UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number 811-22310
ETF Managers Trust (Formerly FactorShares Trust)
(Exact name of registrant as specified in charter)
(Exact name of registrant as specified in charter)
30 Maple Street, Suite 2
Summit, NJ 07901
(Address of principal executive offices) (Zip code)
(Address of principal executive offices) (Zip code)
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
(Name and address of agent for service)
(Name and address of agent for service)
(908)-897-0518
Registrant's telephone number, including area code
Date of fiscal year end: September 30, 2016
Date of reporting period: September 30, 2016
Item 1. Reports to Stockholders.
Annual Report
September 30, 2016
PureFunds™ ISE Junior Silver ETF
Ticker: SILJ
PureFunds™ ISE Cyber Security ETF
Ticker: HACK
PureFunds™ ISE Big Data ETF
Ticker: BIGD
PureFunds™ ISE Mobile Payments ETF
Ticker: IPAY
PureFunds™ Drone Economy Strategy ETF
Ticker: IFLY
PureFunds™ Video Game Tech ETF
Ticker: GAMR
PureFunds™ Solactive FinTech ETF
Ticker: FINQ
PureFunds™ ETFx HealthTech ETF
Ticker: IMED
The Funds are series of ETF Managers Trust.
PureFunds™ ETFs
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The year ended September 30, 2016 has been a banner period for PureFunds. With our most recent Exchange-Traded Funds launched in August 2016, PureFunds has continued to expand its leadership role in the thematic ETF space. PureFunds Solactive FinTech ETF (Nasdaq Ticker: FINQ) and PureFunds ETFx HealthTech ETF (Nasdaq Ticker: IMED) now join our PureFunds ISE Cyber Security ETF (NYSE Arca Ticker: HACK), PureFunds ISE Junior Silver ETF (NYSE Arca Ticker: SILJ), PureFunds ISE Big Data ETF (NYSE Arca Ticker: BIGD), PureFunds Video Game Tech ETF (Nasdaq Ticker: GAMR), PureFunds Drone Economy Strategy ETF (Nasdaq Ticker: IFLY), and PureFunds ISE Mobile Payments ETF (NYSE Arca Ticker: IPAY) in this thematic advancement of the ETF industry. PureFunds strives to continue its endeavor of providing first-to-market thematic investments in the form of ETFs. We are extremely proud of the many accomplishments PureFunds has achieved with its partners to date and strive to continue providing investors with access to in demand investment themes and strategies.
During the 12-month period from October 1, 2015 to September 30, 2016, the S&P 500 Information Technology Sector Index, a broad measure of US listed technology companies, returned 14.60%. During the same period, the S&P Global 1200 Information Technology Sector Index, a broad measure of global technology companies, returned 22.50%. It was a strong 12 months for the broad technology sector and the more targeted strategies followed by the tech oriented PureFunds ETFs underperformed the broader sector during the period. For all of the funds, the primary difference between fund returns and index returns were the expenses of the funds, which are not part of the indexes that each of the funds track.
The ISE Cyber Security Index (“Index”) returned 11.79% over the period, The Fund NAV return for HACK was 11.23%, in line with the return of the Index. The best performing stocks during the period were The Keyw Holding Corp (up 79.51%), Science Applications Intl (up 75.52%) and Barracuda Networks Inc (up 63.54%). The worst performing stocks during the period were FireEye Inc (down -53.71%), Rapid7 Inc (down-22.42%) and Imperva Inc (down -17.97%).
The ISE Junior Silver (Small Cap Miners/ Explorers) Index (“Index”) returned 210.48% during the period. The Fund NAV return for SILJ was 201.99%, in line with the return of the index. The best performing stocks during the period were Impact Silver Corp (up 442.86%) Excellion Resources (up 429.58%), and Silvercorp Metals (up 392.94%). The worst performing stocks during the period were Mandalay Resources Corp (up 38.89%), Sierra Metals Inc (up 76.52%), and Silver Standard Resources (up 81.72%).
The ISE Big Data Index (“Index”) returned 12.33% during the period. The Fund NAV return for BIGD was 11.41% in line with the return of the Index. The best performing stocks during the period were Varonis Systems Inc (up 93.20%), Fair Isaac Corp (up 47.44%), and Hexagon AB (up 46.73%). The worst performing stocks during the period were Hortonworks (down -61.85%), The Rubicon Project Inc (down -43.01%), and Tableau Software Inc (down -30.72%).
The ISE Mobile Payments Index (“Index”) returned 7.07% during the period. The Fund NAV return for IPAY was 6.51%, in line with the return of the index. The best performing stocks during the period were NCR Corp (up 41.49%), Global Payments Inc (up 33.81%), and Paypal Holdings (up 31.99%). The worst performing stocks during the period were Net 1 UEPS Technologies (down -48.86%), Verifone Systems (down -43.24%), and Pax Global Technology Ltd (down -29.10%).
IFLY was listed for trading on March 9, 2016. From fund inception, The Reality Shares Drone Index (“Index”) returned 7.43%. The Fund NAV return for IFLY was 7.15%, in line with the return of the Index. The best performing stocks were Trimble Inc (up 73.93%), Vestel Elektronic (up 66.58%), and Kratos Defense & Security (up 63.27%). The worst performing stocks during the period were Parrot (down -70.42%), GoPro (down -46.57%), and Cobham (down -30.93%).
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GAMR was listed for trading on March 9, 2016. From fund inception, the EEFund Video Game Tech Index returned 32.08%. The Fund NAV return for GAMR was 31.62%, in line with the return of the index. The best performing stocks during the period were Weibo (up 328.91%), Advanced Micro Devices (up 301.74%), and Nvidia Corp (up 177.97%). The worst performing stocks during the period were Glu Mobile (down -48.74%), Gamestop Corp (down -33.05%), and Gungho Online Entertainment (down -30.23%).
FINQ was listed for trading on August 30, 2016. From fund inception, the Solactive FinTech Index returned 0.49%. The Fund NAV return for FINQ was 0.35%, in line with the return of the index. The best performing stocks during the period were Ellie Mae (up 58.18%), Temenos Group (up 53.00%), and Fair Isaac Corp (up 47.44%). The worst performing stocks during the period were Lending Club Corp (down -53.29%), On Deck Capital Inc (down -42.42%), and DH Corp (down -27.60%).
IMED was listed for trading on August 30, 2016. From fund inception, the ETFx HealthTech Index returned 1.92%. The Fund NAV return for IMED was 1.86%, in line with the return of the index. The best performing stocks during the period were Edward LifeSciences Corp (up 69.60%), Cochlear Ltd (up 68.91%), and Align Technology Inc (up 65.17%). The worst performing stocks during the period were Computer Programs & Systems (down -38.14%), Teladoc (down -17.86%), and ConMed Corp (down -16.09%).
Silver prices have risen far in 2016. This has significantly benefited the junior silver mining/exploration industry and the performance of SILJ was a stellar 201.99% as of September, 30. We are excited to see the renewed interest in this space positively affect SILJ. We have seen inflows into SILJ throughout the year while Assets Under Management in the fund have risen from ~$3.5 million at the start of the year to ~$77 million as of the 9/30/16 (roughly a 2,100% increase YTD).
The period ended on a strong note for technology in general and for the thematic strategies tracked by PureFunds.
On behalf of PureFunds and our industry leading partners, I would like to thank you for your continued interest in PureFunds and our unique suite of ETFs. We endeavor to provide our investors with new and innovative products and look forward to continuing this for years to come.
You can find further details about BIGD, FINQ, GAMR, HACK, IFLY, IMED, IPAY and SILJ by visiting www.purefunds.com, or by calling 1-877-756-PURE.
Sincerely, |
Samuel Masucci III |
Chairman of the Board |
Samuel Masucci III is a registered representative of ALPS Distributors, Inc. |
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Since | ||||
Average Annual Returns | 1 Year | Inception | ||
Periods Ended September 30, 2016 | Return | (11/29/12) | ||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF (NAV) | 201.99% | -5.71% | ||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF (Market) | 190.81% | -5.79% | ||
S&P 500 Index | 15.43% | 14.14% | ||
ISE Junior Silver (Small Cap Miners/Explorers) Index | 210.48% | -4.19% |
Total Fund Operating Expenses1 | 0.69% | |
1. The expense ratio is taken from the Fund’s most recent prospectus dated January 31, 2016. |
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on November 29, 2012, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any. The unmanaged indices do not reflect fees and are not available for direct investment.
5
PureFundsTM ISE Junior Silver (Small Cap Miners/Explorers) ETF
Top Ten Holdings* |
% of Total | ||||||
Security | Investments† | |||||
1 | Coeur Mining Inc. | 17.39% | ||||
2 | Pan American Silver Corporation | 14.51% | ||||
3 | First Majestic Silver Corporation | 10.35% | ||||
4 | Hochschild Mining PLC | 6.61% | ||||
5 | Endeavour Silver Corporation | 4.87% | ||||
6 | Fortuna Silver Mines, Inc. | 4.82% | ||||
7 | Silvercorp Metals, Inc. | 4.78% | ||||
8 | MAG Silver Corporation | 4.72% | ||||
9 | Silver Standard Resources, Inc. | 4.63% | ||||
10 | Mandalay Resources Corporation | 3.82% | ||||
Top Ten Holdings =76.50% of Total Investments† | ||||||
* Current portfolio holdings may not be indicative of future fund holdings. | ||||||
† Percentage of total investments less cash. |
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PureFunds™ ISE Cyber Security ETF
Growth of $10,000
Growth of $10,000
Average Annual Returns | 1 Year | Since Inception | ||
Periods Ended September 30, 2016 | Return | (11/11/14) | ||
PureFunds™ ISE Cyber Security ETF (NAV) | 11.23% | 6.43% | ||
PureFunds™ ISE Cyber Security ETF (Market) | 11.30% | 6.41% | ||
S&P 500 Index | 15.43% | 5.54% | ||
ISE Cyber Security Index | 11.79% | 7.66% |
Total Fund Operating Expenses1 | 0.75% | ||
1. The expense ratio is taken from the Fund’s most recent prospectus dated January 31, 2016. |
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on November 11, 2014, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any. The unmanaged indices do not reflect fees and are not available for direct investment.
7
PureFundsTM ISE Cyber Security ETF
Top Ten Holdings* |
% of Total | ||||||
Security | Investments† | |||||
1 | Imperva, Inc. | 4.39% | ||||
2 | Infoblox, Inc. | 4.28% | ||||
3 | Palo Alto Networks, Inc. | 4.08% | ||||
4 | Qualys, Inc. | 3.99% | ||||
5 | Juniper Networks, Inc. | 3.84% | ||||
6 | Science Applications International Corporation | 3.84% | ||||
7 | Fortinet, Inc. | 3.82% | ||||
8 | Cisco Systems, Inc. | 3.80% | ||||
9 | Symantec Corporation | 3.79% | ||||
10 | Check Point Software Technologies, Ltd. | 3.74% | ||||
Top Ten Holdings =39.59% of Total Investments† | ||||||
* Current portfolio holdings may not be indicative of future Fund holdings. | ||||||
† Percentage of total investments less cash. |
8
PureFunds™ ISE Big Data ETF
Growth of $10,000
Growth of $10,000
Average Annual Returns | 1 Year | Since Inception |
Periods Ended September 30, 2016 | Return | (7/15/15) |
PureFunds™ ISE Big Data ETF (NAV) | 11.41% | -0.60% |
PureFunds™ ISE Big Data ETF (Market) | 12.15% | -1.19% |
S&P 500 Index | 15.43% | 4.65% |
ISE Big DataTM Index | 12.33% | 0.19% |
Total Fund Operating Expenses1 | 0.75% |
1. The expense ratio is taken from the Fund’s most recent prospectus dated January 31, 2016.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on July 15, 2015, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any. The unmanaged indices do not reflect fees and are not available for direct investment.
9
PureFundsTM ISE Big Data ETF
Top Ten Holdings*
% of Total | ||||
Security | Investments† | |||
1 | PROS Holdings, Inc. | 2.49% | ||
2 | Hewlett Packard Enterprise Co. | 2.40% | ||
3 | HubSpot, Inc. | 2.35% | ||
4 | New Relic, Inc. | 2.33% | ||
5 | Software AG | 2.32% | ||
6 | Acxiom Corporation | 2.30% | ||
7 | Black Knight Financial Services, Inc. | 2.29% | ||
8 | Teradata Corporation | 2.29% | ||
9 | Medidata Solutions, Inc. | 2.29% | ||
10 | Nielsen Holdings PLC | 2.26% | ||
Top Ten Holdings =23.31% of Total Investments† | ||||
* Current Fund holdings may not be indicative of future Fund holdings. | ||||
† Percentage of total investments less cash. |
10
PureFunds™ ISE Mobile Payments ETF
Growth of $10,000
Average Annual Returns | 1 Year | Since Inception |
Periods Ended September 30, 2016 | Return | (7/15/15) |
PureFunds™ ISE Mobile Payments ETF (NAV) | 6.51% | 0.22% |
PureFunds™ ISE Mobile Payments ETF (Market) | 8.10% | 0.73% |
S&P 500 Index | 15.43% | 4.65% |
ISE Mobile PaymentsTM Index | 7.07% | 0.75% |
Total Fund Operating Expenses1 | 0.75% |
1. The expense ratio is taken from the Fund’s most recent prospectus dated January 31, 2016.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on July 15, 2015, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any. The unmanaged indices do not reflect fees and are not available for direct investment.
11
PureFundsTM ISE Mobile Payments ETF |
Top Ten Holdings* |
% of Total | ||||
Security | Investments† | |||
1 | Visa, Inc. | 5.40% | ||
2 | MasterCard, Inc. | 5.33% | ||
3 | PayPal Holdings, Inc. | 5.19% | ||
4 | American Express Co. | 4.89% | ||
5 | Fiserv, Inc. | 4.60% | ||
6 | FleetCor Technologies, Inc. | 4.47% | ||
7 | Discover Financial Services | 4.31% | ||
8 | Fidelity National Information Services, Inc. | 4.29% | ||
9 | Vantiv, Inc. | 4.05% | ||
10 | First Data Corporation | 3.82% | ||
Top Ten Holdings =46.36% of Total Investments† | ||||
* Current Fund holdings may not be indicative of future Fund holdings. | ||||
† Percentage of total investments less cash. |
12
PureFunds™ Drone Economy Strategy ETF
Growth of $10,000
Cumulative Returns | Since Inception |
Periods Ended September 30, 2016 | (3/8/2016) |
PureFunds™ Drone Economy Strategy ETF (NAV) | 7.15% |
PureFunds™ Drone Economy Strategy ETF (Market) | 7.86% |
S&P 500 Index | 10.86% |
Reality Shares Drone Index | 7.43% |
Total Fund Operating Expenses1 | 0.75% |
1. The expense ratio is taken from the Fund’s most recent prospectus dated March 8, 2016.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on March 8, 2016, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any. The unmanaged indices do not reflect fees and are not available for direct investment.
13
PureFundsTM Drone Economy Strategy ETF |
Top Ten Holdings* |
% of Total | ||||
Security | Investments† | |||
1 | Aerovironment, Inc. | 8.42% | ||
2 | Parrot SA | 7.34% | ||
3 | GoPro, Inc. | 6.47% | ||
4 | Ambarella, Inc. | 5.70% | ||
5 | Boeing Co. | 4.45% | ||
6 | Kratos Defense & Security Solutions, Inc. | 3.46% | ||
7 | Thales SA | 2.43% | ||
8 | Leonardo-Finmeccanica SpA | 2.40% | ||
9 | L-3 Communications Holdings, Inc. | 2.21% | ||
10 | BAE Systems PLC | 2.20% | ||
Top Ten Holdings =45.09% of Total Investments† | ||||
* Current Fund holdings may not be indicative of future Fund holdings. | ||||
† Percentage of total investments less cash. |
14
PureFunds™ Video Game Tech ETF
Growth of $10,000
Growth of $10,000
Cumulative Returns Periods Ended September 30, 2016 | Since Inception (3/8/2016) |
PureFunds™ Video Game Tech ETF (NAV) | 31.62% |
PureFunds™ Video Game Tech ETF (Market) | 32.92% |
S&P 500 Index | 10.86% |
EEFund Video Game Tech Index | 32.08% |
Total Fund Operating Expenses1 | 0.75% |
1. The expense ratio is taken from the Fund’s most recent prospectus dated March 8, 2016. |
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844- ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on March 8, 2016, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any. The unmanaged indices do not reflect fees and are not available for direct investment.
15
PureFundsTM Video Game Tech ETF |
Top Ten Holdings* |
Security | % of Total Investments† | |||
1 | Nintendo Co. Ltd. | 7.20% | ||
2 | NCSoft Corporation | 5.68% | ||
3 | Changyou.com Ltd. | 5.44% | ||
4 | Activision Blizzard, Inc. | 4.97% | ||
5 | Take-Two Interactive Software, Inc. | 4.89% | ||
6 | Electronic Arts, Inc. | 4.81% | ||
7 | Zynga, Inc. | 4.64% | ||
8 | Square Enix Holdings Co. Ltd. | 4.54% | ||
9 | Gamestop Corporation | 4.41% | ||
10 | UBISOFT Entertainment | 4.30% | ||
Top Ten Holdings =50.88% of Total Investments† | ||||
* Current Fund holdings may not be indicative of future Fund holdings. | ||||
† Percentage of total investments less cash. |
16
PureFunds™ Solative FinTech ETF
Growth of $10,000
Growth of $10,000
Cumulative Returns Periods Ended September 30, 2016 | Since Inception (8/31/2016) |
PureFunds™ Solactive FinTech ETF (NAV) | 0.35% |
PureFunds™ Solactive FinTech ETF (Market) | 0.96% |
S&P 500 Index | -0.20% |
Solactive FinTech Index | 0.49% |
Total Fund Operating Expenses1 | 0.68% |
1. The expense ratio is taken from the Fund’s most recent prospectus dated August 25, 2016. |
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Fund may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains, if any. Performance data current to the most recent month end may be obtained by calling 1-844- ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on August 31, 2016, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any. The unmanaged indices do not reflect fees and are not available for direct investment.
17
PureFundsTM Solactive FinTech ETF |
Top Ten Holdings* |
Security | % of Total Investments† | |||
1 | Ellie Mae, Inc. | 3.45% | ||
2 | SimCorp AS | 3.44% | ||
3 | Pegasystems, Inc. | 3.26% | ||
4 | IRESS Ltd. | 3.25% | ||
5 | Black Knight Financial Services, Inc. | 3.19% | ||
6 | CoStar Group, Inc. | 3.18% | ||
7 | Zillow Group, Inc. | 3.18% | ||
8 | Square, Inc. | 3.18% | ||
9 | SS&C Technologies Holdings, Inc. | 3.17% | ||
10 | IHS Markit Ltd. | 3.17% | ||
Top Ten Holdings =32.47% of Total Investments† | ||||
* Current Fund holdings may not be indicative of future Fund holdings. | ||||
† Percentage of total investments less cash. |
18
PureFunds™ ETFx HealthTech ETF
Growth of $10,000
Growth of $10,000
Cumulative Returns Periods Ended September 30, 2016 | Since Inception (8/31/2016) |
PureFunds™ HealthTech ETF (NAV) | 1.86% |
PureFunds™ ETFx HealthTech ETF (Market) | 2.60% |
S&P 500 Index | -0.20% |
ETFx HealthTech TR Index | 1.92% |
Total Fund Operating Expenses1 | 0.75% |
1. The expense ratio is taken from the Fund’s most recent prospectus dated August 25, 2016. |
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains, if any. Performance data current to the most recent month end may be obtained by calling 1-844- ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on August 31, 2016, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of fund shares. The chart assumes reinvestment of capital gains and dividends, if any. The unmanaged indices do not reflect fees and are not available for direct investment.
19
PureFundsTM ETFx HealthTech ETF |
Top Ten Holdings* |
Security | % of Total Investments† | |||
1 | CompuGroup Medical SE | 2.08% | ||
2 | Allscripts Healthcare Solutions, Inc. (a) | 2.05% | ||
3 | Quality Systems, Inc. | 2.04% | ||
4 | DENTSPLY SIRONA, Inc. | 2.03% | ||
5 | NantHealth, Inc. (a) | 2.03% | ||
6 | Teladoc, Inc. (a) | 2.03% | ||
7 | Cerner Corporation (a) | 2.02% | ||
8 | Omnicell, Inc. (a) | 2.00% | ||
9 | Merit Medical Systems, Inc. (a) | 1.99% | ||
10 | Mettler-Toledo International, Inc. (a) | 1.98% | ||
Top Ten Holdings =20.25% of Total Investments† | ||||
* Current Fund holdings may not be indicative of future Fund holdings. | ||||
† Percentage of total investments less cash. |
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PureFunds™ ETFs |
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed by the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility.
IFLY, GAMR, FINQ, and IMED are new Funds with limited operating history.
Past performance is no indicative of future return. A fund’s performance for very short time periods may not be indicative of future performance.
SILJ
The PureFunds® ISE Junior SilverTM (Small Cap Miners/Explorers) ETF (the “Fund” or the “Junior Silver ETF”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Junior Silver (Small Cap Miners/Explorers)TM Index (the “Index”).
Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. These risks are greater for investments in emerging markets. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual issuer volatility than a diversified fund. Funds that are less diversified across countries or geographic regions are generally riskier than more geographically diversified funds and risks associated with such countries or geographic regions may negatively affect a Fund. Investments in small-capitalization companies tend to have limited liquidity and greater price volatility than large-capitalization companies. The PureFundsTM ISE Junior Silver ETF is subject to risks associated with the worldwide price of silver and the costs of extraction and production. Worldwide silver prices may fluctuate substantially over short periods of time, so the Fund’s share price may be more volatile than other types of economic conditions, tax treatment, government regulation and intervention, and world events in the regions in which the companies operate. Several foreign countries have begun a process of privatizing certain entities and industries. Privatized entities may lose money or be renationalized. The Fund invests in some economies that are heavily dependent upon trading with key partners. Any reduction in this trading may cause an adverse impact on the economy in which the Fund invests. The Fund’s return may not match or achieve a high degree of correlation with the return of the ISE Junior Silver (Small Cap Miners/Explorers)™ Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the ISE Junior Silver (Small Cap Miners/Explorers)™ Index. IOPV or indicative optimized portfolio value is an estimated intraday fair value of one share of an ETF determined by the last trade price of the fund’s underlying securities.
The ISE Junior Silver (Small Cap Miners/Explorers) Index is designed to reflect the performance of small-capitalization companies involved in the silver industry, including companies that mine, explore and refine silver. The stocks are screened for liquidity and weighted according to modified free-float market capitalization. The Index generally is comprised of 20-30 securities. The Index was created and is maintained by ISE Indexes. An investment cannot be made directly in an index.
HACK
The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Cyber SecurityTM Index (the “Index”).
The Fund is concentrated in technology-related companies that face intense competition, both domestically and internationally, which may have an adverse effect on profit margins.
21
PureFunds™ ETFs |
Such companies may have limited product lines, markets, financial resources or personnel. The products of such companies may face obsolescence due to rapid technological developments, frequent new product introduction, unpredictable changes in growth rates, competition for the services of qualified personnel, and competition from foreign competitors with lower production costs. Technology companies are heavily dependent on patent and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Investments in smaller companies tend to have limited liquidity and greater price volatility than large-capitalization companies. The Fund’s return may not match or achieve a high degree of correlation with the return of the ISE Cyber Security Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the ISE Cyber Security Index.
The ISE Cyber Security Index is designed to reflect the performance of companies involved in the cyber security industry, including companies that provide cyber security related hardware/software and services. The stocks are screened for liquidity and weighted according to modified free-float market capitalization. The Index was created and is maintained by ISE Indexes. An investment cannot be made directly in an index.
BIGD
The PureFundsTM ISE Big Data ETF (the “Fund” or the “Big Data ETF”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Big DataTM Index (the “Index”).
Big Data Companies face intense competition, both domestically and internationally, may have limited product lines, markets, financial resources or personnel, may have products that face rapid obsolescence, and are heavily dependent on the protection of patent and intellectual property rights. Big Data Companies are also subject to increasing regulatory constraints, particularly with respect to cybersecurity and privacy. Such factors may adversely affect the profitability and value of such companies. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Investments in smaller companies tend to have limited liquidity and greater price volatility than large-capitalization companies. The Fund’s return may not match or achieve a high degree of correlation with the return of the ISE Big Data Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not guarantee a profit, nor does it protect against a loss in a declining market.
The ISE Big Data Index is designed to reflect the performance of companies involved in the big data and analytics industry, including companies that provide big data origination, aggregation, applications and solutions. The stocks are screened for liquidity and weighted according to a modified linear-based capitalization-weighted methodology. The Index was created and is maintained by ISE Indexes. An investment cannot be made directly in an index.
IPAY
The PureFundsTM ISE Mobile Payments ETF (the “Fund” or the “Mobile Payments ETF”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Mobile PaymentsTM Index (the “Index”).
22
PureFunds™ ETFs |
Mobile Payment Companies face intense competition, both domestically and internationally, and are subject to increasing regulatory constraints, particularly with respect to fees, competition and anti-trust matters, cybersecurity and privacy. Mobile Payment Companies may be highly dependent on their ability to enter into agreements with merchants and other third parties to utilize a particular payment method, system, software or service, and such agreements may be subject to increased regulatory scrutiny. Additionally, certain Mobile Payment Companies have recently faced increased costs related to class-action litigation challenging such agreements. Such factors may adversely affect the profitability and value of such companies. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Investments in smaller companies tend to have limited liquidity and greater price volatility than large-capitalization companies. The Fund’s return may not match or achieve a high degree of correlation with the return of the ISE Mobile Payments Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not guarantee a profit, nor does it protect against a loss in a declining market.
The ISE Mobile Payments Index is designed to reflect the performance of companies involved in the mobile and electronic payments industry, including card networks, processors, infrastructure/software and solutions companies. The stocks are screened for liquidity and weighted according to a modified linear-based capitalization-weighted methodology. The Index was created and is maintained by ISE Indexes. An investment cannot be made directly in an index.
IFLY
The PureFundsTM Drone Economy Strategy ETF (the “Fund” or the “Drone Economy ETF”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Reality Shares DroneTM Index (the “Index”).
Drone Economy Companies face intense competition, both domestically and internationally and are heavily dependent on the protection of patent and intellectual property rights. In addition, Drone Economy Companies may be dependent on the U.S. government and its agencies for a significant portion of their sales, and their success and growth may be affected by budgetary constraints, spending reductions, congressional appropriations, and administrative allocations of funds that affect the U.S. government and its agencies. Such factors may adversely affect the profitability and value of such companies. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Investments in smaller companies tend to have limited liquidity and greater price volatility than large-capitalization companies. The Fund’s return may not match or achieve a high degree of correlation with the return of the Reality Shares Drone™ Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not guarantee a profit, nor does it protect against a loss in a declining market.
The Reality Shares Drone™ Index provides a benchmark for investors interested in tracking companies actively involved in drone technology and services. The Index uses Modified Equal Weight capitalization-weighted methodology. The index was created and is maintained by Reality Shares Index Committee. You cannot invest directly in an index.
GAMR
The PureFundsTM Video Game Tech ETF (the “Fund” or the “Video Game Tech ETF”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the EEFund Video Game Tech Index (the “Index”).
23
PureFunds™ ETFs |
Investing involves risk, including the possible loss of principal. The Fund is new with limited operating history. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed by the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility. Video Game Tech Companies face intense competition, both domestically and internationally, may have limited product lines, markets, financial resources or personnel, may have products that face rapid obsolescence, and are heavily dependent on the protection of patent and intellectual property rights. Video Game Tech Companies are also subject to increasing regulatory constraints, particularly with respect to cybersecurity and privacy. Such factors may adversely affect the profitability and value of such companies. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Investments in smaller companies tend to have limited liquidity and greater price volatility than large-capitalization companies. The Fund’s return may not match or achieve a high degree of correlation with the return of the EEFund Video Game Tech Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not guarantee a profit, nor does it protect against a loss in a declining market.
The EEFund Video Game Tech™ Index provides a benchmark for investors interested in tracking companies actively involved in the electronic gaming industry including the entertainment, education and simulation segments. The Index uses a market capitalization weighted allocation across the pure play and non-pure play sectors and a set weight for the conglomerate sector as well as an equal weighted allocation methodology for all components within each sector allocation. The Index was created and is maintained by EEFund Management. You cannot invest directly in an index.
FINQ
The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Solactive FinTech Index.
The Fund is new with limited operating history. The Fund is concentrated in technology oriented companies, which face intense competition, both domestically and internationally, which may have an adverse effect on profit margins. Such companies may have limited product lines, markets, financial resources or personnel. The products of such companies may face obsolescence due to rapid technological developments, frequent new product introduction, unpredictable changes in growth rates, competition for the services of qualified personnel, and competition from foreign competitors with lower production costs. Technology oriented companies are heavily dependent on patent and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Investments in smaller companies tend to have limited liquidity and greater price volatility than large-capitalization companies. The Fund’s return may not match or achieve a high degree of correlation with the return of the Solactive FinTech Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Solactive FinTech Index.
The Solactive FinTech Index is designed to reflect the performance of companies involved in the financial technology industry, including companies in the financial services industry with a focus on automation of processes, enhanced distribution of products and services or the creation of new products or services that did not previously exist. An investment cannot be made directly in an index.
IMED
The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ETFx HealthTech Index.
24
PureFunds™ ETFs |
The fund is new with limited operating history. The Fund is concentrated in technology oriented companies, which face intense competition, both domestically and internationally, which may have an adverse effect on profit margins. Such companies may have limited product lines, markets, financial resources or personnel. The products of such companies may face obsolescence due to rapid technological developments, frequent new product introduction, unpredictable changes in growth rates, competition for the services of qualified personnel, and competition from foreign competitors with lower production costs. Technology oriented companies are heavily dependent on patent and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies. Health care companies are subject to extensive government regulation and their profitability can be significantly affected by restrictions on government reimbursement for medical expenses, rising costs of medical products and services, pricing pressure (including price discounting), limited product lines, and an increased emphasis on the delivery of healthcare through outpatient services. Health care companies are heavily dependent on obtaining and defending patents, which may be time consuming and costly, and the expiration of patents may also adversely affect the profitability of the companies. Health care companies are also subject to extensive litigation based on product liability and similar claims. In addition, their products can become obsolete due to industry innovation, changes in technologies, or other market developments. Many new products in the health care field require significant research and development and may be subject to regulatory approvals, all of which may be time consuming and costly with no guarantee that any product will come to market. Investments in foreign securities involve political, economic and currency risks, greater volatility and differences in accounting methods. The Fund is non-diversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Investments in smaller companies tend to have limited liquidity and greater price volatility than large-capitalization companies. The Fund’s return may not match or achieve a high degree of correlation with the return of the ETFx HealthTech Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the ETFx HealthTech Index.
The ETFx HealthTech Index is designed to reflect the performance of companies involved in the healthcare technology industry, including companies that provide three technology-driven segments affecting the allocation, delivery and management of healthcare services and products through companies engaged in Healthcare Informatics, Medical Instruments and Medical Appliances. An investment cannot be made directly in an index.
S&P 500: The S&P 500 Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
25
PureFunds™ ETFs
PureFundsTM ISE Junior Silver (Small Cap Miners/Explorers) ETF | PureFundsTM ISE Cyber Security ETF | PureFundsTM ISE Big Data ETF | PureFundsTM ISE Mobile Payments ETF | PureFundsTM Drone Economy Strategy ETF | PureFundsTM Video Game Tech ETF | PureFundsTM Solactive FinTech ETF | PureFundsTM ETFx HealthTech ETF | ||||||||||||||||||||||||||
As a percent of Net Assets: | |||||||||||||||||||||||||||||||||
Australia | —% | —% | 2.8% | —% | —% | —% | 3.2% | 1.4% | |||||||||||||||||||||||||
Bermuda | — | — | — | — | — | — | 3.2 | — | |||||||||||||||||||||||||
Canada | 73.3 | — | 2.8 | — | — | — | 3.0 | — | |||||||||||||||||||||||||
Cayman Islands | — | — | — | — | 5.7 | 10.4 | — | — | |||||||||||||||||||||||||
Cyprus | — | — | — | 1.4 | — | — | — | — | |||||||||||||||||||||||||
Denmark | — | — | — | — | — | — | 3.4 | 2.8 | |||||||||||||||||||||||||
Finland | — | 1.2 | — | — | — | — | — | — | |||||||||||||||||||||||||
France | — | — | — | 3.1 | 11.7 | 4.3 | — | 3.3 | |||||||||||||||||||||||||
Germany | — | — | 5.7 | 3.1 | 1.6 | — | 3.1 | 5.5 | |||||||||||||||||||||||||
Hong Kong | — | — | — | 1.8 | — | 1.2 | — | 1.9 | |||||||||||||||||||||||||
Ireland | — | — | — | — | — | — | — | 1.4 | |||||||||||||||||||||||||
Israel | — | 10.9 | 2.7 | — | 1.4 | — | — | — | |||||||||||||||||||||||||
Italy | — | — | — | — | 2.4 | — | — | — | |||||||||||||||||||||||||
Jersey | — | — | — | — | — | — | 3.1 | — | |||||||||||||||||||||||||
Japan | — | 4.1 | — | — | 13.2 | 35.5 | — | 10.9 | |||||||||||||||||||||||||
Netherlands | — | 1.4 | — | — | 1.8 | — | — | 2.7 | |||||||||||||||||||||||||
New Zealand | — | — | — | — | — | — | 3.0 | 2.0 | |||||||||||||||||||||||||
Puerto Rico | — | — | — | 1.6 | — | — | — | — | |||||||||||||||||||||||||
Republic of Korea | — | 2.0 | — | — | 2.2 | 5.6 | — | — | |||||||||||||||||||||||||
Singapore | — | — | — | — | — | — | 3.0 | — | |||||||||||||||||||||||||
Spain | — | — | — | — | 1.6 | — | — | 1.9 | |||||||||||||||||||||||||
Sweden | — | — | 2.8 | — | 3.1 | — | — | 3.3 | |||||||||||||||||||||||||
Switzerland | — | — | — | — | — | 2.0 | 3.2 | 2.8 | |||||||||||||||||||||||||
Turkey | — | — | — | — | 3.0 | — | — | ||||||||||||||||||||||||||
United Kingdom | 6.4 | 5.8 | — | 4.6 | 4.6 | — | 2.9 | 6.0 | |||||||||||||||||||||||||
United States | 17.7 | 74.5 | 83.0 | 84.0 | 47.5 | 40.7 | 68.7 | 54.0 | |||||||||||||||||||||||||
Short-Term and other Net | |||||||||||||||||||||||||||||||||
Assets (Liabilities) | 2.6 | 0.1 | 0.2 | 0.4 | 0.2 | 0.3 | 0.2 | 0.1 | |||||||||||||||||||||||||
100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% | 100.0% |
26
PureFunds™ ETFs
Shares | Market Value | |||||||
COMMON STOCKS - 97.4% | ||||||||
Metals & Mining - 97.4% | ||||||||
Canada - 73.3% | ||||||||
Alexco Resource Corporation (a) | 1,076,970 | $ | 1,917,007 | |||||
Americas Silver Corporation (a) | 5,209,666 | 1,369,972 | ||||||
Aurcana Corporation (a) * | 1,568,867 | 681,622 | ||||||
Bear Creek Mining Corporation (a) | 1,137,064 | 2,435,420 | ||||||
Endeavour Silver Corporation (a) | 712,177 | 3,653,468 | ||||||
Excellon Resources, Inc. (a) | 362,439 | 519,368 | ||||||
First Majestic Silver Corporation (a) | 754,803 | 7,774,471 | ||||||
Fortuna Silver Mines, Inc. (a) | 499,508 | 3,620,810 | ||||||
Great Panther Silver Ltd. (a) | 1,434,768 | 1,936,937 | ||||||
IMPACT Silver Corporation (a) | 690,622 | 400,071 | ||||||
Kootenay Silver, Inc. (a) | 993,718 | 348,420 | ||||||
MAG Silver Corporation (a) | 235,001 | 3,541,270 | ||||||
Mandalay Resources Corporation (a) | 3,759,951 | 2,865,925 | ||||||
Minco Silver Corporation (a) | 371,231 | 396,146 | ||||||
Mirasol Resources Ltd. (a) * | 950,206 | 1,767,219 | ||||||
Pan American Silver Corporation (a) | 618,798 | 10,895,410 | ||||||
Sabina Gold & Silver Corporation (a) | 1,783,669 | 1,903,378 | ||||||
Santacruz Silver Mining Ltd. (a) | 1,008,819 | 342,181 | ||||||
Sierra Metals, Inc. (a) | 337,728 | 501,978 | ||||||
Silver Standard Resources, Inc. (a) | 288,482 | 3,476,429 | ||||||
Silvercorp Metals, Inc. (a) | 1,124,555 | 3,591,513 | ||||||
Trevali Mining Corporation (a) | 3,046,238 | 2,530,889 | ||||||
Total Canada | 56,469,904 | |||||||
United Kingdom - 6.4% | ||||||||
Hochschild Mining PLC | 1,323,811 | 4,967,380 | ||||||
United States - 17.7% | ||||||||
Coeur Mining, Inc. (a) | 1,103,841 | 13,058,440 | ||||||
Golden Minerals Co. (a) | 790,275 | 600,609 | ||||||
Total United States | 13,659,049 | |||||||
Total Metals & Mining | 75,096,333 | |||||||
TOTAL COMMON STOCKS (Cost $73,294,538) | 75,096,333 | |||||||
Total Investments (Cost $73,294,538) - 97.4% | 75,096,333 | |||||||
Other Assets in Excess of Liabilities - 2.6% | 1,968,701 | |||||||
TOTAL NET ASSETS - 100.0% | $ | 77,065,034 |
Percentages are stated as a percent of net assets.
(a) Non-income producing security.
* Illiquid Security - At September 30, 2016, the value of these securities amount to $2,448,841 or 3.2% of net assets.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
27
PureFunds™ ETFs
PureFundsTM ISE Cyber Security ETF Schedule of Investments September 30, 2016 |
Shares | Market Value | |||||||
COMMON STOCKS - 99.9% | ||||||||
Finland - 1.2% | ||||||||
Software - 1.2% | ||||||||
F-Secure OYJ | 2,510,365 | $ | 9,503,510 | |||||
Israel - 10.9% | ||||||||
Communications Equipment - 2.7% | ||||||||
Radware Ltd. (a) | 1,590,920 | 21,859,241 | ||||||
Software - 8.2% | ||||||||
Check Point Software Technologies, Ltd. (a) ^ | 434,287 | 33,705,014 | ||||||
CyberArk Software Ltd. (a) ^ | 642,881 | 31,867,611 | ||||||
Total Software | 65,572,625 | |||||||
Total Israel | 87,431,866 | |||||||
Japan - 4.1% | ||||||||
Software - 4.1% | ||||||||
Trend Micro, Inc. | 941,023 | 32,572,267 | ||||||
Netherlands - 1.4% | ||||||||
Software - 1.4% | ||||||||
Gemalto NV | 168,932 | 10,832,113 | ||||||
Republic of Korea - 2.0% | ||||||||
Internet Software & Services - 2.0% | ||||||||
Ahnlab, Inc. | 290,460 | 16,430,434 | ||||||
United Kingdom - 5.8% | ||||||||
Internet Software & Services - 1.7% | ||||||||
Mimecast Ltd. (a) | 703,145 | 13,451,164 | ||||||
Software - 4.1% | ||||||||
Sophos Group PLC | 9,690,166 | 33,509,647 | ||||||
Total United Kingdom | 46,960,811 | |||||||
United States - 74.5% | ||||||||
Aerospace & Defense - 2.1% | ||||||||
The KEYW Holding Corporation (a) ^ | 1,558,899 | 17,210,245 | ||||||
Communications Equipment - 14.8% | ||||||||
Cisco Systems, Inc. | 1,080,706 | 34,279,994 | ||||||
F5 Networks, Inc. (a) | 102,152 | 12,732,225 | ||||||
Juniper Networks, Inc. | 1,439,541 | 34,635,356 | ||||||
Palo Alto Networks, Inc. (a) | 230,873 | 36,784,995 | ||||||
Total Communications Equipment | 118,432,570 | |||||||
Internet Software & Services - 5.4% | ||||||||
Intralinks Holdings, Inc. (a) | 2,128,721 | 21,414,933 | ||||||
VeriSign, Inc. (a) ^ | 161,089 | 12,603,603 | ||||||
Zix Corporation (a) | 2,236,742 | 9,170,642 | ||||||
Total Internet Software & Services | 43,189,178 | |||||||
IT Services - 8.9% | ||||||||
Booz Allen Hamilton Holding Corporation | 405,483 | 12,817,318 | ||||||
Leidos Holdings, Inc. | 290,649 | 12,579,289 |
The accompanying notes are an integral part of these financial statements.
28
PureFunds™ ETFs
PureFundsTM ISE Cyber Security ETF Schedule of Investments September 30, 2016 (Continued) |
Shares | Market Value | |||||||
ManTech International Corporation | 302,915 | $ | 11,416,866 | |||||
Science Applications International Corporation | 498,654 | 34,591,628 | ||||||
Total IT Services | 71,405,101 | |||||||
Software - 43.3% | ||||||||
Barracuda Networks, Inc. (a) | 1,054,387 | 26,865,781 | ||||||
FireEye, Inc. (a) ^ | 2,281,988 | 33,613,683 | ||||||
Fortinet, Inc. (a) | 932,324 | 34,430,725 | ||||||
Imperva, Inc. (a) | 736,791 | 39,573,045 | ||||||
Infoblox, Inc. (a) ^ | 1,464,197 | 38,610,875 | ||||||
Proofpoint, Inc. (a) ^ | 441,413 | 33,039,763 | ||||||
Qualys, Inc. (a) | 942,603 | 35,998,009 | ||||||
Rapid7, Inc. (a) ^ | 704,400 | 12,432,660 | ||||||
SecureWorks Corp. (a) ^ | 341,301 | 4,269,676 | ||||||
Splunk, Inc. (a) | 559,019 | 32,803,235 | ||||||
Symantec Corporation | 1,361,366 | 34,170,287 | ||||||
VASCO Data Security International, Inc. (a) ^ | 1,305,289 | 22,986,139 | ||||||
Total Software | 348,793,878 | |||||||
Total United States | 599,030,972 | |||||||
TOTAL COMMON STOCKS (Cost $844,778,213) | 802,761,973 | |||||||
SHORT-TERM INVESTMENTS - 12.2% | ||||||||
Mount Vernon Prime Portfolio, 0.68% (b) + | 98,368,561 | 98,368,561 | ||||||
TOTAL SHORT-TERM INVESTMENTS (Cost | ||||||||
$98,368,561) | 98,368,561 | |||||||
Total Investments (Cost $943,146,774) - 112.1% | 901,130,534 | |||||||
Liabilities in Excess of Other Assets - (12.1%) | (97,336,610 | ) | ||||||
TOTAL NET ASSETS - 100.0% | $ | 803,793,924 |
Percentages are stated as a percent of net assets.
(a) Non-income producing security.
(b) The rate quoted is the annualized seven-day yield at September 30, 2016.
+ Investments purchased with cash proceeds from securities lending. Total cash collateral has a value of $98,368,561 as of September 30, 2016.
^ All or a portion of this security is out on loan as of September 30, 2016. Total value of securities out on loan is $96,031,723. The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statement
29
PureFunds™ ETFs
PureFundsTM ISE Big Data ETF Schedule of Investments September 30, 2016 |
Shares | Market Value | |||||||
COMMON STOCKS - 99.8% | ||||||||
Australia - 2.8% | ||||||||
Internet Software & Services - 2.8% | ||||||||
iSentia Group Ltd. | 11,789 | $ | 34,557 | |||||
Canada - 2.8% | ||||||||
Media - 2.8% | ||||||||
Thomson Reuters Corporation | 838 | 34,676 | ||||||
Germany - 5.7% | ||||||||
Software - 5.7% | ||||||||
SAP SE | 384 | 34,906 | ||||||
Software AG | 849 | 35,970 | ||||||
Total Software | 70,876 | |||||||
Israel - 2.7% | ||||||||
Software - 2.7% | ||||||||
NICE-Systems Ltd. - ADR | 507 | 33,939 | ||||||
Sweden - 2.8% | ||||||||
Electronic Equipment, Instruments & Components - 2.8% | ||||||||
Hexagon AB | 798 | 34,845 | ||||||
United States - 83.0% | ||||||||
Diversified Financial Services - 2.5% | ||||||||
FactSet Research Systems, Inc. ^ | 193 | 31,285 | ||||||
Health Care Technology - 5.4% | ||||||||
Inovalon Holdings, Inc. (a) ^ | 2,130 | 31,332 | ||||||
Medidata Solutions, Inc. (a) | 636 | 35,464 | ||||||
Total Health Care Technology | 66,796 | |||||||
Internet Software & Services - 4.8% | ||||||||
Hortonworks, Inc. (a) | 2,898 | 24,198 | ||||||
New Relic, Inc. (a) | 941 | 36,059 | ||||||
Total Internet Software & Services | 60,257 | |||||||
IT Services - 19.7% | ||||||||
Acxiom Corporation (a) | 1,335 | 35,578 | ||||||
Alliance Data Systems Corporation (a) ^ | 163 | 34,968 | ||||||
Black Knight Financial Services, Inc. (a) | 868 | 35,501 | ||||||
CoreLogic, Inc. (a) | 850 | 33,337 | ||||||
International Business Machines Corporation ^ | 220 | 34,947 | ||||||
NeuStar, Inc. (a) ^ | 1,317 | 35,019 | ||||||
Teradata Corporation (a) | 1,145 | 35,495 | ||||||
Total IT Services | 244,845 | |||||||
Professional Services - 8.4% | ||||||||
Dun & Bradstreet Corporation ^ | 256 | 34,975 | ||||||
Nielsen Holdings PLC | 655 | 35,089 | ||||||
Verisk Analytics, Inc. (a) | 416 | 33,812 | ||||||
Total Professional Services | 103,876 | |||||||
Software - 39.2% | ||||||||
ANSYS, Inc. (a) | 368 | 34,080 | ||||||
Blackbaud, Inc. ^ | 514 | 34,099 |
The accompanying notes are an integral part of these financial statements.
