combined Statements of Operations. 

 


EachThe Fund’s ongoing fees, costs and expenses of its operation, not subject to the applicable Expense Cap include brokerage and other fees and commissions incurred in connection with the trading activities of the Fund, and extraordinary expenses (including, but not limited to, legal claims and liabilities and litigation costs and any indemnification related thereto). Expenses subject to an Expense Cap include (i) expenses incurred in connection with registering additional Shares of athe Fund or offering Shares of athe Fund; (ii) the routine expenses associated with the preparation and, if required, the printing and mailing of monthly, quarterly, annual and other reports required by applicable U.S. federal and state regulatory authorities, Trust meetings and preparing, printing and mailing proxy statements to Shareholders; (iii) the routine services of the Trustee, legal counsel and independent accountants; (iv) routine accounting, bookkeeping, custodial and transfer agency services, whether performed by an outside service provider or by affiliates of the Sponsor; (v) postage and insurance; (vi) costs and expenses associated with client relations and services; (vii) costs of preparation of all federal, state, local and foreign tax returns and any taxes payable on the income, assets or operations of athe Fund.

 

While the Sponsor has agreed to pay registration fees to the SEC and any other regulatory agency in connection with the offer and sale of the Shares offered through eachthe Fund’s prospectus, the legal, printing, accounting and other expenses associated with such registration, and the initial fee of $7,500 for listing the Shares on the NYSE Arca, each Fund will be responsible for any registration fees and related expenses incurred in connection with any future offer and sale of Shares of the Fund in excess of those offered through its prospectus.

 

Any general expenses of the Trust will be allocated amongto the FundsFund and any other future series of the Trust as determined by the Sponsor in its sole and absolute discretion. The Trust is also responsible for extraordinary expenses, including, but not limited to, legal claims and liabilities and litigation costs and any indemnification related thereto. The Trust and/or the Sponsor may be required to indemnify the Trustee, Distributor or Administrator under certain circumstances.

 

The parties cannot anticipate the amount of payments that will be required under these arrangements for future periods as the NAV and trading levels to meet investment objectives for the FundsFund will not be known until a future date. These agreements are effective for a specific term agreed upon by the parties with an option to renew, or, in some cases, are in effect for the duration of athe Fund’s existence. The parties may terminate these agreements earlier for certain reasons listed in the agreements.


Item 3. Quantitative and Qualitative Disclosures About Market Risk

 

Not applicable to Smaller Reporting Companies.

 

Item 4. Controls and Procedures

 

Disclosure Controls and Procedures

 

The Trust and the FundsFund maintain disclosure controls and procedures that are designed to ensure that material information required to be disclosed in the Trust’s periodic reports filed or submitted under the Securities Exchange Act of 1934, as amended, is recorded, processed, summarized and reported within the time period specified in the SEC’s rules and forms.

 

The duly appointed officers of the Sponsor, including its principal executive officer and principal financial officer, have evaluated the effectiveness of the Trust’s and the Funds’Fund’s disclosure controls and procedures and have concluded that the disclosure controls and procedures of the Trust and the FundsFund have been effective as of the end of the period covered by this quarterly report on Form 10-Q.

 

Change in Internal Control Over Financial Reporting

 

There were no changes in the Trust’s or eitherthe Fund’s internal control over financial reporting during the last fiscal quarter that have materially affected, or are reasonably likely to materially affect, the Trust’s or the Funds’Fund’s internal control over financial reporting.


Part II. OTHER INFORMATION

 

Item 1. Legal Proceedings.

 

Although the Funds may, from time to time, be involved in litigation arising out of its operations in the normal course of business or otherwise, the Funds are currently not a party to any pending material legal proceedings.None.

Samuel Masucci III and Bernard Karol, principals of the Sponsor, are defendants, along with certain affiliates of the Sponsor, in an action filed May 2, 2017 in the Superior Court of New Jersey captionedPureShares, LLC d/b/a PureFunds et al. v. ETF Managers Group, LLC et al., Docket No. C-63-17 (the “PureShares Action”). The PureShares Action alleges claims based ondisputesarising out of contractual relationships with ETF Managers Group LLC, an affiliate of the Sponsor. The action seeks damages in unspecified amounts and injunctive relief based on breach of contract, wrongful termination, and several other theories.

Samuel Masucci III, a principal of the Sponsor, was a defendant, along with certain affiliates of the Sponsor, in a case filed on October 26, 2017 in the United States District Court for the Southern District of New York by NASDAQ, Inc. captionedNasdaq, Inc. v. Exchange Traded Managers Group, LLC et al., Case 1:17-cv-08252 (the “Nasdaq Action”). This action arose out of the same facts and circumstances as the PureShares Action and asserts claims for breach of contract, conversion and certain other claims with respect to the same exchange traded funds as in thePureShares Action. Mr. Masucci was dismissed as a defendant pursuant to a motion to dismiss in August 2018. The matter was the subject of a bench trial in May 2019, and on December 20, 2019, the Court issued an Opinion and Order awarding compensatory damages to Plaintiff in the amount of $78,403,172.36, plus prejudgment interest. The Court also denied Plaintiff’s requests for punitive damages and equitable relief. The Adviser filed a notice of appeal from the judgment on January 19, 2020. The Sponsor believes that this judgment will not affect its ability to continue to act as CPO and Sponsor for the Funds.

