UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment Company Act file number:
811-22175
ALPS ETF TRUST
(Exact name of registrant as specified in charter)
1290 Broadway, Suite 1100, Denver, Colorado 80203
(Address of principal executive offices) (Zip code)
Andrea E. Kuchli, Esq., Secretary
ALPS ETF Trust
1290 Broadway, Suite 1100
Denver, Colorado 80203
(Name and address of agent for service)
Registrant’s Telephone Number, including Area Code: (303) 623-2577
Date of fiscal year end: November 30
Date of reporting period: December 1, 2017 – May 31, 2018
Item 1. Report to Stockholders.
TABLE OF CONTENTS |
Performance Overview | |
Alerian MLP ETF | 1 |
Alerian Energy Infrastructure ETF | 4 |
Disclosure of Fund Expenses | 7 |
Financial Statements | |
Alerian MLP ETF | |
Schedule of Investments | 8 |
Statement of Assets and Liabilities | 9 |
Statement of Operations | 10 |
Statements of Changes in Net Assets | 11 |
Financial Highlights | 12 |
Alerian Energy Infrastructure ETF | |
Schedule of Investments | 13 |
Statement of Assets and Liabilities | 15 |
Statement of Operations | 16 |
Statements of Changes in Net Assets | 17 |
Financial Highlights | 18 |
Notes to Financial Statements | 19 |
Additional Information | 30 |
Board Considerations Regarding Approval of Investment Advisory Agreements | 32 |
alpsfunds.com
Alerian MLP ETF
Performance Overview | May 31, 2018 (Unaudited) |
INVESTMENT OBJECTIVE
The Alerian MLP ETF (the “Fund” or “AMLP”) seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the Alerian MLP Infrastructure Index (the “Underlying Index” or “AMZI”). The Shares of the Fund are listed and trade on the New York Stock Exchange (“NYSE”) Arca under the ticker symbol AMLP. The Fund generally will invest in all of the securities that comprise the Index in proportion to their weightings in the Underlying Index.
The Underlying Index is a rules based, modified capitalization weighted, float-adjusted index intended to give investors a means of tracking the overall performance of the United States energy infrastructure Master Limited Partnership (“MLP”) asset class. The Underlying Index is comprised of energy infrastructure MLPs that earn a majority of their cash flow from the transportation, storage, and processing of energy commodities.
PERFORMANCE OVERVIEW
During the six-month period from December 1, 2017 to May 31, 2018, the Fund delivered a total return of 3.84% (3.54% NAV). This compares to the Fund’s Underlying Index, which was roughly flat (+0.10%) on a price-return basis but gained 4.03% on a total-return basis. The difference in the performance between the AMZI and AMLP is primarily attributable to the Fund’s operating expenses and the tax impact of the Fund’s C-corporation structure.
During the period, NGL Energy Partners (NGL) was added to the index in the December quarterly review.
For the first quarter of 2018 relative to the prior quarter, 16 of the 26 constituents in the index increased their distribution, eight constituents kept their distribution steady, and two constituents cut their distributions. While most names grew their distribution, the distribution cuts tended to add to the headline risk in the MLP space.
Turning to performance, MLPs gained in December and January as crude prices increased following OPEC’s November 30th decision to extend its production cuts through 2018. West Texas Intermediate (WTI) crude prices rallied from the mid-$50’s to reach the mid-$60’s per barrel by the end of January.
Despite the good start to the year, MLPs were pressured in February and March by a series of negative headlines, including distribution cuts, corporate reorganizations and unanticipated news from the Federal Energy Regulatory Commission (FERC). On March 15th, the FERC announced that MLPs could no longer include an income tax allowance in their cost-of-service pipeline rates. While only select assets of select MLPs will likely be impacted and cost-of-service pipeline rates are not necessarily decreasing, MLPs were broadly sold in a textbook example of a market overreaction.
MLPs recovered in April and May against a backdrop of rising crude prices. With WTI crude prices ending May at $67 per barrel, US oil and gas production is growing significantly at this price level, with US oil production exceeding that of Saudi Arabia for the first time in March. As volume-driven businesses, MLPs stand to benefit from this production growth, which results in more volumes to transport and process. The need for additional pipeline infrastructure is highlighted by the Permian Basin, where both crude and natural gas prices have seen widening discounts to benchmarks due to insufficient pipeline takeaway capacity.
While energy companies broadly have lagged the improvement in crude prices year-to-date, MLPs have been particularly pressured by headline risk. This noise has distracted from the underlying fundamentals, which are constructive. MLPs continue to announce new growth projects to meet infrastructure demand created by US oil and gas production growth. As the US becomes a major energy supplier for the world, infrastructure investment will be required to process hydrocarbons and transport them to end markets, which will increasingly be overseas. This dynamic supports cash flow growth for fee-based midstream assets.
1 | May 31, 2018
Alerian MLP ETF
Performance Overview | May 31, 2018 (Unaudited) |
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | 5 Year | Since Inception^ | |
Alerian MLP ETF – NAV | 3.54% | -6.83% | -7.32% | -2.96% | 2.18% |
Alerian MLP ETF – Market Price* | 3.84% | -6.64% | -7.23% | -2.90% | 2.21% |
Alerian MLP Infrastructure Index | 4.03% | -6.89% | -8.97% | -3.04% | 4.61% |
S&P 500® Total Return Index | 3.16% | 14.38% | 10.97% | 12.98% | 15.34% |
Total Expense Ratio (per the current prospectus) 0.85%.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.877.398.8461. The Fund accrues deferred income taxes for future tax liabilities associated with the portion of MLP distributions considered to be a tax-deferred return of capital and for any net operating gains as well as capital appreciation of its investment. This deferred tax liability is reflected in the daily NAV and as a result the fund's after-tax performance could differ significantly from the underlying assets even if the pre-tax performance is closely tracked.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced Investment Operations on August 24, 2010 with an Inception Date, the first day of trading on the NYSE ARCA, of August 25, 2010. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The Alerian MLP Infrastructure Index is comprised of 26 midstream energy Master Limited Partnerships and provides investors with an unbiased benchmark for the infrastructure component of this emerging asset class.
S&P 500® Total Return Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. Total return assumes reinvestment of any dividends and distributions realized during a given time period.
The index is not actively managed and does not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The Alerian MLP ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the Fund.
2 | May 31, 2018
Alerian MLP ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018) | |
Enterprise Products Partners LP | 11.10% |
Magellan Midstream Partners LP | 10.93% |
Energy Transfer Partners LP | 10.18% |
MPLX LP | 8.66% |
Williams Partners LP | 8.51% |
Plains All American Pipeline LP | 8.34% |
Buckeye Partners LP | 4.42% |
Western Gas Partners LP | 4.35% |
Andeavor Logistics LP | 3.20% |
DCP Midstream LP | 3.18% |
Total% of Top 10 Holdings | 72.87% |
* | % of Total Investments |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of change in value of a $10,000 investment in the Fund and the Indexes
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
3 | May 31, 2018
Alerian Energy Infrastructure ETF
Performance Overview | May 31, 2018 (Unaudited) |
INVESTMENT OBJECTIVE
The Alerian Energy Infrastructure ETF (the “Fund” or “ENFR”) seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the Alerian Energy Infrastructure Index (the “Underlying Index” or “AMEI”). As a secondary objective, the Fund seeks to provide total return through income and capital appreciation.
The Underlying Index is a composite of North American energy infrastructure companies engaged in the pipeline transportation, storage, and processing of energy commodities (also known as “midstream energy businesses”). Currently, each constituent is assigned to one of four categories: (i) U.S. Energy Infrastructure Master Limited Partnerships (“MLPs”) (ii) U.S. General Partners, (iii) U.S. Energy Infrastructure Companies, and (iv) Canadian Energy Infrastructure Companies. Each category is assigned an index weight of 25%.
PERFORMANCE OVERVIEW
During the six-month period of December 1, 2017 to May 31, 2018, the Fund delivered a total return of -0.68% (-0.77% NAV). This compares to the Fund’s Underlying Index, which fell 3.37% on a price-return basis and fell 0.36% on a total-return basis.
Antero Midstream GP (AMGP) was added to the index during the December 2017 quarterly review, while Antero Midstream Partners (AM) and Archrock Inc (AROC) were removed.
Energy infrastructure companies performed well in December and January against the backdrop of rising crude prices, following OPEC’s November 30th decision to extend production cuts through 2018.
Specific to the energy infrastructure space, there were a series of negative headlines in February and March that weighed on performance, including dividend cuts and corporate reorganizations. Macquarie Infrastructure Corp (MIC) announced a dividend cut, and NuStar GP Holdings (NSH) announced a distribution cut and plans to merge with its MLP, NuStar Energy (NS). On March 15th, the FERC announced that MLPs could no longer include an income tax allowance in their cost-of-service pipeline rates. At the same time, FERC announced a proposed rulemaking that would allow FERC to determine which interstate natural gas pipelines may be overearning given the lowered corporate tax rate and the change in policy regarding the income tax allowance for MLPs. While only select assets of select MLPs and corporations will likely be impacted and cost-of-service pipeline rates are not necessarily decreasing, energy infrastructure companies, particularly MLPs, were broadly sold in a textbook example of a market overreaction. Energy infrastructure companies recovered in April and May as oil prices increased.
While headline risk has been a headwind for the space, the underlying fundamentals for North American energy infrastructure are quite constructive. According to the International Energy Agency, the US and Canada combined produced 19.4 million barrels per day of crude and natural gas liquids in the first quarter of 2018 – accounting for nearly 20% of global supply. On the natural gas side, US production reached a new record high in March 2018, and Canadian natural gas production also continues to grow. This production growth creates opportunities for energy infrastructure companies to build new projects, providing visibility to cash flow growth.
4 | May 31, 2018
Alerian Energy Infrastructure ETF
Performance Overview | May 31, 2018 (Unaudited) |
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | Since Inception^ | |
Alerian Energy Infrastructure ETF - NAV | -0.77% | -1.67% | -3.65% | -0.18% |
Alerian Energy Infrastructure ETF - Market Price* | -0.68% | -1.67% | -3.65% | -0.17% |
Alerian Energy Infrastructure Index | -0.36% | -0.86% | -2.87% | 0.66% |
S&P 500® Total Return Index | 3.16% | 14.38% | 10.97% | 12.20% |
Total Expense Ratio (per the current prospectus) 0.65%.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For most current month-end performance data please visit www.alpsfunds.com or call 1.866.675.2639.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced Investment Operations on November 1, 2013. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The Alerian Energy Infrastructure Index is comprised of 32 equity securities of issuers headquartered or incorporated in the United States and Canada that engage in the transportation, storage, and processing of energy commodities.
S&P 500® Total Return Index: the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. Total return assumes reinvestment of any dividends and distributions realized during a given time period.
The index is not actively managed and does not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The Alerian Energy Infrastructure ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the Fund.
5 | May 31, 2018
Alerian Energy Infrastructure ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018) | |
ONEOK, Inc. | 5.83% |
SemGroup Corp. | 5.49% |
Enterprise Products Partners LP | 5.48% |
Magellan Midstream Partners LP | 5.26% |
Targa Resources Corp. | 5.25% |
OGE Energy Corp. | 5.21% |
Pembina Pipeline Corp. | 5.20% |
Energy Transfer Equity LP | 4.98% |
Kinder Morgan, Inc. | 4.96% |
Enbridge, Inc. | 4.70% |
Total% of Top 10 Holdings | 52.36% |
* | % of Total Investments |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of change in value of a $10,000 investment in the Fund and the Indexes
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6 | May 31, 2018
Alerian Exchange Traded Funds
Disclosure of Fund Expenses | May 31, 2018 (Unaudited) |
Shareholder Expense Example: As a shareholder of a Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, 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. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through May 31, 2018.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values 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 ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. Therefore, the second line is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 12/1/17 | Ending Account Value 5/31/18 | Expense Ratio(a) | Expenses Paid During Period 12/1/17 - 5/31/18(b) | |
Alerian MLP ETF | ||||
Actual | $1,000.00 | $1,035.40 | 0.85% | $4.31 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,020.69 | 0.85% | $4.28 |
Alerian Energy Infrastructure ETF | ||||
Actual | $1,000.00 | $992.30 | 0.65% | $3.23 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.69 | 0.65% | $3.28 |
(a) | Annualized, based on the Fund's most recent fiscal half-year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. |
7 | May 31, 2018
Alerian MLP ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Master Limited Partnerships (99.98%) | ||||||||
Gathering & Processing | Natural Gas (30.45%) | ||||||||
Antero Midstream Partners LP | 7,317,762 | $ | 221,362,300 | |||||
DCP Midstream LP(a) | 7,567,033 | 317,134,353 | ||||||
EnLink Midstream Partners LP | 13,846,788 | 236,780,075 | ||||||
MPLX LP | 24,060,923 | 864,027,745 | ||||||
Rice Midstream Partners LP(a) | 6,124,327 | 113,116,320 | ||||||
Western Gas Partners LP(a) | 8,394,570 | 433,747,432 | ||||||
Williams Partners LP | 21,341,961 | 849,410,048 | ||||||
Total Gathering & Processing | Natural Gas | 3,035,578,273 | |||||||
Pipeline Transportation | Natural Gas (28.84%) | ||||||||
Boardwalk Pipeline Partners LP | 10,389,911 | 110,029,157 | ||||||
Dominion Energy Midstream Partners LP | 4,106,186 | 52,559,181 | ||||||
Energy Transfer Partners LP | 53,484,223 | 1,015,665,395 | ||||||
Enterprise Products Partners LP | 38,314,022 | 1,107,275,236 | ||||||
EQT Midstream Partners LP(a) | 4,904,495 | 273,817,956 | ||||||
Spectra Energy Partners LP | 6,827,387 | 205,777,444 | ||||||
TC PipeLines LP(a) | 4,521,356 | 109,959,378 | ||||||
Total Pipeline Transportation | Natural Gas | 2,875,083,747 | |||||||
Pipeline Transportation | Petroleum (40.69%) | ||||||||
Andeavor Logistics LP | 7,431,253 | 318,800,754 | ||||||
Buckeye Partners LP(a) | 12,238,006 | 441,180,116 | ||||||
Enbridge Energy Partners LP | 17,996,788 | 177,268,362 | ||||||
Genesis Energy LP(a) | 9,127,653 | 200,443,260 | ||||||
Holly Energy Partners LP | 3,492,643 | 102,613,851 | ||||||
Magellan Midstream Partners LP(a) | 15,593,526 | 1,089,987,467 | ||||||
NGL Energy Partners LP(a) | 9,356,586 | 100,115,470 | ||||||
NuStar Energy LP(a) | 6,607,737 | 161,493,092 | ||||||
Phillips 66 Partners LP | 4,389,393 | 229,565,254 | ||||||
Plains All American Pipeline LP | 35,419,469 | 832,357,522 | ||||||
Shell Midstream Partners LP | 10,347,162 | 231,672,957 | ||||||
Tallgrass Energy Partners LP(a) | 3,894,274 | 170,062,946 | ||||||
Total Pipeline Transportation | Petroleum | 4,055,561,051 | |||||||
Total Master Limited Partnerships | ||||||||
(Cost $9,713,927,637) | 9,966,223,071 |
7 Day Yield | Shares | Value | ||||||||||
Short Term Investments (0.09%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | 1.669 | % | 9,380,600 | 9,380,600 | ||||||||
Total Short Term Investments | ||||||||||||
(Cost $9,380,600) | 9,380,600 | |||||||||||
Total Investments (100.07%) | ||||||||||||
(Cost $9,723,308,237) | $ | 9,975,603,671 | ||||||||||
Liabilities in Excess of Other Assets (-0.07%) | (6,869,918 | ) | ||||||||||
Net Assets (100.00%) | $ | 9,968,733,753 |
(a) | Affiliated Company. See Note 8 in Notes to Financial Statements. |
See Notes to Financial Statements.
8 | May 31, 2018
Alerian MLP ETF
Statement of Assets and Liabilities | May 31, 2018 (Unaudited) |
ASSETS: | ||||
Investments, at value | $ | 6,564,545,881 | ||
Investments in affiliates, at value | 3,411,057,790 | |||
Cash held in escrow account (Note 3) | 3,081,907 | |||
Interest receivable | 31,648 | |||
Deferred tax asset (Note 2) | – | (a) | ||
Income tax receivable | 9,482 | |||
Franchise tax receivable | 142,936 | |||
Total Assets | 9,978,869,644 | |||
LIABILITIES: | ||||
Payable to adviser | 10,135,891 | |||
Total Liabilities | 10,135,891 | |||
NET ASSETS | $ | 9,968,733,753 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 10,849,603,669 | ||
Accumulated net investment loss, net of deferred income taxes | (431,852,782 | ) | ||
Accumulated net realized loss on investments, net of deferred income taxes | (701,285,850 | ) | ||
Net unrealized appreciation on investments, net of deferred income taxes | 252,268,716 | |||
NET ASSETS | $ | 9,968,733,753 | ||
INVESTMENTS, AT COST | $ | 6,438,988,251 | ||
INVESTMENTS IN AFFILIATES, AT COST | 3,284,319,986 | |||
PRICING OF SHARES | ||||
Net Assets | $ | 9,968,733,753 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 965,362,100 | |||
Net Asset Value, offering and redemption price per share | $ | 10.33 |
(a) | Net Deferred Tax Asset of $131,411,825 is offset 100% by Valuation Allowance. |
See Notes to Financial Statements.
9 | May 31, 2018
Alerian MLP ETF
Statement of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
INVESTMENT INCOME: | ||||
Distributions from master limited partnerships | $ | 386,504,314 | ||
Less return of capital distributions | (386,504,314 | ) | ||
Total Investment Income | – | |||
EXPENSES: | ||||
Investment adviser fee | 41,223,743 | |||
Total Expenses | 41,223,743 | |||
NET INVESTMENT LOSS, BEFORE INCOME TAXES | (41,223,743 | ) | ||
Deferred income tax benefit/(expense) | – | |||
NET INVESTMENT LOSS | (41,223,743 | ) | ||
REALIZED AND UNREALIZED GAIN/(LOSS): | ||||
Net realized gain on investments, before income taxes | 72,850 | |||
Net realized loss on affiliated investments, before income taxes | (17,776,200 | ) | ||
Deferred income tax benefit/(expense) | – | |||
Net realized loss | (17,703,350 | ) | ||
Net change in unrealized appreciation on investments, before income taxes | 590,736,309 | |||
Net change in unrealized depreciation on affiliated investments, before income taxes | (136,233,018 | ) | ||
Deferred income tax benefit/(expense) | – | |||
Net change in unrealized appreciation | 454,503,291 | |||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 436,799,941 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 395,576,198 |
See Notes to Financial Statements.
10 | May 31, 2018
Alerian MLP ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment loss | $ | (41,223,743 | ) | $ | (182,634,315 | ) | ||
Net realized loss | (17,703,350 | ) | (62,647,432 | ) | ||||
Net change in unrealized appreciation/(depreciation) | 454,503,291 | (774,374,707 | ) | |||||
Net increase/(decrease) in net assets resulting from operations | 395,576,198 | (1,019,656,454 | ) | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From tax return of capital | (391,873,550 | ) | (738,470,998 | ) | ||||
Total distributions | (391,873,550 | ) | (738,470,998 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 1,947,280,656 | 2,858,164,282 | ||||||
Cost of shares redeemed | (1,387,533,328 | ) | (1,072,772,241 | ) | ||||
Net increase from share transactions | 559,747,328 | 1,785,392,041 | ||||||
Net increase in net assets | 563,449,976 | 27,264,589 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 9,405,283,777 | 9,378,019,188 | ||||||
End of period * | $ | 9,968,733,753 | $ | 9,405,283,777 | ||||
*Including accumulated net investment loss, net of deferred income taxes of: | $ | (431,852,782 | ) | $ | (390,629,039 | ) | ||
OTHER INFORMATION: | ||||||||
SHARE TRANSACTIONS: | ||||||||
Beginning shares | 907,362,100 | 761,612,100 | ||||||
Shares sold | 189,250,000 | 238,500,000 | ||||||
Shares redeemed | (131,250,000 | ) | (92,750,000 | ) | ||||
Shares outstanding, end of period | 965,362,100 | 907,362,100 |
See Notes to Financial Statements.
11 | May 31, 2018
Alerian MLP ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Year Ended November 30, 2014 | For the Year Ended November 30, 2013 | |||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 10.37 | $ | 12.31 | $ | 12.25 | $ | 18.10 | $ | 17.69 | $ | 16.32 | ||||||||||||
INCOME/(LOSS) FROM OPERATIONS: | ||||||||||||||||||||||||
Net investment income/(loss)(a) | (0.04 | ) | (0.22 | ) | 0.04 | (0.13 | ) | (0.16 | ) | (0.09 | ) | |||||||||||||
Net realized and unrealized gain/(loss) on investments | 0.41 | (0.86 | ) | 1.04 | (4.53 | ) | 1.70 | 2.53 | ||||||||||||||||
Total from investment operations | 0.37 | (1.08 | ) | 1.08 | (4.66 | ) | 1.54 | 2.44 | ||||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||||||
From net realized gains | – | – | – | – | (0.73 | ) | – | |||||||||||||||||
From tax return of capital | (0.41 | ) | (0.86 | ) | (1.02 | ) | (1.19 | ) | (0.40 | ) | (1.07 | ) | ||||||||||||
Total distributions | (0.41 | ) | (0.86 | ) | (1.02 | ) | (1.19 | ) | (1.13 | ) | (1.07 | ) | ||||||||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | (0.04 | ) | (1.94 | ) | 0.06 | (5.85 | ) | 0.41 | 1.37 | |||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 10.33 | $ | 10.37 | $ | 12.31 | $ | 12.25 | $ | 18.10 | $ | 17.69 | ||||||||||||
TOTAL RETURN(b) | 3.54 | % | (9.27 | )% | 9.76 | % | (26.84 | )% | 8.82 | % | 15.16 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||
Net assets, end of period (000s) | $ | 9,968,734 | $ | 9,405,284 | $ | 9,378,019 | $ | 7,203,754 | $ | 9,349,001 | $ | 7,384,685 | ||||||||||||
RATIO TO AVERAGE NET ASSETS: | ||||||||||||||||||||||||
Expenses (excluding net current and deferred tax expenses/benefits and franchise tax expense) | 0.85 | %(c) | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | 0.85 | % | ||||||||||||
Expenses (including net current and deferred tax expenses/benefits)(d) | 0.85 | %(c) | 0.41 | % | 1.42 | % | (11.40 | )% | 5.43 | % | 8.56 | % | ||||||||||||
Expenses (including current and deferred tax expenses/benefits)(e) | 0.85 | %(c) | 1.81 | % | (0.36 | )% | 1.57 | % | 0.55 | % | 0.55 | % | ||||||||||||
Net investment loss (excluding deferred tax expenses/benefits and franchise tax expense) | (0.85 | )%(c) | (0.85 | )% | (0.85 | )% | (0.85 | )% | (0.85 | )% | (0.85 | )% | ||||||||||||
Net investment income/(loss)(including deferred tax expenses/benefits)(e) | (0.85 | )%(c) | (1.81 | )% | 0.36 | % | (1.57 | )% | (0.55 | )% | (0.55 | )% | ||||||||||||
PORTFOLIO TURNOVER RATE(f) | 4 | % | 23 | % | 31 | % | 21 | % | 29 | % | 12 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net assets value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Includes amount of current and deferred taxes/benefits for all components of the Statement of Operations. |
(e) | Includes amount of current and deferred tax benefit associated with net investment income/(loss). |
(f) | Portfolio turnover for periods less than one year is not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
12 | May 31, 2018
Alerian Energy Infrastructure ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Canadian Energy Infrastructure Companies (24.52%) | ||||||||
Energy (24.52%) | ||||||||
AltaGas, Ltd. | 37,428 | $ | 734,646 | |||||
Enbridge, Inc. | 59,053 | 1,834,988 | ||||||
Gibson Energy, Inc. | 31,121 | 427,236 | ||||||
Inter Pipeline, Ltd. | 83,106 | 1,569,695 | ||||||
Keyera Corp. | 44,508 | 1,247,776 | ||||||
Pembina Pipeline Corp. | 58,410 | 2,031,691 | ||||||
TransCanada Corp. | 43,425 | 1,817,915 | ||||||
Total Energy | 9,663,947 | |||||||
Total Canadian Energy Infrastructure Companies | ||||||||
(Cost $11,380,919) | 9,663,947 | |||||||
U.S. Energy Infrastructure Companies (25.89%) | ||||||||
Energy (21.33%) | ||||||||
Kinder Morgan, Inc. | 116,103 | 1,936,598 | ||||||
ONEOK, Inc. | 33,383 | 2,275,386 | ||||||
SemGroup Corp., Class A | 84,720 | 2,143,416 | ||||||
Targa Resources Corp. | 42,129 | 2,048,733 | ||||||
Total Energy | 8,404,133 | |||||||
Industrials (4.56%) | ||||||||
Macquarie Infrastructure Corp. | 46,443 | 1,797,344 | ||||||
Total U.S. Energy Infrastructure Companies | ||||||||
(Cost $12,263,129) | 10,201,477 | |||||||
U.S. Energy Infrastructure MLPs (24.52%) | ||||||||
Energy (24.52%) | ||||||||
Andeavor Logistics LP | 10,735 | 460,531 | ||||||
Buckeye Partners LP | 18,102 | 652,577 | ||||||
Cheniere Energy Partners LP | 4,903 | 176,410 | ||||||
Energy Transfer Equity LP | 112,588 | 1,945,521 | ||||||
Enterprise Products Partners LP | 73,987 | 2,138,224 | ||||||
EQT GP Holdings LP | 2,815 | 69,756 | ||||||
Magellan Midstream Partners LP | 29,393 | 2,054,571 | ||||||
MPLX LP | 36,855 | 1,323,463 | ||||||
NuStar GP Holdings LLC | 3,234 | 44,144 | ||||||
Phillips 66 Partners LP | 6,135 | 320,860 | ||||||
Shell Midstream Partners LP | 14,472 | 324,028 | ||||||
Western Gas Equity Partners LP | 4,188 | 153,700 | ||||||
Total Energy | 9,663,785 | |||||||
Total U.S. Energy Infrastructure MLPs | ||||||||
(Cost $11,346,251) | 9,663,785 | |||||||
U.S. General Partners (24.10%) | ||||||||
Energy (10.20%) | ||||||||
Antero Midstream GP LP | 21,884 | 421,267 | ||||||
EnLink Midstream LLC | 18,395 | 321,912 | ||||||
Plains GP Holdings LP, Class A | 45,400 | 1,115,478 | ||||||
Tallgrass Energy GP LP | 15,812 | 340,116 |
See Notes to Financial Statements.
13 | May 31, 2018
Alerian Energy Infrastructure ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Energy (continued) | ||||||||
The Williams Cos., Inc. | 67,757 | $ | 1,819,953 | |||||
Total Energy | 4,018,726 | |||||||
Utilities (13.90%) | ||||||||
CenterPoint Energy, Inc. | 69,531 | 1,816,845 | ||||||
Dominion Energy, Inc. | 25,393 | 1,629,977 | ||||||
OGE Energy Corp. | 58,055 | 2,033,086 | ||||||
Total Utilities | 5,479,908 | |||||||
Total U.S. General Partners | ||||||||
(Cost $11,175,069) | 9,498,634 |
7 Day Yield | Shares | Value | ||||||||||
Short Term Investments (0.04%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | 1.669 | % | 14,920 | 14,920 | ||||||||
Total Short Term Investments | ||||||||||||
(Cost $14,920) | 14,920 | |||||||||||
Total Investments (99.07%) | ||||||||||||
(Cost $46,180,288) | $ | 39,042,763 | ||||||||||
Net Other Assets and Liabilities (0.93%) | 368,114 | |||||||||||
Net Assets (100.00%) | $ | 39,410,877 |
See Notes to Financial Statements.
14 | May 31, 2018
Alerian Energy Infrastructure ETF
Statement of Assets and Liabilities | May 31, 2018 (Unaudited) |
ASSETS: | ||||
Investments, at value | $ | 39,042,763 | ||
Cash held in escrow account (Note 3) | 9,382 | |||
Receivable for Investments Sold | 299,875 | |||
Dividends receivable | 89,570 | |||
Total Assets | 39,441,590 | |||
LIABILITIES: | ||||
Payable to adviser | 30,713 | |||
Total Liabilities | 30,713 | |||
NET ASSETS | $ | 39,410,877 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 45,560,440 | ||
Accumulated net investment income | 114,767 | |||
Accumulated net realized gain | 873,725 | |||
Net unrealized depreciation | (7,138,055 | ) | ||
NET ASSETS | $ | 39,410,877 | ||
INVESTMENTS, AT COST | $ | 46,180,288 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 39,410,877 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 1,800,000 | |||
Net Asset Value, offering and redemption price per share | $ | 21.89 |
See Notes to Financial Statements.
15 | May 31, 2018
Alerian Energy Infrastructure ETF
Statement of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
INVESTMENT INCOME: | ||||
Dividends | $ | 1,260,118 | ||
Foreign taxes withheld | (44,606 | ) | ||
Total Investment Income | 1,215,512 | |||
EXPENSES: | ||||
Investment adviser fees | 135,377 | |||
Total Expenses | 135,377 | |||
NET INVESTMENT INCOME | 1,080,135 | |||
REALIZED AND UNREALIZED GAIN/(LOSS): | ||||
Net realized gain on investments | 118,286 | |||
Net realized loss on foreign currency transactions | (811 | ) | ||
Net realized gain | 117,475 | |||
Net change in unrealized depreciation on investments | (1,839,788 | ) | ||
Net change in unrealized appreciation on translation of assets and liabilities denominated in foreign currencies | 37 | |||
Net change in unrealized depreciation | (1,839,751 | ) | ||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS AND FOREIGN CURRENCIES | (1,722,276 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (642,141 | ) |
See Notes to Financial Statements.
16 | May 31, 2018
Alerian Energy Infrastructure ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,080,135 | $ | 1,127,429 | ||||
Net realized gain | 117,475 | 278,219 | ||||||
Net change in unrealized depreciation | (1,839,751 | ) | (2,284,049 | ) | ||||
Net decrease in net assets resulting from operations | (642,141 | ) | (878,401 | ) | ||||
DISTRIBUTIONS: | ||||||||
From net investment income | (414,009 | ) | (671,029 | ) | ||||
Dividends to shareholders from tax return of capital | – | (376,837 | ) | |||||
Total distributions | (414,009 | ) | (1,047,866 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 4,606,602 | 28,328,448 | ||||||
Cost of shares redeemed | (6,509,915 | ) | (2,388,525 | ) | ||||
Net increase/(decrease) from share transactions | (1,903,313 | ) | 25,939,923 | |||||
Net increase/(decrease) in net assets | (2,959,463 | ) | 24,013,656 | |||||
NET ASSETS: | ||||||||
Beginning of period | 42,370,340 | 18,356,684 | ||||||
End of period * | $ | 39,410,877 | $ | 42,370,340 | ||||
*Including accumulated net investment income/(loss) of: | $ | 114,767 | $ | (551,359 | ) | |||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,900,000 | 800,000 | ||||||
Shares sold | 200,000 | 1,200,000 | ||||||
Shares redeemed | (300,000 | ) | (100,000 | ) | ||||
Shares outstanding, end of period | 1,800,000 | 1,900,000 |
See Notes to Financial Statements.
17 | May 31, 2018
Alerian Energy Infrastructure ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Year Ended November 30, 2014 | For the Period November 1, 2013 (Commencement of Operations) to November 30, 2013 | |||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 22.30 | $ | 22.95 | $ | 18.97 | $ | 28.55 | $ | 24.86 | $ | 25.00 | ||||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||||||
Net investment income(a) | 0.57 | 0.79 | 0.80 | 0.83 | 0.85 | 0.06 | ||||||||||||||||||
Net realized and unrealized gain/(loss) on investments | (0.76 | ) | (0.72 | ) | 3.95 | (9.78 | ) | 3.40 | (0.20 | ) | ||||||||||||||
Total from investment operations | (0.19 | ) | 0.07 | 4.75 | (8.95 | ) | 4.25 | (0.14 | ) | |||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||||||
From net investment income | (0.22 | ) | (0.47 | ) | (0.63 | ) | (0.48 | ) | (0.56 | ) | – | |||||||||||||
Tax return of capital | – | (0.25 | ) | (0.14 | ) | (0.15 | ) | – | – | |||||||||||||||
Total distributions | (0.22 | ) | (0.72 | ) | (0.77 | ) | (0.63 | ) | (0.56 | ) | – | |||||||||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | (0.41 | ) | (0.65 | ) | 3.98 | (9.58 | ) | 3.69 | (0.14 | ) | ||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 21.89 | $ | 22.30 | $ | 22.95 | $ | 18.97 | $ | 28.55 | $ | 24.86 | ||||||||||||
TOTAL RETURN(b) | (0.77 | )% | 0.21 | % | 25.63 | % | (31.83 | )% | 17.12 | % | (0.56 | )% | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||
Net assets, end of period (000s) | $ | 39,411 | $ | 42,370 | $ | 18,357 | $ | 12,331 | $ | 17,131 | $ | 3,729 | ||||||||||||
Ratio of expenses to average net assets | 0.65 | %(c) | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | %(c) | ||||||||||||
Ratio of net investment income to average net assets | 5.19 | %(c) | 3.39 | % | 4.04 | % | 3.31 | % | 2.98 | % | 3.21 | %(c) | ||||||||||||
PORTFOLIO TURNOVER RATE(d) | 11 | % | 37 | % | 38 | % | 47 | % | 27 | % | 0 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net assets value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year is not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
18 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of May 31, 2018, the Trust consisted of twenty separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the Alerian MLP ETF and the Alerian Energy Infrastructure ETF (each a “Fund” and collectively, the “Funds”).
The investment objective of the Alerian MLP ETF is to seek investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the Alerian MLP Infrastructure Index. The investment objective of the Alerian Energy Infrastructure ETF is to seek investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the Alerian Energy Infrastructure Index. The investment advisor uses a “passive management” or indexing investment approach to try to achieve each Fund’s investment objective. Each Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
Each Fund’s Shares (“Shares”) are listed on the NYSE Arca, Inc. (“the NYSE Arca”). Each Fund issues and redeems Shares at net asset value (“NAV”), in blocks of 50,000 Shares, each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
A. Portfolio Valuation
Each Fund’s NAV is determined daily, as of the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern Time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“NASDAQ”) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the latest quoted sale price in such market.
The Funds’ investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Funds may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Funds’ NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
19 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
B. Fair Value Measurements
Each Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Funds’ investments by major category are as follows:
Equity securities, including restricted securities, and Limited Partnerships for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Funds’ investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value each Fund’s investments at May 31, 2018:
Alerian MLP ETF
Investments in Securities at Value* | Level 1- Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3- Significant Unobservable Inputs | Total | ||||||||||||
Master Limited Partnerships | $ | 9,966,223,071 | $ | – | $ | – | $ | 9,966,223,071 | ||||||||
Short Term Investments | 9,380,600 | – | – | 9,380,600 | ||||||||||||
TOTAL | $ | 9,975,603,671 | $ | – | $ | – | $ | 9,975,603,671 |
20 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Alerian Energy Infrastructure ETF
Investments in Securities at Value* | Level 1- Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3- Significant Unobservable Inputs | Total | ||||||||||||
Canadian Energy Infrastructure Companies | $ | 9,663,947 | $ | – | $ | – | $ | 9,663,947 | ||||||||
U.S. Energy Infrastructure Companies | 10,201,477 | – | – | 10,201,477 | ||||||||||||
U.S. Energy Infrastructure MLPs | 9,663,785 | – | – | 9,663,785 | ||||||||||||
U.S. General Partners | 9,498,634 | – | – | 9,498,634 | ||||||||||||
Short Term Investments | 14,920 | – | – | 14,920 | ||||||||||||
TOTAL | $ | 39,042,763 | $ | – | $ | – | $ | 39,042,763 |
* | For a detailed breakdown of sectors, see the accompanying Schedule of Investments. |
Each Fund recognizes transfers between levels as of the end of the period. For the six months ended May 31, 2018, the Funds did not have any transfers between Level 1 and Level 2 securities. The Funds did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
C. Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.
D. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the last in, first out (“LIFO”) cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date, net of any foreign taxes withheld. Interest income, if any, is recorded on the accrual basis, including amortization of premiums and accretion of discounts.
E. Dividends and Distributions to Shareholders
Each Fund intends to declare and make quarterly distributions, or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Alerian Energy Infrastructure ETF, if any, are distributed at least annually. Distributions from net investment income and capital gains are determined in accordance with income tax regulations, which may differ from U.S. GAAP. These differences are primarily due to differing treatments of income and gains on various investment securities held by the Funds, timing differences and differing characterization of distributions made by the Funds.
Distributions received from each Fund’s investments in Master Limited Partnerships (“MLPs”) may be comprised of both income and return of capital. Each Fund records investment income and return of capital based on estimates made at the time such distributions are received. Such estimates are based on historical information available from each MLP and other industry sources. These estimates may subsequently be revised based on information received from MLPs after their tax reporting periods are concluded. For the six months ended May 31, 2018, the Alerian MLP ETF distributed $391,873,550 of which 100% is anticipated to be characterized as return of capital from MLP distributions received.
The Alerian MLP ETF also expects a portion of the distributions it receives from MLPs to be treated as a tax deferred return of capital, thus reducing the Alerian MLP ETF’s current tax liability. Return of capital distributions are not taxable income to the shareholder, but reduce the investor’s tax basis in the investor’s Fund Shares. Such a reduction in tax basis will result in larger taxable gains and/or lower tax losses on a subsequent sale of Fund Shares. Shareholders who periodically receive the payment of dividends or other distributions consisting of a return of capital may be under the impression that they are receiving net profits from the Funds when, in fact, they are not. Shareholders should not assume that the source of the distributions is from the net profits of the Funds.
21 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
F. Federal Income Taxation and Tax Basis Information
Alerian MLP ETF
The Fund is taxed as a regular C-corporation for federal income tax purposes and as such is obligated to pay federal and state income tax. This treatment differs from most investment companies, which elect to be treated as “regulated investment companies” under the Internal Revenue Code of 1986, as amended (the “Code”) in order to avoid paying entity level income taxes. Under current law, the Fund is not eligible to elect treatment as a regulated investment company due to its investments primarily in MLPs invested in energy assets. The Fund expects that substantially all of the distributions it receives from MLPs may be treated as a tax-deferred return of capital, thus reducing the Fund’s current tax liability. However, the amount of taxes paid by the Fund will vary depending on the amount of income and gains derived from investments and/or sales of MLP interests and such taxes will reduce your return from an investment in the Fund.