30
PureFunds™ ETFs
PureFundsTM ISE Big Data ETF Schedule of Investments September 30, 2016 (Continued) |
Shares | Market Value | |||||||
Fair Isaac Corporation ^ | 265 | $ | 33,016 | |||||
Guidewire Software, Inc. (a) | 555 | 33,289 | ||||||
HubSpot, Inc. (a) | 632 | 36,417 | ||||||
MicroStrategy, Inc. (a) | 200 | 33,488 | ||||||
Oracle Corporation ^ | 851 | 33,427 | ||||||
PROS Holdings, Inc. (a) | 1,705 | 38,551 | ||||||
Rubicon Project, Inc. (a) | 3,115 | 25,792 | ||||||
Splunk, Inc. (a) ^ | 571 | 33,506 | ||||||
Tableau Software, Inc. (a) | 592 | 32,720 | ||||||
TubeMogul, Inc. (a) | 1,779 | 16,669 | ||||||
Varonis Systems, Inc. (a) | 1,056 | 31,786 | ||||||
Verint Systems, Inc. (a) | 910 | 34,243 | ||||||
Workiva, Inc. (a) | 1,895 | 34,356 | ||||||
Total Software | 485,439 | |||||||
Technology Hardware, Storage & Peripherals - 3.0% | ||||||||
Hewlett Packard Enterprise Co. | 1,632 | 37,128 | ||||||
Total United States | 1,029,626 | |||||||
TOTAL COMMON STOCKS (Cost $1,222,383) | 1,238,519 | |||||||
SHORT-TERM INVESTMENTS - 25.1% | ||||||||
Mount Vernon Prime Portfolio, 0.68% (b) + | 310,935 | 310,935 | ||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $310,935) | ||||||||
Total Investments (Cost $1,533,318) - 124.9% | 1,549,454 | |||||||
Liabilities in Excess of Other Assets - (24.9%) | (308,529 | ) | ||||||
TOTAL NET ASSETS - 100.0% | $ | 1,240,925 |
Percentages are stated as a percent of net assets.
ADR American Depositary Receipt
(a) | Non-income producing security. |
(b) | The rate quoted is the annualized seven-day yield at September 30, 2016. |
+ | Investments purchased with cash proceeds from securities lending. Total cash collateral has a value of $310,935 as of September 30, 2016. |
^ | All or a portion of this security is out on loan as of September 30, 2016. Total value of securities out on loan is $304,703. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
31
PureFunds™ ETFs
PureFundsTM ISE Mobile Payments ETF
Schedule of Investments
September 30, 2016
Shares | Market Value | ||||||||
COMMON STOCKS - 99.5% | |||||||||
Cyprus - 1.4% | |||||||||
IT Services - 1.4% | |||||||||
QIWI PLC - ADR ^ | 8,169 | $ | 119,594.00 | ||||||
France - 3.1% | |||||||||
Electronic Equipment, Instruments & Components - 3.1% | |||||||||
Ingenico Group SA | 3,108 | 271,526 | |||||||
Germany - 3.1% | |||||||||
IT Services - 3.1% | |||||||||
Wirecard AG | 5,166 | 268,401 | |||||||
Hong Kong - 1.8% | |||||||||
Electronic Equipment, Instruments & Components - 1.8% | |||||||||
PAX Global Technologies Ltd. | 213,000 | 156,529 | |||||||
Puerto Rico - 1.6% | |||||||||
IT Services - 1.6% | |||||||||
EVERTEC, Inc. | 8,442 | 141,657 | |||||||
United Kingdom - 4.6% | |||||||||
Commercial Services & Supplies - 1.2% | |||||||||
PayPoint PLC | 8,029 | 107,397 | |||||||
IT Services - 3.4% | |||||||||
Worldpay Group PLC | 76,965 | 295,482 | |||||||
Total United Kingdom | 402,879 | ||||||||
United States - 84.0% | |||||||||
Consumer Finance - 11.6% | |||||||||
American Express Co. | 7,105 | 455,004 | |||||||
Discover Financial Services | 7,091 | 400,996 | |||||||
Green Dot Corporation (a) | 6,678 | 153,995 | |||||||
Total Consumer Finance | 1,009,995 | ||||||||
Electronic Equipment, Instruments & Components - 1.8% | |||||||||
VeriFone Systems, Inc. (a) | 10,143 | 159,651 | |||||||
Internet Software & Services - 2.3% | |||||||||
Q2 Holdings, Inc. (a) | 7,126 | 204,231 | |||||||
IT Services - 62.2% | |||||||||
Blackhawk Network Holdings, Inc. (a) | 5,782 | 174,443 | |||||||
Euronet Worldwide, Inc. (a) | 2,961 | 242,299 | |||||||
Fidelity National Information Services, Inc. | 5,180 | 399,015 | |||||||
First Data Corporation (a) | 26,992 | 355,215 | |||||||
Fiserv, Inc. (a) | 4,305 | 428,218 | |||||||
FleetCor Technologies, Inc. (a) | 2,394 | 415,910 | |||||||
Global Payments, Inc. | 4,186 | 321,317 | |||||||
MasterCard, Inc. | 4,872 | 495,823 | |||||||
MoneyGram International, Inc. (a) | 8,960 | 63,616 | |||||||
Net 1 UEPS Technologies, Inc. (a) | 7,917 | 67,770 | |||||||
PayPal Holdings, Inc. (a) | 11,774 | 482,381 | |||||||
The accompanying notes are an integral part of these financial statements
32
PureFunds™ ETFs
PureFundsTM ISE Mobile Payments ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
Square, Inc. (a) | 21,910 | $ | 255,471 | |||||
Total System Services, Inc. | 6,601 | 311,237 | ||||||
Vantiv, Inc. (a) | 6,699 | 376,953 | ||||||
Visa, Inc. ^ | 6,069 | 501,906 | ||||||
Western Union Co. | 16,359 | 340,594 | ||||||
WEX, Inc. (a) | 1,820 | 196,724 | ||||||
Total IT Services | 5,428,892 | |||||||
Software - 2.4% | ||||||||
ACI Worldwide, Inc. (a) ^ | 10,885 | 210,951 | ||||||
Technology Hardware, Storage & Peripherals - 3.7% | ||||||||
CPI Card Group, Inc. ^ | 16,709 | 100,922 | ||||||
NCR Corporation (a) | 6,769 | 217,894 | ||||||
Total Technology Hardware, Storage & Peripherals | 318,816 | |||||||
Total United States | 7,332,536 | |||||||
TOTAL COMMON STOCKS (Cost $8,508,454) | 8,693,122 | |||||||
SHORT-TERM INVESTMENTS - 6.9% | ||||||||
Mount Vernon Prime Portfolio, 0.68% (b) + | 605,950 | 605,950 | ||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $605,950) | 605,950 | |||||||
Total Investments (Cost $9,114,404) - 106.5% | 9,299,072 | |||||||
Liabilities in Excess of Other Assets - (6.5)% | (564,642) | |||||||
TOTAL NET ASSETS - 100.0% | $ | 8,734,430 |
Percentages are stated as a percent of net assets.
ADR American Depositary Receipt
(a) Non-income producing security.
(b) The rate quoted is the annualized seven-day yield at September 30, 2016.
+ | Investments purchased with cash proceeds from securities lending. Total cash collateral has a value of $605,950 as of September 30, 2016. |
^ | All or a portion of this security is out on loan as of September 30, 2016. Total value of securities out on loan is $593,694. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements
33
PureFunds™ ETFs
PureFundsTM Drone Economy Strategy ETF
Schedule of Investments
September 30, 2016
Shares | Market Value | |||||||
COMMON STOCKS - 99.8% | ||||||||
Cayman Islands - 5.7% | ||||||||
Semiconductors & Semiconductor Equipment - 5.7% | ||||||||
Ambarella, Inc. (a) | 5,170 | $ | 380,563 | |||||
France - 11.7% | ||||||||
Aerospace & Defense - 4.4% | ||||||||
Dassault Aviation SA | 120 | 133,124 | ||||||
Thales SA | 1,760 | 162,103 | ||||||
Total Aerospace & Defense | 295,227 | |||||||
Communications Equipment - 7.3% | ||||||||
Parrot SA (a) | 45,561 | 489,804 | ||||||
Total France | 785,031 | |||||||
Germany - 1.6% | ||||||||
Industrial Conglomerates - 1.6% | ||||||||
Rheinmetall AG | 1,540 | 107,189 | ||||||
Israel - 1.4% | ||||||||
Aerospace & Defense - 1.4% | ||||||||
Elbit Systems Ltd. | 1,001 | 95,654 | ||||||
Italy - 2.4% | ||||||||
Aerospace & Defense - 2.4% | ||||||||
Leonardo-finmeccanica Spa (a) | 14,105 | 159,875 | ||||||
Japan - 13.2% | ||||||||
Automobiles - 2.9% | ||||||||
Fuji Heavy Industries Ltd. | 2,500 | 92,574 | ||||||
Yamaha Motor Co. Ltd. | 5,000 | 99,601 | ||||||
Total Automobiles | 192,175 | |||||||
Electrical Equipment - 1.9% | ||||||||
Mitsubishi Electric Corporation | 10,000 | 126,473 | ||||||
Electronic Equipment, Instruments & Components - 1.7% | ||||||||
Hitachi Ltd. | 25,000 | 115,527 | ||||||
Household Durables - 1.9% | ||||||||
Sony Corporation - ADR (a) | 3,860 | 128,191 | ||||||
Machinery - 3.1% | ||||||||
Kawasaki Heavy Industries Ltd. | 35,000 | 106,997 | ||||||
Mitsubishi Heavy Industries Ltd. | 25,000 | 103,323 | ||||||
Total Machinery | 210,320 | |||||||
Technology Hardware, Storage & Peripherals - 1.7% | ||||||||
NEC Corporation | 45,000 | 114,935 | ||||||
Total Japan | 887,621 | |||||||
Netherlands - 1.8% | ||||||||
Aerospace & Defense - 1.8% | ||||||||
Airbus Group Se | 1,975 | 119,451 | ||||||
Republic of Korea - 2.2% | ||||||||
Aerospace & Defense - 2.2% | ||||||||
Korea Aerospace Industries Ltd | 2,080 | 144,100 |
The accompanying notes are an integral part of these financial statements.
34
PureFunds™ ETFs
PureFundsTM Drone Economy Strategy ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
Spain - 1.6% | ||||||||
IT Services - 1.6% | ||||||||
Indra Sistemas SA (a) | 8,015 | $ | 107,459 | |||||
Sweden – 3.1% | ||||||||
Aerospace & Defense – 1.5% | ||||||||
Saab Ab | 2,780 | 98,966 | ||||||
Electronic Equipment, Instruments & Components – 1.6% | ||||||||
Hexagon AB | 2,375 | 103,706 | ||||||
Total Sweden | 202,672 | |||||||
Turkey – 3.0% | ||||||||
Aerospace & Defense – 1.4% | ||||||||
Aselsan Elektronik Sanayi Ve Ticaret AS | 28,860 | 90,494 | ||||||
Household Durables – 1.6% | ||||||||
Vestel Elektronik Sanayi ve Ticaret AS (a) | 47,115 | 104,089 | ||||||
Total Turkey | 194,583 | |||||||
United Kingdom – 4.6% | ||||||||
Aerospace & Defense – 4.6% | ||||||||
BAE Systems PLC | 21,590 | 146,635 | ||||||
Cobham PLC | 37,456 | 81,416 | ||||||
QinetiQ Group PLC | 26,845 | 82,394 | ||||||
Total Aerospace & Defense | 310,445 | |||||||
United States – 47.5% | ||||||||
Aerospace & Defense – 33.5% | ||||||||
Aerovironment, Inc. (a) | 23,031 | 562,187 | ||||||
Boeing Co. | 2,255 | 297,074 | ||||||
General Dynamics Corporation | 836 | 129,714 | ||||||
Honeywell International, Inc. | 1,215 | 141,657 | ||||||
Kratos Defense & Security Solutions, Inc. (a) | 33,515 | 230,918 | ||||||
L-3 Communications Holdings, Inc. | 980 | 147,715 | ||||||
Lockheed Martin Corporation | 486 | 116,504 | ||||||
Northrop Grumman Corporation | 541 | 115,747 | ||||||
Orbital ATK, Inc. | 1,095 | 83,472 | ||||||
Raytheon Co. | 865 | 117,752 | ||||||
Rockwell Collins, Inc. | 1,100 | 92,774 | ||||||
Textron, Inc. | 2,280 | 90,630 | ||||||
United Technologies Corporation | 1,150 | 116,840 | ||||||
Total Aerospace & Defense | 2,242,984 | |||||||
Electronic Equipment, Instruments & Components – 6.0% | ||||||||
FLIR Systems, Inc. | 2,380 | 74,780 | ||||||
InvenSense, Inc. (a) | 16,045 | 119,054 | ||||||
Jabil Circuit, Inc. | 5,995 | 130,811 | ||||||
Trimble Navigation Ltd. (a) | 2,650 | 75,684 | ||||||
Total Electronic Equipment, Instruments & Components | 400,329 | |||||||
Household Durables – 6.5% | ||||||||
GoPro, Inc. (a) | 25,901 | 432,029 | ||||||
Semiconductors & Semiconductor Equipment – 1.5% | ||||||||
IXYS Corporation | 8,595 | 103,570 | ||||||
Total United States | 3,178,912 | |||||||
The accompanying notes are an integral part of these financial statements.
35
PureFunds™ ETFs
PureFundsTM Drone Economy Strategy ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
TOTAL COMMON STOCKS (Cost $6,376,503) | $ | 6,673,555 | ||||||
Total Investments (Cost $6,376,503) - 99.8% | 6,673,555 | |||||||
Other Assets in Excess of Liabilities - 0.2% | 12,922 | |||||||
TOTAL NET ASSETS - 100.0% | $ | 6,686,477 |
Percentages are stated as a percent of net assets.
(a) Non-income producing security.
ADR American Depository Receipt
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
36
PureFunds™ ETFs
PureFundsTM Video Game Tech ETF
Schedule of Investments
September 30, 2016
Shares | Market Value | |||||||
COMMON STOCKS - 99.7% | ||||||||
Cayman Islands - 10.4% | ||||||||
Internet Software & Services - 3.0% | ||||||||
NetEase, Inc. - ADR | 405 | $ | 97,516 | |||||
SINA Corporation (a) | 1,249 | 92,214 | ||||||
Weibo Corporation - ADR (a) | 126 | 6,323 | ||||||
Total Internet Software & Services | 196,053 | |||||||
Software - 7.4% | ||||||||
Changyou.com Ltd. - ADR (a) | 13,097 | 356,894 | ||||||
KongZhong Corporation - ADR (a) | 19,068 | 128,518 | ||||||
Total Software | 485,412 | |||||||
Total Cayman Islands | 681,465 | |||||||
France - 4.3% | ||||||||
Software - 4.3% | ||||||||
UBISOFT Entertainment (a) | 7,480 | 282,331 | ||||||
Hong Kong - 1.2% | ||||||||
Internet Software & Services - 1.2% | ||||||||
Tencent Hldgs Ltd | 2,800 | 76,891 | ||||||
Japan - 35.5% | ||||||||
Household Durables - 1.6% | ||||||||
Sony Corporation - ADR (a) | 3,081 | 102,320 | ||||||
Internet Software & Services - 5.6% | ||||||||
DeNa Co. Ltd. | 3,000 | 108,131 | ||||||
Gree, Inc. | 47,300 | 263,542 | ||||||
Total Internet Software & Services | 371,673 | |||||||
Leisure Products - 2.2% | ||||||||
Bandai Namco Holdings, Inc. | 2,600 | 78,843 | ||||||
Sega Sammy Holdings, Inc. | 5,200 | 73,587 | ||||||
Total Leisure Products | 152,430 | |||||||
Software - 26.1% | ||||||||
Capcom Co. Ltd. | 11,200 | 273,359 | ||||||
GungHo Online Entertainment, Inc. | 22,900 | 55,779 | ||||||
Koei Tecmo Holdings Co. Ltd. | 3,500 | 68,685 | ||||||
Konami Holdings Co. | 7,300 | 280,395 | ||||||
Nexon Co Ltd | 17,700 | 274,912 | ||||||
Nintendo Co. Ltd. | 1,800 | 472,256 | ||||||
Square Enix Holdings Co. Ltd. | 8,700 | 297,707 | ||||||
Total Software | 1,723,093 | |||||||
Total Japan | 2,349,516 | |||||||
Republic of Korea - 5.6% | ||||||||
Software - 5.6% | ||||||||
NCSoft Corporation | 1,388 | 372,411 | ||||||
Switzerland - 2.0% | ||||||||
Technology Hardware, Storage & Peripherals - 2.0% | ||||||||
Logitech International SA | 5,620 | 126,225 |
The accompanying notes are an integral part of these financial statements.
37
PureFunds™ ETFs
PureFundsTM Video Game Tech ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
United States - 40.7% | ||||||||
Leisure Products - 3.0% | ||||||||
Hasbro, Inc. | 761 | $ | 60,370 | |||||
JAKKS Pacific, Inc. (a) | 8,332 | 71,988 | ||||||
Mattel, Inc. | 2,105 | 63,739 | ||||||
Total Leisure Products | 196,097 | |||||||
Semiconductors & Semiconductor Equipment - 5.6% | ||||||||
Advanced Micro Devices, Inc. (a) | 19,941 | 137,792 | ||||||
Intel Corporation | 2,692 | 101,623 | ||||||
NVIDIA Corporation | 1,869 | 128,064 | ||||||
Total Semiconductors & Semiconductor Equipment | 367,479 | |||||||
Software - 25.0% | ||||||||
Activision Blizzard, Inc. | 7,364 | 326,225 | ||||||
Electronic Arts, Inc. (a) | 3,696 | 315,638 | ||||||
Glu Mobile, Inc. (a) | 122,713 | 274,877 | ||||||
Microsoft Corporation | 1,680 | 96,768 | ||||||
Take-Two Interactive Software, Inc. (a) | 7,124 | 321,150 | ||||||
Zynga, Inc. (a) | 104,684 | 304,630 | ||||||
Total Software | 1,639,288 | |||||||
Specialty Retail - 4.4% | ||||||||
Gamestop Corporation | 10,477 | 289,060 | ||||||
Technology Hardware, Storage & Peripherals - 2.7% | ||||||||
Apple, Inc. | 877 | 99,145 | ||||||
Immersion Corporation (a) | 9,957 | 81,248 | ||||||
Total Technology Hardware, Storage & Peripherals | 180,393 | |||||||
Total United States | 2,672,317 | |||||||
TOTAL COMMON STOCKS (Cost $5,614,951) | 6,561,156 | |||||||
Total Investments (Cost $5,614,951) - 99.7% | 6,561,156 | |||||||
Other Assets in Excess of Liabilities - 0.3% | 19,757 | |||||||
TOTAL NET ASSETS - 100.0% | $ | 6,580,913 |
Percentages are stated as a percent of net assets.
ADR American Depositary Receipt
(a) Non-income producing security.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
38
PureFunds™ ETFs
PureFundsTM Solactive FinTech ETF
Schedule of Investments
September 30, 2016
Shares | Market Value | |||||||
COMMON STOCKS - 99.8% | ||||||||
Australia - 3.2% | ||||||||
IT Services - 3.2% | ||||||||
IRESS Ltd. | 8,996 | $ | 81,244 | |||||
Bermuda - 3.2% | ||||||||
Professional Services - 3.2% | ||||||||
IHS Markit Ltd. (a) | 2,116 | 79,456 | ||||||
Canada - 3.0% | ||||||||
IT Services - 3.0% | ||||||||
DH Corporation (a) | 3,534 | 76,393 | ||||||
Denmark - 3.4% | ||||||||
Software - 3.4% | ||||||||
SimCorp AS | 1,482 | 86,086 | ||||||
Germany - 3.1% | ||||||||
IT Services - 3.1% | ||||||||
GFT Technologies SE | 3,796 | 78,121 | ||||||
Jersey - 3.1% | ||||||||
Professional Services - 3.1% | ||||||||
Experian PLC | 3,874 | 77,528 | ||||||
New Zealand - 3.0% | ||||||||
Software - 3.0% | ||||||||
Xero Ltd. (a) | 5,338 | 75,211 | ||||||
Singapore - 3.0% | ||||||||
Software - 3.0% | ||||||||
Silverlake Axis Ltd. | 155,000 | 75,017 | ||||||
Switzerland - 3.2% | ||||||||
Software - 3.2% | ||||||||
Temenos Group AG | 1,256 | 79,122 | ||||||
United Kingdom - 2.9% | ||||||||
Software - 2.9% | ||||||||
Fidessa Group PLC | 2,330 | 72,571 | ||||||
United States - 68.7% | ||||||||
Consumer Finance - 3.0% | ||||||||
LendingClub Corporation (a) | 12,056 | 74,506 | ||||||
Diversified Financial Services - 3.0% | ||||||||
On Deck Capital, Inc. (a) | 13,162 | 75,023 | ||||||
Internet Software & Services - 12.5% | ||||||||
CoStar Group, Inc. (a) | 368 | 79,683 | ||||||
Envestnet, Inc. (a) | 2,098 | 76,472 | ||||||
Q2 Holdings, Inc. (a) | 2,744 | 78,643 | ||||||
Zillow Group, Inc. (a) | 2,298 | 79,626 | ||||||
Total Internet Software & Services | 314,424 |
The accompanying notes are an integral part of these financial statements.
39
PureFunds™ ETFs
PureFundsTM Solactive FinTech ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
IT Services - 21.8% | ||||||||
Black Knight Financial Services, Inc. (a) | 1,952 | $ | 79,837 | |||||
Broadridge Financial Solutions, Inc. | 1,128 | 76,467 | ||||||
CoreLogic, Inc. (a) | 1,988 | 77,969 | ||||||
DST Systems, Inc. | 652 | 76,884 | ||||||
PayPal Holdings, Inc. (a) | 1,904 | 78,007 | ||||||
Square, Inc. (a) | 6,818 | 79,498 | ||||||
Syntel, Inc. (a) | 1,842 | 77,198 | ||||||
Total IT Services | 545,860 | |||||||
Professional Services - 6.2% | ||||||||
Equifax, Inc. | 586 | 78,864 | ||||||
Verisk Analytics, Inc. (a) | 960 | 78,029 | ||||||
Total Professional Services | 156,893 | |||||||
Software - 22.2% | ||||||||
Bottomline Technologies, Inc. (a) | 3,324 | 77,482 | ||||||
Ellie Mae, Inc. (a) | 820 | 86,347 | ||||||
Fair Isaac Corporation | 600 | 74,754 | ||||||
Guidewire Software, Inc. (a) | 1,296 | 77,734 | ||||||
Intuit, Inc. | 712 | 78,327 | ||||||
Pegasystems, Inc. | 2,770 | 81,687 | ||||||
SS&C Technologies Holdings, Inc. | 2,472 | 79,475 | ||||||
Total Software | 555,806 | |||||||
Total United States | 1,722,512 | |||||||
TOTAL COMMON STOCKS (Cost $2,497,032) | 2,503,261 | |||||||
Total Investments (Cost $2,497,032) - 99.8% | 2,503,261 | |||||||
Other Assets in Excess of Liabilities - 0.2% | 5,494 | |||||||
TOTAL NET ASSETS - 100.0% | $ | 2,508,755 |
Percentages are stated as a percent of net assets.
(a) Non-income producing security.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
40
PureFunds™ ETFs
PureFundsTM ETFx HealthTech ETF
Schedule of Investments
September 30, 2016
Shares | Market Value | |||||||
COMMON STOCKS - 98.5% | ||||||||
Australia - 1.4% | ||||||||
Health Care Equipment & Supplies - 1.4% | ||||||||
Cochlear Ltd. | 326 | $ | 35,178 | |||||
Denmark - 2.8% | ||||||||
Health Care Equipment & Supplies - 2.8% | ||||||||
GN Store Nord AS | 1,610 | 34,639 | ||||||
William Demant Holding AS (a) | 1,716 | 35,030 | ||||||
Total Health Care Equipment & Supplies | 69,669 | |||||||
France - 3.3% | ||||||||
Health Care Equipment & Supplies - 1.4% | ||||||||
Essilor International SA | 272 | 35,077 | ||||||
Life Sciences Tools & Services - 1.9% | ||||||||
Eurofins Scientific SE | 104 | 47,240 | ||||||
Total France | 82,317 | |||||||
Germany - 4.1% | ||||||||
Health Care Equipment & Supplies - 2.0% | ||||||||
Carl Zeiss Meditec AG | 1,300 | 49,696 | ||||||
Health Care Technology - 2.1% | ||||||||
CompuGroup Medical SE | 1,148 | 52,919 | ||||||
Total Germany | 102,615 | |||||||
Hong Kong - 1.9% | ||||||||
Health Care Technology - 1.9% | ||||||||
Alibaba Health Information Technology Ltd. (a) | 88,000 | 49,239 | ||||||
Ireland - 1.4% | ||||||||
Health Care Equipment & Supplies - 1.4% | ||||||||
Medtronic PLC | 402 | 34,733 | ||||||
Japan - 10.9% | ||||||||
Electronic Equipment, Instruments & Components - 1.3% | ||||||||
Hoya Corportation | 800 | 31,856 | ||||||
Health Care Equipment & Supplies - 7.7% | ||||||||
Asahi Intecc Co Ltd. | 800 | 36,330 | ||||||
CYBERDYNE, Inc. | 3,000 | 46,595 | ||||||
Nihon Kohden Corporation | 1,400 | 33,687 | ||||||
Sysmex Corporation | 600 | 44,022 | ||||||
Terumo Corporation | 1,000 | 38,114 | ||||||
Total Health Care Equipment & Supplies | 198,748 | |||||||
Health Care Technology - 1.9% | ||||||||
M3, Inc. | 1,400 | 47,493 | ||||||
Total Japan | 278,097 | |||||||
Netherlands - 2.7% | ||||||||
Health Care Equipment & Supplies - 1.3% | ||||||||
Wright Medical Group NV (a) | 1,400 | 34,342 |
The accompanying notes are an integral part of these financial statements.
41
PureFunds™ ETFs
PureFundsTM ETFx HealthTech ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
Industrial Conglomerates - 1.4% | ||||||||
Koninklijke Philips NV | 1,210 | $ | 35,857 | |||||
Total Netherlands | 70,199 | |||||||
New Zealand - 2.0% | ||||||||
Health Care Equipment & Supplies - 2.0% | ||||||||
Fisher & Paykel Healthcare Corporation Ltd. | 6,900 | 50,293 | ||||||
Spain - 1.9% | ||||||||
Biotechnology - 1.9% | ||||||||
Grifols SA | 2,278 | 49,082 | ||||||
Sweden - 3.3% | ||||||||
Health Care Equipment & Supplies - 3.3% | ||||||||
Elekta AB | 5,062 | 49,004 | ||||||
Getinge AB | 1,856 | 35,979 | ||||||
Total Health Care Equipment & Supplies | 84,983 | |||||||
Switzerland - 2.8% | ||||||||
Health Care Equipment & Supplies - 2.8% | ||||||||
Sonova Holding AG | 254 | 35,950 | ||||||
Straumann Holding AG | 92 | 35,962 | ||||||
Total Health Care Equipment & Supplies | 71,912 | |||||||
United Kingdom - 6.0% | ||||||||
Health Care Equipment & Supplies - 4.1% | ||||||||
LivaNova PLC (a) | 570 | 34,263 | ||||||
Smith & Nephew PLC | 2,192 | 35,344 | ||||||
STERIS PLC | 480 | 35,088 | ||||||
Total Health Care Equipment & Supplies | 104,695 | |||||||
Life Sciences Tools & Services - 1.9% | ||||||||
ICON PLC (a) | 618 | 47,815 | ||||||
Total United Kingdom | 152,510 | |||||||
United States - 54.0% | ||||||||
Health Care Equipment & Supplies - 30.6% | ||||||||
ABIOMED, Inc. (a) | 368 | 47,317 | ||||||
Align Technology, Inc. (a) | 374 | 35,063 | ||||||
Becton Dickinson and Co. | 274 | 49,246 | ||||||
CONMED Corporation | 874 | 35,012 | ||||||
CR Bard, Inc. | 214 | 47,996 | ||||||
DENTSPLY SIRONA, Inc. | 870 | 51,704 | ||||||
Edwards Lifesciences Corporation (a) | 292 | 35,204 | ||||||
Hologic, Inc. (a) | 908 | 35,258 | ||||||
ICU Medical, Inc. (a) | 374 | 47,266 | ||||||
Intuitive Surgical, Inc. (a) | 48 | 34,792 | ||||||
Masimo Corporation (a) | 592 | 35,218 | ||||||
Merit Medical Systems, Inc. (a) | 2,082 | 50,572 | ||||||
NuVasive, Inc. (a) | 710 | 47,329 | ||||||
Orthofix International NV (a) | 826 | 35,328 | ||||||
ResMed, Inc. (a) | 542 | 35,116 | ||||||
St. Jude Medical, Inc. (a) | 440 | 35,094 |
The accompanying notes are an integral part of these financial statements.
42
PureFunds™ ETFs
PureFundsTM ETFx HealthTech ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
Stryker Corporation | 408 | $ | 47,495 | |||||
Varian Medical Systems, Inc. (a) | 354 | 35,234 | ||||||
Zimmer Biomet Holdings, Inc. (a) | 272 | 35,365 | ||||||
Total Health Care Equipment & Supplies | 775,609 | |||||||
Health Care Providers & Services - 2.0% | ||||||||
Teladoc, Inc. (a) | 2,818 | 51,598 | ||||||
Health Care Technology - 12.0% | ||||||||
Allscripts Healthcare Solutions, Inc. (a) | 3,948 | 51,995 | ||||||
Cerner Corporation (a) | 830 | 51,253 | ||||||
Computer Programs & Systems, Inc. | 1,906 | 49,670 | ||||||
NantHealth, Inc. (a) | 3,924 | 51,601 | ||||||
Omnicell, Inc. (a) | 1,328 | 50,862 | ||||||
Quality Systems, Inc. | 4,588 | 51,936 | ||||||
Total Health Care Technology | 307,317 | |||||||
Life Sciences Tools & Services - 9.4% | ||||||||
Cambrex Corporation (a) | 1,064 | 47,305 | ||||||
Charles River Laboratories International, Inc. (a) | 572 | 47,670 | ||||||
Luminex Corporation (a) | 2,156 | 48,984 | ||||||
Mettler-Toledo International, Inc. (a) | 120 | 50,380 | ||||||
Waters Corporation (a) | 298 | 47,230 | ||||||
Total Life Sciences Tools & Services | 241,569 | |||||||
Total United States | 1,376,093 | |||||||
PREFERRED STOCKS - 1.4% | ||||||||
Germany - 1.4% | ||||||||
Health Care Equipment & Supplies - 1.4% | ||||||||
Sartorius AG | 428 | 35,617 | ||||||
TOTAL COMMON STOCKS (Cost $2,503,621) | 2,542,537 | |||||||
Total Investments (Cost $2,503,621) - 99.9% | 2,542,537 | |||||||
Other Assets in Excess of Liabilities - 0.1% | 3,488 | |||||||
TOTAL NET ASSETS - 100.0% | $ | 2,546,025 |
Percentages are stated as a percent of net assets.
(a) Non-income producing security.
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
43
PureFunds™ ETFs
PureFundsTM ISE Junior Silver (Small Cap Miners/ Explorers) ETF | PureFundsTM ISE Cyber Security ETF | PureFundsTM ISE Big Data ETF | ||||||||||
ASSETS | ||||||||||||
Investments in securities, at fair value* | $ | 75,096,333 | $ | 901,130,534 | $ | 1,549,454 | ||||||
Cash | 814,667 | 1,314,953 | 4,882 | |||||||||
Foreign currency | 612 | — | — | |||||||||
Dividends and interest receivable | — | 169,033 | 105 | |||||||||
Securities lending income receivable | — | 44,697 | 237 | |||||||||
Receivable for investments sold | 1,975,728 | 4,139,083 | 34,807 | |||||||||
Total Assets | 77,887,340 | 906,798,300 | 1,589,485 | |||||||||
LIABILITIES | ||||||||||||
Collateral received for securities loaned (Note 7) | $ | — | $ | 98,368,561 | $ | 310,935 | ||||||
Payable for investments purchased | — | — | 36,695 | |||||||||
Payable for fund shares redeemed | 774,075 | 4,150,815 | — | |||||||||
Management fees payable | 48,231 | 485,000 | 930 | |||||||||
Total Liabilities | 822,306 | 103,004,376 | 348,560 | |||||||||
Net Assets | $ | 77,065,034 | $ | 803,793,924 | $ | 1,240,925 | ||||||
NET ASSETS CONSIST OF: | ||||||||||||
Paid-in Capital | $ | 80,365,297 | $ | 958,962,489 | $ | 1,295,679 | ||||||
Undistributed net investment income (accumulated loss) | (120,937 | ) | 3,186,993 | (1,074 | ) | |||||||
Accumulated net realized gain (loss) on investments | (4,978,114 | ) | (116,348,582 | ) | (69,816 | ) | ||||||
Net unrealized appreciation (depreciation) on: | ||||||||||||
Investments in securities | 1,801,795 | (42,016,240 | ) | 16,136 | ||||||||
Foreign currency and translation of other assets and liabilities in foreign currency | (3,007 | ) | 9,264 | — | ||||||||
Net Assets | $ | 77,065,034 | $ | 803,793,924 | $ | 1,240,925 | ||||||
*Identified Cost: | ||||||||||||
Investments in unaffiliated securities | $ | 73,294,538 | $ | 943,146,774 | $ | 1,533,318 | ||||||
Foreign currency | 608 | — | — | |||||||||
Shares Outstanding^ | 4,950,000 | 28,800,000 | 50,000 | |||||||||
Net Asset Value, Offering and Redemption Price per Share | $ | 15.57 | $ | 27.91 | $ | 24.82 |
^ No par value, unlimited number of shares authorized
The accompanying notes are an integral part of these financial statements.
44
PureFunds™ ETFs
STATEMENTS OF ASSETS AND LIABILITIES (Continued)
As of September 30, 2016
As of September 30, 2016
PureFundsTM ISE Mobile Payments ETF | PureFundsTM Drone Economy Strategy ETF | PureFundsTM Video Game Tech ETF | PureFundsTM Solactive FinTech ETF | PureFundsTM ETFx HealthTech ETF | ||||||||||||||
$ | 9,299,072 | $ | 6,673,555 | $ | 6,561,156 | $ | 2,503,261 | $ | 2,542,537 | |||||||||
40,054 | 10,012 | 19,133 | 5,892 | 4,980 | ||||||||||||||
911 | — | — | 547 | 91 | ||||||||||||||
3,015 | 6,741 | 4,564 | 542 | 1,130 | ||||||||||||||
2,889 | — | — | — | — | ||||||||||||||
— | — | — | — | 310,235 | ||||||||||||||
9,345,941 | 6,690,308 | 6,584,853 | 2,510,242 | 2,858,973 | ||||||||||||||
$ | 605,950 | $ | — | $ | — | $ | — | $ | — | |||||||||
— | — | — | — | 311,399 | ||||||||||||||
— | — | — | — | — | ||||||||||||||
5,561 | 3,831 | 3,940 | 1,487 | 1,549 | ||||||||||||||
611,511 | 3,831 | 3,940 | 1,487 | 312,948 | ||||||||||||||
$ | 8,734,430 | $ | 6,686,477 | $ | 6,580,913 | $ | 2,508,755 | $ | 2,546,025 | |||||||||
$ | 8,691,865 | $ | 6,364,770 | $ | 5,531,370 | $ | 2,500,000 | $ | 2,500,000 | |||||||||
9,406 | 7,309 | 6,872 | — | 593 | ||||||||||||||
(151,492 | ) | 17,410 | 96,515 | 2,525 | 6,857 | |||||||||||||
184,668 | 297,052 | 946,205 | 6,229 | 38,916 | ||||||||||||||
(17 | ) | (634 | ) | (49 | ) | 1 | (341 | ) | ||||||||||
$ | 8,734,430 | $ | 6,686,477 | $ | 6,580,913 | $ | 2,508,755 | $ | 2,546,025 | |||||||||
$ | 9,114,404 | $ | 6,376,503 | $ | 5,614,951 | $ | 2,497,032 | $ | 2,503,621 | |||||||||
905 | — | — | 546 | 91 | ||||||||||||||
350,000 | 250,000 | 200,000 | 100,000 | 100,000 | ||||||||||||||
$ | 24.96 | $ | 26.75 | $ | 32.90 | $ | 25.09 | $ | 25.46 |
^ No par value, unlimited number of shares authorized
The accompanying notes are an integral part of these financial statements.
45
PureFunds™ ETFs
For the year ended September 30, 2016 |
PureFundsTM ISE Junior Silver (Small Cap Miners/ Explorers) ETF | PureFundsTM ISE Cyber Security ETF | PureFundsTM ISE Big Data ETF | ||||||||||||
INVESTMENT INCOME | ||||||||||||||
Income: | ||||||||||||||
Dividend income (net of foreign withholdings tax of $8,967, $240,483, $460, $869, | ||||||||||||||
$ | 2,197, $2,479, $171, $109) | $ | 72,015 | $ | 15,314,905 | $ | 7,683 | |||||||
Securities Lending Income | — | 878,891 | 1,935 | |||||||||||
Total Investment Income | 72,015 | 16,193,796 | 9,618 | |||||||||||
Expenses: | ||||||||||||||
Management fees | 206,882 | 6,187,479 | 11,154 | |||||||||||
Total Expenses | 206,882 | 6,187,479 | 11,154 | |||||||||||
Net Investment Income (Loss) | (134,867 | ) | 10,006,317 | (1,536 | ) | |||||||||
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||||||||||||
Net Realized Gain (Loss) on: | ||||||||||||||
Investments | (1,951,832 | ) | (100,020,240 | ) | (50,376 | ) | ||||||||
In-Kind redemptions | 9,071,048 | (23,134,987 | ) | (153,538 | ) | |||||||||
Foreign currency | (3,377 | ) | (168,890 | ) | (1,074 | ) | ||||||||
Net realized gain (loss) on investments and In-Kind redemptions | 7,115,839 | (123,324,117 | ) | (204,988 | ) | |||||||||
Net Change in Unrealized Appreciation of: | ||||||||||||||
Investments | 4,716,349 | 170,461,874 | 268,077 | |||||||||||
Foreign currency and foreign currency translation | (3,002 | ) | 11,940 | — | ||||||||||
Net change in Unrealized Appreciation of Investments | 4,713,347 | 170,473,814 | 268,077 | |||||||||||
Net Realized and Unrealized Gain on Investments | 11,829,186 | 47,149,697 | 63,089 | |||||||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 11,694,319 | $ | 57,156,014 | $ | 61,553 |
The accompanying notes are an integral part of these financial statements.
46
PureFunds™ ETFs
STATEMENTS OF OPERATIONS (Continued) |
For the year ended September 30, 2016 |
PureFundsTM ISE Mobile Payments ETF | PureFundsTM Drone Economy Strategy ETF1 | PureFundsTM Video Game Tech ETF1 | PureFundsTM Solactive FinTech ETF2 | PureFundsTM ETFx HealthTech ETF2 | ||||||||||||||
$ | 71,111 | $ | 30,631 | $ | 24,456 | $ | 2,072 | $ | 2,132 | |||||||||
38,231 | — | — | — | — | ||||||||||||||
109,342 | 30,631 | 24,456 | 2,072 | 2,132 | ||||||||||||||
59,330 | 16,112 | 15,380 | 1,487 | 1,549 | ||||||||||||||
59,330 | 16,112 | 15,380 | 1,487 | 1,549 | ||||||||||||||
50,012 | 14,519 | 9,076 | 585 | 583 | ||||||||||||||
(174,597 | ) | 14,147 | 96,515 | 1,940 | 6,867 | |||||||||||||
188,732 | — | — | — | — | ||||||||||||||
(606 | ) | — | (2,397 | ) | — | — | ||||||||||||
13,529 | 14,147 | 94,188 | 1,940 | 6,867 | ||||||||||||||
385,054 | 297,052 | 946,205 | 6,229 | 38,916 | ||||||||||||||
(17 | ) | (64 | ) | (49 | ) | 1 | (341 | ) | ||||||||||
385,037 | 296,988 | 946,156 | 6,230 | 38,575 | ||||||||||||||
398,566 | 311,135 | 1,040,274 | 8,170 | 45,442 | ||||||||||||||
$ | 448,578 | $ | 325,654 | $ | 1,049,350 | $ | 8,755 | $ | 46,025 |
1 | Fund commenced operations on March 8, 2016. The information presented is for the period from March 8, 2016 to September 30, 2016. |
2 | Fund commenced operations on August 31, 2016. The information presented is for the period from August 31, 2016 to September 30, 2016. |
The accompanying notes are an integral part of these financial statements.
47
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF
Year ended September 30, 2016 | Year ended September 30, 2015 | ||||||||
OPERATIONS | |||||||||
Net investment loss | $ | (134,867 | ) | $ | (19,154 | ) | |||
Net realized gain (loss) on investments and In-Kind Redemptions | 7,115,839 | (2,287,841 | ) | ||||||
Net change in unrealized appreciation (depreciation) of investments | 4,713,347 | (853,399 | ) | ||||||
Net increase (decrease) in net assets resulting from operations | 11,694,319 | (3,160,394 | ) | ||||||
DISTRIBUTIONS TO SHAREHOLDERS | |||||||||
From net investment income | (87,131 | ) | — | ||||||
CAPITAL SHARE TRANSACTIONS | |||||||||
Net increase (decrease) in net assets derived | |||||||||
from net change in outstanding shares (a) | 62,026,105 | (405,000 | ) | ||||||
Net increase (decrease) in net assets | $ | 73,633,293 | $ | (3,565,394 | ) | ||||
NET ASSETS | |||||||||
Beginning of Period | 3,431,741 | 6,997,135 | |||||||
End of Period | $ | 77,065,034 | $ | 3,431,741 | |||||
Accumulated net investment loss | $ | (120,937 | ) | $ | (16,838 | ) |
(a) Summary of share transactions is as follows:
Year Ended September 30, 2016 | Year Ended September 30, 2015 | ||||||||||||
Shares | Amount | Shares | Amount | ||||||||||
Shares Sold | 5,400,000 | $ | 79,061,830 | — | $ | — | |||||||
Shares Redeemed | (1,100,000 | ) | (17,035,725 | ) | (50,000 | ) | (405,000 | ) | |||||
4,300,000 | $ | 62,026,105 | (50,000 | ) | $ | (405,000 | ) | ||||||
Beginning Shares | 650,000 | 700,000 | |||||||||||
Ending Shares | 4,950,000 | 650,000 |
The accompanying notes are an integral part of these financial statements.
48
PureFunds™ ISE Cyber Security ETF
STATEMENTS OF CHANGES IN NET ASSETS
Year ended September 30, 2016 | Period ended September 30, 2015* | |||||||
OPERATIONS | ||||||||
Net investment income (loss) | $ | 10,006,317 | $ | (1,115,975 | ) | |||
Net realized gain (loss) on investments and In-Kind Redemptions | (123,324,117 | ) | 4,593,655 | |||||
Net change in unrealized appreciation (depreciation) of investments | 170,473,814 | (212,480,790 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 57,156,014 | (209,003,110 | ) | |||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | (5,498,499 | ) | — | |||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Net increase (decrease) in net assets derived | ||||||||
from net change in outstanding shares (a) | (306,990,660 | ) | 1,268,128,154 | |||||
Transaction fees (See Note 1) | 2,025 | — | ||||||
Net increase (decrease) in net assets from capital share transactions | (306,988,635 | — | ||||||
Total increase (decrease) in net assets | $ | (255,331,120 | ) | $ | 1,059,125,044 | |||
NET ASSETS | ||||||||
Beginning of Period | 1,059,125,044 | — | ||||||
End of Period | 803,793,924 | $ | 1,059,125,044 | |||||
Undistributed net investment income (accumulated loss) | $ | 3,186,993 | $ | (1,193,419 | ) |
(a) Summary of share transactions is as follows:
Year Ended September 30, 2016 | Period Ended September 30, 2015* | ||||||||||||
Shares | Amount | Shares | Amount | ||||||||||
Shares Sold | 2,200,000 | $ | 57,823,125 | 49,000,000 | $ | 1,473,110,885 | |||||||
Transaction Fees | — | 2,025 | — | 48,459 | |||||||||
Shares Redeemed | (15,300,000 | ) | (364,813,785 | ) | (7,100,000 | ) | (205,031,190 | ) | |||||
(13,100,000 | ) | $ | (306,988,635 | ) | 41,900,000 | $ | 1,268,128,154 | ||||||
Beginning Shares | 41,900,000 | — | |||||||||||
Ending Shares | 28,800,000 | 41,900,000 | |||||||||||
*Fund commenced operations on November 11, 2014. The information presented is for the period from November 11, 2014 to September 30, 2015.
The accompanying notes are an integral part of these financial statements.
49
PureFunds™ ISE Big Data ETF
STATEMENTS OF CHANGES IN NET ASSETS
Year ended September 30, 2016 | Period ended September 30, 2015* | |||||||
OPERATIONS | ||||||||
Net investment loss | $ | (1,536 | ) | $ | (392 | ) | ||
Net realized loss on investments and In-Kind Redemptions | (204,988 | ) | (19,980 | ) | ||||
Net change in unrealized appreciation (depreciation) of investments | 268,077 | (251,941 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 61,553 | (272,313 | ) | |||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | — | — | ||||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Net increase (decrease) in net assets derived | (1,048,315 | ) | 2,500,000 | |||||
from net change in outstanding shares (a) | ||||||||
Net increase (decrease) in net assets | $ | (986,762 | ) | $ | 2,227,687 | |||
NET ASSETS | ||||||||
Beginning of Period | 2,227,687 | — | ||||||
End of Period | $ | 1,240,925 | $ | 2,227,687 | ||||
Accumulated net investment loss | $ | (1,074 | ) | $ | — |
(a) Summary of share transactions is as follows:
Year Ended September 30, 2016 | Period Ended September 30, 2015* | ||||||||||||
Shares | Amount | Shares | Amount | ||||||||||
Shares Sold | — | $ | — | 100,000 | $ | 2,500,000 | |||||||
Transaction Fees | — | — | — | — | |||||||||
Shares Redeemed | (50,000 | ) | (1,048,315 | ) | — | — | |||||||
(50,000 | ) | $ | (1,048,315 | ) | 100,000 | $ | 2,500,000 | ||||||
Beginning Shares | 100,000 | — | |||||||||||
Ending Shares | 50,000 | 100,000 |
*Fund commenced operations on July 15, 2015. The information presented is for the period from July 15, 2015 to September 30, 2015.
The accompanying notes are an integral part of these financial statements.