 

Item 1A. Risk Factors

 

Not applicable to Smaller Reporting Companies.

 

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds

 

 (a)On January 4, 2018, the Sponsor made a $1,000 capital contribution to the Breakwave Dry Bulk Shipping ETF in exchange for forty shares of such Fund prior to the Fund’s commencement of operations; such shares were sold in a private offering exempt from registration under Section 4(a)(2) of the Securities Act of 1933, as amended.

 

 (b)The original registration statement on Form S-1 registering 20,000,00010,000,000 common units, or “Shares,” of the Sit Rising RateBreakwave Dry Bulk Shipping ETF (File No. 333-199190)333-218453) was declared effective on January 29, 2015. A second registration statement on Form S-1 (File No. 333-222379) which replaced the original registration statement was declared effective on January 19,March 9, 2018. On December 31, 2019, 250,0402020, 3,175,040 shares of the Fund were outstanding for a market capitalization of $5,740,486.$24,447,808. The offering proceeds were invested in futures contracts, options on futures contracts, or cash and cash equivalents in accordance with the Fund’s investment objective stated in the prospectus.

The original registration statement on Form S-1 registering 10,000,000 common units, or “Shares,” of the Breakwave Dry Bulk Shipping ETF (File No. 333-218453) was declared effective on March 9, 2018. On December 31, 2019, 150,040 shares of the Fund were outstanding for a market capitalization of $2,318,118. The offering proceeds were invested in futures contracts, options on futures contracts or cash and cash equivalents in accordance with the Fund’s investment objective stated in the prospectus.

(c)RISE does not purchase shares directly from its shareholders. In connection with redemptions of baskets held by an Authorized Participant, RISE redeemed one (1) basket (comprising 25,000 shares) during the three months ended December 31, 2019 at an average price per share of $23.11. The following table provides information about RISES’s redemptions by Authorized Participants during the three months ended December 31, 2019:

Calendar Month Number of Shares Redeemed  

Average Price

Paid per Share

 
October 2019  -   - 
November 2019  -   - 
December 2019  25,000  $23.11 
Total  25,000  $23.11 

 

BDRY does not purchase shares directly from its shareholders. In connection with redemptions of baskets held by an Authorized Participant, BDRY redeemed one (1) basket (comprisingninety (24) baskets (each comprising 25,000 shares) during the three months ended December 31, 20192020 at an average price per share of $17.26.$7.79. The following table provides information about BDRY’s redemptions by Authorized Participants during the three months ended December 31, 2019:2020:

 

Calendar Month Number of Shares Redeemed  

Average Price

Paid per Share

 
October 2019  -   - 
November 2019  -   - 
December 2019  25,000  $17.26 
Total  25,000  $17.26 


Calendar Month Number
of Shares
Redeemed		  Average
Price
Paid per
Share		 
October 2020  550,000  $7.78 
November 2020  -   - 
December 2020  50,000   7.87 
Total  600,000  $7.79 

Item 3. Defaults Upon Senior Securities

 

None.

 

Item 4. Mine Safety Disclosures

 

Not Applicable.

 

Item 5. Other Information

 

(a)None.

 

(b)Not Applicable.


Item 6. Exhibits

 

The following exhibits are filed as part of this report as required under Item 601 of Regulation S-K:

 

31.1 Certification by the Principal Executive Officer of the Registrant pursuant to Rules 13a-14 and 15d-14 of the Exchange Act. (1)
   
31.2 Certification by the Principal Financial Officer of the Registrant pursuant to Rules 13a-14 and 15d-14 of the Exchange Act. (1)
   
32.1 Certification by the Principal Executive Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)
   
32.2 Certification by the Principal Financial Officer of the Registrant pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. (1)
   
101.INS XBRL Instance Document
   
101.SCH XBRL Taxonomy Extension Schema
   
101.CAL XBRL Taxonomy Extension Calculation Linkbase
   
101.DEF XBRL Taxonomy Definition Linkbase
   
101.LAB XBRL Taxonomy Extension Label Linkbase
   
101.PRE XBRL Taxonomy Extension Presentation Linkbase

 

(1)Filed Herewith.


SIGNATURES

 

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

 

ETF Managers Group Commodity Trust I (Registrant)

 

By:ETF Managers Capital, LLC 
 its Sponsor 
   
By:/s/ Samuel Masucci III 
 Name: Samuel Masucci III 
 Title:Principal Executive Officer
 
   
By:/s/ John A. Flanagan 
 Name: John A. Flanagan 
 Title:Principal Financial Officer 

 

Date: February 14, 202016, 2021

 

 

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