Since the Fund will be subject to taxation on its taxable income, the NAV of the Fund shares will also be reduced by the accrual of any deferred tax liabilities. The Underlying Index however is calculated without any deductions for taxes. As a result, the Fund's after tax performance could differ significantly from the Underlying Index even if the pretax performance of the Fund and the performance of Underlying Index are closely related.
Cash distributions from MLPs to the Fund that exceed the Fund’s allocable share of such MLP’s net taxable income are considered a tax deferred return of capital that will reduce the Fund’s adjusted tax basis in the equity securities of the MLP. These reductions in the Fund’s adjusted tax basis in the MLP equity securities will increase the amount of any taxable gain (or decrease the amount of any tax loss) recognized by the Fund on a subsequent sale of the securities. The Fund will accrue deferred income taxes for any future tax liability associated with (i) that portion of MLP distributions considered to be a tax-deferred return of capital as well as (ii) capital appreciation of its investments. Upon the sale of an MLP security, the Fund may be liable for previously deferred taxes. The Fund will rely to some extent on information provided by the MLPs, which is not necessarily timely, to estimate the deferred tax liability for purposes of financial statement reporting and determining the Fund’s NAV. From time to time, the Adviser will modify the estimates or assumptions related to the Fund’s deferred tax liability as new information becomes available. The Fund will generally compute deferred income taxes based on the federal income tax rate applicable to corporations and an assumed rate attributable to state taxes.
The Tax Cuts and Jobs Act (“TCJA”) was signed into law on December 22, 2017. The TCJA includes changes to the corporate income tax rate, alternative minimum tax (“AMT”), and modifications to the net operating loss (“NOL”) deduction. Prior to enactment, the highest marginal federal income tax rate was 35%. The TCJA reduced the corporate rate to a flat income tax rate of 21%. The change in the rate was reflected in the Fund's NAV at the time the new tax law was enacted. The Fund may also be subject to a 20% AMT to the extent that the Fund's alternative minimum tax exceeds the Fund's regular federal income tax. For tax years beginning after December 31, 2017 the TCJA repealed the corporate AMT. The TCJA also eliminated the NOL carryback ability and replaced the 20 year carryforward period with an indefinite carryforward period for any NOLs arising in tax years ending after December 31, 2017. The TCJA also established a limitation for any NOLs generated in tax years beginning after December 31, 2017 to the lesser of the aggregate of available NOLs or 80% of taxable income before any NOL utilization. These changes may affect the Fund’s daily estimates of its current taxes and deferred tax liability and/or asset balances used in the calculation of its daily NAV. The Fund will be evaluating this tax legislation for its potential effects on these estimates and for its potential effects on the amounts of income taxes actually incurred. This recent tax legislation may also affect information provided to the Fund by MLPs, information that may not be provided to the Fund on a timely basis. As disclosed above, the daily estimate of current taxes and deferred tax liability and/or asset balances used to calculate the Fund’s NAV could vary significantly from the Fund’s actual tax liability or benefit, which may have a material impact on the Fund’s NAV. The Fund may modify its estimates and assumptions regarding its current taxes and deferred tax liability and/or asset balances as this evaluation of the tax legislation occurs and as new information regarding the legislation or other matters becomes available, such modifications in estimates or assumptions may have a material impact on the Fund’s NAV.
The Fund’s income tax expense/(benefit) consists of the following:
Alerian MLP ETF | Period ended May 31, 2018 | |||||||||||
Current | Deferred | Total | ||||||||||
Federal | $ | – | $ | 212,850,476 | $ | 212,850,476 | ||||||
State | – | (733,651 | ) | (733,651 | ) | |||||||
Valuation Allowance | – | (212,116,825 | ) | (212,116,825 | ) | |||||||
Total tax expense/(benefit) | $ | – | $ | – | $ | – |
Deferred income taxes reflect the net tax effect of temporary differences between the carrying amount of assets and liabilities for financial reporting and tax purposes.
22 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Components of the Fund’s deferred tax assets and liabilities are as follows:
Alerian MLP ETF | As of May 31, 2018 | |||
Deferred tax assets: | ||||
Capital loss carryforward | $ | 393,911,960 | ||
Net operating loss carryforward | 431,155,686 | |||
Income recognized from MLP investments | 270,943,241 | |||
Charitable contribution carryforward | 598,118 | |||
Credit for prior year minimum tax | 331,761 | |||
Accrued franchise taxes | 36,080 | |||
Valuation allowance | (131,411,825 | ) | ||
Less Deferred tax liabilities: | ||||
Net unrealized gain on investment securities | (965,556,829 | ) | ||
Other | (8,192 | ) | ||
Net Deferred Tax Asset/Liability | $ | – |
Due to the activities of the MLPs that the fund is invested in, the Fund is required to pay franchise tax in certain states. Generally speaking, franchise tax expense is a tax on equity of a corporation, or base minimum fees, imposed by various jurisdictions. The amounts of the tax are estimated throughout the year based upon the Fund's estimate of underlying activities conducted in the states and reconciled to actual amounts paid upon the filing of the tax returns for the states. These taxes are paid as either estimated tax payments, extension payments, or with the tax return filings of the various states.
The net operating loss carryforward is available to offset future taxable income. The Fund has net operating loss carryforwards for federal income tax purposes as follows:
Alerian MLP ETF | Period-Ended | Amount | Expiration | |||||||
Federal | 11/30/2012 | $ | 92,112,756 | 11/30/2032 | ||||||
Federal | 11/30/2013 | 349,770,934 | 11/30/2033 | |||||||
Federal | 11/30/2014 | 64,228,395 | 11/30/2034 | |||||||
Federal | 11/30/2015 | 270,791,678 | 11/30/2035 | |||||||
Federal | 11/30/2016 | 481,506,187 | 11/30/2036 | |||||||
Federal | 11/30/2017 | 325,814,104 | 11/30/2037 | |||||||
Federal | 11/30/2018 | 250,926,383 | Indefinite | |||||||
Total | $ | 1,835,150,437 |
The Fund also has state tax net operating loss carryforwards of various amounts per state. The Deferred Tax Assets associated with these state tax net operating losses are as follows:
Alerian MLP ETF | Period-Ended | Amount | Expiration | ||||||
State | 11/30/2012 | $ | 2,427,559 | Varies by State (5-20 years) | |||||
State | 11/30/2013 | 8,323,408 | Varies by State (5-20 years) | ||||||
State | 11/30/2014 | 1,500,663 | Varies by State (5-20 years) | ||||||
State | 11/30/2015 | 7,185,746 | Varies by State (5-20 years) | ||||||
State | 11/30/2016 | 11,572,162 | Varies by State (5-20 years) | ||||||
State | 11/30/2017 | 3,270,061 | Varies by State (5-20 years) | ||||||
State | 11/30/2018 | 11,494,495 | Varies by State | ||||||
Total | $ | 45,774,094 |
23 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
The capital loss carryforward is available to offset future taxable income. The capital loss can be carried forward for 5 years and, accordingly, would begin to expire as of November 30, 2020. The Fund has net capital loss carryforwards for federal income tax purposes as follows:
Alerian MLP ETF | Year-Ended | Amount | Expiration | |||||||
Federal | 11/30/2015 | $ | 504,879,549 | 11/30/2020 | ||||||
Federal | 11/30/2016 | 651,931,137 | 11/30/2021 | |||||||
Federal | 11/30/2017 | 195,667,832 | 11/30/2022 | |||||||
Federal | 11/30/2018 | 319,473,774 | 11/30/2023 | |||||||
Total | $ | 1,671,952,292 |
The Fund reviews the recoverability of its deferred tax assets based upon the weight of available evidence. When assessing the recoverability of its deferred tax assets, significant weight was given to the effects of potential future realized and unrealized gains on investments and the period over which these deferred tax assets can be realized. Currently, any capital losses that may be generated by the Fund are eligible to be carried back up to three years and can be carried forward for five years to offset capital gains recognized by the Fund in those years. Any NOL generated in the current year can be carried forward indefinitely and any NOL generated in prior years is eligible for a two year carryback and 20 year carryforward period.
Based upon the Fund’s assessment, it has determined that it is “more-likely-than-not” that a portion of its deferred tax assets will not be realized through future taxable income of the appropriate character. Accordingly, a valuation allowance has been established for the Fund’s deferred tax assets. The Fund will continue to assess the need for a valuation allowance in the future. Significant increases in the fair value of its portfolio of investments may change the Fund’s assessment of the recoverability of these assets and may result in the removal of the valuation allowance against all or a portion of the Fund’s gross deferred tax assets.
Total income tax expense/(benefit) (current and deferred) differs from the amount computed by applying the federal statutory income tax rate of 21% to net investment income and realized and unrealized gain/(losses) on investment before taxes as follows:
Alerian MLP ETF | As of May 31, 2018 | |||
Income tax expense at statutory rate | $ | 83,071,002 | ||
State income tax benefit (net of federal benefit) | 10,126,751 | |||
Permanent differences, net | (2,889,644 | ) | ||
Effect of tax rate change* | 121,754,881 | |||
Other | 53,835 | |||
Valuation allowance | (212,116,825 | ) | ||
Net income tax expense | $ | – |
* | The tax rate change listed in the table above is reflective of the change in deferred tax assets and liabilities due to the federal corporate tax rate change enacted by the TCJA as of December 22, 2017. For tax years beginning after December 31, 2017, corporations will be taxed at a flat rate of 21%. |
The following is a tabular reconciliation of the total amounts of unrecognized tax benefits:
Alerian MLP ETF | Inception to May 31, 2018 | |||
Unrecognized tax benefit - Beginning | $ | – | ||
Gross increases - tax positions in prior period | – | |||
Gross decreases - tax positions in prior period | – | |||
Gross increases - tax positions in current period | – | |||
Settlement | – | |||
Lapse of statute of limitations | – | |||
Unrecognized tax benefit - Ending | $ | – |
24 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
The Fund recognizes interest accrued related to unrecognized tax benefits and penalties as income tax expense. For the period from inception to May 30, 2018, the Fund had no accrued penalties or interest.
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. Management has analyzed the Fund’s tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions taken on U.S. tax returns and state tax returns filed since inception of the Fund. Tax periods ended November 30, 2014 through November 30, 2017 remain subject to examination by tax authorities in the United States. Due to the nature of the Fund’s investments, the Fund may be required to file income tax returns in several states. 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 12 months.
Alerian Energy Infrastructure ETF
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2018.
No provision for income taxes is included in the accompanying financial statements, as the Alerian Energy Infrastructure ETF intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. The Alerian Energy Infrastructure ETF evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the six months ended May 31, 2018, the Alerian Energy Infrastructure ETF did not have a liability for any unrecognized tax benefits. The Alerian Energy Infrastructure ETF files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
At November 30, 2017, the Fund had available for tax purposes unused capital loss carryforwards as follows:
Short-Term | Long-Term | |||||||
Alerian Energy Infrastructure ETF | $ | 618,957 | $ | 172,110 |
The tax character of the distributions paid during the fiscal year ended November 30, 2017 was as follows:
Ordinary Income | Long-Term Capital Gain | Return of Capital | ||||||||||
November 30, 2017 | ||||||||||||
Alerian Energy Infrastructure ETF | $ | 671,029 | $ | – | $ | 376,837 |
As of May 31, 2018, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Alerian MLP ETF | Alerian Energy Infrastructure ETF | |||||||
Cost of investments for income tax purposes | $ | 6,942,044,533 | $ | 43,556,775 | ||||
Gross appreciation (excess of value over tax cost) | $ | 3,922,494,476 | $ | 3,858,516 | ||||
Gross depreciation (excess of tax cost over value) | (888,935,338 | ) | (8,372,528 | ) | ||||
Net unrealized appreciation/(depreciation) | $ | 3,033,559,138 | $ | (4,514,012 | ) |
The difference between cost amounts for financial statement purposes is due primarily to the recognition of pass-through income from a Fund’s investments in master limited partnerships and wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of May 31, 2018.
25 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
G. Lending of Portfolio Securities
The Alerian Energy Infrastructure ETF (the “Fund”) has entered into a securities lending agreement with State Street Bank & Trust Co. (“SSB”), the Fund’s lending agent. The Fund may lend its portfolio securities only to borrowers that are approved by SSB. The Fund will limit such lending to not more than 33 1/3% of the value of its total assets. The Fund’s securities held at SSB as custodian shall be available to be lent except those securities the Fund or ALPS Advisors, Inc. specifically identifies in writing as not being available for lending. The borrower pledges and maintains with the Fund collateral consisting of cash (U.S. Dollars only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and cash equivalents (including irrevocable bank letters of credit) issued by a person other than the borrower or an affiliate of the borrower. The initial collateral received by the Fund is required to have a value of no less than 102% of the market value of the loaned securities for U.S equity securities and a value of no less than 105% of the market value for non-U.S. equity securities. The collateral is maintained thereafter, at a market value equal to not less than 102% of the current value of the U.S. equity securities on loan and not less than 105% of the current value of the non- U.S. equity securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to the Fund on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the customary time period for settlement of securities transactions. As of May 31, 2018, the Fund had no securities on loan.
Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments and is reflected in the Statements of Assets and Liabilities as a payable for collateral upon return of securities loaned. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Fund’s Statements of Assets and Liabilities as it is held by the lending agent on behalf of the Fund, and the Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as each Fund's investment adviser pursuant to advisory agreements with the Trust on behalf of each Fund (the “Advisory Agreements”). Pursuant to the Advisory Agreements, each Fund pays the Adviser a unitary fee for the services and facilities it provides payable on a monthly basis as a percentage of the relevant Fund's average daily net assets as set out below.
Fund | Advisory Fee | |
Alerian MLP ETF | 0.85% | up to and including $10 billion |
0.80% | greater than $10 billion up to and including $15 billion | |
0.755% | greater than $15 billion up to and including $20 billion | |
0.715% | greater than $20 billion | |
Alerian Energy Infrastructure ETF | 0.65% |
Capitalized terms used but not defined within this paragraph, shall have the respective meanings given to them in the Board Considerations Regarding Approval of Investment Advisory Agreement section of this Semi-Annual Report (“Board Considerations”). As discussed in the Board Considerations, the Adviser is an indirect wholly owned subsidiary of DST and on April 16, 2018, DST was acquired by SS&C resulting in a change of control of the Adviser. As discussed in the Board Considerations, in order for the Adviser to continue to serve as the investment adviser to the applicable Funds, among other approvals, the Board approved an Interim Advisory Agreement between the Adviser and the Trust, on behalf of the Funds. The Interim Advisory Agreement is effective for the earlier of 150 days from the close of the Transaction or the date of shareholder approval of the New Advisory Agreement. Under the terms of the Interim Advisory Agreement, the unitary management fee paid to the Adviser will be held in escrow until shareholder approval of the New Advisory Agreement is obtained and is reported as Cash held in escrow account on the Statement of Assets and Liabilities.
26 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Out of the unitary management fees, the Adviser pays substantially all expenses of the Funds, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for taxes, interest expenses, distribution fees or expenses, brokerage expenses, and extraordinary expenses such as litigation, and other expenses not incurred in the ordinary course of the each Fund's business. The Adviser’s unitary management fee is designed to pay substantially all the Funds’ expenses and to compensate the Adviser for providing services for each Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Funds.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee for regularly scheduled meetings of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, both the Chairman of the Board and Chairman of the Audit Committee each receives a quarterly retainer of $2,000, in connection with their respective roles.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2018, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Fund | Purchases | Sales | ||||||
Alerian MLP ETF | $ | 433,516,601 | $ | 1,872,720,281 | ||||
Alerian Energy Infrastructure ETF | 4,827,549 | 4,479,637 |
For the year ended May 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
Alerian MLP ETF | $ | 1,946,863,537 | $ | – | ||||
Alerian Energy Infrastructure ETF | 4,606,437 | 6,506,249 |
For the six months ended May 31, 2018, the Alerian Energy Infrastructure ETF had in-kind net realized gain of $406,318.
Gains on in-kind transactions are not considered taxable for federal income tax purposes and losses on in-kind transactions are also not deductible for tax purposes.
5. MASTER LIMITED PARTNERSHIPS
MLPs are publicly traded partnerships engaged in, among other things, the transportation, storage and processing of minerals and natural resources, and are treated as partnerships for U.S. federal income tax purposes. By confining their operations to these specific activities, their interests, or units, are able to trade on public securities exchanges exactly like the shares of a corporation, without entity level taxation. To qualify as a MLP and to not be taxed as a corporation, a partnership must receive at least 90% of its income from qualifying sources as set forth in Section 7704(d) of the Code. These qualifying sources include, among other things, natural resource-based activities such as the processing, transportation and storage of mineral or natural resources. MLPs generally have two classes of owners, the general partner and limited partners. The general partner of an MLP is typically owned by a major energy company, an investment fund, the direct management of the MLP, or is an entity owned by one or more of such parties. The general partner may be structured as a private or publicly traded corporation or other entity. The general partner typically controls the operations and management of the MLP through an up to 2% equity interest in the MLP plus, in many cases, ownership of common units and subordinated units. Limited partners typically own the remainder of the partnership, through ownership of common units, and have a limited role in the partnership’s operations and management.
MLPs are typically structured such that common units and general partner interests have first priority to receive quarterly cash distributions up to an established minimum amount (“minimum quarterly distributions” or “MQD”). Common and general partner interests also accrue arrearages in distributions to the extent the MQD is not paid. Once common and general partner interests have been paid, subordinated units receive distributions of up to the MQD; however, subordinated units do not accrue arrearages. Distributable cash in excess of the MQD is distributed to both common and subordinated units and generally on a pro rata basis. The general partner is also eligible to receive incentive distributions if the general partner operates the business in a manner which results in distributions paid per common unit surpassing specified target levels. As the general partner increases cash distributions to the limited partners, the general partner receives an increasingly higher percentage of the incremental cash distributions.
27 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
6. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 Shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Funds. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of each Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
7. RELATED PARTY TRANSACTIONS
The Fund engaged in cross trades between other funds in the Trust during the six months ended May 31, 2018 pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which the Adviser serves as the investment adviser. The Board previously adopted procedures that apply to transactions between the Funds of the Trust pursuant to Rule 17a-7. These transactions related to cross trades during the period complied with the requirements set forth by Rule 17a-7 and the Trust’s procedures.
Transactions related to cross trades during the six months ended May 31, 2018, were as follows:
Fund | Purchase cost paid | Sale proceeds received | Realized gain/(loss) on sales | |||||||||
Alerian MLP ETF | $ | 339,821 | $ | - | $ | - | ||||||
Alerian Energy Infrastructure ETF | - | 339,821 | 11,404 |
8. AFFILIATED COMPANIES
As defined by the Investment Company Act of 1940, an affiliated person, including an affiliated company, is one in which a Fund owns 5% or more of the outstanding voting securities, or a company which is under common ownership or control with the Fund.
For the six months ended May 31, 2018, the Alerian MLP ETF held shares in the following affiliates, as defined by the Investment Company Act of 1940.
Security Name | Share Balance as of November 30, 2017 | Purchases | Purchases In-Kind | Sales | Corporate Actions | Share Balance as of May 31, 2018 | Market Value as of May 31, 2018 | Dividends* | Change in Unrealized Gain (Loss) | Realized Gain/(Loss) | ||||||||||||||||||||||||
Master Limited Partnerships | ||||||||||||||||||||||||||||||||||
Buckeye Partners LP | 11,471,355 | 108,120 | 2,400,700 | (1,742,169 | ) | – | 12,238,006 | $ | 441,180,116 | $ | – | $ | (82,766,127 | ) | $ | (728,366 | ) | |||||||||||||||||
DCP Midstream LP | 7,380,879 | 29,300 | 1,491,251 | (1,334,397 | ) | – | 7,567,033 | 317,134,353 | – | 60,986,537 | 2,579,940 | |||||||||||||||||||||||
EQT Midstream Partners LP | 4,781,272 | 21,500 | 965,894 | (864,171 | ) | – | 4,904,495 | 273,817,956 | – | (47,210,694 | ) | (2,377,253 | ) | |||||||||||||||||||||
Genesis Energy LP | 8,762,589 | 166,500 | 1,786,549 | (1,587,985 | ) | – | 9,127,653 | 200,443,260 | – | 17,327,365 | (3,471,085 | ) | ||||||||||||||||||||||
Magellan Midstream Partners LP | 15,052,756 | 721,000 | 3,013,227 | (3,193,457 | ) | – | 15,593,526 | 1,089,987,467 | – | 82,596,864 | (1,525,995 | ) | ||||||||||||||||||||||
NGL Energy Partners LP | – | 9,000,898 | 1,660,873 | (1,305,185 | ) | – | 9,356,586 | 100,115,470 | – | (19,675,886 | ) | (371,254 | ) | |||||||||||||||||||||
NuStar Energy LP | 6,453,764 | 12,300 | 1,305,271 | (1,163,598 | ) | – | 6,607,737 | 161,493,092 | – | (11,044,696 | ) | (6,027,850 | ) | |||||||||||||||||||||
Rice Midstream Partners LP | 5,981,093 | 12,400 | 1,208,742 | (1,077,908 | ) | – | 6,124,327 | 113,116,320 | – | (9,799,790 | ) | (100,720 | ) | |||||||||||||||||||||
TC PipeLines LP | 4,253,931 | 118,200 | 880,303 | (731,078 | ) | – | 4,521,356 | 109,959,378 | – | (103,886,662 | ) | (731,843 | ) | |||||||||||||||||||||
Tallgrass Energy Partners LP | 3,835,924 | – | 771,319 | (712,969 | ) | – | 3,894,274 | 170,062,946 | – | 8,200,781 | (1,929,125 | ) | ||||||||||||||||||||||
Western Gas Partners LP | 8,181,076 | 34,500 | 1,654,002 | (1,475,008 | ) | – | 8,394,570 | 433,747,432 | – | 75,055,573 | (1,155,039 | ) | ||||||||||||||||||||||
$ | 3,411,057,790 | $ | – | $ | (30,216,735 | ) | $ | (15,838,590 | ) |
28 | May 31, 2018
Alerian Exchange Traded Funds
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Security Name | Share Balance as of November 30, 2017 | Purchases | Purchases In-Kind | Sales | Corporate Actions | Share Balance as of May 31, 2018 | Market Value as of May 31, 2018 | Dividends* | Change in Unrealized Gain (Loss) | Realized Gain/(Loss) | ||||||||||||||||||||||||
Investments no longer affiliated as of May 31, 2018 | ||||||||||||||||||||||||||||||||||
Dominion Energy Midstream Partners LP | 3,944,909 | 45,300 | 806,206 | (690,229 | ) | – | 4,106,186 | $ | 52,559,181 | $ | – | $ | (71,203,513 | ) | $ | (1,230,556 | ) | |||||||||||||||||
Enbridge Energy Partners LP | 17,579,625 | 37,300 | 3,553,212 | (3,173,349 | ) | – | 17,996,788 | 177,268,362 | – | (66,059,053 | ) | (2,375,593 | ) | |||||||||||||||||||||
MPLX LP | 23,433,562 | 119,500 | 4,739,004 | (4,231,143 | ) | – | 24,060,923 | 864,027,745 | – | 31,246,283 | 1,668,539 | |||||||||||||||||||||||
$ | 1,093,855,288 | $ | – | $ | (106,016,283 | ) | $ | (1,937,610 | ) | |||||||||||||||||||||||||
GRAND TOTAL | $ | 4,504,913,078 | $ | – | $ | (136,233,018 | ) | $ | (17,776,200 | ) |
* | 100% of the Income received was estimated as Return of Capital |
9. SHAREHOLDER MEETING
A Special Meeting of Shareholders of the Funds, each a series of the Trust, was held at the offices of ALPS Fund Services, Inc., at 1290 Broadway, Suite 1100, Denver, CO 80203 on May 31, 2018. At the meeting, the following matters were voted on by the Shareholders. The results of the Special Meeting of Shareholders are noted below:
Proposal 1: To approve a new investment advisory agreement (the “New Advisory Agreement”) between the Trust, on behalf of each Fund, and the Adviser.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
Alerian MLP ETF | 449,508,257 | 12,404,439 | Yes |
Proposal 2: To approve a proposal that would authorize the Adviser to enter into and materially amend sub-advisory agreements in the future with wholly-owned sub-advisers and unaffiliated sub-advisers, with the approval of the Board, but without obtaining additional Shareholder approval.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
Alerian MLP ETF | 224,374,038 | 237,538,658 | No |
Alerian Energy Infrastructure ETF adjourned to a new special shareholder meeting date of August 3, 2018.
10. SUBSEQUENT EVENTS
With respect to the Alerian MLP ETF, effective June 29, 2018, the Fund changed its primary benchmark for performance comparison purposes from the S&P 500 Index to the Alerian MLP Index. The Adviser made this recommendation to the Board because the Fund's new primary benchmark, the Alerian MLP Index, more closely aligns with the Fund's investment strategies and investment restrictions. In addition, effective June 29, 2018, the breakpoints to the Fund's unitary advisory fee as a percentage of net assets changed to the following: (i) 0.85% for average net assets up to and including $10 billion, (ii) 0.80% for average net assets greater than $10 billion up to and including $15 billion, (iii) 0.70% for average net assets greater than $15 billion up to and including $20 billion, (iv) 0.55% for average net assets greater than $20 billion up to and including $25 billion, and (v) 0.40% for average net assets greater than $25 billion.
29 | May 31, 2018
Alerian Exchange Traded Funds
Additional Information | May 31, 2018 (Unaudited) |
PROXY VOTING RECORDS, POLICIES AND PROCEDURES
Information regarding how each Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Funds’ proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-675-2639.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. Form N-Q for each Fund will be available on the SEC’s website at www.sec.gov. Each Fund’s Form N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Each Fund’s Form N-Q will be available without charge, upon request, by calling (toll-free) 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Fund designates the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2017:
Qualified Dividend Income | Dividend Received Deduction | |
Alerian Energy Infrastructure ETF | 100.00% | 48.71% |
In early 2018, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2017 via Form 1099. The Fund will notify shareholders in early 2019 of amounts paid to them by the Fund, if any, during the calendar year 2018.
LICENSING AGREEMENTS
Alerian (the “Licensor”) has entered into an index licensing agreement with ALPS Advisors Inc. (the “Advisor”) with respect to each of the Alerian MLP ETF and the Alerian Energy Infrastructure ETF, to allow the Adviser’s use of AMZI and AMEI. The following disclosure relates to the Licensor:
Alerian is the designer of the construction and methodology for the underlying index (each an “Underlying Index”) for each of the Alerian MLP ETF and the Alerian Energy Infrastructure ETF (each a “Fund” and collectively, the “Funds”). “Alerian,” “Alerian MLP Infrastructure Index,” “Alerian Energy Infrastructure Index,” “Alerian Index Series” and “AMZI” are service marks or trademarks of Alerian. Alerian acts as brand licensor for each Underlying Index. Alerian is not responsible for the descriptions of either Underlying Index or the Funds that appear herein. Alerian is not affiliated with the Trust, the Adviser or the Distributor.
Neither Fund is issued, sponsored, endorsed, sold or promoted by Alerian (“Licensor”) or its affiliates. Licensor makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly or the ability of the Alerian MLP Infrastructure Index (“Index”) to track general market performance. Licensor’s only relationship to the Licensee is the licensing of the Index which is determined, composed and calculated by Licensor without regard to the Licensee or the Fund. Licensor has no obligation to take the needs of the Licensee or the owners of the Fund into consideration in determining, composing or calculating the Index. Licensor is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Fund to be issued or in the determination or calculation of the equation by which the Fund is to be converted into cash. Licensor has no obligation or liability in connection with the issuance, administration, marketing or trading of either Fund and is not responsible for and has not participated in the determination of pricing or the timing of the issuance or sale of the Shares of either Fund or in the determination or calculation of the NAV of the relevant Fund. Alerian MLP Infrastructure Index, Alerian MLP Infrastructure Total Return Index, AMZI and AMZIX are trademarks of GKD Index Partners, LLC and their general use is granted under a license from GKD Index Partners, LLC.
LICENSOR DOES NOT GUARANTEE THE QUALITY, ACCURACY AND/OR THE COMPLETENESS OF THE INDEX OR ANY DATA INCLUDED THEREIN AND SHALL HAVE NO LIABILITY FOR ERRORS OR OMISSIONS OF ANY KIND RELATED TO THE INDEX OR DATA. LICENSOR MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE INDEX OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE RIGHTS LICENSED TO LICENSEE OR FOR ANY OTHER USE. LICENSOR MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL LICENSOR HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
30 | May 31, 2018
Alerian Exchange Traded Funds
Additional Information | May 31, 2018 (Unaudited) |
The Adviser does not guarantee the accuracy and/or the completeness of either Underlying Index or any data included therein, and the Adviser shall have no liability for any errors, omissions or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by either Fund, owners of the Shares of the relevant Fund or any other person or entity from the use of either Underlying Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to either Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect, or consequential damages (including lost profits) arising out of matters relating to the use of either Underlying Index, even if notified of the possibility of such damages.
(Applicable to the Alerian Energy Infrastructure ETF only)
The Underlying Index is the exclusive property of GKD Index Partners LLC d/b/a Alerian, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) (“S&P Dow Jones Indices”) to calculate and maintain the Underlying Index. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“SPFS”); Dow Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”); and these trademarks have been licensed to S&P Dow Jones Indices. “Calculated by S&P Dow Jones Indices” and its related stylized mark(s) have been licensed for use by Alerian.
The Fund is not sponsored, endorsed, sold or promoted by S&P Dow Jones Indices, SPFS, Dow Jones or any of their affiliates (collectively, “S&P Dow Jones Indices Entities”). S&P Dow Jones Indices Entities do not make any representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly or the ability of the Underlying Index to track general market performance. S&P Dow Jones Indices Entities only relationship to Alerian with respect to the Underlying Index is the licensing of certain trademarks, service marks and trade names of S&P Dow Jones Indices Entities and for the providing of calculation and maintenance services related to the Underlying Index. S&P Dow Jones Indices Entities are not responsible for and have not participated in the determination of the prices and amount of the Fund or the timing of the issuance or sale of the Fund or in the determination or calculation of the equation by which the Fund is to be converted into cash. S&P Dow Jones Indices Entities have no obligation or liability in connection with the administration, marketing or trading of the Fund. S&P Dow Jones Indices LLC is not an investment advisor. Inclusion of a security within the Underlying Index is not a recommendation by S&P Dow Jones Indices Entities to buy, sell, or hold such security, nor is it considered to be investment advice.
S&P DOW JONES INDICES ENTITIES DO NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE UNDERLYING INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P DOW JONES INDICES ENTITIES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. S&P DOW JONES INDICES ENTITIES MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY ALERIAN, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE UNDERLYING INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P DOW JONES INDICES ENTITIES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE.
31 | May 31, 2018
Alerian Exchange Traded Funds
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
At an in-person meeting held on March 5, 2018, the Board of Trustees of the Trust (the “Board” or the “Trustees”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve each of (i) the continuance of the investment advisory agreements between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect to the Alerian MLP ETF (“AMLP”) and the Alerian Energy Infrastructure ETF (“ENFR”) (each “a Fund” and collectively the “Funds”) (the “Existing Advisory Agreements”); (ii) a new investment advisory agreement between the Adviser and the Trust on behalf of each Fund (the “New Advisory Agreement”); and (iii) an interim investment advisory agreement between the Adviser and the Trust on behalf of each Fund (the “Interim Advisory Agreement” and together with the Existing Advisory Agreements and New Advisory Agreement, the “Advisory Agreements”). The Independent Trustees also met separately to consider the Advisory Agreements.
Consideration by the Board of the New Advisory Agreement and Interim Advisory Agreement was necessary because DST Systems, Inc. (“DST”), the ultimate parent company to the Adviser, had entered into an agreement to be acquired by SS&C Technologies Holdings, Inc. (“SS&C”) (the “Transaction”). Because the Adviser would be acquired along with DST, the closing of the Transaction (the “Closing”) may be deemed a change in control with respect to the Adviser. The Closing occurred on April 16, 2018. This change in control with respect to the Adviser may be deemed to trigger an “assignment” of the Existing Advisory Agreements under the Investment Company Act of 1940, as amended (the “1940 Act”). As required by the 1940 Act, the Existing Advisory Agreements provide for their automatic termination in the event of an assignment, and therefore, the Existing Advisory Agreements automatically terminated upon Closing. In order for the Adviser to continue as the Funds’ investment adviser, the Board and the Fund’s shareholders must approve the New Advisory Agreement which would take effect, if approved, upon the date of such shareholder approval. As of the date of this report, the New Advisory Agreement with respect to ENFR has not received shareholder approval and efforts to secure such shareholder approval are ongoing. As of the date of this report, the New Advisory Agreement with respect to AMLP has received shareholder approval. The Interim Advisory Agreement approved by the Board permits the Adviser to continue as investment adviser to ENFR from the date of the Closing until the Fund’s shareholders approve the New Advisory Agreement, subject to a maximum term of 150 days.
In evaluating the Advisory Agreements, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by AAI with respect to the applicable Fund under the Advisory Agreements; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided (or to be provided) by AAI under the Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Advisory Agreements, the investment parameters of the index of each Fund, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Funds.
The Independent Trustees reviewed information on the performance of each Fund and its applicable benchmark. The Independent Trustees also evaluated the correlation and tracking error between each underlying index and its corresponding Fund’s performance. Based on their review, the Independent Trustees found that the nature and extent of services provided to each Fund under the Advisory Agreements was appropriate and that the quality was satisfactory.
The Independent Trustees noted that the advisory fees for each Fund were unitary fees pursuant to which AAI assumes all expenses of the Funds (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreements, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
With respect to advisory fee rates, the Independent Trustees noted the following:
The net advisory fee rate for each Fund is higher than the median of its Broadridge expense group. The expense ratio for each Fund is higher than the median of its expense group.
With respect to AMLP, the Independent Trustees took into account, among other things, supplemental information provided by the Adviser showing AMLP’s total expenses were in line with the total expenses of peer groups deemed by the Adviser to be more comparable, including peer groups comprised of (i) the master limited partnership (“MLP”) asset class as a whole and (ii) exchange-traded products focused solely on MLP investments. The Independent Trustees also considered the additional costs and expenses incurred by AAI in managing and administering the Fund and that AMLP’s investment advisory fee schedule included breakpoints.
32 | May 31, 2018
Alerian Exchange Traded Funds
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
The Board took into account, among other things, the brand recognition of the Funds’ index provider and the fees charged by the index provider for licensing its indexes.
Based on the foregoing, and the other information available to them, the Independent Trustees concluded that the advisory fee rate for each of the Funds was reasonable under the circumstances and in light of the quality of the services provided.
The Independent Trustees considered other benefits available to AAI because of its relationship with the Funds and concluded that the advisory fees were reasonable taking into account any such benefits.
The Independent Trustees also considered with respect to each Fund the information provided by AAI about the costs and profitability of AAI with respect to each of the Funds. The Independent Trustees reviewed and noted the relatively small size of ENFR in considering economies of scale that may be realized by AAI. With respect to AMLP, the Independent Trustees noted that while the Fund has experienced some growth over the prior year, the Fund’s asset levels have not yet recovered to its historic highs and had declined over the most recent period. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
With respect to AMLP, the Independent Trustees considered, among other things the brand recognition of AMLP’s index provider as well as the trading volumes of the Fund and the narrow trading spreads. The Independent Trustees considered the breakpoint schedule adopted previously and whether the breakpoints would benefit shareholders and appropriately reflect economies of scale achieved by AAI with respect to AMLP should AMLP’s assets increase, noting also the volatility of the asset class and that AMLP’s assets were still below historical highs. Upon discussion, the Independent Trustees determined that the advisory fee rate for the Fund reflects an appropriate sharing of economies of scale.
In voting to renew each Existing Advisory Agreement and approve each New Advisory Agreement and Interim Advisory Agreement, the Independent Trustees concluded that the terms of each Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
33 | May 31, 2018
TABLE OF CONTENTS |
Performance Overview | 1 |
Disclosure of Fund Expenses | 3 |
Schedule of Investments | 4 |
Statement of Assets & Liabilities | 5 |
Statement of Operations | 6 |
Statements of Changes In Net Assets | 7 |
Financial Highlights | 8 |
Notes to Financial Statements | 9 |
Additional Information | 14 |
Board Considerations Regarding Approval of Investment Advisory Agreement | 15 |
alpsfunds.com
ALPS Equal Sector Weight ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
The ALPS Equal Sector Weight ETF (the “Fund”) seeks investment results that replicate as closely as possible, before fees and expenses, the performance of the NYSE® Select Sector Equal Weight IndexSM (the “Underlying Index”).
The Underlying Index is an index of ETFs comprised of all active Select Sector SPDR® ETFs in an equal weighted portfolio. These are the Consumer Discretionary Select Sector SPDR® Fund, Consumer Staples Select Sector SPDR® Fund, Materials Select Sector SPDR® Fund, Energy Select Sector SPDR® Fund, Technology Select Sector SPDR® Fund, Utilities Select Sector SPDR® Fund, Financial Select Sector SPDR® Fund, Industrial Select Sector SPDR® Fund, Health Care Select Sector SPDR® Fund and Real Estate Select Sector SPDR® Fund (each, an “Underlying Sector ETF” and collectively, the “Underlying Sector ETFs”). In order to track the Underlying Index, the Fund will use a “fund of funds” approach, and seek to achieve its investment objective by investing at least 90% of its total assets in the shares of the Underlying Sector ETFs.
The Underlying Index is designed to track performance of the equally weighted Underlying Sector ETFs. Accordingly, the Underlying Index is rebalanced to an equal weighting quarterly during the months of March, June, September, and December.
Each Underlying Sector ETF is an “index fund” that invests in the equity securities of companies in a particular sector or group of industries. The objective of each Underlying Sector ETF is to track its respective underlying sector index by replicating the securities in the underlying sector index. Together, the ten Underlying Sector ETFs represent the Underlying Index as a whole.
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | 5 Year | Since Inception^ | |
ALPS Equal Sector Weight ETF - NAV | 0.75% | 10.35% | 8.70% | 11.04% | 14.34% |
ALPS Equal Sector Weight ETF - Market Price* | 0.73% | 10.43% | 8.72% | 11.04% | 14.37% |
NYSE® Select Sector Equal Weight Index** | -0.26% | 8.09% | 6.45% | 8.90% | 12.22% |
S&P 500® Total Return Index | 3.16% | 14.38% | 10.97% | 12.98% | 15.58% |
Total Expense Ratio (per the current Prospectus) 0.51%. Net Expense Ratio (per the current Prospectus) 0.48%. Net expense ratio reflects the reimbursement of distribution fees for underlying sector ETFs. Please see the prospectus for additional information.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.675.2639.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced Investment Operations on July 6, 2009 with an Inception Date, the first day of trading on the Exchange, of July 7, 2009. |
* | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
** | The Fund’s underlying index changed on October 2, 2017 from Bank of America Securities - Merrill Lynch Equal Sector Weight Index to NYSE® Select Sector Equal Weight Index due to the former index closing on October 4, 2017. |
The NYSE® Select Sector Equal Weight Index consists of a strategy that holds all active Select Sector SPDR® ETFs in an equal-weighted portfolio.