50
PureFunds™ ISE Mobile Payments ETF
STATEMENTS OF CHANGES IN NET ASSETS
Year ended September 30, 2016 | Period ended September 30, 2015* | |||||||
OPERATIONS | ||||||||
Net investment income (loss) | $ | 50,012 | $ | (1,899 | ) | |||
Net realized gain (loss) on investments and In-Kind Redemptions | 13,529 | (23,598 | ) | |||||
Net change in unrealized appreciation (depreciation) of investments | 385,037 | (200,386 | ) | |||||
Net increase in net assets resulting from operations | 448,578 | (225,883 | ) | |||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
From net investment income | (40,000 | ) | — | |||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Net increase (decrease) in net assets derived | ||||||||
from net change in outstanding shares (a) | 3,618,915 | 4,932,820 | ||||||
Net increase in net assets | $ | 4,027,493 | $ | 4,706,937 | ||||
NET ASSETS | ||||||||
Beginning of Period | 4,706,937 | — | ||||||
End of Period | $ | 8,734,430 | $ | 4,706,937 | ||||
Undistributed net investment income | $ | 9,406 | $ | — |
(a) Summary of share transactions is as follows:
Year Ended September 30, 2016 | Period Ended September 30, 2015* | ||||||||||||
Shares | Amount | Shares | Amount | ||||||||||
Shares Sold | 200,000 | $ | 4,842,235 | 200,000 | $ | 4,932,820 | |||||||
Transaction Fees | — | — | — | — | |||||||||
Shares Redeemed | (50,000 | ) | (1,223,320 | ) | — | — | |||||||
150,000 | $ | 3,618,915 | 200,000 | $ | 4,932,820 | ||||||||
Beginning Shares | 200,000 | — | |||||||||||
Ending Shares | 350,000 | 200,000 |
*Fund commenced operations on July 15, 2015. The information presented is for the period from July 15, 2015 to September 30, 2015.
The accompanying notes are an integral part of these financial statements.
51
PureFunds™ Drone Economy Strategy ETF
STATEMENT OF CHANGES IN NET ASSETS
Period ended September 30, 2016* | ||||
OPERATIONS | ||||
Net investment income | $ | 14,519 | ||
Net realized gain on investments and In-Kind Redemptions | 14,147 | |||
Net change in unrealized appreciation of investments | 296,988 | |||
Net increase in net assets resulting from operations | 325,654 | |||
DISTRIBUTIONS TO SHAREHOLDERS | ||||
From net investment income | (4,000 | ) | ||
CAPITAL SHARE TRANSACTIONS | ||||
Net increase in net assets derived | ||||
from net change in outstanding shares (a) | 6,364,770 | |||
Transaction Fees (Note 1) | 53 | |||
Net increase in net assets | $ | 6,686,477 | ||
NET ASSETS | ||||
Beginning of Period | — | |||
End of Period | $ | 6,686,477 | ||
Undistributed net investment income | $ | 7,309 |
(a) Summary of share transactions is as follows:
Period Ended September 30, 2016* | |||||||
Shares | Amount | ||||||
Shares Sold | 250,000 | $ | 6,364,770 | ||||
Transaction Fees | — | 53 | |||||
Shares Redeemed | — | — | |||||
250,000 | $ | 6,364,823 | |||||
Beginning Shares | — | ||||||
Ending Shares | 250,000 |
*Fund commenced operations on March 8, 2016. The information presented is for the period from March 8, 2016 to September 30, 2016.
The accompanying notes are an integral part of these financial statements.
52
PureFunds™ Video Game Tech ETF
STATEMENT OF CHANGES IN NET ASSETS
Period ended September 30, 2016* | ||||
OPERATIONS | ||||
Net investment income | $ | 9,076 | ||
Net realized gain on investments and In-Kind Redemptions | 94,118 | |||
Net change in unrealized appreciation of investments | 946,156 | |||
Net increase in net assets resulting from operations | 1,049,350 | |||
DISTRIBUTIONS TO SHAREHOLDERS | ||||
From net investment income | — | |||
CAPITAL SHARE TRANSACTIONS | ||||
Net increase in net assets derived | ||||
from net change in outstanding shares (a) | 5,531,370 | |||
Transaction Fees (Note 1) | 193 | |||
Net increase in net assets | $ | 6,580,913 | ||
NET ASSETS | ||||
Beginning of Period | — | |||
End of Period | $ | 6,580,913 | ||
Undistributed net investment income | $ | 6,872 |
(a) Summary of share transactions is as follows:
Period Ended September 30, 2016* | |||||||
Shares | Amount | ||||||
Shares Sold | 200,000 | $ | 5,531,370 | ||||
Transaction Fees | — | 193 | |||||
Shares Redeemed | — | — | |||||
200,000 | $ | 5,531,563 | |||||
Beginning Shares | — | ||||||
Ending Shares | 200,000 |
*Fund commenced operations on March 8, 2016. The information presented is for the period from March 8, 2016 to September 30, 2016.
The accompanying notes are an integral part of these financial statements.
53
PureFunds™ Solactive FinTech ETF
STATEMENT OF CHANGES IN NET ASSETS
Period ended September 30, 2016* | ||||
OPERATIONS | ||||
Net investment income | $ | 585 | ||
Net realized gain on investments and In-Kind Redemptions | 1,940 | |||
Net change in unrealized appreciation of investments | 6,230 | |||
Net increase in net assets resulting from operations | 8,755 | |||
DISTRIBUTIONS TO SHAREHOLDERS | ||||
From net investment income | — | |||
CAPITAL SHARE TRANSACTIONS | ||||
Net increase in net assets derived | ||||
from net change in outstanding shares (a) | 2,500,000 | |||
Net increase in net assets | $ | 2,508,755 | ||
NET ASSETS | ||||
Beginning of Period | — | |||
End of Period | $ | 2,508,755 | ||
Undistributed net investment income | $ | — |
(a) Summary of share transactions is as follows:
Period Ended September 30, 2016* | |||||||
Shares | Amount | ||||||
Shares Sold | 100,000 | $ | 2,500,000 | ||||
Transaction Fees | — | — | |||||
Shares Redeemed | — | — | |||||
100,000 | $ | 2,500,000 | |||||
Beginning Shares | — | ||||||
Ending Shares | 100,000 |
*Fund commenced operations on August 31, 2016. The information presented is for the period from August 31, 2016 to September 30, 2016.
The accompanying notes are an integral part of these financial statements.
54
PureFunds™ ETFx HealthTech ETF
STATEMENT OF CHANGES IN NET ASSETS
Period ended September 30, 2016* | ||||
OPERATIONS | ||||
Net investment income | $ | 583 | ||
Net realized gain on investments and In-Kind Redemptions | 6,867 | |||
Net change in unrealized appreciation of investments | 38,575 | |||
Net increase in net assets resulting from operations | 46,025 | |||
DISTRIBUTIONS TO SHAREHOLDERS | ||||
From net investment income | — | |||
CAPITAL SHARE TRANSACTIONS | ||||
Net increase in net assets derived | ||||
from net change in outstanding shares (a) | 2,500,000 | |||
Net increase in net assets | $ | 2,546,025 | ||
NET ASSETS | ||||
Beginning of Period | — | |||
End of Period | $ | 2,546,025 | ||
Undistributed net investment income | $ | 593 |
(a) Summary of share transactions is as follows:
Period Ended September 30, 2016* | |||||||
Shares | Amount | ||||||
Shares Sold | 100,000 | $ | 2,500,000 | ||||
Transaction Fees | — | — | |||||
Shares Redeemed | — | — | |||||
100,000 | $ | 2,500,000 | |||||
Beginning Shares | — | ||||||
Ending Shares | 100,000 |
*Fund commenced operations on August 31, 2016. The information presented is for the period from August 31, 2016 to September 30, 2016.
The accompanying notes are an integral part of these financial statements.
55
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF
For a capital share outstanding throughout the period
Year Ended September 30, 2016 | Year Ended September 30, 2015 | Year Ended September 30, 2014 | Period Ended September 30, 20131 | |||||||||||||
Net Asset Value, Beginning of Period | $ | 5.28 | $ | 10.00 | $ | 11.71 | $ | 20.00 | ||||||||
Income (Loss) from Investment Operations: | ||||||||||||||||
Net investment loss 2 | (0.06 | ) | (0.03 | ) | (0.06 | ) | (0.02 | ) | ||||||||
Net realized and unrealized gain (loss) on investments | 10.47 | (4.69 | ) | (1.64 | ) | (8.27 | ) | |||||||||
Total from investment operations | 10.41 | (4.72 | ) | (1.70 | ) | (8.29 | ) | |||||||||
Less Distributions: | ||||||||||||||||
Distributions from net investment income | (0.12 | ) | — | (0.01 | ) | — | ||||||||||
Total distributions | (0.12 | ) | — | (0.01 | ) | — | ||||||||||
Net asset value, end of period | $ | 15.57 | $ | 5.28 | $ | 10.00 | $ | 11.71 | ||||||||
Total Return | 201.99 | % | -47.20 | % | -14.52 | % | -41.45 | %3 | ||||||||
Ratios/Supplemental Data: | ||||||||||||||||
Net assets at end of period (000’s) | $ | 77,065 | $ | 3,432 | $ | 6,997 | $ | 1,757 | ||||||||
Expenses to Average Net Assets | 0.69 | % | 0.69 | % | 0.69 | % | 0.69 | %4 | ||||||||
Net Investment Income (Loss) to Average Net Assets | -0.45 | % | -0.39 | % | -0.52 | % | -0.21 | %4 | ||||||||
Portfolio Turnover Rate | 33 | % | 55 | % | 44 | % | 69 | %3 |
1Commencement of operations on November 29, 2012.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
56
PureFundsTM ISE Cyber Security ETF
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
Year Ended September 30, 2016 | Period Ended September 30, 20151 | |||||||
Net Asset Value, Beginning of Period | $ | 25.28 | $ | 25.00 | ||||
Income (Loss) from Investment Operations: | ||||||||
Net investment income (loss) 2 | 0.30 | (0.05 | ) | |||||
Net realized and unrealized gain (loss) on investments | 2.52 | 0.33 | ||||||
Total from investment operations | 2.82 | 0.28 | ||||||
Less Distributions: | ||||||||
Distributions from net investment income | (0.19 | ) | — | |||||
Total distributions | (0.19 | ) | — | |||||
Net asset value, end of period | $ | 27.91 | $ | 25.28 | ||||
Total Return | 11.23 | % | 1.11 | %3 | ||||
Ratios/Supplemental Data: | ||||||||
Net assets at end of period (000’s) | $ | 803,794 | $ | 1,059,125 | ||||
Expenses to Average Net Assets | 0.75 | % | 0.75 | %4 | ||||
Net Investment Income (Loss) to Average Net Assets | 1.21 | % | -0.19 | %4 | ||||
Portfolio Turnover Rate | 34 | % | 31 | %3 |
1Commencement of operations on November 11, 2014.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
57
PureFundsTM ISE Big Data ETF
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
Year Ended September 30, 2016 | Period Ended September 30, 20151 | |||||||
Net Asset Value, Beginning of Period | $ | 22.28 | $ | 25.00 | ||||
Income (Loss) from Investment Operations: | ||||||||
Net investment income (loss) 2 | (0.02 | ) | — | 5 | ||||
Net realized and unrealized gain (loss) on investments | 2.56 | (2.72 | ) | |||||
Total from investment operations | 2.54 | (2.72 | ) | |||||
Less Distributions: | ||||||||
Distributions from net investment income | — | — | ||||||
Total distributions | — | — | ||||||
Net asset value, end of period | $ | 24.82 | $ | 22.28 | ||||
Total Return | 11.41 | % | -10.89 | %3 | ||||
Ratios/Supplemental Data: | ||||||||
Net assets at end of period (000’s) | $ | 1,241 | $ | 2,228 | ||||
Expenses to Average Net Assets | 0.75 | % | 0.75 | %4 | ||||
Net Investment Loss to Average Net Assets | -0.10 | % | -0.08 | %4 | ||||
Portfolio Turnover Rate | 50 | % | 25 | %3 |
1Commencement of operations on July 15, 2015.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
5Amount is less than $0.005 per share
The accompanying notes are an integral part of these financial statements.
58
PureFundsTM ISE Mobile Payments ETF
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
Year Ended September 30, 2016 | Period Ended September 30, 20151 | |||||||
Net Asset Value, Beginning of Period | $ | 23.53 | $ | 25.00 | ||||
Income (Loss) from Investment Operations: | ||||||||
Net investment income (loss) 2 | 0.15 | (0.01 | ) | |||||
Net realized and unrealized gain (loss) on investments | 1.39 | (1.46 | ) | |||||
Total from investment operations | 1.54 | (1.47 | ) | |||||
Less Distributions: | ||||||||
Distributions from net investment income | (0.11 | ) | — | |||||
Total distributions | (0.11 | ) | — | |||||
Net asset value, end of period | $ | 24.96 | $ | 23.53 | ||||
Total Return | 6.51 | % | -5.86 | %3 | ||||
Ratios/Supplemental Data: | ||||||||
Net assets at end of period (000’s) | $ | 8,734 | $ | 4,707 | ||||
Expenses to Average Net Assets | 0.75 | % | 0.75 | %4 | ||||
Net Investment Income (Loss) to Average Net Assets | 0.63 | % | -0.23 | %4 | ||||
Portfolio Turnover Rate | 32 | % | 8 | %3 |
1Commencement of operations on July 15, 2015.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
59
PureFundsTM Drone Economy Strategy ETF
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
Period Ended September 30, 20161 | ||||
Net Asset Value, Beginning of Period | $ | 25.00 | ||
Income from Investment Operations: | ||||
Net investment income 2 | 0.11 | |||
Net realized and unrealized gain on investments | 1.68 | |||
Total from investment operations | 1.79 | |||
Less Distributions: | ||||
Distributions from net investment income | (0.04 | ) | ||
Total distributions | (0.04 | ) | ||
Net asset value, end of period | $ | 26.75 | ||
Total Return | 7.15 | %3 | ||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000’s) | $ | 6,686 | ||
Expenses to Average Net Assets | 0.75 | %4 | ||
Net Investment Income to Average Net Assets | 0.68 | %4 | ||
Portfolio Turnover Rate | 13 | %3 |
1Commencement of operations on March 8, 2016.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
60
PureFundsTM Video Game Tech ETF
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
Period Ended September 30, 20161 | ||||
Net Asset Value, Beginning of Period | $ | 25.00 | ||
Income from Investment Operations: | ||||
Net investment income 2 | 0.08 | |||
Net realized and unrealized gain on investments | 7.82 | |||
Total from investment operations | 7.90 | |||
Less Distributions: | ||||
Distributions from net investment income | — | |||
Total distributions | — | |||
Net asset value, end of period | $ | 32.90 | ||
Total Return | 31.62 | %3 | ||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000’s) | $ | 6,581 | ||
Expenses to Average Net Assets | 0.74 | %4 | ||
Net Investment Income to Average Net Assets | 0.44 | %4 | ||
Portfolio Turnover Rate | 10 | %3 |
1Commencement of operations on March 8, 2016.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
61
PureFundsTM Solactive FinTech ETF
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
Period Ended September 30, 20161 | ||||
Net Asset Value, Beginning of Period | $ | 25.00 | ||
Income from Investment Operations: | ||||
Net investment income 2 | 0.01 | |||
Net realized and unrealized gain on investments | 0.08 | |||
Total from investment operations | 0.09 | |||
Less Distributions: | ||||
Distributions from net investment income | — | |||
Total distributions | — | |||
Net asset value, end of period | $ | 25.09 | ||
Total Return | 0.36 | %3 | ||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000’s) | $ | 2,509 | ||
Expenses to Average Net Assets | 0.70 | %4 | ||
Net Investment Income to Average Net Assets | 0.27 | %4 | ||
Portfolio Turnover Rate | 6 | %3 |
1Commencement of operations on August 31, 2016.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
62
PureFundsTM ETFx HealthTech ETF
FINANCIAL HIGHLIGHTS
For a capital share outstanding throughout the period
Period Ended September 30, 20161 | ||||
Net Asset Value, Beginning of Period | $ | 25.00 | ||
Income from Investment Operations: | ||||
Net investment income 2 | 0.01 | |||
Net realized and unrealized gain on investments | 0.45 | |||
Total from investment operations | 0.46 | |||
Less Distributions: | ||||
Distributions from net investment income | — | |||
Total distributions | — | |||
Net asset value, end of period | $ | 25.46 | ||
Total Return | 1.86 | %3 | ||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000’s) | $ | 2,546 | ||
Expenses to Average Net Assets | 0.75 | %4 | ||
Net Investment Income to Average Net Assets | 0.28 | %4 | ||
Portfolio Turnover Rate | 12 | %3 |
1Commencement of operations on August 31, 2016.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
63
PureFunds™ ETFs
NOTE 1 – ORGANIZATION
PureFunds™ ISE Junior Silver “Silver” (Small Cap Miners/Explorers) ETF, PureFunds™ ISE Cyber Security “Cyber Security” ETF, PureFunds™ ISE Big Data “Big Data” ETF, PureFunds™ ISE Mobile Payments “Mobile” ETF, PureFunds™ ISE Drone Economy Strategy “Drone” ETF, PureFunds™ ISE Video Game Tech “Video Game” ETF, PureFunds™ Solactive FinTech “FinTech” ETF and PureFunds™ ETFX HealthTech “HealthTech” ETF (each a “Fund”, or collectively the “Funds”) are series of ETF Managers Trust (the “Trust”), an open-end management investment company consisting of multiple investment series, organized as a Delaware statutory trust on July 1, 2009. The Trust is registered with the SEC under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and the offering of the Funds’ shares (“Shares”) is registered under the Securities Act of 1933, as amended (the “Securities Act”).
The following table is a summary of the Commencement Date and Strategy of the Funds:
Fund Name | Commencement Date | Strategy | |
Silver | 11/29/2012 | Seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Junior Silver (Small Cap Miners/Explorers)™ Index. | |
Cyber Security | 11/11/2014 | Seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield of the ISE Cyber Security™ Index. | |
Big Data | 7/15/2015 | Seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Big Data™ Index. | |
Mobile | 7/15/2015 | Seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ISE Mobile Payments™ Index. | |
Drone | 3/8/2016 | Seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Reality Shares Drone™ Index. | |
Video Game | 3/8/2016 | Seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the EEFund Video Game Tech™ Index. | |
FinTech | 8/31/2016 | Seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Solactive FinTech Index. | |
HealthTech | 8/31/2016 | Seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the ETFx HealthTech Index. |
The Funds each currently offer one class of shares, which have no front end sales load, no deferred sales charges, and no redemption fees. The Funds may issue an unlimited number of shares of beneficial interest, with no par value. All shares of each Fund have equal rights and privileges.
64
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
Shares of the Funds are listed and traded on the NYSE Arca, Inc. Market prices for the Shares may be different from their net asset value (“NAV”). Each Fund issues and redeems Shares on a continuous basis at NAV only in blocks of 50,000 shares, called “Creation Units.” Creation Units are issued and redeemed principally in-kind for securities included in a specified Index. Once created, Shares generally trade in the secondary market at market prices that change throughout the day in quantities less than a Creation Unit. Except when aggregated in Creation Units, Shares are not redeemable securities of a Fund. Shares of a Fund may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem the Shares directly from a Fund. Rather, most retail investors may purchase Shares in the secondary market with the assistance of a broker and may be subject to customary brokerage commissions or fees.
Authorized Participants transacting in Creation Units for cash may pay an additional variable charge to compensate the relevant Fund for certain transaction costs (i.e., brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, if any, are included in “Transaction Fees” in the statements of changes in net assets.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
A. | Security Valuation. Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded on the valuation date (or at approximately 4:00 pm Eastern Time if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. |
Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees (the “Board”). When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the pricing procedures adopted by the Funds’ Board. The use of fair value pricing by a Fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without regard to such considerations. As of September 30, 2016, the Funds did not hold any fair valued securities. |
65
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
As described above, the Funds utilize various methods to measure the fair value of their investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access. |
Level 2 | Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
Level 3 | Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Funds’ own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3. |
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety. |
66
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
The following table presents a summary of the Funds’ assets measured at fair value:
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) | |||||||||||||
ETF | |||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | |||||||||
Common Stocks | $ | 72,647,492 | $ | 2,448,841 | $ | — | $ | 75,096,333 | |||||
Total Investments in Securities | $ | 72,647,492 | $ | 2,448,841 | $ | — | $ | 75,096,333 | |||||
PureFunds™ ISE Cyber Security ETF | |||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | |||||||||
Common Stocks | $ | 802,761,973 | $ | — | $ | — | $ | 802,761,973 | |||||
Short Term Investments | 98,368,561 | — | — | 98,368,561 | |||||||||
Total Investments in Securities | $ | 901,130,534 | $ | — | $ | — | $ | 901,130,534 | |||||
PureFunds™ ISE Big Data ETF | |||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | |||||||||
Common Stocks | $ | 1,238,519 | $ | — | $ | — | $ | 1,238,519 | |||||
Short Term Investments | 310,935 | — | — | 310,935 | |||||||||
Total Investments in Securities | $ | 1,549,454 | $ | — | $ | — | $ | 1,549,454 | |||||
PureFunds™ ISE Mobile Payments ETF | |||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | |||||||||
Common Stocks | $ | 8,693,122 | $ | — | $ | — | $ | 8,693,122 | |||||
Short Term Investments | 605,950 | — | — | 605,950 | |||||||||
Total Investments in Securities | $ | 9,299,072 | $ | — | $ | — | $ | 9,299,072 | |||||
PureFunds™ Drone Economy Strategy ETF | |||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | |||||||||
Common Stocks | $ | 6,673,555 | $ | — | $ | — | $ | 6,673,555 | |||||
Total Investments in Securities | $ | 6,673,555 | $ | — | $ | — | $ | 6,673,555 | |||||
PureFunds™ Video Game Tech ETF | |||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | |||||||||
Common Stocks | $ | 6,561,156 | $ | — | $ | — | $ | 6,561,156 | |||||
Total Investments in Securities | $ | 6,561,156 | $ | — | $ | — | $ | 6,561,156 | |||||
PureFunds™ Solactive FinTech ETF | |||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | |||||||||
Common Stocks | $ | 2,503,261 | $ | — | $ | — | $ | 2,503,261 | |||||
Total Investments in Securities | $ | 2,503,261 | $ | — | $ | — | $ | 2,503,261 | |||||
PureFunds™ ETX HealthTech ETF | |||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | |||||||||
Common Stocks | $ | 2,542,537 | $ | — | $ | — | $ | 2,542,537 | |||||
Total Investments in Securities | $ | 2,542,537 | $ | — | $ | — | $ | 2,542,537 |
^ See Schedule of Investments for classifications by country and industry.
67
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
Below are the transfers into or out of Levels 1 and 2 during the year ended September 30, 2016:
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | ||||
Transfers into Level 1 | $ | 1,192,579 | ||
Transfers out of Level 1 | (2,448,841 | ) | ||
Net Transfers in and/(out) of Level 1 | $ | (1,256,262 | ) | |
Transfers into Level 2 | $ | 2,448,841 | ||
Transfers out of Level 2 | (1,192,579 | ) | ||
Net Transfers in and/(out) of Level 2 | $ | 1,256,262 |
The transfers from Level 1 to Level 2 are due to an decrease in trading activity on September 30, 2016. Transfers between levels are recognized at the end of the reporting period.
Each of PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Big Data ETF, PureFunds™ ISE Mobile Payments ETF, PureFunds™ Drone Economy Strategy ETF, PureFunds™ Video Game Tech ETF, PureFunds™ Solactive FinTech ETF and PureFunds™ ETX HealthTech ETF did not have any transfers between Levels 1 and 2 during the year ended September 30, 2016.
The Funds did not have any transfers into or out of Level 3 during the year ended September 30, 2016.
B. | Federal Income Taxes. The Funds have each elected to be taxed as a “regulated investment company” and intend to distribute substantially all taxable income to their shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provisions for federal income taxes or excise taxes have been made. |
To avoid imposition of the excise tax applicable to regulated investment companies, each Fund intends to declare each year as dividends, in each calendar year, at least 98.0% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years.
Net capital losses incurred after October 31, within the taxable year are deemed to arise on the first business day of each Fund’s next taxable year.
Each Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. Each Fund has analyzed its tax position and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Funds’ 2016 tax returns. The Funds identify their major tax jurisdictions as U.S. Federal, the State of New Jersey, and the State of Delaware; however the Funds are not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
C. | Security Transactions and Investment Income. Investment securities transactions are accounted for on the trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Discounts/premiums on debt securities purchased are accreted/amortized over the life of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Income, including gains, from investments in foreign securities received by the Funds may be subject to income, withholding or other taxes imposed by foreign countries. |
68
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
D. | Foreign Currency Translations and Transactions. The Funds may engage in foreign currency transactions. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. For financial reporting purposes, the Funds do not isolate changes in the exchange rate of investment securities from the fluctuations arising from changes in the market prices of securities for unrealized gains and losses. However, for federal income tax purposes, the Funds do isolate and treat as ordinary income the effect of changes in foreign exchange rates on realized gains or losses from the sale of investment securities and payables and receivables arising from trade-date and settlement-date differences. |
E. | Distributions to Shareholders. Distributions to shareholders from net investment income are generally declared and paid by each of the Funds on a quarterly basis. Distributions to shareholders from realized gains on securities for each Fund normally are declared and paid on an annual basis. Distributions are recorded on the ex-dividend date. |
F. | Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. |
G. | Share Valuation. The net asset value (“NAV”) per share of each Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding for the Fund, rounded to the nearest cent. The Funds’ shares will not be priced on the days on which the NYSE is closed for trading. For Authorized Participants, the offering and redemption price per share for the Funds are equal to the Funds’ respective net asset value per share. |
H. | Guarantees and Indemnifications. In the normal course of business, the Funds enter into contracts with service providers that contain general indemnification clauses. The Funds’ maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Funds that have not yet occurred. However, based on experience, the Funds expect the risk of loss to be remote. |
NOTE 3 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS.
ETF Managers Group, LLC (the “Advisor”), serves as the investment advisor to the Funds. Pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between the Trust, on behalf of the Funds, and the Advisor, the Advisor provides investment advice to the Funds and oversees the day-to-day operations of the Funds, subject to the direction and control of the Board and the officers of the Trust. Under the Advisory Agreement, the Advisor is also responsible for arranging transfer agency, custody, fund administration and accounting, and other non-distribution related services necessary for the Funds to operate.
69
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
Under the Investment Advisory Agreement. the Advisor has overall responsibility for the general management and administration of the Funds and arranges for sub-advisory, transfer agency, custody, fund administration, securities lending, and all other non-distribution related services necessary for the Funds to operate. The Advisor bears the costs of all advisory and non-advisory services required to operate the Funds, in exchange for a single unitary fee at the following annual rates:
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | 0.69% |
PureFunds™ ISE Cyber Security ETF | 0.75% |
PureFunds™ ISE Big Data ETF | 0.75% |
PureFunds™ ISE Mobile Payments ETF | 0.75% |
PureFunds™ Drone Economy Strategy ETF | 0.75% |
PureFunds™ Video Game Tech ETF | 0.75% |
PureFunds™ Solactive FinTech ETF | 0.68% |
PureFunds™ ETX HealthTech ETF | 0.75% |
The Advisor has an agreement with, and is dependent on, a third party to pay the Funds’ expenses in excess of the annual expense rates of each Funds’ average daily net assets. Additionally, under the Investment Advisory Agreement, the Advisor has agreed to pay all expenses of the Funds, except for: the fee paid to the Advisor pursuant to the Investment Advisory Agreement, interest charges on any borrowings, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution (12b-1) fees and expenses (collectively, “Excluded Expenses”). The Advisor has entered into an Agreement with PureShares, LLC (the “Sponsor”), under which the Sponsor agrees to sublicense the use of the Underlying Index to the Advisor. The Sponsor also provides marketing support for the Funds, including distributing marketing materials related to the Funds. PureShares, LLC is a privately held business focused on bringing exchange-traded investment products to investors in the U.S. The Sponsor does not make investment decisions, provide investment advice, or otherwise act in the capacity of an investment adviser to the Funds. Additionally, the Sponsor is not involved in the maintenance of the Underlying Index of each Fund and does not otherwise act in the capacity of an index provider.
U.S. Bancorp Fund Services, LLC (the “Administrator”) provides fund accounting, fund administration, and transfer agency services to the Funds. The Advisor compensates the Administrator for these services under an administration agreement between the two parties.
The Advisor pays each independent Trustee a quarterly fee for service to the Funds. Each Trustee is also reimbursed by the Advisor for all reasonable out-of-pocket expenses incurred in connection with his duties as Trustee, including travel and related expenses incurred in attending Board meetings.
NOTE 4 – DISTRIBUTION PLAN
The Funds have each adopted a Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, each Fund may pay compensation to the Distributor or any other distributor or financial institution with which the Trust has an agreement with respect to each Fund, with the amount of such compensation not to exceed an annual rate of 0.25% of each Fund’s average daily net assets. For the year ended September 30, 2016, the Funds did not incur any 12b-1 expenses.
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PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
NOTE 5 - PURCHASES AND SALES OF SECURITIES
The costs of purchases and sales of securities, excluding short-term securities and in-kind transactions, for the year ended September 30, 2016:
Purchases | Sales | |||||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | $ | 10,436,333 | $ | 12,022,469 | ||||
PureFunds™ ISE Cyber Security ETF | 276,382,151 | 289,957,618 | ||||||
PureFunds™ ISE Big Data ETF | 808,589 | 717,412 | ||||||
PureFunds™ ISE Mobile Payments ETF | 3,220,238 | 2,964,578 | ||||||
PureFunds™ Drone Economy Strategy ETF | 684,076 | 497,137 | ||||||
PureFunds™ Video Game Tech ETF | 1,063,346 | 412,685 | ||||||
PureFunds™ Solactive FinTech ETF | 177,821 | 138,742 | ||||||
PureFunds™ ETX HealthTech ETF | 350,936 | 310,235 |
The costs of purchases and sales of in-kind transactions associated with creations and redemptions for the year ended September 30, 2016:
Purchases In- Kind | Sales In- Kind | |||||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | $ | 78,465,177 | $ | 17,026,139 | ||||
PureFunds™ ISE Cyber Security ETF | 51,133,195 | 345,308,725 | ||||||
PureFunds™ ISE Big Data ETF | — | 1,046,711 | ||||||
PureFunds™ ISE Mobile Payments ETF | 4,821,349 | 1,219,875 | ||||||
PureFunds™ Drone Economy Strategy ETF | 6,165,585 | — | ||||||
PureFunds™ Video Game Tech ETF | 5,133,812 | — | ||||||
PureFunds™ Solactive FinTech ETF | 2,455,343 | — | ||||||
PureFunds™ ETX HealthTech ETF | 2,456,063 | — |
Purchases in-kind are the aggregate of all in-kind purchases and sales in-kind are the aggregate of all proceeds from in-kind sales. Net capital gains or losses resulting from in-kind redemptions are excluded from the Funds’ determination of taxable gains and are not distributed to shareholders.
During the year ended September 30, 2016, the Funds incurred broker commissions to Esposito Securities, LLC and Penserra Securities, LLC affiliated brokers to the sub-advisors Esposito Capital Management, LLC and Penserra Capital Management, LLC, in the amount of $10,377 and $36,401, respectively.
There were no purchases or sales of U.S. Government obligations for the period ended September 30, 2016.
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PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
administered by U.S. Bank N.A. (“the Custodian”). The securities lending agreement requires that loans are collateralized at all times in an amount equal to at least 102% of the value of any loaned securities at the time of the loan, plus accrued interest. The Funds receive compensation in the form of fees and earn interest on the cash collateral. The amount of fees depends on a number of factors including the type of security and length of the loan. The Funds continue to receive interest payments or dividends on the securities loaned during the borrowing period. Gain or loss on the fair value of securities loaned that may occur during the term of the loan will be for the account of the Funds. The Funds have the right under the terms of the securities lending agreement to recall the securities from the borrower on demand. As of September 30, 2016, Funds had loaned securities and received cash collateral for the loans. The cash collateral is invested by the Custodian in accordance with approved investment guidelines. Those guidelines require the cash collateral to be invested in readily marketable, high quality, short-term obligations; however, such investments are subject to risk of payment delays or default on the part of the issuer or counterparty or otherwise may not generate sufficient interest to support the costs associated with securities lending. The Funds could also experience delays in recovering their securities and possible loss of income or value if the borrower fails to return the borrowed securities, although the Fund is indemnified from this risk by contract with the securities lending agent.
As of September 30, 2016, the value of the securities on loan and payable for collateral due to broker were as follows:
Value of Securities on Loan Collateral Received
Fund | Values of Securities on Loan | Fund Collateral Received* | ||||||
PureFunds™ ISE Cyber Security ETF | $ | 96,031,723 | $ | 98,368,561 | ||||
PureFunds™ ISE Big Data ETF | 304,703 | 310,935 | ||||||
PureFunds™ ISE Mobile Payments ETF | 593,694 | 605,950 |
* The cash collateral received was invested in the Mount Vernon Prime Portfolio as shown on the Schedule of Investments, a money market fund with an overnight and continuous maturity.
Net interest income earned on collateral investments and recognized by the Funds during the year ended September 30, 2016, were as follows:
Fees and Interest Income Earned
Fund | Interest income earned net of applicable fees | |||
PureFunds™ ISE Cyber Security ETF | $ | 878,891 | ||
PureFunds™ ISE Big Data ETF | 1,935 | |||
PureFunds™ ISE Mobile Payments ETF | 38,231 |
Offsetting Assets and Liabilities
The Funds are subject to various netting arrangements, which govern the terms of certain transactions with counterparties. The arrangements allow the Funds to close out and net their total exposure to a counterparty in the event of a default with respect to all transactions governed under a single agreement with a counterparty. The following is a summary of the arrangements subject to offsetting as of September 30, 2016.
72
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
Fund | Description | Gross Amount of Recognized Liabilities | Gross Amount in the Statement of Assets & Liabilities | Net Amount Presented in the Statement of Assets & Liabilities | Collateral Received | Net Amount | ||||||||||||||||
PureFunds™ ISE Cyber Security ETF | Securities Lending | $ | 98,368,561 | $ | 98,368,561 | $ | — | $ | 98,368,561 | $ | — | |||||||||||
PureFunds™ ISE Big Data ETF | Securities Lending | 310,935 | 310,935 | — | 310,935 | — | ||||||||||||||||
PureFunds™ ISE Mobile Payments ETF | Securities Lending | 605,950 | 605,950 | — | 605,950 | — |
NOTE 7 – FEDERAL INCOME TAXES
The components of distributable earnings (losses) and cost basis of investments for federal income tax purposes at September 30, 2016 were as follows:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | |||||||||||||
Silver | $ | 73,950,503 | $ | 9,194,782 | $ | (8,048,952 | ) | $ | 1,145,830 | |||||||
Cyber Security | 946,012,840 | 60,320,100 | (105,202,406 | ) | (44,882,306 | ) | ||||||||||
Big Data | 1,536,736 | 141,440 | (128,722 | ) | 12,718 | |||||||||||
Mobile | 9,219,122 | 781,450 | (701,500 | ) | 79,950 | |||||||||||
Drone | 6,387,943 | 652,397 | (366,785 | ) | 285,612 | |||||||||||
Video Game | 5,652,670 | 1,047,644 | (139,158 | ) | 908,486 | |||||||||||
FinTech | 2,498,067 | 61,103 | (55,909 | ) | 5,194 | |||||||||||
Health Tech | 2,503,673 | 56,802 | (17,938 | ) | 38,864 |
The difference between the tax cost of investments and the cost of investments for GAAP purposes is primarily due to the tax treatment of wash sale losses.
73
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
As of September 30, 2016, the components of distributable earnings (loss) on a tax basis were as follows:
Undistributed Ordinary Income | Undistributed Long-term Gain | Total Distributable Earnings | Other Accumulated (Loss) | Undistributed Long-term Gain | Total Accumulated (Loss) | |||||||||||||||||||
Silver | $ | 258,169 | $ | — | $ | 258,169 | $ | (4,704,262 | ) | $ | — | $ | (3,300,263 | ) | ||||||||||
Cyber Security | 3,186,993 | — | 3,186,993 | (113,473,252 | ) | — | (155,168,565 | ) | ||||||||||||||||
Big Data | — | — | — | (67,472 | ) | — | (54,754 | ) | ||||||||||||||||
Mobile | 9,406 | — | — | (46,791 | ) | — | 42,565 | |||||||||||||||||
Drone | 36,159 | — | 36,159 | (64 | ) | — | 321,707 | |||||||||||||||||
Video Game | 141,106 | — | — | (49 | ) | — | 1,049,543 | |||||||||||||||||
FinTech | 3,803 | — | — | (242 | ) | — | 8,755 | |||||||||||||||||
Health Tech | 7,502 | — | — | (341 | ) | — | 46,025 |
The difference between the tax cost of investments and the cost of investments for GAAP purposes is primarily due to the tax treatment of wash sale losses.
As of September 30, 2016, the Funds had accumulated capital loss carryovers of:
Capital Loss Carryover | Expires | ||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | $ | 3,167,052 | Indefinite | ||
PureFunds™ ISE Cyber Security ETF | 25,785,007 | Indefinite | |||
PureFunds™ ISE Big Data ETF | 66,398 | Indefinite | |||
PureFunds™ ISE Mobile Payments ETF | 44,321 | Indefinite | |||
PureFunds™ Drone Economy Strategy ETF | — | Indefinite | |||
PureFunds™ Video Game Tech ETF | — | Indefinite | |||
PureFunds™ Solactive FinTech ETF | — | Indefinite | |||
PureFunds™ ETX HealthTech ETF | — | Indefinite |
Under current tax law, capital and currency losses realized after October 31 of a Fund’s fiscal year may be deferred and treated as occurring on the first business day of the following fiscal year for tax purposes. The following Funds had deferred post-October capital and currency losses, which will be treated as arising on the first business day of the year ending September 30, 2017.
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PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
Late Year Ordinary Loss | Post- October Capital Loss | |||||||
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | $ | — | $ | 1,450,008 | ||||
PureFunds™ ISE Cyber Security ETF | — | 87,697,509 | ||||||
PureFunds™ ISE Big Data ETF | 1,074 | — | ||||||
PureFunds™ ISE Mobile Payments ETF | — | — | ||||||
PureFunds™ Drone Economy Strategy ETF | — | — | ||||||
PureFunds™ Video Game Tech ETF | — | — | ||||||
PureFunds™ Solactive FinTech ETF | — | — | ||||||
PureFunds™ ETX HealthTech ETF | — | — |
NOTE 8 – DISTRIBUTIONS TO SHAREHOLDERS
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF paid $87,131 from ordinary income during the year ended September 30, 2016, and did not pay any distributions from ordinary income or capital gains during the year ended September 30, 2015.
PureFunds™ ISE Cyber Security ETF paid $5,498,499 from ordinary income during the year ended September 30, 2016, and did not pay any distributions from ordinary income or capital gains during the year ended September 30, 2015.
PureFunds™ ISE Mobile Payments ETF paid $40,000 from ordinary income during the year ended September 30, 2016, and did not pay any distributions from ordinary income or capital gains during the year ended September 30, 2015.
PureFunds™ Drone Economy Strategy ETF paid $4,000 from ordinary income during the year ended September 30, 2016.
PureFunds™ ISE Big Data ETF, PureFunds™ Video Game Tech ETF, PureFunds™ Solactive FinTech ETF and PureFunds™ ETFx HealthTech ETF have paid no distributions to shareholders during the year ended September 30, 2016.
75
PureFunds™ ETFs
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
NOTE 9 – INVESTMENTS IN AFFILIATES
PureFundsTM ISE Cyber Security ETF
PureFunds™ ISE Cyber Security ETF owned 5% or more of the voting securities of the following companies during the year ended September 30, 2016. After PureFunds™ ISE Cyber Security ETF sold some of their holdings in each company, each company was no longer deemed an affiliate of the Fund as defined by the Investment Company Act of 1940. Transactions during the year in these securities were as follows:
Share Activity | ||||||||||||||||||||||||||||
Security Name | Balance September 30, 2015 | Purchases | Sales | Balance September 30, 2016 | Realized Gains (Losses)1 | Dividend Income | Value September 30, 2016 | |||||||||||||||||||||
Absolute Software Corporation | 2,439,332 | 58,408 | (2,497,740 | ) | — | $ | (5,934,726 | ) | $ | 251,197 | $ | — | ||||||||||||||||
AhnLab, Inc. | 781,693 | 70,347 | (561,580 | ) | 290,460 | 832,689 | 204,579 | 16,430,434 | ||||||||||||||||||||
F-Secure OYJ | 9,766,867 | 460,869 | (7,717,371 | ) | 2,510,365 | (3,885,847 | ) | 450,635 | 9,503,510 | |||||||||||||||||||
Guidance Software, Inc. | 2,131,824 | 46,568 | (2,178,392 | ) | — | (7,362,325 | ) | — | — | |||||||||||||||||||
IntraLinks Holding Corporation | 4,290,158 | 1,042,899 | (3,204,336 | ) | 2,128,721 | (8,741,687 | ) | — | 21,414,933 | |||||||||||||||||||
The KEYW Holding Corporation | 3,163,201 | 377,709 | (1,982,011 | ) | 1,558,899 | (6,114,920 | ) | — | 17,210,245 | |||||||||||||||||||
Radware Ltd. | 2,336,508 | 728,787 | (1,474,375 | ) | 1,590,920 | (11,395,707 | ) | — | 21,859,241 | |||||||||||||||||||
VASCO Data Security International, Inc. | 2,448,262 | 295,565 | (1,438,538 | ) | 1,305,289 | (12,333,286 | ) | — | 22,986,139 | |||||||||||||||||||
Zix Corporation | 3,204,568 | 396,259 | (1,364,085 | ) | 2,236,742 | 278,134 | — | 9,170,642 | ||||||||||||||||||||
$ | (54,657,675 | ) | $ | 906,411 | $ | 118,575,145 |
1 Realized Gains (Losses) include transactions in affiliated investments and affiliated in-kind redemptions
NOTE 10 – SUBSEQUENT EVENTS
In preparing these financial statements, the Funds have evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
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PureFunds™ ETFs
To the Board of Trustees of ETF Managers Trust and the Shareholders of PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFunds ISE Cyber Security ETF, PureFunds ISE Big Data ETF, PureFunds ISE Mobile Payments ETF, PureFunds Drone Economy Strategy ETF, PureFunds Video Game Tech ETF, PureFunds Solactive FinTech ETF, and PureFunds ETFx HealthTech ETF:
We have audited the accompanying statements of assets and liabilities of the ETF Managers Trust, which includes PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFunds ISE Cyber Security ETF, PureFunds ISE Big Data ETF, PureFunds ISE Mobile Payments ETF, PureFunds Drone Economy Strategy ETF, PureFunds Video Game Tech ETF, PureFunds Solactive FinTech ETF, and PureFunds ETFx HealthTech ETF (collectively the “Funds”) including the schedules of investments, as of September 30, 2016, and the related statements each of their operations, the changes in each of their net assets and financial highlights for each of the periods indicated. These financial statements and financial highlights are the responsibility of the Funds’ management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2016 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the ETF Managers Trust, which includes PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFunds ISE Cyber Security ETF, PureFunds ISE Big Data ETF, PureFunds ISE Mobile Payments ETF, PureFunds Drone Economy Strategy ETF, PureFunds Video Game Tech ETF, PureFunds Solactive FinTech ETF, and PureFunds ETFx HealthTech ETF as of September 30, 2016, and the results of their operations and changes in their net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America.
/s/ WithumSmith+Brown, PC
New York, NY
November 28, 2016
November 28, 2016
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PureFunds™ ETFs
PureFunds™ ETFs Closing Price vs. NAV
The following Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the closing price for each Fund is at a premium or discount to its daily net asset value (NAV). The chart presented represents past performance and cannot be used to predict future results.
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | October 1, 2015 through September 30, 2016 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.00% | 65 | 25.7 | ||||||
Greater Than or equal to 0.75% And Less Than 1.00% | 24 | 9.5 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 44 | 17.4 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 40 | 15.8 | ||||||
Greater Than or Equal to 0.00% And Less Than 0.25% | 15 | 5.9 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 19 | 7.5 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 20 | 7.9 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 9 | 3.6 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 9 | 3.6 | ||||||
Less than -1.00% | 8 | 3.2 |
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | October 1, 2014 through September 30, 2015 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.50% | 21 | 8.3 | ||||||
Greater Than or equal to 1.25% And Less Than 1.50% | 12 | 4.8 | ||||||
Greater Than or Equal to 1.00% And Less Than 1.25% | 20 | 7.9 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 24 | 9.5 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 27 | 10.7 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 20 | 7.9 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 27 | 10.7 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 16 | 6.4 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 28 | 11.1 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 18 | 7.2 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 19 | 7.5 | ||||||
Less Than or Equal to -1.00% And Greater Than -1.25% | 8 | 3.2 | ||||||
Less Than or Equal to -1.25% And Greater Than -1.50% | 5 | 2.0 | ||||||
Less than -1.50% | 7 | 2.8 |
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PureFunds™ ETFs
FREQUENCY DISTRIBUTION OF PREMIUMS AND DISCOUNTS (Unaudited) (Cont.)
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | October 1, 2013 through September 30, 2014 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.50% | 28 | 11.1 | ||||||
Greater Than or equal to 1.25% And Less Than 1.50% | 8 | 3.2 | ||||||
Greater Than or Equal to 1.00% And Less Than 1.25% | 20 | 7.9 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 17 | 6.7 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 30 | 11.9 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 32 | 12.7 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 35 | 13.9 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 25 | 9.9 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 28 | 11.1 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 12 | 4.8 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 9 | 3.6 | ||||||
Less Than or Equal to -1.00% And Greater Than -1.25% | 3 | 1.2 | ||||||
Less Than or Equal to -1.25% And Greater Than -1.50% | 4 | 1.6 | ||||||
Less than -1.50% | 1 | 0.4 |
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | November 29, 2012* through September 30, 2013 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 2.50% | 22 | 10.6 | ||||||
Greater Than or Equal to 2.50% And Less Than 1.50% | 20 | 9.5 | ||||||
Greater Than or Equal to 1.50% And Less Than 0.75% | 30 | 14.4 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 26 | 12.4 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 17 | 8.2 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 18 | 8.6 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.50% | 22 | 10.6 | ||||||
Less Than or Equal to -0.50% And Greater Than -1.25% | 20 | 9.5 | ||||||
Less Than or Equal to -1.25% And Greater Than -2.0% | 24 | 11.4 | ||||||
Less than -2.0% | 10 | 4.8 |
*First day of secondary market trading
PureFunds™ ISE Cyber Security ETF | Year Ended September 30, 2016 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.00% | 0 | 0.0 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 0 | 0.0 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 0 | 0.0 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 1 | 0.4 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 80 | 31.6 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 142 | 56.1 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 26 | 10.3 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 3 | 1.2 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 1 | 0.4 | ||||||
Less than -1.00% | 0 | 0.0 |
79
PureFunds™ ETFs
FREQUENCY DISTRIBUTION OF PREMIUMS AND DISCOUNTS (Unaudited) (Cont.)
PureFunds™ ISE Cyber Security ETF | November 11, 2014* through September 30, 2015 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.50% | 0 | 0.0 | ||||||
Greater than or equal to 1.25% And Less Than 1.50% | 0 | 0.0 | ||||||
Greater Than or Equal to 1.00% And Less Than 1.25% | 1 | 0.4 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 0 | 0.0 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 4 | 1.8 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 17 | 7.6 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 162 | 72.7 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 33 | 14.8 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 6 | 2.7 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 0 | 0.0 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 0 | 0.0 | ||||||
Less Than or Equal to -1.00% And Greater Than -1.25% | 0 | 0.0 | ||||||
Less Than or Equal to -1.25% And Greater Than -1.50% | 0 | 0.0 | ||||||
Less than -1.50% | 0 | 0.0 |
*First day of secondary market trading
PureFunds™ ISE Big Data ETF | Year Ended September 30, 2016 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.00% | 33 | 13.0 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 10 | 4.0 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 14 | 5.5 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 24 | 9.5 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 23 | 9.1 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 23 | 9.1 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 23 | 9.1 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 25 | 9.9 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 17 | 6.7 | ||||||
Less than -1.00% | 61 | 24.1 |
80
PureFunds™ ETFs
FREQUENCY DISTRIBUTION OF PREMIUMS AND DISCOUNTS (Unaudited) (Cont.)
PureFunds™ ISE Big Data ETF | July 15, 2015* through September 30, 2015 | |||||||
Number of Days | Percentage of Total Days | |||||||
Greater than 1.50% | 3 | 5.4 | ||||||
Greater than or equal to 1.25% And Less Than 1.50% | 0 | 0.0 | ||||||
Greater Than or Equal to 1.00% And Less Than 1.25% | 1 | 1.8 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 3 | 5.5 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 2 | 3.6 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 7 | 12.7 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 18 | 32.7 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 8 | 14.6 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 3 | 5.5 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 1 | 1.8 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 3 | 5.5 | ||||||
Less Than or Equal to -1.00% And Greater Than -1.25% | 2 | 3.6 | ||||||
Less Than or Equal to -1.25% And Greater Than -1.50% | 3 | 5.5 | ||||||
Less than -1.50% | 1 | 1.8 |
*First day of secondary market trading
PureFunds™ ISE Mobile Payments ETF | Year Ended September 30, 2016 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.00% | 3 | 1.2 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 6 | 2.4 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 13 | 5.1 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 36 | 14.2 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 80 | 31.6 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 56 | 22.1 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 21 | 8.3 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 16 | 6.3 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 11 | 4.4 | ||||||
Less than -1.00% | 11 | 4.4 |
81
PureFunds™ ETFs
FREQUENCY DISTRIBUTION OF PREMIUMS AND DISCOUNTS (Unaudited) (Cont.)
PureFunds™ ISE Mobile Payments ETF | July 15, 2015* through September 30, 2015 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.50% | 1 | 1.8 | ||||||
Greater than or equal to 1.25% And Less Than 1.50% | 1 | 1.8 | ||||||
Greater Than or Equal to 1.00% And Less Than 1.25% | 0 | 0.0 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 1 | 1.8 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 1 | 1.8 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 4 | 7.3 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 27 | 49.1 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 14 | 25.5 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 3 | 5.5 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 1 | 1.8 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 2 | 3.6 | ||||||
Less Than or Equal to -1.00% And Greater Than -1.25% | 0 | 0.0 | ||||||
Less Than or Equal to -1.25% And Greater Than -1.50% | 0 | 0.0 | ||||||
Less than -1.50% | 0 | 0.0 |
*First day of secondary market trading
PureFunds™ Drone Economy Strategy ETF | March 8, 2016* through September 30, 2016 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.00% | 7 | 4.8 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 23 | 15.9 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 40 | 27.6 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 36 | 24.8 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 22 | 15.2 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 10 | 6.9 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 4 | 2.8 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 3 | 2.1 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 0 | 0.0 | ||||||
Less than -1.00% | 0 | 0.0 |
*First day of secondary market trading
82
PureFunds™ ETFs
FREQUENCY DISTRIBUTION OF PREMIUMS AND DISCOUNTS (Unaudited) (Cont.)
PureFunds™ Video Game Tech ETF | March 8, 2016* through September 30, 2016 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.00% | 10 | 6.9 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 20 | 13.8 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 24 | 16.6 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 37 | 25.5 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 28 | 19.3 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 17 | 11.7 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 5 | 3.5 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 2 | 1.4 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 2 | 1.4 | ||||||
Less than -1.00% | 0 | 0.0 |
*First day of secondary market trading
PureFunds™ Solactive FinTech ETF | August 31, 2016* through September 30, 2016 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.00% | 1 | 4.4 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 0 | 0.0 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 1 | 4.4 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 4 | 17.4 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 9 | 39.1 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 4 | 17.4 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 1 | 4.4 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 2 | 8.7 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 1 | 4.4 | ||||||
Less than -1.00% | 0 | 0.0 |
*First day of secondary market trading
PureFunds™ ETFx HealthTech ETF | August 31, 2016* through September 30, 2016 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.00% | 1 | 4.4 | ||||||
Greater Than or Equal to 0.75% And Less Than 1.00% | 1 | 4.4 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 1 | 4.4 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 4 | 17.4 | ||||||
Greater Than or Equal to 0.0% And Less Than 0.25% | 6 | 26.1 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 6 | 26.1 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 2 | 8.7 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 0 | 0.0 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 2 | 8.7 | ||||||
Less than -1.00% | 0 | 0.0 |
*First day of secondary market trading
83
PureFunds™ ETFs
For the Year Ended September 30, 2016 (Unaudited)
Pursuant to Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), at a meeting held on April 21, 2016, the Board of Trustees (the “Board”) of ETF Managers Trust (the “Trust”) considered an Interim Sub-Advisory Agreement between ETF Managers Group, LLC (the “Adviser”) and Penserra Capital Management LLC (“Penserra” or the “Sub-Adviser”) with respect to PureFunds ISE Junior Silver (Small Cap Miners/Explorers) ETF (the “Fund”) (the “Interim Sub-Advisory Agreement”).
The Interim Sub-Advisory Agreement must be approved by the vote of the Trustees, including a majority of the Trustees who are not “interested persons” of the Fund, as defined in the 1940 Act (the “Independent Trustees”), cast at a meeting in which directors may participate by any means of communication that allows all directors participating to hear each other simultaneously during the meeting.
At a meeting held on April 21, 2016, the Board, including a majority of the Independent Trustees, approved Penserra to replace Esposito Partners, LLC (“Esposito”) as sub-adviser to the Fund on an interim basis, effective April 20, 2016. The Interim Sub-Advisory Agreement has the same sub- advisory fee rate as the prior Sub-Advisory Agreement between the Adviser and Esposito with respect to the Fund (the “Esposito Agreement”) and is otherwise the same in all material respects to the Esposito Agreement, except that, as required by the 1940 Act, the Interim Sub-Advisory Agreement has a term of up to 150 days. In approving the Agreement, the Board considered all factors it believed relevant, including (i) the nature, extent and quality of the services to be provided to the Fund’s shareholders by the Sub-Adviser; (ii) the Sub-Adviser’s proposed compensation; (iii) the Sub- Adviser’s past performance; and (iv) the terms of the Interim Sub-Advisory Agreement.
In approving the Interim Sub-Advisory Agreement, the Board relied on a presentation it received from the Adviser stating the basis for its recommendation to engage Penserra as the interim sub-adviser. The Board also took into account that it was familiar with the services provided by the Sub-Adviser, its respective personnel and prior performance based on past dealings with the Sub-Adviser, its regular monitoring process and the quarterly reports it receives from the Sub-Adviser with respect to other series of the Trust. In addition to information provided to it by the Adviser, the Board took into consideration information that the Sub-Adviser had provided the Board at its prior meetings in connection with the Board’s approval of investment sub-advisory agreements for the other series of the Trust.
Nature, Extent and Quality of Services Provided. The Trustees first considered the scope of services to be provided under the Interim Sub-Advisory Agreement, noting that the Sub-Adviser will be providing portfolio investment management services to the Fund. The Board discussed the responsibilities that the Sub-Adviser has as the Fund’s investment sub-adviser, including: responsibility for the general management of the day-to-day investment and reinvestment of the assets of the Fund; determining the daily baskets of deposit securities and cash components; executing portfolio security trades for purchases and redemptions of Fund shares conducted on a cash-in-lieu basis; oversight of general portfolio compliance with relevant law; responsibility for daily monitoring of tracking error and quarterly reporting to the Board; and implementation of Board directives as they relate to the Fund.
In considering the nature, extent and quality of the services to be provided by the Sub-Adviser, the Board considered the history and experience the Sub-Adviser has as an investment adviser, as well as the experience of its personnel in managing ETFs, including the other series of the Trust.
84
PureFunds™ ETFs
APPROVAL OF INTERIM SUB-ADVISORY AGREEMENT AND BOARD CONSIDERATIONS
For the Year Ended September 30, 2016 (Unaudited) (Continued)
Historical Performance. The Board considered the performance of the Sub-Adviser as sub-adviser to other series of the Trust. It was noted that Board continued to be satisfied with Penserra’s performance in tracking the underlying indexes of such funds.
Cost of Services Provided and Economies of Scale. The Board reviewed the fees to be paid by the Adviser to the Sub-Adviser for its services to the Fund under the Interim Sub-Advisory Agreement. The Board noted that the fee was the same as the fee under the Esposito Agreement. The Board considered that the fees paid to the Sub-Adviser would be paid by the Adviser from the unified fee the Adviser will receive from the Fund and noted that the fee reflected an arms-length negotiation between the Adviser and the Sub-Adviser. As a consequence, the anticipated level of profitability to Penserra from its relationship with the Fund was not a substantial factor in the Board’s deliberations. For similar reasons, the Board did not consider potential economies of scale in Penserra’s management of the Fund to be a substantial factor in its consideration. The Board concluded that the sub-advisory fees were reasonable, given the nature, extent and quality of the services allocated to and assumed by each of the Adviser and Sub-Adviser.
In their deliberations, the Board did not identify any single piece of information discussed above that was all-important, controlling or determinative of its decision.
Based on the Board’s deliberations and its evaluation of the information described above, the Board, including the Independent Trustees, unanimously: (a) concluded that the terms of the Interim Sub- Advisory Agreement are fair and reasonable; (b) concluded that the Sub-Adviser’s fees are reasonable in light of the services that the Sub-Adviser provides to the Fund; and (c) agreed to approve the Interim Sub-Advisory Agreement.
85
PureFunds™ ETFs
APPROVAL OF ADVISORY AGREEMENT AND BOARD CONSIDERATIONS
For the Year Ended September 30, 2016 (Unaudited)
Pursuant to Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), at a meeting held on June 22, 2016, the Board of Trustees (the “Board”) of ETF Managers Trust (the “Trust”) considered the approval of the Investment Advisory Agreement between ETF Managers Group, LLC (the “Adviser”) and the Trust, on behalf of PureFunds™ Solactive FinTech ETF and PureFunds™ ETFx HealthTech ETF (the “Funds”) (the “Agreement”).
The Agreement must be approved: (i) by the vote of the Trustees or by a vote of the shareholders of the Fund; and (ii) by the vote of a majority of the Trustees who are not parties to the Agreement or “interested persons” of any party thereto, as defined in the 1940 Act (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. Each year after the initial two-year term, the Board will call and hold a meeting to decide whether to renew the Agreement for an additional one-year term. In preparation for such meetings, the Board requests and reviews a wide variety of information from the Adviser.
In reaching this decision, the Board, including the Independent Trustees, considered all factors it believed relevant, including: (i) the nature, extent and quality of the services to be provided to the Funds’ shareholders by the Adviser; (ii) the Adviser’s cost and profits it will realize in providing its services, including any fall-out benefits enjoyed by the Adviser; (iii) comparative fee and expense data for the Funds and other similar investment companies; (iv) the extent to which economies of scale would be realized as the Funds grow and whether the proposed advisory fees for the Funds reflect these economies of scale for the benefit of the Funds; and (v) other financial benefits to the Adviser and its affiliates resulting from services rendered to the Funds. The Board’s review included written and oral information furnished to the Board prior to and at the meeting held on June 22, 2016, and throughout the year. Among other things, the information provided by the Adviser provided an overview of its advisory business, including investment personnel. Representatives of the Adviser discussed the services to be provided by the Adviser. Representatives also discussed the rationale for launching the Funds, the Funds’ fees and fee structures of comparable investment companies. The Board then discussed the written and oral information that it received before the meeting and throughout the year, and the Adviser’s oral presentations and any other information that the Board received at the meeting, and deliberated on the approval of the Agreement in light of this information. In its deliberations, the Board did not identify any single piece of information discussed below that was all-important or controlling.
Nature, Extent and Quality of Services Provided by the Adviser
The Trustees considered the scope of services provided under the Agreement, noting that the Adviser will be providing investment management services to the Fund. The Board discussed the responsibilities of the Adviser, including: responsibility for the general management of the day-to-day investment and reinvestment of the assets of the Funds; determining the daily baskets of deposit securities and cash components; executing portfolio security trades for purchases and redemptions of Fund shares conducted on a cash-in-lieu basis; responsibility for daily monitoring of tracking error and quarterly reporting to the Board; and implementation of Board directives as they relate to the Funds. In considering the nature, extent and quality of the services to be provided by the Adviser, the Board considered the quality of the Adviser’s compliance program. The Board also considered the Adviser’s experience managing ETFs, including other series of the Trust.
The Board also considered other services to be provided to the Funds, such as overseeing the Funds’ service providers, monitoring adherence to the Funds’ investment restrictions, and monitoring compliance with various policies and procedures and with applicable securities regulations. Based on the factors above, as well as those discussed below, the Board concluded that it was satisfied with the nature, extent and quality of the services to be provided to the Funds by the Adviser.
86
PureFunds™ ETFs
APPROVAL OF ADVISORY AGREEMENT AND BOARD CONSIDERATIONS
For the Year Ended September 30, 2016 (Unaudited) (Continued)
Cost of Services Provided and Economies of Scale
The Board reviewed the Funds’ estimated expense ratio and the advisory fee to be paid by the Funds, and considered the expense ratios of comparable Funds. The Board considered that there are limited peers for each of the Funds because of the niche strategies used by each Fund. The Board also took into consideration management’s discussion of other factors relevant to the expense ratio of each Fund and other applicable differences between the Funds and other funds in their peer groups. The Board concluded that the advisory fee was reasonable and the result of arm’s length negotiations. Additionally, the Board took into consideration that the Funds’ operating expenses would be paid by the Adviser. With respect to the profitability of the Adviser, the Board evaluated compensation and benefits expected to be received by the Adviser from its relationship with the Funds. The Board noted that because the Funds were new, it was difficult to estimate the profitability of each Fund to the Adviser at this time. The Board also noted that because the Funds were new, it was difficult to estimate whether the Funds would experience economies of scale. The Board determined to evaluate economies of scale on an ongoing basis as a result of asset growth of the Funds.
Based on the Board’s deliberations and its evaluation of the information described above, the Board, including the Independent Trustees, unanimously: (a) concluded that the terms of the Agreement are fair and reasonable; (b) concluded that the Adviser’s fees are reasonable in light of the services that the Adviser will provide to the Funds; and (c) agreed to approve the Agreement for an initial term of two years.
87
PureFunds™ ETFs
APPROVAL OF ADVISORY AGREEMENTS AND BOARD CONSIDERATIONS
For the Year Ended September 30, 2016 (Unaudited)
Pursuant to Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), at a meeting held on September 29, 2016, the Board of Trustees (the “Board”) of ETF Managers Trust (the “Trust”) considered the renewal of the following agreements (collectively, the “Agreements”):
● | the Investment Advisory Agreement between ETF Managers Group, LLC (the “Adviser”) and the Trust, on behalf of PureFundsTM ISE Cyber Security ETF (the “Fund”); and |
● | the Sub-Advisory Agreement between the Adviser and Penserra Capital Management, LLC (the “Sub-Adviser”) with respect to the Fund. |
Pursuant to Section 15(c) of the 1940 Act, the Board must annually review and approve the Agreements after their initial two-year term: (i) by the vote of the Trustees or by a vote of the shareholders of the Fund; and (ii) by the vote of a majority of the Trustees who are not parties to the Agreements or “interested persons” of any party thereto, as defined in the 1940 Act (the “Independent Trustees”), cast in person at a meeting called for the purpose of voting on such approval. Each year, the Board calls and holds a meeting to decide whether to renew the Agreements for an additional one-year term. In preparation for such meetings, the Board requests and reviews a wide variety of information from the Adviser and the Sub-Adviser.
In reaching this decision, the Board, including the Independent Trustees, considered all factors it believed relevant, including: (i) the nature, extent and quality of the services to be provided to the Fund’s shareholders by the Adviser and the Sub-Adviser; (ii) the investment performance of the Fund; (iii) the Adviser’s and the Sub-Adviser’s cost and profits they realize in providing their services, including any fall-out benefits enjoyed by the Adviser and the Sub-Adviser; (iv) comparative fee and expense data for the Fund and other similar investment companies; (v) the extent to which economies of scale would be realized as the Fund grows and whether the proposed advisory fee for the Fund reflects these economies of scale for the benefit of the Fund; and (vi) other financial benefits to the Adviser and Sub-Adviser and their affiliates resulting from services rendered to the Fund. The Board’s review included written and oral information furnished to the Board prior to and at the meeting held on September 29, 2016, and throughout the year. Among other things, the Adviser and the Sub- Adviser provided overviews of their advisory businesses, including investment personnel. The information provided discussed the services provided by the Adviser and Sub-Adviser. The Board then discussed the written and oral information that it received before the meeting and throughout the year, and the Adviser and Sub-Adviser’s oral presentations and any other information that the Board received at the meeting, and deliberated on the renewal of the Agreements in light of this information. In its deliberations, the Board did not identify any single piece of information discussed below that was all-important or controlling.
Nature, Extent and Quality of Services Provided by the Adviser and the Sub-Adviser
The Trustees considered the scope of services provided under the Investment Advisory Agreement, noting that the Adviser will be providing investment management services to the Fund. In considering the nature, extent and quality of the services provided by the Adviser, the Board considered the quality of the Adviser’s compliance program. The Board also considered the Adviser’s experience managing ETFs, including other series of the Trust.
The Board also considered other services to be provided to the Fund by the Adviser, such as overseeing the activities of the Sub-Adviser, as well as the Fund’s other service providers, monitoring adherence to the Fund’s investment restrictions, and monitoring compliance with various policies and procedures and with applicable securities regulations.
88
PureFunds™ ETFs
APPROVAL OF ADVISORY AGREEMENTS AND BOARD CONSIDERATIONS
For the Year Ended September 30, 2016 (Unaudited) (Continued)
The Trustees then considered the scope of services to be provided under the Sub-Advisory Agreement, noting that Sub-Adviser will be providing investment management services to the Fund. The Board discussed the responsibilities of the Sub-Adviser, including: responsibility for the general management of the day-to-day investment and reinvestment of the assets of the Fund; determining the daily baskets of deposit securities and cash components; executing portfolio security trades for purchases and redemptions of Fund shares conducted on a cash-in-lieu basis; oversight of general portfolio compliance with relevant law; responsibility for daily monitoring of tracking error and quarterly reporting to the Board; and implementation of Board directives as they relate to the Fund. In considering the nature, extent and quality of the services to be provided by the Sub-Adviser, the Board considered the history and experience the Sub-Adviser has as an investment adviser, as well as the experience of its personnel in managing ETFs, including the other series of the Trust.
Based on the factors above, as well as those discussed below, the Board concluded that it was satisfied with the nature, extent and quality of the services to be provided to the Fund by the Adviser and the Sub-Adviser.
Historical Performance
The Board then considered the Fund’s performance history over various time periods, including the year-to-date period, the most recent one-year period and the period since the Fund’s inception, each as of August 31, 2016. The Board also noted that the index-based investment objective of the Fund made analysis of investment performance, in absolute terms, less of a priority than that which normally attaches to the performance of actively managed funds. Instead, the Board focused on the extent to which the Fund achieved its investment objective as a passively managed fund. In that regard, the Board noted that it received regular reports regarding the Fund’s performance at its quarterly meetings, which reports included information about the Fund’s tracking error. The Board reviewed the factors that impacted the Fund’s index tracking, noting that the Fund’s tracking error, as presented by the Sub-Adviser, was largely attributable to the Fund’s expenses that detract from the net asset value per share and that, after taking this into account, the Fund satisfactorily tracked its underlying index.
Cost of Services Provided and Economies of Scale
The Board reviewed the Fund’s expense ratio and the advisory fee to be paid by the Fund, and considered the expense ratios of comparable Funds. The Board noted that none of the ETFs in the peer group tracked a cyber security index. The Board noted that the Adviser was responsible for compensating the Trust’s other service providers and paying the Fund’s other expenses out of its own fee and resources. The Board concluded that the advisory fee was reasonable and the result of arm’s length negotiations. The Board also evaluated the compensation and benefits expected to be received by the Adviser from its relationship with the Fund, taking into account an analysis of the Adviser’s profitability provided at the meeting.
In addition, the Board considered for the Fund whether economies of scale had been realized. The Trustees noted that any reduction in fixed costs associated with the management of the Fund would be enjoyed by the Adviser, but a unitary fee provides a level of certainty in expenses for the Fund. The Trustees considered whether the advisory fee rate for the Fund was reasonable in relation to the asset size of the Fund, and concluded that the flat advisory fee was reasonable and appropriate.
89
PureFunds™ ETFs
APPROVAL OF ADVISORY AGREEMENTS AND BOARD CONSIDERATIONS
For the Year Ended September 30, 2016 (Unaudited) (Continued)
The Board reviewed the fees paid by the Adviser to the Sub-Adviser for its services to the Fund under the Sub-Advisory Agreement. The Board considered that the fees paid to the Sub-Adviser are paid by the Adviser from the unified fee the Adviser receives from the Fund, so that the Fund’s shareholders are not directly impacted by those fees. In considering the reasonableness of the fees payable by the Adviser, the Board noted the ability of the Adviser to negotiate the Sub-Advisory Agreement and the fees thereunder at arm’s length. The Board also considered analyses of the Sub-Adviser’s profitability with respect to the Fund. The Board noted that the Sub-Adviser was not experiencing economies of scale at this time with respect to its management of the Fund and determined to evaluate economies of scale on an ongoing basis as a result of asset growth of the Fund. The Board also noted that the Sub-Adviser may use an affiliated broker-dealer for the Fund’s brokerage transactions. The Board concluded that the sub-advisory fees were reasonable, given the nature, extent and quality of the services allocated to and assumed by each of the Adviser and Sub-Adviser.
Based on the Board’s deliberations and its evaluation of the information described above, the Board, including the Independent Trustees, unanimously: (a) concluded that the terms of the Agreements are fair and reasonable; (b) concluded that the Adviser’s and Sub-Adviser’s fees are reasonable in light of the services that the Adviser and Sub-Adviser provide to the Fund; and (c) agreed to renew the Agreements for another year.
90
As a shareholder of PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Big Data ETF, PureFunds™ ISE Mobile Payments ETF, PureFunds™ Drone Economy Strategy ETF, PureFunds™ Video Game Tech ETF, PureFunds™ Solactive FinTech ETF and PureFunds™ ETX HealthTech ETF (the “Funds”) you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Funds and to compare these costs with the ongoing costs of investing in other funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2016 to September 30, 2016) for PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFunds™ ISE Cyber Security ETF, PureFunds™ ISE Big Data ETF, PureFunds™ ISE Mobile Payments ETF, PureFunds™ Drone Economy Strategy ETF and PureFunds™ Video Game Tech ETF or the period since inception (August 31, 2016 to September 30, 2016) for PureFunds™ Solactive FinTech ETF and PureFunds™ ETX HealthTech ETF.
Actual Expenses
The first line of the table provides information about actual account values based on actual returns and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then, multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account values based on a hypothetical return and hypothetical expenses based on each Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not each Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in each Fund and in other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of each Fund’s shares. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
91
PureFunds™ ETFs
EXPENSE EXAMPLES
For the Periods Ended September 30, 2016 (Unaudited) (Continued)
PureFunds™ ISE Junior Silver (Small Cap Miners/Explorers) ETF | ||||||
Beginning Account Value April 1, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||
Actual | $1,000.00 | $1,807.60 | $4.84 | |||
Hypothetical (5% annual) | $1,000.00 | $1,021.55 | $3.49 |
PureFunds™ ISE Cyber Security ETF | ||||||
Beginning Account Value April 1, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||
Actual | $1,000.00 | $1,172.50 | $4.07 | |||
Hypothetical (5% annual) | $1,000.00 | $1,021.25 | $3.79 |
PureFunds™ ISE Big Data ETF | ||||||
Beginning Account Value April 1, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||
Actual | $1,000.00 | $1,153.30 | $4.04 | |||
Hypothetical (5% annual) | $1,000.00 | $1,021.25 | $3.79 |
PureFunds™ ISE Mobile Payments ETF | ||||||
Beginning Account Value April 1, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||
Actual | $1,000.00 | $1,045.70 | $3.84 | |||
Hypothetical (5% annual) | $1,000.00 | $1,021.25 | $3.79 |
PureFunds™ Drone Economy Strategy ETF | ||||||
Beginning Account Value April 1, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||
Actual | $1,000.00 | $1,023.90 | $3.79 | |||
Hypothetical (5% annual) | $1,000.00 | $1,021.25 | $3.79 |
92
PureFunds™ ETFs
EXPENSE EXAMPLES
For the Periods Ended September 30, 2016 (Unaudited) (Continued)
PureFunds™ Video Game Tech ETF | ||||||
Beginning Account Value April 1, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||
Actual | $1,000.00 | $1,233.70 | $4.19 | |||
Hypothetical (5% annual) | $1,000.00 | $1,021.25 | $3.79 |
PureFunds™ Solactive FinTech ETF | ||||||
Beginning Account Value August 31, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||
Actual | $1,000.00 | $1,033.50 | $3.41 | |||
Hypothetical (5% annual) | $1,000.00 | $1,021.60 | $3.44 |
PureFunds™ ETX HealthTech ETF | ||||||
Beginning Account Value August 31, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||
Actual | $1,000.00 | $1,018.60 | $3.78 | |||
Hypothetical (5% annual) | $1,000.00 | $1,021.25 | $3.79 |
^ The dollar amounts shown as expenses paid during the period are equal to the annualized six-month expense ratio multiplied by the average account value during the period, multiplied by 183/366 (to reflect the one-half year period in the case of PureFundsTM ISE Junior Silver (Small Cap Miners/Explorers) ETF, PureFundsTM ISE Cyber Security ETF, PureFundsTM ISE Big Data ETF, PureFundsTM ISE Mobile Payments ETF, PureFunds™ Drone Economy Strategy ETF, and PureFunds™ Video Game Tech ETF and 31/366 (to reflect the period from August 31, 2016 to September 30, 2016 in the case of PureFunds™ Solactive FinTech ETF and PureFunds™ ETX HealthTech ETF.
93
PureFunds™ ETFs
Set forth below are the names, birth years, positions with the Trust, length of term of office, and the principal occupations and other directorships held during at least the last five years of each of the persons currently serving as a Trustee of the Trust, as well as information about each officer. The business address of each Trustee and officer is 30 Maple Street, Summit, New Jersey 07901.
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years |
Interested Trustee* and Officers | ||||
Samuel Masucci, III (1962) | Trustee, Chairman of the Board and President (since 2012); Secretary (since 2014) | Chief Executive Officer, Exchange Traded Managers Group, LLC (since 2013); Chief Executive Officer and Chief Compliance Officer, Factor Advisors, LLC (2012-2014); President and Chief Executive Officer, Factor Capital Management LLC (2012-2014); President and Chief Executive Officer, GENCAP Ventures, LLC (holding company) (2012–2013); Chief Executive Officer, MacroMarkets LLC (exchange traded funds) (2005–2011); President, Chief Executive and Chief Compliance Officer, Macro Financial (financial services) (2005–2011). | 12 | None |
Reshma J. Amin (1978) | Chief Compliance Officer (since 2016) | Chief Operating Officer and Chief Compliance Officer, Exchange Traded Managers Group, LLC (since 2016); Partner, Crow & Cushing (2007–2016). | 12 | n/a |
John A. Flanagan (1946) | Treasurer (since 2015) | President, John A. Flanagan CPA, LLC (accounting services) (since 2010); Treasurer, FactorShares Trust (since 2015); Chief Financial Officer, ETF Managers Group, Inc. (commodity pool operator) (since 2014); Chief Financial Officer, Macromarkets LLC (exchange traded funds) (2007–2010) | n/a | n/a |
* Mr. Masucci is an interested Trustee by virtue of his role as the Chief Executive Officer of the Adviser.
94
PureFunds™ ETFs
Board of Trustees
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years |
Independent Trustees | ||||
John W. Southard (1969) | Trustee (since 2012) | Director and Co-Founder, T2 Capital Management, 2010 to present; Co-Founder and Head of Research and Trading, PowerShares Capital Management, 2002 to 2009. | 12 | None |
Terry Loebs (1963) | Trustee (since 2014) | Founder and Managing Member, Pulsenomics LLC (index product development and consulting firm) (since 2011); Managing Director, MacroMarkets, LLC (exchange-traded products firm) (2006–2011). | 12 | None |
95
PureFunds™ ETFs
SUPPLEMENTARY INFORMATION
September 30, 2016
September 30, 2016
During the year ended September 30, 2016, the Funds did not declare any long-term realized gains distributions.
Qualified Dividend Income/Dividends Received Deduction
For the fiscal year ended September 30, 2016, certain dividends paid by the Funds may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:
Fund Name | Qualified Dividend Income |
Silver | 22.21% |
Cyber Security | 100.00% |
Big Data | 0.00% |
Mobile | 100.00% |
Drone | 75.41% |
Video Game | 0.00% |
FinTech | 0.00% |
HealthTech | 0.00% |
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended September 30, 2016 was as follows:
Fund Name | Dividends Received Deductions |
Silver | 0.00% |
Cyber Security | 100.00% |
Big Data | 0.00% |
Mobile | 87.08% |
Drone | 25.31% |
Video Game | 0.00% |
FinTech | 0.00% |
HealthTech | 0.00% |
96
PureFunds™ ETFs
SUPPLEMENTARY INFORMATION
September 30, 2016 (continued)
September 30, 2016 (continued)
Each Fund files its Form N-Q with the Securities and Exchange Commission (the ‘‘SEC’’) no more than sixty days after the Funds’ first and third fiscal quarters. For each Fund, this would be for the fiscal quarters ending June 30 and December 31. Form N-Q includes a complete schedule of the Funds’ portfolio holdings as of the end of those fiscal quarters. The Funds’ N-Q filings can be found free of charge on the SEC’s website at http://www.sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (call 800-SEC-0330 for information on the operation of the Public Reference Room). The Funds’ portfolio holdings are posted on the Funds’ website at www.ETFMG.com daily.
A description of the policies and procedures the Funds use to determine how to vote proxies relating to portfolio securities is provided in the Statement of Additional Information (“SAI”). The SAI is available without charge upon request by calling toll-free at (877) 756-7873, by accessing the SEC’s website at www.sec.gov, or by accessing the Funds’ website at www.pureetfs.com.
Information regarding how the Funds voted proxies relating to portfolio securities during the period ending June 30 is available by calling toll-free at (877) 756-7873 or by accessing the SEC’s website at www.sec.gov.
Carefully consider each Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in each Fund’s prospectus, which may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477) or by visiting www.pureetfs.com. Read the prospectus carefully before investing.
97
PureFunds™ ETFs
ETF MANAGERS TRUST
ETF Managers Trust, (the “Trust”) has adopted the following privacy policies in order to safeguard the personal information of the Trust’s customers and consumers in accordance with Regulation S-P as promulgated by the U.S. Securities and Exchange Commission.
Trust officers are responsible for ensuring that the following policies and procedures are implemented:
1) | The Trust is committed to protecting the confidentiality and security of the information they collect and will handle personal customer and consumer information only in accordance with Regulation S-P and any other applicable laws, rules and regulations1. The Trust will ensure: (a) the security and confidentiality of customer records and information; (b) that customer records and information are protected from any anticipated threats and hazards; and (c) that customer records and information are protected from unauthorized access or use. |
2) | The Trust conducts its business affairs through its trustees, officers and third parties that provide services pursuant to agreements with the Trust. The Trust has no employees. It is anticipated that the trustees and officers of the Trust who are not employees of service providers of the Trust will not have access to customer records and information in the performance of their normal responsibilities for the Trust. |
3) | The Trust may share customer information with its affiliates, subject to the customers’ right to prohibit such sharing. |
4) | The Trust may share customer information with unaffiliated third parties only in accordance with the requirements of Regulation S-P. Pursuant to this policy, the Trust will not share customer information with unaffiliated third parties other than as permitted by law, unless authorized to do so by the customer. |
Consistent with these policies, the Trust has adopted the following procedures:
1) | The Trust will determine that the policies and procedures of its affiliates and Service Providers are reasonably designed to safeguard customer information and only permit appropriate and authorized access to and use of customer information through the application of appropriate administrative, technical and physical protections. |
2) | The Trust will direct each of its Service Providers to adhere to the privacy policy of the Trust and to its privacy policies with respect to all customer information of the Trust and to take all actions reasonably necessary so that the Trust is in compliance with the provisions of Regulation S-P, including, as applicable, the development and delivery of privacy notices and the maintenance of appropriate and adequate records. |
3) | The Trust requires its Service Providers to provide periodic reports to the Trust’s Board of Trustees outlining their privacy policies and the implementation of such policies. Each Service Provider is required to promptly report to the Trust’s Board any material changes to its privacy policy before, or promptly after, the adoption of such changes. |
1 | Generally, the Funds have institutional clients which are not considered “customers” for purposes of regulation S-P. |
98
Advisor
ETF Managers Group, LLC
30 Maple Street, Suite 2, Summit, NJ 07901
30 Maple Street, Suite 2, Summit, NJ 07901
Sub-Adviser – HACK, BIGD, IPAY, IFLY, AND GAMR
Penserra Capital Management, LLC
4 Orinda Way, Suite 100-A, Orinda, CA 94563
4 Orinda Way, Suite 100-A, Orinda, CA 94563
Distributor
ALPS Distributors, Inc.
1290 Broadway, Suite 1100, Denver, Colorado 80203
Custodian
U.S. Bank National Association
Custody Operations
Custody Operations
1555 North River Center Drive, Suite 302, Milwaukee, Wisconsin 53212
Transfer Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street, Milwaukee, Wisconsin 53202
Securities Lending Agent
U.S Bank, National Association
Securities Lending
800 Nicolet Mall
Securities Lending
800 Nicolet Mall
Minneapolis, MN 55402-7020
Independent Registered Public Accounting Firm
WithumSmith + Brown, PC
1411 Broadway, 9th Floor, New York, NY 10018
Legal Counsel
Sullivan & Worcester LLP
1666 K Street NW, Washington, DC 20006
Sullivan & Worcester LLP
1666 K Street NW, Washington, DC 20006
Annual Report
September 30, 2016
TierraXP™ Latin America Real Estate ETF Ticker: LARE
The Fund is a series of ETF Managers Trust.
TierraXPTM Latin America Real Estate ETF
TABLE OF CONTENTS September 30, 2016 | ||
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On behalf of the entire team, we want to express our appreciation for the confidence you have placed in the Tierra XP Latin America Real Estate Exchange-Traded Fund. (“LARE” or the “Fund”). The following information pertains to the fiscal period from December 3, 2015 (the Fund’s Inception Date) to September 30, 2016.
The Fund saw positive performance during the fiscal period ended on September 30, 2016. The NAV price for LARE rose 22.63%, while the Solactive Latin America Real Estate Index (“Index’), the Fund’s benchmark, rose 19.79% over the same period. The primary difference between the Fund return and the Index return was attributable to Fund expenses, which are not a part of the Index.
For the period ended September 30, 2016, the best performing securities in the Fund were MRV Engenharia (up 96.06%), Grupo Aeroport Del Sureste (up 82.62%), and Socovesa SA (up 70.73%). The worst performing securities in the Fund were Cocentradora Fibra Hotelra (down - 23.94%), Jones Lang Lasalle (down -20.85%), and BR Properties SA (down -20.09%).
You can find further details about LARE by visiting www.tierrafunds.com, or by calling 1‐844‐ ETF‐ MGRS (1‐844‐383‐6477).
Sincerely,
Samuel Masucci III Chairman of the Board
Samuel Masucci III is a registered representative of ALPS Distributors, Inc.
3
TierraXPTM Latin America Real Estate ETF
Cumulative Returns | Since Inception | |||
Period Ended September 30, 2016 | (12/2/2015) | |||
TierraXPTM Latin America Real Estate ETF (NAV) | 22.63 | % | ||
TierraXPTM Latin America Real Estate ETF (Market) | 25.52 | % | ||
S&P 500 Index | 6.15 | % | ||
Solactive Latin America Real Estate Index | 19.79 | % | ||
Total Fund Operating Expenses1 | 0.79 | % | ||
1. The expense ratio is taken from the Fund’s most recent prospectus dated May 27, 2016. |
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on December 2, 2015, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of Fund shares. The chart assumes reinvestment of capital gains and dividends.
The unmanaged indices do not reflect fees and are not available for direct investment.
4
TierraXPTM Latin America Real Estate ETF
% of Total | |||
Security | Investments† | ||
1 | FII BTG Pactual Corporate Office Fund | 3.11% | |
2 | BR Properties SA | 3.10% | |
3 | Fibra Uno Administracion SA de CV | 2.99% | |
4 | Macquarie Mexico Real Estate Management SA de CV | 2.97% | |
5 | PLA Administradora Industrial S de RL de CV | 2.93% | |
6 | Kinea Rendimentos Imobiliarios FII | 2.93% | |
7 | JS Real Estate Multigestao FII | 2.89% | |
8 | Concentradora Fibra Danhos SA de CV | 2.80% | |
9 | BB Progressivo II FII | 2.78% | |
10 | Prologis Property Mexico SA de CV | 2.69% | |
Top Ten Holdings = 29.19% of Total Investments† | |||
* Current Fund holdings may not be indicative of future Fund holdings. | |||
† Percentage of total investments less cash. |
5
TierraXPTM Latin America Real Estate ETF
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility.
The TierraXPTM Latin America Real Estate ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Solactive Latin America Real Estate Index (the “Index”).
Foreign investing involves special risks such as currency fluctuations and political uncertainty. Investments in emerging markets accentuate these risks. The Fund is subject to the risks associated with investing in real estate, which may include possible declines in the value of real estate. Funds focusing on a single country or sector may experience greater price volatility. The Fund’s return may not match or achieve a high degree of correlation with the return of the Solactive Latin America Real Estate Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not guarantee a profit, nor does it protect against a loss in a declining market.
Real estate risk factors include, but are not limited to, the fact that direct ownership of real estate is subject to fluctuations in the value of underlying properties, the impact of economic conditions on real estate values, the strength of specific industries renting properties and defaults by borrowers or tenants. Real estate is a cyclical business, highly sensitive to general and local economic conditions and developments, and characterized by intense competition and periodic overbuilding. Changing interest rates and credit quality requirements may affect the cash flow of real estate companies and their ability to borrow or lend money or to meet capital needs.
The Fund is new with limited operating history.
LAREPR: The Solactive Latin America Real Estate Index screens for all listed equities with primary listings in the Latin America region and which derive substantially most of their income from real estate and real estate services.
MSCI EM: The MSCI Emerging Markets Index captures large and mid cap representation across 23 Emerging Markets (EM) countries*. With 836 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in each country.
MSCI Mexico: The MSCI Mexico Index is designed to measure the performance of the large and mid cap segments of the Mexican market. With 27 constituents, the index covers approximately 85% of the free float-adjusted market capitalization in Mexico.
MSCI Brazil: The MSCI Brazil Index is designed to measure the performance of the large and mid cap segments of the Brazilian market. With 61 constituents, the index covers about 85% of the Brazilian equity universe.
S&P 500: The S&P 500 Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
6
TierraXPTM Latin America Real Estate ETF
As of September 30, 2016
TierraXPTM Latin America Real Estate ETF | ||||
As a percent of Net Assets: | ||||
Argentina | 2.4 | % | ||
Brazil | 46.6 | |||
Chile | 5.9 | |||
Mexico | 37.1 | |||
United States | 7.2 | |||
Short-Term and other Net Assets (Liabilities) | 0.8 | |||
100.0 | % |
7
TierraXPTM Latin America Real Estate ETF
September 30, 2016
Shares | Market Value | ||||||||
COMMON STOCKS - 99.2% | |||||||||
Argentina - 2.4% | |||||||||
Real Estate Management & Development - 2.4% | |||||||||
Cresud SACIF y A - ADR (a) | 2,142 | $ | 38,256 | ||||||
IRSA Inversiones y Representaciones SA - ADR (a) | 1,672 | 31,751 | |||||||
Total Real Estate Management & Development | 70,007 | ||||||||
Brazil - 46.6% | |||||||||
Capital Markets - 0.1% | |||||||||
GP Investments Ltd. (a) | 1,200 | 2,528 | |||||||
Household Durables - 14.9% | |||||||||
Cyrela Brazil Realty SA Empreendimentos e | |||||||||
Participacoes | 20,400 | 63,982 | |||||||
Direcional Engenharia SA | 25,300 | 45,510 | |||||||
Even Construtora e Incorporadora SA | 14,600 | 17,284 | |||||||
Ez Tec Empreendimentos e Participacoes SA | 14,832 | 69,687 | |||||||
Gafisa SA | 58,200 | 44,919 | |||||||
Helbor Empreendimentos SA | 26,100 | 16,693 | |||||||
MRV Engenharia e Participacoes SA | 19,200 | 70,433 | |||||||
Multiplan Empreendimentos Imobiliarios SA | 4,100 | 80,004 | |||||||
Tecnisa SA | 47,188 | 35,549 | |||||||
Total Household Durables | 444,061 | ||||||||
Real Estate Management & Development - 31.6% | |||||||||
Aliansce Shopping Centers SA | 8,900 | 42,281 | |||||||
BB Progressivo II FII | 2,116 | 83,732 | |||||||
BR Malls Participacoes SA (a) | 15,380 | 58,547 | |||||||
BR Properties SA | 35,700 | 93,527 | |||||||
Brasil Brokers Participacoes SA (a) | 7,500 | 3,944 | |||||||
CSHG Brasil Shopping Investimento Imobiliario | 96 | 59,038 | |||||||
CSHG Logistica FI Imobiliario | 97 | 34,599 | |||||||
CSHG Real Estate FI Imobiliario | 170 | 68,164 | |||||||
FII BTG Pactual Corporate Office Fund | 3,120 | 93,635 | |||||||
FII TB Office | 1,599 | 30,115 | |||||||
Iguatemi Empresa de Shopping Centers SA | 6,100 | 55,520 | |||||||
JHSF Participacoes SA (a) | 17,900 | 8,917 | |||||||
JS Real Estate Multigestao FII | 2,755 | 87,170 | |||||||
Kinea Renda Imobiliaria FII | 1,712 | 70,856 | |||||||
Kinea Rendimentos Imobiliarios FII | 2,517 | 88,230 | |||||||
Santander Agencias FII | 1,385 | 49,401 | |||||||
Sao Carlos Empreendimentos e Participacoes SA | 1,500 | 12,439 | |||||||
Total Real Estate Management & Development | 940,115 | ||||||||
Total Brazil | 1,386,704 | ||||||||
Chile - 5.9% | |||||||||
Consumer Discretionary - 2.1% | |||||||||
PAZ Corporacion SA | 81,153 | 61,445 | |||||||
Household Durables - 1.0% | |||||||||
Socovesa SA | 94,950 | 30,320 |
The accompanying notes are an integral part of these financial statements.
8
TierraXPTM Latin America Real Estate ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
Real Estate Management & Development - 2.8% | |||||||||
Parque Arauco SA | 24,447 | $ | 55,264 | ||||||
Zona Franca de Iquique SA | 32,191 | 26,188 | |||||||
Total Real Estate Management & Development | 81,452 | ||||||||
Total Chile | 173,217 | ||||||||
Mexico - 37.1% | |||||||||
Banks - 0.7% | |||||||||
FIBRA HD Servicios SC | 41,355 | 21,328 | |||||||
Construction & Engineering - 0.8% | |||||||||
Empresas ICA SAB de CV (a) | 38,850 | 5,410 | |||||||
Impulsora del Desarrollo y el Empleo en America | |||||||||
Latina SAB de CV (a) | 13,790 | 18,505 | |||||||
Total Construction & Engineering | 23,915 | ||||||||
Diversified Financial Services - 2.6% | |||||||||
Concentradora Hipotecaria SAPI de CV | 55,839 | 77,582 | |||||||
Hotels, Restaurants & Leisure - 0.8% | |||||||||
Hoteles City Express SAB de CV (a) | 26,368 | 24,750 | |||||||
Household Durables - 1.7% | |||||||||
Consorcio ARA SAB de CV | 39,355 | 13,741 | |||||||
Corporacion GEO SAB De CV (a) | 3,695 | 1,538 | |||||||
Corpovael SA de CV | 19,816 | 14,614 | |||||||
Desarrolladora Homex SAB de CV (a) | 54,702 | 5,473 | |||||||
Servicios Corporativos Javer SAB de CV | 12,001 | 10,769 | |||||||
Total Household Durables | 46,135 | ||||||||
Real Estate Investment Trusts (REITs) - 20.3% | |||||||||
Asesor de Activos Prisma SAPI de CV | 57,930 | 35,314 | |||||||
Concentradora Fibra Danhos SA de CV | 46,720 | 84,333 | |||||||
Concentradora Fibra Hotelera Mexicana SA de CV | 70,344 | 46,618 | |||||||
Fibra MTY SAPI de CV | 65,920 | 43,007 | |||||||
Fibra Shop Portafolios Inmobiliarios SAPI de CV | 54,953 | 45,091 | |||||||
Fibra Uno Administracion SA de CV | 49,340 | 90,208 | |||||||
Macquarie Mexico Real Estate Management SA de CV | 73,116 | 89,520 | |||||||
PLA Administradora Industrial S de RL de CV | 53,373 | 88,360 | |||||||
Prologis Property Mexico SA de CV | 49,392 | 81,030 | |||||||
Total Real Estate Investment Trusts (REITs) | 603,481 | ||||||||
Real Estate Management & Development - 2.9% | |||||||||
Corporacion Inmobiliaria Vesta SAB de CV | 42,253 | 58,227 | |||||||
Grupo GICSA SA de CV (a) | 41,525 | 26,984 | |||||||
Total Real Estate Management & Development | 85,211 | ||||||||
Transportation Infrastructure - 7.3% | |||||||||
Grupo Aeroportuario del Centro Norte SAB de CV | 12,682 | 74,759 | |||||||
Grupo Aeroportuario del Pacifico SAB de CV | 8,486 | 80,673 | |||||||
Grupo Aeroportuario del Sureste SAB de CV | 4,212 | 61,612 | |||||||
Total Transportation Infrastructure | 217,044 | ||||||||
Total Mexico | 1,099,446 |
The accompanying notes are an integral part of these financial statements.