S&P 500® Total Return Index: the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. Total return assumes reinvestment of any dividends and distributions realized during a given time period.
The indexes are not actively managed and do not reflect any deductions for fees, expenses or taxes. The indexes are reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The ALPS Equal Sector Weight ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the Fund.
1 | May 31, 2018
ALPS Equal Sector Weight ETF
Performance Overview | May 31, 2018 (Unaudited) |
The following table shows the sector weights of both the Fund and the S&P 500® as of May 31, 2018:
Sector Weighting Comparison (as of May 31, 2018)
EQL* | S&P 500® | +/- | |
Energy | 11.3% | 6.3% | 5.0% |
Utilities | 10.2% | 2.8% | 7.4% |
Real Estate | 10.1% | 2.7% | 7.4% |
Consumer Discretionary | 10.1% | 12.9% | -2.8% |
Technology | 10.1% | 27.8% | -17.7% |
Materials | 9.9% | 2.8% | 7.1% |
Industrials | 9.8% | 9.9% | -0.1% |
Healthcare | 9.7% | 13.9% | -4.2% |
Financials | 9.4% | 14.2% | -4.8% |
Consumer Staples | 9.4% | 6.7% | 2.7% |
Total | 100.0% | 100.0% |
Source: S&P 500®
* | % of Total Investments (excluding investments purchased with collateral from securities loaned). |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
2 | May 31, 2018
ALPS Equal Sector Weight ETF
Disclosure of Fund Expenses | May 31, 2018 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, 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 (six month) period and held through May 31, 2018.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values 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 ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. 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. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 12/1/17 | Ending Account Value 5/31/18 | Expense Ratio(a) | Expenses Paid During Period 12/1/17 - 5/31/18(b) | |
ALPS Equal Sector Weight ETF | ||||
Actual | $1,000.00 | $1,007.50 | 0.15% | $0.75 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.18 | 0.15% | $0.76 |
(a) | Annualized based on the Fund's most recent half-year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. |
3 | May 31, 2018
ALPS Equal Sector Weight ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
SECURITY DESCRIPTION | SHARES | VALUE | ||||||
EXCHANGE TRADED FUNDS (99.99%) | ||||||||
Consumer Discretionary (10.10%) | ||||||||
Consumer Discretionary Select Sector SPDR® Fund | 148,374 | $ | 15,692,034 | |||||
Consumer Staples (9.36%) | ||||||||
Consumer Staples Select Sector SPDR® Fund | 293,070 | 14,553,856 | ||||||
Energy (11.34%) | ||||||||
Energy Select Sector SPDR® Fund | 231,854 | 17,625,541 | ||||||
Financials (9.45%) | ||||||||
Financial Select Sector SPDR® Fund | 540,562 | 14,692,475 | ||||||
Healthcare (9.69%) | ||||||||
Health Care Select Sector SPDR® Fund | 182,762 | 15,061,417 | ||||||
Industrials (9.76%) | ||||||||
Industrial Select Sector SPDR® Fund | 203,787 | 15,169,904 | ||||||
Materials (9.88%) | ||||||||
Materials Select Sector SPDR® Fund | 263,839 | 15,350,153 | ||||||
Real Estate (10.14%) | ||||||||
Real Estate Select Sector SPDR® Fund | 499,232 | 15,765,747 | ||||||
Technology (10.08%) | ||||||||
Technology Select Sector SPDR® Fund | 224,192 | 15,671,021 | ||||||
Utilities (10.19%) | ||||||||
Utilities Select Sector SPDR® Fund(a) | 310,568 | 15,835,862 | ||||||
TOTAL EXCHANGE TRADED FUNDS | ||||||||
(Cost $118,123,283) | 155,418,010 |
7 DAY YIELD | SHARES | VALUE | ||||||||||
SHORT TERM INVESTMENTS (7.75%) | ||||||||||||
Money Market Fund (0.02%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | 1.669 | % | 29,090 | 29,090 | ||||||||
Investments Purchased with Collateral from Securities Loaned (7.73%) | ||||||||||||
State Street Navigator Securities Lending Prime Portfolio, 1.77% | 12,018,552 | 12,018,552 | ||||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(COST OF $12,047,642) | 12,047,642 | |||||||||||
TOTAL INVESTMENTS (107.74%) | ||||||||||||
(Cost $130,170,925) | $ | 167,465,652 | ||||||||||
NET LIABILITIES LESS OTHER ASSETS (-7.74%) | (12,035,408 | ) | ||||||||||
NET ASSETS (100.00%) | $ | 155,430,244 |
(a) | Security, or a portion of the security position, is currently on loan. The total market value of securities on loan is $11,785,115 |
Common Abbreviations:
SPDR® - Standard & Poor's Depositary Receipts
See Notes to Financial Statements.
4 | May 31, 2018
ALPS Equal Sector Weight ETF
Statement of Assets and Liabilities | May 31, 2018 (Unaudited) |
ASSETS: | ||||
Investments, at value | $ | 167,465,652 | ||
Cash held in escrow account (Note 3) | 9,313 | |||
Dividends receivable | 3,161 | |||
Total Assets | 167,478,126 | |||
LIABILITIES: | ||||
Payable to adviser | 29,330 | |||
Payable for collateral upon return of securities loaned | 12,018,552 | |||
Total Liabilities | 12,047,882 | |||
NET ASSETS | $ | 155,430,244 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 111,151,523 | ||
Accumulated net investment loss | (18,220 | ) | ||
Accumulated net realized gain | 7,002,214 | |||
Net unrealized appreciation | 37,294,727 | |||
NET ASSETS | $ | 155,430,244 | ||
INVESTMENTS, AT COST | $ | 130,170,925 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 155,430,244 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 2,250,000 | |||
Net Asset Value, offering and redemption price per share | $ | 69.08 |
See Notes to Financial Statements.
5 | May 31, 2018
ALPS Equal Sector Weight ETF
Statement of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
INVESTMENT INCOME: | ||||
Dividends | $ | 1,801,717 | ||
Securities lending income | 18,566 | |||
Total investment income | 1,820,283 | |||
EXPENSES: | ||||
Investment adviser fees | 307,124 | |||
Total expenses before waiver/reimbursement | 307,124 | |||
Less fees waiver/reimbursement by investment adviser | (182,614 | ) | ||
Net Expenses | 124,510 | |||
NET INVESTMENT INCOME | 1,695,773 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 7,429,501 | |||
Net change in unrealized depreciation on investments | (7,855,477 | ) | ||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (425,976 | ) | ||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,269,797 |
See Notes to Financial Statements.
6 | May 31, 2018
ALPS Equal Sector Weight ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,695,773 | $ | 3,390,145 | ||||
Net realized gain | 7,429,501 | 6,257,769 | ||||||
Net change in unrealized appreciation/(depreciation) | (7,855,477 | ) | 18,185,874 | |||||
Net increase in net assets resulting from operations | 1,269,797 | 27,833,788 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (1,735,129 | ) | (4,499,673 | ) | ||||
Total distributions | (1,735,129 | ) | (4,499,673 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 6,915,900 | 18,897,952 | ||||||
Cost of shares redeemed | (17,303,875 | ) | (16,339,186 | ) | ||||
Net increase/(decrease) from share transactions | (10,387,975 | ) | 2,558,766 | |||||
Net increase/(decrease) in net assets | (10,853,307 | ) | 25,892,881 | |||||
NET ASSETS: | ||||||||
Beginning of period | 166,283,551 | 140,390,670 | ||||||
End of period * | $ | 155,430,244 | $ | 166,283,551 | ||||
*Including accumulated net investment income/(loss) of: | $ | (18,220 | ) | $ | 21,136 | |||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 2,400,000 | 2,350,000 | ||||||
Shares sold | 100,000 | 300,000 | ||||||
Shares redeemed | (250,000 | ) | (250,000 | ) | ||||
Shares outstanding, end of year | 2,250,000 | 2,400,000 |
See Notes to Financial Statements.
7 | May 31, 2018
ALPS Equal Sector Weight ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Year Ended November 30, 2014 | For the Year Ended November 30, 2013 | |||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 69.28 | $ | 59.74 | $ | 56.16 | $ | 57.01 | $ | 50.11 | $ | 39.79 | ||||||||||||
INCOME FROM OPERATIONS: | ||||||||||||||||||||||||
Net investment income(a) | 0.71 | 1.37 | 1.66 | 1.09 | 0.90 | 0.81 | ||||||||||||||||||
Net realized and unrealized gain/(loss) | (0.20 | ) | 10.03 | 3.11 | (0.84 | ) | 6.90 | 10.35 | ||||||||||||||||
Total from investment operations | 0.51 | 11.40 | 4.77 | 0.25 | 7.80 | 11.16 | ||||||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||||||
From net investment income | (0.71 | ) | (1.86 | ) | (1.19 | ) | (1.10 | ) | (0.90 | ) | (0.84 | ) | ||||||||||||
Total distributions | (0.71 | ) | (1.86 | ) | (1.19 | ) | (1.10 | ) | (0.90 | ) | (0.84 | ) | ||||||||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | (0.20 | ) | 9.54 | 3.58 | (0.85 | ) | 6.90 | 10.32 | ||||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 69.08 | $ | 69.28 | $ | 59.74 | $ | 56.16 | $ | 57.01 | $ | 50.11 | ||||||||||||
TOTAL RETURN(b) | 0.75 | % | 19.46 | % | 8.62 | % | 0.48 | % | 15.71 | % | 28.41 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||
Net assets, end of period (in 000s) | $ | 155,430 | $ | 166,284 | $ | 140,391 | $ | 140,407 | $ | 139,686 | $ | 110,245 | ||||||||||||
Ratio of expenses excluding waiver/reimbursement to average net assets | 0.37 | %(c) | 0.37 | % | 0.37 | % | 0.37 | % | 0.37 | % | 0.37 | % | ||||||||||||
Ratio of expenses including waiver/reimbursement to average net assets | 0.15 | %(c) | 0.15 | % | 0.15 | % | 0.21 | %(d) | 0.34 | % | 0.34 | % | ||||||||||||
Ratio of net investment income excluding waiver/reimbursement to average net assets | 1.82 | %(c) | 1.92 | % | 2.71 | % | 1.78 | % | 1.67 | % | 1.77 | % | ||||||||||||
Ratio of net investment income including waiver/reimbursement to average net assets | 2.04 | %(c) | 2.14 | % | 2.93 | % | 1.94 | %(d) | 1.70 | % | 1.80 | % | ||||||||||||
Portfolio turnover rate(e) | 3 | % | 5 | % | 13 | % | 6 | % | 3 | % | 2 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. |
(c) | Annualized. |
(d) | The effective expense ratio including waivers changed from 0.34% to 0.15% effective April 1, 2015 through March 31, 2016. |
(e) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
8 | May 31, 2018
ALPS Equal Sector Weight ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of May 31, 2018, the Trust consists of twenty separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the ALPS Equal Sector Weight ETF (the “Fund”). The investment objective of the Fund is to seek investment results that replicate as closely as possible, before fees and expenses, the performance of the NYSE® Select Sector Equal Weight Index (the “Underlying Index”). The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The Fund’s Shares (“Shares”) are listed on the NYSE Arca, Inc. The Fund issues and redeems Shares at net asset value (“NAV”) in blocks of 50,000 Shares each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the New York Stock Exchange (the “NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“NASDAQ”) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the last quoted sale price in such market.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
9 | May 31, 2018
ALPS Equal Sector Weight ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
B. Fair Value Measurements
The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund’s investments by major category are as follows:
Exchange Traded Funds, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 - | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 - | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 - | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of inputs used to value the Fund’s investments at May 31, 2018:
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Exchange Traded Funds | $ | 155,418,010 | $ | – | $ | – | $ | 155,418,010 | ||||||||
Short Term Investments | ||||||||||||||||
Money Market Fund | 29,090 | – | – | 29,090 | ||||||||||||
Investments Purchased with Collateral from | ||||||||||||||||
Securities Loaned | 12,018,552 | – | – | 12,018,552 | ||||||||||||
TOTAL | $ | 167,465,652 | $ | – | $ | – | $ | 167,465,652 |
* | For a detailed sector breakdown, see the accompanying Schedule of Investments. |
The Fund recognizes transfers between levels as of the end of the period. For the six months ended May 31, 2018, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
C. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
10 | May 31, 2018
ALPS Equal Sector Weight ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
D. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid quarterly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
E. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2018.
The tax character of the distributions paid during the fiscal year ended November 30, 2017 was as follows:
Ordinary Income | ||||
November 30, 2017 | ||||
ALPS Equal Sector Weight ETF | $ | 4,499,673 |
At November 30, 2017, the Fund had available for tax purposes unused post-enactment capital loss carryforwards as follows:
Fund | Short-Term | Long-Term | ||||||
ALPS Equal Sector Weight ETF | $ | — | $ | 356,705 |
As of May 31, 2018, the cost of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Gross appreciation (excess of value over tax cost) | $ | 38,429,964 | ||
Gross depreciation (excess of tax cost over value) | (1,189,631 | ) | ||
Net unrealized appreciation (depreciation) | 37,240,333 | |||
Cost of investments for income tax purposes | $ | 130,225,319 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of May 31, 2018.
F. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the six months ended May 31, 2018, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
G. Lending of Portfolio Securities
The Fund has entered into a securities lending agreement with State Street Bank & Trust Co. (“SSB”), the Fund’s lending agent. The Fund may lend its portfolio securities only to borrowers that are approved by SSB. The Fund will limit such lending to not more than 33 1/3% of the value of its total assets. The Fund’s securities held at SSB as custodian shall be available to be lent except those securities the Fund or ALPS Advisors, Inc. specifically identifies in writing as not being available for lending. The borrower pledges and maintains with the Fund collateral consisting of cash (U.S. Dollars only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and cash equivalents (including irrevocable bank letters of credit) issued by a person other than the borrower or an affiliate of the borrower. The initial collateral received by the Fund is required to have a value of no less than 102% of the market value of the loaned securities for U.S equity securities and a value of no less than 105% of the market value for non-U.S. equity securities. The collateral is maintained thereafter, at a market value equal to not less than 102% of the current value of the U.S. equity securities on loan and not less than 105% of the current value of the non-U.S. equity securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to the Fund on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the customary time period for settlement of securities transactions.
11 | May 31, 2018
ALPS Equal Sector Weight ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments and is reflected in the Statements of Assets and Liabilities as a payable for collateral upon return of securities loaned. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Fund’s Statements of Assets and Liabilities as it is held by the lending agent on behalf of the Fund, and the Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.
The following is a summary of the Fund's securities lending agreement and related cash and non-cash collateral received as of May 31, 2018.
Market Value of Securities on Loan | Cash Collateral Received | Non-Cash Collateral Received | Total Collateral Received | |||||||||||||
ALPS Equal Sector Weight ETF | $ | 11,785,115 | $ | 12,018,552 | $ | — | $ | 12,018,552 |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged or securities loaned, and the remaining contractual maturity of those transactions as of May 31, 2018:
ALPS Equal Sector Weight ETF | Remaining contractual maturity of the agreement | |||||||||||||||||
Securities Lending Transactions | Overnight & Continuous | Up to 30 days | 30-90 days | Greater than 90 days | Total | |||||||||||||
Common Stocks | $12,018,552 | $ | — | $ | — | $ | — | $ | 12,018,552 | |||||||||
Total Borrowings | 12,018,552 | |||||||||||||||||
Gross amount of recognized liabilities for securities lending (collateral received) | $ | 12,018,552 |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as the Fund’s investment adviser pursuant to an Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.37% of the Fund’s average daily net assets.
The Adviser has agreed to waive 0.19% of its annual unitary fee payable by the Fund on a voluntary basis.
Capitalized terms used but not defined within this paragraph, shall have the respective meanings given to them in the Board Considerations Regarding Approval of Investment Advisory Agreement section of this Semi-Annual Report (“Board Considerations”). As discussed in the Board Considerations, the Adviser is an indirect wholly owned subsidiary of DST and on April 16, 2018, DST was acquired by SS&C resulting in a change of control of the Adviser. As discussed in the Board Considerations, in order for the Adviser to continue to serve as the investment adviser to the applicable Fund, among other approvals, the Board approved an Interim Advisory Agreement between the Adviser and the Trust, on behalf of the Funds. The Interim Advisory Agreement is effective for the earlier of 150 days from the close of the Transaction or the date of shareholder approval of the New Advisory Agreement. Under the terms of the Interim Advisory Agreement, the unitary management fee paid to the Adviser will be held in escrow until shareholder approval of the New Advisory Agreement is obtained and is reported as Cash held in escrow account on the Statement of Assets and Liabilities.
12 | May 31, 2018
ALPS Equal Sector Weight ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
ALPS Portfolio Solutions Distributor, Inc. (“APSD”) is both the distributor for the Fund as well as the Select Sector SPDR exchange traded funds (“Underlying Sector ETFs”) that the Fund invests in. As required by exemptive relief obtained by the Underlying Sector ETFs, the Adviser will reimburse the Fund an amount equal to the distribution fee received by APSD from the Underlying Sector ETFs attributable to the Fund’s investment in the Underlying Sector ETFs, for so long as APSD acts as the distributor to the Fund and the Underlying Sector ETFs. Such reimbursement is generally expected to equal 0.03% annually.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for acquired fund fees and expenses, interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee for regularly scheduled meetings of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, both the Chairman of the Board and Chairman of the Audit Committee each receives a quarterly retainer of $2,000, in connection with their respective roles.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2018 the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Fund | Purchases | Sales | ||||||
ALPS Equal Sector Weight ETF | $ | 5,359,918 | $ | 5,259,372 |
For the six months ended May 31, 2018, the cost in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
ALPS Equal Sector Weight ETF | $ | 6,915,841 | $ | 17,396,587 |
For the six months ended May 31, 2018, the ALPS Equal Sector Weight ETF had in-kind net realized gain of $7,237,507.
Gains on in-kind transactions are generally not considered taxable gains for federal income tax purposes and losses on in kind transactions are also not deductible for tax purposes.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 Shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of the Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
13 | May 31, 2018
ALPS Equal Sector Weight ETF
Additional Information | May 31, 2018 (Unaudited) |
PROXY VOTING RECORDS, POLICIES AND PROCEDURES
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-675-2639.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of the Fund’s portfolio holdings with the SEC on Form N-Q. Forms N-Q for the Fund are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s Forms N-Q are available without charge, upon request, by calling (toll-free) 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Fund designated the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2017:
Qualified Dividend Income | Dividend Received Deduction | |||||||
ALPS Equal Sector Weight ETF | 86.38 | % | 86.89 | % |
In early 2018, if applicable, shareholders of record received this information for the distributions paid to them by the Fund during the calendar year 2017 via Form 1099. The Fund will notify shareholders in early 2019 of amounts paid to them by the Fund, if any, during the calendar year 2018.
LICENSING AGREEMENT
ICE Data Indices, LLC (“ICE Data” or the “Licensor”) has entered into an index licensing agreement with ALPS Advisors Inc. to allow ALPS Advisors Inc.’s use of the Underlying Index of the ALPS Equal Sector Weight ETF. The following disclosure relates to the Licensor:
NYSE Select Sector Equal Weight IndexSM is a service mark of ICE Data Indices, LLC or its affiliates (“ICE Data”) and has been licensed for use by ALPS Advisors, Inc. (the “Adviser”) in connection with ALPS Equal Sector Weight ETF (the “Fund”). Neither the Trust nor the Fund is sponsored, endorsed, sold or promoted by ICE Data. ICE Data makes no representations or warranties regarding the Adviser or the Fund or the ability of the NYSE Select Sector Equal Weight IndexSM to track general stock market performance.
ICE DATA MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND HEREBY EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO THE NYSE SELECT SECTOR EQUAL WEIGHT INDEXSM OR ANY DATA INCLUDED THEREIN. IN NO EVENT SHALL ICE DATA HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The Adviser does not guarantee the accuracy and/or the completeness of the Underlying Index or any data included therein, and the Adviser shall have no liability for any errors, omissions or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by the Fund, owners of the Shares of the Fund or any other person or entity from the use of the Underlying Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits) arising out of matters relating to the use of the Underlying Index even if notified of the possibility of such damages.
14 | May 31, 2018
ALPS Equal Sector Weight ETF
Board Considerations Regarding Approval of Investment Advisory Agreement | May 31, 2018 (Unaudited) |
At an in-person meeting held on March 5, 2018, the Board of Trustees of the Trust (the “Board” or the “Trustees”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve each of (i) the continuance of the Investment Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect to the ALPS Equal Sector Weight ETF (“EQL” or “the Fund”) (the “Existing Advisory Agreement”); (ii) a new investment advisory agreement between the Adviser and the Trust on behalf of the Fund (the “New Advisory Agreement”); and (iii) an interim investment advisory agreement between the Adviser and the Trust on behalf of the Fund (the “Interim Advisory Agreement” and together with the Existing Advisory Agreement and New Advisory Agreement, the “Advisory Agreements”). The Independent Trustees also met separately to consider the Advisory Agreements.
Consideration by the Board of the New Advisory Agreement and Interim Advisory Agreement was necessary because DST Systems, Inc. (“DST”), the ultimate parent company to the Adviser, had had entered into an agreement to be acquired by SS&C Technologies Holdings, Inc. (“SS&C”) (the “Transaction”). Because the Adviser would be acquired along with DST, the closing of the Transaction (the “Closing”) may be deemed a change in control with respect to the Adviser. The Closing occurred on April 16, 2018. This change in control with respect to the Adviser may be deemed to trigger an “assignment” of the Existing Advisory Agreement under the Investment Company Act of 1940, as amended (the “1940 Act”). As required by the 1940 Act, the Existing Advisory Agreement provides for its automatic termination in the event of an assignment, and therefore, the Existing Advisory Agreement automatically terminated upon Closing. In order for the Adviser to continue as the Fund’s investment adviser, the Board and the Fund’s shareholders must approve the New Advisory Agreement which would take effect, if approved, upon the date of such shareholder approval. As of the date of this report, the New Advisory Agreement has not received shareholder approval and efforts to secure such shareholder approval are ongoing. The Interim Advisory Agreement approved by the Board permits the Adviser to continue as investment adviser to the Fund from the date of the Closing until the Fund’s shareholders approve the New Advisory Agreement, subject to a maximum term of 150 days.
In evaluating the Advisory Agreements with respect to the Fund, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by AAI with respect to the Fund under the Advisory Agreements; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided (or to be provided) by AAI under the Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Advisory Agreements, the investment parameters of the index of the Fund, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Fund.
The Independent Trustees reviewed information on the performance of the Fund and its benchmark. The Independent Trustees also evaluated the correlation and tracking error between the underlying index and the Fund’s performance. Based on their review, the Independent Trustees found that the nature and extent of services provided (or to be provided) to the Fund under the Advisory Agreements was appropriate and that the quality was satisfactory.
The Independent Trustees noted that the advisory fee for the Fund was a unitary fee pursuant to which AAI assumes all expenses of the Fund (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreements, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
With respect to the advisory fee rate, the Independent Trustees noted the following:
The net advisory fee rate for the Fund is lower than the median of its Broadridge expense group and the Fund’s expense ratio is below the median of its Broadridge expense group.
Based on the foregoing, and the other information available to them, the Independent Trustees concluded that the advisory fee rate for the Fund was reasonable under the circumstances and in light of the quality of the services provided.
The Independent Trustees considered other benefits available to AAI because of its relationship with the Fund and concluded that the advisory fees were reasonable taking into account any such benefits.
The Independent Trustees also considered with respect to the Fund the information provided by AAI about the costs and profitability of AAI with respect to the Fund. The Independent Trustees reviewed and noted the relatively small size of the Fund in considering economies of scale that may be realized by AAI. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
In voting to renew the Existing Advisory Agreement and approve the New Advisory Agreement and Interim Advisory Agreement, the Independent Trustees concluded that the terms of each Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
15 | May 31, 2018
TABLE OF CONTENTS |
Performance Overview | 1 |
Disclosure of Fund Expenses | 6 |
Schedules of Investments | 7 |
Statements of Assets and Liabilities | 14 |
Statements of Operations | 15 |
Statements of Changes In Net Assets | 16 |
Financial Highlights | 18 |
Notes to Financial Statements | 20 |
Additional Information | 28 |
Board Considerations Regarding Approval of Investment Advisory Agreements | 30 |
alpsfunds.com
ALPS Disruptive Technologies ETF |
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
ALPS Disruptive Technologies ETF (the “Fund”) employs a “passive management” - or indexing - investment approach designed to seek investment results that correspond (before fees and expenses) generally to the performance of the Indxx Disruptive Technologies Index (the “Underlying Index”). The Shares of the Fund are listed and trade on the Cboe BZX under the ticker symbol DTEC. The Fund will invest at least 80% of its net assets in securities that comprise the Underlying Index.
The Underlying Index utilizes a rules-based methodology developed by Indxx, LLC (the “Index Provider”), which is designed to identify the companies using disruptive technologies in each of ten thematic areas: Healthcare Innovation, Internet of Things, Clean Energy and Smart Grid, Cloud Computing, Data and Analytics, FinTech, Robotics and Artificial Intelligence, Cybersecurity, 3D Printing, and Mobile Payments (each a “Theme” and together, the “Themes”). Companies using disruptive technologies are those that are entering traditional markets with new digital forms of production and distribution, seek to disrupt an existing market and value network, displace established market-leading firms, products and alliances and increasingly gain market share. The Underlying Index is compiled by the Index Provider and may be comprised of U.S. and non-U.S. companies, including foreign and emerging markets companies. In order to be eligible for inclusion in the Underlying Index’s Index Universe, a company’s stock must be traded on one or more major global securities exchanges, have a minimum market capitalization of at least $500 million, and have a six month minimum average daily trading volume of $2 million, and the company must derive a minimum of 50% of its revenue from a single Theme. All equity securities meeting the above criteria are selected for inclusion in the Index Universe. From the Index Universe, the Underlying Index methodology selects ten stocks in each Theme according to proprietary quantitative and qualitative factors. The eligible stocks that are selected for inclusion in the Index’s portfolio are equally weighted. The Underlying Index is reconstituted annually on the third Friday of September and rebalanced quarterly.
Fund Performance (as of May 31, 2018)
Since Inception^ | |
ALPS Disruptive Technologies ETF - NAV | 10.05% |
ALPS Disruptive Technologies ETF - Market Price* | 10.69% |
Indxx Disruptive Technologies Total Return Index | 10.69% |
Total Expense Ratio (per the current prospectus) 0.50%.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.759.5679.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced operations on December 28, 2017, with the first day of trading on the exchange of December 29, 2017. Total return for a period of less than one year is not annualized. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The Fund is new with limited operating history.
Indxx Disruptive Technologies Index (Ticker: IDTEC) is based around companies that enter traditional markets with new digital forms of production and distribution, are likely to disrupt an existing market and value network, displace established market leading firms, products and alliances and increasingly gain market share. The index is reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period.
One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
1 | May 31, 2018
ALPS Disruptive Technologies ETF |
Performance Overview | May 31, 2018 (Unaudited) |
The ALPS Disruptive Technologies ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the Distributor for the ALPS Disruptive Technologies ETF.
Top Ten Holdings* (as of May 31, 2018)
DexCom, Inc. | 1.43% |
China Longyuan Power Group Corp., Ltd. | 1.33% |
ABIOMED, Inc. | 1.30% |
Aerovironment, Inc. | 1.25% |
First Data Corp. | 1.22% |
SimCorp A/S | 1.22% |
Align Technology, Inc. | 1.22% |
Temenos AG | 1.22% |
Xero, Ltd. | 1.21% |
Intuit, Inc. | 1.15% |
Total % of Top 10 Holdings | 12.55% |
* | % of Total Investments (excluding investments purchased with collateral from securities loaned) |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of change in value of a $10,000 investment in the Fund and the Index
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
Sector Allocation* (as of May 31, 2018)
2 | May 31, 2018
ALPS Medical Breakthroughs ETF |
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
ALPS Medical Breakthroughs ETF (the “Fund”) employs a “passive management” - or indexing - investment approach designed to seek investment results that correspond (before fees and expenses) generally to the performance of the Poliwogg Medical Breakthroughs IndexSM (the “Underlying Index”).
The Underlying Index is comprised of small- and mid-cap stocks of biotechnology and pharmaceutical companies that have one or more drugs in either Phase II or Phase III U.S. Food and Drug Administration (“FDA”) clinical trials. In a Phase II trial, the drug is administered to a group of 100-300 people to see if it is effective and to evaluate its safety. In a Phase III trial, the drug is given to a larger group, between 500-3,000 people, to confirm its effectiveness, monitor side effects, compare it to commonly used treatments and collect information that will allow the drug or treatment to be used safely. Stocks selected for inclusion in the Underlying Index must be listed on a U.S. stock exchange. Underlying Index constituents must have a market capitalization of no less than $200 million and no more than $5 billion. Stocks included in the Underlying Index must also sustain an average daily trading volume in excess of $1 million for the 90-day period preceding an Underlying Index reconstitution. Constituents must be able to sustain the monthly rates at which they use shareholder capital (“cash burn rates”) for at least 24 months. The Underlying Index is reconstituted semi-annually on the third Fridays of June and December.
Fund Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | Since Inception^ | |
ALPS Medical Breakthroughs ETF - NAV | 22.61% | 58.90% | 4.69% | 14.27% |
ALPS Medical Breakthroughs ETF - Market Price* | 22.65% | 58.97% | 4.67% | 14.27% |
Poliwogg Medical Breakthroughs Total Return Index | 22.89% | 59.47% | 5.10% | 14.72% |
NASDAQ Biotechnology Total Return Index | 3.26% | 14.44% | -3.33% | 2.42% |
Total Expense Ratio (per the current prospectus) 0.50%
Performance data quoted represents past performance. Past performance does not guarantee future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For most current month-end performance data please visit www.alpsfunds.com or call 1.844.234.5852.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced investment operations on December 31, 2014. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
NASDAQ Biotechnology Total Return Index (Ticker: NBI) is a modified market capitalization-weighted index designed to measure the performance of the all NASDAQ stocks in the biotechnology sector. Total return assumes reinvestment of any dividends and distributions realized during a given time period.
Poliwogg Medical Breakthroughs Total Return Index is designed to capture research and development opportunities in the pharmaceutical industry. PMBI consists of small-cap and mid-cap pharmaceutical and biotechnology stocks listed on U.S. stock exchanges that have one or more drugs in either Phase II or Phase III U.S. FDA clinical trials. Total return assumes reinvestment of any dividends and distributions realized during a given time period.
One cannot invest directly in an index. Index performance does not reflect fund performance.
Companies in the pharmaceuticals and biotechnology industry may be subject to extensive litigation based on product liability and similar claims. Legislation introduced or considered by certain governments on such industries or on the healthcare sector cannot be predicted.
Companies in the pharmaceuticals industry are subject to competitive forces that may make it difficult to raise prices and, in fact, may result in price discounting. The profitability of some companies in the pharmaceuticals industry may be dependent on a relatively limited number of products. In addition, their products can become obsolete due to industry innovation, changes in technologies or other market developments. Many new products in the pharmaceuticals industry are subject to government approvals, regulation and reimbursement rates. The process of obtaining government approvals may be long and costly. Many companies in the pharmaceuticals industry are heavily dependent on patents and intellectual property rights. The loss or impairment of these rights may adversely affect the profitability of these companies.
3 | May 31, 2018
ALPS Medical Breakthroughs ETF |
Performance Overview | May 31, 2018 (Unaudited) |
The development of new drugs generally has a high failure rate, and such failures may negatively impact the stock price of the company developing the failed drug. Biotechnology companies may have persistent losses during a new product’s transition from development to production. In order to fund operations, biotechnology companies may require financing from the capital markets, which may not always be available on satisfactory terms or at all.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The ALPS Medical Breakthroughs ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the Distributor for the ALPS Medical Breakthroughs ETF.
ALPS Portfolio Solutions Distributor, Inc. is not affiliated with S-Network Global Indexes, Inc.
Top Ten Holdings* (as of May 31, 2018)
BeiGene, Ltd. | 5.66% |
Sarepta Therapeutics, Inc. | 4.13% |
Loxo Oncology, Inc. | 3.61% |
Agios Pharmaceuticals, Inc. | 3.55% |
Galapagos NV | 3.53% |
Taro Pharmaceutical Industries, Ltd. | 3.25% |
FibroGen, Inc. | 3.01% |
GW Pharmaceuticals PLC | 2.78% |
Ligand Pharmaceuticals, Inc. | 2.77% |
Madrigal Pharmaceuticals, Inc. | 2.53% |
Total % of Top 10 Holdings | 34.82% |
* | % of Total Investments (excluding investments purchased with collateral from securities loaned) |
Future holdings are subject to change.