9
TierraXPTM Latin America Real Estate ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
United States - 7.2% | |||||||||
Real Estate Investment Trusts (REITs) - 2.2% | |||||||||
Prologis, Inc. | 1,196 | $ | 64,034 | ||||||
Real Estate Management & Development - 5.0% | |||||||||
Brookfield Property Partners LP ^ | 3,003 | 68,829 | |||||||
CBRE Group, Inc. (a) | 1,700 | 47,566 | |||||||
Jones Lang LaSalle, Inc. | 286 | 32,544 | |||||||
Total Real Estate Management & Development | 148,939 | ||||||||
Total United States | 212,973 | ||||||||
TOTAL COMMON STOCKS (Cost $2,569,537) | 2,942,347 | ||||||||
RIGHTS - 0.1% | |||||||||
Aliansce Shopping Center | 2,197 | 298 | |||||||
Helbor Empreedimentos | 7,064 | 760 | |||||||
TOTAL RIGHTS (Cost $796) | 1,058 | ||||||||
SHORT-TERM INVESTMENTS - 2.4% | |||||||||
Mount Vernon Prime Portfolio, 0.68% (b) + | 69,772 | 69,772 | |||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $69,772) | 69,772 | ||||||||
Total Investments (Cost $2,640,105) - 101.6% | 3,013,177 | ||||||||
Liabilities in Excess of Other Assets - (1.6)% | (49,456 | ) | |||||||
TOTAL NET ASSETS - 100.0% | $ | 2,963,721 |
Percentages are stated as a percent of net assets.
ADR | American Depositary Receipt |
(a) | Non-income producing security. |
(b) | The rate quoted is the annualized seven-day yield at September 30, 2016. |
+ | Investments purchased with cash proceeds from securities lending. Total cash collateral has a value of $69,772 as of September 30, 2016. |
^ | All or a portion of this security is out on loan as of September 30, 2016. Total value of securities out on loan is $68,049. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
10
TierraXPTM Latin America Real Estate ETF
TierraXPTM Latin | ||||
America Real | ||||
Estate ETF | ||||
ASSETS | ||||
Investments in securities, at fair value* | $ | 3,013,177 | ||
Cash | 17,188 | |||
Dividends and interest receivable | 5,049 | |||
Total Assets | $ | 3,035,414 | ||
LIABILITIES | ||||
Collateral received for securities loaned (Note 7) | 69,772 | |||
Management fees payable | 1,921 | |||
Total Liabilities | 71,693 | |||
Net Assets | $ | $2,963,721 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in Capital | $ | 2,502,056 | ||
Undistributed net investment income | (164 | ) | ||
Accumulated net realized gain on investments | 88,568 | |||
Net unrealized appreciation on: | ||||
Investments in securities | 373,072 | |||
Foreign currency and translation of other assets and liabilities in foreign currency | 189 | |||
Net Assets | $ | 2,963,721 | ||
*Identified Cost: | ||||
Investments in unaffiliated securities | $ | 2,640,105 | ||
Shares Outstanding^ | 100,000 | |||
Net Asset Value, Offering and Redemption Price per Share | $ | $29.64 |
^ No par value, unlimited number of shares authorized
The accompanying notes are an integral part of these financial statements.
11
TierraXPTM Latin America Real Estate ETF
TierraXPTM Latin America Real Estate ETF1 | ||||
INVESTMENT INCOME | ||||
Income: | ||||
Dividends from unaffiliated securities (net of foreign withholdings tax of $11,711) | $ | 113,103 | ||
Securities lending income | 289 | |||
Total Investment Income | 113,392 | |||
Expenses: | ||||
Management fees | 17,488 | |||
Total Expenses | 17,488 | |||
Net Investment Income | 95,904 | |||
REALIZED AND UNREALIZED GAIN ON INVESTMENTS | ||||
Net Realized Gain (Loss) on: | ||||
Unaffiliated investments | 54,830 | |||
Net Change in Unrealized Appreciation of: | ||||
Unaffiliated investments in securities | 373,072 | |||
Foreign currency and foreign currency translation | 189 | |||
Net change in unrealized appreciation on investments | 373,261 | |||
Net Realized and Unrealized Gain on Investments | 428,091 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 523,995 |
1 | Fund commenced operations on December 2, 2015. The information presented is for the period from December 2, 2015 to September 30, 2016. |
The accompanying notes are an integral part of these financial statements.
12
TierraXPTM Latin America Real Estate ETF
Period Ended September 30, 2016* | ||||
OPERATIONS | ||||
Net investment income | $ | 95,904 | ||
Net realized gain on investments | 54,830 | |||
Net change in unrealized appreciation of investments | 373,261 | |||
Net increase in net assets resulting from operations | 523,995 | |||
DISTRIBUTIONS TO SHAREHOLDERS | ||||
From net investment income | (93,090 | ) | ||
Total Distributions to Shareholders | (93,090 | ) | ||
CAPITAL SHARE TRANSACTIONS | ||||
Net increase in net assets derived from net change in outstanding shares (a) | 2,500,000 | |||
Transaction Fee (Note 1) | 32,816 | |||
Net increase in net assets from capital share transactions | 2,532,816 | |||
Net increase in net assets | 2,963,721 | |||
NET ASSETS | ||||
Beginning of Period | — | |||
End of Period | $ | 2,963,721 | ||
Undistributed net investment income | $ | (164 | ) |
(a) Summary of share transactions is as follows:
Period Ended September 30, 2016* | ||||||||
Shares | Amount | |||||||
Shares Sold | 100,000 | $ | 2,500,000 | |||||
Reinvested Dividends | — | — | ||||||
Shares Redeemed | — | — | ||||||
100,000 | $ | 2,500,000 | ||||||
Beginning Shares | — | |||||||
Ending Shares | 100,000 |
*Fund commenced operations on December 2, 2015. The information presented is for the period from December 2, 2015 to September 30, 2016.
The accompanying notes are an integral part of these financial statements.
13
TierraXPTM Latin America Real Estate ETF
For a capital share outstanding throughout the period
Period Ended September 30, 20161 | |||||
Net Asset Value, Beginning of Period | $ | 25.00 | |||
Income (Loss) from Investment Operations: | |||||
Net investment income (loss) 2 | 0.98 | ||||
Net realized and unrealized gain (loss) on investments | 4.59 | ||||
Total from investment operations | 5.57 | ||||
Less Distributions: | |||||
Distributions from net investment income | (0.93 | ) | |||
Total distributions | (0.93 | ) | |||
Net asset value, end of period | $ | 29.64 | |||
Total Return | 22.63 | % | 3 | ||
Ratios/Supplemental Data: | |||||
Net assets at end of period (000’s) | $ | 2,964 | |||
Expenses to Average Net Assets | 0.79 | % | 4 | ||
Net Investment Income (Loss) to Average Net Assets | 5.88 | % | 4 | ||
Portfolio Turnover Rate | 44 | % | 3 |
1Commencement of operations on December 2, 2015.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
14
TierraXPTM Latin America Real Estate ETF
NOTE 1 – ORGANIZATION
TierraXPTM Latin America Real Estate ETF (the “Fund”) is a series of ETF Managers Trust (the “Trust”), an open-end management investment company consisting of multiple investment series, organized as a Delaware statutory trust on July 1, 2009. The Trust is registered with the SEC under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and the offering of the Fund’s shares (“Shares”) is registered under the Securities Act of 1933, as amended (the “Securities Act”). The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Solactive Latin America Real Estate Index (“The Index”). The Fund commenced operations on December 2, 2015.
The Fund currently offers one class of shares, which has no front end sales load, no deferred sales charges, and no redemption fees. The Fund may issue an unlimited number of shares of beneficial interest, with no par value. All shares of the Fund have equal rights and privileges.
Shares of the Fund are listed and traded on the NYSE Arca, Inc. Market prices for the Shares may be different from their net asset value (“NAV”). The Fund issues and redeems Shares on a continuous basis at NAV only in blocks of 50,000 shares, called “Creation Units.” Creation Units are issued and redeemed principally in-kind for securities included in the Index. Once created, Shares generally trade in the secondary market at market prices that change throughout the day in quantities less than a Creation Unit. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund. Shares of the Fund may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem the Shares directly from the Fund. Rather, most retail investors may purchase Shares in the secondary market with the assistance of a broker and are subject to customary brokerage commissions or fees.
Authorized Participants transacting in Creation Units for cash may pay an additional variable charge to compensate the relevant Fund for certain transaction costs (i.e., brokerage costs) and market impact expenses relating to investing in portfolio securities. Such variable charges, are included in “Transaction Fees” in the Statement of Changes in Net Assets.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
A. | Security Valuation. Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded on the valuation date (or at approximately 4:00 pm Eastern Time if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. |
15
TierraXPTM Latin America Real Estate ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees (the “Board”). When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the pricing procedures adopted by the Fund’s Board. The use of fair value pricing by the Fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without regard to such considerations. As of September 30, 2016, the Fund did not hold any fair valued securities.
As described above, the Fund utilizes various methods to measure the fair value of its investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. |
Level 2 | Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
Level 3 | Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The following table presents a summary of the Fund’s assets measured at fair value:
TierraXPTM Latin America Real Estate ETF | ||||||||||||||||
Assets^ | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 2,942,347 | $ | — | $ | — | $ | 2,942,347 | ||||||||
Rights | 1,058 | — | — | 1,058 | ||||||||||||
Short-Term Investments | 69,772 | — | — | 69,772 | ||||||||||||
Total Investments in Securities | $ | 3,013,177 | $ | — | $ | — | $ | 3,013,177 |
^ See Schedule of Investments for classifications by sector or country.
16
TierraXPTM Latin America Real Estate ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
There were no transfers between Levels 1, 2 and 3 during the period ended September 30, 2016. Transfers between levels are recognized at the end of the reporting period.
B. | Federal Income Taxes. The Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provisions for federal income taxes or excise taxes have been made. |
To avoid imposition of the excise tax applicable to regulated investment companies, the Fund intends to declare each year as dividends, in each calendar year, at least 98.0% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years.
Net capital losses incurred after October 31, within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year.
The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The Fund has analyzed its tax position and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Fund’s 2016 tax returns. The Fund identifies its major tax jurisdictions as U.S. Federal, the State of New Jersey, and the State of Delaware; however the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
C. | Security Transactions and Investment Income. Investment securities transactions are accounted for on the trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Discounts/premiums on debt securities purchased are accreted/amortized over the life of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Income, including gains, from investments in foreign securities received by the Fund may be subject to income, withholding or other taxes imposed by foreign countries. |
D. | Foreign Currency Translations and Transactions. The Fund may engage in foreign currency transactions. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. For financial reporting purposes, the Fund does not isolate changes in the exchange rate of investment securities from the fluctuations arising from changes in the market prices of securities for unrealized gains and losses. However, for federal income tax purposes, the Fund does isolate and treat as ordinary income the effect of changes in foreign exchange rates on realized gains or losses from the sale of investment securities and payables and receivables arising from trade-date and settlement-date differences. |
E. | Distributions to Shareholders. Distributions to shareholders from net investment income are declared and paid by the Fund on a monthly basis. Distributions to Shareholders from net realized gains on securities of the Fund normally are declared and paid on an annual basis. Distributions are recorded on the ex-dividend date. |
17
TierraXPTM Latin America Real Estate ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
F. | Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. |
G. | Share Valuation. The net asset value (“NAV”) per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding of the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on the days on which the NYSE is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s net asset value per share. |
H. | Guarantees and Indemnifications. In the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote. |
NOTE 3 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The “Derivatives and Hedging” Topic of the Codification (Accounting Standards Codification 815, formerly Statement of Financial Accounting Standards (“SFAS”) 133 and SFAS 161) requires enhanced disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial position, performance and cash flows. The Fund did not use derivatives during the period ended September 30, 2016.
NOTE 4 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS.
ETF Managers Group, LLC (the “Advisor”), serves as the investment advisor to the Fund. Pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between the Trust, on behalf of the Fund, and the Advisor, the Advisor provides investment advice to the Fund and oversees the day-today operations of the Fund, subject to the direction and control of the Board and the officers of the Trust. Under the Advisory Agreement, the Advisor is also responsible for arranging transfer agency, custody, fund administration and accounting, and other non-distribution related services necessary for the Fund to operate.
Under the Investment Advisory Agreement with the Fund, the Advisor has overall responsibility for the general management and administration of the Fund and arranges for sub-advisory, transfer agency, custody, fund administration, securities lending, and all other non-distribution related services necessary for the Fund to operate. The Advisor bears the costs of all advisory and non-advisory services required to operate the Fund, in exchange for a single unitary fee. For services provided the Fund pays the Advisor at an annual rate of 0.79% of the Fund’s average daily net assets. The Advisor has an agreement with, and is dependent on, a third party to pay the Fund’s expenses in excess of 0.79% of the Fund’s average daily net assets. Additionally, under the Investment Advisory Agreement, the Advisor has agreed to pay all expenses of the Fund, except for: the fee paid to the Advisor pursuant to the Investment Advisory Agreement, interest charges on any borrowings, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution (12b-1) fees and expenses (collectively, “Excluded Expenses”). The Advisor has entered into an Agreement with Tierra Funds, LLC (the “Sponsor”), under which the Sponsor agrees to sublicense the use of the Underlying Index to the Advisor. The Sponsor also provides marketing support for the Fund, including distributing marketing materials related to the Fund. Tierra Funds, LLC is a privately held business focused on bringing exchange-traded investment products to investors in the U.S.. The Sponsor does not make investment decisions, provide investment advice, or otherwise act in the capacity of an investment adviser to the Fund.
18
TierraXPTM Latin America Real Estate ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
Additionally, the Sponsor is not involved in the maintenance of the Underlying Index and does not otherwise act in the capacity of an index provider.
U.S. Bancorp Fund Services, LLC (the “Administrator”) provides fund accounting, fund administration, and transfer agency services to the Fund. The Advisor compensates the Administrator for these services under an administration agreement between the two parties.
The Advisor pays each independent Trustee a quarterly fee for service to the Fund. Each Trustee is also reimbursed by the Advisor for all reasonable out-of-pocket expenses incurred in connection with his duties as Trustee, including travel and related expenses incurred in attending Board meetings.
NOTE 5 – DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may pay compensation to the Distributor or any other distributor or financial institution with which the Trust has an agreement with respect to the Fund, with the amount of such compensation not to exceed an annual rate of 0.25% of each Fund’s average daily net assets. For the period ended September 30, 2016, the Fund did not incur any 12b-1 expenses.
NOTE 6 - PURCHASES AND SALES OF SECURITIES
The costs of purchases and sales of securities, excluding short-term securities and in-kind transactions, for the period ended September 30, 2016:
Purchases | Sales | |||||||
TierraXPTM Latin America Real Estate ETF | $ | 2,751,750 | $ | 1,176,521 |
The costs of purchases and sales of in-kind transactions associated with creations and redemptions for the period ended September 30, 2016:
Purchases In- | Sales In- Kind | |||||||
TierraXPTM Latin America Real Estate ETF | $ | 927,032 | $ | — |
Purchases in-kind are the aggregate of all in-kind purchases and sales in-kind are the aggregate of all proceeds from in-kind sales. Net capital gains or losses resulting from in-kind redemptions are excluded from the determination of the Fund’s taxable gains and are not distributed to shareholders.
There were no purchases or sales of U.S. Government obligations for the period ended September 30, 2016.
19
TierraXPTM Latin America Real Estate ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
NOTE 7 — SECURITIES LENDING
The Fund may lend up to 33 1/3% of the value of the securities in its portfolio to brokers, dealers and financial institutions (but not individuals) under terms of participation in a securities lending program administered by U.S. Bank N.A. (“the Custodian”). The securities lending agreement requires that loans are collateralized at all times in an amount equal to at least 102% of the value of any loaned securities at the time of the loan, plus accrued interest. The Fund receives compensation in the form of fees and earn interest on the cash collateral. The amount of fees depends on a number of factors including the type of security and length of the loan. The Fund continues to receive interest payments or dividends on the securities loaned during the borrowing period. Gain or loss in the fair value of securities loaned that may occur during the term of the loan will be for the account of the Fund. The Fund has the right under the terms of the securities lending agreement to recall the securities from the borrower on demand. The cash collateral is invested by the Custodian in accordance with approved investment guidelines. Those guidelines require the cash collateral to be invested in readily marketable, high quality, short-term obligations; however, such investments are subject to risk of payment delays or default on the part of the issuer or counterparty or otherwise may not generate sufficient interest to support the costs associated with securities lending. The Fund could also experience delays in recovering its securities and possible loss of income or value if the borrower fails to return the borrowed securities, although the Fund is indemnified from this risk by contract with the securities lending agent.
As of September 30, 2016, the value of the securities on loan and payable for collateral due to broker were as follows:
Value of Securities on Loan Collateral Received
Values of | Fund | |||||||
Securities | Collateral | |||||||
Fund | on Loan | Received* | ||||||
TierraXPTM Latin America Real Estate ETF | $ | 68,049 | $ | 69,772 |
* The cash collateral received was invested in the Mount Vernon Securities Lending Prime Portfolio as shown on the Schedule of Investments, a money market fund with an overnight and continuous maturity.
Interest income earned on collateral investments and recognized by the Fund during the period ended September 30, 2016, were as follows:
Interest Income Earned
Interest Income | ||||
Earned net of | ||||
Fund | applicable Fees | |||
TierraXPTM Latin America Real Estate ETF | $ | 289 |
Offsetting Assets and Liabilities
The Fund is subject to various netting arrangements, which govern the terms of certain transactions with counterparties. The arrangements allow the Fund to close out and net its total exposure to a counterparty in the event of a default with respect to all transactions governed under a single agreement with a counterparty. The following is a summary of the arrangements subject to offsetting as of September 30, 2016.
20
TierraXPTM Latin America Real Estate ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
Fund | Description | Gross Amounts of Recognized Liabilities | Gross Amounts in the Statement of Assets and Liabilities | Net Amounts Presented in the Statement of Assets and Liabilities | Collateral Received | Net Amount | |||||||||||
TierraXPTM | |||||||||||||||||
Latin | |||||||||||||||||
America | |||||||||||||||||
Real Estate | Securities | ||||||||||||||||
ETF | Lending | $ | 69,772 | $ | 69,772 | $ | — | $ | 69,772 | $ | — |
NOTE 8 – FEDERAL INCOME TAXES
The components of distributable earnings (losses) and cost basis of investments for federal income tax purposes at September 30, 2016 were as follows:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | |||||||||||||
TierraXPTM Latin America Real Estate ETF | $ | 2,642,639 | $ | 472,811 | $ | (102,273 | ) | $ | 307,538 |
Undistributed | Undistributed | Total | Other | Total | ||||||||||||||||
Ordinary | Long-term | Distributable | Accumulated | Accumulated | ||||||||||||||||
Income | Gain | Earnings | (Loss) | Gain | ||||||||||||||||
TierraXPTM Latin | $ | 89,615 | $ | 1,436 | $ | 91,051 | $ | 76 | $ | 461,665 | ||||||||||
America Real | ||||||||||||||||||||
Estate ETF |
As of September 30, 2016, the Fund had accumulated capital loss carryovers of:
Capital Loss | |||
Carryover | Expires | ||
TierraXPTM Latin America Real Estate ETF | None | Indefinite |
Under current tax law, capital and currency losses realized after October 31 of a Fund’s fiscal year may be deferred and treated as occurring on the first business day of the following fiscal year for tax purposes. The Fund had deferred post-October capital and currency losses, which will be treated as arising on the first business day of the year ended September 30, 2017.
Late Year | |||
Ordinary | Post-October | ||
Loss | Capital Loss | ||
TierraXPTM Latin America Real Estate ETF | None | None | |
21
TierraXPTM Latin America Real Estate ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
NOTE 9 – DISTRIBUTIONS TO SHAREHOLDERS
The Fund paid $93,090 from ordinary income during the period ended September 30, 2016.
NOTE 10 – SUBSEQUENT EVENTS
In preparing these financial statements, the Fund has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
22
TierraXPTM Latin America Real Estate ETF
To the Board of Trustees of ETF Managers Trust
and the Shareholders of TierraXP Latin America Real Estate ETF:
We have audited the accompanying statement of assets and liabilities of the ETF Managers Trust, which includes TierraXP Latin America Real Estate ETF (the “Fund”), including the schedule of investments as of September 30, 2016, and the related statements of its operations, the changes in its net assets and financial highlights for the period December 2, 2015 (commencement of operations) to September 30, 2016. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2016 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the ETF Managers Trust, which includes TierraXP Latin America Real Estate ETF, as of September 30, 2016, and the results of its operations and changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America.
/s/ WithumSmith+Brown, PC
New York, NY
November 28, 2016
23
TierraXPTM Latin America Real Estate ETF
TierraXPTM Latin America Real Estate ETF Closing Price vs. NAV
The following Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the closing price for each Fund is at a premium or discount to its daily net asset value (NAV). The chart presented represents past performance and cannot be used to predict future results.
December 2, 2015* through | ||||||
TierraXPTM Latin America Real Estate ETF | September 30, 2016 | |||||
Number | Percentage of | |||||
Premium/Discount Range | of Days | Total Days | ||||
Greater than 1.00% | 186 | 88.6 | ||||
Greater Than or equal to 0.75% And Less Than 1.00% | 0 | 0.0 | ||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 3 | 1.4 | ||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 3 | 1.4 | ||||
Greater Than or Equal to 0.00% And Less Than 0.25% | 3 | 1.4 | ||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 2 | 1.0 | ||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 4 | 1.9 | ||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 2 | 1.0 | ||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 3 | 1.4 | ||||
Less than -1.00% | 4 | 1.9 |
*First day of secondary market trading
24
TierraXPTM Latin America Real Estate ETF
September 30, 2016 (Unaudited)
During the year ended September 30, 2016, the Fund did not declare any long-term realized gains distributions.
Qualified Dividend Income/Dividends Received Deduction
For the fiscal year ended September 30, 2016, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:
Fund Name | Qualified Dividend Income |
TierraXPTM Latin America Real Estate ETF | 11.24% |
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended September 30, 2016 was as follows:
Fund Name | Dividends Received Deduction |
TierraXPTM Latin America Real Estate ETF | 0.00% |
The Fund files a Form N-Q with the Securities and Exchange Commission (the ‘‘SEC’’) no more than sixty days after the Fund’s first and third fiscal quarters. For the Fund, this would be for the fiscal quarters ending June 30 and December 31. Form N-Q includes a complete schedule of the Funds’ portfolio holdings as of the end of those fiscal quarters. The Fund’s N-Q filings can be found free of charge on the SEC’s website at http://www.sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (call 800-SEC-0330 for information on the operation of the Public Reference Room). The Fund’s portfolio holdings are posted on the Fund’s website at www.tierrafunds.com daily.
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is provided in the Statement of Additional Information (“SAI”). The SAI is available without charge upon request by calling toll-free at 1-844-ETF-MGRS (1-844-383-6477), by accessing the SEC’s website at www.sec.gov, or by accessing the Fund’s website at www.tierrafunds.com.
Information regarding how the Fund voted proxies relating to portfolio securities during the period ending June 30 is available by calling toll-free at 1-844-ETF-MGRS (1-844-383-6477) or by accessing the SEC’s website at www.sec.gov.
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477) or by visiting www.tierrafunds.com. Read the prospectus carefully before investing.
25
TierraXPTM Latin America Real Estate ETF
For the period Ended September 30, 2016
As a shareholder of TierraXPTM Latin America Real Estate ETF (the “Fund”) you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2016 to September 30, 2016).
Actual Expenses
The first line of the table provides information about actual account values based on actual returns and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then, multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account values based on a hypothetical return and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and in other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of Fund shares. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
TierraXPTM Latin America Real Estate ETF
Beginning | Ending | |||||||||||||
Account Value | Account Value | Expenses Paid | ||||||||||||
April 1, 2016 | September 30, 2016 | During the Period^ | ||||||||||||
Actual | $ | 1,000.00 | $ | 1,113.00 | $ | 4.17 | ||||||||
Hypothetical (5% annual) | $ | 1,000.00 | $ | 1,012.05 | $ | 3.99 |
^ The dollar amounts shown as expenses paid during the period are equal to the annualized six-month expense ratio multiplied by the average account value during the period, multiplied by 183/366 (to reflect the period from April 1, 2016 to September 30, 2016.
26
TierraXP™ Latin America Real Estate ETF
Set forth below are the names, birth years, positions with the Trust, length of term of office, and the principal occupations and other directorships held during at least the last five years of each of the persons currently serving as a Trustee of the Trust, as well as information about each officer. The business address of each Trustee and officer is 30 Maple Street, Summit, New Jersey 07901.
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years |
Interested Trustee* and Officers | ||||
Samuel Masucci, III (1962) | Trustee, Chairman of the Board and President (since 2012); Secretary (since 2014) | Chief Executive Officer, Exchange Traded Managers Group, LLC (since 2013); Chief Executive Officer and Chief Compliance Officer, Factor Advisors, LLC (2012-2014); President and Chief Executive Officer, Factor Capital Management LLC (2012-2014); President and Chief Executive Officer, GENCAP Ventures, LLC (holding company) (2012–2013); Chief Executive Officer, MacroMarkets LLC (exchange traded funds) (2005–2011); President, Chief Executive and Chief Compliance Officer, Macro Financial (financial services) (2005–2011). | 12 | None |
Reshma J. Amin (1978) | Chief Compliance Officer (since 2016) | Chief Operating Officer and Chief Compliance Officer, Exchange Traded Managers Group, LLC (since 2016); Partner, Crow & Cushing (2007–2016). | 12 | n/a |
John A. Flanagan (1946) | Treasurer (since 2015) | President, John A. Flanagan CPA, LLC (accounting services) (since 2010); Treasurer, ETF Managers Group, Inc., (since 2015); Chief Financial Officer, ETF Managers Capital, LLC (commodity pool operator) (since 2014); Chief Financial Officer, Macromarkets LLC (exchange traded funds) (2007–2010) | n/a | n/a |
* Mr. Masucci is an interested Trustee by virtue of his role as the Chief Executive Officer of the Adviser.
27
TierraXP Latin America Real Estate ETF
Board of Trustees
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years |
Independent Trustees | ||||
John W. Southard (1969) | Trustee (since 2012) | Director and Co-Founder, T2 Capital Management, 2010 to present; Co-Founder and Head of Research and Trading, PowerShares Capital Management, 2002 to 2009. | 12 | None |
Terry Loebs (1963) | Trustee (since 2014) | Founder and Managing Member, Pulsenomics LLC (index product development and consulting firm) (since 2011); Managing Director, MacroMarkets, LLC (exchange-traded products firm) (2006–2011). | 12 | None |
28
TierraXPTM Latin America Real Estate ETF
ETF MANAGERS TRUST
ETF Managers Trust, (the “Trust”) has adopted the following privacy policies in order to safeguard the personal information of the Trust’s customers and consumers in accordance with Regulation S-P as promulgated by the U.S. Securities and Exchange Commission.
Trust officers are responsible for ensuring that the following policies and procedures are implemented:
1) | The Trust is committed to protecting the confidentiality and security of the information they collect and will handle personal customer and consumer information only in accordance with Regulation S-P and any other applicable laws, rules and regulations1. The Trust will ensure: (a) the security and confidentiality of customer records and information; (b) that customer records and information are protected from any anticipated threats and hazards; and (c) that customer records and information are protected from unauthorized access or use. |
2) | The Trust conducts its business affairs through its trustees, officers and third parties that provide services pursuant to agreements with the Trust. The Trust has no employees. It is anticipated that the trustees and officers of the Trust who are not employees of service providers of the Trust will not have access to customer records and information in the performance of their normal responsibilities for the Trust. |
3) | The Trust may share customer information with its affiliates, subject to the customers’ right to prohibit such sharing. |
4) | The Trust may share customer information with unaffiliated third parties only in accordance with the requirements of Regulation S-P. Pursuant to this policy, the Trust will not share customer information with unaffiliated third parties other than as permitted by law, unless authorized to do so by the customer. |
Consistent with these policies, the Trust has adopted the following procedures:
1) | The Trust will determine that the policies and procedures of its affiliates and Service Providers are reasonably designed to safeguard customer information and only permit appropriate and authorized access to and use of customer information through the application of appropriate administrative, technical and physical protections. |
2) | The Trust will direct each of its Service Providers to adhere to the privacy policy of the Trust and to its privacy policies with respect to all customer information of the Trust and to take all actions reasonably necessary so that the Trust is in compliance with the provisions of Regulation S-P, including, as applicable, the development and delivery of privacy notices and the maintenance of appropriate and adequate records. |
3) | The Trust requires its Service Providers to provide periodic reports to the Trust’s Board of Trustees outlining their privacy policies and the implementation of such policies. Each Service Provider is required to promptly report to the Trust’s Board any material changes to its privacy policy before, or promptly after, the adoption of such changes. |
1 Generally, the Funds have institutional clients which are not considered “customers” for purposes of regulation S-P.
29
Advisor
ETF Managers Group, LLC
30 Maple Street, Suite 2, Summit, NJ 07901
30 Maple Street, Suite 2, Summit, NJ 07901
Sub-Adviser
Penserra Capital Management, LLC
4 Orinda Way, Suite 100-A, Orinda, CA 94563
4 Orinda Way, Suite 100-A, Orinda, CA 94563
Distributor
ALPS Distributors, Inc.
1290 Broadway, Suite 1100, Denver, Colorado 80203
Custodian
U.S. Bank National Association
Custody Operations
Custody Operations
1555 North River Center Drive, Suite 302, Milwaukee, Wisconsin 53212
Transfer Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street, Milwaukee, Wisconsin 53202
Securities Lending Agent
U.S Bank, National Association
Securities Lending
800 Nicolet Mall
Minneapolis, MN 55402-7020
Securities Lending
800 Nicolet Mall
Minneapolis, MN 55402-7020
Independent Registered Public Accounting Firm
WithumSmith + Brown, PC
1411 Broadway, 9th Floor, New York, NY 10018
Legal Counsel
Sullivan & Worcester LLP
1666 K Street NW, Washington, DC 20006
1666 K Street NW, Washington, DC 20006
Annual Report
September 30, 2016
BlueStar TA-BIGITech™ Israel Technology ETF
Ticker: ITEQ
The Fund is a series of ETF Managers Trust.
BlueStar TA-BIGITechTM Israel Technology ETF
TABLE OF CONTENTS |
September 30, 2016 |
Page | |
2 | |
3 | |
4 | |
5 | |
6 | |
7 | |
11 | |
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13 | |
14 | |
15 | |
23 | |
24 | |
25 | |
25 | |
25 | |
25 | |
26 | |
27 | |
29 |
On behalf of the entire team, we want to express our appreciation for the confidence you have placed in the Bluestar TA-BIGITech Israel Technology Exchange-Traded Fund (“ITEQ” or the “Fund”). The following information pertains to the fiscal period from November 3, 2015 (the Fund’s Inception Date) to September 30, 2016.
The Fund saw positive performance during the fiscal period ended September 30, 2016. The NAV price for ITEQ was 2.31% while the TASE-Bluestar Israel Global Technology Index (“Index”), the Fund’s benchmark, was 2.96% over the same period. The difference was primarily attributable to Fund expenses that are not a part of the Index.
For the period ended September 30, 2016, the best performing securities in the Fund were Wix.com (up 149.31%), Mazor Robotics (up 114.84%), and Varonis Systems (up 93.20%). The worst performing securities in the Fund were Chiasma (down – 85.21%), Alcobra (down - 59.11%) and Protalix Biotherapeutics (down- 58.68%).
We believe Israeli companies play an essential role in the global high technology value chain. Most technology users, from online shoppers to Fortune 500 companies, use Israeli technology applications and solutions every day without ever being aware of it. From cybersecurity and defense to clean energy and agriculture, Israeli innovations power some of the biggest names in the tech industry today.
Even in industries where Israeli companies do not have dominant individual market share, the collective footprint of Israeli companies is significant in many key technology subsectors, and Israel- based Research & Development and non-public companies are usually significant contributors to that same sub-industry’s ecosystem.
There is much ahead for Israeli Technology companies and we are thankful you have joined us. You can find further details about ITEQ by visiting www.iteqetf.com, or by calling 1-844-ETF- MGRS. (1-844-383‐6477).
Sincerely,
Samuel Masucci III Chairman of the Board
Samuel Masucci III is a registered representative of ALPS Distributors, Inc.
2
BlueStar TA‐BIGITechTM Israel Technology ETF
Cumulative Returns | Since Inception | |||
Period Ended September 30, 2016 | (11/2/2015) | |||
BlueStar TA-BIGITechTM Israel Technology ETF (NAV) | 2.31 | % | ||
BlueStar TA-BIGITechTM Israel Technology ETF (Market) | 2.60 | % | ||
S&P 500 Index | 5.20 | % | ||
TASE-BlueStar Israel Global Technology IndexTM | 2.96 | % | ||
Total Fund Operating Expenses1 | 0.75 | % |
1. The expense ratio is taken from the Fund’s most recent prospectus dated May 27, 2016.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on November 2, 2015, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of Fund shares. The chart assumes reinvestment of capital gains and dividends, if any. The unmanaged indices do not reflect fees and are not available for direct investment.
3
% of Total | ||||
Security | Investments† | |||
1 | Mobileye NV | 8.84% | ||
2 | Amdocs Ltd. | 7.82% | ||
3 | Check Point Software Technologies, Ltd. | 7.08% | ||
4 | OPKO Health, Inc. | 3.88% | ||
5 | NICE-Systems Ltd. | 3.70% | ||
6 | Elbit Systems Ltd. | 3.63% | ||
7 | Verint Systems, Inc. | 3.55% | ||
8 | Ormat Technologies, Inc. | 2.74% | ||
9 | Imperva, Inc. | 2.29% | ||
10 | Mellanox Technologies Ltd. | 2.21% |
Top Ten Holdings = 45.74% of Total Investments†
* Current Fund holdings may not be indicative of future Fund holdings.
† Percentage of total investments less cash.
4
BlueStar TA-BIGITechTM Israel Technology ETF
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed by the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility.
The BlueStar TA-BIGITechTM Israel Technology ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the TASE-BlueStar Israel Global Technology IndexTM (“TA-BIGITechTM” or the “Index”).
Investment in securities of Israeli companies involves risks that may negatively affect the value of your investment in the Fund. Among other things, Israel’s economy depends on imports of certain key items, such as crude oil, coal, grains, raw materials and military equipment. Foreign investing involves special risks such as currency fluctuations and political uncertainty. Funds that invest in smaller companies may experience greater volatility. Funds that emphasize investments in technology generally will experience greater price volatility. The Fund’s return may not match or achieve a high degree of correlation with the return of the Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not guarantee a profit, nor does it protect against a loss in a declining market.
The Fund is new with limited operating history.
The TASE- BlueStar Israel Technology Index™ (TA-BIGITech™) is an index of more than 60 Israeli technology companies listed on global stock exchanges in Tel Aviv, New York, London and elsewhere.
S&P 500: The S&P 500 Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
5
BlueStar TA-BIGITechTM Israel Technology ETF
As of September 30, 2016
BlueStar TA- BIGITechTM Israel Technology ETF | ||||
As a percent of Net Assets: | ||||
Guernsey | 9.9 | % | ||
Israel | 52.0 | |||
Jersey | 0.5 | |||
Netherlands | 10.6 | |||
Netherlands Antilles | 0.9 | |||
United Kingdom | 3.0 | |||
United States | 23.0 | |||
Short-Term and other Net Assets (Liabilities) | 0.1 | |||
100.0 | % |
6
BlueStar TA-BIGITechTM Israel Technology ETF
September 30, 2016
Shares | Market Value | |||||||
COMMON STOCKS - 99.9% | ||||||||
Guernsey - 9.9% | ||||||||
IT Services - 9.9% | ||||||||
Amdocs Ltd. | 8,332 | $ | 482,005 | |||||
SafeCharge International Group Ltd. | 9,620 | 27,432 | ||||||
Total Guernsey | 509,437 | |||||||
Israel - 52.0% | ||||||||
Aerospace & Defense - 4.4% | ||||||||
Elbit Systems Ltd. | 2,344 | 223,989 | ||||||
Biotechnology - 1.8% | ||||||||
Enzymotec Ltd. (a) | 3,500 | 24,500 | ||||||
Evogene Ltd. (a) | 4,704 | 29,494 | ||||||
Kamada Ltd. (a) | 6,864 | 35,306 | ||||||
Total Biotechnology | 89,300 | |||||||
Communications Equipment - 5.2% | ||||||||
AudioCodes Ltd.(a) ^ | 5,960 | 31,826 | ||||||
Ceragon Networks Ltd. (a) | 14,228 | 33,578 | ||||||
Ituran Location And Control Ltd. | 2,096 | 55,460 | ||||||
RADCOM Ltd. (a) | 2,204 | 45,006 | ||||||
Radware Ltd. (a) | 4,072 | 55,950 | ||||||
Silicom Ltd. | 1,028 | 42,559 | ||||||
Total Communications Equipment | 264,379 | |||||||
Electronic Equipment, Instruments & Components - 2.4% | ||||||||
Orbotech Ltd. (a) | 3,592 | 106,360 | ||||||
SuperCom Ltd. (a) | 5,236 | 17,959 | ||||||
Total Electronic Equipment, Instruments & Components | 124,319 | |||||||
Health Care Equipment & Supplies - 2.5% | ||||||||
Brainsway Ltd. (a) | 5,660 | 24,218 | ||||||
Mazor Robotics Ltd. (a) | 4,328 | 52,864 | ||||||
ReWalk Robotics Ltd. (a) | 3,056 | 17,603 | ||||||
Syneron Medical Ltd. (a) | 4,752 | 34,024 | ||||||
Total Health Care Equipment & Supplies | 128,709 | |||||||
Household Durables - 0.6% | ||||||||
Maytronics Ltd. | 8,240 | 28,945 | ||||||
Internet Software & Services - 3.6% | ||||||||
CYREN Ltd. (a) | 10,640 | 26,068 | ||||||
Perion Network Ltd. (a) | 18,944 | 22,982 | ||||||
Wix.com Ltd. (a) ^ | 3,044 | 132,201 | ||||||
Total Internet Software & Services | 181,251 | |||||||
IT Services - 1.5% | ||||||||
Formula Systems (1985) Ltd. | 1,072 | 41,777 | ||||||
Matrix IT Ltd. | 4,904 | 35,369 | ||||||
Total IT Services | 77,146 | |||||||
Life Sciences Tools & Services - 0.9% | ||||||||
Compugen Ltd. (a) | 6,828 | 43,796 |
The accompanying notes are an integral part of these financial statements.
7
BlueStar TA-BIGITechTM Israel Technology ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
Machinery - 1.2% | ||||||||
Kornit Digital Ltd. (a) | 2,344 | $ | 21,987 | |||||
Sarine Technologies Ltd. | 30,400 | 38,342 | ||||||
Total Machinery | 60,329 | |||||||
Pharmaceuticals - 2.7% | ||||||||
Alcobra Ltd. (a) | 4,416 | 10,908 | ||||||
Foamix Pharmaceuticals Ltd. (a) | 4,056 | 37,559 | ||||||
MediWound Ltd. (a) | 2,744 | 21,129 | ||||||
Neuroderm Ltd. (a) | 1,788 | 33,060 | ||||||
Redhill Biopharma Ltd. (a) | 24,760 | 36,488 | ||||||
Total Pharmaceuticals | 139,144 | |||||||
Semiconductors & Semiconductor Equipment - 5.7% | ||||||||
Mellanox Technologies Ltd. (a) | 3,152 | 136,324 | ||||||
Nova Measuring Instruments Ltd. (a) | 3,708 | 43,796 | ||||||
Tower Semiconductor Ltd. (a) | 7,172 | 107,320 | ||||||
Total Semiconductors & Semiconductor Equipment | 287,440 | |||||||
Software - 17.4% | ||||||||
Allot Communications Ltd. (a) | 5,784 | 30,152 | ||||||
Attunity Ltd. (a) | 2,828 | 18,778 | ||||||
Check Point Software Technologies, Ltd. (a) ^ | 5,624 | 436,479 | ||||||
CyberArk Software Ltd. (a) ^ | 2,360 | 116,985 | ||||||
Hilan Ltd. | 2,088 | 33,089 | ||||||
Magic Software Enterprises Ltd. | 4,156 | 29,715 | ||||||
NICE-Systems Ltd. | 3,408 | 228,237 | ||||||
Total Software | 893,435 | |||||||
Technology Hardware, Storage & Peripherals - 2.1% | ||||||||
Stratasys Ltd. (a) ^ | 4,400 | 105,996 | ||||||
Total Israel | 2,648,178 | |||||||
Jersey - 0.5% | ||||||||
Internet Software & Services - 0.5% | ||||||||
XLMedia PLC | 22,424 | 26,231 | ||||||
Netherlands - 10.6% | ||||||||
Software - 10.6% | ||||||||
Mobileye NV (a) ^ | 12,808 | 545,236 | ||||||
Netherlands Antilles - 0.9% | ||||||||
Software - 0.9% | ||||||||
Sapiens International Corporation NV | 3,364 | 43,828 | ||||||
United Kingdom - 3.0% | ||||||||
Communications Equipment - 0.8% | ||||||||
Telit Communications PLC | 11,896 | 41,631 | ||||||
Diversified Financial Services - 1.2% | ||||||||
Plus500 Ltd. | 6,988 | 60,006 | ||||||
Hotels, Restaurants & Leisure - 1.0% | ||||||||
888 Holdings PLC | 19,232 | 55,214 | ||||||
Total United Kingdom | 156,851 |
The accompanying notes are an integral part of these financial statements.
8
BlueStar TA-BIGITechTM Israel Technology ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
United States - 23.0% | ||||||||
Biotechnology - 1.6% | ||||||||
Chiasma, Inc. (a) ^ | 5,848 | $ | 17,193 | |||||
Medgenics, Inc. (a) | 4,264 | 23,750 | ||||||
Pluristem Therapeutics, Inc. (a) | 17,284 | 27,699 | ||||||
Protalix BioTherapeutics, Inc. (a) | 25,672 | 14,671 | ||||||
Total Biotechnology | 83,313 | |||||||
Communications Equipment - 0.5% | ||||||||
Gilat Satellite Networks Ltd. (a) | 5,493 | 26,626 | ||||||
Electric Utilities - 3.3% | ||||||||
Ormat Technologies, Inc. | 3,484 | 168,695 | ||||||
Health Care Equipment & Supplies - 0.7% | ||||||||
EndoChoice Holdings, Inc. (a) | 4,652 | 37,123 | ||||||
Internet Software & Services - 1.0% | ||||||||
LivePerson, Inc. (a) | 6,068 | 51,198 | ||||||
Pharmaceuticals - 5.1% | ||||||||
OPKO Health, Inc. (a) | 22,136 | 239,476 | ||||||
Oramed Pharmaceuticals, Inc. (a) ^ | 2,540 | 18,440 | ||||||
Total Pharmaceuticals | 257,916 | |||||||
Semiconductors & Semiconductor Equipment - 2.9% | ||||||||
CEVA, Inc. (a) | 2,220 | 77,855 | ||||||
DSP Group, Inc. (a) | 3,120 | 37,471 | ||||||
SolarEdge Technologies, Inc. (a) ^ | 2,020 | 34,805 | ||||||
Total Semiconductors & Semiconductor Equipment | 150,131 | |||||||
Software - 7.9% | ||||||||
Imperva, Inc. (a) | 2,624 | 140,935 | ||||||
Varonis Systems, Inc. (a) | 1,388 | 41,779 | ||||||
Verint Systems, Inc. (a) | 5,824 | 219,157 | ||||||
Total Software | 401,871 | |||||||
Total United States | 1,176,873 | |||||||
TOTAL COMMON STOCKS (Cost $4,879,080) | 5,106,634 | |||||||
SHORT-TERM INVESTMENTS - 20.7% | ||||||||
Mount Vernon Prime Portfolio, 0.68% (b) + | 1,059,096 | 1,059,096 | ||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $1,059,096) | 1,059,096 | |||||||
Total Investments (Cost $5,938,176) - 120.6% | 6,165,730 | |||||||
Liabilities in Excess of Other Assets - (20.6)% | (1,050,181 | ) | ||||||
TOTAL NET ASSETS - 100.0% | $ | 5,115,549 |
The accompanying notes are an integral part of these financial statements.
9
BlueStar TA-BIGITechTM Israel Technology ETF
Schedule of Investments
September 30, 2016 (Continued)
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. |
(b) | The rate quoted is the annualized seven-day yield at September 30, 2016. |
^ | All or a portion of this security is out on loan as of September 30, 2016. Total value of securities out on loan is $1,043,372. |
+ | Investments purchased with cash proceeds from securities lending. Total cash collateral has a value of $1,059,096 as of September 30, 2016. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
10
BlueStar TA-BIGITechTM Israel Technology ETF
As of September 30, 2016
BlueStar TA- BIGITechTM Israel Technology ETF | ||||
ASSETS | ||||
Investments in securities, at fair value* | $ | 6,165,730 | ||
Cash | 6,131 | |||
Foreign Currency | 395 | |||
Dividends and interest receivable | 4,936 | |||
Securities lending income receivable | 596 | |||
Total Assets | $ | 6,177,788 | ||
LIABILITIES | ||||
Collateral received for securities loaned (Note 7) | 1,059,096 | |||
Management fees payable | 3,143 | |||
Total Liabilities | 1,062,239 | |||
Net Assets | $ | 5,115,549 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in Capital | $ | 4,901,905 | ||
Undistributed (accumulated) net investment income (loss) | 7,135 | |||
Accumulated net realized gain (loss) on investments | (21,042 | ) | ||
Net unrealized appreciation (depreciation) on: | ||||
Investments in securities | 227,554 | |||
Foreign currency and translation of other assets and liabilities in foreign | ||||
currency | (3 | ) | ||
Net Assets | $ | 5,115,549 | ||
*Identified Cost: | ||||
Investments in securities | $ | 5,938,176 | ||
Foreign currency | 398 | |||
Shares Outstanding^ | 200,000 | |||
Net Asset Value, Offering and Redemption Price per Share | $ | 25.58 |
^ No par value, unlimited number of shares authorized
The accompanying notes are an integral part of these financial statements.