Sector Allocation* (as of May 31, 2018)
4 | May 31, 2018
ALPS Medical Breakthroughs ETF |
Performance Overview | May 31, 2018 (Unaudited) |
Growth of $10,000 (as of May 31, 2018)
Comparison of change in value of a $10,000 investment in the Fund and the Index
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Performance calculations are as of the end of each month. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
5 | May 31, 2018
ALPS ETF Trust
Disclosure of Fund Expenses | May 31, 2018 (Unaudited) |
Shareholder Expense Example: As a shareholder of a Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, 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 a Fund and to compare these costs with the ongoing costs of investing in other funds. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through May 31, 2018.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values 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 ongoing costs of investing in the Fund and 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.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. Therefore, the second line is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 12/1/17 | Ending Account Value 5/31/18 | Expense Ratio(a) | Expenses Paid During Period 12/1/17 - 5/31/18(b) | |
ALPS Disruptive Technologies ETF | ||||
Actual(c) | $1,000.00 | $1,100.50 | 0.50% | $2.23 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.44 | 0.50% | $2.52 |
ALPS Medical Breakthroughs ETF | ||||
Actual | $1,000.00 | $1,226.10 | 0.50% | $2.78 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.44 | 0.50% | $2.52 |
(a) | Annualized, based on the Fund's most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. |
(c) | The ALPS Disruptive Technologies ETF commenced operations on December 28, 2017. Actual expenses on this Fund are equal to the Fund's annualized expense ratio multiplied by the average account value of the period, multiplied by the number of days since the Fund launched (155), divided by 365. |
6 | May 31, 2018
ALPS Disruptive Technologies ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.86%) | ||||||||
Consumer Discretionary (1.99%) | ||||||||
iRobot Corp.(a)(b) | 3,430 | $ | 214,066 | |||||
Netflix, Inc.(b) | 719 | 252,801 | ||||||
Total Consumer Discretionary | 466,867 | |||||||
Financials (5.51%) | ||||||||
American Express Co. | 2,380 | 233,954 | ||||||
LendingClub Corp.(b) | 58,907 | 193,804 | ||||||
LendingTree, Inc.(b) | 666 | 172,427 | ||||||
Moody's Corp. | 1,364 | 232,658 | ||||||
S&P Global, Inc. | 1,190 | 235,025 | ||||||
Thomson Reuters Corp. | 5,789 | 225,068 | ||||||
Total Financials | 1,292,936 | |||||||
Health Care (12.45%) | ||||||||
ABIOMED, Inc.(b) | 797 | 303,768 | ||||||
Align Technology, Inc.(b) | 859 | 285,145 | ||||||
Boston Scientific Corp.(b) | 8,242 | 250,474 | ||||||
Cochlear, Ltd. | 1,592 | 236,155 | ||||||
CYBERDYNE, Inc.(a)(b) | 15,800 | 202,901 | ||||||
DENTSPLY SIRONA, Inc. | 4,039 | 176,949 | ||||||
DexCom, Inc.(b) | 3,814 | 335,594 | ||||||
DiaSorin SpA | 2,532 | 244,499 | ||||||
Intuitive Surgical, Inc. (b) | 528 | 242,706 | ||||||
Mazor Robotics, Ltd., Sponsored ADR(a)(b) | 3,313 | 197,223 | ||||||
Smith & Nephew PLC, Sponsored ADR | 6,169 | 224,922 | ||||||
William Demant Holding A/S(b) | 6,053 | 220,380 | ||||||
Total Health Care | 2,920,716 | |||||||
Industrials (18.71%) | ||||||||
ABB, Ltd., Sponsored ADR | 9,451 | 214,916 | ||||||
Aerovironment, Inc.(b) | 5,060 | 292,772 | ||||||
ATS Automation Tooling Systems, Inc.(b) | 17,057 | 266,655 | ||||||
Experian PLC | 10,626 | 260,124 | ||||||
FANUC Corp. | 950 | 203,213 | ||||||
Hyundai Robotics Co., Ltd.(b) | 559 | 201,208 | ||||||
IHS Markit, Ltd.(b) | 4,778 | 235,460 | ||||||
Nielsen Holdings Plc | 6,999 | 211,160 | ||||||
Proto Labs, Inc.(b) | 1,947 | 234,808 | ||||||
Prysmian SpA | 7,011 | 195,070 | ||||||
RELX NV, Sponsored ADR | 11,037 | 240,717 | ||||||
Schneider Electric SE | 2,640 | 227,707 | ||||||
Sensata Technologies Holding NV(b) | 4,347 | 222,088 | ||||||
Siemens Gamesa Renewable Energy SA | 14,843 | 228,268 | ||||||
SLM Solutions Group AG(b) | 5,584 | 225,215 | ||||||
Verisk Analytics, Inc.(b) | 2,197 | 233,409 |
7 | May 31, 2018
ALPS Disruptive Technologies ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Industrials (18.71%) (continued) | ||||||||
Vestas Wind Systems A/S | 3,157 | $ | 207,024 | |||||
Wolters Kluwer NV | 4,453 | 250,086 | ||||||
Xinjiang Goldwind Science & Technology Co., Ltd., Class H | 149,000 | 238,607 | ||||||
Total Industrials | 4,388,507 | |||||||
Information Technology (56.84%) | ||||||||
3D Systems Corp.(a)(b) | 19,073 | 235,742 | ||||||
Advanced Energy Industries, Inc.(b) | 3,279 | 214,873 | ||||||
Alarm.com Holdings, Inc.(b) | 6,004 | 266,758 | ||||||
Ambarella, Inc.(b) | 4,304 | 210,293 | ||||||
ams AG | 1,834 | 158,391 | ||||||
ANSYS, Inc.(b) | 1,365 | 222,222 | ||||||
Arista Networks, Inc.(b) | 780 | 196,217 | ||||||
Autodesk, Inc.(b) | 1,674 | 216,113 | ||||||
Black Knight, Inc.(b) | 4,773 | 241,514 | ||||||
Check Point Software Technologies, Ltd.(b) | 2,187 | 212,926 | ||||||
Citrix Systems, Inc.(b) | 2,424 | 256,023 | ||||||
Cognex Corp. | 4,213 | 192,576 | ||||||
Dassault Systemes SE | 1,715 | 240,891 | ||||||
Ellie Mae, Inc.(b) | 2,478 | 263,387 | ||||||
FARO Technologies, Inc.(b) | 3,858 | 206,982 | ||||||
FireEye, Inc.(b) | 12,932 | 215,835 | ||||||
First Data Corp., Class A(b) | 15,115 | 287,185 | ||||||
First Solar, Inc.(b) | 3,399 | 229,806 | ||||||
Fiserv, Inc.(b) | 3,140 | 227,964 | ||||||
Fitbit, Inc., Class A(a)(b) | 44,879 | 243,693 | ||||||
FleetCor Technologies, Inc.(b) | 1,110 | 221,279 | ||||||
Fortinet, Inc.(b) | 4,250 | 260,015 | ||||||
Gartner, Inc.(b) | 1,903 | 252,604 | ||||||
Gemalto NV(b) | 3,773 | 221,159 | ||||||
Global Payments, Inc. | 2,004 | 222,765 | ||||||
Guidewire Software, Inc.(b) | 2,604 | 241,755 | ||||||
InterDigital, Inc. | 3,119 | 245,933 | ||||||
Intuit, Inc. | 1,339 | 269,942 | ||||||
Keyence Corp. | 388 | 238,361 | ||||||
Mastercard, Inc., Class A | 1,280 | 243,354 | ||||||
Nemetschek SE | 2,174 | 263,809 | ||||||
NETGEAR, Inc.(b) | 3,928 | 237,448 | ||||||
Omron Corp. | 3,900 | 205,424 | ||||||
Palo Alto Networks, Inc.(b) | 1,223 | 254,494 | ||||||
PayPal Holdings, Inc.(b) | 2,877 | 236,115 | ||||||
Proofpoint, Inc.(b) | 1,898 | 221,857 | ||||||
PTC, Inc.(b) | 2,856 | 246,302 | ||||||
Qorvo, Inc.(b) | 2,722 | 218,441 | ||||||
Qualys, Inc.(b) | 2,952 | 227,156 | ||||||
Red Hat, Inc.(b) | 1,497 | 243,143 |
8 | May 31, 2018
ALPS Disruptive Technologies ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||||||
Information Technology (56.84%) (continued) | ||||||||||||
salesforce.com, Inc.(b) | 1,816 | $ | 234,863 | |||||||||
SAP SE, Sponsored ADR(a) | 2,122 | 239,340 | ||||||||||
ServiceNow, Inc.(b) | 1,324 | 235,156 | ||||||||||
Silicon Laboratories, Inc.(b) | 2,369 | 250,166 | ||||||||||
SimCorp A/S | 3,540 | 286,630 | ||||||||||
Skyworks Solutions, Inc. | 2,063 | 203,432 | ||||||||||
Sophos Group PLC(c)(d) | 32,141 | 250,378 | ||||||||||
SS&C Technologies Holdings, Inc. | 4,422 | 225,124 | ||||||||||
Stratasys, Ltd.(b) | 10,152 | 188,827 | ||||||||||
Symantec Corp. | 8,313 | 172,744 | ||||||||||
Temenos AG | 1,924 | 285,008 | ||||||||||
Total System Services, Inc. | 2,568 | 218,768 | ||||||||||
Trend Micro, Inc. | 4,021 | 228,430 | ||||||||||
Visa, Inc., Class A | 1,877 | 245,361 | ||||||||||
VMware, Inc., Class A(b) | 1,860 | 255,713 | ||||||||||
Worldpay, Inc., Class A(b) | 2,748 | 218,384 | ||||||||||
Xero, Ltd.(b) | 9,161 | 283,841 | ||||||||||
Total Information Technology | 13,332,912 | |||||||||||
Real Estate (2.02%) | ||||||||||||
Digital Realty Trust, Inc. | 2,213 | 237,853 | ||||||||||
Equinix, Inc. | 592 | 234,935 | ||||||||||
Total Real Estate | 472,788 | |||||||||||
Utilities (2.34%) | ||||||||||||
Brookfield Renewable Partners LP | 7,676 | 236,863 | ||||||||||
China Longyuan Power Group Corp., Ltd., Class H | 338,000 | 312,006 | ||||||||||
Total Utilities | 548,869 | |||||||||||
TOTAL COMMON STOCKS | ||||||||||||
(Cost $22,856,269) | 23,423,595 | |||||||||||
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (3.57%) | ||||||||||||
Money Market Fund (0.10%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund (Cost $22,407) | 1.669 | % | 22,407 | 22,407 | ||||||||
Investments Purchased with Collateral from Securities Loaned (3.47%) | ||||||||||||
State Street Navigator Securities Lending Prime Portfolio, 1.77% (Cost $812,986) | 812,986 | 812,986 | ||||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $835,393) | 812,986 |
9 | May 31, 2018
ALPS Disruptive Technologies ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
7 Day Yield | Shares | Value | |||||||||
TOTAL INVESTMENTS (103.43%) | |||||||||||
(Cost $23,691,662) | $ | 24,258,988 | |||||||||
NET LIABILITIES LESS OTHER ASSETS (-3.43%) | (802,959 | ) | |||||||||
NET ASSETS (100.00%) | $ | 23,456,029 |
(a) | Security, or a portion of the security position, is currently on loan. The total market value of securities on loan is $954,152. |
(b) | Non-income producing security. |
(c) | Securities were purchased pursuant to Regulation S under the Securities Act of 1933, which exempts securities offered and sold outside of the United States from registration. Such securities cannot be sold in the United States without either an effective registration statement filed pursuant to the Securities Act of 1933, or pursuant to an exemption from registration. These securities have been deemed liquid under procedures approved by the Fund's Board of Trustees. As of May 31, 2018, the aggregate fair value of those securities was $250,378, representing 1.07% of net assets. |
(d) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. These securities have been deemed liquid under guidelines approved by the Fund's Board of Trustees. As of May 31, 2018, the aggregate value of those securities was $250,378, representing 1.07% of net assets. |
See Notes to Financial Statements.
10 | May 31, 2018
ALPS Medical Breakthroughs ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.95%) | ||||||||
Biotechnology (79.90%) | ||||||||
Acceleron Pharma, Inc.(a) | 64,203 | $ | 2,281,775 | |||||
Achillion Pharmaceuticals, Inc.(a) | 195,743 | 663,569 | ||||||
Acorda Therapeutics, Inc.(a) | 66,637 | 1,749,221 | ||||||
Adamas Pharmaceuticals, Inc.(a)(b) | 37,140 | 1,063,690 | ||||||
Adaptimmune Therapeutics PLC, ADR(a)(b) | 132,981 | 1,760,668 | ||||||
Aduro Biotech, Inc.(a) | 105,900 | 931,920 | ||||||
Agios Pharmaceuticals, Inc.(a) | 79,073 | 7,393,326 | ||||||
Aimmune Therapeutics, Inc.(a) | 80,321 | 2,657,822 | ||||||
Akebia Therapeutics, Inc.(a) | 67,094 | 658,863 | ||||||
AMAG Pharmaceuticals, Inc.(a)(b) | 48,384 | 1,182,989 | ||||||
Amarin Corp. PLC, ADR(a)(b) | 411,703 | 1,362,737 | ||||||
AnaptysBio, Inc.(a)(b) | 33,351 | 2,594,708 | ||||||
Aquinox Pharmaceuticals, Inc.(a) | 33,308 | 477,637 | ||||||
Arena Pharmaceuticals, Inc.(a) | 55,668 | 2,545,141 | ||||||
Array BioPharma, Inc.(a) | 294,721 | 4,818,688 | ||||||
Arrowhead Pharmaceuticals, Inc.(a) | 123,188 | 1,320,575 | ||||||
Ascendis Pharma A/S, ADR(a) | 51,619 | 3,717,600 | ||||||
Atara Biotherapeutics, Inc.(a)(b) | 59,448 | 2,960,510 | ||||||
Athenex, Inc.(a) | 88,764 | 1,421,999 | ||||||
BeiGene, Ltd., ADR(a) | 58,924 | 11,791,871 | ||||||
BioCryst Pharmaceuticals, Inc.(a)(b) | 139,717 | 898,380 | ||||||
Calithera Biosciences, Inc.(a) | 50,354 | 259,323 | ||||||
Catalyst Pharmaceuticals, Inc.(a) | 145,450 | 558,528 | ||||||
Chimerix, Inc.(a) | 66,777 | 305,171 | ||||||
Clementia Pharmaceuticals, Inc.(a)(b) | 43,331 | 614,000 | ||||||
Clovis Oncology, Inc.(a)(b) | 69,573 | 3,267,148 | ||||||
Concert Pharmaceuticals, Inc.(a) | 32,203 | 657,907 | ||||||
DBV Technologies SA, Sponsored ADR(a)(b) | 70,910 | 1,595,475 | ||||||
Dynavax Technologies Corp.(a)(b) | 86,012 | 1,358,990 | ||||||
Emergent BioSolutions, Inc.(a) | 70,126 | 3,615,697 | ||||||
Enanta Pharmaceuticals, Inc.(a) | 27,185 | 2,712,791 | ||||||
Epizyme, Inc.(a)(b) | 98,342 | 1,716,068 | ||||||
FibroGen, Inc.(a) | 116,407 | 6,274,337 | ||||||
Five Prime Therapeutics, Inc.(a) | 48,274 | 847,691 | ||||||
Flexion Therapeutics, Inc.(a)(b) | 53,284 | 1,444,529 | ||||||
G1 Therapeutics, Inc.(a) | 40,377 | 1,748,728 | ||||||
Galapagos NV, Sponsored ADR(a) | 72,127 | 7,344,692 | ||||||
Global Blood Therapeutics, Inc.(a) | 65,302 | 3,144,291 | ||||||
GlycoMimetics, Inc.(a)(b) | 48,735 | 870,894 | ||||||
Halozyme Therapeutics, Inc.(a) | 203,080 | 3,736,672 | ||||||
Heron Therapeutics, Inc.(a)(b) | 91,091 | 2,969,567 | ||||||
ImmunoGen, Inc.(a) | 187,715 | 2,151,214 | ||||||
Immunomedics, Inc.(a)(b) | 235,312 | 5,190,983 | ||||||
Insmed, Inc.(a)(b) | 108,739 | 3,029,469 | ||||||
Ironwood Pharmaceuticals, Inc.(a)(b) | 192,173 | 3,570,574 |
11 | May 31, 2018
ALPS Medical Breakthroughs ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Biotechnology (79.90%) (continued) | ||||||||
Jounce Therapeutics, Inc.(a)(b) | 45,653 | $ | 513,596 | |||||
Kura Oncology, Inc.(a) | 42,890 | 714,119 | ||||||
Ligand Pharmaceuticals, Inc.(a) | 29,955 | 5,758,250 | ||||||
Loxo Oncology, Inc.(a) | 42,373 | 7,514,004 | ||||||
Madrigal Pharmaceuticals, Inc.(a)(b) | 19,869 | 5,277,405 | ||||||
MediciNova, Inc.(a)(b) | 56,903 | 526,922 | ||||||
Minerva Neurosciences, Inc.(a) | 54,929 | 483,375 | ||||||
Molecular Templates, Inc.(a) | 38,152 | 240,739 | ||||||
NantKwest, Inc.(a)(b) | 112,758 | 412,694 | ||||||
NuCana PLC, ADR(a)(b) | 45,250 | 1,229,895 | ||||||
PDL BioPharma, Inc.(a) | 219,067 | 584,909 | ||||||
Portola Pharmaceuticals, Inc.(a)(b) | 92,614 | 3,718,452 | ||||||
Progenics Pharmaceuticals, Inc.(a)(b) | 99,744 | 758,054 | ||||||
Protagonist Therapeutics, Inc.(a) | 29,070 | 211,630 | ||||||
PTC Therapeutics, Inc.(a) | 58,894 | 1,996,507 | ||||||
Ra Pharmaceuticals, Inc.(a) | 44,036 | 303,848 | ||||||
Radius Health, Inc.(a)(b) | 63,294 | 1,803,879 | ||||||
Rhythm Pharmaceuticals, Inc.(a)(b) | 38,727 | 1,244,299 | ||||||
Sarepta Therapeutics, Inc.(a)(b) | 91,736 | 8,609,424 | ||||||
Savara, Inc.(a) | 43,288 | 438,075 | ||||||
Selecta Biosciences, Inc.(a)(b) | 31,704 | 379,497 | ||||||
Seres Therapeutics, Inc.(a)(b) | 57,527 | 463,092 | ||||||
Spark Therapeutics, Inc.(a)(b) | 52,524 | 4,190,890 | ||||||
Syndax Pharmaceuticals, Inc.(a) | 34,620 | 302,233 | ||||||
TESARO, Inc.(a)(b) | 77,192 | 3,533,078 | ||||||
Tocagen, Inc.(a)(b) | 28,115 | 263,719 | ||||||
UroGen Pharma, Ltd.(a) | 21,594 | 1,298,231 | ||||||
Vascular Biogenics, Ltd.(a)(b) | 42,189 | 88,597 | ||||||
XOMA Corp.(a) | 11,558 | 247,919 | ||||||
Total Biotechnology | 166,345,760 | |||||||
Pharmaceuticals (20.05%) | ||||||||
Aclaris Therapeutics, Inc.(a)(b) | 43,781 | 791,123 | ||||||
Aerie Pharmaceuticals, Inc.(a)(b) | 53,502 | 2,744,653 | ||||||
Akorn, Inc.(a) | 177,790 | 2,483,726 | ||||||
Amneal Pharmaceuticals Inc(a) | 104,941 | 2,071,535 | ||||||
Avadel Pharmaceuticals PLC, ADR(a)(b) | 56,891 | 397,099 | ||||||
Depomed, Inc.(a) | 89,989 | 559,732 | ||||||
Endo International PLC(a) | 317,007 | 1,993,974 | ||||||
GW Pharmaceuticals PLC, ADR(a)(b) | 35,920 | 5,782,761 | ||||||
Horizon Pharma PLC(a) | 232,618 | 3,791,673 | ||||||
Lannett Co., Inc.(a)(b) | 53,715 | 888,983 | ||||||
MyoKardia, Inc.(a) | 50,732 | 2,414,843 | ||||||
Pacira Pharmaceuticals, Inc.(a) | 57,587 | 1,972,355 | ||||||
Paratek Pharmaceuticals, Inc.(a) | 44,137 | 461,232 | ||||||
Reata Pharmaceuticals, Inc., Class A(a)(b) | 28,165 | 999,576 |
12 | May 31, 2018
ALPS Medical Breakthroughs ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Pharmaceuticals (20.05%) (continued) | ||||||||
Revance Therapeutics, Inc.(a) | 50,777 | $ | 1,416,678 | |||||
Supernus Pharmaceuticals, Inc.(a) | 73,152 | 4,122,115 | ||||||
Taro Pharmaceutical Industries, Ltd.(a) | 56,924 | 6,772,248 | ||||||
Theravance Biopharma, Inc.(a)(b) | 76,794 | 1,869,166 | ||||||
Zynerba Pharmaceuticals, Inc.(a)(b) | 19,240 | 205,291 | ||||||
Total Pharmaceuticals | 41,738,763 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $182,667,261) | 208,084,523 | |||||||
RIGHTS (0.00%)(c) | ||||||||
Biotechnology (0.00%)(c) | ||||||||
Dyax Corp. - CVR (Expiring 12/31/2019)(a) | 170,016 | 1,700 | ||||||
Total Biotechnology | 1,700 | |||||||
TOTAL RIGHTS | ||||||||
(Cost $–) | 1,700 | |||||||
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (3.93%) | ||||||||||||
Money Market Fund (0.08%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | ||||||||||||
(Cost $159,083) | 1.669 | % | 159,083 | 159,083 | ||||||||
Investments Purchased with Collateral from Securities Loaned (3.85%) | ||||||||||||
State Street Navigator Securities Lending Prime Portfolio, 1.77% | ||||||||||||
(Cost $8,008,337) | 8,008,337 | 8,008,337 | ||||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $8,167,420) | 8,167,420 | |||||||||||
TOTAL INVESTMENTS (103.88%) | ||||||||||||
(Cost $190,834,681) | $ | 216,253,643 | ||||||||||
NET LIABILITIES LESS OTHER ASSETS (-3.88%) | (8,061,681 | ) | ||||||||||
NET ASSETS (100.00%) | $ | 208,191,962 |
(a) | Non-income producing security. |
(b) | Security, or a portion of the security position, is currently on loan. The total market value of securities on loan is $55,993,136. |
(c) | Less than 0.005% of Net Assets. |
See Notes to Financial Statements.
13 | May 31, 2018
ALPS ETF Trust |
Statements of Assets and Liabilities | May 31, 2018 (Unaudited) |
ALPS Disruptive Technologies ETF | ALPS Medical Breakthroughs ETF | |||||||
ASSETS: | ||||||||
Investments, at value | $ | 24,258,988 | $ | 216,253,643 | ||||
Cash held in escrow account (Note 3) | 3,105 | 33,607 | ||||||
Dividends receivable | 16,557 | 26,276 | ||||||
Receivable for investments sold | 256 | – | ||||||
Receivable for shares sold | 1,382,138 | – | ||||||
Total Assets | 25,661,044 | 216,313,526 | ||||||
LIABILITIES: | ||||||||
Payable to adviser | 11,150 | 112,930 | ||||||
Payable for investments purchased | 1,380,248 | 297 | ||||||
Payable for collateral upon return of securities loaned | 812,986 | 8,008,337 | ||||||
Foreign currency overdraft (Cost $628 and -) | 631 | – | ||||||
Total Liabilities | 2,205,015 | 8,121,564 | ||||||
NET ASSETS | $ | 23,456,029 | $ | 208,191,962 | ||||
NET ASSETS CONSIST OF: | ||||||||
Paid-in capital | $ | 22,731,328 | $ | 218,036,175 | ||||
Accumulated net investment income/(loss) | 28,580 | (1,953,444 | ) | |||||
Accumulated net realized gain/(loss) | 128,824 | (33,309,731 | ) | |||||
Net unrealized appreciation | 567,297 | 25,418,962 | ||||||
NET ASSETS | $ | 23,456,029 | $ | 208,191,962 | ||||
INVESTMENTS, AT COST | $ | 23,691,662 | $ | 190,834,681 | ||||
PRICING OF SHARES | ||||||||
Net Assets | $ | 23,456,029 | $ | 208,191,962 | ||||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 850,002 | 5,450,000 | ||||||
Net Asset Value, offering and redemption price per share | $ | 27.60 | $ | 38.20 |
See Notes to Financial Statements.
14 | May 31, 2018
ALPS ETF Trust |
Statements of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
ALPS Disruptive Technologies ETF(a) | ALPS Medical Breakthroughs ETF | |||||||
INVESTMENT INCOME: | ||||||||
Dividends* | $ | 48,189 | $ | 939 | ||||
Securities Lending Income | 4,976 | 138,510 | ||||||
Total Investment Income | 53,165 | 139,449 | ||||||
EXPENSES: | ||||||||
Investment adviser fees | 24,585 | 409,573 | ||||||
Total Expenses | 24,585 | 409,573 | ||||||
NET INVESTMENT INCOME/(LOSS) | 28,580 | (270,124 | ) | |||||
REALIZED AND UNREALIZED GAIN/LOSS | ||||||||
Net realized gain on investments | 128,453 | 8,520,528 | ||||||
Net realized gain on foreign currency transactions | 371 | – | ||||||
Total net realized gain | 128,824 | 8,520,528 | ||||||
Net change in unrealized appreciation on investments | 567,326 | 24,114,520 | ||||||
Net change in unrealized depreciation on translation of assets and liabilities denominated in foreign currencies | (29 | ) | – | |||||
Total net change in unrealized appreciation | 567,297 | 24,114,520 | ||||||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 696,121 | 32,635,048 | ||||||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 724,701 | $ | 32,364,924 | ||||
*Net of foreign tax withholding. | $ | 5,951 | $ | – |
(a) | The ALPS Disruptive Technologies ETF commenced operations on December 28, 2017. |
See Notes to Financial Statements.
15 | May 31, 2018
ALPS Disruptive Technologies ETF |
Statement of Changes in Net Assets |
For the Period December 28, 2017 (Commencement) to May 31, 2018 (Unaudited) | ||||
OPERATIONS: | ||||
Net investment income | $ | 28,580 | ||
Net realized gain | 128,824 | |||
Net change in unrealized appreciation | 567,297 | |||
Net increase in net assets resulting from operations | 724,701 | |||
CAPITAL SHARE TRANSACTIONS: | ||||
Proceeds from sale of shares | 24,099,746 | |||
Cost of shares redeemed | (1,368,418 | ) | ||
Net increase from capital share transactions | 22,731,328 | |||
Net increase in net assets | 23,456,029 | |||
NET ASSETS: | ||||
Beginning of period | – | |||
End of period * | $ | 23,456,029 | ||
*Including accumulated net investment income of: | $ | 28,580 | ||
OTHER INFORMATION: | ||||
CAPITAL SHARE TRANSACTIONS: | ||||
Beginning shares | – | |||
Shares sold | 900,002 | |||
Shares redeemed | (50,000 | ) | ||
Shares outstanding, end of period | 850,002 |
See Notes to Financial Statements.
16 | May 31, 2018
ALPS Medical Breakthroughs ETF |
Statements of Changes in Net Assets |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income/(loss) | $ | (270,124 | ) | $ | 745,791 | |||
Net realized gain/(loss) | 8,520,528 | (4,937,819 | ) | |||||
Net change in unrealized appreciation | 24,114,520 | 34,206,761 | ||||||
Net increase in net assets resulting from operations | 32,364,924 | 30,014,733 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (2,404,884 | ) | – | |||||
Total distributions | (2,404,884 | ) | – | |||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 69,235,654 | 27,695,734 | ||||||
Cost of shares redeemed | (19,405,910 | ) | (47,678,198 | ) | ||||
Net increase/(decrease) from capital share transactions | 49,829,744 | (19,982,464 | ) | |||||
Net increase in net assets | 79,789,784 | 10,032,269 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 128,402,178 | 118,369,909 | ||||||
End of period * | $ | 208,191,962 | $ | 128,402,178 | ||||
*Including accumulated net investment income/(loss) of: | $ | (1,953,444 | ) | $ | 721,564 | |||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 4,050,000 | 4,900,000 | ||||||
Shares sold | 2,000,000 | 950,000 | ||||||
Shares redeemed | (600,000 | ) | (1,800,000 | ) | ||||
Shares outstanding, end of period | 5,450,000 | 4,050,000 |
See Notes to Financial Statements.
17 | May 31, 2018
ALPS Disruptive Technologies ETF |
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Period December 28, 2017 (Commencement) to May 31, 2018 (Unaudited) | ||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.00 | ||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||
Net investment income (a) | 0.07 | |||
Net realized and unrealized gain | 2.53 | |||
Total from investment operations | 2.60 | |||
Net increase in net asset value | 2.60 | |||
NET ASSET VALUE, END OF PERIOD | $ | 27.60 | ||
TOTAL RETURN(b) | 10.05 | % | ||
RATIOS/SUPPLEMENTAL DATA: | ||||
Net assets, end of period (000s) | $ | 23,456 | ||
Ratio of expenses to average net assets | 0.50 | %(c) | ||
Ratio of net investment income to average net assets | 0.58 | %(c) | ||
Portfolio turnover rate(d) | 7 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
18 | May 31, 2018
ALPS Medical Breakthroughs ETF |
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Period December 31,2014 (Commencement of Operations) to November 30, 2015 | |||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 31.70 | $ | 24.16 | $ | 32.23 | $ | 24.64 | ||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||
Net investment income/(loss) (a) | (0.06 | ) | 0.18 | (0.09 | ) | (0.13 | ) | |||||||||
Net realized and unrealized gain/(loss) | 7.14 | 7.36 | (7.98 | ) | 7.72 | |||||||||||
Total from investment operations | 7.08 | 7.54 | (8.07 | ) | 7.59 | |||||||||||
DISTRIBUTIONS: | ||||||||||||||||
From net investment income | (0.58 | ) | – | – | – | |||||||||||
Total distributions | (0.58 | ) | – | – | – | |||||||||||
Net increase/(decrease) in net asset value | 6.50 | 7.54 | (8.07 | ) | 7.59 | |||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 38.20 | $ | 31.70 | $ | 24.16 | $ | 32.23 | ||||||||
TOTAL RETURN(b) | 22.61 | % | 31.21 | % | (25.04 | )% | 30.80 | % | ||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||
Net assets, end of period (000s) | $ | 208,192 | $ | 128,402 | $ | 118,370 | $ | 170,824 | ||||||||
Ratio of expenses to average net assets | 0.50 | %(c) | 0.50 | % | 0.50 | % | 0.50 | %(c) | ||||||||
Ratio of net investment income/(loss) to average net assets | (0.33 | )%(c) | 0.66 | % | (0.38 | )% | (0.42 | )%(c) | ||||||||
Portfolio turnover rate(d) | 25 | % | 43 | % | 62 | % | 25 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
19 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of May 31, 2018, the Trust consisted of twenty separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the ALPS Disruptive Technologies ETF and the ALPS Medical Breakthroughs ETF (each a “Fund” and collectively, the “Funds”). Each Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The ALPS Disruptive Technologies ETF commenced operations on December 28, 2017.
The investment objective of the ALPS Disruptive Technologies ETF is to seek investment results that correspond generally, before fees and expenses, to the performance of the Indxx Disruptive Technologies Index. The investment objective of the ALPS Medical Breakthroughs ETF is to seek investment results that correspond generally, before fees and expenses, to the performance of the Poliwogg Medical Breakthroughs IndexSM.
The shares of the ALPS Disruptive Technologies ETF (“Shares”) are listed on the Cboe BZX Exchange, Inc. (the “Cboe BZX”). The shares of the ALPS Medical Breakthroughs ETF (“Shares”) are listed on the NYSE Arca, Inc. (the “NYSE Arca”). Each Fund issues and redeems Shares at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
A. Portfolio Valuation
Each Fund’s NAV is determined daily, as of the close of regular trading on the New York Stock Exchange (the “NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“NASDAQ”) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the last quoted sale price in such market.
The Funds’ investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Funds may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
20 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
B. Fair Value Measurements
Each Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability; including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Funds’ investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of each Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
21 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
The following is a summary of the inputs used to value the Funds’ investments at May 31, 2018:
ALPS Disruptive Technologies ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 23,423,595 | $ | – | $ | – | $ | 23,423,595 | ||||||||
Short Term Investments | ||||||||||||||||
Money Market Fund | 22,407 | – | – | 22,407 | ||||||||||||
Investments Purchased with Collateral from Securities Loaned | 812,986 | – | – | 812,986 | ||||||||||||
TOTAL | $ | 24,258,988 | $ | – | $ | – | $ | 24,258,988 |
ALPS Medical Breakthroughs ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 208,084,523 | $ | – | $ | – | $ | 208,084,523 | ||||||||
Rights* | – | 1,700 | – | 1,700 | ||||||||||||
Short Term Investments | ||||||||||||||||
Money Market Fund | 159,083 | – | – | 159,083 | ||||||||||||
Investments Purchased with Collateral from Securities Loaned | 8,008,337 | – | – | 8,008,337 | ||||||||||||
TOTAL | $ | 216,251,943 | $ | 1,700 | $ | – | $ | 216,253,643 |
* | For a detailed sector breakdown, see the accompanying Schedule of Investments. |
The Funds recognize transfers between levels as of the end of the period. For the six months or period ended May 31, 2018, the Funds did not have any transfers between Level 1 and Level 2 securities. The Funds did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
C. Foreign Investment Risk
The ALPS Disruptive Technologies ETF may directly purchase securities of foreign issuers. Investments in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers, including, among others, less liquidity generally, greater market volatility than U.S. securities and less complete financial information than for U.S. issuers. In addition, adverse political, economic or social developments could undermine the value of the Fund’s investments or prevent the Fund from realizing the full value of its investments. Financial reporting standards for companies based in foreign markets differ from those in the United States. Finally, the value of the currency of the country in which the Fund has invested could decline relative to the value of the U.S. dollar, which may affect the value of the investment to U.S. investors. The Fund will not enter into transactions to hedge against declines in the value of the Fund’s assets that are denominated in foreign currency.
Countries with emerging markets may have relatively unstable governments and may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets. The economies of emerging markets countries also may be based on only a few industries, making them more vulnerable to changes in local or global trade conditions and more sensitive to debt burdens, inflation rates or adverse news and events.
Because foreign markets may be open on different days than the days during which investors may purchase the shares of the Fund, the value of the Funds’ securities may change on the days when investors are not able to purchase the shares of the Fund. The value of securities denominated in foreign currencies is converted into U.S. dollars using exchange rates determined daily as of the close of regular trading on the NYSE. Any use of a different rate from the rates used by the Index may adversely affect a Fund's ability to track its Index.
22 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
D. Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.
E. Other Risks
Equity Risk: A principal risk of investing in the Funds is equity risk, which is the risk that the value of the securities held by the Fund will fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities held by the Fund participate or factors relating to specific companies in which the Fund invests. For example, an adverse event, such as an unfavorable earnings report, may depress the value of equity securities of an issuer held by a Fund; the price of common stock of an issuer may be particularly sensitive to general movements in the stock market; or a drop in the stock market may depress the price of most or all of the common stocks and other equity securities held by a Fund. In addition, common stock of an issuer in a Fund’s portfolio may decline in price if the issuer fails to make anticipated dividend payments because, among other reasons, the issuer of the security experiences a decline in its financial condition.
Small- and Mid- Capitalization Company Risk: Investments in securities of small and mid-capitalization companies are subject to the risks of common stocks. Investments in smaller companies may involve greater risks because these companies generally have a limited track record. Smaller companies often have narrower markets, more limited managerial and financial resources and a less diversified product offering than larger, more established companies. As a result, their performance can be more volatile, which may increase the volatility of the Fund’s portfolio.
Concentration Risk: Each Fund seeks to track its respective Underlying Index, which may have concentration in certain industries or sectors, as well as regions, economies or markets. Underperformance or increased risk in such other concentrated areas may result in underperformance or increased risk in a Fund.
Non-Correlation Risk: Each Fund’s return may not match the return of its respective Underlying Index for a number of reasons. For example, a Fund incurs a number of operating expenses not applicable to its Underlying Index, and incurs costs in buying and selling securities, especially when rebalancing the Fund’s securities holdings to reflect changes in the composition of the Underlying Index. In addition, the performance of a Fund and its Underlying Index may vary due to asset valuation differences and differences between the Fund’s portfolio and the Underlying Index resulting from legal restrictions. Due to legal and regulatory rules and limitations, a Fund may not be able to invest in all securities included in its Underlying Index. For tax efficiency purposes, a Fund may sell certain securities to realize losses, causing it to deviate from the Underlying Index. The Fund may not be fully invested at times, either as a result of cash flows into the Fund or reserves of cash held by the Fund to meet redemptions and expenses. If a Fund utilizes a sampling approach or otherwise does not hold all of the securities in the Underlying Index, its return may not correlate as well with the return on its Underlying Index, as would be the case if it purchased all of the securities in the Underlying Index with the same weightings as the Underlying Index.
F. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date, net of any foreign taxes withheld. Interest income, if any, is recorded on the accrual basis.
G. Dividends and Distributions to Shareholders
Dividends from net investment income for each Fund, if any, are declared and paid annually or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Funds, if any, are distributed at least annually.
H. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2018.
There were no distributions paid by the ALPS Medical Breakthroughs ETF for the year ended November 30, 2017.
23 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
At November 30, 2017, the Fund’s post-enactment capital losses deferred to the next tax year were as follows:
Fund | Short-Term | Long-Term | ||||||
ALPS Medical Breakthroughs ETF | $ | 26,185,173 | $ | 15,298,179 |
As of May 31, 2018, the cost of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
ALPS Disruptive Technologies ETF | ALPS Medical Breakthroughs ETF | |||||||
Gross appreciation (excess of value over tax cost) | $ | 1,318,330 | $ | 53,905,607 | ||||
Gross depreciation (excess of tax cost over value) | (749,486 | ) | (29,239,586 | ) | ||||
Net unrealized appreciation (depreciation) | $ | 568,844 | $ | 24,666,021 | ||||
Cost of investments for income tax purposes | $ | 23,690,144 | $ | 191,587,622 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses due to wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of May 31, 2018.
I. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as each Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Each Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the six months ended May 31, 2018, each Fund did not have a liability for any unrecognized tax benefits. Each Fund files U.S. federal, state, and local tax returns as required. Each Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes. As the ALPS Disruptive Technologies ETF commenced operations on December 28, 2017, no tax returns have been filed as of the date of this report.
J. Lending of Portfolio Securities
The Funds have entered into a securities lending agreement with State Street Bank & Trust Co. (“SSB”), the Funds’ lending agent. Each Fund may lend their portfolio securities only to borrowers that are approved by SSB. Each Fund will limit such lending to not more than 33 1/3% of the value of its total assets. Each Funds’ securities held at SSB as custodian shall be available to be lent except those securities the Fund or ALPS Advisors, Inc. specifically identifies in writing as not being available for lending. The borrower pledges and maintains with each Fund collateral consisting of cash (U.S. Dollars only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and cash equivalents (including irrevocable bank letters of credit) issued by a person other than the borrower or an affiliate of the borrower. The initial collateral received by each Fund is required to have a value of no less than 102% of the market value of the loaned securities for U.S equity securities and a value of no less than 105% of the market value for non-U.S. equity securities. The collateral is maintained thereafter, at a market value equal to not less than 102% of the current value of the U.S. equity securities on loan and not less than 105% of the current value of the non-U.S. equity securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to each Fund on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the customary time period for settlement of securities transactions.
Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments and is reflected in the Statements of Assets and Liabilities as a payable for collateral upon return of securities loaned. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in a Fund’s Statements of Assets and Liabilities as it is held by the lending agent on behalf of each Fund, and each Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.
24 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
The following is a summary of each Fund's securities lending agreement and related cash and non-cash collateral received as of May 31, 2018:
Market Value of Securities on Loan | Cash Collateral Received | Non-Cash Collateral Received | Total Collateral Received | |||||||||||||
ALPS Disruptive Technologies ETF | $ | 954,152 | $ | 812,986 | $ | 173,131 | $ | 986,117 |
Market Value of Securities on Loan | Cash Collateral Received | Non-Cash Collateral Received | Total Collateral Received | |||||||||||||
ALPS Medical Breakthroughs ETF | $ | 55,993,136 | $ | 8,008,337 | $ | 46,894,347 | $ | 54,902,684 |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, each Fund benefits from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Funds could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
The following tables reflect a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged or securities loaned, and the remaining contractual maturity of those transactions as of May 31, 2018:
ALPS Disruptive Technologies ETF | Remaining contractual maturity of the lending agreement | |||||||||||||||||
Securities Lending Transactions | Overnight & Continuous | Up to 30 days | 30-90 days | Greater than 90 days | Total | |||||||||||||
Common Stocks | $ | 812,986 | $ | – | $ | – | $ | – | $ | 812,986 | ||||||||
Total Borrowings | 812,986 | |||||||||||||||||
Gross amount of recognized liabilities for securities lending (collateral received) | $ | 812,986 |
ALPS Medical Breakthroughs ETF | Remaining contractual maturity of the lending agreement | |||||||||||||||||
Securities Lending Transactions | Overnight & Continuous | Up to 30 days | 30-90 days | Greater than 90 days | Total | |||||||||||||
Common Stocks | $ | 8,008,337 | $ | – | $ | – | $ | – | $ | 8,008,337 | ||||||||
Total Borrowings | 8,008,337 | |||||||||||||||||
Gross amount of recognized liabilities for securities lending (collateral received) | $ | 8,008,337 |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as the Funds’ investment adviser pursuant to an Advisory Agreement with the Trust on behalf of each Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, each Fund pays the Adviser a unitary fee for the services and facilities it provides, payable on a monthly basis as a percentage of each Fund’s average daily net assets as set forth below. From time to time, the Adviser may waive all or a portion of its fee.
Fund | Advisory Fee |
ALPS Disruptive Technologies ETF | 0.50% |
ALPS Medical Breakthroughs ETF | 0.50% |
Capitalized terms used but not defined within this paragraph, shall have the respective meanings given to them in the Board Considerations Regarding Approval of Investment Advisory Agreement section of this Semi-Annual Report (“Board Considerations”). As discussed in the Board Considerations, the Adviser is an indirect wholly owned subsidiary of DST and on April 16, 2018, DST was acquired by SS&C resulting in a change of control of the Adviser. As discussed in the Board Considerations, in order for the Adviser to continue to serve as the investment adviser to the applicable Funds, among other approvals, the Board approved an Interim Advisory Agreement between the Adviser and the Trust, on behalf of the Funds. The Interim Advisory Agreement is effective for the earlier of 150 days from the close of the Transaction or the date of shareholder approval of the New Advisory Agreement. Under the terms of the Interim Advisory Agreement, the unitary management fee paid to the Adviser will be held in escrow until shareholder approval of the New Advisory Agreement is obtained and is reported as Cash held in escrow account on the Statement of Assets and Liabilities.
25 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Out of the unitary management fee, the Adviser pays substantially all expenses for each Fund, including the licensing fees to the Index provider, the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of each Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of each Fund’s expenses and to compensate the Adviser for providing services for each Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator for the Funds.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee for regularly scheduled meetings of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, both the Chairman of the Board and Chairman of the Audit Committee each receives a quarterly retainer of $2,000, in connection with their respective roles.
4. PURCHASES AND SALES OF SECURITIES
For the six months or period ended May 31, 2018, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Fund | Purchases | Sales | ||||||
ALPS Disruptive Technologies ETF | $ | 820,895 | $ | 1,019,459 | ||||
ALPS Medical Breakthroughs ETF | 41,156,513 | 43,342,199 |
For the six months or period ended May 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
ALPS Disruptive Technologies ETF | $ | 23,560,333 | $ | 633,953 | ||||
ALPS Medical Breakthroughs ETF | 69,240,876 | 19,995,573 |
For the six months or period ended May 31, 2018, the in-kind net realized gains/(losses) were as follows:
Fund | Net Realized Gain/(Loss) | |||
ALPS Disruptive Technologies ETF | $ | 149,157 | ||
ALPS Medical Breakthroughs ETF | 11,260,774 |
Gains on in-kind transactions are not considered taxable for federal income tax purposes and losses on in-kind transactions are also not deductible for tax purposes.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 Shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Funds. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of each Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
26 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
6. RELATED PARTY TRANSACTIONS
The ALPS Medical Breakthroughs ETF engaged in cross trades between other funds in the Trust during the six months ended May 31, 2018 pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which the Adviser serves as the investment adviser. The Board previously adopted procedures that apply to transactions between the Funds of the Trust pursuant to Rule 17a-7. These transactions related to cross trades during the period complied with the requirements set forth by Rule 17a-7 and the Trust’s procedures.