11
BlueStar TA-BIGITechTM Israel Technology ETF
For the period ended September 30, 2016
BlueStar TA- BIGITechTM Israel Technology ETF1 | ||||
INVESTMENT INCOME | ||||
Income: | ||||
Dividends from unaffiliated securities (net of foreign withholdings tax of $3,572) | $ | 24,357 | ||
Securities lending income | 5,579 | |||
Total investment income | 29,936 | |||
Expenses: | ||||
Management fees | 22,911 | |||
Total Expenses | 22,911 | |||
Net Investment Income | 7,025 | |||
REALIZED & UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net Realized Gain (Loss) on: | ||||
Unaffiliated investments | (22,955 | ) | ||
Foreign currency | 2,023 | |||
Net Realized Gain on Investments and Foreign Currency | (20,932 | ) | ||
Net Change in Unrealized Appreciation (Depreciation) of: | ||||
Unaffiliated investments | 227,554 | |||
Foreign currency and foreign currency translation | (3 | ) | ||
Net Change in Unrealized Appreciation of Investments and Foreign | ||||
Currency | 227,551 | |||
Net Realized and Unrealized Gain on Investments | 206,619 | |||
NET INCREASE IN NET ASSETS RESULTING FROM | ||||
OPERATIONS | $ | 213,644 |
1 | Fund commenced operations on November 2, 2015. The information presented is for the period from November 2, 2015 to September 30, 2016. |
The accompanying notes are an integral part of these financial statements.
12
BlueStar TA-BIGITechTM Israel Technology ETF
Period Ended September 30, 2016* | ||||
OPERATIONS | ||||
Net investment income | $ | 7,025 | ||
Net realized loss on investments | (20,932 | ) | ||
Net change in unrealized appreciation of investments | 227,551 | |||
Net increase in net assets resulting from operations | 213,644 | |||
DISTRIBUTIONS TO SHAREHOLDERS | ||||
From net investment income | — | |||
CAPITAL SHARE TRANSACTIONS | ||||
Net increase in net assets derived from net change in outstanding shares (a) | 4,901,905 | |||
Net increase in net assets | 5,115,549 | |||
NET ASSETS | ||||
Beginning of Period | — | |||
End of Period | $ | 5,115,549 | ||
Undistributed net investment income | $ | 7,135 |
(a) | Summary of share transactions is as follows: |
Period Ended | ||||||||
September 30, 2016* | ||||||||
Shares | Amount | |||||||
Shares Sold | 200,000 | $ | 4,901,905 | |||||
Reinvested Dividends | — | — | ||||||
Shares Redeemed | — | — | ||||||
200,000 | $ | 4,901,905 | ||||||
Beginning Shares | — | |||||||
Ending Shares | 200,000 |
* | Fund commenced operations on November 2, 2015. The information presented is for the period from November 2, 2015 to September 30, 2016. |
The accompanying notes are an integral part of these financial statements.
13
BlueStar TA-BIGITechTM Israel Technology ETF
For a capital share outstanding throughout the period
Period Ended September 30, 20161 | ||||
Net Asset Value, Beginning of Period | $ | 25.00 | ||
Income (Loss) from Investment Operations: | ||||
Net investment income (loss) 2 | 0.05 | |||
Net realized and unrealized gain (loss) on investments | 0.53 | |||
Total from investment operations | 0.58 | |||
Less Distributions: | ||||
Distributions from net investment income | — | |||
Total distributions | — | |||
Net asset value, end of period | $ | 25.58 | ||
Total Return | 2.31% | 3 | ||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000’s) | $ | 5,116 | ||
Expenses to Average Net Assets | 0.75% | 4 | ||
Net Investment Income (Loss) to Average Net Assets | 0.23% | 4 | ||
Portfolio Turnover Rate | 14% | 3 |
1Commencement of operations on November 2, 2015.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
14
BlueStar TA-BIGITechTM Israel Technology ETF
September 30, 2016
NOTE 1 – ORGANIZATION
BlueStar TA-BIGITechTM Israel Technology ETF (the “Fund”) is a series of ETF Managers Trust (the “Trust”), an open-end management investment company consisting of multiple investment series, organized as a Delaware statutory trust on July 1, 2009. The Trust is registered with the SEC under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and the offering of the Fund’s shares (“Shares”) is registered under the Securities Act of 1933, as amended (the “Securities Act”). The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the TASE-BlueStar Israel Technology Index™. The Fund commenced operations on November 2, 2015.
The Fund currently offers one class of shares, which has no front end sales load, no deferred sales charges, and no redemption fees. The Fund may issue an unlimited number of shares of beneficial interest, with no par value. All shares of the Fund have equal rights and privileges.
Shares of the Fund are listed and traded on the NASDAQ Stock Market, LLC. Market prices for the Shares may be different from their net asset value (“NAV”). The Fund issues and redeems Shares on a continuous basis at NAV only in blocks of 50,000 shares, called “Creation Units.” Creation Units are issued and redeemed principally in-kind for securities included in the Index. Once created, Shares generally trade in the secondary market at market prices that change throughout the day in quantities less than a Creation Unit. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund. Shares of the Fund may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem the Shares directly from the Fund. Rather, most retail investors may purchase Shares in the secondary market with the assistance of a broker and may be subject to customary brokerage commissions or fees.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
A. | Security Valuation. Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded on the valuation date (or at approximately 4:00 pm Eastern Time if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. |
Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees (the “Board”). When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the pricing procedures adopted by the Fund’s Board. The use of fair value pricing by the Fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without regard to such considerations. As of September 30, 2016, the Fund did not hold any fair valued securities. |
15
BlueStar TA-BIGITechTM Israel Technology ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
As described above, the Fund utilizes various methods to measure the fair value of its investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. |
Level 2 | Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
Level 3 | Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The following table presents a summary of the Funds’ assets measured at fair value:
BlueStar TA-BIGITechTM Israel Technology ETF
Assets^ | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 5,106,634 | $ | — | $ | — | $ | 5,106,634 | ||||||||
Short-Term Investments | 1,059,096 | — | — | 1,059,096 | ||||||||||||
Total Investments in Securities | $ | 6,165,730 | $ | — | $ | — | $ | 6,165,730 |
^ | See Schedule of Investments for classifications by country and industry. |
There were no transfers between Levels 1, 2 and 3 during the period ended September 30, 2016. Transfers between levels are recognized at the end of the reporting period.
16
BlueStar TA-BIGITechTM Israel Technology ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
B. | Federal Income Taxes. The Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provisions for federal income taxes or excise taxes have been made. |
To avoid imposition of the excise tax applicable to regulated investment companies, the Fund intends to declare each year as dividends, in each calendar year, at least 98.0% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years. |
Net capital losses incurred after October 31, within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year. |
The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The Fund has analyzed its tax position and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Fund’s 2016 tax returns. The Fund identifies its major tax jurisdictions as U.S. Federal, the State of New Jersey, and the State of Delaware; however the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. |
C. | Security Transactions and Investment Income. Investment securities transactions are accounted for on the trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Discounts/premiums on debt securities purchased are accreted/amortized over the life of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Income, including gains, from investments in foreign securities received by the Fund may be subject to income, withholding or other taxes imposed by foreign countries. |
D. | Foreign Currency Translations and Transactions. The Fund may engage in foreign currency transactions. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. For financial reporting purposes, the Fund does not isolate changes in the exchange rate of investment securities from the fluctuations arising from changes in the market prices of securities for unrealized gains and losses. However, for federal income tax purposes, the Fund does isolate and treat as ordinary income the effect of changes in foreign exchange rates on realized gains or losses from the sale of investment securities and payables and receivables arising from trade-date and settlement-date differences. |
E. | Distributions to Shareholders. Distributions to shareholders from net investment income, if any are generally declared and paid by the Fund on a quarterly basis. Net realized gains on securities of the Fund normally are declared and paid on an annual basis. Distributions are recorded on the ex-dividend date. |
F. | Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. |
17
BlueStar TA-BIGITechTM Israel Technology ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
G. | Share Valuation. The net asset value (“NAV”) per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding of the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on the days on which the NYSE is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s net asset value per share. |
H. | Guarantees and Indemnifications. In the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote. |
NOTE 3 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The “Derivatives and Hedging” Topic of the Codification (Accounting Standards Codification 815, formerly Statement of Financial Accounting Standards (“SFAS”) 133 and SFAS 161) requires enhanced disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial position, performance and cash flows. The Fund did not use derivatives during the period ended September 30, 2016.
NOTE 4 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS.
ETF Managers Group, LLC (the “Advisor”), serves as the investment advisor to the Fund. Pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between the Trust, on behalf of the Fund, and the Advisor, the Advisor provides investment advice to the Fund and oversees the day-today operations of the Fund, subject to the direction and control of the Board and the officers of the Trust. Under the Advisory Agreement, the Advisor is also responsible for arranging transfer agency, custody, fund administration and accounting, and other non-distribution related services necessary for the Fund to operate.
Under the Investment Advisory Agreement with the Fund, the Advisor has overall responsibility for the general management and administration of the Fund and arranges for sub-advisory, transfer agency, custody, fund administration, securities lending, and all other non-distribution related services necessary for the Fund to operate. The Advisor bears the costs of all advisory and non-advisory services required to operate the Fund, in exchange for a single unitary fee. For services provided the Fund pays the Advisor at an annual rate of 0.75% of the Fund’s average daily net assets. The Advisor has an agreement with, and is dependent on, a third party to pay the Fund’s expenses in excess of 0.75% of the Fund’s average daily net assets. Additionally, under the Investment Advisory Agreement, the Advisor has agreed to pay all expenses of the Fund, except for: the fee paid to the Advisor pursuant to the Investment Advisory Agreement, interest charges on any borrowings, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution (12b-1) fees and expenses (collectively, “Excluded Expenses”). The Advisor has entered into an Agreement with ITEQ ETF Partners, LLC (the “Sponsor”), under which the Sponsor agrees to sublicense the use of the Underlying Index to the Advisor. The Sponsor also provides marketing support for the Fund, including distributing marketing materials related to the Fund. ITEQ ETF Partners, LLC is a privately held business focused on bringing exchange-traded investment products to investors in the U.S. The Sponsor does not make investment decisions, provide investment advice, or otherwise act in the capacity of an investment adviser to the Fund. Additionally, the Sponsor is not involved in the maintenance of the Underlying Index and does not otherwise act in the capacity of an index provider.
18
BlueStar TA-BIGITechTM Israel Technology ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
US Bancorp Fund Services, LLC (the “Administrator”) provides fund accounting, fund administration, and transfer agency services to the Fund. The Advisor compensates the Administrator for these services under an administration agreement between the two parties.
The Advisor pays each independent Trustee a quarterly fee for service to the Fund. Each Trustee is also reimbursed by the Advisor for all reasonable out-of-pocket expenses incurred in connection with his duties as Trustee, including travel and related expenses incurred in attending Board meetings.
NOTE 5 – DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may pay compensation to the Distributor or any other distributor or financial institution with which the Trust has an agreement with respect to the Fund, with the amount of such compensation not to exceed an annual rate of 0.25% of each Fund’s average daily net assets. For the period ended September 30, 2016, the Fund did not incur any 12b-1 expenses.
NOTE 6 - PURCHASES AND SALES OF SECURITIES
The costs of purchases and sales of securities, excluding short-term securities and in-kind transactions, for the period ended September 30, 2016:
Purchases | Sales | |||||
BlueStar TA-BIGITechTM Israel Technology ETF | $ | 600,919 | $ | 498,804 |
The costs of purchases and sales of in-kind transactions associated with creations and redemptions for the period ended September 30, 2016:
Purchases In- Kind | Sales In- Kind | |||||
BlueStar TA-BIGITechTM Israel Technology ETF | $ | 4,834,459 | $ | — |
Purchases in-kind are the aggregate of all in-kind purchases and sales in-kind are the aggregate of all proceeds from in-kind sales. Net capital gains or losses resulting from in-kind redemptions are excluded from the determination of the Fund’s taxable gains and are not distributed to shareholders.
During the period ended September 30, 2016, the Fund incurred broker commissions to Penserra Securities, LLC, an affiliated broker to the sub-advisor Penserra Capital Management, LLC, in the amount of $131.
There were no purchases or sales of U.S. Government obligations for the period ended September 30, 2016.
19
BlueStar TA-BIGITechTM Israel Technology ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
NOTE 7 — SECURITIES LENDING
The Fund may lend up to 331/3% of the value of the securities in its portfolio to brokers, dealers and financial institutions (but not individuals) under terms of participation in a securities lending program administered by U.S. Bank N.A. (“the Custodian”). The securities lending agreement requires that loans are collateralized at all times in an amount equal to at least 102% of the value of any loaned securities at the time of the loan, plus accrued interest. The Fund receives compensation in the form of fees and earn interest on the cash collateral. The amount of fees depends on a number of factors including the type of security and length of the loan. The Fund continues to receive interest payments or dividends on the securities loaned during the borrowing period. Gain or loss in the fair value of securities loaned that may occur during the term of the loan will be for the account of the Fund. The Fund has the right under the terms of the securities lending agreement to recall the securities from the borrower on demand. As of September 30, 2016, the Fund had loaned securities and received cash collateral for the loans. The cash collateral is invested by the Custodian in accordance with approved investment guidelines. Those guidelines require the cash collateral to be invested in readily marketable, high quality, short-term obligations; however, such investments are subject to risk of payment delays or default on the part of the issuer or counterparty or otherwise may not generate sufficient interest to support the costs associated with securities lending. The Fund could also experience delays in recovering its securities and possible loss of income or value if the borrower fails to return the borrowed securities, although the Fund is indemnified from this risk by contract with the securities lending agent.
As of September 30, 2016, the value of the securities on loan and payable for collateral due to broker were as follows:
Value of Securities on Loan Collateral Received
Fund | Values of Securities on Loan | Fund Collateral Received* | |||||||
BlueStar TA-BIGITechTM Israel Technology ETF | $ | 1,043,372 | $ | 1,059,096 |
* The cash collateral received was invested in the Mount Vernon Securities Lending Prime Portfolio as shown on the Schedule of Investments, a money market fund with an overnight and continuous maturity.
Fees and interest income earned on collateral investments and recognized by the Fund during the period ended September 30, 2016, were as follows:
Fees and Interest Income Earned
Fund | Interest income earned net of applicable fees | ||||
BlueStar TA-BIGITechTM Israel Technology ETF | $ | 5,579 |
Offsetting Assets and Liabilities
The Fund is subject to various netting arrangements, which govern the terms of certain transactions with counterparties. The arrangements allow the Fund to close out and net its total exposure to a counterparty in the event of a default with respect to all transactions governed under a single agreement with a counterparty. The following is a summary of the arrangements subject to offsetting as of September 30, 2016.
20
BlueStar TA-BIGITechTM Israel Technology ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
Fund | Description | Gross Amount of Recognized Liabilities | Gross Amount in the Statement of Assets and Liabilities | Net Amount Presented in the Statement of Assets and Liabilities | Collateral Received | Net Amount | |||||||||||||
BlueStar TA-BIGITechTM Israel Technology ETF | Securities Lending | $ | 1,059,096 | $ | 1,059,096 | $ | 1,059,096 | — |
NOTE 8 – FEDERAL INCOME TAXES
The components of distributable earnings (losses) and cost basis of investments for federal income tax purposes at September 30, 2016 were as follows:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | |||||||||||||
BlueStar TA-BIGITechTM Israel Technology ETF | $ | 5,954,417 | $ | 505,791 | $ | (294,478 | ) | $ | 211,313 |
Undistributed Ordinary Income | Undistributed Long-term Gain | Total Distributable Earnings | Other Accumulated (Loss) | Total Accumulated Gain | ||||||||||||||||
BlueStar TA-BIGITechTM Israel Technology ETF | $ | 18,370 | $ | — | $ | 18,370 | $ | (16,039 | ) | $ | 213,644 |
As of September 30, 2016, the Fund had accumulated capital loss carryovers of:
Capital Loss Carryover | Expires | |||
BlueStar TA-BIGITechTM Israel Technology ETF | NONE | Indefinite |
Under current tax law, capital and currency losses realized after October 31 of a Fund’s fiscal year may be deferred and treated as occurring on the first business day of the following fiscal year for tax purposes. The following Funds had deferred post-October capital and currency losses, which will be treated as arising on the first business day of the year ended September 30, 2017.
Late Year Ordinary Loss | Post-October Capital Loss | |||||||
BlueStar TA-BIGITechTM Israel Technology ETF | NONE | $ | 16,036 |
NOTE 9 – DISTRIBUTIONS TO SHAREHOLDERS
The Fund did not pay any distributions from ordinary income or capital gains during the period ended September 30, 2016.
21
BlueStar TA-BIGITechTM Israel Technology ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
NOTE 10 – SUBSEQUENT EVENTS
In preparing these financial statements, the Fund has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
22
BlueStar TA-BIGITechTM Israel Technology ETF
To the Board of Trustees of ETF Managers Trust and the Shareholders of BlueStar TA-BIGITech Israel Technology ETF:
We have audited the accompanying statement of assets and liabilities of the ETF Managers Trust, which includes BlueStar TA-BIGITech Israel Technology ETF (the “Fund”), including the schedule of investments, as of September 30, 2016 and the related statements of its operations, the changes in its net assets and financial highlights for the period November 2, 2015 (commencement of operations) to September 30, 2016. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2016 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the ETF Managers Trust, which includes BlueStar TA-BIGITech Israel Technology ETF as of September 30, 2016, and the results of its operations and changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America.
/s/ WithumSmith+Brown, PC
New York, NY
November 28, 2016
November 28, 2016
23
BlueStar TA-BIGITechTM Israel Technology ETF
BlueStar TA-BIGITechTM Israel Technology ETF Closing Price vs. NAV
The following Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the closing price for each Fund is at a premium or discount to its daily net asset value (NAV). The chart presented represents past performance and cannot be used to predict future results.
BlueStar TA-BIGITechTM Israel Technology ETF | November 2, 2015* through September 30, 2016 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.00% | 3 | 1.3 | ||||||
Greater Than or equal to 0.75% And Less Than 1.00% | 8 | 3.5 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 70 | 30.3 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 103 | 44.6 | ||||||
Greater Than or Equal to 0.00% And Less Than 0.25% | 38 | 16.5 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 8 | 3.5 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 1 | 0.4 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 0 | 0.0 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 0 | 0.0 | ||||||
Less than -1.00% | 0 | 0.0 |
*First day of secondary market trading
24
BlueStar TA-BIGITechTM Israel Technology ETF
September 30, 2016 (Unaudited)
During the year ended September 30, 2016, the Fund did not declare any long-term realized gains distributions.
Qualified Dividend Income/Dividends Received Deduction
For the fiscal year ended September 30, 2016, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:
Fund Name | Qualified Dividend Income |
BlueStar TA-BIGITechTM Israel Technology ETF | 0.00% |
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended September 30, 2016 was as follows:
Fund Name | Dividends Received Deduction |
BlueStar TA-BIGITechTM Israel Technology ETF | 0.00% |
The Fund files a Form N-Q with the Securities and Exchange Commission (the “SEC”) no more than sixty days after the Fund’s first and third fiscal quarters. For the Fund, this would be for the fiscal quarters ending June 30 and December 31. Form N-Q includes a complete schedule of the Funds’ portfolio holdings as of the end of those fiscal quarters. The Fund’s N-Q filings can be found free of charge on the SEC’s website at http://www.sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (call 800-SEC-0330 for information on the operation of the Public Reference Room). The Fund’s portfolio holdings are posted on the Fund’s website at www.iteqetf.com daily.
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is provided in the Statement of Additional Information (“SAI”). The SAI is available without charge upon request by calling toll-free at 1-844-ETF-MGRS (1-844-383-6477), by accessing the SEC’s website at www.sec.gov, or by accessing the Fund’s website at www.iteqetf.com.
Information regarding how the Fund voted proxies relating to portfolio securities during the period ending June 30 is available by calling toll-free at 1-844-ETF-MGRS (1-844-383-6477) or by accessing the SEC’s website at www.sec.gov.
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477) or by visiting www.iteqetf.com. Read the prospectus carefully before investing.
25
BlueStar TA-BIGITechTM Israel Technology ETF
For the six month period Ended September 30, 2016
As a shareholder of BlueStar TA-BIGITechTM Israel Technology ETF (the “Fund”) you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2016 to September 30, 2016).
Actual Expenses
The first line of the table provides information about actual account values based on actual returns and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then, multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account values based on a hypothetical return and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and in other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of Fund shares. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
BlueStar TA-BIGITechTM Israel Technology ETF
Beginning Account Value April 1, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||||||||
Actual | $ | 1,000.00 | $ | 1,070.60 | $ | 3.88 | ||||||
Hypothetical (5% annual) | $ | 1,000.00 | $ | 1,021.25 | $ | 3.79 |
^ The dollar amounts shown as expenses paid during the period are equal to the annualized six-month expense ratio multiplied by the average account value during the period, multiplied by 183/366 (to reflect the period from April 1, 2016 to September 30, 2016.
26
BlueStar TA‐BIGITechTM Israel Technology ETF
Set forth below are the names, birth years, positions with the Trust, length of term of office, and the principal occupations and other directorships held during at least the last five years of each of the persons currently serving as a Trustee of the Trust, as well as information about each officer. The business address of each Trustee and officer is 30 Maple Street, Summit, New Jersey 07901.
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years |
Interested Trustee* and Officers | ||||
Samuel Masucci, III (1962) | Trustee, Chairman of the Board and President (since 2012); Secretary (since 2014) | Chief Executive Officer, Exchange Traded Managers Group, LLC (since 2013); Chief Executive Officer and Chief Compliance Officer, Factor Advisors, LLC (2012-2014); President and Chief Executive Officer, Factor Capital Management LLC (2012-2014); President and Chief Executive Officer, GENCAP Ventures, LLC (holding company) (2012–2013); Chief Executive Officer, MacroMarkets LLC (exchange traded funds) (2005–2011); President, Chief Executive and Chief Compliance Officer, Macro Financial (financial services) (2005–2011). | 12 | None |
Reshma J. Amin (1978) | Chief Compliance Officer (since 2016) | Chief Operating Officer and Chief Compliance Officer, Exchange Traded Managers Group, LLC (since 2016); Partner, Crow & Cushing (2007–2016). | 12 | n/a |
John A. Flanagan (1946) | Treasurer (since 2015) | President, John A. Flanagan CPA, LLC (accounting services) (since 2010); Treasurer, ETF Managers Trust (since 2015); Chief Financial Officer, ETF Managers Group, Inc. (commodity pool operator) (since 2014); Chief Financial Officer, Macromarkets LLC (exchange traded funds) (2007–2010) | n/a | n/a |
* Mr. Masucci is an interested Trustee by virtue of his role as the Chief Executive Officer of the Adviser.
27
BlueStar TA‐BIGITechTM Israel Technology ETF
Board of Trustees
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years |
Independent Trustees | ||||
John W. Southard (1969) | Trustee (since 2012) | Director and Co-Founder, T2 Capital Management, 2010 to present; Co-Founder and Head of Research and Trading, PowerShares Capital Management, 2002 to 2009. | 12 | None |
Terry Loebs (1963) | Trustee (since 2014) | Founder and Managing Member, Pulsenomics LLC (index product development and consulting firm) (since 2011); Managing Director, MacroMarkets, LLC (exchange-traded products firm) (2006–2011). | 12 | None |
28
BlueStar TA‐BIGITechTM Israel Technology ETF
ETF MANAGERS TRUST
ETF Managers Trust, (the “Trust”) has adopted the following privacy policies in order to safeguard the personal information of the Trust’s customers and consumers in accordance with Regulation S-P as promulgated by the U.S. Securities and Exchange Commission.
Trust officers are responsible for ensuring that the following policies and procedures are implemented:
1) | The Trust is committed to protecting the confidentiality and security of the information they collect and will handle personal customer and consumer information only in accordance with Regulation S-P and any other applicable laws, rules and regulations1. The Trust will ensure: (a) the security and confidentiality of customer records and information; (b) that customer records and information are protected from any anticipated threats and hazards; and (c) that customer records and information are protected from unauthorized access or use. |
2) | The Trust conducts its business affairs through its trustees, officers and third parties that provide services pursuant to agreements with the Trust. The Trust has no employees. It is anticipated that the trustees and officers of the Trust who are not employees of service providers of the Trust will not have access to customer records and information in the performance of their normal responsibilities for the Trust. |
3) | The Trust may share customer information with its affiliates, subject to the customers’ right to prohibit such sharing. |
4) | The Trust may share customer information with unaffiliated third parties only in accordance with the requirements of Regulation S-P. Pursuant to this policy, the Trust will not share customer information with unaffiliated third parties other than as permitted by law, unless authorized to do so by the customer. |
Consistent with these policies, the Trust has adopted the following procedures:
1) | The Trust will determine that the policies and procedures of its affiliates and Service Providers are reasonably designed to safeguard customer information and only permit appropriate and authorized access to and use of customer information through the application of appropriate administrative, technical and physical protections. |
2) | The Trust will direct each of its Service Providers to adhere to the privacy policy of the Trust and to its privacy policies with respect to all customer information of the Trust and to take all actions reasonably necessary so that the Trust is in compliance with the provisions of Regulation S-P, including, as applicable, the development and delivery of privacy notices and the maintenance of appropriate and adequate records. |
3) | The Trust requires its Service Providers to provide periodic reports to the Trust’s Board of Trustees outlining their privacy policies and the implementation of such policies. Each Service Provider is required to promptly report to the Trust’s Board any material changes to its privacy policy before, or promptly after, the adoption of such changes. |
1 | Generally, the Funds have institutional clients which are not considered “customers” for purposes of regulation S-P. |
29
Advisor
ETF Managers Group, LLC
30 Maple Street #2, Summit, NJ 07901
30 Maple Street #2, Summit, NJ 07901
Sub-Adviser
Penserra Capital Management, LLC
4 Orinda Way, Suite 100-A, Orinda, CA 94563
4 Orinda Way, Suite 100-A, Orinda, CA 94563
Distributor
ALPS Distributors, Inc.
1290 Broadway, Suite 1100, Denver, Colorado 80203
Custodian
U.S. Bank National Association
Custody Operations
Custody Operations
1555 North River Center Drive, Suite 302, Milwaukee, Wisconsin 53212
Transfer Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street, Milwaukee, Wisconsin 53202
Securities Lending Agent
U.S Bank, National Association
Securities Lending
800 Nicolet Mall
Minneapolis, MN 55402-7020
Securities Lending
800 Nicolet Mall
Minneapolis, MN 55402-7020
Independent Registered Public Accounting Firm
WithumSmith + Brown, PC
1411 Broadway, 9th Floor, New York, NY 10018
Legal Counsel
Sullivan & Worcester LLP
1666 K Street NW, Washington, DC 20006
1666 K Street NW, Washington, DC 20006
Annual Report
September 30, 2016
September 30, 2016
The Restaurant ETF™
Ticker: BITE
Ticker: BITE
The Fund is a series of ETF Managers Trust.
The Restaurant ETFTM
TABLE OF CONTENTS |
September 30, 2016 |
Page | ||
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6 | ||
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9 | ||
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11 | ||
12 | ||
13 | ||
21 | ||
22 | ||
23 | ||
23 | ||
23 | ||
23 | ||
24 | ||
25 | ||
27 |
On behalf of the entire team, we want to express our appreciation for the confidence you have placed in The Restaurant Exchange-Traded Fund (“BITE” or the “Fund”). The following information pertains to the fiscal period from October 28, 2015 (the Fund’s Inception Date) to September 30, 2016.
The Fund saw positive performance during the fiscal period ended September 30, 2016. The NAV price for BITE rose 0.00%, while the BITE Index (“Index”), the Fund’s benchmark, rose 0.23% over the same period. The primary difference between the Fund return and the Index return was attributable to Fund expenses, which are not a part of the Index.
For the period ended September 30, 2016, the best performing securities in the Fund were Arcos Dorados Holdings (up 93.75%), Dominos Pizza (up 40.72%), and Wendy’s (up 24.86%). The worst performing securities in the Fund were Ruby Tuesday (down - 59.74%), Fiesta Restaurant Group (down - 47.10%), and Zoe’s Kitchen (down - 43.81%).
You can find further details about BITE by visiting www.biteetf.com, or by calling 1-800-ETF- MGRS (1-800-383-6477).
Sincerely,
Samuel Masucci III Chairman of the Board
Samuel Masucci III is a registered representative of ALPS Distributors, Inc.
2
Cumulative Returns | Since Inception | ||
Period Ended September 30, 2016 | (10/27/2015) | ||
The Restaurant ETFTM (NAV) | 0.00% | ||
The Restaurant ETFTM (Market) | 0.12% | ||
S&P 500 Index | 7.17% | ||
The BITE Index | 0.23% | ||
Total Fund Operating Expenses1 | 0.75% |
1. The expense ratio is taken from the Fund’s most recent prospectus dated May 27, 2016.
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on October 27, 2015, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of Fund shares. The chart assumes reinvestment of capital gains and dividends. The unmanaged indices do not reflect fees and are not available for direct investment.
3
The Restaurant ETFTM
Security | % of Total Investments† | |||||
1 | Del Taco Restaurants, Inc. | 2.53% | ||||
2 | Domino’s Pizza, Inc. | 2.49% | ||||
3 | Papa John’s International, Inc. | 2.47% | ||||
4 | Arcos Dorados Holdings, Inc. | 2.39% | ||||
5 | Dunkin’ Brands Group, Inc. | 2.39% | ||||
6 | Wingstop, Inc. | 2.24% | ||||
7 | El Pollo Loco Holdings, Inc. | 2.24% | ||||
8 | Jack in the Box, Inc. | 2.23% | ||||
9 | Brinker International, Inc. | 2.23% | ||||
10 | Yum! Brands, Inc. | 2.20% |
Top Ten Holdings = 23.41% of Total Investments† | |
* Current Fund holdings may not be indicative of future Fund holdings. | |
† Percentage of total investments less cash. |
4
The Restaurant ETFTM
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed from the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility.
The Restaurant ETFTM (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the BITE Index (the “Index”).
The Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the retail sector. Returns on investments in foreign companies could be more volatile than, or trail the returns on, investments in U.S. companies. Smaller companies in which the Fund may invest may be more vulnerable to adverse business or economic events than larger, more established companies, and may underperform other segments of the market or the equity market as a whole. Companies owning and operating restaurants may be affected by the performance of the domestic and international economy, interest rates, rates of inflation, exchange rates, competition, consumer confidence and reputational damage. These companies may be subject to severe competition, which may have an adverse impact on their profitability. The Fund’s return may not match or achieve a high degree of correlation with the return of the Index. To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not guarantee a profit, nor does it protect against a loss in a declining market.
The Fund is new with limited operating history.
The BITE Index is an equal-weighted index of all restaurants that are publicly traded in the United States with a market cap of $200 million or greater and $1 million of daily average turnover. An equal-weighted approach helps to minimize the outsized impact that a few mega-cap restaurant operators can have on more traditional, market cap-weighted indexes.
S&P 500: The S&P 500 Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
5
The Restaurant ETFTM
As of September 30, 2016 |
The Restaurant ETFTM | ||||
As a percent of Net Assets: | ||||
Canada | 2.7 | % | ||
United States | 93.9 | |||
Virgin Islands (UK) | 3.0 | |||
Short-Term and other Net Assets (Liabilities) | 0.4 | |||
100.0 | % |
6
The Restaurant ETFTM
September 30, 2016 |
Shares | Market Value | |||||||
COMMON STOCKS - 99.6% | ||||||||
Canada - 2.7% | ||||||||
Hotels, Restaurants & Leisure - 2.7% | ||||||||
Restaurant Brands International, Inc. | 737 | $ | 32,855 | |||||
United States - 93.9% | ||||||||
Hotels, Restaurants & Leisure - 93.9% | ||||||||
Biglari Holdings, Inc. (a) | 77 | 33,574 | ||||||
BJ’s Restaurants, Inc. (a) | 686 | 24,387 | ||||||
Bloomin’ Brands, Inc. | 1,618 | 27,894 | ||||||
Bob Evans Farms, Inc. | 693 | 26,542 | ||||||
Brinker International, Inc. | 685 | 34,545 | ||||||
Buffalo Wild Wings, Inc. (a) | 211 | 29,696 | ||||||
Carrols Restaurant Group, Inc. (a) | 2,535 | 33,487 | ||||||
Chipotle Mexican Grill, Inc. (a) ^ | 69 | 29,222 | ||||||
Chuy’s Holdings, Inc. (a) | 933 | 26,068 | ||||||
Cracker Barrel Old Country Store, Inc. ^ | 207 | 27,370 | ||||||
Darden Restaurants, Inc. | 456 | 27,962 | ||||||
Dave & Buster’s Entertainment, Inc. (a) | 787 | 30,835 | ||||||
Del Frisco’s Restaurant Group, Inc. (a) | 1,987 | 26,765 | ||||||
Del Taco Restaurants, Inc. (a) ^ | 3,290 | 39,217 | ||||||
Denny’s Corporation (a) | 2,863 | 30,605 | ||||||
DineEquity, Inc. | 366 | 28,984 | ||||||
Domino’s Pizza, Inc. ^ | 254 | 38,570 | ||||||
Dunkin’ Brands Group, Inc. ^ | 712 | 37,081 | ||||||
El Pollo Loco Holdings, Inc. (a) | 2,760 | 34,748 | ||||||
Fiesta Restaurant Group, Inc. (a) | 1,223 | 29,352 | ||||||
Jack in the Box, Inc. ^ | 361 | 34,634 | ||||||
McDonald’s Corporation | 253 | 29,186 | ||||||
Panera Bread Co. (a) | 140 | 27,261 | ||||||
Papa John’s International, Inc. ^ | 486 | 38,321 | ||||||
Popeyes Louisiana Kitchen, Inc. (a) | 529 | 28,111 | ||||||
Potbelly Corporation (a) | 2,323 | 28,875 | ||||||
Red Robin Gourmet Burgers, Inc. (a) | 606 | 27,234 | ||||||
Ruby Tuesday, Inc. (a) | 7,920 | 19,800 | ||||||
Ruth’s Hospitality Group, Inc. | 1,854 | 26,178 | ||||||
Shake Shack, Inc. (a) ^ | 802 | 27,805 | ||||||
Sonic Corporation | 1,034 | 27,070 | ||||||
Starbucks Corporation | 561 | 30,373 | ||||||
Texas Roadhouse, Inc. | 687 | 26,814 | ||||||
The Cheesecake Factory, Inc. ^ | 617 | 30,887 | ||||||
The Habit Restaurants, Inc. (a) | 1,718 | 24,052 | ||||||
Wendy’s Co. | 2,999 | 32,389 | ||||||
Wingstop, Inc. ^ | 1,187 | 34,779 | ||||||
Yum! Brands, Inc. | 375 | 34,054 | ||||||
Zoe’s Kitchen, Inc. (a) | 833 | 18,484 | ||||||
Total Hotels, Restaurants & Leisure | 1,163,211 | |||||||
Total United States | 1,163,211 |
The accompanying notes are an integral part of these financial statements.
7
The Restaurant ETFTM
Schedule of Investments |
September 30, 2016 (continued) |
Shares | Market Value | |||||||
Virgin Islands (UK) - 3.0% | ||||||||
Hotels, Restaurants & Leisure - 3.0% | ||||||||
Arcos Dorados Holdings, Inc. (a) | 7,045 | $ | 37,126 | |||||
TOTAL COMMON STOCKS (Cost $1,356,811) | 1,233,192 | |||||||
SHORT-TERM INVESTMENTS - 25.7% | ||||||||
Mount Vernon Prime Portfolio, 0.68% (b) + | 317,740 | 317,740 | ||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $317,740) | 317,740 | |||||||
Total Investments (Cost $1,674,551) - 125.3% | 1,550,932 | |||||||
Liabilities in Excess of Other Assets - (25.3)% | (313,268 | ) | ||||||
TOTAL NET ASSETS - 100.0% | $ | 1,237,664 |
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. |
(b) | The rate quoted is the annualized seven-day yield at September 30, 2016. |
^ | All or a portion of this security is out on loan as of September 30, 2016. Total value of securities out on loan is $313,449. |
+ | Investments purchased with cash proceeds from securities lending. Total cash collateral has a value of $317,740 as of September 30, 2016. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
8
The Restaurant ETFTM
As of September 30, 2016 |
The Restaurant ETFTM | ||||
ASSETS | ||||
Investments in securities, at fair value* | $ | 1,550,932 | ||
Cash | 4,621 | |||
Dividends and interest receivable | 437 | |||
Securities lending income receivable | 199 | |||
Total Assets | $ | 1,556,189 | ||
LIABILITIES | ||||
Collateral received for securities loaned (Note 7) | 317,740 | |||
Management fees payable | 785 | |||
Total Liabilities | 318,525 | |||
Net Assets | $ | 1,237,664 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in Capital | $ | 1,342,289 | ||
Undistributed (accumulated) net investment income | 3,590 | |||
Accumulated net realized gain on investments | 15,404 | |||
Net unrealized depreciation on: | ||||
Investments in securities | (123,619 | ) | ||
Net Assets | $ | 1,237,664 | ||
*Identified Cost: | ||||
Investments in unaffiliated securities | $ | 1,674,551 | ||
Shares Outstanding^ | 50,000 | |||
Net Asset Value, Offering and Redemption Price per Share | $ | 24.75 |
^ No par value, unlimited number of shares authorized
The accompanying notes are an integral part of these financial statements.
9
The Restaurant ETFTM
For the period ended September 30, 2016 |
The Restaurant ETFTM 1 | ||||
INVESTMENT INCOME | ||||
Income: | ||||
Dividends from unaffiliated securities (net of foreign withholdings tax of $11,711) | $ | 27,917 | ||
Securities lending income | 3,271 | |||
Total Investment Income | 31,188 | |||
Expenses: | ||||
Management fees | 15,098 | |||
Total Expenses | 15,098 | |||
Net Investment Income (Loss) | 16,090 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net Realized Gain on: | ||||
Unaffiliated investments | 15,404 | |||
In-Kind redemptions | 33,959 | |||
Net Realized Gain on Investments and In-kind Redemptions | 49,363 | |||
Net Change in Unrealized Depreciation of: | ||||
Unaffiliated investments in securities and foreign currency | (123,619 | ) | ||
Net Realized and Unrealized Loss on Investments | (74,256 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (58,166 | ) |
1 | Fund commenced operations on October 27, 2015. The information presented is for the period from October 27, 2015 to September 30, 2016. |
The accompanying notes are an integral part of these financial statements.
10
The Restaurant ETFTM
Period Ended September 30, 2016* | ||||
OPERATIONS | ||||
Net investment income | $ | 16,090 | ||
Net realized gain on investments and In-Kind redemptions | 49,363 | |||
Net change in unrealized depreciation of investments | (123,619 | ) | ||
Net decrease in net assets resulting from operations | (58,166 | ) | ||
DISTRIBUTIONS TO SHAREHOLDERS | ||||
From net investment income | (12,500 | ) | ||
CAPITAL SHARE TRANSACTIONS | ||||
Net increase in net assets derived from net change in outstanding shares (a) | 1,308,330 | |||
Net increase in net assets | 1,237,664 | |||
NET ASSETS | ||||
Beginning of Period | — | |||
End of Period | $ | 1,237,664 | ||
Undistributed net investment income | $ | 3,590 |
(a) Summary of share transactions is as follows:
Period Ended September 30, 2016* | ||||||||
Shares | Amount | |||||||
Shares Sold | 150,000 | $ | 3,775,415 | |||||
Reinvested Dividends | — | — | ||||||
Shares Redeemed | (100,000 | ) | (2,467,085 | ) | ||||
50,000 | $ | 1,308,330 | ||||||
Beginning Shares | — | |||||||
Ending Shares | 50,000 |
*Fund commenced operations on October 27, 2015. The information presented is for the period from October 27, 2015 to September 30, 2016.
The accompanying notes are an integral part of these financial statements.
11
The Restaurant ETFTM
For a capital share outstanding throughout the period |
Period Ended September 30, 20161 | ||||
Net Asset Value, Beginning of Period | $ | 25.00 | ||
Income (Loss) from Investment Operations: | ||||
Net investment income 2 | 0.19 | |||
Net realized and unrealized loss on investments | (0.19 | ) | ||
Total from investment operations | — | |||
Less Distributions: | ||||
Distributions from net investment income | (0.25 | ) | ||
Total distributions | — | |||
Net asset value, end of period | $ | 24.75 | ||
Total Return | 0.00%3 | |||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000’s) | $ | 1,238 | ||
Expenses to Average Net Assets | 0.75%4 | |||
Net Investment Income (Loss) to Average Net Assets | 0.79%4 | |||
Portfolio Turnover Rate | 24%3 |
1Commencement of operations on October 27, 2015.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
12
The Restaurant ETFTM
NOTE 1 – ORGANIZATION
The Restaurant ETFTM (the “Fund”) is a series of ETF Managers Trust (the “Trust”), an open-end management investment company consisting of multiple investment series, organized as a Delaware statutory trust on July 1, 2009. The Trust is registered with the SEC under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and the offering of the Fund’s shares (“Shares”) is registered under the Securities Act of 1933, as amended (the “Securities Act”). The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the BITE Index. The Fund commenced operations on October 27, 2015.
The Fund currently offers one class of shares, which has no front end sales load, no deferred sales charges, and no redemption fees. The Fund may issue an unlimited number of shares of beneficial interest, with no par value. All shares of the Fund have equal rights and privileges.
Shares of the Fund are listed and traded on the NASDAQ Stock Market, LLC. Market prices for the Shares may be different from their net asset value (“NAV”). The Fund issues and redeems Shares on a continuous basis at NAV only in blocks of 50,000 shares, called “Creation Units.” Creation Units are issued and redeemed principally in-kind for securities included in the Index. Once created, Shares generally trade in the secondary market at market prices that change throughout the day in quantities less than a Creation Unit. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund. Shares of the Fund may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem the Shares directly from the Fund. Rather, most retail investors may purchase Shares in the secondary market with the assistance of a broker and may be subject to customary brokerage commissions or fees.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
A. | Security Valuation. Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded on the valuation date (or at approximately 4:00 pm Eastern Time if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. |
Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees (the “Board”). When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the pricing procedures adopted by the Fund’s Board. The use of fair value pricing by the Fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without regard to such considerations. As of September 30, 2016, the Fund did not hold any fair valued securities. |
13
The Restaurant ETFTM
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
As described above, the Fund utilizes various methods to measure the fair value of its investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. |
Level 2 | Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
Level 3 | Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment.
Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The following table presents a summary of the Funds’ assets measured at fair value:
The Restaurant ETFTM
Assets^ | Level 1 | Level 2 | Level 3 | Total | |||||||
Common Stocks | $ | 1,233,192 | $ | — | $ | — | $ | 1,233,192 | |||
Short-Term Investments | 317,740 | — | — | 317,740 | |||||||
Total Investments in Securities | $ | 1,550,932 | $ | — | $ | — | $ | 1,550,932 |
^ See Schedule of Investments for classifications by country and industry.
There were no transfers between Levels 1, 2 and 3 during the period ended September 30, 2016. Transfers between levels are recognized at the end of the reporting period.
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The Restaurant ETFTM
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
B. | Federal Income Taxes. The Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provisions for federal income taxes or excise taxes have been made. |
To avoid imposition of the excise tax applicable to regulated investment companies, the Fund intends to declare each year as dividends, in each calendar year, at least 98.0% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years. Net capital losses incurred after October 31, within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year. |
The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The Fund has analyzed its tax position and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Fund’s 2016 tax returns. The Fund identifies its major tax jurisdictions as U.S. Federal, the State of New Jersey, and the State of Delaware; however the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months. |
C. | Security Transactions and Investment Income. Investment securities transactions are accounted for on the trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Discounts/premiums on debt securities purchased are accreted/amortized over the life of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Income, including gains, from investments in foreign securities received by the Fund may be subject to income, withholding or other taxes imposed by foreign countries. |
D. | Foreign Currency Translations and Transactions. The Fund may engage in foreign currency transactions. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. For financial reporting purposes, the Fund does not isolate changes in the exchange rate of investment securities from the fluctuations arising from changes in the market prices of securities for unrealized gains and losses. However, for federal income tax purposes, the Fund does isolate and treat as ordinary income the effect of changes in foreign exchange rates on realized gains or losses from the sale of investment securities and payables and receivables arising from trade-date and settlement-date differences. |
E. | Distributions to Shareholders. Distributions to shareholders from net investment income, if any are generally declared and paid by the Fund on a quarterly basis. Net realized gains on securities of the Fund normally are declared and paid on an annual basis. Distributions are recorded on the ex-dividend date. |
F. | Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. |
15
The Restaurant ETFTM
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
G. | Share Valuation. The net asset value (“NAV”) per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding of the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on the days on which the NYSE is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s net asset value per share. |
H. | Guarantees and Indemnifications. In the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote. |
NOTE 3 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The “Derivatives and Hedging” Topic of the Codification (Accounting Standards Codification 815, formerly Statement of Financial Accounting Standards (“SFAS”) 133 and SFAS 161) requires enhanced disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial position, performance and cash flows. The Fund did not use derivatives during the period ended September 30, 2016.
NOTE 4 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS.
ETF Managers Group, LLC (the “Advisor”), serves as the investment advisor to the Fund. Pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between the Trust, on behalf of the Fund, and the Advisor, the Advisor provides investment advice to the Fund and oversees the day-today operations of the Fund, subject to the direction and control of the Board and the officers of the Trust. Under the Advisory Agreement, the Advisor is also responsible for arranging transfer agency, custody, fund administration and accounting, and other non-distribution related services necessary for the Fund to operate.
Under the Investment Advisory Agreement with the Fund, the Advisor has overall responsibility for the general management and administration of the Fund and arranges for sub-advisory, transfer agency, custody, fund administration, securities lending, and all other non-distribution related services necessary for the Fund to operate. The Advisor bears the costs of all advisory and non-advisory services required to operate the Fund, in exchange for a single unitary fee. For services provided the Fund pays the Advisor at an annual rate of 0.75% of the Fund’s average daily net assets. The Advisor has an agreement with, and is dependent on, a third party to pay the Fund’s expenses in excess of 0.75% of the Fund’s average daily net assets. Additionally, under the Investment Advisory Agreement, the Advisor has agreed to pay all expenses of the Fund, except for: the fee paid to the Advisor pursuant to the Investment Advisory Agreement, interest charges on any borrowings, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution (12b-1) fees and expenses (collectively, “Excluded Expenses”). The Advisor has entered into an Agreement with Big Tree Capital, LLC (the “Sponsor”), under which the Sponsor agrees to sublicense the use of the Underlying Index to the Advisor. The Sponsor also provides marketing support for the Fund, including distributing marketing materials related to the Fund. Big Tree Capital, LLC is a privately held business focused on bringing exchange-traded investment products to investors in the U.S. The Sponsor does not make investment decisions, provide investment advice, or otherwise act in capacity of an investment adviser to the Fund.
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The Restaurant ETFTM
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
Additionally, the Sponsor is not involved in the maintenance of the Underlying Index and does not otherwise act in the capacity of an index provider.
US Bancorp Fund Services, LLC (the “Administrator”) provides fund accounting, fund administration, and transfer agency services to the Fund. The Advisor compensates the Administrator for these services under an administration agreement between the two parties.
The Advisor pays each independent Trustee a quarterly fee for service to the Fund. Each Trustee is also reimbursed by the Advisor for all reasonable out-of-pocket expenses incurred in connection with his duties as Trustee, including travel and related expenses incurred in attending Board meetings.
NOTE 5 – DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may pay compensation to the Distributor or any other distributor or financial institution with which the Trust has an agreement with respect to the Fund, with the amount of such compensation not to exceed an annual rate of 0.25% of each Fund’s average daily net assets. For the period ended September 30, 2016, the Fund did not incur any 12b-1 expenses.
NOTE 6 – PURCHASES AND SALES OF SECURITIES
The costs of purchases and sales of securities, excluding short-term securities and in-kind transactions, for the period ended September 30, 2016:
Purchases | Sales | ||||
The Restaurant ETFTM | $ | 584,665 | $ | 529,501 |
The costs of purchases and sales of in-kind transactions associated with creations and redemptions for the period ended September 30, 2016:
Purchases In- Kind | Sales In- Kind | ||||
The Restaurant ETFTM | $ | 3,706,849 | $ | 2,454,565 |
Purchases in-kind are the aggregate of all in-kind purchases and sales in-kind are the aggregate of all proceeds from in-kind sales. Net capital gains resulting from in-kind redemptions are excluded from the determination of the Fund’s taxable gains and are not distributed to shareholders.
During the period ended September 30, 2016, the Fund incurred broker commissions to Penserra Securities, LLC, an affiliated broker to the sub-advisor Penserra Capital Management, LLC, in the amount of $12.
There were no purchases or sales of U.S. Government obligations for the period ended September 30, 2016.
17
The Restaurant ETFTM
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
NOTE 7 – SECURITIES LENDING
The Fund may lend up to 331/3% of the value of the securities in its portfolio to brokers, dealers and financial institutions (but not individuals) under terms of participation in a securities lending program administered by U.S. Bank N.A. (“the Custodian”). The securities lending agreement requires that loans are collateralized at all times in an amount equal to at least 102% of the value of any loaned securities at the time of the loan, plus accrued interest. The Fund receives compensation in the form of fees and earn interest on the cash collateral. The amount of fees depends on a number of factors including the type of security and length of the loan. The Fund continues to receive interest payments or dividends on the securities loaned during the borrowing period. Gain or loss in the fair value of securities loaned that may occur during the term of the loan will be for the account of the Fund. The Fund has the right under the terms of the securities lending agreement to recall the securities from the borrower on demand. As of September 30, 2016, the Fund had loaned securities and received cash collateral for the loans. The cash collateral is invested by the Custodian in accordance with approved investment guidelines. Those guidelines require the cash collateral to be invested in readily marketable, high quality, short-term obligations; however, such investments are subject to risk of payment delays or default on the part of the issuer or counterparty or otherwise may not generate sufficient interest to support the costs associated with securities lending. The Fund could also experience delays in recovering its securities and possible loss of income or value if the borrower fails to return the borrowed securities, although the Fund is indemnified from this risk by contract with the securities lending agent.
As of September 30, 2016, the value of the securities on loan and payable for collateral due to broker were as follows:
Value of Securities on Loan Collateral Received
Fund | Values of Securities on Loan | Fund Collateral Received* | ||||
The Restaurant ETFTM | $ | 313,449 | $ | 317,740 |
* The cash collateral received was invested in the Mount Vernon Securities Lending Prime Portfolio as shown on the Schedule of Investments, a money market fund with an overnight and continuous maturity.
Fees and interest income earned on collateral investments and recognized by the Fund during the period ended September 30, 2016, were as follows:
Fees and Interest Income Earned | |||
Fund | Interest income earned net of applicable fees | ||
The Restaurant ETFTM | $ | 3,271 |
Offsetting Assets and Liabilities
The Fund is subject to various netting arrangements, which govern the terms of certain transactions with counterparties. The arrangements allow the Fund to close out and net its total exposure to a counterparty in the event of a default with respect to all transactions governed under a single agreement with a counterparty. The following is a summary of the arrangements subject to offsetting as of September 30, 2016.
18
The Restaurant ETFTM
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
Fund | Description | Gross Amount of Recognized Liabilities | Gross Amount in the Statement of Assets and Liabilities | Net Amount Presented in the Statement of Assets and Liabilities | Collateral Received | Net Amount | |||||||||||||||
The Restaurant ETFTM | Securities Lending | $ | 317,740 | $ | 317,740 | $ | — | $ | 317,740 | $ | — |
NOTE 8 – FEDERAL INCOME TAXES
The components of distributable earnings (losses) and cost basis of investments for federal income tax purposes at September 30, 2016 were as follows:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | |||||||||||||
The Restaurant ETFTM | $ | 1,674,818 | $ | 53,869 | $ | (177,755 | ) | $ | (123,886 | ) |
Undistributed Ordinary Income | Undistributed Long-term Gain | Total Distributable Earnings | Other Accumulated (Loss) | Total Accumulated Gain | ||||||||||||||||
The Restaurant ETFTM | $ | 19,261 | $ | — | $ | 19,261 | $ | — | $ | (104,625 | ) |
As of September 30, 2016, the Fund had accumulated capital loss carryovers of:
Capital Loss Carryover | Expires | ||
The Restaurant ETFTM | None | Indefinite |
Under current tax law, capital and currency losses realized after October 31 of a Fund’s fiscal year may be deferred and treated as occurring on the first business day of the following fiscal year for tax purposes. The Fund had deferred post-October capital and currency losses, which will be treated as arising on the first business day of the year ended September 30, 2017.
Late Year Ordinary Loss | Post-October Capital Loss | ||
The Restaurant ETFTM | None | None |
NOTE 9 – DISTRIBUTIONS TO SHAREHOLDERS
The Fund paid $12,500 from ordinary income during the period ended September 30, 2016.
19
The Restaurant ETFTM
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
NOTE 10 – SUBSEQUENT EVENTS
In preparing these financial statements, the Fund has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
20
The Restaurant ETFTM
To the Board of Trustees of ETF Managers Trust
and the Shareholders of The Restaurant ETF:
We have audited the accompanying statement of assets and liabilities of the ETF Managers Trust, which includes The Restaurant ETF (the “Fund”), including the schedule of investments, as of September 30, 2016 and the related statements of its operations, the changes in its net assets and financial highlights for the period October 27, 2015 (commencement of operations) to September 30, 2016. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2016 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the ETF Managers Trust as of September 30, 2016, which includes The Restaurant ETF, and the results of its operations and changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America.
/s/ WithumSmith+Brown, PC
New York, NY
November 28, 2016
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The Restaurant ETFTM
The Restaurant ETFTM Closing Price vs. NAV
The following Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the closing price for each Fund is at a premium or discount to its daily net asset value (NAV). The chart presented represents past performance and cannot be used to predict future results.
The Restaurant ETFTM | October 27, 2015* through September 30, 2016 | |||||||
Premium/Discount Range | Number of Days | Percentage of Total Days | ||||||
Greater than 1.00% | 4 | 1.7 | ||||||
Greater Than or equal to 0.75% And Less Than 1.00% | 4 | 1.7 | ||||||
Greater Than or Equal to 0.50% And Less Than 0.75% | 15 | 6.4 | ||||||
Greater Than or Equal to 0.25% And Less Than 0.50% | 24 | 10.2 | ||||||
Greater Than or Equal to 0.00% And Less Than 0.25% | 77 | 32.8 | ||||||
Less Than or Equal to 0.0% And Greater Than -0.25% | 70 | 29.8 | ||||||
Less Than or Equal to -0.25% And Greater Than -0.50% | 20 | 8.5 | ||||||
Less Than or Equal to -0.50% And Greater Than -0.75% | 10 | 4.3 | ||||||
Less Than or Equal to -0.75% And Greater Than -1.00% | 4 | 1.7 | ||||||
Less than -1.00% | 7 | 3.0 |
*First day of secondary market trading
22
The Restaurant ETFTM
September 30, 2016 (Unaudited)
(Unaudited)
During the year ended September 30, 2016, the Fund did not declare any long-term realized gains distributions.
Qualified Dividend Income/Dividends Received Deduction
For the fiscal year ended September 30, 2016, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:
Fund Name | Qualified Dividend Income |
The Restaurant ETF | 74.34% |
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended September 30, 2016 was as follows:
Fund Name | Dividends Received Deduction |
The Restaurant ETF | 86.15% |
(Unaudited)
The Fund files a Form N-Q with the Securities and Exchange Commission (the ‘‘SEC’’) no more than sixty days after the Fund’s first and third fiscal quarters. For the Fund, this would be for the fiscal quarters ending June 30 and December 31. Form N-Q includes a complete schedule of the Funds’ portfolio holdings as of the end of those fiscal quarters. The Fund’s N-Q filings can be found free of charge on the SEC’s website at http://www.sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (call 800-SEC-0330 for information on the operation of the Public Reference Room). The Fund’s portfolio holdings are posted on the Fund’s website at www.biteetf.com daily.
(Unaudited)
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is provided in the Statement of Additional Information (“SAI”). The SAI is available without charge upon request by calling toll-free at 1-844-ETF-MGRS (1-844-383-6477), by accessing the SEC’s website at www.sec.gov, or by accessing the Fund’s website at www.biteetf.com.
Information regarding how the Fund voted proxies relating to portfolio securities during the period ending June 30 is available by calling toll-free at 1-844-ETF-MGRS (1-844-383-6477) or by accessing the SEC’s website at www.sec.gov.
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477) or by visiting www.biteetf.com. Read the prospectus carefully before investing.
23
The Restaurant ETFTM
For the six month period Ended September 30, 2016 (Unaudited)
As a shareholder of The Restaurant ETF (the “Fund”) you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2016 to September 30, 2016).
Actual Expenses
The first line of the table provides information about actual account values based on actual returns and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then, multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account values based on a hypothetical return and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and in other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of Fund shares. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
The Restaurant ETFTM
Beginning Account Value April 1, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||||||||
Actual | $ | 1,000.00 | $ | 969.40 | $ | 3.69 | ||||||
Hypothetical (5% annual) | $ | 1,000.00 | $ | 1,021.25 | $ | 3.79 |
^ The dollar amounts shown as expenses paid during the period are equal to the annualized six-month expense ratio multiplied by the average account value during the period, multiplied by 183/366 (to reflect the period from April 1, 2016 to September 30, 2016.
24
The Restaurant ETFTM
Set forth below are the names, birth years, positions with the Trust, length of term of office, and the principal occupations and other directorships held during at least the last five years of each of the persons currently serving as a Trustee of the Trust, as well as information about each officer. The business address of each Trustee and officer is 30 Maple Street, Summit, New Jersey 07901.
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years |
Interested Trustee* and Officers | ||||
Samuel Masucci, III (1962) | Trustee, Chairman of the Board and President (since 2012); Secretary (since 2014) | Chief Executive Officer, Exchange Traded Managers Group, LLC (since 2013); Chief Executive Officer and Chief Compliance Officer, Factor Advisors, LLC (2012-2014); President and Chief Executive Officer, Factor Capital Management LLC (2012-2014); President and Chief Executive Officer, GENCAP Ventures, LLC (holding company) (2012-2013); Chief Executive Officer, MacroMarkets LLC (exchange traded funds) (2005-2011); President, Chief Executive and Chief Compliance Officer, Macro Financial (financial services) (2005-2011). | 12 | None |
Reshma J. Amin (1978) | Chief Compliance Officer (since 2016) | Chief Operating Officer and Chief Compliance Officer, Exchange Traded Managers Group, LLC (since 2016); Partner, Crow & Cushing (2007-2016). | 12 | n/a |
John A. Flanagan (1946) | Treasurer (since 2015) | President, John A. Flanagan CPA, LLC (accounting services) (since 2010); Treasurer, ETF Managers Trust (since 2015); Chief Financial Officer, ETF Managers Group, Inc. (commodity pool operator) (since 2014); Chief Financial Officer, Macromarkets LLC (exchange traded funds) (2007-2010) | n/a | n/a |
* Mr. Masucci is an interested Trustee by virtue of his role as the Chief Executive Officer of the Adviser.
25
The Restaurant ETFTM
Board of Trustees
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years |
Independent Trustees | ||||
John W. Southard (1969) | Trustee (since 2012) | Director and Co-Founder, T2 Capital Management, 2010 to present; Co-Founder and Head of Research and Trading, PowerShares Capital Management, 2002 to 2009. | 12 | None |
Terry Loebs (1963) | Trustee (since 2014) | Founder and Managing Member, Pulsenomics LLC (index product development and consulting firm) (since 2011); Managing Director, MacroMarkets, LLC (exchange-traded products firm) (2006-2011). | 12 | None |
26
The Restaurant ETFTM
ETF MANAGERS TRUST
ETF Managers Trust, (the “Trust”) has adopted the following privacy policies in order to safeguard the personal information of the Trust’s customers and consumers in accordance with Regulation S-P as promulgated by the U.S. Securities and Exchange Commission.
Trust officers are responsible for ensuring that the following policies and procedures are implemented:
1) | The Trust is committed to protecting the confidentiality and security of the information they collect and will handle personal customer and consumer information only in accordance with Regulation S-P and any other applicable laws, rules and regulations1. The Trust will ensure: (a) the security and confidentiality of customer records and information; (b) that customer records and information are protected from any anticipated threats and hazards; and (c) that customer records and information are protected from unauthorized access or use. |
2) | The Trust conducts its business affairs through its trustees, officers and third parties that provide services pursuant to agreements with the Trust. The Trust has no employees. It is anticipated that the trustees and officers of the Trust who are not employees of service providers of the Trust will not have access to customer records and information in the performance of their normal responsibilities for the Trust. |
3) | The Trust may share customer information with its affiliates, subject to the customers’ right to prohibit such sharing. |
4) | The Trust may share customer information with unaffiliated third parties only in accordance with the requirements of Regulation S-P. Pursuant to this policy, the Trust will not share customer information with unaffiliated third parties other than as permitted by law, unless authorized to do so by the customer. |
Consistent with these policies, the Trust has adopted the following procedures:
1) | The Trust will determine that the policies and procedures of its affiliates and Service Providers are reasonably designed to safeguard customer information and only permit appropriate and authorized access to and use of customer information through the application of appropriate administrative, technical and physical protections. |
2) | The Trust will direct each of its Service Providers to adhere to the privacy policy of the Trust and to its privacy policies with respect to all customer information of the Trust and to take all actions reasonably necessary so that the Trust is in compliance with the provisions of Regulation S-P, including, as applicable, the development and delivery of privacy notices and the maintenance of appropriate and adequate records. |
3) | The Trust requires its Service Providers to provide periodic reports to the Trust’s Board of Trustees outlining their privacy policies and the implementation of such policies. Each Service Provider is required to promptly report to the Trust’s Board any material changes to its privacy policy before, or promptly after, the adoption of such changes. |
1 | Generally, the Funds have institutional clients which are not considered “customers” for purposes of regulation S-P. |
27
Advisor
ETF Managers Group, LLC
30 Maple Street #2, Summit, NJ 07901
Sub-Adviser
Penserra Capital Management, LLC
4 Orinda Way, Suite 100-A, Orinda, CA 94563
Distributor
ALPS Distributors, Inc.
1290 Broadway, Suite 1100, Denver, Colorado 80203
Custodian
U.S. Bank National Association
Custody Operations
1555 North River Center Drive, Suite 302, Milwaukee, Wisconsin 53212
Transfer Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street, Milwaukee, Wisconsin 53202
Securities Lending Agent
U.S Bank, National Association
Securities Lending
800 Nicolet Mall
Minneapolis, MN 55402-7020
Independent Registered Public Accounting Firm
WithumSmith + Brown, PC
1411 Broadway, 9th Floor, New York, NY 10018
Legal Counsel
Sullivan & Worcester LLP
1666 K Street NW, Washington, DC 20006
Annual Report
September 30, 2016
Etho Climate Leadership U.S. ETF
Ticker: ETHO
The Fund is a series of ETF Managers Trust.
Etho Climate Leadership U.S. ETF | |
TABLE OF CONTENTS | |
September 30, 2016 | |
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33 | |
33 | |
33 | |
34 | |
35 | |
36 |
On behalf of the entire team, we want to express our appreciation for the confidence you have placed in the Etho Climate Leadership U.S. Exchange-Traded Fund (“ETHO” or the “Fund”). The following information pertains to the fiscal period from November 19, 2015 (the Fund’s Inception Date) to September 30, 2016.
The Fund saw positive performance during the fiscal period ended September 30, 2016. The NAV price for ETHO rose 8.43%, while the Etho Climate Leadership Index – U.S. (“Index”), the Fund’s benchmark, rose 7.80% over the same period.
For the period ended September 30, 2016, the best performing securities in the Fund were Energy Recovery Inc (up 646.73%), Nvidia Corp (up 177.97%), and Applied Materials Inc (up 105.24%). The worst performing securities in the Fund were Endo International (down -70.92%), FireEye Inc (down -53.71%), and SunPower Corp (down -55.49%).
As you may know, the Etho Climate Leadership Index U.S. ETF offers broad diversification across companies that have demonstrated efficiency and leadership with their use of resources and their supply chains when compared to industry peers. The Fund holds roughly 400 equities equally weighted and results in a carbon emissions profile that is, on average, 50-70% lower per dollar invested than conventional U.S. benchmark indices.1 ETHO avoids investment in any direct fossil fuel companies, as well as enablers of that industry, along with a series of other unsustainable industries such as Tobacco/Weapons/Gambling, etc. Equal weighting of the Fund allows for the elimination of equities that do not meet ETHO’S standards without there being a significant impact on the diversification or performance of the Fund. It also creates broad exposure to both the sectors and factors that potentially make for greater stability and higher performance.
There is much ahead for environmentally sustainable and socially responsible investing. We are thankful you have joined us by investing in the Etho Climate Leadership U.S. ETF.
You can find further details about ETHO by visiting www.ethoetf.com, or by calling 1-844-ETF- MGRS (1-844-383-6477).
Sincerely,
Samuel Masucci
III Chairman of
the Board
III Chairman of
the Board
Samuel Masucci III is a registered representative of ALPS Distributors, Inc.
1 | Etho Capital. www.ethocapital.com |
1
Cumulative Returns | Since Inception | |
Period Ended September 30, 2016 | (11/18/2015) | |
Etho Climate Leadership U.S. ETF (NAV) | 8.43% | |
Etho Climate Leadership U.S. ETF (Market) | 8.26% | |
S&P 500 Index | 6.04% | |
Etho Climate Leadership Index - U.S. | 7.80% | |
Total Fund Operating Expenses1 | 0.45% | |
1.The expense ratio is taken from the Fund’s most recent prospectus dated May 27, 2016. |
Performance data quoted represents past performance and does not guarantee future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance of the Funds may be lower or higher than the performance quoted. All performance is historical and includes reinvestment of dividends and capital gains. Performance data current to the most recent month end may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477).
The chart illustrates the performance of a hypothetical $10,000 investment made on November 18, 2015, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on fund distributions from the redemption of Fund shares. The chart assumes reinvestment of capital gains and dividends.
The unmanaged indices do not reflect fees and are not available for direct investment.
2
Etho Climate Leadership U.S. ETF
Security | % of Total Investments† | |||||
1 | NVIDIA Corporation | 0.46% | ||||
2 | Newell Brands, Inc. | 0.45% | ||||
3 | Charter Communications, Inc.` | 0.41% | ||||
4 | GenMark Diagnostics, Inc. | 0.40% | ||||
5 | Centene Corporation | 0.37% | ||||
6 | LinkedIn Corporation | 0.35% | ||||
7 | Intersil Corporation | 0.34% | ||||
8 | Xylem, Inc. | 0.32% | ||||
9 | NetSuite, Inc. | 0.29% | ||||
10 | Energy Recovery, Inc. | 0.29% |
Top Ten Holdings = 3.68% of Total Investments† |
* Current Fund holdings may not be indicative of future Fund holdings. |
† Percentage of total investments less cash. |
3
Etho Climate Leadership U.S. ETF
Investing involves risk, including the possible loss of principal. Shares of any ETF are bought and sold at market price (not NAV), may trade at a discount or premium to NAV and are not individually redeemed by the Fund. Brokerage commissions will reduce returns. Narrowly focused investments typically exhibit higher volatility.
The Etho Climate Leadership U.S. ETF (the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the total return performance of the Etho Climate Leadership Index – US (the “Index”).
Funds that invest in smaller companies may experience greater volatility. The Fund’s return may not match or achieve a high degree of correlation with the return of the Etho Climate Leadership Index – US (ticker: ETHO INDEX). To the extent the Fund utilizes a sampling approach, it may experience tracking error to a greater extent than if the Fund had sought to replicate the Index. Diversification does not guarantee a profit, nor does it protect against a loss in a declining market.
The Fund is new with limited operating history.
The Etho Climate Leadership Index™ (ECLI™) is an index of more than 350 companies listed on the NYSE Arca stock exchange that have the smallest carbon footprint in their industries.
S&P 500: The S&P 500 Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
4
Etho Climate Leadership U.S. ETF
As of September 30, 2016 (Unaudited)
Etho Climate Leadership U.S. ETF | ||
As a percent of Net Assets: | ||
Bermuda | 2.7 | % |
Ireland | 2.1 | |
Jersey | 0.2 | |
Netherlands | 0.3 | |
Switzerland | 0.9 | |
United Kingdom | 0.3 | |
United States | 92.4 | |
Virgin Islands (UK) | 0.2 | |
Mutual Funds | 0.6 | |
Short-Term and other Net Assets (Liabilities) | 0.3 | |
100.0 | % |
5
Etho Climate Leadership U.S. ETF
September 30, 2016
Shares | Market Value | ||||||||
COMMON STOCKS - 99.1% Bermuda - 2.7% | |||||||||
Insurance - 2.0% | |||||||||
Arch Capital Group Ltd. (a) | 238 | $ | 18,864 | ||||||
Axis Capital Holdings Ltd. | 337 | 18,309 | |||||||
Endurance Specialty Holdings Ltd. | 291 | 19,046 | |||||||
Everest Re Group Ltd. | 85 | 16,147 | |||||||
RenaissanceRe Holdings Ltd. | 144 | 17,303 | |||||||
Validus Holdings Ltd. | 362 | 18,035 | |||||||
White Mountains Insurance Group Ltd. | 21 | 17,430 | |||||||
Total Insurance | 125,134 | ||||||||
IT Services - 0.2% | |||||||||
Genpact Ltd. (a) | 609 | 14,586 | |||||||
Professional Services - 0.3% | |||||||||
IHS Markit Ltd.(a) | 526 | 19,751 | |||||||
Specialty Retail - 0.2% | |||||||||
Signet Jewelers Ltd. | 147 | 10,956 | |||||||
Total Bermuda | 170,427 | ||||||||
Ireland - 2.1% | |||||||||
Biotechnology - 0.4% | |||||||||
Alkermes PLC (a) | 480 | 22,575 | |||||||
Building Products - 0.3% | |||||||||
Allegion PLC | 257 | 17,710 | |||||||
Health Care Equipment & Supplies - 0.3% | |||||||||
Medtronic PLC ^ | 215 | 18,576 | |||||||
IT Services - 0.3% | |||||||||
Accenture PLC ^ | 160 | 19,547 | |||||||
Machinery - 0.3% | |||||||||
Pentair PLC | 316 | 20,300 | |||||||
Pharmaceuticals - 0.5% | |||||||||
Allergan PLC (a) | 56 | 12,897 | |||||||
Endo International PLC (a) | 391 | 7,879 | |||||||
Jazz Pharmaceuticals PLC (a) | 137 | 16,643 | |||||||
Total Pharmaceuticals | 37,419 | ||||||||
Total Ireland | 136,127 | ||||||||
Jersey - 0.2% | |||||||||
Auto Components - 0.2% | |||||||||
Delphi Automotive PLC | 232 | 16,546 |
The accompanying notes are an integral part of these financial statements.
6
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
Netherlands - 0.3% | |||||||||
Electrical Equipment - 0.3% | |||||||||
Sensata Technologies Holding NV (a) | 449 | $ | 17,412 | ||||||
Switzerland - 0.9% | |||||||||
Electronic Equipment, Instruments & Components - 0.3% | |||||||||
TE Connectivity Ltd. | 270 | 17,383 | |||||||
Household Durables - 0.3% | |||||||||
Garmin Ltd. | 414 | 19,918 | |||||||
Insurance - 0.3% | |||||||||
Allied World Assurance Co. Holdings Ltd. | 477 | 19,280 | |||||||
Total Switzerland | 56,581 | ||||||||
United Kingdom - 0.3% | |||||||||
Insurance - 0.3% | |||||||||
Aon PLC | 165 | 18,561 | |||||||
United States - 92.4% | |||||||||
Air Freight & Logistics - 0.2% | |||||||||
CH Robinson Worldwide, Inc. | 229 | 16,135 | |||||||
Airlines - 0.4% | |||||||||
JetBlue Airways Corporation (a) | 744 | 12,827 | |||||||
Southwest Airlines Co. | 395 | 15,361 | |||||||
Total Airlines | 28,188 | ||||||||
Auto Components - 1.1% | |||||||||
Autoliv, Inc. | 146 | �� | 15,593 | ||||||
BorgWarner, Inc. ^ | 460 | 16,183 | |||||||
Gentex Corporation ^ | 1,050 | 18,438 | |||||||
Johnson Controls International PLC | 438 | 20,364 | |||||||
Total Auto Components | 70,578 | ||||||||
Automobiles - 0.2% | |||||||||
Tesla Motors, Inc. (a) | 79 | 16,118 | |||||||
Banks - 3.4% | |||||||||
Associated Banc-Corp | 880 | 17,239 | |||||||
BancorpSouth, Inc. | 751 | 17,423 | |||||||
Bank of Hawaii Corporation | 241 | 17,501 | |||||||
Citizens Financial Group, Inc. | 766 | 18,928 | |||||||
Commerce Bancshares, Inc. | 360 | 17,734 | |||||||
First Citizens BancShares, Inc. | 64 | 18,809 | |||||||
First Republic Bank | 246 | 18,970 | |||||||
Fulton Financial Corporation | 1,236 | 17,947 |
The accompanying notes are an integral part of these financial statements.
7
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
M&T Bank Corporation | 149 | $ | 17,299 | ||||||
People’s United Financial, Inc. | 1,054 | 16,674 | |||||||
SVB Financial Group (a) | 158 | 17,465 | |||||||
Synovus Financial Corporation | 566 | 18,412 | |||||||
Valley National Bancorp | 1,710 | 16,638 | |||||||
Total Banks | 231,039 | ||||||||
Beverages - 0.5% | |||||||||
Dr Pepper Snapple Group, Inc. | 182 | 16,618 | |||||||
Monster Beverage Corporation (a) | 128 | 18,792 | |||||||
Total Beverages | 35,410 | ||||||||
Biotechnology - 2.2% | |||||||||
Agios Pharmaceuticals, Inc. (a) | 342 | 18,064 | |||||||
Alexion Pharmaceuticals, Inc. (a) | 109 | 13,357 | |||||||
Alnylam Pharmaceuticals, Inc. (a) | 280 | 18,978 | |||||||
BioMarin Pharmaceutical, Inc. (a) | 185 | 17,116 | |||||||
Celgene Corporation (a) | 157 | 16,411 | |||||||
Incyte Corporation (a) | 222 | 20,932 | |||||||
Ionis Pharmaceuticals, Inc. (a) ^ | 393 | 14,400 | |||||||
Regeneron Pharmaceuticals, Inc. (a) | 39 | 15,679 | |||||||
Vertex Pharmaceuticals, Inc. (a) | 179 | 15,611 | |||||||
Total Biotechnology | 150,548 | ||||||||
Building Products - 2.3% | |||||||||
Advanced Drainage Systems, Inc. | 749 | 18,021 | |||||||
AO Smith Corporation | 226 | 22,326 | |||||||
Apogee Enterprises, Inc. | 401 | 17,921 | |||||||
Fortune Brands Home & Security, Inc. | 320 | 18,592 | |||||||
Lennox International, Inc. ^ | 128 | 20,100 | |||||||
Masco Corporation | 568 | 19,488 | |||||||
Simpson Manufacturing Co., Inc. | 450 | 19,778 | |||||||
Trex Co., Inc. (a) | 365 | 21,432 | |||||||
Total Building Products | 157,658 | ||||||||
Capital Markets - 2.4% | |||||||||
BlackRock, Inc. ^ | 51 | 18,485 | |||||||
Charles Schwab Corporation | 597 | 18,847 | |||||||
E*TRADE Financial Corporation (a) | 644 | 18,753 | |||||||
Interactive Brokers Group, Inc. ^ | 424 | 14,954 | |||||||
NorthStar Asset Management Group, Inc. | 1,492 | 19,292 | |||||||
S&P Global, Inc. | 173 | 21,896 | |||||||
SEI Investments Co. | 404 | 18,426 | |||||||
T. Rowe Price Group, Inc. | 230 | 15,295 | |||||||
TD Ameritrade Holding Corporation | 524 | 18,466 | |||||||
Total Capital Markets | 164,414 | ||||||||
Chemicals - 2.6% | |||||||||
Albemarle Corporation | 281 | 24,022 | |||||||
Celanese Corporation | 285 | 18,970 |
The accompanying notes are an integral part of these financial statements.
8
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
Ecolab, Inc. ^ | 154 | $ | 18,745 | ||||||
International Flavors & Fragrances, Inc. ^ | 154 | 22,017 | |||||||
PPG Industries, Inc. | 158 | 16,331 | |||||||
RPM International, Inc. | 383 | 20,575 | |||||||
Sherwin-Williams Co. | 59 | 16,323 | |||||||
Valspar Corporation | 204 | 21,638 | |||||||
Westlake Chemical Corporation | 391 | 20,919 | |||||||
Total Chemicals | 179,540 | ||||||||
Commercial Services & Supplies - 1.1% | |||||||||
Brink’s Co. | 542 | 20,097 | |||||||
Cintas Corporation ^ | 187 | 21,056 | |||||||
Copart, Inc. (a) | 408 | 21,853 | |||||||
Stericycle, Inc. (a) | 143 | 11,460 | |||||||
Total Commercial Services & Supplies | 74,466 | ||||||||
Communications Equipment - 1.1% | |||||||||
Cisco Systems, Inc. ^ | 612 | 19,413 | |||||||
F5 Networks, Inc. (a) ^ | 163 | 20,316 | |||||||
Juniper Networks, Inc. | 654 | 15,735 | |||||||
Palo Alto Networks, Inc. (a) | 106 | 16,889 | |||||||
Total Communications Equipment | 72,353 | ||||||||
Construction & Engineering - 0.9% | |||||||||
AECOM (a) | 598 | 17,779 | |||||||
EMCOR Group, Inc. | 338 | 20,152 | |||||||
Jacobs Engineering Group, Inc. (a) | 390 | 20,170 | |||||||
Total Construction & Engineering | 58,101 | ||||||||
Construction Materials - 0.6% | |||||||||
Martin Marietta Materials, Inc. | 107 | 19,165 | |||||||
Vulcan Materials Co. | 160 | 18,197 | |||||||
Total Construction Materials | 37,362 | ||||||||
Consumer Finance - 0.3% | |||||||||
SLM Corporation (a) | 2,606 | 19,467 | |||||||
Containers & Packaging - 0.8% | |||||||||
AptarGroup, Inc. | 218 | 16,875 | |||||||
Avery Dennison Corporation | 241 | 18,747 | |||||||
Sealed Air Corporation | 358 | 16,404 | |||||||
Total Containers & Packaging | 52,026 | ||||||||
Distributors - 0.6% | |||||||||
Genuine Parts Co. | 173 | 17,378 | |||||||
LKQ Corporation (a) | 587 | 20,815 | |||||||
Total Distributors | 38,193 | ||||||||
Diversified Consumer Services - 0.2% | |||||||||
H&R Block, Inc. ^ | 589 | 13,635 |
The accompanying notes are an integral part of these financial statements.
9
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
Diversified Financial Services - 2.1% | |||||||||
CME Group, Inc. | 197 | $ | 20,591 | ||||||
FactSet Research Systems, Inc. | 103 | 16,696 | |||||||
Intercontinental Exchange, Inc. | 70 | 18,855 | |||||||
Moody’s Corporation | 173 | 18,732 | |||||||
Morningstar, Inc. | 207 | 16,409 | |||||||
MSCI, Inc. | 234 | 19,642 | |||||||
Nasdaq, Inc. | 255 | 17,223 | |||||||
Voya Financial, Inc. | 519 | 14,958 | |||||||
Total Diversified Financial Services | 143,106 | ||||||||
Diversified Telecommunication Services - 0.6% | |||||||||
SBA Communications Corporation (a) | 170 | 19,067 | |||||||
Zayo Group Holdings, Inc. (a) | 659 | 19,579 | |||||||
Total Diversified Telecommunication Services | 38,646 | ||||||||
Electric Utilities - 1.0% | |||||||||
Eversource Energy | 296 | 16,037 | |||||||
Hawaiian Electric Industries, Inc. | 541 | 16,149 | |||||||
ITC Holdings Corporation | 418 | 19,429 | |||||||
NextEra Energy, Inc. | 145 | 17,736 | |||||||
Total Electric Utilities | 69,351 | ||||||||
Electrical Equipment - 1.7% | |||||||||
Acuity Brands, Inc. | 76 | 20,110 | |||||||
AMETEK, Inc. | 339 | 16,197 | |||||||
Emerson Electric Co. ^ | 320 | 17,443 | |||||||
FuelCell Energy, Inc. (a) ^ | 2,383 | 12,916 | |||||||
Generac Holdings, Inc. (a) | 456 | 16,553 | |||||||
Hubbell, Inc. | 161 | 17,346 | |||||||
Rockwell Automation, Inc. | 152 | 18,596 | |||||||
Total Electrical Equipment | 119,161 | ||||||||
Electronic Equipment, Instruments & Components - | |||||||||
3.6% | |||||||||
Amphenol Corporation | 288 | 18,697 | |||||||
Badger Meter, Inc. | 483 | 16,185 | |||||||
Corning, Inc. | 845 | 19,984 | |||||||
Dolby Laboratories, Inc. ^ | 436 | 23,671 | |||||||
IPG Photonics Corporation (a) ^ | 183 | 15,070 | |||||||
Itron, Inc. (a) | 390 | 21,746 | |||||||
Keysight Technologies, Inc. (a) | 603 | 19,109 | |||||||
Littelfuse, Inc. | 139 | 17,905 | |||||||
National Instruments Corporation | 548 | 15,563 | |||||||
OSI Systems, Inc. (a) | 260 | 16,999 | |||||||
Trimble Navigation Ltd. (a) | 651 | 18,593 | |||||||
Universal Display Corporation (a) | 316 | 17,541 | |||||||
VeriFone Systems, Inc. (a) | 683 | 10,750 | |||||||
Zebra Technologies Corporation (a) | 243 | 16,915 | |||||||
Total Electronic Equipment, Instruments & Components | 248,728 |
The accompanying notes are an integral part of these financial statements.
10
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
Food & Staples Retailing - 1.2% | |||||||||
Costco Wholesale Corporation ^ | 111 | $ | 16,929 | ||||||
CVS Health Corporation ^ | 166 | 14,772 | |||||||
PriceSmart, Inc. | 209 | 17,505 | |||||||
Walgreens Boots Alliance, Inc. ^ | 209 | 16,850 | |||||||
Whole Foods Market, Inc. | 490 | 13,892 | |||||||
Total Food & Staples Retailing | 79,948 | ||||||||
Food Products - 1.6% | |||||||||
Hain Celestial Group, Inc. (a) | 414 | 14,730 | |||||||
Kraft Heinz Co. | 216 | 19,334 | |||||||
McCormick & Co., Inc. ^ | 175 | 17,486 | |||||||
Mead Johnson Nutrition Co. | 216 | 17,066 | |||||||
Pinnacle Foods, Inc. | 366 | 18,362 | |||||||
WhiteWave Foods Co. (a) | 397 | 21,609 | |||||||
Total Food Products | 108,587 | ||||||||
Health Care Equipment & Supplies - 1.3% | |||||||||
Danaher Corporation | 182 | 14,267 | |||||||
Edwards Lifesciences Corporation (a) | 186 | 22,424 | |||||||
GenMark Diagnostics, Inc. (a) | 2,676 | 31,577 | |||||||
Intuitive Surgical, Inc. (a) | 28 | 20,295 | |||||||
Total Health Care Equipment & Supplies | 88,563 | ||||||||
Health Care Providers & Services - 3.4% | |||||||||
Aetna, Inc. | 148 | 17,087 | |||||||
AMN Healthcare Services, Inc. (a) ^ | 514 | 16,381 | |||||||
Anthem, Inc. | 123 | 15,413 | |||||||
Centene Corporation (a) | 440 | 29,462 | |||||||
Cigna Corporation | 115 | 14,987 | |||||||
Envision Healthcare Holdings, Inc. (a) | 688 | 15,322 | |||||||
Henry Schein, Inc. (a) | 98 | 15,972 | |||||||
Humana, Inc. | 88 | 15,566 | |||||||
Laboratory Corporation of America Holdings (a) | 145 | 19,935 | |||||||
MEDNAX, Inc. (a) ^ | 245 | 16,231 | |||||||
Quest Diagnostics, Inc. | 235 | 19,888 | |||||||
UnitedHealth Group, Inc. ^ | 136 | 19,040 | |||||||
VCA, Inc. (a) ^ | 301 | 21,064 | |||||||
Total Health Care Providers & Services | 236,348 | ||||||||
Health Care Technology - 0.5% | |||||||||
Allscripts Healthcare Solutions, Inc. (a) | 1,245 | 16,397 | |||||||
Cerner Corporation (a) | 309 | 19,080 | |||||||
Total Health Care Technology | 35,477 | ||||||||
Hotels, Restaurants & Leisure - 0.8% | |||||||||
Chipotle Mexican Grill, Inc. (a) ^ | 30 | 12,705 | |||||||
Choice Hotels International, Inc. | 311 | 14,020 |
The accompanying notes are an integral part of these financial statements.
11
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
International Speedway Corporation | 454 | $ | 15,173 | ||||||
Starbucks Corporation | 282 | 15,267 | |||||||
Total Hotels, Restaurants & Leisure | 57,165 | ||||||||
Household Durables - 2.6% | |||||||||
D.R. Horton, Inc. | 583 | 17,607 | |||||||
Harman International Industries, Inc. | 204 | 17,228 | |||||||
KB Home ^ | 1,211 | 19,521 | |||||||
Lennar Corporation | 359 | 15,200 | |||||||
Newell Brands, Inc. | 677 | 35,650 | |||||||
NVR, Inc. (a) ^ | 10 | 16,399 | |||||||
Tempur Sealy International, Inc. (a) | 277 | 15,717 | |||||||
Toll Brothers, Inc. (a) | 574 | 17,140 | |||||||
TopBuild Corporation (a) | 572 | 18,990 | |||||||
Total Household Durables | 173,452 | ||||||||
Household Products - 0.8% | |||||||||
Church & Dwight Co., Inc. | 364 | 17,443 | |||||||
Colgate-Palmolive Co. ^ | 245 | 18,164 | |||||||
Procter & Gamble Co. | 198 | 17,771 | |||||||
Total Household Products | 53,378 | ||||||||
Independent Power and Renewable Electricity | |||||||||
Producers - 1.3% | |||||||||
NextEra Energy Partners LP | 643 | 17,985 | |||||||
NRG Yield, Inc. | 1,277 | 20,840 | |||||||
Ormat Technologies, Inc. | 433 | 20,961 | |||||||
Pattern Energy Group, Inc. | 895 | 20,129 | |||||||
Total Independent Power and Renewable Electricity | |||||||||
Producers | 79,915 | ||||||||
Industrial Conglomerates - 1.0% | |||||||||
3M Co. ^ | 102 | 17,975 | |||||||
Carlisle Cos, Inc. | 174 | 17,847 | |||||||
General Electric Co. ^ | 548 | 16,232 | |||||||
Roper Technologies, Inc. | 93 | 16,970 | |||||||
Total Industrial Conglomerates | 69,024 | ||||||||
Insurance - 2.3% | |||||||||
Alleghany Corporation (a) | 35 | 18,376 | |||||||
Brown & Brown, Inc. | 487 | 18,365 | |||||||
Cincinnati Financial Corporation | 259 | 19,533 | |||||||
Markel Corporation (a) | 19 | 17,647 | |||||||
Marsh & McLennan Cos, Inc. | 285 | 19,166 | |||||||
MBIA, Inc. (a) | 1,833 | 14,279 | |||||||
Torchmark Corporation | 304 | 19,423 | |||||||
Travelers Cos, Inc. | 171 | 19,587 | |||||||
XL Group Ltd. | 465 | 15,638 | |||||||
Total Insurance | 162,014 |
The accompanying notes are an integral part of these financial statements.
12
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
Internet & Catalog Retail - 1.7% | |||||||||
Amazon.com, Inc. (a) | 30 | $ | 25,120 | ||||||
Expedia, Inc. | 156 | 18,208 | |||||||
Liberty Interactive Corporation (a) | 428 | 17,064 | |||||||
Netflix, Inc. (a) | 172 | 16,951 | |||||||
Priceline Group, Inc. (a) ^ | 13 | 19,129 | |||||||
TripAdvisor, Inc. (a) ^ | 249 | 15,732 | |||||||
Total Internet & Catalog Retail | 112,204 | ||||||||
Internet Software & Services - 1.9% | |||||||||
Alphabet, Inc. (a) | 24 | 18,655 | |||||||
CommerceHub, Inc. - Series A (a) | 42 | 664 | |||||||
CommerceHub, Inc. - Series C (a) | 85 | 1,352 | |||||||
Facebook, Inc. (a) | 155 | 19,882 | |||||||
LinkedIn Corporation (a) | 147 | 28,094 | |||||||
Twitter, Inc. (a) | 851 | 19,616 | |||||||
VeriSign, Inc. (a) | 185 | 14,474 | |||||||
Zillow Group, Inc. (a) | 694 | 24,047 | |||||||
Total Internet Software & Services | 126,784 | ||||||||
IT Services - 3.8% | |||||||||
Alliance Data Systems Corporation (a) ^ | 74 | 15,875 | |||||||
Automatic Data Processing, Inc. ^ | 191 | 16,846 | |||||||
Broadridge Financial Solutions, Inc. | 288 | 19,524 | |||||||
Cognizant Technology Solutions Corporation (a) | 288 | 13,740 | |||||||
CoreLogic, Inc. (a) | 479 | 18,786 | |||||||
Fidelity National Information Services, Inc. | 273 | 21,029 | |||||||
Fiserv, Inc. (a) | 168 | 16,711 | |||||||
FleetCor Technologies, Inc. (a) | 116 | 20,153 | |||||||
Global Payments, Inc. | 271 | 20,802 | |||||||
MasterCard, Inc. | 214 | 21,779 | |||||||
Paychex, Inc. | 315 | 18,229 | |||||||
Total System Services, Inc. | 367 | 17,304 | |||||||
Vantiv, Inc. (a) | 310 | 17,444 | |||||||
Visa, Inc. ^ | 226 | 18,690 | |||||||
Total IT Services | 256,912 | ||||||||
Leisure Products - 0.2% | |||||||||
Hasbro, Inc. | 210 | 16,659 | |||||||
Life Sciences Tools & Services - 0.9% | |||||||||
Bio-Techne Corporation | 175 | 19,163 | |||||||
Illumina, Inc. (a) | 102 | 18,529 | |||||||
Waters Corporation (a) | 128 | 20,287 | |||||||
Total Life Sciences Tools & Services | 57,979 | ||||||||
Machinery - 5.3% | |||||||||
CLARCOR, Inc. | 309 | 20,085 | |||||||
Donaldson Co., Inc. | 498 | 18,590 |
The accompanying notes are an integral part of these financial statements.