Transactions related to cross trades during the six months ended May 31, 2018, were as follows:
Fund | Purchase cost paid | Sale proceeds received | Realized gain/(loss) on sales | |||||||||
ALPS Medical Breakthroughs ETF | $ | 258,138 | $ | – | $ | – |
27 | May 31, 2018
ALPS ETF Trust |
Additional Information | May 31, 2018 (Unaudited) |
PROXY VOTING RECORDS, POLICIES AND PROCEDURES
Information regarding how each Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-675-2639.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. Forms N-Q for each Fund will be available on the SEC’s website at www.sec.gov. Each Fund’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Each Fund’s Forms N-Q will be available without charge, upon request, by calling (toll-free) 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
LICENSING AGREEMENT
ALPS Disruptive Technology ETF
The Indxx Disruptive Technologies Index (the “Underlying Index”) is a service mark of Indxx, LLC (“Indxx” or the “Index Provider”) and has been licensed for use for certain purposes by ALPS Advisors, Inc. The ALPS Disruptive Technologies ETF is not sponsored, endorsed, sold or promoted by Indxx and Indxx makes no representation regarding the advisability of investing in the ALPS Disruptive Technologies ETF.
The ALPS Disruptive Technologies ETF is not sponsored, endorsed, sold or promoted by Indxx. Indxx makes no representation or warranty, express or implied, to the owners of the ALPS Disruptive Technologies ETF or any member of the public regarding the advisability of investing in securities generally or in the ALPS Disruptive Technologies ETF particularly. Indxx has no obligation to take the needs of ALPS Advisors, Inc. or the shareholders of ALPS Disruptive Technologies ETF into consideration in determining, composing, or calculating the Underlying Index. Indxx is not responsible for and has not participated in the determination of the timing, amount or pricing of the ALPS Disruptive Technologies ETF shares to be issued or in the determination or calculation of the equation by which the ALPS Disruptive Technologies ETF is to be converted into cash. Indxx has no obligation or liability in connection with the administration, marketing or trading of the ALPS Disruptive Technologies ETF.
INDXX MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO THE RESULTS TO BE OBTAINED BY ANY PERSON OR ENTITY FROM THE USE OF THE INDEX(ES), TRADING BASED ON THE INDEX(ES), OR ANY DATA INCLUDED THEREIN IN CONNECTION WITH THE PRODUCTS, OR FOR ANY OTHER USE. INDXX EXPRESSLY DISCLAIMS ALL WARRANTIES AND CONDITIONS, EXPRESS, STATUTORY, OR IMPLIED, EXCEPT AS SET FORTH IN THIS AGREEMENT. EXCEPT AS OTHERWISE SPECIFICALLY SET FORTH IN THIS AGREEMENT, INDXX HEREBY EXPRESSLY DISCLAIMS ALL IMPLIED WARRANTIES AND CONDITIONS OF MERCHANTABILITY, TITLE, OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE INDEX(ES) OR ANY DATA INCLUDED THEREIN. INDXX DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF ANY DATA SUPPLIED BY IT OR ANY DATA INCLUDED THEREIN. INDXX MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE FUNDS, ITS SHAREHOLDERS OR AFFILIATES, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DATA SUPPLIED BY INDXX OR ANY DATA INCLUDED THEREIN. INDXX MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DATA SUPPLIED BY INDXX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL INDXX HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The Adviser does not guarantee the accuracy and/or the completeness of the Underlying Index or any data included therein, and the Adviser shall have no liability for any errors, omissions or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by the Fund, owners of the Shares of the Fund or any other person or entity from the use of the Underlying Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits) arising out of matters relating to the use of the Underlying Index, even if notified of the possibility of such damages.
ALPS Medical Breakthroughs ETF
The Poliwogg Medical Breakthroughs IndexSM is a service mark of S-Network Global Indexes, Inc. and has been licensed for use by ALPS Advisors, Inc. The ALPS Medical Breakthroughs ETF is not sponsored, endorsed, sold or promoted by S-Network Global Indexes, Inc. and S-Network Global Indexes, Inc. makes no representation regarding the advisability of investing in the ALPS Medical Breakthroughs ETF.
28 | May 31, 2018
ALPS ETF Trust |
Additional Information | May 31, 2018 (Unaudited) |
The ALPS Medical Breakthroughs ETF is not sponsored, endorsed, sold or promoted by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) or its third party licensors. Neither S&P nor its third party licensors make any representation or warranty, express or implied, to the owners of the ALPS Medical Breakthroughs ETF or any member of the public regarding the advisability of investing in securities generally or in the ALPS Medical Breakthroughs ETF particularly or the ability of the Poliwogg Medical Breakthroughs IndexSM to track general stock market performance. S&P’s and its third party licensor’s only relationship to S-Network Global Indexes, LLC is the licensing of certain trademarks, service marks and trade names of S&P and/or its third party licensors and for the providing of calculation and maintenance services related to the Poliwogg Medical Breakthroughs IndexSM. Neither S&P nor its third party licensors is responsible for and has not participated in the determination of the prices and amount of the ALPS Medical Breakthroughs ETF or the timing of the issuance or sale of the ALPS Medical Breakthroughs ETF or in the determination or calculation of the equation by which the ALPS Medical Breakthroughs ETF is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of the ALPS Medical Breakthroughs ETF.
NEITHER S&P, ITS AFFILIATES NOR THEIR THIRD PARTY LICENSORS GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF THE POLIWOGG MEDICAL BREAKTHROUGHS INDEXSM OR ANY DATA INCLUDED THEREIN OR ANY COMMUNICATIONS, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATIONS (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P, ITS AFFILIATES AND THEIR THIRD PARTY LICENSORS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS OR DELAYS THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO ITS TRADEMARKS, THE INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P, ITS AFFILIATES OR THEIR THIRD PARTY LICENSORS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE.
Standard & Poor’s®, and S&P® are registered trademarks of The McGraw-Hill Companies, Inc.; “Calculated by S&P Custom Indices” and its related stylized mark are service marks of The McGraw-Hill Companies, Inc. These marks have been licensed for use by S-Network Global Indexes, LLC. The Adviser does not guarantee the accuracy and/or the completeness of either Underlying Index or any data included therein, and the Adviser shall have no liability for any errors, omissions or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by the Funds, owners of the Shares of the Funds or any other person or entity from the use of either Underlying Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to either Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits) arising out of matters relating to the use of either Underlying Index even if notified of the possibility of such damages.
29 | May 31, 2018
ALPS ETF Trust |
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
At an in-person meeting held on March 5, 2018, the Board of Trustees of the Trust (the “Board” or the “Trustees”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve each of (i) the continuance of the investment advisory agreement between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect to the ALPS Medical Breakthroughs ETF (“SBIO”) and the ALPS Disruptive Technologies ETF (“DTEC”) (each, a “Fund” and collectively, “the Funds”) (the “Existing Advisory Agreements”); (ii) a new investment advisory agreement between the Adviser and the Trust on behalf of the Funds (the “New Advisory Agreement”); and (iii) an interim investment advisory agreement between the Adviser and the Trust on behalf of the Funds (the “Interim Advisory Agreement” and together with the Existing Advisory Agreement and New Advisory Agreement, the “Advisory Agreements”). The Independent Trustees also met separately to consider the Advisory Agreements.
Consideration by the Board of the New Advisory Agreement and Interim Advisory Agreement was necessary because DST Systems, Inc. (“DST”), the ultimate parent company to the Adviser, had had entered into an agreement to be acquired by SS&C Technologies Holdings, Inc. (“SS&C”) (the “Transaction”). Because the Adviser would be acquired along with DST, the closing of the Transaction (the “Closing”) may be deemed a change in control with respect to the Adviser. The Closing occurred on April 16, 2018. This change in control with respect to the Adviser may be deemed to trigger an “assignment” of the Existing Advisory Agreements under the Investment Company Act of 1940, as amended (the “1940 Act”). As required by the 1940 Act, the Existing Advisory Agreements provide for their automatic termination in the event of an assignment, and therefore, the Existing Advisory Agreements automatically terminated upon Closing. In order for the Adviser to continue as the Funds’ investment adviser, the Board and the Funds’ shareholders must approve the New Advisory Agreement which would take effect, if approved, upon the date of such shareholder approval. As of the date of this report, the New Advisory Agreement has not received shareholder approval and efforts to secure such shareholder approval are ongoing. The Interim Advisory Agreement approved by the Board permits the Adviser to continue as investment adviser to the Funds from the date of the Closing until the Funds’ shareholders approve the New Advisory Agreement, subject to a maximum term of 150 days.
In evaluating the Advisory Agreements with respect to each Fund, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by AAI with respect to the Fund under the Advisory Agreements; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided (or to be provided) by AAI under the Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Advisory Agreements, the investment parameters of the index of each Fund, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Funds.
The Independent Trustees reviewed information on the performance of each Fund and its applicable benchmark. The Independent Trustees also evaluated the correlation and tracking error between each underlying index and its corresponding Fund’s performance. Based on their review, the Independent Trustees found that the nature and extent of services provided (or to be provided) to each Fund under the Advisory Agreements was appropriate and that the quality was satisfactory.
The Independent Trustees noted that the advisory fees for each Fund were unitary fees pursuant to which AAI assumes all expenses of the Funds (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreements, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
With respect to the advisory fee rate, the Independent Trustees noted the following:
The net advisory fee rate for SBIO is higher than the median of its Broadridge expense group. The net advisory fee rate for DTEC is lower than the median of its Broadridge expense group. The expense ratio for each of the Funds is below the median of its respective Broadridge expense group.
Based on the foregoing, and the other information available to them, the Independent Trustees concluded that the advisory fee rate for each of the Funds was reasonable under the circumstances and in light of the quality of the services provided.
The Independent Trustees considered other benefits available to AAI because of its relationship with the Funds and concluded that the advisory fees were reasonable taking into account any such benefits.
30 | May 31, 2018
ALPS ETF Trust |
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
The Independent Trustees also considered with respect to each Fund the information provided by AAI about the costs and profitability of AAI with respect to each of the Funds. The Independent Trustees reviewed and noted the relatively small sizes of the Funds in considering economies of scale that may be realized by AAI. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
In voting to renew each Existing Advisory Agreement and approve each New Advisory Agreement and Interim Advisory Agreement, the Independent Trustees concluded that the terms of each Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
31 | May 31, 2018
TABLE OF CONTENTS |
Performance Overview | 1 |
Disclosure of Fund Expenses | 9 |
Schedules of Investments | 10 |
Statements of Assets and Liabilities | 16 |
Statements of Operations | 17 |
Statements of Changes in Net Assets | 18 |
Financial Highlights | 22 |
Notes to Financial Statements | 26 |
Additional Information | 34 |
Board Considerations Regarding Approval of Investment Advisory Agreements | 37 |
alpsfunds.com
ALPS Sector Dividend Dogs ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
The ALPS Sector Dividend Dogs ETF (the “Fund”) seeks investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network® Sector Dividend Dogs Index (the “Underlying Index”). The Shares of the Fund are listed and trade on the NYSE Arca under the ticker symbol SDOG. The Fund generally will invest in all of the securities that comprise the Underlying Index in proportion to their weightings in the Underlying Index.
The Underlying Index is a rules based index intended to give investors a means of tracking the overall performance of the highest dividend paying stocks (i.e. “Dividend Dogs”) in the S&P 500® (“SPX”) on a sector-by-sector basis. “Dividend Dogs” refers to the five stocks in each of the ten Global Industry Classification Standard (“GICS”) sectors that make up the S&P 500® which offer the highest dividend yields.
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | 5 Year | Since Inception^ | |
ALPS Sector Dividend Dogs ETF – NAV | -0.80% | 8.69% | 8.84% | 11.34% | 14.16% |
ALPS Sector Dividend Dogs ETF – Market Price* | -0.71% | 8.78% | 8.86% | 11.32% | 14.17% |
S-Network® Sector Dividend Dogs TR Index | -0.60% | 9.19% | 9.36% | 11.87% | 14.70% |
S&P 500® Total Return Index | 3.16% | 14.38% | 10.97% | 12.98% | 14.68% |
Total Expense Ratio (per the current prospectus) 0.40%.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.675.2639.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund Commencement Date was June 29, 2012. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The S-Network® Sector Dividend Dogs Index is designed to serve as a fair, impartial and transparent measure of the performance of US large cap equities with above average dividend yields. The Underlying Index is a portfolio of fifty stocks derived from the S&P 500® Index. The index is reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period.
The S&P 500® Total Return Index is an index of 500 stocks chosen for market size, liquidity and industry grouping among other factors.
The indexes are not actively managed and do not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The ALPS Sector Dividend Dogs ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the ETF.
1 | May 31, 2018
ALPS Sector Dividend Dogs ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018) | |
Occidental Petroleum Corp. | 2.83% |
Macy's, Inc. | 2.58% |
ONEOK, Inc. | 2.55% |
The AES Corp. | 2.53% |
Exxon Mobil Corp. | 2.35% |
Merck & Co., Inc. | 2.31% |
Ford Motor Co. | 2.31% |
Eli Lilly & Co. | 2.29% |
Kohl's Corp. | 2.26% |
FirstEnergy Corp. | 2.26% |
Total % of Top 10 Holdings | 24.27% |
Sector Allocation* (as of May 31, 2018) | |
Energy | 11.90% |
Consumer Discretionary | 11.09% |
Utilities | 11.09% |
Industrials | 10.26% |
Materials | 10.25% |
Health Care | 10.05% |
Information Technology | 9.93% |
Financials | 9.81% |
Consumer Staples | 9.35% |
Telecommunication Services | 6.11% |
Money Market Fund | 0.16% |
Total | 100.00% |
* | % of Total Investments |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
2 | May 31, 2018
ALPS International Sector Dividend Dogs ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
The ALPS International Sector Dividend Dogs ETF (the “Fund”) seeks investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network® International Sector Dividend Dogs Index (the “Underlying Index”). The Shares of the Fund are listed and trade on the NYSE Arca under the ticker symbol IDOG. The Fund generally will invest in all of the securities that comprise the Underlying Index in proportion to their weightings in the Underlying Index.
The Underlying Index is a rules-based index intended to give investors a means of tracking the overall performance of the highest dividend paying stocks (i.e. “Dividend Dogs”) in the S-Net International Developed Markets (ex-Americas) Index, a universe of mainly large capitalization stocks in international developed markets not located in the Americas (the “S-Net Developed Markets”) on a sector-by-sector basis. “Dividend Dogs” refers to the five stocks in each of the ten Global Industry Classification Standard (“GICS”) sectors that make up the S-Net Developed Markets which offer the highest dividend yields.
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | Since Inception^ | |
ALPS International Sector Dividend Dogs ETF – NAV | 0.19% | 7.63% | 4.56% | 6.02% |
ALPS International Sector Dividend Dogs ETF – Market Price* | -0.30% | 7.27% | 4.51% | 6.02% |
S-Network® International Sector Dividend Dogs NTR Index | 0.25% | 7.95% | 4.91% | 6.42% |
MSCI EAFE Index | 0.03% | 7.97% | 4.33% | 6.83% |
Total Expense Ratio (per the current prospectus) 0.50%.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.675.2639.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund Commencement Date was June 28, 2013. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The S-Network® International Sector Dividend Dogs Index is designed to serve as a fair, impartial and transparent measure of the performance of international large cap equities with above average dividend yields. The Underlying Index is a portfolio of fifty stocks derived from the S-Net International Developed Markets Index (ex-Americas) Index. Total Return assumes reinvestment of any dividends and distributions realized during a given time period. Net Total Return (NTR) is obtained by reinvesting the net dividend, which is equal to the ordinary gross dividend minus the amount of withholding tax.
MSCI EAFE® Index is a stock market index that is designed to measure the equity market performance of developed markets outside of the U.S. & Canada.
The indexes are not actively managed and do not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The ALPS International Sector Dividend Dogs ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the ETF.
3 | May 31, 2018
ALPS International Sector Dividend Dogs ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018) | |
BP Plc | 2.39% |
BHP Billiton, Ltd. | 2.31% |
AstraZeneca Plc | 2.27% |
Royal Dutch Shell Plc | 2.27% |
GlaxoSmithKline Plc | 2.27% |
Woodside Petroleum, Ltd. | 2.26% |
EDP - Energias de Portugal SA | 2.25% |
Rio Tinto, Ltd. | 2.24% |
Eni SpA | 2.24% |
Wesfarmers, Ltd. | 2.22% |
Total% of Top 10 Holdings | 22.72% |
Sector Allocation* (as of May 31, 2018) | |
Energy | 11.36% |
Utilities | 10.71% |
Materials | 10.70% |
Health Care | 10.39% |
Consumer Staples | 10.14% |
Industrials | 9.85% |
Consumer Discretionary | 9.77% |
Information Technology | 9.35% |
Telecommunication Services | 8.96% |
Financials | 8.40% |
Money Market Fund | 0.37% |
Total | 100.00% |
* | % of Total Investments |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
4 | May 31, 2018
ALPS Emerging Sector Dividend Dogs ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
The ALPS Emerging Sector Dividend Dogs ETF (the “Fund”) seeks investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network® Emerging Sector Dividend Dogs Index (the “Underlying Index”). The Shares of the Fund are listed and trade on the NYSE Arca under the ticker symbol EDOG. The Fund generally will invest in all of the securities that comprise the Underlying Index in proportion to their weightings in the Underlying Index.
The Underlying Index is a rules-based index intended to give investors a means of tracking the overall performance of the highest dividend paying stocks (i.e. “Dividend Dogs”) in the S-Network® Emerging Markets Index, a universe of mainly large capitalization stocks domiciled in emerging markets (the “S-Network Emerging Markets”) on a sector-by-sector basis. “Dividend Dogs” refers to the five stocks in each of the ten Global Industry Classification Standard (“GICS”) sectors that make up the S-Network® Emerging Markets which offer the highest dividend yields. Emerging market countries are countries that major international financial institutions, such as the World Bank, generally consider to be less economically mature than developed nations.
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | Since Inception^ | |
ALPS Emerging Sector Dividend Dogs ETF – NAV | -4.44% | -1.41% | 1.44% | 1.25% |
ALPS Emerging Sector Dividend Dogs ETF – Market Price* | -5.08% | -1.79% | 1.45% | 1.19% |
S-Network® Emerging Sector Dividend Dogs NTR Index | -4.01% | -0.67% | 2.38% | 2.16% |
MSCI Emerging Markets Net TR Index® | 0.89% | 14.03% | 6.17% | 5.84% |
Total Expense Ratio (per the current prospectus) 0.60%.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.675.2639.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund Commencement Date was March 28, 2014. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The S-Network® Emerging Sector Dividend Dogs Index is a portfolio of stocks derived from a universe of mainly large capitalization stocks domiciled in emerging markets (the “S-Network Emerging Markets Index” “SNEMX”). The index methodology selects the five stocks in each of the ten GICS sectors that make up the universe which offer the highest dividend yields as of the last trading day of November. The fifty stocks that are selected for inclusion in the portfolio are equally weighted. The universe includes stocks whose domicile and primary exchange listings are in countries identified by the World Bank as Upper Middle Income (certain lower middle income countries are also included, as well as stocks traded on the Taiwan Stock Exchange despite non-recognition by the World Bank). The selection criteria for the universe, in addition to the aforementioned country qualifications, also include requirements for sector inclusion, primary exchange listing, minimum market capitalization, share price, average daily trading volume and other factors. Total Return assumes reinvestment of any dividends and distributions realized during a given time period. Net Total Return (NTR) is obtained by reinvesting the net dividend, which is equal to the ordinary gross dividend minus the amount of withholding tax.
The MSCI Emerging Markets Index® is a free float-adjusted market capitalization index that is designed to measure equity market performance in the global emerging markets.
The indexes are not actively managed and do not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The ALPS Emerging Sector Dividend Dogs ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the ETF.
5 | May 31, 2018
ALPS Emerging Sector Dividend Dogs ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018) | |
Sinopec Shanghai Petrochemical Co., Ltd. | 2.81% |
British American Tobacco Malay Bhd | 2.68% |
BTS Group Holdings Pcl | 2.62% |
Huaneng Power International, Inc. | 2.57% |
Netcare, Ltd. | 2.42% |
COSCO SHIPPING Energy Transportation Co., Ltd. | 2.33% |
CEZ A.S. | 2.32% |
Severstal PJSC | 2.30% |
Charoen Pokphand Foods Pcl | 2.29% |
Lenovo Group, Ltd. | 2.27% |
Total% of Top 10 Holdings | 24.61% |
* | % of Total Investments (excluding investments purchased with collateral from securities loaned). |
Future holdings are subject to change.
Sector Allocation* (as of May 31, 2018) | |
Materials | 10.76% |
Consumer Staples | 10.76% |
Utilities | 10.58% |
Industrials | 10.21% |
Energy | 10.14% |
Health Care | 10.06% |
Information Technology | 10.03% |
Financials | 9.15% |
Consumer Discretionary | 9.07% |
Telecommunication Services | 9.01% |
Money Market Fund | 0.23% |
Total | 100.00% |
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6 | May 31, 2018
ALPS | Dorsey Wright Sector Momentum ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
The ALPS | Dorsey Wright Sector Momentum ETF (the “Fund”) employs a “passive management” – or indexing – investment approach designed to seek investment results that correspond (before fees and expenses) generally to the performance of the Dorsey Wright US Sector Momentum Index (the “Underlying Index”). The shares of the Fund are listed and trade on the NASDAQ under the ticker symbol SWIN.
The Underlying Index is a rules-based index intended to track the overall performance of the stocks with the highest relative strength or “momentum” within the NASDAQ US Large Mid Cap Index on a sector-by-sector basis.
Performance (as of May 31, 2018)
6 Months | 1 Year | Since Inception^ | |
ALPS | Dorsey Wright Sector Momentum ETF - NAV | 5.50% | 15.88% | 18.24% |
ALPS | Dorsey Wright Sector Momentum ETF - Market Price* | 5.53% | 15.87% | 18.29% |
Dorsey Wright US Sector Momentum Index | 5.61% | 15.75% | 17.90% |
S&P 500® Total Return Index | 3.16% | 14.38% | 15.78% |
Total Expense Ratio (per the current prospectus) 0.40%
Performance data quoted represents past performance. Past performance does not guarantee future results. 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 may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.855.759.5679.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund Commencement date was January 10, 2017. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The Dorsey Wright US Sector Momentum Index is a rules-based index intended to track the overall performance of the stocks with the highest relative strength or “momentum” within the NASDAQ US Large Mid Cap Index on a sector-by-sector basis.
The S&P 500® Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices
The indexes are reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. The indexes are not actively managed and do not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The NASDAQ US Large Mid Cap Index is designed to track the performance of securities assigned to United States and comprised of the Large Mid Cap segment.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The ALPS | Dorsey Wright Sector Momentum ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the ALPS | Dorsey Wright Sector Momentum ETF.
ALPS Portfolio Solutions Distributor, Inc. is not affiliated with Nasdaq, Inc.
7 | May 31, 2018
ALPS | Dorsey Wright Sector Momentum ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018) | |
ABIOMED, Inc. | 2.57% |
Valero Energy Corp. | 2.55% |
Continental Resources, Inc. | 2.51% |
Cheniere Energy, Inc. | 2.42% |
TransDigm Group, Inc. | 2.20% |
Sirius XM Holdings, Inc. | 2.16% |
Domino's Pizza, Inc. | 2.16% |
VF Corp. | 2.13% |
O'Reilly Automotive, Inc. | 2.12% |
Square, Inc. | 2.10% |
Total% of Top 10 Holdings | 22.92% |
Sector Allocation* (as of May 31, 2018) | |
Information Technology | 25.65% |
Consumer Discretionary | 16.44% |
Industrials | 13.77% |
Health Care | 11.70% |
Energy | 11.45% |
Materials | 11.38% |
Financials | 7.62% |
Real Estate | 1.87% |
Money Market Fund | 0.12% |
Total | 100.00% |
* | % of Total Investments |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
8 | May 31, 2018
ALPS ETF Trust
Disclosure of Fund Expenses | May 31, 2018 (Unaudited) |
Shareholder Expense Example: As a shareholder of a Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, 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. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through May 31, 2018.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values 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 ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. Therefore, the second line is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 12/1/17 | Ending Account Value 5/31/18 | Expense Ratio(a) | Expenses Paid During Period 12/1/17 - 5/31/18(b) | |
ALPS Sector Dividend Dogs ETF | ||||
Actual | $1,000.00 | $992.00 | 0.40% | $1.99 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.94 | 0.40% | $2.02 |
ALPS International Sector Dividend Dogs ETF | ||||
Actual | $1,000.00 | $1,001.90 | 0.50% | $2.50 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.44 | 0.50% | $2.52 |
ALPS Emerging Sector Dividend Dogs ETF | ||||
Actual | $1,000.00 | $955.60 | 0.60% | $2.93 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.94 | 0.60% | $3.02 |
ALPS | Dorsey Wright Sector Momentum ETF | ||||
Actual | $1,000.00 | $1,055.00 | 0.40% | $2.05 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.94 | 0.40% | $2.02 |
(a) | Annualized based on the Fund's most recent half-year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. |
9 | May 31, 2018
ALPS Sector Dividend Dogs ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.48%) | ||||||||
Consumer Discretionary (11.06%) | ||||||||
Ford Motor Co. | 4,442,354 | $ | 51,309,189 | |||||
Kohl's Corp. | 751,747 | 50,179,112 | ||||||
L Brands, Inc. | 1,120,352 | 37,991,136 | ||||||
Macy's, Inc. | 1,639,407 | 57,231,698 | ||||||
Target Corp. | 677,765 | 49,402,291 | ||||||
Total Consumer Discretionary | 246,113,426 | |||||||
Consumer Staples (9.32%) | ||||||||
Altria Group, Inc. | 721,080 | 40,192,999 | ||||||
Archer-Daniels-Midland Co. | 1,097,811 | 47,996,297 | ||||||
The Coca-Cola Co. | 1,060,768 | 45,613,024 | ||||||
General Mills, Inc. | 920,145 | 38,912,932 | ||||||
Philip Morris International, Inc. | 437,241 | 34,778,149 | ||||||
Total Consumer Staples | 207,493,401 | |||||||
Energy (11.86%) | ||||||||
Exxon Mobil Corp. | 640,745 | 52,054,124 | ||||||
Helmerich & Payne, Inc. | 710,893 | 47,189,077 | ||||||
Occidental Petroleum Corp. | 746,568 | 62,861,026 | ||||||
ONEOK, Inc. | 829,772 | 56,557,259 | ||||||
The Williams Cos., Inc. | 1,690,560 | 45,408,442 | ||||||
Total Energy | 264,069,928 | |||||||
Financials (9.77%) | ||||||||
Invesco, Ltd. | 1,386,475 | 37,878,497 | ||||||
MetLife, Inc. | 989,690 | 45,515,843 | ||||||
Navient Corp. | 3,415,841 | 47,172,764 | ||||||
People's United Financial, Inc. | 2,349,577 | 43,255,713 | ||||||
Wells Fargo & Co. | 813,117 | 43,900,187 | ||||||
Total Financials | 217,723,004 | |||||||
Health Care (10.02%) | ||||||||
Cardinal Health, Inc. | 665,397 | 34,660,530 | ||||||
Eli Lilly & Co. | 597,229 | 50,788,354 | ||||||
Gilead Sciences, Inc. | 586,546 | 39,533,200 | ||||||
Merck & Co., Inc. | 862,058 | 51,318,313 | ||||||
Pfizer, Inc. | 1,300,118 | 46,713,240 | ||||||
Total Health Care | 223,013,637 | |||||||
Industrials (10.22%) | ||||||||
Eaton Corp. Plc | 569,495 | 43,611,927 | ||||||
Emerson Electric Co. | 660,178 | 46,767,010 | ||||||
General Electric Co. | 3,169,040 | 44,620,083 | ||||||
Nielsen Holdings Plc | 1,417,157 | 42,755,627 | ||||||
United Parcel Service, Inc., Class B | 428,828 | 49,795,507 | ||||||
Total Industrials | 227,550,154 | |||||||
Information Technology (9.89%) | ||||||||
International Business Machines Corp. | 300,046 | 42,399,500 | ||||||
QUALCOMM, Inc. | 751,076 | 43,652,537 | ||||||
Seagate Technology Plc | 789,521 | 44,489,509 | ||||||
Western Union Co. | 2,347,329 | 46,688,374 |
Security Description | Shares | Value | ||||||
Information Technology (continued) | ||||||||
Xerox Corp. | 1,582,356 | $ | 43,008,436 | |||||
Total Information Technology | 220,238,356 | |||||||
Materials (10.21%) | ||||||||
CF Industries Holdings, Inc. | 1,152,807 | 47,426,480 | ||||||
International Paper Co. | 856,959 | 45,847,306 | ||||||
LyondellBasell Industries NV, Class A | 421,548 | 47,263,962 | ||||||
Nucor Corp. | 704,947 | 45,250,548 | ||||||
WestRock Co. | 705,845 | 41,560,154 | ||||||
Total Materials | 227,348,450 | |||||||
Telecommunication Services (6.08%) | ||||||||
AT&T, Inc. | 1,277,854 | 41,300,241 | ||||||
CenturyLink, Inc. | 2,639,104 | 48,084,475 | ||||||
Verizon Communications, Inc. | 966,062 | 46,052,176 | ||||||
Total Telecommunication Services | 135,436,892 | |||||||
Utilities (11.05%) | ||||||||
The AES Corp. | 4,398,847 | 56,085,299 | ||||||
FirstEnergy Corp. | 1,456,109 | 50,119,272 | ||||||
PPL Corp. | 1,726,170 | 47,158,964 | ||||||
SCANA Corp. | 1,209,906 | 43,919,588 | ||||||
The Southern Co. | 1,086,858 | 48,799,924 | ||||||
Total Utilities | 246,083,047 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $2,179,590,207) | 2,215,070,295 |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.16%) | ||||||||||||
Money Market Fund (0.16%) | ||||||||||||
State Street Institutional | ||||||||||||
Treasury Plus Money | ||||||||||||
Market Fund | ||||||||||||
(Cost $3,501,559) | 1.669 | % | 3,501,559 | 3,501,559 | ||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $3,501,559) | 3,501,559 | |||||||||||
TOTAL INVESTMENTS (99.64%) | ||||||||||||
(Cost $2,183,091,766) | $ | 2,218,571,854 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.36%) | 8,142,015 | |||||||||||
NET ASSETS (100.00%) | $ | 2,226,713,869 |
See Notes to Financial Statements.
10 | May 31, 2018
ALPS International Sector Dividend Dogs ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (98.98%) | ||||||||
Australia (17.41%) | ||||||||
AMP, Ltd. | 1,622,895 | $ | 4,786,528 | |||||
BHP Billiton, Ltd. | 310,983 | 7,711,585 | ||||||
Fortescue Metals Group, Ltd. | 1,856,206 | 6,583,617 | ||||||
National Australia Bank, Ltd. | 290,941 | 5,896,649 | ||||||
Telstra Corp., Ltd. | 2,561,613 | 5,424,218 | ||||||
Wesfarmers, Ltd. | 215,490 | 7,424,657 | ||||||
Westpac Banking Corp. | 292,854 | 6,167,965 | ||||||
Woodside Petroleum, Ltd. | 308,066 | 7,550,720 | ||||||
Woolworths, Ltd. | 327,562 | 7,050,079 | ||||||
Total Australia | 58,596,018 | |||||||
Belgium (1.67%) | ||||||||
Proximus SADP | 209,772 | 5,618,313 | ||||||
Denmark (1.59%) | ||||||||
Pandora A/S | 68,208 | 5,369,519 | ||||||
Finland (6.27%) | ||||||||
Fortum OYJ | 304,294 | 7,153,832 | ||||||
Nokia OYJ | 1,171,804 | 6,767,297 | ||||||
UPM-Kymmene OYJ | 195,386 | 7,174,550 | ||||||
Total Finland | 21,095,679 | |||||||
France (5.86%) | ||||||||
Carrefour SA | 321,511 | 5,797,681 | ||||||
Sanofi | 85,624 | 6,569,483 | ||||||
TOTAL SA | 120,871 | 7,354,889 | ||||||
Total France | 19,722,053 | |||||||
Germany (5.86%) | ||||||||
Bayer AG | 57,352 | 6,829,447 | ||||||
Evonik Industries AG | 194,729 | 6,824,888 | ||||||
Telefonica Deutschland Holding AG | 1,437,945 | 6,078,606 | ||||||
Total Germany | 19,732,941 | |||||||
Great Britain (2.15%) | ||||||||
Persimmon Plc | 192,594 | 7,250,631 | ||||||
Hong Kong (2.13%) | ||||||||
Sands China, Ltd. | 1,195,800 | 7,158,151 | ||||||
Italy (3.96%) | ||||||||
Atlantia SpA | 201,389 | 5,836,407 | ||||||
Eni SpA | 412,979 | 7,478,469 | ||||||
Total Italy | 13,314,876 | |||||||
Japan (9.80%) | ||||||||
Canon, Inc. | 190,463 | 6,502,547 |
Security Description | Shares | Value | ||||||
Japan (continued) | ||||||||
Japan Airlines Co., Ltd. | 175,700 | $ | 6,812,544 | |||||
Japan Tobacco, Inc. | 247,700 | 6,685,179 | ||||||
Nissan Motor Co., Ltd. | 663,700 | 6,592,158 | ||||||
Tokyo Electron, Ltd. | 34,100 | 6,394,632 | ||||||
Total Japan | 32,987,060 | |||||||
Netherlands (2.25%) | ||||||||
Royal Dutch Shell Plc, Class A | 218,615 | 7,586,655 | ||||||
Portugal (2.23%) | ||||||||
EDP - Energias de Portugal SA | 1,920,833 | 7,522,595 | ||||||
Spain (5.98%) | ||||||||
Abertis Infraestructuras SA | 300,385 | 6,447,394 | ||||||
Endesa SA | 321,048 | 7,072,931 | ||||||
Ferrovial SA | 324,403 | 6,610,214 | ||||||
Total Spain | 20,130,539 | |||||||
Sweden (9.35%) | ||||||||
Hennes & Mauritz AB, Class B(a) | 417,582 | 6,291,832 | ||||||
Nordea Bank AB | 588,066 | 5,654,545 | ||||||
Swedbank AB, Class A | 269,842 | 5,608,513 | ||||||
Telefonaktiebolaget LM Ericsson, Class B | 998,385 | 7,240,728 | ||||||
Telia Co. AB | 1,424,299 | 6,676,477 | ||||||
Total Sweden | 31,472,095 | |||||||
Switzerland (1.83%) | ||||||||
Roche Holding AG | 28,776 | 6,161,906 | ||||||
United Kingdom (20.64%) | ||||||||
AstraZeneca Plc | 104,542 | 7,596,268 | ||||||
BP Plc | 1,045,188 | 8,007,240 | ||||||
Centrica Plc | 3,529,061 | 6,844,698 | ||||||
GlaxoSmithKline Plc | 374,061 | 7,578,220 | ||||||
Imperial Brands Plc | 192,994 | 6,952,691 | ||||||
International Consolidated Airlines Group SA | 801,333 | 7,250,113 | ||||||
Micro Focus International Plc | 247,199 | 4,380,430 | ||||||
Rio Tinto, Ltd. | 119,358 | 7,489,248 | ||||||
SSE Plc | 397,771 | 7,231,032 | ||||||
Vodafone Group Plc | 2,413,469 | 6,154,254 | ||||||
Total United Kingdom | 69,484,194 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $335,675,332) | 333,203,225 |
11 | May 31, 2018
ALPS International Sector Dividend Dogs ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.37%) | ||||||||||||
Money Market Fund (0.37%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund (Cost $1,237,126) | 1.669 | % | 1,237,126 | $ | 1,237,126 | |||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $1,237,126) | 1,237,126 | |||||||||||
TOTAL INVESTMENTS (99.35%) | ||||||||||||
(Cost $336,912,458) | $ | 334,440,351 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.65%) | 2,166,618 | |||||||||||
NET ASSETS (100.00%) | $ | 336,606,969 |
(a) | Security, or a portion of the security position is currently on loan. The total market value of securities on loan is $4,645,964. |
See Notes to Financial Statements.