13
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
Energy Recovery, Inc. (a) | 1,907 | $ | 30,474 | ||||||
Flowserve Corporation | 361 | 17,415 | |||||||
Fortive Corporation | 92 | 4,683 | |||||||
Graco, Inc. | 198 | 14,652 | |||||||
IDEX Corporation | 209 | 19,556 | |||||||
Illinois Tool Works, Inc. ^ | 167 | 20,013 | |||||||
ITT, Inc. | 438 | 15,698 | |||||||
Lincoln Electric Holdings, Inc. | 286 | 17,909 | |||||||
Lindsay Corporation | 222 | 16,424 | |||||||
Snap-on, Inc. ^ | 108 | 16,412 | |||||||
Stanley Black & Decker, Inc. ^ | 164 | 20,169 | |||||||
Tennant Co. | 316 | 20,477 | |||||||
Toro Co. | 398 | 18,642 | |||||||
WABCO Holdings, Inc. (a) | 164 | 18,619 | |||||||
Wabtec Corporation | 211 | 17,228 | |||||||
Watts Water Technologies, Inc. | 305 | 19,776 | |||||||
Xylem, Inc. ^ | 487 | 25,543 | |||||||
Total Machinery | 352,365 | ||||||||
Media - 2.6% | |||||||||
Charter Communications, Inc. (a) | 121 | 32,666 | |||||||
DISH Network Corporation (a) ^ | 329 | 18,023 | |||||||
Liberty Braves Group (a) | 44 | 768 | |||||||
Liberty Broadband Corporation (a) | 310 | 22,159 | |||||||
Liberty Media Group LLC (a) | 108 | 3,094 | |||||||
Liberty SiriusXM Group (a) | 431 | 14,645 | |||||||
Scripps Networks Interactive, Inc. | 256 | 16,253 | |||||||
Starz, Inc. (a) | 610 | 19,026 | |||||||
Time Warner, Inc. ^ | 238 | 18,947 | |||||||
Twenty-First Century Fox, Inc. | 585 | 14,473 | |||||||
Walt Disney Co. | 166 | 15,415 | |||||||
Total Media | 175,469 | ||||||||
Metals & Mining - 1.3% | |||||||||
Carpenter Technology Corporation | 480 | 19,804 | |||||||
Commercial Metals Co. | 1,008 | 16,320 | |||||||
Compass Minerals International, Inc. ^ | 236 | 17,393 | |||||||
Nucor Corporation | 367 | 18,148 | |||||||
Reliance Steel & Aluminum Co. | 250 | 18,008 | |||||||
Total Metals & Mining | 89,673 | ||||||||
Multiline Retail - 0.5% | |||||||||
Dollar General Corporation | 220 | 15,398 | |||||||
Dollar Tree, Inc. (a) | 213 | 16,812 | |||||||
Total Multiline Retail | 32,210 |
The accompanying notes are an integral part of these financial statements.
14
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | ||||||||
Multi-Utilities - 0.5% | |||||||||
CenterPoint Energy, Inc. | 842 | $ | 19,560 | ||||||
Consolidated Edison, Inc. | 231 | 17,394 | |||||||
Total Multi-Utilities | 36,954 | ||||||||
Personal Products - 0.2% | |||||||||
Estee Lauder Cos, Inc. | 178 | 15,764 | |||||||
Pharmaceuticals - 0.6% | |||||||||
Bristol-Myers Squibb Co. | 249 | 13,426 | |||||||
Zoetis, Inc. ^ | 396 | 20,596 | |||||||
Total Pharmaceuticals | 34,022 | ||||||||
Professional Services - 1.1% | |||||||||
Dun & Bradstreet Corporation | 166 | 22,679 | |||||||
Equifax, Inc. | 155 | 20,860 | |||||||
Nielsen Holdings PLC ^ | 317 | 16,982 | |||||||
Verisk Analytics, Inc. (a) | 215 | 17,475 | |||||||
Total Professional Services | 77,996 | ||||||||
Real Estate Investment Trusts (REITs) - 4.0% | |||||||||
AvalonBay Communities, Inc. ^ | 91 | 16,183 | |||||||
Crown Castle International Corporation | 192 | 18,088 | |||||||
Digital Realty Trust, Inc. | 202 | 19,618 | |||||||
Equinix, Inc. ^ | 61 | 21,976 | |||||||
Equity Residential | 240 | 15,439 | |||||||
Essex Property Trust, Inc. ^ | 75 | 16,703 | |||||||
Extra Space Storage, Inc. | 199 | 15,803 | |||||||
Federal Realty Investment Trust ^ | 112 | 17,240 | |||||||
Hannon Armstrong Sustainable Infrastructure Capital, | |||||||||
Inc. | 910 | 21,267 | |||||||
Kimco Realty Corporation | 604 | 17,486 | |||||||
Prologis, Inc. | 402 | 21,523 | |||||||
Realty Income Corporation ^ | 287 | 19,209 | |||||||
Regency Centers Corporation | 227 | 17,590 | |||||||
Simon Property Group, Inc. ^ | 83 | 17,182 | |||||||
UDR, Inc. ^ | 463 | 16,663 | |||||||
Total Real Estate Investment Trusts (REITs) | 271,970 | ||||||||
Real Estate Management & Development - 0.8% | |||||||||
CBRE Group, Inc. (a) | 642 | 17,963 | |||||||
Jones Lang LaSalle, Inc. | 144 | 16,386 | |||||||
St. Joe Co. (a) | 1,002 | 18,417 | |||||||
Total Real Estate Management & Development | 52,766 | ||||||||
Road & Rail - 0.5% | |||||||||
Avis Budget Group, Inc. (a) | 579 | 19,807 | |||||||
Hertz Global Holdings, Inc. (a) | 305 | 12,249 | |||||||
Total Road & Rail | 32,056 |
The accompanying notes are an integral part of these financial statements.
15
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
Semiconductors & Semiconductor Equipment - 6.6% | ||||||||
Analog Devices, Inc. | 291 | $ | 18,755 | |||||
Applied Materials, Inc. | 847 | 25,537 | ||||||
Cypress Semiconductor Corporation ^ | 1,920 | 23,347 | ||||||
First Solar, Inc. (a) ^ | 235 | 9,280 | ||||||
Integrated Device Technology, Inc. (a) | 790 | 18,249 | ||||||
Intel Corporation ^ | 535 | 20,196 | ||||||
Intersil Corporation | 1,216 | 26,667 | ||||||
KLA-Tencor Corporation | 239 | 16,661 | ||||||
Lam Research Corporation ^ | 220 | 20,836 | ||||||
Linear Technology Corporation ^ | 378 | 22,412 | ||||||
Maxim Integrated Products, Inc. | 487 | 19,446 | ||||||
Microchip Technology, Inc. | 347 | 21,563 | ||||||
NVIDIA Corporation | 531 | 36,384 | ||||||
ON Semiconductor Corporation (a) | 1,818 | 22,398 | ||||||
Power Integrations, Inc. | 338 | 21,304 | ||||||
QUALCOMM, Inc. ^ | 312 | 21,372 | ||||||
Rambus, Inc. (a) | 1,251 | 15,638 | ||||||
Skyworks Solutions, Inc. | 224 | 17,055 | ||||||
SunPower Corporation (a) | 674 | 6,012 | ||||||
Teradyne, Inc. | 818 | 17,652 | ||||||
Texas Instruments, Inc. ^ | 295 | 20,703 | ||||||
Xilinx, Inc. | 349 | 18,965 | ||||||
Total Semiconductors & Semiconductor Equipment | 440,432 | |||||||
Software - 3.9% | ||||||||
Activision Blizzard, Inc. | 531 | 23,523 | ||||||
Adobe Systems, Inc. (a) ^ | 191 | 20,731 | ||||||
ANSYS, Inc. (a) | 185 | 17,133 | ||||||
Autodesk, Inc. (a) ^ | 282 | 20,397 | ||||||
FireEye, Inc. (a) ^ | 914 | 13,463 | ||||||
Intuit, Inc. | 164 | 18,042 | ||||||
NetSuite, Inc. (a) | 255 | 28,227 | ||||||
Red Hat, Inc. (a) | 245 | 19,803 | ||||||
salesforce.com, Inc. (a) | 233 | 16,620 | ||||||
ServiceNow, Inc. (a) | 281 | 22,241 | ||||||
Splunk, Inc. (a) | 369 | 21,653 | ||||||
Tableau Software, Inc. (a) | 368 | 20,339 | ||||||
Workday, Inc. (a) ^ | 226 | 20,722 | ||||||
Total Software | 262,894 | |||||||
Specialty Retail - 3.1% | ||||||||
Advance Auto Parts, Inc. | 108 | 16,105 | ||||||
AutoZone, Inc. (a) | 21 | 16,135 | ||||||
Foot Locker, Inc. | 262 | 17,743 | ||||||
L Brands, Inc. | 191 | 13,517 | ||||||
Lowe’s Cos, Inc. | 231 | 16,681 | ||||||
The accompanying notes are an integral part of these financial statements.
16
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
O’Reilly Automotive, Inc. (a) | 62 | $ | 17,367 | |||||
Ross Stores, Inc. | 284 | 18,261 | ||||||
The Home Depot, Inc. ^ | 130 | 16,728 | ||||||
Tiffany & Co. | 235 | 17,068 | ||||||
TJX Cos, Inc. | 219 | 16,377 | ||||||
Tractor Supply Co. | 190 | 12,797 | ||||||
Ulta Salon Cosmetics & Fragrance, Inc. (a) | 99 | 23,560 | ||||||
Williams-Sonoma, Inc. ^ | 288 | 14,711 | ||||||
Total Specialty Retail | 217,050 | |||||||
Technology Hardware, Storage & Peripherals - 1.2% | ||||||||
3D Systems Corporation (a) ^ | 1,281 | 22,994 | ||||||
Apple, Inc. | 162 | 18,314 | ||||||
NetApp, Inc. | 613 | 21,958 | ||||||
Western Digital Corporation | 334 | 19,529 | ||||||
Total Technology Hardware, Storage & Peripherals | 82,795 | |||||||
Textiles, Apparel & Luxury Goods - 1.4% | ||||||||
Hanesbrands, Inc. | 604 | 15,251 | ||||||
Lululemon Athletica, Inc. (a) | 264 | 16,100 | ||||||
NIKE, Inc. ^ | 276 | 14,531 | ||||||
Ralph Lauren Corporation | 167 | 16,891 | ||||||
Under Armour, Inc. - Class A (a) ^ | 227 | 8,780 | ||||||
Under Armour, Inc. - Class C (a) ^ | 197 | 6,670 | ||||||
VF Corporation | 249 | 13,956 | ||||||
Total Textiles, Apparel & Luxury Goods | 92,179 | |||||||
Thrifts & Mortgage Finance - 1.1% | ||||||||
Capitol Federal Financial, Inc. | 1,284 | 18,066 | ||||||
New York Community Bancorp, Inc. ^ | 1,047 | 14,899 | ||||||
TFS Financial Corporation | 1,102 | 19,626 | ||||||
Washington Federal, Inc. | 726 | 19,370 | ||||||
Total Thrifts & Mortgage Finance | 71,961 | |||||||
Trading Companies & Distributors - 1.8% | ||||||||
Air Lease Corporation | 522 | 14,919 | ||||||
Fastenal Co. ^ | 357 | 14,915 | ||||||
GATX Corporation ^ | 328 | 14,612 | ||||||
Herc Holdings, Inc. (a) | 101 | 3,404 | ||||||
MSC Industrial Direct Co., Inc. ^ | 232 | 17,031 | ||||||
United Rentals, Inc. (a) | 272 | 21,350 | ||||||
WESCO International, Inc. (a) | 328 | 20,169 | ||||||
WW Grainger, Inc. ^ | 73 | 16,413 | ||||||
Total Trading Companies & Distributors | 122,813 | |||||||
Water Utilities - 0.7% | ||||||||
American States Water Co. | 398 | 15,940 | ||||||
American Water Works Co., Inc. | 245 | 18,336 |
The accompanying notes are an integral part of these financial statements.
17
Etho Climate Leadership U.S. ETF
Schedule of Investments
September 30, 2016 (Continued)
Shares | Market Value | |||||||
Aqua America, Inc. | 525 | $ | 16,002 | |||||
Total Water Utilities | 50,278 | |||||||
Total United States | 6,260,279 | |||||||
Virgin Islands (UK) - 0.2% | ||||||||
Textiles, Apparel & Luxury Goods - 0.2% | ||||||||
Michael Kors Holdings Ltd. (a) | 285 | 13,335 | ||||||
TOTAL COMMON STOCKS (Cost $6,478,497) | 6,689,268 | |||||||
MUTUAL FUNDS - 0.6% | ||||||||
American Capital Ltd. (a) | 1,161 | 19,633 | ||||||
Fifth Street Finance Corporation | 3,549 | 20,619 | ||||||
TOTAL MUTUAL FUNDS (Cost $36,797) | 40,252 | |||||||
SHORT-TERM INVESTMENTS - 17.9% | ||||||||
Mount Vernon Prime Portfolio, 0.68% (b) + | 1,211,974 | 1,211,974 | ||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $1,211,974) | 1,211,974 | |||||||
Total Investments (Cost $7,727,268) - 117.6% | 7,941,494 | |||||||
Liabilities in Excess of Other Assets - (17.6)% | (1,190,671 | ) | ||||||
TOTAL NET ASSETS - 100.0% | $ | 6,750,823 |
Percentages are stated as a percent of net assets.
(a) | Non-income producing security. |
(b) | The rate quoted is the annualized seven-day yield at September 30, 2016. |
^ | All or a portion of this security is out on loan as of September 30, 2016. Total value of securities out on loan is $1,194,502. |
+ | Investments purchased with cash proceeds from securities lending. Total cash collateral has a value of $1,211,974 as of September 30, 2016. |
The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.
The accompanying notes are an integral part of these financial statements.
18
Etho Climate Leadership U.S. ETF
Etho Climate Leadership U.S. ETF | ||||
ASSETS | ||||
Investments in securities, at fair value* | $ | 7,941,494 | ||
Cash | 58,134 | |||
Receivable for fund shares sold | 185,186 | |||
Dividends and interest receivable | 5,262 | |||
Securities lending income receivable | 601 | |||
Total Assets | 8,190,677 | |||
LIABILITIES | ||||
Payable for investments purchased | 225,621 | |||
Collateral received for securities loaned (Note 7) | 1,211,974 | |||
Management fees payable | 2,259 | |||
Total Liabilities | 1,439,854 | |||
Net Assets | $ | 6,750,823 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in Capital | $ | 6,498,665 | ||
Undistributed (accumulated) net investment income | 6,916 | |||
Accumulated net realized gain on investments | 31,016 | |||
Net unrealized appreciation on: | ||||
Investments in securities | 214,226 | |||
Net Assets | $ | 6,750,823 | ||
*Identified Cost: | ||||
Investments in unaffiliated securities | $ | 7,727,268 | ||
Shares Outstanding^ | 250,000 | |||
Net Asset Value, Offering and Redemption Price per Share | $ | 27.00 |
^ No par value, unlimited number of shares authorized
The accompanying notes are an integral part of these financial statements.
19
Etho Climate Leadership U.S. ETF
Etho Climate Leadership U.S. ETF1 | ||||
INVESTMENT INCOME | ||||
Income: | ||||
Dividends from unaffiliated securities | $ | 41,610 | ||
Securities lending income | 2,243 | |||
Total Investment Income | 43,853 | |||
Expenses: | ||||
Management fees | 14,937 | |||
Total Expenses | 14,937 | |||
Net Investment Income (Loss) | 28,916 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net Realized Gain on: | ||||
Unaffiliated investments | 24,977 | |||
In-Kind redemptions | 59,424 | |||
Net realized gain on investments and In-Kind redemptions | 84,401 | |||
Net Change in Unrealized Appreciation of: | ||||
Unaffiliated investments in securities and foregin currency | 214,226 | |||
Net Realized and Unrealized Gain on Investments | 298,627 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 327,543 |
1 | Fund commenced operations on November 18, 2015. The information presented is for the period from November 18, 2015 to September 30, 2016. |
The accompanying notes are an integral part of these financial statements.
20
Etho Climate Leadership U.S. ETF
Period Ended September 30, 2016* | ||||
OPERATIONS | ||||
Net investment income | $ | 28,916 | ||
Net realized gain on investments and In-Kind redemptions | 84,401 | |||
Net change in unrealized appreciation of investments | 214,226 | |||
Net increase in net assets resulting from operations | 327,543 | |||
DISTRIBUTIONS TO SHAREHOLDERS | ||||
From net investment income | ||||
(22,000 | ) | |||
CAPITAL SHARE TRANSACTIONS | ||||
Net increase in net assets derived | ||||
from net change in outstanding shares (a) | 6,445,280 | |||
Net increase in net assets | 6,750,823 | |||
NET ASSETS | ||||
Beginning of Period | — | |||
End of Period | $ | 6,750,823 | ||
Undistributed net investment income | $ | 6,916 |
(a) Summary of share transactions is as follows:
Period Ended September 30, 2016* | ||||||||
Shares | Amount | |||||||
Shares Sold | 300,000 | $ | 7,688,910 | |||||
Reinvested Dividends | — | — | ||||||
Shares Redeemed | (50,000 | ) | (1,243,630 | ) | ||||
250,000 | $ | 6,445,280 | ||||||
Beginning Shares | — | |||||||
Ending Shares | 250,000 |
* Fund commenced operations on November 18, 2015. The information presented is for the period from November 18, 2015 to September 30, 2016.
The accompanying notes are an integral part of these financial statements.
21
Etho Climate Leadership U.S. ETF
For a capital share outstanding throughout the period
Period Ended September 30, 20161 | ||||
Net Asset Value, Beginning of Period | $ | 25.00 | ||
Income (Loss) from Investment Operations: | ||||
Net investment income 2 | 0.23 | |||
Net realized and unrealized gain on investments | 1.87 | |||
Total from investment operations | 2.10 | |||
Less Distributions: | ||||
Distributions from net investment income | (0.10 | ) | ||
Total distributions | (0.10 | ) | ||
Net asset value, end of period | $ | 27.00 | ||
Total Return | 8.43% | 3 | ||
Ratios/Supplemental Data: | ||||
Net assets at end of period (000’s) | $ | 6,751 | ||
Expenses to Average Net Assets | 0.50% | 4 | ||
Net Investment Income (Loss) to Average Net Assets | 1.04% | 4 | ||
Portfolio Turnover Rate | 25% | 3 |
1Commencement of operations on November 18, 2015.
2Calculated based on average shares outstanding during the period.
3Not annualized.
4Annualized.
The accompanying notes are an integral part of these financial statements.
22
Etho Climate Leadership U.S. ETF
September 30, 2016
NOTE 1 – ORGANIZATION
Etho Climate Leadership U.S. ETF (the “Fund”) is a series of ETF Managers Trust (the “Trust”), an open-end management investment company consisting of multiple investment series, organized as a Delaware statutory trust on July 1, 2009. The Trust is registered with the SEC under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and the offering of the Fund’s shares (“Shares”) is registered under the Securities Act of 1933, as amended (the “Securities Act”). The Fund seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Etho Climate Leadership Index™ Index (“the Index”). The Fund commenced operations on November 18, 2015.
The Fund currently offers one class of shares, which has no front end sales load, no deferred sales charges, and no redemption fees. The Fund may issue an unlimited number of shares of beneficial interest, with no par value. All shares of the Fund have equal rights and privileges.
Shares of the Fund are listed and traded on the NYSE Arca, Inc. Market prices for the Shares may be different from their net asset value (“NAV”). The Fund issues and redeems Shares on a continuous basis at NAV only in blocks of 50,000 shares, called “Creation Units.” Creation Units are issued and redeemed principally in-kind for securities included in the Index. Once created, Shares generally trade in the secondary market at market prices that change throughout the day in quantities less than a Creation Unit. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund. Shares of the Fund may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem the Shares directly from the Fund. Rather, most retail investors may purchase Shares in the secondary market with the assistance of a broker and may be subject to customary brokerage commissions or fees.
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
A. | Security Valuation. Securities listed on a securities exchange, market or automated quotation system for which quotations are readily available (except for securities traded on NASDAQ), including securities traded over the counter, are valued at the last quoted sale price on the primary exchange or market (foreign or domestic) on which they are traded on the valuation date (or at approximately 4:00 pm Eastern Time if a security’s primary exchange is normally open at that time), or, if there is no such reported sale on the valuation date, at the most recent quoted bid price. For securities traded on NASDAQ, the NASDAQ Official Closing Price will be used. |
Securities for which quotations are not readily available are valued at their respective fair values as determined in good faith by the Board of Trustees (the “Board”). When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the pricing procedures adopted by the Fund’s Board. The use of fair value pricing by the Fund may cause the net asset value of its shares to differ significantly from the net asset value that would be calculated without regard to such considerations. As of September 30, 2016, the Fund did not hold any fair valued securities.
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Etho Climate Leadership U.S. ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
As described above, the Fund utilizes various methods to measure the fair value of its investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:
Level 1 | Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. |
Level 2 | Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
Level 3 | Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The following table presents a summary of the Funds’ assets measured at fair value:
Etho Climate Leadership U.S. ETF
Assets^ | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 6,689,268 | $ | — | $ | — | $ | 6,689,268 | ||||||||
Mutual Funds | 40,252 | — | — | 40,252 | ||||||||||||
Short-Term Investments | 1,211,974 | — | — | 1,211,974 | ||||||||||||
Total Investments in Securities | $ | 7,941,494 | $ | — | $ | — | $ | 7,941,494 |
^ See Schedule of Investments for classifications by sector or country.
There were no transfers between Levels 1, 2 and 3 during the period ended September 30, 2016. Transfers between levels are recognized at the end of the reporting period.
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Etho Climate Leadership U.S. ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
B. | Federal Income Taxes. The Fund has elected to be taxed as a “regulated investment company” and intends to distribute substantially all taxable income to its shareholders and otherwise comply with the provisions of the Internal Revenue Code applicable to regulated investment companies. Therefore, no provisions for federal income taxes or excise taxes have been made. |
To avoid imposition of the excise tax applicable to regulated investment companies, the Fund intends to declare each year as dividends, in each calendar year, at least 98.0% of its net investment income (earned during the calendar year) and 98.2% of its net realized capital gains (earned during the twelve months ended October 31) plus undistributed amounts, if any, from prior years.
Net capital losses incurred after October 31, within the taxable year are deemed to arise on the first business day of the Fund’s next taxable year.
The Fund recognizes the tax benefits of uncertain tax positions only where the position is “more likely than not” to be sustained assuming examination by tax authorities. The Fund has analyzed its tax position and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions expected to be taken in the Fund’s 2016 tax returns. The Fund identifies its major tax jurisdictions as U.S. Federal, the State of New Jersey, and the State of Delaware; however the Fund is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next twelve months.
C. | Security Transactions and Investment Income. Investment securities transactions are accounted for on the trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Discounts/premiums on debt securities purchased are accreted/amortized over the life of the respective securities using the effective interest method. Dividend income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Income, including gains, from investments in foreign securities received by the Fund may be subject to income, withholding or other taxes imposed by foreign countries. |
D. | Foreign Currency Translations and Transactions. The Fund may engage in foreign currency transactions. Foreign currency transactions are translated into U.S. dollars on the following basis: (i) market value of investment securities, assets and liabilities at the daily rates of exchange, and (ii) purchases and sales of investment securities, dividend and interest income and certain expenses at the rates of exchange prevailing on the respective dates of such transactions. For financial reporting purposes, the Fund does not isolate changes in the exchange rate of investment securities from the fluctuations arising from changes in the market prices of securities for unrealized gains and losses. However, for federal income tax purposes, the Fund does isolate and treat as ordinary income the effect of changes in foreign exchange rates on realized gains or losses from the sale of investment securities and payables and receivables arising from trade-date and settlement-date differences. |
E. | Distributions to Shareholders. Distributions to shareholders from net investment income, if any, are declared and paid by the Fund on a quarterly basis. Distributions to shareholders from net realized gains on securities of the Fund normally are declared and paid on an annual basis. Distributions are recorded on the ex-dividend date. |
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Etho Climate Leadership U.S. ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
F. | Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenes during the period. Actual results could differ from those estimates. |
G. | Share Valuation. The net asset value (“NAV”) per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding by the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on the days on which the NYSE is closed for trading. The offering and redemption price per share for the Fund is equal to the Fund’s net asset value per share. |
H. | Guarantees and Indemnifications. In the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote. |
NOTE 3 – DERIVATIVE INSTRUMENTS AND HEDGING ACTIVITIES
The “Derivatives and Hedging” Topic of the Codification (Accounting Standards Codification 815, formerly Statement of Financial Accounting Standards (“SFAS”) 133 and SFAS 161) requires enhanced disclosures about the Fund’s derivative and hedging activities, including how such activities are accounted for and their effect on the Fund’s financial position, performance and cash flows. The Fund did not use derivatives during the period ended September 30, 2016.
NOTE 4 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS.
ETF Managers Group, LLC (the “Advisor”), serves as the investment advisor to the Fund. Pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between the Trust, on behalf of the Fund, and the Advisor, the Advisor provides investment advice to the Fund and oversees the day-today operations of the Fund, subject to the direction and control of the Board and the officers of the Trust. Under the Advisory Agreement, the Advisor is also responsible for arranging transfer agency, custody, fund administration and accounting, and other non-distribution related services necessary for the Fund to operate.
Under the Investment Advisory Agreement with the Fund, the Advisor has overall responsibility for the general management and administration of the Fund and arranges for sub-advisory, transfer agency, custody, fund administration, securities lending, and all other non-distribution related services necessary for the Fund to operate. The Advisor bears the costs of all advisory and non-advisory services required to operate the Fund, in exchange for a single unitary fee. At a meeting of the Board held on March 17, 2016, the Board approved the reduction in unitary fees to ensure that total expenses do not exceed 0.45% of the Fund’s annual average net assets, from a previous unitary fee of 0.75%. The Advisor has an agreement with, and is dependent on, a third party to pay the Fund’s expenses in excess of 0.45% of the Fund’s average daily net assets. Additionally, under the Investment Advisory Agreement, the Advisor has agreed to pay all expenses of the Fund, except for: the fee paid to the Advisor pursuant to the Investment Advisory Agreement, interest charges on any borrowings, taxes, brokerage commissions and other expenses incurred in placing orders for the Purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution (12b-1) fees and expenses (collectively, “Excluded Expenses”). The Advisor has entered into an Agreement with Etho Climate Leadership U.S. (the “Sponsor”), under which the Sponsor agrees to sublicense the use of the Underlying Index to the Advisor. The Sponsor also provides marketing support for the Fund, including distributing marketing materials related to the Fund. Etho Climate Leadership U.S. is a privately held business focused on bringing exchange-traded investment products to investors in the U.S. The Sponsor does not make investment decisions, provide investment advice, or otherwise act in the capacity of an investment adviser to the Fund. Additionally, the Sponsor is not involved in the maintenance of the Underlying Index and does not otherwise act in the capacity of an index provider.
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Etho Climate Leadership U.S. ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
U.S. Bancorp Fund Services, LLC (the “Administrator”) provides fund accounting, fund administration, and transfer agency services to the Fund. The Advisor compensates the Administrator for these services under an administration agreement between the two parties.
The Advisor pays each independent Trustee a quarterly fee for service to the Fund. Each Trustee is also reimbursed by the Advisor for all reasonable out-of-pocket expenses incurred in connection with his duties as Trustee, including travel and related expenses incurred in attending Board meetings.
NOTE 5 – DISTRIBUTION PLAN
The Fund has adopted a Plan of Distribution pursuant to Rule 12b-1 under the 1940 Act. Under the Plan, the Fund may pay compensation to the Distributor or any other distributor or financial institution with which the Trust has an agreement with respect to the Fund, with the amount of such compensation not to exceed an annual rate of 0.25% of each Fund’s average daily net assets. For the period ended September 30, 2016, the Fund did not incur any 12b-1 expenses.
NOTE 6 - PURCHASES AND SALES OF SECURITIES
The costs of purchases and sales of securities, excluding short-term securities and in-kind transactions, for the period ended September 30, 2016:
Purchases | Sales | |||||||
Etho Climate Leadership U.S. ETF | $ | 1,047,061 | $ | 897,052 |
The costs of purchases and sales of in-kind transactions associated with creations and redemptions for the period ended September 30, 2016:
Purchases In- Kind | Sales In- Kind | |||||||
Etho Climate Leadership U.S. ETF | $ | 7,651,549 | $ | 1,227,217 |
Purchases in-kind are the aggregate of all in-kind purchases and sales in-kind are the aggregate of all proceeds from in-kind sales. Net capital gains or losses resulting from in-kind redemptions are excluded from the determination of the Fund’s taxable gains and are not distributed to shareholders.
During the period ended September 30, 2016, the Fund incurred broker commissions to an affiliated broker, Penserra Securities, LLC sub-advisor in the amount of $423.
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Etho Climate Leadership U.S. ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
There were no purchases or sales of U.S. Government obligations for the period ended September 30, 2016.
NOTE 7 — SECURITIES LENDING
The Fund may lend up to 33 1/3% of the value of the securities in its portfolio to brokers, dealers and financial institutions (but not individuals) under terms of participation in a securities lending program administered by U.S. Bank N.A. (“the Custodian”). The securities lending agreement requires that loans are collateralized at all times in an amount equal to at least 102% of the value of any loaned securities at the time of the loan, plus accrued interest. The Fund receives compensation in the form of fees and earn interest on the cash collateral. The amount of fees depends on a number of factors including the type of security and length of the loan. The Fund continues to receive interest payments or dividends on the securities loaned during the borrowing period. Gain or loss in the fair value of securities loaned that may occur during the term of the loan will be for the account of the Fund. The Fund has the right under the terms of the securities lending agreement to recall the securities from the borrower on demand. As of September 30, 2016, the Fund had loaned securities and received cash collateral for the loans. The cash collateral is invested by the Custodian in accordance with approved investment guidelines. Those guidelines require the cash collateral to be invested in readily marketable, high quality, short-term obligations; however, such investments are subject to risk of payment delays or default on the part of the issuer or counterparty or otherwise may not generate sufficient interest to support the costs associated with securities lending. The Fund could also experience delays in recovering its securities and possible loss of income or value if the borrower fails to return the borrowed securities, although the Fund is indemnified from this risk by contract with the securities lending agent.
As of September 30, 2016, the value of the securities on loan and payable for collateral due to broker were as follows:
Value of Securities on Loan Collateral Received | |||||||
Fund | Values of Securities on Loan | Fund Collateral Received* | |||||
Etho Climate Leadership U.S. ETF | $ | 1,194,502 | $ | 1,211,974 |
* The cash collateral received was invested in the Mount Vernon Securities Lending Prime Portfolio as shown on the Schedule of Investments, a money market fund with an overnight and continuous maturity.
Fees and interest income earned on collateral investments and recognized by the Fund during the period ended September 30, 2016, were as follows:
Fees and Interest Income Earned | ||||
Fund | Interest income earned net of applicable fees | |||
Etho Climate Leadership U.S. ETF | $ | 2,243 |
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Etho Climate Leadership U.S. ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
September 30, 2016 (Continued)
Offsetting Assets and Liabilities
The Fund is subject to various netting arrangements, which govern the terms of certain transactions with counterparties. The arrangements allow the Fund to close out and net its total exposure to a counterparty in the event of a default with respect to all transactions governed under a single agreement with a counterparty. The following is a summary of the arrangements subject to offsetting as of September 30, 2016.
Fund | Description | Gross Amounts of Recognized Liabilities | Gross Amounts in the Statement of Assets and Liabilities | Net Amounts Presented in the Statement of Assets and Liabilities | Collateral Received | Net Amount | ||||||||||||||||
Etho Climate Leadership U.S. ETF | Securities Lending | $ | 1,211,974 | $ | 1,211,974 | $ | — | $ | 1,211,974 | $ | — |
NOTE 8 – FEDERAL INCOME TAXES
The components of distributable earnings (losses) and cost basis of investments for federal income tax purposes at September 30, 2016 were as follows:
Cost | Gross Unrealized Appreciation | Gross Unrealized Depreciation | Net Unrealized Appreciation (Depreciation) | ||||||||||||
Etho Climate Leadership U.S. ETF | $ | 7,735,765 $ | $ | 434,113 | $ | (228,384) | $ | 205,729 |
Undistributed Ordinary Income | Undistributed Long-term Gain | Total Distributable Earnings | Other Accumulated (Loss) | Total Accumulated Gain | ||||||||||||||||
Etho Climate Leadership U.S. ETF | $ | 45,279 | $ | 1,178 | $ | 46,457 | $ | (28 | ) | $ | 252,158 |
The difference between the tax cost of investments and the cost of investments for GAAP purposes is primarily due to the tax treatment of wash sale losses.
As of September 30, 2016, the Fund had accumulated capital loss carryovers of:
Capital Loss Carryover | Expires | ||
Etho Climate Leadership U.S. ETF | None | Indefinite |
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Etho Climate Leadership U.S. ETF
NOTES TO FINANCIAL STATEMENTS
September 30, 2016 (Continued)
Under current tax law, capital and currency losses realized after October 31 of a Fund’s fiscal year may be deferred and treated as occurring on the first business day of the following fiscal year for tax purposes. The Fund had deferred post-October capital and currency losses, which will be treated as arising on the first business day of the year ended September 30, 2016.
Late Year Ordinary Loss | Post-October Capital Loss | ||
Etho Climate Leadership U.S. ETF | None | None |
NOTE 9 – DISTRIBUTIONS TO SHAREHOLDERS
The Fund paid $22,000 from ordinary income during the period ended September 30, 2016.
NOTE 10 – SUBSEQUENT EVENTS
In preparing these financial statements, the Fund has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued.
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Etho Climate Leadership U.S. ETF
To the Board of Trustees of ETF Managers
Trust and the Shareholders of Etho Climate Leadership U.S. ETF:
We have audited the accompanying statement of assets and liabilities of the ETF Managers Trust, which includes Etho Climate Leadership U.S. ETF (the “Fund”), including the schedule of investments as of September 30, 2016, and the related statements of its operations, the changes in its net assets and financial highlights for the period November 18, 2015 (commencement of operations) to September 30, 2016. These financial statements and financial highlights are the responsibility of the Fund’s management. Our responsibility is to express an opinion on these financial statements and financial highlights based on our audits.
We conducted our audits in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements and financial highlights are free of material misstatement. The Fund is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. Our audits included consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of September 30, 2016 by correspondence with the custodian. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements and financial highlights referred to above present fairly, in all material respects, the financial position of the ETF Managers Trust, which includes Etho Climate Leadership U.S. ETF as of September 30, 2016, and the results of its operations and changes in its net assets and the financial highlights for the periods indicated, in conformity with accounting principles generally accepted in the United States of America.
/s/ WithumSmith+Brown, PC
New York, NY
November 28, 2016
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Etho Climate Leadership U.S. ETF
Etho Climate Leadership U.S. ETF Closing Price vs. NAV
The following Frequency Distribution of Premiums and Discounts chart is provided to show the frequency at which the closing price for each Fund is at a premium or discount to its daily net asset value (NAV). The chart presented represents past performance and cannot be used to predict future results.
Etho Climate Leadership U.S. ETF | November 18, 2015* through September 30, 2016 | ||||
Premium/Discount Range | Number of Days | Percentage of Total Days | |||
Greater than 1.00% | 16 | 7.3 | |||
Greater Than or equal to 0.75% And Less Than 1.00% | 2 | 0.9 | |||
Greater Than or Equal to 0.50% And Less Than 0.75% | 14 | 6.4 | |||
Greater Than or Equal to 0.25% And Less Than 0.50% | 24 | 11.0 | |||
Greater Than or Equal to 0.00% And Less Than 0.25% | 90 | 41.1 | |||
Less Than or Equal to 0.0% And Greater Than -0.25% | 55 | 25.1 | |||
Less Than or Equal to -0.25% And Greater Than -0.50% | 9 | 4.1 | |||
Less Than or Equal to -0.50% And Greater Than -0.75% | 5 | 2.3 | |||
Less Than or Equal to -0.75% And Greater Than -1.00% | 3 | 1.4 | |||
Less than -1.00% | 1 | 0.5 |
*First day of secondary market trading
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Etho Climate Leadership U.S. ETF
September 30, 2016
During the year ended September 30, 2016, the Fund did not declare any long-term realized gains distributions.
Qualified Dividend Income/Dividends Received Deduction
For the fiscal year ended September 30, 2016, certain dividends paid by the Fund may be subject to a maximum tax rate of 15%, as provided for by the Jobs and Growth Tax Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was as follows:
Fund Name | Qualified Dividend Income |
Etho Climate Leadership U.S. ETF | 54.73% |
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal year ended September 30, 2016 was as follows:
Fund Name | Dividends Received Deduction |
Etho Climate Leadership U.S. ETF | 52.02% |
The Fund files a Form N-Q with the Securities and Exchange Commission (the ‘‘SEC’’) no more than sixty days after the Fund’s first and third fiscal quarters. For the Fund, this would be for the fiscal quarters ending June 30 and December 31. Form N-Q includes a complete schedule of the Funds’ portfolio holdings as of the end of those fiscal quarters. The Fund’s N-Q filings can be found free of charge on the SEC’s website at http://www.sec.gov, or they may be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. (call 800-SEC-0330 for information on the operation of the Public Reference Room). The Fund’s portfolio holdings are posted on the Fund’s website at www.ethoetf.com daily.
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is provided in the Statement of Additional Information (“SAI”). The SAI is available without charge upon request by calling toll-free at 1-844-ETF-MGRS (1-844-383-6477), by accessing the SEC’s website at www.sec.gov, or by accessing the Fund’s website at www.ethoetf.com.
Information regarding how the Fund voted proxies relating to portfolio securities during the period ending June 30 is available by calling toll-free at 1-844-ETF-MGRS (1-844-383-6477) or by accessing the SEC’s website at www.sec.gov.
Carefully consider the Fund’s investment objectives, risk factors, charges, and expenses before investing. This and additional information can be found in the Fund’s prospectus, which may be obtained by calling 1-844-ETF-MGRS (1-844-383-6477) or by visiting www.ethoetf.com. Read the prospectus carefully before investing.
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Etho Climate Leadership U.S. ETF
ETF MANAGERS TRUST
ETF Managers Trust, (the “Trust”) has adopted the following privacy policies in order to safeguard the personal information of the Trust’s customers and consumers in accordance with Regulation S-P as promulgated by the U.S. Securities and Exchange Commission.
Trust officers are responsible for ensuring that the following policies and procedures are implemented:
1) | The Trust is committed to protecting the confidentiality and security of the information they collect and will handle personal customer and consumer information only in accordance with Regulation S-P and any other applicable laws, rules and regulations1. The Trust will ensure: (a) the security and confidentiality of customer records and information; (b) that customer records and information are protected from any anticipated threats and hazards; and (c) that customer records and information are protected from unauthorized access or use. |
2) | The Trust conducts its business affairs through its trustees, officers and third parties that provide services pursuant to agreements with the Trust. The Trust has no employees. It is anticipated that the trustees and officers of the Trust who are not employees of service providers of the Trust will not have access to customer records and information in the performance of their normal responsibilities for the Trust. |
3) | The Trust may share customer information with its affiliates, subject to the customers’ right to prohibit such sharing. |
4) | The Trust may share customer information with unaffiliated third parties only in accordance with the requirements of Regulation S-P. Pursuant to this policy, the Trust will not share customer information with unaffiliated third parties other than as permitted by law, unless authorized to do so by the customer. |
Consistent with these policies, the Trust has adopted the following procedures:
1) | The Trust will determine that the policies and procedures of its affiliates and Service Providers are reasonably designed to safeguard customer information and only permit appropriate and authorized access to and use of customer information through the application of appropriate administrative, technical and physical protections. |
2) | The Trust will direct each of its Service Providers to adhere to the privacy policy of the Trust and to its privacy policies with respect to all customer information of the Trust and to take all actions reasonably necessary so that the Trust is in compliance with the provisions of Regulation S-P, including, as applicable, the development and delivery of privacy notices and the maintenance of appropriate and adequate records. |
3) | The Trust requires its Service Providers to provide periodic reports to the Trust’s Board of Trustees outlining their privacy policies and the implementation of such policies. Each Service Provider is required to promptly report to the Trust’s Board any material changes to its privacy policy before, or promptly after, the adoption of such changes. |
1 Generally, the Funds have institutional clients which are not considered “customers” for purposes of regulation S-P.
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Etho Climate Leadership U.S. ETF
For the period Ended September 30, 2016
As a shareholder of Etho Climate Leadership U.S. ETF (the “Fund”) you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period (April 1, 2016 to September 30, 2016).
Actual Expenses
The first line of the table provides information about actual account values based on actual returns and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then, multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account values based on a hypothetical return and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and in other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of Fund shares. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
Etho Climate Leadership U.S. ETF
Beginning Account Value April 1, 2016 | Ending Account Value September 30, 2016 | Expenses Paid During the Period^ | ||||||||||
Actual | $1,000.00 | $1,079.30 | $3.27 | |||||||||
Hypothetical (5% annual) | $1,000.00 | $1,021.85 | $3.18 |
^ The dollar amounts shown as expenses paid during the period are equal to the annualized six-month expense ratio multiplied by the average account value during the period, multiplied by 183/366 (to reflect the period from April 1, 2016 to September 30, 2016.
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Etho Climate Leadership U.S. ETF
Set forth below are the names, birth years, positions with the Trust, length of term of office, and the principal occupations and other directorships held during at least the last five years of each of the persons currently serving as a Trustee of the Trust, as well as information about each officer. The business address of each Trustee and officer is 30 Maple Street, Summit, New Jersey 07901.
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years |
Interested Trustee* and Officers | ||||
Samuel Masucci, III (1962) | Trustee, Chairman of the Board and President (since 2012); Secretary (since 2014) | Chief Executive Officer, Exchange Traded Managers Group, LLC (since 2013); Chief Executive Officer and Chief Compliance Officer, Factor Advisors, LLC (2012-2014); President and Chief Executive Officer, Factor Capital Management LLC (2012-2014); President and Chief Executive Officer, GENCAP Ventures, LLC (holding company) (2012–2013); Chief Executive Officer, MacroMarkets LLC (exchange traded funds) (2005–2011); President, Chief Executive and Chief Compliance Officer, Macro Financial (financial services) (2005–2011). | 12 | None |
Reshma J. Amin (1978) | Chief Compliance Officer (since 2016) | Chief Operating Officer and Chief Compliance Officer, Exchange Traded Managers Group, LLC (since 2016); Partner, Crow & Cushing (2007–2016). | 12 | n/a |
John A. Flanagan (1946) | Treasurer (since 2015) | President, John A. Flanagan CPA, LLC (accounting services) (since 2010); Treasurer, ETF Managers Group, Inc., (since 2015); Chief Financial Officer, ETF Managers Capital, LLC (commodity pool operator) (since 2014); Chief Financial Officer, Macromarkets LLC (exchange traded funds) (2007–2010) | n/a | n/a |
* Mr. Masucci is an interested Trustee by virtue of his role as the Chief Executive Officer of the Adviser.
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Etho Climate Leadership U.S. ETF
Board of Trustees
Name and Year of Birth | Position(s) Held with the Trust, Term of Office and Length of Time Served | Principal Occupation(s) During Past 5 Years | Number of Portfolios in Fund Complex Overseen By Trustee | Other Directorships Held by Trustee During Past 5 Years |
Independent Trustees | ||||
John W. Southard (1969) | Trustee (since 2012) | Director and Co-Founder, T2 Capital Management, 2010 to present; Co-Founder and Head of Research and Trading, PowerShares Capital Management, 2002 to 2009. | 12 | None |
Terry Loebs (1963) | Trustee (since 2014) | Founder and Managing Member, Pulsenomics LLC (index product development and consulting firm) (since 2011); Managing Director, MacroMarkets, LLC (exchange-traded products firm) (2006–2011). | 12 | None |
37
Advisor
ETF Managers Group, LLC
30 Maple Street, Suite 2, Summit, NJ 07901
30 Maple Street, Suite 2, Summit, NJ 07901
Sub-Adviser
Penserra Capital Management, LLC
4 Orinda Way, Suite 100-A, Orinda, CA 94563
Penserra Capital Management, LLC
4 Orinda Way, Suite 100-A, Orinda, CA 94563
Distributor
ALPS Distributors, Inc.
1290 Broadway, Suite 1100, Denver, Colorado 80203
Custodian
U.S. Bank National Association
Custody Operations
Custody Operations
1555 North River Center Drive, Suite 302, Milwaukee, Wisconsin 53212
Transfer Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street, Milwaukee, Wisconsin 53202
Securities Lending Agent
U.S Bank, National Association
Securities Lending
800 Nicolet Mall
Minneapolis, MN 55402-7020
Securities Lending
800 Nicolet Mall
Minneapolis, MN 55402-7020
Independent Registered Public Accounting Firm
WithumSmith + Brown, PC
1411 Broadway, 9th Floor, New York, NY 10018
Legal Counsel
Sullivan & Worcester LLP
1666 K Street NW, Washington, DC 20006
1666 K Street NW, Washington, DC 20006
Item 2. Code of Ethics.
The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report.
A copy of the registrant’s Code of Ethics is filed herewith
Item 3. Audit Committee Financial Expert.
The Board believes that the collective knowledge and experience of the members of the audit committee enable the committee to provide appropriate oversight given the Trust's level of financial complexity. In addition, the Board notes that the audit committee has the authority to retain any experts necessary to carry out its duties.
Item 4. Principal Accountant Fees and Services.
The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past fiscal year. “Audit services” refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no “Other services” provided by the principal accountant. The following table details the aggregate fees billed or expected to be billed for the last fiscal year for audit fees, audit-related fees, tax fees and other fees by the principal accountant.
FYE 9/30/2016 | FYE 9/30/2015 | |||||||
Audit Fees | $ | 218,000 | $ | 90,000 | ||||
Audit-Related Fees | N/A | N/A | ||||||
Tax Fees | $30,000 | $ | 10,000 | |||||
All Other Fees | N/A | N/A |
The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre‑approve all audit and non‑audit services of the registrant, including services provided to any entity affiliated with the registrant.
The percentage of fees billed by WithumSmith+Brown, PC applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:
FYE 9/30/2016 | FYE 9/30/2015 | |||||||
Audit-Related Fees | 0% | 0% | ||||||
Tax Fees | 0% | 0% | ||||||
All Other Fees | 0% | 0% |
All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full‑time permanent employees of the principal accountant.
The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (and any other controlling entity, etc.—not sub-adviser) for the past year. The audit committee of the board of trustees/directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant’s independence.
Non-Audit Related Fees | FYE 9/30/2016 | FYE 9/30/2015 | ||||||
Registrant | N/A | N/A | ||||||
Registrant’s Investment Adviser | N/A | N/A |
Item 5. Audit Committee of Listed Registrants.
Not applicable to registrants who are not listed issuers (as defined in Rule 10A-3 under the Securities Exchange Act of 1934).
Item 6. Investments.
Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed‑End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) | The Registrant’s Principal Executive Officer and Principal Financial Officer/Treasurer have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d‑15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal quarter of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Filed herewith. |
(2) A separate certification for each principal executive and Treasurer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c‑1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(b) | Certifications pursuant to Section 906 of the Sarbanes‑Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) ETF Managers Trust
By (Signature and Title /s/ Samuel Masucci III
Samuel Masucci III, Principal Executive Officer
Date December 7, 2016
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* /s/ Samuel Masucci III
Samuel Masucci III, Principal Executive Officer
Date December 7, 2016
By (Signature and Title)* /s/ John Flanagan
John Flanagan, Principal Financial Officer/Treasurer
Date December 7, 2016
* Print the name and title of each signing officer under his or her signature.