12 | May 31, 2018
ALPS Emerging Sector Dividend Dogs ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.37%) | ||||||||
Brazil (8.30%) | ||||||||
BB Seguridade Participacoes SA | 102,536 | $ | 717,522 | |||||
CCR SA | 242,057 | 669,483 | ||||||
Cielo SA | 130,984 | 596,173 | ||||||
Engie Brasil Energia SA | 76,826 | 763,092 | ||||||
Fleury SA | 104,684 | 690,950 | ||||||
Total Brazil | 3,437,220 | |||||||
Chile (3.82%) | ||||||||
AES Gener SA | 2,983,930 | 780,378 | ||||||
Cencosud SA | 301,096 | 799,439 | ||||||
Total Chile | 1,579,817 | |||||||
China (11.87%) | ||||||||
COSCO SHIPPING Energy Transportation Co., Ltd., Class H | 1,697,000 | 960,664 | ||||||
Great Wall Motor Co., Ltd., Class H | 816,000 | 795,900 | ||||||
Huaneng Power International, Inc., Sponsored ADR(a) | 34,809 | 1,061,674 | ||||||
Lenovo Group, Ltd. | 1,768,000 | 937,740 | ||||||
Sinopec Shanghai Petrochemical Co., Ltd., Class H | 1,570,000 | 1,159,004 | ||||||
Total China | 4,914,982 | |||||||
Czech Republic (2.31%) | ||||||||
CEZ A.S. | 38,214 | 955,793 | ||||||
Hungary (1.95%) | ||||||||
Richter Gedeon Nyrt | 41,286 | 807,366 | ||||||
India (5.84%) | ||||||||
Infosys, Ltd., Sponsored ADR | 51,027 | 928,181 | ||||||
Vedanta, Ltd., ADR | 48,197 | 708,496 | ||||||
Wipro, Ltd., ADR(a) | 169,850 | 781,310 | ||||||
Total India | 2,417,987 | |||||||
Indonesia (7.85%) | ||||||||
Astra International Tbk PT | 1,650,700 | 819,707 | ||||||
Indocement Tunggal Prakarsa Tbk PT | 638,300 | 809,646 | ||||||
Kalbe Farma Tbk PT | 8,312,900 | 819,624 | ||||||
Perusahaan Gas Negara Persero Tbk | 5,376,900 | 801,021 | ||||||
Total Indonesia | 3,249,998 | |||||||
Malaysia (7.92%) | ||||||||
Astro Malaysia Holdings Bhd | 1,545,700 | 543,713 | ||||||
British American Tobacco Malay Bhd | 135,827 | 1,103,680 | ||||||
Malayan Banking Bhd | 347,300 | 842,944 | ||||||
MISC Bhd | 534,600 | 788,468 | ||||||
Total Malaysia | 3,278,805 |
Security Description | Shares | Value | ||||||
Mexico (3.95%) | ||||||||
Banco Santander Mexico SA Institucion de Banca Multiple Grupo Financiero Santand, ADR | 125,247 | $ | 810,348 | |||||
Kimberly-Clark de Mexico SAB de CV, Class A | 496,300 | 825,896 | ||||||
Total Mexico | 1,636,244 | |||||||
Philippines (3.72%) | ||||||||
PLDT, Inc., Sponsored ADR | 31,489 | 760,774 | ||||||
Semirara Mining & Power Corp. | 1,430,900 | 778,973 | ||||||
Total Philippines | 1,539,747 | |||||||
Poland (1.75%) | ||||||||
Bank Pekao SA | 23,925 | 723,950 | ||||||
Russia (10.14%) | ||||||||
Gazprom PAO, Sponsored ADR | 190,816 | 866,686 | ||||||
Lukoil PJSC, Sponsored ADR | 14,014 | 935,294 | ||||||
MegaFon PJSC, GDR(b) | 81,842 | 721,847 | ||||||
Mobile TeleSystems PJSC, Sponsored ADR | 75,861 | 726,749 | ||||||
Severstal PJSC, GDR(b) | 59,759 | 950,168 | ||||||
Total Russia | 4,200,744 | |||||||
South Africa (9.77%) | ||||||||
AVI, Ltd. | 95,002 | 763,449 | ||||||
Barclays Africa Group, Ltd. | 53,460 | 678,980 | ||||||
Life Healthcare Group Holdings, Ltd. | 371,874 | 832,554 | ||||||
Netcare, Ltd.(a) | 428,794 | 997,375 | ||||||
Woolworths Holdings, Ltd. | 169,396 | 776,321 | ||||||
Total South Africa | 4,048,679 | |||||||
Thailand (11.25%) | ||||||||
BTS Group Holdings Pcl | 3,559,820 | 1,079,408 | ||||||
Charoen Pokphand Foods Pcl | 1,209,900 | 945,530 | ||||||
Delta Electronics Thailand Pcl | 443,624 | 894,459 | ||||||
Intouch Holdings Pcl, NVDR | 503,100 | 868,905 | ||||||
Thai Oil Pcl | 302,500 | 869,959 | ||||||
Total Thailand | 4,658,261 | |||||||
Turkey (8.93%) | ||||||||
Enka Insaat ve Sanayi A.S. | 722,547 | 711,783 | ||||||
Eregli Demir ve Celik Fabrikalari TAS | 326,880 | 810,801 | ||||||
Ford Otomotiv Sanayi AS | 56,970 | 805,328 | ||||||
Tupras Turkiye Petrol Rafinerileri A.S. | 31,282 | 733,088 | ||||||
Turkcell Iletisim Hizmetleri AS, ADR | 95,627 | 638,788 | ||||||
Total Turkey | 3,699,788 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $43,691,373) | 41,149,381 |
13 | May 31, 2018
ALPS Emerging Sector Dividend Dogs ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (4.47%) | ||||||||||||
Money Market Fund (0.23%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund (Cost $94,674) | 1.669 | % | 94,674 | $ | 94,674 | |||||||
Investments Purchased with Collateral | ||||||||||||
From Securities Loaned (4.24%) | ||||||||||||
State Street Navigator Securities Lending Prime Portfolio, 1.77% (Cost $1,755,398) | 1,755,398 | 1,755,398 | ||||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $1,850,072) | 1,850,072 | |||||||||||
TOTAL INVESTMENTS (103.84%) | ||||||||||||
(Cost $45,541,445) | $ | 42,999,453 | ||||||||||
NET LIABILITIES LESS OTHER ASSETS (-3.84%) | (1,589,090 | ) | ||||||||||
NET ASSETS (100.00%) | $ | 41,410,363 |
(a) | Security, or a portion of the security position is currently on loan. The total market value of securities on loan is $1,702,113. |
(b) | These securities initially sold to other parties pursuant to Regulation S under the 1933 Act and subsequently resold to the Fund. As of May 31, 2018, the aggregate market values of these securities were $1,672,015, representing 4.04% of the Fund’s net assets. |
See Notes to Financial Statements.
14 | May 31, 2018
ALPS | Dorsey Wright Sector Momentum ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.83%) | ||||||||
Consumer Discretionary (16.43%) | ||||||||
Amazon.com, Inc.(a) | 137 | $ | 223,258 | |||||
Domino's Pizza, Inc. | 936 | 235,385 | ||||||
Home Depot, Inc. | 1,205 | 224,793 | ||||||
O'Reilly Automotive, Inc.(a) | 857 | 230,885 | ||||||
Sirius XM Holdings, Inc.(b) | 33,283 | 236,309 | ||||||
VF Corp. | 2,858 | 231,955 | ||||||
Wyndham Destinations, Inc. | 1,855 | 201,156 | ||||||
Yum! Brands, Inc. | 2,583 | 210,076 | ||||||
Total Consumer Discretionary | 1,793,817 | |||||||
Energy (11.44%) | ||||||||
Cheniere Energy, Inc.(a) | 3,970 | 264,481 | ||||||
CONSOL Energy, Inc.(a) | 13,914 | 224,850 | ||||||
Continental Resources, Inc.(a) | 4,064 | 273,670 | ||||||
Diamondback Energy, Inc. | 1,718 | 207,466 | ||||||
Valero Energy Corp. | 2,300 | 278,760 | ||||||
Total Energy | 1,249,227 | |||||||
Financials (7.61%) | ||||||||
American Financial Group, Inc. | 1,908 | 209,651 | ||||||
Chubb Ltd. | 1,530 | 199,956 | ||||||
Discover Financial Services | 2,818 | 208,137 | ||||||
Western Alliance Bancorp(a) | 3,543 | 213,501 | ||||||
Total Financials | 831,245 | |||||||
Health Care (11.70%) | ||||||||
ABIOMED, Inc.(a) | 736 | 280,519 | ||||||
Becton Dickinson and Co. | 966 | 214,056 | ||||||
Bluebird Bio, Inc.(a) | 1,079 | 193,195 | ||||||
Mettler-Toledo International, Inc.(a) | 351 | 193,310 | ||||||
Nektar Therapeutics(a) | 2,094 | 168,085 | ||||||
UnitedHealth Group, Inc. | 944 | 227,985 | ||||||
Total Health Care | 1,277,150 | |||||||
Industrials (13.77%) | ||||||||
IDEX Corp. | 1,460 | 202,473 | ||||||
ITT, Inc. | 4,177 | 215,617 | ||||||
Lockheed Martin Corp. | 650 | 204,451 | ||||||
Northrop Grumman Corp. | 637 | 208,458 | ||||||
Roper Technologies, Inc. | 752 | 207,394 | ||||||
TransDigm Group, Inc. | 719 | 240,225 | ||||||
Union Pacific Corp. | 1,572 | 224,419 | ||||||
Total Industrials | 1,503,037 | |||||||
Information Technology (25.64%) | ||||||||
Activision Blizzard, Inc. | 3,009 | 213,368 | ||||||
Amphenol Corp., Class A | 2,344 | 203,764 | ||||||
ANSYS, Inc.(a) | 1,297 | 211,152 | ||||||
Apple, Inc. | 1,209 | 225,926 | ||||||
EPAM Systems, Inc.(a) | 1,811 | 223,079 | ||||||
Facebook, Inc., Class A(a) | 1,165 | 223,424 | ||||||
Fiserv, Inc.(a) | 2,906 | 210,976 |
Security Description | Shares | Value | ||||||
Information Technology (continued) | ||||||||
LogMeIn, Inc. | 1,706 | $ | 184,077 | |||||
Micron Technology, Inc.(a) | 3,560 | 205,020 | ||||||
Monolithic Power Systems, Inc. | 1,729 | 227,899 | ||||||
NVIDIA Corp. | 861 | 217,136 | ||||||
Square, Inc., Class A(a) | 3,929 | 228,864 | ||||||
Take-Two Interactive Software, Inc.(a) | 2,010 | 225,281 | ||||||
Total Information Technology | 2,799,966 | |||||||
Materials (11.37%) | ||||||||
Air Products & Chemicals, Inc. | 1,272 | 205,314 | ||||||
Freeport-McMoRan, Inc. | 11,747 | 198,524 | ||||||
Louisiana-Pacific Corp. | 7,271 | 212,168 | ||||||
The Sherwin-Williams Co. | 527 | 199,865 | ||||||
Steel Dynamics, Inc. | 4,594 | 227,081 | ||||||
United States Steel Corp. | 5,397 | 198,987 | ||||||
Total Materials | 1,241,939 | |||||||
Real Estate (1.87%) | ||||||||
American Tower Corp. | 1,472 | 203,681 | ||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $9,672,832) | 10,900,062 |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.12%) | ||||||||||||
Money Market Fund (0.12%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund (Cost $13,566) | 1.669 | % | 13,566 | 13,566 | ||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $13,566) | 13,566 | |||||||||||
TOTAL INVESTMENTS (99.95%) | ||||||||||||
(Cost $9,686,398) | $ | 10,913,628 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.05%) | 5,826 | |||||||||||
NET ASSETS (100.00%) | $ | 10,919,454 |
(a) | Non-income producing security. |
(b) | Security, or a portion of the security position is currently on loan. The total market value of securities on loan is $177,230. |
See Notes to Financial Statements.
15 | May 31, 2018
ALPS ETF Trust
Statements of Assets and Liabilities | May 31, 2018 (Unaudited) |
ALPS Sector Dividend Dogs ETF | ALPS International Sector Dividend Dogs ETF | ALPS Emerging Sector Dividend Dogs ETF | ALPS | Dorsey Wright Sector Momentum ETF | |||||||||||||
ASSETS: | ||||||||||||||||
Investments, at value | $ | 2,218,571,854 | $ | 334,440,351 | $ | 42,999,453 | $ | 10,913,628 | ||||||||
Foreign currency, at value (Cost $–, $–, $76,899 and $–) | – | – | 76,877 | – | ||||||||||||
Foreign tax reclaims | – | 547,587 | 1,582 | – | ||||||||||||
Cash held in escrow account (Note 3) | 347,089 | 64,977 | 12,313 | 1,616 | ||||||||||||
Dividends receivable | 8,897,191 | 1,763,445 | 110,613 | 9,496 | ||||||||||||
Receivable for investments sold | – | – | 424 | – | ||||||||||||
Total Assets | 2,227,816,134 | 336,816,360 | 43,201,262 | 10,924,740 | ||||||||||||
LIABILITIES: | ||||||||||||||||
Payable to adviser | 1,102,265 | 209,391 | 35,501 | 5,286 | ||||||||||||
Payable for collateral upon return of securities loaned | – | – | 1,755,398 | – | ||||||||||||
Total Liabilities | 1,102,265 | 209,391 | 1,790,899 | 5,286 | ||||||||||||
NET ASSETS | $ | 2,226,713,869 | $ | 336,606,969 | $ | 41,410,363 | $ | 10,919,454 | ||||||||
NET ASSETS CONSIST OF: | ||||||||||||||||
Paid-in capital | $ | 2,178,301,222 | $ | 339,983,706 | $ | 44,463,012 | $ | 9,432,833 | ||||||||
Accumulated net investment income/(loss) | (179,184 | ) | 3,396,110 | 474,453 | 9,022 | |||||||||||
Accumulated net realized gain/(loss) | 13,111,743 | (4,292,407 | ) | (983,585 | ) | 250,369 | ||||||||||
Net unrealized appreciation/(depreciation) | 35,480,088 | (2,480,440 | ) | (2,543,517 | ) | 1,227,230 | ||||||||||
NET ASSETS | $ | 2,226,713,869 | $ | 336,606,969 | $ | 41,410,363 | $ | 10,919,454 | ||||||||
INVESTMENTS, AT COST | $ | 2,183,091,766 | $ | 336,912,458 | $ | 45,541,445 | $ | 9,686,398 | ||||||||
PRICING OF SHARES: | ||||||||||||||||
Net Assets | $ | 2,226,713,869 | $ | 336,606,969 | $ | 41,410,363 | $ | 10,919,454 | ||||||||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 50,109,141 | 12,100,000 | 1,800,000 | 350,002 | ||||||||||||
Net Asset Value, offering and redemption price per share | $ | 44.44 | $ | 27.82 | $ | 23.01 | $ | 31.20 |
See Notes to Financial Statements.
16 | May 31, 2018
ALPS ETF Trust
Statements of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
ALPS Sector Dividend Dogs ETF | ALPS International Sector Dividend Dogs ETF | ALPS Emerging Sector Dividend Dogs ETF | ALPS | Dorsey Wright Sector Momentum ETF | |||||||||||||
INVESTMENT INCOME: | ||||||||||||||||
Dividends* | $ | 45,907,751 | $ | 9,621,058 | $ | 962,382 | $ | 56,710 | ||||||||
Securities Lending Income | 21,820 | 5,612 | 10,943 | 2,175 | ||||||||||||
Total Investment Income | 45,929,571 | 9,626,670 | 973,325 | 58,885 | ||||||||||||
EXPENSES: | ||||||||||||||||
Investment adviser fees | 4,623,767 | 868,968 | 155,671 | 21,022 | ||||||||||||
Total Expenses | 4,623,767 | 868,968 | 155,671 | 21,022 | ||||||||||||
NET INVESTMENT INCOME | 41,305,804 | 8,757,702 | 817,654 | 37,863 | ||||||||||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||||||||||||||
Net realized gain on investments | 164,940,389 | 22,320,599 | 1,733,448 | 436,628 | ||||||||||||
Net realized loss on foreign currency transactions | – | (165,689 | ) | (57,630 | ) | – | ||||||||||
Total net realized gain | 164,940,389 | 22,154,910 | 1,675,818 | 436,628 | ||||||||||||
Net change in unrealized appreciation/(depreciation) on investments | (225,366,769 | ) | (30,527,050 | ) | (5,145,500 | ) | 86,918 | |||||||||
Net change in unrealized depreciation on translation of assets and liabilities denominated in foreign currencies | – | (25,394 | ) | (1,632 | ) | – | ||||||||||
Total net change in unrealized appreciation/(depreciation) | (225,366,769 | ) | (30,552,444 | ) | (5,147,132 | ) | 86,918 | |||||||||
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS | (60,426,380 | ) | (8,397,534 | ) | (3,471,314 | ) | 523,546 | |||||||||
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (19,120,576 | ) | $ | 360,168 | $ | (2,653,660 | ) | $ | 561,409 | ||||||
*Net of foreign tax withholding: | $ | – | $ | 883,930 | $ | 109,812 | $ | – |
See Notes to Financial Statements.
17 | May 31, 2018
ALPS Sector Dividend Dogs ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 41,305,804 | $ | 70,692,559 | ||||
Net realized gain | 164,940,389 | 79,876,828 | ||||||
Net change in unrealized appreciation/(depreciation) | (225,366,769 | ) | 84,019,526 | |||||
Net increase/(decrease) in net assets resulting from operations | (19,120,576 | ) | 234,588,913 | |||||
Net Equalization Credits/(Debits) | (1,388,870 | ) | 1,506,585 | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (41,484,988 | ) | (70,756,115 | ) | ||||
From tax return of capital | – | (2,592,040 | ) | |||||
Total distributions | (41,484,988 | ) | (73,348,155 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 529,159,839 | 1,098,967,514 | ||||||
Cost of shares redeemed | (564,044,956 | ) | (640,408,820 | ) | ||||
Net income equalization (Note 2) | 1,388,870 | (1,506,585 | ) | |||||
Net increase/(decrease) from share transactions | (33,496,247 | ) | 457,052,109 | |||||
Net increase/(decrease) in net assets | (95,490,681 | ) | 619,799,452 | |||||
NET ASSETS: | ||||||||
Beginning of period | 2,322,204,550 | 1,702,405,098 | ||||||
End of period * | $ | 2,226,713,869 | $ | 2,322,204,550 | ||||
* Including accumulated net investment loss of: | $ | (179,184 | ) | $ | – | |||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 50,909,141 | 40,259,141 | ||||||
Shares sold | 11,550,000 | 25,600,000 | ||||||
Shares redeemed | (12,350,000 | ) | (14,950,000 | ) | ||||
Shares outstanding, end of period | 50,109,141 | 50,909,141 |
See Notes to Financial Statements.
18 | May 31, 2018
ALPS International Sector Dividend Dogs ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 8,757,702 | $ | 8,948,867 | ||||
Net realized gain/(loss) | 22,154,910 | (2,156,351 | ) | |||||
Net change in unrealized appreciation/(depreciation) | (30,552,444 | ) | 49,755,411 | |||||
Net increase in net assets resulting from operations | 360,168 | 56,547,927 | ||||||
Net Equalization Credits/(Debits) | (97,264 | ) | 1,103,408 | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (6,191,767 | ) | (8,514,874 | ) | ||||
Total distributions | (6,191,767 | ) | (8,514,874 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 75,662,867 | 167,824,202 | ||||||
Cost of shares redeemed | (82,407,981 | ) | (27,715,964 | ) | ||||
Net income equalization (Note 2) | 97,264 | (1,103,408 | ) | |||||
Net increase/(decrease) from share transactions | (6,647,850 | ) | 139,004,830 | |||||
Net increase/(decrease) in net assets | (12,576,713 | ) | 188,141,291 | |||||
NET ASSETS: | ||||||||
Beginning of period | 349,183,682 | 161,042,391 | ||||||
End of period * | $ | 336,606,969 | $ | 349,183,682 | ||||
* Including accumulated net investment income of: | $ | 3,396,110 | $ | 830,175 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 12,350,000 | 7,050,000 | ||||||
Shares sold | 2,650,000 | 6,400,000 | ||||||
Shares redeemed | (2,900,000 | ) | (1,100,000 | ) | ||||
Shares outstanding, end of period | 12,100,000 | 12,350,000 |
See Notes to Financial Statements.
19 | May 31, 2018
ALPS Emerging Sector Dividend Dogs ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 817,654 | $ | 1,221,858 | ||||
Net realized gain | 1,675,818 | 143,336 | ||||||
Net change in unrealized appreciation/(depreciation) | (5,147,132 | ) | 3,453,932 | |||||
Net increase/(decrease) in net assets resulting from operations | (2,653,660 | ) | 4,819,126 | |||||
Net Equalization Credits/(Debits) | (104,384 | ) | 80,789 | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (478,875 | ) | (1,225,826 | ) | ||||
Total distributions | (478,875 | ) | (1,225,826 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 18,738,468 | 26,866,382 | ||||||
Cost of shares redeemed | (21,551,763 | ) | (2,160,243 | ) | ||||
Net income equalization (Note 2) | 104,384 | (80,789 | ) | |||||
Net increase/(decrease) from share transactions | (2,708,911 | ) | 24,625,350 | |||||
Net increase/(decrease) in net assets | (5,945,830 | ) | 28,299,439 | |||||
NET ASSETS: | ||||||||
Beginning of period | 47,356,193 | 19,056,754 | ||||||
End of period * | $ | 41,410,363 | $ | 47,356,193 | ||||
* Including accumulated net investment income of: | $ | 474,453 | $ | 135,674 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,950,000 | 900,000 | ||||||
Shares sold | 750,000 | 1,150,000 | ||||||
Shares redeemed | (900,000 | ) | (100,000 | ) | ||||
Shares outstanding, end of period | 1,800,000 | 1,950,000 |
See Notes to Financial Statements.
20 | May 31, 2018
ALPS | Dorsey Wright Sector Momentum ETF
Statement of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Period January 10, 2017 (Commencement) to November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 37,863 | $ | 42,075 | ||||
Net realized gain/(loss) | 436,628 | (19,217 | ) | |||||
Net change in unrealized appreciation | 86,918 | 1,140,312 | ||||||
Net Increase in net assets resulting from operations | 561,409 | 1,163,170 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (37,072 | ) | (33,844 | ) | ||||
Total distributions | (37,072 | ) | (33,844 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 3,063,651 | 10,615,997 | ||||||
Cost of shares redeemed | (3,055,977 | ) | (1,357,880 | ) | ||||
Net increase from share transactions | 7,674 | 9,258,117 | ||||||
Net Increase in Net Assets | 532,011 | 10,387,443 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 10,387,443 | – | ||||||
End of period * | $ | 10,919,454 | $ | 10,387,443 | ||||
* Including accumulated net investment income of: | $ | 9,022 | $ | 8,231 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 350,002 | – | ||||||
Shares sold | 100,000 | 400,002 | ||||||
Shares redeemed | (100,000 | ) | (50,000 | ) | ||||
Shares outstanding, end of period | 350,002 | 350,002 |
See Notes to Financial Statements.
21 | May 31, 2018
ALPS Sector Dividend Dogs ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Year Ended November 30, 2014 | For the Year Ended November 30, 2013 | |||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 45.61 | $ | 42.29 | $ | 36.23 | $ | 38.80 | $ | 33.76 | $ | 26.71 | ||||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||||||
Net investment income (a) | 0.81 | 1.40 | 1.26 | 1.21 | 1.35 | 1.12 | ||||||||||||||||||
Net realized and unrealized gain/(loss) | (1.17 | ) | 3.39 | 6.15 | (2.47 | ) | 4.94 | 7.14 | ||||||||||||||||
Total from investment operations | (0.36 | ) | 4.79 | 7.41 | (1.26 | ) | 6.29 | 8.26 | ||||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||||||
From net investment income | (0.81 | ) | (1.42 | ) | (1.34 | ) | (1.31 | ) | (1.25 | ) | (1.21 | ) | ||||||||||||
Tax return of capital | – | (0.05 | ) | (0.01 | ) | – | – | – | ||||||||||||||||
Total distributions | (0.81 | ) | (1.47 | ) | (1.35 | ) | (1.31 | ) | (1.25 | ) | (1.21 | ) | ||||||||||||
Net increase/(decrease) in net asset value | (1.17 | ) | 3.32 | 6.06 | (2.57 | ) | 5.04 | 7.05 | ||||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 44.44 | $ | 45.61 | $ | 42.29 | $ | 36.23 | $ | 38.80 | $ | 33.76 | ||||||||||||
TOTAL RETURN(b) | (0.80 | )% | 11.59 | % | 20.86 | % | (3.21 | )% | 18.96 | % | 31.66 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||
Net assets, end of period (000s) | $ | 2,226,714 | $ | 2,322,205 | $ | 1,702,405 | $ | 1,014,899 | $ | 1,024,473 | $ | 464,277 | ||||||||||||
Ratio of expenses to average net assets | �� | 0.40 | %(c) | 0.40 | % | 0.40 | % | 0.40 | % | 0.40 | % | 0.40 | % | |||||||||||
Ratio of net investment income to average net assets | 3.57 | %(c) | 3.24 | % | 3.23 | % | 3.25 | % | 3.74 | % | 3.58 | % | ||||||||||||
Portfolio turnover rate(d) | 48 | % | 48 | % | 49 | % | 55 | % | 12 | % | 8 | % | ||||||||||||
Undistributed net investment income included in price of units issued and redeemed(a)(e) | $ | (0.03 | ) | $ | 0.03 | $ | 0.06 | $ | 0.06 | $ | 0.09 | $ | 0.13 |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year is not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
(e) | The per share amount of equalization is presented to show the impact of equalization on distributable earnings per share. |
See Notes to Financial Statements.
22 | May 31, 2018
ALPS International Sector Dividend Dogs ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Year Ended November 30, 2014 | For the Period June 28, 2013 (Commencement) to November 30, 2013 | |||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 28.27 | $ | 22.84 | $ | 24.25 | $ | 27.33 | $ | 29.21 | $ | 25.00 | ||||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||||||
Net investment income(a) | 0.72 | 0.94 | 1.00 | 1.06 | 1.19 | 0.34 | ||||||||||||||||||
Net realized and unrealized gain/(loss) | (0.67 | ) | 5.41 | (1.47 | ) | (3.13 | ) | (1.83 | ) | 4.08 | ||||||||||||||
Total from investment operations | 0.05 | 6.35 | (0.47 | ) | (2.07 | ) | (0.64 | ) | 4.42 | |||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||||||
From net investment income | (0.50 | ) | (0.92 | ) | (0.94 | ) | (0.99 | ) | (1.17 | ) | (0.21 | ) | ||||||||||||
Tax return of capital | – | – | – | (0.02 | ) | (0.07 | ) | – | ||||||||||||||||
Total distributions | (0.50 | ) | (0.92 | ) | (0.94 | ) | (1.01 | ) | (1.24 | ) | (0.21 | ) | ||||||||||||
Net increase/(decrease) in net asset value | (0.45 | ) | 5.43 | (1.41 | ) | (3.08 | ) | (1.88 | ) | 4.21 | ||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 27.82 | $ | 28.27 | $ | 22.84 | $ | 24.25 | $ | 27.33 | $ | 29.21 | ||||||||||||
TOTAL RETURN(b) | 0.19 | % | 28.21 | % | (1.95 | )% | (7.76 | )% | (2.53 | )% | 17.72 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||
Net assets, end of period (000s) | $ | 336,607 | $ | 349,184 | $ | 161,042 | $ | 135,778 | $ | 143,461 | $ | 77,411 | ||||||||||||
Ratio of expenses to average net assets | 0.50 | %(c) | 0.50 | % | 0.50 | % | 0.50 | % | 0.50 | % | 0.50 | %(c) | ||||||||||||
Ratio of net investment income to average net assets | 5.04 | %(c) | 3.55 | % | 4.28 | % | 4.05 | % | 4.05 | % | 2.87 | %(c) | ||||||||||||
Portfolio turnover rate(d) | 56 | % | 37 | % | 47 | % | 67 | % | 19 | % | 2 | % | ||||||||||||
Undistributed net investment income included in price of units issued and redeemed(a)(e) | $ | (0.01 | ) | $ | 0.12 | $ | 0.09 | $ | 0.05 | $ | 0.09 | $ | 0.14 |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year is not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
(e) | The per share amount of equalization is presented to show the impact of equalization on distributable earnings per share. |
See Notes to Financial Statements.
23 | May 31, 2018
ALPS Emerging Sector Dividend Dogs ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Period March 28, 2014 (Commencement) to November 30, 2014 | ||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 24.29 | $ | 21.17 | $ | 20.78 | $ | 26.57 | $ | 25.00 | ||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income(a) | 0.39 | 0.80 | 0.67 | 1.26 | 0.64 | |||||||||||||||
Net realized and unrealized gain/(loss) | (1.44 | ) | 3.06 | 0.39 | (6.15 | ) | 1.59 | |||||||||||||
Total from investment operations | (1.05 | ) | 3.86 | 1.06 | (4.89 | ) | 2.23 | |||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||
From net investment income | (0.23 | ) | (0.74 | ) | (0.67 | ) | (0.90 | ) | (0.54 | ) | ||||||||||
Tax return of capital | – | – | – | – | (0.12 | ) | ||||||||||||||
Total distributions | (0.23 | ) | (0.74 | ) | (0.67 | ) | (0.90 | ) | (0.66 | ) | ||||||||||
Net increase/(decrease) in net asset value | (1.28 | ) | 3.12 | 0.39 | (5.79 | ) | 1.57 | |||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 23.01 | $ | 24.29 | $ | 21.17 | $ | 20.78 | $ | 26.57 | ||||||||||
TOTAL RETURN(b) | (4.44 | )% | 18.37 | % | 5.10 | % | (18.66 | )% | 8.93 | % | ||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||
Net assets, end of period (000s) | $ | 41,410 | $ | 47,356 | $ | 19,057 | $ | 9,349 | $ | 10,629 | ||||||||||
Ratio of expenses to average net assets | 0.60 | %(c) | 0.60 | % | 0.60 | % | 0.60 | % | 0.60 | %(c) | ||||||||||
Ratio of net investment income to average net assets | 3.15 | %(c) | 3.33 | % | 3.11 | % | 5.34 | % | 3.54 | %(c) | ||||||||||
Portfolio turnover rate(d) | 57 | % | 42 | % | 68 | % | 96 | % | 19 | % | ||||||||||
Undistributed net investment income included in price of units issued and redeemed(a)(e) | $ | (0.05 | ) | $ | 0.05 | $ | 0.36 | $ | 0.03 | $ | 0.16 |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year is not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
(e) | The per share amount of equalization is presented to show the impact of equalization on distributable earnings per share. |
See Notes to Financial Statements.
24 | May 31, 2018
ALPS | Dorsey Wright Sector Momentum ETF
Financial Highlights | For a Share Outstanding Throughout the Period Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Period January 10, 2017 (Commencement) to November 30, 2017 | |||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 29.68 | $ | 24.94 | ||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||
Net investment income (a) | 0.11 | 0.18 | ||||||
Net realized and unrealized gain | 1.52 | 4.70 | ||||||
Total from investment operations | 1.63 | 4.88 | ||||||
DISTRIBUTIONS: | ||||||||
From net investment income | (0.11 | ) | (0.14 | ) | ||||
Total distributions | (0.11 | ) | (0.14 | ) | ||||
Net increase in net asset value | 1.52 | 4.74 | ||||||
NET ASSET VALUE, END OF PERIOD | $ | 31.20 | $ | 29.68 | ||||
TOTAL RETURN(b) | 5.50 | % | 19.63 | % | ||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||
Net assets, end of period (000s) | $ | 10,919 | $ | 10,387 | ||||
Ratio of expenses to average net assets | 0.40 | %(c) | 0.40 | %(c) | ||||
Ratio of net investment income to average net assets | 0.72 | %(c) | 0.72 | %(c) | ||||
Portfolio turnover rate(d) | 72 | % | 88 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year is not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
25 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). As of May 31, 2018, the Trust consisted of twenty separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the ALPS Sector Dividend Dogs ETF, the ALPS International Sector Dividend Dogs ETF, the ALPS Emerging Sector Dividend Dogs ETF, and the ALPS | Dorsey Wright Sector Momentum ETF (each a “Fund” and collectively, the “Funds”). Each Fund has elected to qualify as a diversified series of the Trust under the 1940 Act, except for the ALPS | Dorsey Wright Sector Momentum ETF, which is a non-diversified series of the Trust under the 1940 Act. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The investment objective of the ALPS Sector Dividend Dogs ETF is to seek investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network® Sector Dividend Dogs Index. The investment objective of the ALPS International Sector Dividend Dogs ETF is to seek investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network® International Sector Dividend Dogs Index. The investment objective of the ALPS Emerging Sector Dividend Dogs ETF is to seek investment results that replicate as closely as possible, before fees and expenses, the performance of the S-Network® Emerging Sector Dividend Dogs Index. The investment objective of the ALPS | Dorsey Wright Sector Momentum ETF is to seek investment results that correspond (before fees and expenses) generally to the performance of the Dorsey Wright US Sector Momentum Index.
The shares of the ALPS Sector Dividend Dogs ETF, the ALPS International Sector Dividend Dogs ETF, and the ALPS Emerging Sector Dividend Dogs ETF (“Shares”) are listed on the NYSE Arca, Inc. (the “NYSE Arca”). The shares of the ALPS | Dorsey Wright Sector Momentum ETF (“Shares”) are listed on the NASDAQ Stock Market LLC (“NASDAQ”). Each Fund issues and redeems Shares, at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
A. Portfolio Valuation
Each Fund’s NAV is determined daily, as of the close of regular trading on the New York Stock Exchange (“NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the latest quoted sale price in such market.
The Funds’ investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Funds may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
26 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
B. Fair Value Measurements
Each Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Funds’ investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of each Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Funds’ investments at May 31, 2018:
ALPS Sector Dividend Dogs ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 2,215,070,295 | $ | – | $ | – | $ | 2,215,070,295 | ||||||||
Short Term Investments | 3,501,559 | – | 3,501,559 | |||||||||||||
TOTAL | $ | 2,218,571,854 | $ | – | $ | – | $ | 2,218,571,854 |
27 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
ALPS International Sector Dividend Dogs ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 333,203,225 | $ | – | $ | – | $ | 333,203,225 | ||||||||
Short Term Investments | 1,237,126 | – | – | 1,237,126 | ||||||||||||
TOTAL | $ | 334,440,351 | $ | – | $ | – | $ | 334,440,351 |
ALPS Emerging Sector Dividend Dogs ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 41,149,381 | $ | – | $ | – | $ | 41,149,381 | ||||||||
Short Term Investments | ||||||||||||||||
Money Market Fund | 94,674 | – | – | 94,674 | ||||||||||||
Investments Purchased with Collateral from Securities Loaned | 1,755,398 | – | – | 1,755,398 | ||||||||||||
TOTAL | $ | 42,999,453 | $ | – | $ | – | $ | 42,999,453 |
ALPS | Dorsey Wright Sector Momentum ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 10,900,062 | $ | – | $ | – | $ | 10,900,062 | ||||||||
Short Term Investments | 13,566 | – | – | 13,566 | ||||||||||||
TOTAL | $ | 10,913,628 | $ | – | $ | – | $ | 10,913,628 |
* | For a detailed sector/country breakdown, see the accompanying Schedule of Investments. |
The Funds recognize transfers between levels as of the end of the period. For the six months ended May 31, 2018, the Funds did not have any transfers between Level 1 and Level 2 securities. The Funds did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
C. Foreign Securities
The ALPS International Sector Dividend Dogs ETF and the ALPS Emerging Sector Dividend Dogs ETF may directly purchase securities of foreign issuers. Investments in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers, including, among others, less liquidity generally, greater market volatility than U.S. securities and less complete financial information than for U.S. issuers. In addition, adverse political, economic or social developments could undermine the value of the Fund’s investments or prevent the Fund from realizing the full value of its investments. Financial reporting standards for companies based in foreign markets differ from those in the United States. Finally, the value of the currency of the country in which the Fund has invested could decline relative to the value of the U.S. dollar, which may affect the value of the investment to U.S. investors.
Because foreign markets may be open on different days than the days during which investors may purchase the shares of each Fund, the value of each Fund's securities may change on the days when investors are not able to purchase the shares of the Funds. The value of securities denominated in foreign currencies is converted into U.S. dollars using exchange rates determined daily as of the close of regular trading on the NYSE or NASDAQ. Any use of a different rate from the rates used by the Index may adversely affect a Fund's ability to track its Index.
28 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
D. Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.
E. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date, net of any foreign taxes withheld. Interest income, if any, is recorded on the accrual basis, including any amortization of premiums and accretion of discounts.
F. Dividends and Distributions to Shareholders
Dividends from net investment income for each Fund, if any, are declared and paid quarterly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Funds, if any, are distributed at least annually.
G. Equalization
The ALPS Sector Dividend Dogs ETF, the ALPS International Sector Dividend Dogs ETF, and the ALPS Emerging Sector Dividend Dogs ETF utilize the accounting practice known as “Equalization” by which a portion of the proceeds from sales and costs of reacquiring the Funds’ shares, equivalent on a per share basis to the amount of distributable net investment income on the date of the transaction, is credited or charged to undistributed net investment income. As a result, undistributed net investment income per share is unaffected by sales or reacquisitions of the Funds’ shares. Amounts related to Equalization can be found on the Statement of Changes in Net Assets.
H. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2018.
The tax character of the distributions paid during the fiscal year ended November 30, 2017 were as follows:
Fund | Ordinary Income | Return of Capital | ||||||
November 30, 2017 | ||||||||
ALPS Sector Dividend Dogs ETF | $ | 70,756,115 | $ | 2,592,040 | ||||
ALPS International Sector Dividend Dogs ETF | 8,514,874 | – | ||||||
ALPS Emerging Sector Dividend Dogs ETF | 1,225,826 | – | ||||||
ALPS | Dorsey Wright Sector Momentum ETF | 33,844 | – |
At November 30, 2017, capital losses deferred to the next tax year were as follows:
Fund | Short-Term | Long-Term | ||||||
ALPS Sector Dividend Dogs ETF | $ | 48,757,731 | $ | 96,833,402 | ||||
ALPS International Sector Dividend Dogs ETF | 13,407,043 | 11,887,371 | ||||||
ALPS Emerging Sector Dividend Dogs ETF | 583,245 | 1,781,400 | ||||||
ALPS | Dorsey Wright Sector Momentum ETF | 186,127 | – |
29 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
As of May 31, 2018, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Gross Appreciation (excess of value over tax cost) | Gross Depreciation (excess of tax cost over value) | Net Unrealized Appreciation/(Depreciation) | Cost of Investments for Income Tax Purposes | |||||||||||||
ALPS Sector Dividend Dogs ETF | $ | 203,815,769 | $ | (174,259,429 | ) | $ | 29,556,340 | $ | 2,189,015,514 | |||||||
ALPS International Sector Dividend Dogs ETF | 23,312,802 | (26,476,907 | ) | (3,164,105 | ) | 337,604,456 | ||||||||||
ALPS Emerging Sector Dividend Dogs ETF | 2,173,285 | (4,992,397 | ) | (2,819,112 | ) | 45,818,565 | ||||||||||
ALPS | Dorsey Wright Sector Momentum ETF | 1,406,772 | (179,563 | ) | 1,227,209 | 9,686,419 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of May 31, 2018.
I. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as each Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Each Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the six months ended May 31, 2018, each Fund did not have a liability for any unrecognized tax benefits. Each Fund files U.S. federal, state, and local tax returns as required. Each Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Each Fund’s tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
J. Lending of Portfolio Securities
The Funds have entered into a securities lending agreement with State Street Bank & Trust Co. (“SSB”), the Funds’ lending agent. Each Fund may lend its portfolio securities only to borrowers that are approved by SSB. Each Fund will limit such lending to not more than 33 1/3% of the value of its total assets. The Fund’s securities held at SSB as custodian shall be available to be lent except those securities the Fund or ALPS Advisors, Inc. specifically identifies in writing as not being available for lending. The borrower pledges and maintains with the Fund collateral consisting of cash (U.S. Dollars only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and cash equivalents (including irrevocable bank letters of credit) issued by a person other than the borrower or an affiliate of the borrower. The initial collateral received by the Fund is required to have a value of no less than 102% of the market value of the loaned securities for U.S equity securities and a value of no less than 105% of the market value for non-U.S. equity securities. The collateral is maintained thereafter, at a market value equal to not less than 102% of the current value of the U.S. equity securities on loan and not less than 105% of the current value of the non-U.S. equity securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to the Fund on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the customary time period for settlement of securities transactions.
Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments and is reflected in the Statements of Assets and Liabilities as a payable for collateral upon return of securities loaned. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Fund’s Statement of Assets and Liabilities as it is held by the lending agent on behalf of the Fund, and the Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.
30 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Market Value of Securities on Loan | Cash Collateral Received | Non-Cash Collateral Received | Total Collateral Received | |||||||||||||
ALPS International Sector Dividend Dogs ETF | $ | 4,645,964 | – | $ | 5,050,675 | $ | 5,050,675 | |||||||||
ALPS Emerging Sector Dividend Dogs ETF | $ | 1,702,113 | $ | 1,755,398 | – | $ | 1,755,398 | |||||||||
ALPS | Dorsey Wright Sector Momentum ETF | $ | 177,230 | – | $ | 187,215 | $ | 187,215 |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Funds could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged or securities loaned, and the remaining contractual maturity of those transactions as of May 31, 2018:
ALPS Emerging Sector Dividend Dogs ETF | Remaining contractual maturity of the agreements | |||||||||||||||||||
Securities Lending Transactions | Overnight & Continuous | Up to 30 days | 30-90 days | Greater than 90 days | Total | |||||||||||||||
Common Stocks | $ | 1,755,398 | $ | – | $ | – | $ | – | $ | 1,755,398 | ||||||||||
Total Borrowings | 1,755,398 | |||||||||||||||||||
Gross amount of recognized liabilities for securities lending (collateral received) | $ | 1,755,398 |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as the Funds’ investment adviser pursuant to advisory agreements with the Trust on behalf of each Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, each Fund pays the Adviser a unitary fee for the services and facilities it provides, payable on a monthly basis as a percentage of each Fund’s average daily net assets as set out below. From time to time, the Adviser may waive all or a portion of its fee.
Fund | Advisory Fee |
ALPS Sector Dividend Dogs ETF | 0.40% |
ALPS International Sector Dividend Dogs ETF | 0.50% |
ALPS Emerging Sector Dividend Dogs ETF | 0.60% |
ALPS | Dorsey Wright Sector Momentum ETF | 0.40% |
Capitalized terms used but not defined within this paragraph, shall have the respective meanings given to them in the Board Considerations Regarding Approval of Investment Advisory Agreement section of this Semi-Annual Report (“Board Considerations”). As discussed in the Board Considerations, the Adviser is an indirect wholly owned subsidiary of DST and on April 16, 2018, DST was acquired by SS&C resulting in a change of control of the Adviser. As discussed in the Board Considerations, in order for the Adviser to continue to serve as the investment adviser to the applicable Funds, among other approvals, the Board approved an Interim Advisory Agreement between the Adviser and the Trust, on behalf of the Funds. The Interim Advisory Agreement is effective for the earlier of 150 days from the close of the Transaction or the date of shareholder approval of the New Advisory Agreement. Under the terms of the Interim Advisory Agreement, the unitary management fee paid to the Adviser will be held in escrow until shareholder approval of the New Advisory Agreement is obtained and is reported as Cash held in escrow account on the Statement of Assets and Liabilities.
Out of the unitary management fee, the Adviser pays substantially all expenses of each Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of each Fund's business. The Adviser’s unitary management fee is designed to pay substantially all of each Fund's expenses and to compensate the Adviser for providing services for each Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator for the Funds.
31 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee for regularly scheduled meetings of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, both the Chairman of the Board and Chairman of the Audit Committee each receives a quarterly retainer of $2,000, in connection with their respective roles.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2018, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Fund | Purchases | Sales | ||||||
ALPS Sector Dividend Dogs ETF | $ | 1,105,846,841 | $ | 1,109,687,770 | ||||
ALPS International Sector Dividend Dogs ETF | 196,675,950 | 193,536,656 | ||||||
ALPS Emerging Sector Dividend Dogs ETF | 31,251,771 | 29,337,431 | ||||||
ALPS | Dorsey Wright Sector Momentum ETF | 7,567,130 | 7,599,595 |
For the six months ended May 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
ALPS Sector Dividend Dogs ETF | $ | 528,716,051 | $ | 563,988,168 | ||||
ALPS International Sector Dividend Dogs ETF | 74,224,477 | 83,279,617 | ||||||
ALPS Emerging Sector Dividend Dogs ETF | 14,960,878 | 19,578,643 | ||||||
ALPS | Dorsey Wright Sector Momentum ETF | 3,063,845 | 3,025,547 |
For the six months ended May 31, 2018, the in-kind net realized gains/(losses) were as follows:
Fund | Net Realized Gain/(Loss) | |||
ALPS Sector Dividend Dogs ETF | $ | 158,530,996 | ||
ALPS International Sector Dividend Dogs ETF | 17,554,300 | |||
ALPS Emerging Sector Dividend Dogs ETF | 2,955,258 | |||
ALPS | Dorsey Wright Sector Momentum ETF | 581,752 |
Gains on in-kind transactions are not considered taxable for federal income tax purposes and losses on in kind transactions are also not deductible for tax purposes.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Funds. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of each Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
6. RELATED PARTY TRANSACTIONS
The ALPS Sector Dvidend Dogs ETF engaged in cross trades between other funds in the Trust during the six months ended May 31, 2018 pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which the Adviser serves as the investment adviser. The Board previously adopted procedures that apply to transactions between the Funds of the Trust pursuant to Rule 17a-7. These transactions related to cross trades during the period complied with the requirements set forth by Rule 17a-7 and the Trust’s procedures.
Transactions related to cross trades during the six months ended May 31, 2018, were as follows:
Fund | Purchase cost paid | Sale proceeds received | Realized gain/(loss) on sales | |||||||||
ALPS Sector Dividend Dogs ETF | $ | 552,533 | $ | 1,451,569 | $ | (41,443 | ) |
32 | May 31, 2018
ALPS ETF Trust |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
7. SHAREHOLDER MEETING
A Special Meeting of Shareholders of the Funds, each a series of the Trust, was held at the offices of ALPS Fund Services, Inc., at 1290 Broadway, Suite 1100, Denver, CO 80203 on May 31, 2018 and with respect to ALPS Sector Dividend Dogs ETF adjourned to June 29,2018. At the meetings, the following matters were voted on by the Shareholders. The results of the Special Meeting of Shareholders are noted below:
Proposal 1: To approve a new investment advisory agreement (the “New Advisory Agreement”) between the Trust, on behalf of each Fund, and the Adviser.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
ALPS Sector Dividend Dogs ETF | 25,153,236 | 936,061 | Yes |
ALPS International Sector Dividend Dogs ETF | 6,176,584 | 97,048 | Yes |
ALPS Emerging Sector Dividend Dogs ETF | 1,192,577 | 10,945 | Yes |
Proposal 2: To approve a proposal that would authorize the Adviser to enter into and materially amend sub-advisory agreements in the future with wholly-owned sub-advisers and unaffiliated sub-advisers, with the approval of the Board, but without obtaining additional Shareholder approval.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
ALPS Sector Dividend Dogs ETF | 13,059,371 | 13,029,926 | No |
ALPS International Sector Dividend Dogs ETF | 2,514,318 | 3,759,314 | No |
ALPS Emerging Sector Dividend Dogs ETF | 229,828 | 973,694 | No |
ALPS | Dorsey Wright Sector Momentum ETF adjourned to a new special shareholder meeting date of August 3, 2018.
33 | May 31, 2018
ALPS ETF Trust |
Additional Information | May 31, 2018 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-675-2639.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. Form N-Q for each Fund will be available on the SEC’s website at www.sec.gov. Each Fund’s Form N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Each Fund’s Form N-Q will be available without charge, upon request, by calling (toll-free) 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Funds designated the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2017:
Qualified Dividend Income | Dividend Received Deduction | |
ALPS Sector Dividend Dogs ETF | 100.00% | 94.20% |
ALPS International Sector Dividend Dogs ETF | 98.20% | 0.00% |
ALPS Emerging Sector Dividend Dogs ETF | 76.38% | 0.00% |
ALPS | Dorsey Wright Sector Momentum ETF | 100.00% | 100.00% |
In early 2018, if applicable, shareholders of record received this information for the distributions paid to them by the Funds during the calendar year 2017 via Form 1099. The Funds will notify shareholders in early 2019 of amounts paid to them by the Funds, if any, during the calendar year 2018.
LICENSING AGREEMENTS
ALPS Sector Dividend Dogs ETF, ALPS International Sector Dividend Dogs ETF, and ALPS Emerging Sector Dividend Dogs ETF
The Funds are not sponsored, endorsed, sold or promoted by the Index Provider. The Index Provider makes no representation or warranty, express or implied, to the owners of each Fund or any member of the public regarding the advisability of investing in securities generally or in each Fund particularly or the ability of each Fund to track the performance of the physical commodities market. The Index Provider’s only relationship to the Adviser or each Fund is the licensing of certain service marks and trade names of the Index Provider and of each Underlying Index that is determined, composed and calculated by the Index Provider without regard to the Adviser or the Funds. The Index Provider has no obligation to take the needs of the Adviser or the Funds or the owners of each Fund into consideration in determining, composing or calculating each Underlying Index. The Index Provider is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of each Fund to be issued or in the determination or calculation of the equation by which each Fund is to be converted into cash. The Index Provider has no obligation or liability in connection with the administration, marketing or trading of each Fund.
THE INDEX PROVIDER DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF EACH UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN AND THE INDEX PROVIDER SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. THE INDEX PROVIDER MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, EACH FUND, OWNERS OF EACH FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX PROVIDER MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO EACH UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX PROVIDER HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
34 | May 31, 2018
ALPS ETF Trust |
Additional Information | May 31, 2018 (Unaudited) |
The Funds are not sponsored, endorsed, sold or promoted by Standard & Poor’s, a division of The McGraw-Hill Companies, Inc. (“S&P”) or its third party licensors. Neither S&P nor its third party licensors make any representation or warranty, express or implied, to the owners of each Fund or any member of the public regarding the advisability of investing in securities generally or in each Fund particularly or the ability of each Underlying Index to track general stock market performance. S&P’s and its third party licensor’s only relationship to the Index Provider is the licensing of certain trademarks, service marks and trade names of S&P and/or its third party licensors and for the providing of calculation and maintenance services related to the Underlying Index. Neither S&P nor its third party licensors is responsible for and has not participated in the determination of the prices and amount of each Fund or the timing of the issuance or sale of each Fund or in the determination or calculation of the equation by which each Fund is to be converted into cash. S&P has no obligation or liability in connection with the administration, marketing or trading of each Fund.
NEITHER S&P, ITS AFFILIATES NOR THEIR THIRD PARTY LICENSORS GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS OR COMPLETENESS OF EACH UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN OR ANY COMMUNICATIONS, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATIONS (INCLUDING ELECTRONIC COMMUNICATIONS) WITH RESPECT THERETO. S&P, ITS AFFILIATES AND THEIR THIRD PARTY LICENSORS SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS OR DELAYS THEREIN. S&P MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO ITS TRADEMARKS, EACH UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL S&P, ITS AFFILIATES OR THEIR THIRD PARTY LICENSORS BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY OR OTHERWISE.
Standard & Poor’s® and S&P® are registered trademarks of The McGraw-Hill Companies, Inc.; “Calculated by S&P Custom Indices” and its related stylized mark are service marks of The McGraw-Hill Companies, Inc. These marks have been licensed for use by the Index Provider.
The S&P 500® is the property of Standard and Poor’s Financial Services LLC (“S&P”) and has been licensed by S&P for use by S-Network® Global Indexes, Inc. in connection with the S-Network® Sector Dividend Dogs Index (Ticker: SDOGX), the S-Network® Emerging Sector Dividend Dogs Index (Ticker: EDOGX), and the S-Network® International Sector Dividend Dogs Index (Ticker: IDOGX).
The Adviser does not guarantee the accuracy and/or the completeness of each Underlying Index or any data included therein, and the Adviser shall have no liability for any errors, omissions or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by each Fund, owners of the Shares of each Fund or any other person or entity from the use of each Underlying Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to each Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits) arising out of matters relating to the use of each Underlying Index, even if notified of the possibility of such damages.
ALPS | Dorsey Wright Sector Momentum ETF
The Product(s) is not sponsored, endorsed, sold or promoted by Nasdaq, Inc. or its affiliates (Nasdaq, with its affiliates, are referred to as the “Corporations”). The Corporations have not passed on the legality or suitability of, or the accuracy or adequacy of descriptions and disclosures relating to, the Product(s). The Corporations make no representation or warranty, express or implied to the owners of the Product(s) or any member of the public regarding the advisability of investing in securities generally or in the Product(s) particularly, or the ability of the Dorsey Wright US Sector Momentum Index to track general stock market performance. The Corporations’ only relationship to ALPS Advisors, Inc. (“Licensee”) is in the licensing of the Nasdaq®, Dorsey Wright US Sector Momentum Index, and certain trade names of the Corporations and the use of the Dorsey Wright US Sector Momentum Index which is determined, composed and calculated by Nasdaq without regard to Licensee or the Product(s). Nasdaq has no obligation to take the needs of the Licensee or the owners of the Product(s) www.alpsfunds.com 15 into consideration in determining, composing or calculating the Dorsey Wright US Sector Momentum Index. The Corporations are not responsible for and have not participated in the determination of the timing of, prices at, or quantities of the Product(s) to be issued or in the determination or calculation of the equation by which the Product(s) is to be converted into cash. The Corporations have no liability in connection with the administration, marketing or trading of the Product(s).
THE CORPORATIONS DO NOT GUARANTEE THE ACCURACY AND/ OR UNINTERRUPTED CALCULATION OF DORSEY WRIGHT US SECTOR MOMENTUM INDEX OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY LICENSEE, OWNERS OF THE PRODUCT(S), OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE DORSEY WRIGHT US SECTOR MOMENTUM INDEX OR ANY DATA INCLUDED THEREIN. THE CORPORATIONS MAKE NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIM ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE DORSEY WRIGHT US SECTOR MOMENTUM INDEX® OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE CORPORATIONS HAVE ANY LIABILITY FOR ANY LOST PROFITS OR SPECIAL, INCIDENTAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
35 | May 31, 2018
ALPS ETF Trust |
Additional Information | May 31, 2018 (Unaudited) |
Nasdaq® and Dorsey Wright US Sector Momentum Index are registered trademarks of Nasdaq, Inc. (which with its affiliates is referred to as the “Corporations”) and are licensed for use by ALPS Advisors, Inc. The Product(s) have not been passed on by the Corporations as to their legality or suitability. The Product(s) are not issued, endorsed, sold, or promoted by the Corporations. THE CORPORATIONS MAKE NO WARRANTIES AND BEAR NO LIABILITY WITH RESPECT TO THE PRODUCT(S).
The Index Provider does not guarantee the accuracy and/or the completeness of the Underlying Index or any data included therein and the Index Provider shall have no liability for any errors, omissions, or interruptions therein. The Index Provider makes no warranty, express or implied, as to results to be obtained by the Adviser, the Fund, owners of the Fund, or any other person or entity from the use of the Underlying Index or any data included therein. The Index Provider makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall the Index Provider have any liability for any special, punitive, indirect, or consequential damages (including lost profits), even if notified of the possibility of such damages.
The Adviser does not guarantee the accuracy and/or the completeness of the Underlying Index or any data included therein, and the Adviser shall have no liability for any errors, omissions or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by the Fund, owners of the Shares of the Fund or any other person or entity from the use of the Underlying Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits) arising out of matters relating to the use of the Underlying Index, even if notified of the possibility of such damages.
36 | May 31, 2018
ALPS ETF Trust |
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
At an in-person meeting held on March 5, 2018, the Board of Trustees of the Trust (the “Board” or the “Trustees”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve each of (i) the continuance of the investment advisory agreements between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect to the ALPS Sector Dividend Dogs ETF (“SDOG”), the ALPS International Sector Dividend Dogs ETF (“IDOG”), the ALPS Emerging Sector Dividend Dogs ETF (“EDOG”) and the ALPS/Dorsey Wright Sector Momentum ETF (“SWIN”) (each “a Fund” and collectively the “Funds”) (the “Existing Advisory Agreement”); (ii) a new investment advisory agreement between the Adviser and the Trust on behalf of each Fund (the “New Advisory Agreement”); and (iii) an interim investment advisory agreement between the Adviser and the Trust on behalf of each Fund (the “Interim Advisory Agreement” and together with the Existing Advisory Agreement and New Advisory Agreement, the “Advisory Agreements”). The Independent Trustees also met separately to consider the Advisory Agreements.
Consideration by the Board of the New Advisory Agreement and Interim Advisory Agreement was necessary because DST Systems, Inc. (“DST”), the ultimate parent company to the Adviser, had had entered into an agreement to be acquired by SS&C Technologies Holdings, Inc. (“SS&C”) (the “Transaction”). Because the Adviser would be acquired along with DST, the closing of the Transaction (the “Closing”) may be deemed a change in control with respect to the Adviser. The Closing occurred on April 16, 2018. This change in control with respect to the Adviser may be deemed to trigger an “assignment” of the Existing Advisory Agreements under the Investment Company Act of 1940, as amended (the “1940 Act”). As required by the 1940 Act, each Existing Advisory Agreement provides for its automatic termination in the event of an assignment, and therefore, each Existing Advisory Agreement automatically terminated upon Closing. In order for the Adviser to continue as the Funds’ investment adviser, the Board and the Funds’ shareholders must approve the New Advisory Agreement which would take effect, if approved, upon the date of such shareholder approval. As of the mailing of this report, the New Advisory Agreement with respect to each of SDOG, EDOG and IDOG has received shareholder approval. As of that same date the New Advisory Agreement with respect to SWIN has not received shareholder approval and efforts to secure such shareholder approval are ongoing. The Interim Advisory Agreement approved by the Board permits the Adviser to continue as investment adviser to SWIN from the date of the Closing until the Fund’s shareholders approve the New Advisory Agreement, subject to a maximum term of 150 days.
In evaluating the Advisory Agreements with respect to each Fund, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by AAI with respect to the applicable Fund under the Advisory Agreements; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided by AAI under the Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Advisory Agreements, the investment parameters of the index of each Fund, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Funds.
The Independent Trustees reviewed information on the performance of each Fund and its applicable benchmark. The Independent Trustees also evaluated the correlation and tracking error between each underlying index and its corresponding Fund’s performance. Based on their review, the Independent Trustees found that the nature and extent of services provided (or to be provided) to each Fund under the Advisory Agreements was appropriate and that the quality was satisfactory.
The Independent Trustees noted that the advisory fees for each Fund were unitary fees pursuant to which AAI assumes all expenses of the Funds (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreements, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
With respect to advisory fee rates, the Independent Trustees noted the following:
The net advisory fee rate for SDOG, EDOG and IDOG is higher than the median of its respective Broadridge expense group. The net advisory fee rate for SWIN is equal to the median of its Broadridge expense group. The Funds’ respective expense ratios, however, are (i) in the case of IDOG, below the median of its Broadridge expense group, (ii) in the case of EDOG and SDOG, slightly above the median of their respective Broadridge expense group, and (iii) in the case of SWIN, equal to the median of its Broadridge expense group.
Based on the foregoing, and the other information available to them, the Independent Trustees concluded that the advisory fee rate for each of the Funds was reasonable under the circumstances and in light of the quality of the services provided.
37 | May 31, 2018
ALPS ETF Trust |
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
The Independent Trustees considered other benefits available to AAI because of its relationship with the Funds and concluded that the advisory fees were reasonable taking into account any such benefits.
The Independent Trustees also considered with respect to each Fund the information provided by AAI about the costs and profitability of AAI with respect to each of the Funds. The Independent Trustees reviewed and noted the relatively small sizes of the Funds (other than SDOG and IDOG) in considering economies of scale that may be realized by AAI. With respect to SDOG and IDOG, the Independent Trustees considered the growth in assets and that the Funds may be achieving some economies of scale, but that the Funds’ present advisory fees are appropriate. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
In voting to renew each Existing Advisory Agreement and approve each New Advisory Agreement and Interim Advisory Agreement, the Independent Trustees concluded that the terms of each Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
38 | May 31, 2018
Intentionally Left Blank
TABLE OF CONTENTS
Performance Overview | 1 |
Disclosure of Fund Expenses | 3 |
Schedule of Investments | 4 |
Statement of Assets and Liabilities | 9 |
Statement of Operations | 10 |
Statements of Changes in Net Assets | 11 |
Financial Highlights | 12 |
Notes to Financial Statements | 13 |
Additional Information | 19 |
Board Considerations Regarding Approval of Investment Advisory Agreement | 21 |
Barron’s 400SM ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
The Barron’s 400SM ETF (the “Fund”) seeks investment results that correspond generally, before fees and expenses, to the performance of the Barron’s 400 IndexSM (the “Underlying Index”). The Underlying Index is a rules-based index intended to give investors a means of tracking the overall performance of high performing equity securities of U.S. companies. The Fund will invest at least 80% of its total assets in the equity securities which comprise the Underlying Index.
The Underlying Index generally consists of 400 stocks. The Underlying Index’s stocks are constituents of the MarketGrader U.S. Coverage Universe. In compiling the Underlying Index, MarketGrader Capital, LLC (the “Index Provider”) selects the 400 stocks from the MarketGrader U.S. Coverage Universe by using a methodology that selects components based on the strength of their fundamentals in growth, value, profitability and cash flow and then screens such potential Underlying Index components for certain criteria regarding concentration, market capitalization and liquidity. The eligible stocks that are selected for inclusion in the Underlying Index’s portfolio are equally weighted. The Underlying Index is rebalanced by the Index Provider semiannually, on the third Friday of March and September each year.
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | Since Inception^ | |
Barron’s 400SM ETF - NAV | 4.47% | 16.88% | 9.84% | 12.25% |
Barron’s 400SM ETF - Market Price* | 4.54% | 16.95% | 9.85% | 12.27% |
Barron’s 400 IndexSM | 4.80% | 17.60% | 10.54% | 13.00% |
Total Expense Ratio (per the current prospectus) 0.66%
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.855.724.0450.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced Investment Operations on June 4, 2013. |
* | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The Barron’s 400 IndexSM, calculated by NYSE Arca or its affiliates, measures the performance of a diversified group of U.S. companies selected in part based on fundamentals-related rules-based criteria. The index includes companies that have scored highest according to fundamentals-related rankings calculated by MarketGrader Capital, LLC. Additional rules-based screening provides for sector and market cap diversification. The Underlying Index has been licensed by MarketGrader for use with the Barron’s 400SM ETF.
The index is not actively managed and does not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect Fund performance.
Funds that emphasize investments in small/mid cap companies will generally experience greater price volatility.
Barron’s 400SM ETF shares are not individually redeemable. Investors buy and sell shares of the Barron’s 400SM ETF on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The Barron’s 400SM ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the Fund.
1 | May 31, 2018
Barron’s 400SM ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018)
Denbury Resources, Inc. | 0.44% |
Medifast, Inc. | 0.41% |
Applied Optoelectronics, Inc. | 0.40% |
PBF Energy, Inc. | 0.39% |
The Trade Desk, Inc. | 0.37% |
Viper Energy Partners LP | 0.37% |
SRC Energy, Inc. | 0.35% |
Nanometrics, Inc. | 0.35% |
Texas Pacific Land Trust | 0.34% |
Insperity, Inc. | 0.33% |
Total % of Top 10 Holdings | 3.75% |
* | % of Total Investments (excluding investments purchased with collateral from securities loaned). |
Future holdings are subject to change.
Sector Allocation* (as of May 31, 2018)
Growth of $10,000 (as of May 31, 2018)
Comparison of change in value of a $10,000 investment in the Fund and the Underlying Index
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
2 | May 31, 2018
Barron’s 400SM ETF
Disclosure of Fund Expenses | May 31, 2018 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, 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. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through May 31, 2018.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values 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 ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. Therefore, the second line is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 12/1/17 | Ending Account Value 5/31/18 | Expense Ratio(a) | Expenses Paid During Period 12/1/17 - 5/31/18(b) | |
Actual | $1,000.00 | $1,044.70 | 0.65% | $3.31 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.69 | 0.65% | $3.28 |
(a) | Annualized, based on the Fund's most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. |
3 | May 31, 2018
Barron’s 400SM ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (92.95%) | ||||||||
Consumer Discretionary (14.78%) | ||||||||
Aaron's, Inc. | 9,494 | $ | 377,671 | |||||
Altice USA, Inc., Class A | 22,674 | 443,503 | ||||||
AMC Networks, Inc., Class A(a) | 8,922 | 510,071 | ||||||
American Axle & Manufacturing Holdings, Inc.(a) | 29,739 | 470,471 | ||||||
Best Buy Co., Inc. | 6,417 | 437,960 | ||||||
Big Lots, Inc. | 9,672 | 395,682 | ||||||
Boot Barn Holdings, Inc.(a) | 24,554 | 581,439 | ||||||
BorgWarner, Inc. | 9,034 | 440,679 | ||||||
Burlington Stores, Inc.(a) | 3,610 | 527,963 | ||||||
Cable One, Inc. | 640 | 415,514 | ||||||
Carter's, Inc. | 4,110 | 448,031 | ||||||
Cheesecake Factory, Inc. | 9,436 | 488,879 | ||||||
Children's Place, Inc. | 3,485 | 448,694 | ||||||
Cinemark Holdings, Inc. | 11,312 | 382,006 | ||||||
Comcast Corp., Class A | 12,605 | 393,024 | ||||||
Cracker Barrel Old Country Store, Inc.(b) | 2,798 | 438,475 | ||||||
Dave & Buster's Entertainment, Inc.(a) | 10,165 | 423,271 | ||||||
Dollar General Corp. | 5,131 | 448,860 | ||||||
Dollar Tree, Inc.(a) | 4,864 | 401,718 | ||||||
Entravision Communications Corp., Class A | 72,884 | 291,536 | ||||||
Five Below, Inc.(a) | 6,728 | 475,737 | ||||||
Floor & Decor Holdings, Inc., Class A(a) | 9,893 | 464,971 | ||||||
Gap, Inc. | 14,057 | 393,315 | ||||||
Gentex Corp. | 19,564 | 470,123 | ||||||
Grand Canyon Education, Inc.(a) | 4,291 | 476,730 | ||||||
Gray Television, Inc.(a) | 34,013 | 374,143 | ||||||
Hooker Furniture Corp. | 11,550 | 430,815 | ||||||
International Speedway Corp., Class A | 10,283 | 428,801 | ||||||
Interpublic Group of Cos., Inc. | 19,588 | 442,689 | ||||||
Johnson Outdoors, Inc., Class A | 6,814 | 517,046 | ||||||
Las Vegas Sands Corp. | 6,217 | 501,152 | ||||||
LCI Industries | 4,175 | 366,148 | ||||||
Lear Corp. | 2,402 | 475,596 | ||||||
LGI Homes, Inc.(a)(b) | 6,828 | 415,894 | ||||||
Malibu Boats, Inc., Class A(a) | 13,302 | 570,390 | ||||||
MCBC Holdings, Inc.(a) | 17,354 | 511,769 | ||||||
Mohawk Industries, Inc.(a) | 1,829 | 373,189 | ||||||
Nexstar Media Group, Inc., Class A(b) | 6,525 | 432,608 | ||||||
NIKE, Inc., Class B | 6,938 | 498,148 | ||||||
Norwegian Cruise Line Holdings, Ltd.(a) | 8,107 | 424,320 | ||||||
Nutrisystem, Inc. | 14,371 | 536,038 | ||||||
NVR, Inc.(a) | 145 | 433,628 | ||||||
O'Reilly Automotive, Inc.(a) | 1,829 | 492,751 | ||||||
PetMed Express, Inc.(b) | 9,818 | 353,153 | ||||||
Pool Corp. | 3,183 | 454,914 | ||||||
Ross Stores, Inc. | 5,963 | 470,361 | ||||||
Starbucks Corp. | 7,776 | 440,666 | ||||||
Stoneridge, Inc.(a) | 18,287 | 576,589 | ||||||
Target Corp. | 6,451 | 470,213 | ||||||
Thor Industries, Inc. | 3,703 | 342,898 |
Security Description | Shares | Value | ||||||
Consumer Discretionary (continued) | ||||||||
Time Warner, Inc. | 4,776 | $ | 449,708 | |||||
TJX Cos., Inc. | 5,576 | 503,624 | ||||||
Toll Brothers, Inc. | 10,177 | 401,890 | ||||||
Ulta Beauty, Inc.(a) | 2,201 | 543,449 | ||||||
Vail Resorts, Inc. | 2,076 | 499,880 | ||||||
Visteon Corp.(a) | 3,715 | 464,226 | ||||||
Walt Disney Co. | 4,426 | 440,254 | ||||||
Winnebago Industries, Inc. | 10,459 | 379,139 | ||||||
Wynn Resorts, Ltd. | 2,476 | 485,321 | ||||||
ZAGG, Inc.(a) | 36,011 | 547,367 | ||||||
Total Consumer Discretionary | 27,095,100 | |||||||
Consumer Staples (3.86%) | ||||||||
Brown-Forman Corp., Class B | 8,409 | 475,613 | ||||||
Church & Dwight Co., Inc. | 9,050 | 424,897 | ||||||
Coca-Cola Bottling Co. Consolidated | 2,462 | 313,683 | ||||||
Energizer Holdings, Inc. | 8,233 | 500,072 | ||||||
Hostess Brands, Inc.(a) | 31,387 | 427,805 | ||||||
J&J Snack Foods Corp. | 3,257 | 461,256 | ||||||
JM Smucker Co. | 3,491 | 375,283 | ||||||
Kimberly-Clark Corp. | 4,063 | 409,754 | ||||||
McCormick & Co., Inc. | 4,145 | 418,645 | ||||||
Medifast, Inc. | 5,114 | 749,150 | ||||||
MGP Ingredients, Inc. | 5,815 | 514,918 | ||||||
National Beverage Corp.(a) | 4,932 | 464,989 | ||||||
Pilgrim's Pride Corp.(a) | 18,735 | 365,145 | ||||||
Sanderson Farms, Inc. | 3,751 | 367,148 | ||||||
Sprouts Farmers Market, Inc.(a) | 18,168 | 394,246 | ||||||
Tyson Foods, Inc., Class A | 6,074 | 409,813 | ||||||
Total Consumer Staples | 7,072,417 | |||||||
Energy (6.83%) | ||||||||
BP Prudhoe Bay Royalty Trust | 20,499 | 592,421 | ||||||
C&J Energy Services, Inc.(a) | 17,740 | 477,561 | ||||||
Callon Petroleum Co.(a) | 39,380 | 466,259 | ||||||
Centennial Resource Development, Inc., Class A(a) | 25,034 | 440,598 | ||||||
Cimarex Energy Co. | 4,962 | 461,069 | ||||||
Denbury Resources, Inc.(a) | 191,321 | 813,114 | ||||||
Diamondback Energy, Inc. | 3,613 | 436,306 | ||||||
EQT Corp. | 8,717 | 449,274 | ||||||
Gulfport Energy Corp.(a) | 42,553 | 472,764 | ||||||
Laredo Petroleum, Inc.(a) | 53,832 | 499,561 | ||||||
Liberty Oilfield Services, Inc., Class A(a)(b) | 24,901 | 529,395 | ||||||
Mammoth Energy Services, Inc.(a)(b) | 15,508 | 585,582 | ||||||
Marathon Petroleum Corp. | 6,632 | 524,127 | ||||||
Matador Resources Co.(a) | 15,876 | 445,639 | ||||||
Newfield Exploration Co.(a) | 19,538 | 571,291 | ||||||
Parsley Energy, Inc., Class A(a) | 17,122 | 504,757 | ||||||
PBF Energy, Inc., Class A | 14,992 | 707,323 | ||||||
Phillips 66 | 4,856 | 565,676 | ||||||
RPC, Inc.(b) | 22,555 | 370,353 | ||||||
RSP Permian, Inc.(a) | 11,140 | 487,264 | ||||||
San Juan Basin Royalty Trust | 51,710 | 340,252 | ||||||
SRC Energy, Inc.(a) | 49,910 | 645,835 | ||||||
US Silica Holdings, Inc. | 17,241 | 533,264 |
4 | May 31, 2018
Barron’s 400SM ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Energy (continued) | ||||||||
Valero Energy Corp. | 4,910 | $ | 595,092 | |||||
Total Energy | 12,514,777 | |||||||
Financials (16.25%) | ||||||||
1st Source Corp. | 8,711 | 463,251 | ||||||
Athene Holding, Ltd., Class A(a) | 8,918 | 398,367 | ||||||
BancFirst Corp. | 8,177 | 488,576 | ||||||
Bank of NT Butterfield & Son, Ltd. | 9,771 | 466,565 | ||||||
Bank of the Ozarks | 8,715 | 414,311 | ||||||
BankUnited, Inc. | 10,724 | 452,231 | ||||||
BofI Holding, Inc.(a) | 10,984 | 452,651 | ||||||
Carolina Financial Corp. | 11,154 | 488,211 | ||||||
Cathay General Bancorp | 10,625 | 448,269 | ||||||
CenterState Bank Corp. | 16,280 | 500,610 | ||||||
Citizens Financial Group, Inc. | 10,041 | 410,175 | ||||||
Comerica, Inc. | 4,620 | 435,620 | ||||||
Commerce Bancshares, Inc. | 7,515 | 485,319 | ||||||
Community Bank System, Inc. | 8,055 | 482,333 | ||||||
Credit Acceptance Corp.(a)(b) | 1,371 | 483,977 | ||||||
Cullen/Frost Bankers, Inc. | 4,182 | 477,710 | ||||||
Eagle Bancorp, Inc.(a) | 7,236 | 438,140 | ||||||
Eaton Vance Corp. | 8,009 | 430,884 | ||||||
Enstar Group, Ltd.(a) | 2,134 | 433,735 | ||||||
Essent Group, Ltd.(a) | 10,834 | 371,606 | ||||||
Evercore, Inc., Class A | 4,734 | 494,230 | ||||||
Federated Investors, Inc., Class B | 13,492 | 327,451 | ||||||
Fifth Third Bancorp | 13,480 | 412,218 | ||||||
First Busey Corp. | 14,573 | 467,939 | ||||||
First Citizens BancShares, Inc., Class A | 1,014 | 445,440 | ||||||
First Financial Bancorp | 15,724 | 494,520 | ||||||
First Financial Bankshares, Inc. | 9,383 | 493,546 | ||||||
First Merchants Corp. | 10,471 | 476,326 | ||||||
Gladstone Investment Corp. | 44,279 | 507,880 | ||||||
Green Dot Corp., Class A(a) | 6,786 | 483,638 | ||||||
Guaranty Bancorp | 15,616 | 526,259 | ||||||
Health Insurance Innovations, Inc., Class A(a)(b) | 14,859 | 474,002 | ||||||
Huntington Bancshares, Inc. | 28,185 | 419,111 | ||||||
Independent Bank Corp. | 6,135 | 480,677 | ||||||
Independent Bank Group, Inc. | 6,267 | 471,592 | ||||||
Lakeland Bancorp, Inc. | 22,022 | 442,642 | ||||||
Live Oak Bancshares, Inc. | 16,545 | 488,905 | ||||||
MB Financial, Inc. | 10,359 | 511,631 | ||||||
Meridian Bancorp, Inc. | 22,674 | 443,277 | ||||||
Meta Financial Group, Inc. | 3,973 | 449,545 | ||||||
OceanFirst Financial Corp. | 16,511 | 484,102 | ||||||
Old Republic International Corp. | 21,538 | 451,867 | ||||||
PacWest Bancorp | 8,678 | 460,455 | ||||||
Peapack Gladstone Financial Corp. | 13,176 | 454,572 | ||||||
People's United Financial, Inc. | 22,903 | 421,644 | ||||||
PNC Financial Services Group, Inc. | 2,860 | 410,153 | ||||||
Preferred Bank | 6,927 | 441,250 | ||||||
Primerica, Inc. | 4,502 | 442,772 | ||||||
Principal Financial Group, Inc. | 7,326 | 408,791 | ||||||
Reinsurance Group of America, Inc. | 2,884 | 430,985 | ||||||
S&P Global, Inc. | 2,341 | 462,347 | ||||||
SEI Investments Co. | 5,993 | 382,233 |
Security Description | Shares | Value | ||||||
Financials (continued) | ||||||||
ServisFirst Bancshares, Inc. | 10,496 | $ | 440,937 | |||||
SunTrust Banks, Inc. | 6,351 | 428,756 | ||||||
T Rowe Price Group, Inc. | 3,925 | 476,573 | ||||||
TCF Financial Corp. | 19,622 | 516,255 | ||||||
Texas Pacific Land Trust | 893 | 631,083 | ||||||
TriState Capital Holdings, Inc.(a) | 18,857 | 484,625 | ||||||
UMB Financial Corp. | 5,975 | 460,374 | ||||||
Universal Insurance Holdings, Inc. | 14,020 | 499,813 | ||||||
Walker & Dunlop, Inc. | 8,813 | 494,585 | ||||||
Washington Federal, Inc. | 12,755 | 413,900 | ||||||
Western Alliance Bancorp(a) | 7,400 | 445,924 | ||||||
Wintrust Financial Corp. | 5,082 | 468,103 | ||||||
Zions Bancorporation | 8,235 | 451,360 | ||||||
Total Financials | 29,796,829 | |||||||
Health Care (9.25%) | ||||||||
AbbVie, Inc. | 3,835 | 379,435 | ||||||
ABIOMED, Inc.(a) | 1,567 | 597,246 | ||||||
Align Technology, Inc.(a) | 1,703 | 565,311 | ||||||
AMN Healthcare Services, Inc.(a) | 7,757 | 438,270 | ||||||
athenahealth, Inc.(a) | 3,144 | 473,078 | ||||||
Biogen, Inc.(a) | 1,621 | 476,509 | ||||||
Cambrex Corp.(a) | 8,177 | 370,418 | ||||||
Celgene Corp.(a) | 5,014 | 394,502 | ||||||
Cerner Corp.(a) | 7,280 | 434,470 | ||||||
ChemoCentryx, Inc.(a) | 35,903 | 466,021 | ||||||
Concert Pharmaceuticals, Inc.(a) | 19,582 | 400,060 | ||||||
Corcept Therapeutics, Inc.(a) | 25,610 | 473,785 | ||||||
Cutera, Inc.(a) | 8,616 | 361,872 | ||||||
Eagle Pharmaceuticals, Inc.(a)(b) | 8,198 | 552,627 | ||||||
Emergent BioSolutions, Inc.(a) | 8,690 | 448,056 | ||||||
Enanta Pharmaceuticals, Inc.(a) | 5,326 | 531,482 | ||||||
Exelixis, Inc.(a) | 18,515 | 383,816 | ||||||
Halozyme Therapeutics, Inc.(a) | 21,928 | 403,475 | ||||||
HealthEquity, Inc.(a) | 7,799 | 579,544 | ||||||
Illumina, Inc.(a) | 1,811 | 493,389 | ||||||
Innoviva, Inc.(a) | 29,531 | 436,763 | ||||||
Laboratory Corp. of America Holdings(a) | 2,628 | 474,591 | ||||||
Lantheus Holdings, Inc.(a) | 27,914 | 390,796 | ||||||
LeMaitre Vascular, Inc. | 12,423 | 423,376 | ||||||
MiMedx Group, Inc.(a)(b) | 62,303 | 524,591 | ||||||
OraSure Technologies, Inc.(a) | 24,689 | 419,960 | ||||||
PDL BioPharma, Inc.(a) | 148,598 | 396,757 | ||||||
Pfizer, Inc. | 12,493 | 448,873 | ||||||
Prestige Brands Holdings, Inc.(a) | 12,755 | 426,400 | ||||||
Regeneron Pharmaceuticals, Inc.(a) | 1,359 | 408,135 | ||||||
Repligen Corp.(a) | 12,743 | 556,614 | ||||||
Supernus Pharmaceuticals, Inc.(a) | 10,227 | 576,291 | ||||||
Tivity Health, Inc.(a) | 11,240 | 393,962 | ||||||
Universal Health Services, Inc., Class B | 3,705 | 426,001 | ||||||
Veeva Systems, Inc., Class A(a) | 6,005 | 464,547 | ||||||
WellCare Health Plans, Inc.(a) | 2,361 | 523,363 | ||||||
Zoetis, Inc. | 5,426 | 454,156 | ||||||
Total Health Care | 16,968,542 |
5 | May 31, 2018
Barron’s 400SM ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Industrials (19.11%) | ||||||||
AAON, Inc. | 11,878 | $ | 362,279 | |||||
ACCO Brands Corp. | 35,052 | 452,171 | ||||||
Aerovironment, Inc.(a) | 9,637 | 557,597 | ||||||
Air Lease Corp. | 10,455 | 464,307 | ||||||
Alaska Air Group, Inc. | 6,671 | 405,663 | ||||||
Allegiant Travel Co. | 2,556 | 386,851 | ||||||
Allison Transmission Holdings, Inc. | 11,909 | 491,961 | ||||||
Apogee Enterprises, Inc. | 9,929 | 433,401 | ||||||
Applied Industrial Technologies, Inc. | 6,213 | 433,357 | ||||||
Argan, Inc. | 11,064 | 428,177 | ||||||
ASGN, Inc.(a) | 5,502 | 423,654 | ||||||
Atkore International Group, Inc.(a) | 22,139 | 478,202 | ||||||
Barrett Business Services, Inc. | 5,285 | 455,673 | ||||||
Boeing Co. | 1,355 | 477,177 | ||||||
Continental Building Products, Inc.(a) | 16,366 | 495,071 | ||||||
Copart, Inc.(a) | 9,044 | 495,883 | ||||||
CoStar Group, Inc.(a) | 1,263 | 481,481 | ||||||
Dover Corp. | 5,686 | 439,016 | ||||||
Encore Wire Corp. | 8,113 | 392,669 | ||||||
ESCO Technologies, Inc. | 7,400 | 415,140 | ||||||
Expeditors International of Washington, Inc. | 7,058 | 525,680 | ||||||
Fastenal Co. | 7,946 | 422,966 | ||||||
Federal Signal Corp. | 20,273 | 484,322 | ||||||
Fortive Corp. | 5,889 | 428,071 | ||||||
Fortune Brands Home & Security, Inc. | 7,341 | 412,344 | ||||||
Forward Air Corp. | 8,215 | 487,314 | ||||||
GATX Corp. | 6,671 | 479,645 | ||||||
Generac Holdings, Inc.(a) | 9,873 | 494,539 | ||||||
Gibraltar Industries, Inc.(a) | 13,028 | 516,560 | ||||||
Graco, Inc. | 9,908 | 449,823 | ||||||
H&E Equipment Services, Inc. | 10,958 | 378,818 | ||||||
Hawaiian Holdings, Inc. | 12,163 | 450,031 | ||||||
HEICO Corp., Class A | 6,478 | 492,652 | ||||||
Hexcel Corp. | 6,740 | 477,394 | ||||||
Hub Group, Inc., Class A(a) | 10,203 | 509,640 | ||||||
IDEX Corp. | 3,138 | 435,178 | ||||||
Insperity, Inc. | 6,609 | 608,028 | ||||||
JB Hunt Transport Services, Inc. | 3,765 | 482,296 | ||||||
JetBlue Airways Corp.(a) | 20,542 | 388,038 | ||||||
Knight Transportation, Inc. | 9,306 | 378,568 | ||||||
Knoll, Inc. | 20,591 | 415,938 | ||||||
Korn/Ferry International | 9,120 | 498,682 | ||||||
Landstar System, Inc. | 4,112 | 466,301 | ||||||
Lincoln Electric Holdings, Inc. | 4,894 | 438,502 | ||||||
Lydall, Inc.(a) | 9,332 | 391,011 | ||||||
McGrath RentCorp | 8,692 | 565,675 | ||||||
Mercury Systems, Inc.(a) | 9,210 | 340,125 | ||||||
Meritor, Inc.(a) | 19,990 | 414,792 | ||||||
National Presto Industries, Inc.(b) | 4,794 | 541,243 | ||||||
Nordson Corp. | 3,274 | 411,313 | ||||||
Norfolk Southern Corp. | 3,224 | 488,920 | ||||||
NV5 Global, Inc.(a) | 8,385 | 526,578 | ||||||
Old Dominion Freight Line, Inc. | 3,095 | 482,696 | ||||||
Oshkosh Corp. | 5,785 | 420,859 | ||||||
PACCAR, Inc. | 6,816 | 424,160 | ||||||
Patrick Industries, Inc.(a) | 6,872 | 416,443 |
Security Description | Shares | Value | ||||||
Industrials (continued) | ||||||||
PGT Innovations, Inc.(a) | 24,294 | $ | 502,886 | |||||
Quad/Graphics, Inc. | 17,151 | 339,075 | ||||||
Raven Industries, Inc. | 11,972 | 452,542 | ||||||
RBC Bearings, Inc.(a) | 3,620 | 455,070 | ||||||
Schneider National, Inc., Class B | 16,893 | 498,006 | ||||||
Snap-on, Inc. | 3,020 | 446,416 | ||||||
Southwest Airlines Co. | 7,608 | 388,617 | ||||||
Spartan Motors, Inc. | 27,248 | 422,344 | ||||||
Spirit Airlines, Inc.(a) | 10,183 | 373,614 | ||||||
Teledyne Technologies, Inc.(a) | 2,388 | 481,086 | ||||||
TPI Composites, Inc.(a) | 20,060 | 527,578 | ||||||
TransUnion | 7,872 | 540,019 | ||||||
Trex Co., Inc.(a) | 4,239 | 499,481 | ||||||
TriNet Group, Inc.(a) | 9,818 | 526,638 | ||||||
Triton International, Ltd. | 14,807 | 515,432 | ||||||
Union Pacific Corp. | 3,357 | 479,245 | ||||||
United Rentals, Inc.(a) | 2,460 | 392,542 | ||||||
Vectrus, Inc.(a) | 11,520 | 369,446 | ||||||
Verisk Analytics, Inc.(a) | 4,393 | 466,712 | ||||||
WABCO Holdings, Inc.(a) | 3,271 | 395,562 | ||||||
WageWorks, Inc.(a) | 9,574 | 454,286 | ||||||
Total Industrials | 35,041,472 | |||||||
Information Technology (14.83%) | ||||||||
Adobe Systems, Inc.(a) | 2,087 | 520,247 | ||||||
Advanced Energy Industries, Inc.(a) | 6,535 | 428,239 | ||||||
Alliance Data Systems Corp. | 1,974 | 416,159 | ||||||
Amkor Technology, Inc.(a) | 41,182 | 374,756 | ||||||
Apple, Inc. | 2,552 | 476,892 | ||||||
Applied Materials, Inc. | 7,692 | 390,600 | ||||||
Applied Optoelectronics, Inc.(a)(b) | 15,560 | 727,741 | ||||||
Arista Networks, Inc.(a) | 1,583 | 398,220 | ||||||
Aspen Technology, Inc.(a) | 5,613 | 523,468 | ||||||
Axcelis Technologies, Inc.(a) | 17,492 | 371,705 | ||||||
Broadridge Financial Solutions, Inc. | 4,235 | 488,931 | ||||||
Casa Systems, Inc.(a) | 15,306 | 294,028 | ||||||
Ciena Corp.(a) | 16,702 | 384,981 | ||||||
Cognex Corp. | 8,360 | 382,136 | ||||||
Coherent, Inc.(a) | 2,060 | 344,123 | ||||||
DXC Technology Co. | 4,329 | 398,744 | ||||||
Electro Scientific Industries, Inc.(a) | 23,560 | 462,247 | ||||||
Electronic Arts, Inc.(a) | 3,627 | 474,811 | ||||||
Etsy, Inc.(a) | 16,445 | 531,831 | ||||||
F5 Networks, Inc.(a) | 3,104 | 537,334 | ||||||
Facebook, Inc., Class A(a) | 2,524 | 484,053 | ||||||
Fiserv, Inc.(a) | 6,225 | 451,935 | ||||||
FormFactor, Inc.(a) | 30,011 | 406,649 | ||||||
GrubHub, Inc.(a) | 4,204 | 450,711 | ||||||
Ichor Holdings, Ltd.(a)(b) | 15,898 | 395,542 | ||||||
IPG Photonics Corp.(a) | 1,797 | 433,562 | ||||||
Jack Henry & Associates, Inc. | 3,698 | 462,472 | ||||||
KEMET Corp.(a) | 23,201 | 463,556 | ||||||
Lam Research Corp. | 2,050 | 406,269 | ||||||
LogMeIn, Inc. | 3,603 | 388,764 | ||||||
Lumentum Holdings, Inc.(a)(b) | 6,386 | 375,178 | ||||||
Manhattan Associates, Inc.(a) | 10,197 | 443,773 | ||||||
Match Group, Inc.(a)(b) | 10,107 | 415,903 | ||||||
MAXIMUS, Inc. | 6,758 | 411,562 |
6 | May 31, 2018
Barron’s 400SM ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Information Technology (continued) | ||||||||
Micron Technology, Inc.(a) | 7,725 | $ | 444,883 | |||||
MKS Instruments, Inc. | 3,723 | 417,721 | ||||||
Nanometrics, Inc.(a) | 15,230 | 639,203 | ||||||
NIC, Inc. | 32,449 | 498,092 | ||||||
Novanta, Inc.(a) | 8,099 | 525,220 | ||||||
NVIDIA Corp. | 1,853 | 467,308 | ||||||
Oclaro, Inc.(a) | 45,734 | 391,483 | ||||||
ON Semiconductor Corp.(a) | 17,643 | 443,369 | ||||||
Paychex, Inc. | 6,882 | 451,322 | ||||||
Paycom Software, Inc.(a)(b) | 4,194 | 442,341 | ||||||
Qualys, Inc.(a) | 5,943 | 457,314 | ||||||
Red Hat, Inc.(a) | 2,982 | 484,336 | ||||||
Rogers Corp.(a) | 3,351 | 381,880 | ||||||
Sabre Corp. | 20,655 | 506,254 | ||||||
Skyworks Solutions, Inc. | 4,100 | 404,301 | ||||||
SMART Global Holdings, Inc.(a) | 11,829 | 526,745 | ||||||
Stamps.com, Inc.(a) | 2,296 | 575,837 | ||||||
Teradyne, Inc. | 9,372 | 355,293 | ||||||
Texas Instruments, Inc. | 4,151 | 464,538 | ||||||
Total System Services, Inc. | 5,131 | 437,110 | ||||||
Trade Desk, Inc., Class A(a)(b) | 7,925 | 677,825 | ||||||
TTM Technologies, Inc.(a) | 27,105 | 488,703 | ||||||
Ultra Clean Holdings, Inc.(a) | 22,086 | 389,155 | ||||||
Universal Display Corp. | 3,635 | 359,865 | ||||||
Versum Materials, Inc. | 11,654 | 465,810 | ||||||
Xcerra Corp.(a) | 41,778 | 575,283 | ||||||
Total Information Technology | 27,188,313 | |||||||
Materials (6.10%) | ||||||||
AdvanSix, Inc.(a) | 10,884 | 397,375 | ||||||
American Vanguard Corp. | 19,836 | 427,466 | ||||||
Berry Global Group, Inc.(a) | 8,157 | 393,902 | ||||||
Celanese Corp., Series A | 4,258 | 480,813 | ||||||
Chemours Co. | 9,186 | 450,022 | ||||||
Eagle Materials, Inc. | 4,477 | 485,217 | ||||||
Eastman Chemical Co. | 4,200 | 438,102 | ||||||
Huntsman Corp. | 14,033 | 448,635 | ||||||
Ingevity Corp.(a) | 5,837 | 444,429 | ||||||
Kronos Worldwide, Inc. | 19,219 | 475,478 | ||||||
Louisiana-Pacific Corp. | 16,079 | 469,185 | ||||||
Martin Marietta Materials, Inc. | 2,181 | 486,079 | ||||||
Mesabi Trust | 16,973 | 433,660 | ||||||
Monsanto Co. | 3,713 | 473,259 | ||||||
Neenah, Inc. | 5,670 | 460,121 | ||||||
Nucor Corp. | 6,800 | 436,492 | ||||||
Packaging Corp. of America | 3,819 | 448,733 | ||||||
PPG Industries, Inc. | 3,953 | 398,937 | ||||||
Rayonier Advanced Materials, Inc. | 22,842 | 409,100 | ||||||
Sherwin-Williams Co. | 1,109 | 420,588 | ||||||
Silgan Holdings, Inc. | 15,554 | 423,380 | ||||||
Steel Dynamics, Inc. | 9,721 | 480,509 | ||||||
Trinseo SA | 5,603 | 405,097 | ||||||
Warrior Met Coal, Inc. | 20,246 | 550,084 | ||||||
Westlake Chemical Corp. | 3,885 | 449,611 | ||||||
Total Materials | 11,186,274 | |||||||
Real Estate (0.44%) | ||||||||
HFF, Inc., Class A | 9,387 | 316,529 |
Security Description | Shares | Value | ||||||
Real Estate (continued) | ||||||||
RMR Group, Inc., Class A | 6,560 | $ | 495,936 | |||||
Total Real Estate | 812,465 | |||||||
Telecommunication Services (0.46%) | ||||||||
T-Mobile US, Inc.(a) | 7,066 | 393,576 | ||||||
Verizon Communications, Inc. | 9,438 | 449,910 | ||||||
Total Telecommunication Services | 843,486 | |||||||
Utilities (1.04%) | ||||||||
Atmos Energy Corp. | 5,664 | 505,286 | ||||||
Dominion Energy, Inc. | 6,289 | 403,691 | ||||||
NextEra Energy, Inc. | 2,968 | 492,124 | ||||||
OGE Energy Corp. | 14,569 | 510,206 | ||||||
Total Utilities | 1,911,307 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $150,593,177) | 170,430,982 | |||||||
LIMITED PARTNERSHIPS (5.59%) | ||||||||
Consumer Discretionary (0.26%) | ||||||||
Cedar Fair LP | 7,146 | 475,066 | ||||||
Total Consumer Discretionary | 475,066 | |||||||
Energy (4.62%) | ||||||||
Andeavor Logistics LP | 9,658 | 414,328 | ||||||
Antero Midstream Partners LP | 16,819 | 508,775 | ||||||
Black Stone Minerals LP | 26,312 | 478,878 | ||||||
CNX Midstream Partners LP | 24,358 | 456,469 | ||||||
Dominion Energy Midstream Partners LP | 17,660 | 226,048 | ||||||
EQT GP Holdings LP | 19,230 | 476,519 | ||||||
EQT Midstream Partners LP | 7,242 | 404,321 | ||||||
Holly Energy Partners LP | 15,070 | 442,757 | ||||||
Magellan Midstream Partners LP | 7,136 | 498,806 | ||||||
MPLX LP | 12,983 | 466,220 | ||||||
Noble Midstream Partners LP | 9,322 | 480,736 | ||||||
Phillips 66 Partners LP | 8,846 | 462,646 | ||||||
Rice Midstream Partners LP | 23,247 | 429,372 | ||||||
Shell Midstream Partners LP | 18,076 | 404,722 | ||||||
Tallgrass Energy Partners LP | 11,082 | 483,951 | ||||||
TC PipeLines LP | 9,136 | 222,188 | ||||||
Valero Energy Partners LP | 11,975 | 490,855 | ||||||
Viper Energy Partners LP | 20,542 | 669,258 | ||||||
Western Gas Equity Partners LP | 12,669 | 464,952 | ||||||
Total Energy | 8,481,801 | |||||||
Financials (0.71%) | ||||||||
Apollo Global Management LLC, Class A | 13,908 | 435,598 | ||||||
Blackstone Group LP | 13,400 | 427,862 | ||||||
Carlyle Group LP | 19,964 | 437,212 | ||||||
Total Financials | 1,300,672 | |||||||
TOTAL LIMITED PARTNERSHIPS | ||||||||
(Cost $10,617,279) | 10,257,539 |
7 | May 31, 2018
Barron’s 400SM ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (3.70%) | ||||||||||||
Money Market Fund (1.42%) | ||||||||||||
State Street | ||||||||||||
Institutional | ||||||||||||
Treasury Plus | ||||||||||||
Money Market | ||||||||||||
Fund | ||||||||||||
(Cost $2,609,794) | 1.669 | % | 2,609,794 | $ | 2,609,794 | |||||||
Investments Purchased With Collateral From Securities Loaned (2.28%) | ||||||||||||
State Street Navigator Securities | ||||||||||||
Lending Government Money | ||||||||||||
Market Portfolio, 1.77% | ||||||||||||
(Cost $4,179,887) | 4,179,887 | $ | 4,179,887 | |||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $6,789,681) | 6,789,681 | |||||||||||
TOTAL INVESTMENTS (102.24%) | ||||||||||||
(Cost $168,000,137) | $ | 187,478,202 | ||||||||||
NET LIABILITIES LESS OTHER ASSETS (2.24%) | (4,113,734 | ) | ||||||||||
NET ASSETS (100.00%) | $ | 183,364,468 |
(a) | Non-income producing security. |
(b) | Security, or a portion of the security position, is currently on loan. The total market value of securities on loan is $6,291,814. |
See Notes to Financial Statements.
8 | May 31, 2018
Barron’s 400SM ETF
Statement of Assets and Liabilities | May 31, 2018 (Unaudited) |
ASSETS: | ||||
Investments, at value | $ | 187,478,202 | ||
Cash held in escrow account (Note 3) | 44,767 | |||
Foreign tax reclaims | 103 | |||
Dividends receivable | 166,233 | |||
Total Assets | 187,689,305 | |||
LIABILITIES: | ||||
Payable to adviser | 144,950 | |||
Payable for collateral upon return of securities loaned | 4,179,887 | |||
Total Liabilities | 4,324,837 | |||
NET ASSETS | $ | 183,364,468 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 171,085,701 | ||
Accumulated net investment income | 711,417 | |||
Accumulated net realized loss | (7,910,715 | ) | ||
Net unrealized appreciation | 19,478,065 | |||
NET ASSETS | $ | 183,364,468 | ||
INVESTMENTS, AT COST | $ | 168,000,137 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 183,364,468 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 4,250,000 | |||
Net Asset Value, offering and redemption price per share | $ | 43.14 |
See Notes to Financial Statements.
9 | May 31, 2018
Barron’s 400SM ETF
Statement of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 1,470,049 | ||
Securities lending income | 100,264 | |||
Total investment income | 1,570,313 | |||
EXPENSES: | ||||
Investment adviser fees | 638,198 | |||
Total expenses | 638,198 | |||
NET INVESTMENT INCOME | 932,115 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 23,029,957 | |||
Net change in unrealized depreciation on investments | (15,301,079 | ) | ||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 7,728,878 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 8,660,993 |
(a) | Net of foreign tax withholding in the amount of $14. |
See Notes to Financial Statements.
10 | May 31, 2018
Barron’s 400SM ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 932,115 | $ | 1,530,468 | ||||
Net realized gain | 23,029,957 | 23,132,804 | ||||||
Net change in unrealized appreciation/(depreciation) | (15,301,079 | ) | 13,971,313 | |||||
Net increase in net assets resulting from operations | 8,660,993 | 38,634,585 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (1,229,976 | ) | (1,450,001 | ) | ||||
Total distributions | (1,229,976 | ) | (1,450,001 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 55,516,826 | 99,009,478 | ||||||
Cost of shares redeemed | (85,183,905 | ) | (109,205,210 | ) | ||||
Net decrease from share transactions | (29,667,079 | ) | (10,195,732 | ) | ||||
Net increase/(decrease) in net assets | (22,236,062 | ) | 26,988,852 | |||||
NET ASSETS | ||||||||
Beginning of period | 205,600,530 | 178,611,678 | ||||||
End of period * | $ | 183,364,468 | $ | 205,600,530 | ||||
*Including accumulated net investment income of: | $ | 711,417 | $ | 1,009,278 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 4,950,000 | 5,200,000 | ||||||
Shares sold | 1,300,000 | 2,650,000 | ||||||
Shares redeemed | (2,000,000 | ) | (2,900,000 | ) | ||||
Shares outstanding, end of period | 4,250,000 | 4,950,000 |
See Notes to Financial Statements.
11 | May 31, 2018
Barron’s 400SM ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Year Ended November 30, 2014 | For the Period June 4, 2013 (Commencement) to November 30, 2013 | |||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 41.54 | $ | 34.35 | $ | 31.75 | $ | 31.64 | $ | 29.30 | $ | 25.00 | ||||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||||||
Net investment income(a) | 0.20 | 0.29 | 0.33 | 0.32 | 0.23 | 0.10 | ||||||||||||||||||
Net realized and unrealized gain | 1.65 | 7.17 | 2.53 | 0.02 | 2.16 | 4.20 | ||||||||||||||||||
Total from investment operations | 1.85 | 7.46 | 2.86 | 0.34 | 2.39 | 4.30 | ||||||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||||||
From net investment income | (0.25 | ) | (0.27 | ) | (0.26 | ) | (0.23 | ) | (0.05 | ) | – | |||||||||||||
Total distributions | (0.25 | ) | (0.27 | ) | (0.26 | ) | (0.23 | ) | (0.05 | ) | – | |||||||||||||
NET INCREASE IN NET ASSET VALUE | 1.60 | 7.19 | 2.60 | 0.11 | 2.34 | 4.30 | ||||||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 43.14 | $ | 41.54 | $ | 34.35 | $ | 31.75 | $ | 31.64 | $ | 29.30 | ||||||||||||
TOTAL RETURN(b) | 4.47 | % | 21.87 | % | 9.12 | % | 1.07 | % | 8.18 | % | 17.20 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||
Net assets, end of period (000s) | $ | 183,364 | $ | 205,601 | $ | 178,612 | $ | 204,805 | $ | 219,901 | $ | 181,652 | ||||||||||||
Ratio of expenses to average net assets | 0.65 | %(c) | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | % | 0.65 | %(c) | ||||||||||||
Ratio of net investment income to average net assets | 0.95 | %(c) | 0.78 | % | 1.07 | % | 1.00 | % | 0.75 | % | 0.78 | %(c) | ||||||||||||
Portfolio turnover rate(d) | 46 | % | 84 | % | 88 | % | 87 | % | 55 | % | 11 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at actual reinvestment prices. Total return calculated for a period less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year is not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
12 | May 31, 2018
Barron’s 400SM ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of May 31, 2018, the Trust consisted of twenty separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the Barron’s 400SM ETF (the “Fund”). The investment objective of the Fund is to seek investment results that correspond generally, before fees and expenses, to the performance of the Barron’s 400 IndexSM (the “Underlying Index”). The Fund has elected to qualify as a diversified series of the Trust under the 1940 Act.
The Fund’s Shares (“Shares”) are listed on the NYSE Arca, Inc. (the “NYSE Arca”). The Fund issues and redeems Shares at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the New York Stock Exchange (the “NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“NASDAQ”) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the latest quoted sale price in such market.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
13 | May 31, 2018
Barron’s 400SM ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
B. Fair Value Measurements
The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability; including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities and Limited Partnerships, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 | – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 | – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 | – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Fund’s investments as of May 31, 2018:
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 170,430,982 | $ | – | $ | – | $ | 170,430,982 | ||||||||
Limited Partnerships | 10,257,539 | – | – | 10,257,539 | ||||||||||||
Short Term Investments | ||||||||||||||||
Money Market Fund | 2,609,794 | – | – | 2,609,794 | ||||||||||||
Investments Purchased with Collateral from Securities Loaned | 4,179,887 | – | – | 4,179,887 | ||||||||||||
TOTAL | $ | 187,478,202 | $ | – | $ | – | $ | 187,478,202 |
* | For a detailed sector breakdown, see the accompanying Schedule of Investments. |
The Fund recognizes transfers between levels as of the end of the period. For the six months ended May 31, 2018, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
14 | May 31, 2018
Barron’s 400SM ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
C. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
D. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid annually or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
E. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2018.
At November 30, 2017, the Fund had available for tax purposes unused post-enactment capital loss carryforwards as follows:
Fund | Short-Term | Long-Term | ||||||
Barron’s 400SM ETF | $ | 20,973,191 | $ | 10,351,112 |
The tax character of the distributions paid during the fiscal year ended November 30, 2017 was as follows:
Ordinary Income | ||||
November 30, 2017 | ||||
Barron’s 400SM ETF | $ | 1,450,001 |
As of May 31, 2018, the cost of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Barron’s 400SM ETF | ||||
Gross appreciation (excess of value over tax cost) | $ | 28,142,045 | ||
Gross depreciation (excess of tax cost over value) | (7,969,831 | ) | ||
Net unrealized appreciation/(depreciation) | 20,172,214 | |||
Cost of investments for income tax purposes | $ | 167,305,988 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of May 31, 2018.
F. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the six months ended May 31, 2018, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
15 | May 31, 2018
Barron’s 400SM ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
G. Lending of Portfolio Securities
The Fund has entered into a securities lending agreement with State Street Bank & Trust Co. (“SSB”), the Fund’s lending agent. The Fund may lend its portfolio securities only to borrowers that are approved by SSB. The Fund will limit such lending to not more than 33 1/3% of the value of its total assets. The Fund’s securities held at SSB as custodian shall be available to be lent except those securities the Fund or ALPS Advisors, Inc. specifically identifies in writing as not being available for lending. The borrower pledges and maintains with the Fund collateral consisting of cash (U.S. Dollars only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and cash equivalents (including irrevocable bank letters of credit) issued by a person other than the borrower or an affiliate of the borrower. The initial collateral received by the Fund is required to have a value of no less than 102% of the market value of the loaned securities for U.S equity securities and a value of no less than 105% of the market value for non-U.S. equity securities. The collateral is maintained thereafter, at a market value equal to not less than 102% of the current value of the U.S. equity securities on loan and not less than 105% of the current value of the non-U.S. equity securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to the Fund on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the customary time period for settlement of securities transactions.
Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments and is reflected in the Statements of Assets and Liabilities as a payable for collateral upon return of securities loaned. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Fund’s Statements of Assets and Liabilities as it is held by the lending agent on behalf of the Fund, and the Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.
The following is a summary of the Fund's securities lending agreement and related cash and non-cash collateral received as of May 31, 2018.
Market Value of Securities on Loan | Cash Collateral Received | Non-Cash Collateral Received | Total Collateral Received | |||||||||||||
Barron's 400 ETF | $ | 6,291,814 | $ | 4,179,887 | $ | 2,232,736 | $ | 6,412,623 |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged or securities loaned, and the remaining contractual maturity of those transactions as of May 31, 2018:
Barron's 400 ETF | Remaining contractual maturity of the agreement | ||||||||||||||||||
Securities Lending Transactions | Overnight & Continuous | Up to 30 days | 30-90 days | Greater than 90 days | Total | ||||||||||||||
Common Stocks | $ | 4,179,887 | $ | – | $ | – | $ | – | $ | 4,179,887 | |||||||||
Total Borrowings | 4,179,887 | ||||||||||||||||||
Gross amount of recognized liabilities for securities lending (collateral received) | $ | 4,179,887 |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as the Fund’s investment adviser pursuant to an Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.65% of the Fund’s average daily net assets. From time to time, the Adviser may waive all or a portion of its fee.
Capitalized terms used but not defined within this paragraph, shall have the respective meanings given to them in the Board Considerations Regarding Approval of Investment Advisory Agreement section of this Semi-Annual Report (“Board Considerations”). As discussed in the Board Considerations, the Adviser is an indirect wholly owned subsidiary of DST and on April 16, 2018, DST was acquired by SS&C resulting in a change of control of the Adviser. As discussed in the Board Considerations, in order for the Adviser to continue to serve as the investment adviser to the applicable Fund, among other approvals, the Board approved an Interim Advisory Agreement between the Adviser and the Trust, on behalf of the Funds. The Interim Advisory Agreement is effective for the earlier of 150 days from the close of the Transaction or the date of shareholder approval of the New Advisory Agreement. Under the terms of the Interim Advisory Agreement, the unitary management fee paid to the Adviser will be held in escrow until shareholder approval of the New Advisory Agreement is obtained and is reported as Cash held in escrow account on the Statement of Assets and Liabilities.
16 | May 31, 2018
Barron’s 400SM ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee for regularly scheduled meetings of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, both the Chairman of the Board and Chairman of the Audit Committee each receives a quarterly retainer of $2,000, in connection with their respective roles.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2018, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Fund | Purchases | Sales | ||||||
Barron's 400 ETF | $ | 89,675,327 | $ | 89,430,698 |
For the six months ended May 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
Barron's 400 ETF | $ | 54,405,094 | $ | 84,513,086 |
For the six months ended May 31, 2018, the Barron's 400SM ETF had in-kind net realized gain of $22,446,231.
Gains on in-kind transactions are not considered taxable for federal income tax purposes and losses on in-kind transactions are also not deductible for tax purposes.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 Shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of the Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
6. RELATED PARTY TRANSACTIONS
The Fund engaged in cross trades between other funds in the Trust during the six months ended May 31, 2018 pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which the Adviser serves as the investment adviser. The Board previously adopted procedures that apply to transactions between the Funds of the Trust pursuant to Rule 17a-7. These transactions related to cross trades during the period complied with the requirements set forth by Rule 17a-7 and the Trust’s procedures.
Transactions related to cross trades during the six months ended May 31, 2018, were as follows:
Fund | Purchase cost paid | Sale proceeds received | Realized gain/(loss) on sales | |||||||||
Barron's 400 ETF | $ | 1,451,569 | $ | 810,671 | $ | (52,703 | ) |
17 | May 31, 2018
Barron’s 400SM ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
7. SUBSEQUENT EVENTS
A Special Meeting of Shareholders of the Fund, a series of the Trust, was held at the offices of ALPS Fund Services, Inc., at 1290 Broadway, Suite 1100, Denver, CO 80203 on May 31, 2018 and adjourned to June 29, 2018. At the meeting, the following matters were voted on by the Shareholders. The results of the Special Meeting of Shareholders are noted below:
Proposal 1: To approve a new investment advisory agreement (the “New Advisory Agreement”) between the Trust, on behalf of the Fund, and the Adviser.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | ||||||||
Barron’s 400 ETF | 2,158,190 | 135,611 | Yes |
Proposal 2: To approve a proposal that would authorize the Adviser to enter into and materially amend sub-advisory agreements in the future with wholly-owned sub-advisers and unaffiliated sub-advisers, with the approval of the Board, but without obtaining additional Shareholder approval.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | ||||||||
Barron’s 400 ETF | 1,530,545 | 763,256 | No |
18 | May 31, 2018
Barron’s 400SM ETF
Additional Information | May 31, 2018 (Unaudited) |
PROXY VOTING RECORDS, POLICIES AND PROCEDURES
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-675-2639.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of the Fund’s portfolio holdings with the SEC on Form N-Q. Forms N-Q for the Fund are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1- 800-SEC-0330. The Fund’s Forms N-Q are available without charge, upon request, by calling (toll-free) 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Fund designated the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2017:
Qualified Dividend Income | Dividend Received Deduction | |||||||
Barron's 400SM ETF | 100.00% | 100.00% |
In early 2018, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2017 via Form 1099. The Fund will notify shareholders in early 2019 of amounts paid to them by the Fund, if any, during the calendar year 2018.
LICENSING AGREEMENT
MarketGrader Capital, LLC has entered into a license agreement with Dow Jones & Company to use the “Barron’s” name and certain related intellectual property in connection with the Underlying Index. MarketGrader Capital, LLC also has entered into a license and services agreement with its parent company, MarketGrader.com, to use the methodology for constructing the Underlying Index. MarketGrader Capital, LLC in turn has entered into the Sublicense Agreement with ALPS Advisers, Inc. to use the Underlying Index. The following disclosure relates to such licensing agreements:
The Barron’s 400SM ETF (the “Fund”) is not sponsored, endorsed, sold or promoted by the MarketGrader Capital, LLC (the “Index Provider”). The Index Provider makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in securities generally or in the Fund particularly or the ability of the Fund to track the performance of the physical commodities market. The Index Provider’s only relationship to the ALPS Advisors, Inc. (the “Adviser”) or the Fund is the licensing of certain service marks and trade names of the Index Provider and of the Underlying Index that is determined, composed and calculated by the Index Provider without regard to the Adviser or the Fund. The Index Provider has no obligation to take the needs of the Adviser or the Fund or the owners of the Fund into consideration in determining, composing or calculating the Underlying Index. The Index Provider is not responsible for and has not participated in the determination of the timing of, prices at, or quantities of the Fund to be issued or in the determination or calculation of the equation by which the Fund is to be converted into cash. The Index Provider has no obligation or liability in connection with the administration, marketing or trading of the Fund.
THE INDEX PROVIDER DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN AND THE INDEX PROVIDER SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. THE INDEX PROVIDER MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE ADVISER, THE FUND, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN. THE INDEX PROVIDER MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE UNDERLYING INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL THE INDEX PROVIDER HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS), EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
“The Barron’s 400 IndexSM” is calculated and published by MarketGrader Capital, LLC (“MarketGrader”). “Barron’s,” “Barron’s 400” and “Barron’s 400 Index” are trademarks or service marks of DJC & Company, Inc. or its affiliates and have been licensed to MarketGrader and sublicensed for certain purposes by Barron’s 400 Exchange Traded Fund, a sub-fund of that certain ALPS ETF Trust, a Delaware Statutory Trust (“Sub-Licensee”).
19 | May 31, 2018
Barron’s 400SM ETF
Additional Information | May 31, 2018 (Unaudited) |
The Barron’s 400 ETF (the “Product”) is not sponsored, endorsed, sold or promoted by DJC or its affiliates. DJC and its affiliates make no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of trading in the Fund particularly. DJC and its affiliates’ only relationship to the Licensee is the licensing of certain trademarks and trade names of DJC. DJC has no obligation to take the needs of the Licensee or the owners of the Fund into consideration in connection with its licensing of the Barron’s 400 Index to MarketGrader or the sublicense to Licensee. DJC and its affiliates are not responsible for and have not participated in the determination of the timing of, prices at, or quantities of the Fund to be sold or in the determination or calculation of the equation by which the Product are to be converted into cash. DJC and its affiliates have no obligation or liability in connection with the administration, marketing or trading of the Barron’s 400 Index or the Product.
DOW JONES DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE BARRON’S 400 INDEX OR ANY DATA INCLUDED THEREIN AND DOW JONES AND ITS AFFILIATES SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. DOW JONESAND ITS AFFILIATES MAKE NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY THE LICENSEE, OWNERS OF THE FUND, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BARRON’S 400 INDEX OR ANY DATA INCLUDED THEREIN. DOW JONES AND ITS AFFILIATES MAKE NO EXPRESS OR IMPLIED WARRANTIES. AND EXPRESSLY DISCLAIM ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE WITH RESPECT TO THE BARRON’S 400 INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL DOW JONES AND ITS AFFILIATES HAVE ANY LIABILITY FOR ANY LOST PROFITS OR INDIRECT, PUNITIVE, SPECIAL OR CONSEQUENTIAL DAMAGES OR LOSSES, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN DJC AND THE LICENSEE, OTHER THAN THE LICENSORS OF MARKETGRADER.
The Adviser does not guarantee the accuracy and/or the completeness of the Underlying Index or any data included therein, and the Adviser shall have no liability for any errors, omissions or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by the Fund, owners of the Shares of the Fund or any other person or entity from the use of the Underlying Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits) arising out of matters relating to the use of the Underlying Index, even if notified of the possibility of such damages.
20 | May 31, 2018
Barron’s 400SM ETF
Board Considerations Regarding Approval of Investment Advisory Agreement | May 31, 2018 (Unaudited) |
At an in-person meeting held on March 5, 2018, the Board of Trustees of the Trust (the “Board” or the “Trustees”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve each of (i) the continuance of the investment advisory agreement between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect to the Barron’s 400 ETF (“BFOR” or “the Fund”) (the “Existing Advisory Agreement”); (ii) a new investment advisory agreement between the Adviser and the Trust on behalf of the Fund (the “New Advisory Agreement”); and (iii) an interim investment advisory agreement between the Adviser and the Trust on behalf of the Fund (the “Interim Advisory Agreement” and together with the Existing Advisory Agreement and New Advisory Agreement, the “Advisory Agreements”). The Independent Trustees also met separately to consider the Advisory Agreements.
Consideration by the Board of the New Advisory Agreement and Interim Advisory Agreement was necessary because DST Systems, Inc. (“DST”), the ultimate parent company to the Adviser, had had entered into an agreement to be acquired by SS&C Technologies Holdings, Inc. (“SS&C”) (the “Transaction”). Because the Adviser would be acquired along with DST, the closing of the Transaction (the “Closing”) may be deemed a change in control with respect to the Adviser. The Closing occurred on April 16, 2018. This change in control with respect to the Adviser may be deemed to trigger an “assignment” of the Existing Advisory Agreement under the Investment Company Act of 1940, as amended (the “1940 Act”). As required by the 1940 Act, the Existing Advisory Agreement provides for its automatic termination in the event of an assignment, and therefore, the Existing Advisory Agreement automatically terminated upon Closing. In order for the Adviser to continue as the Fund’s investment adviser, the Board and the Fund’s shareholders must approve the New Advisory Agreement which would take effect, if approved, upon the date of such shareholder approval. As of the date of this report, the New Advisory Agreement has not received shareholder approval and efforts to secure such shareholder approval are ongoing. The Interim Advisory Agreement approved by the Board permits the Adviser to continue as investment adviser to the Fund from the date of the Closing until the Fund’s shareholders approve the New Advisory Agreement, subject to a maximum term of 150 days.
In evaluating the Advisory Agreements with respect to the Fund, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by AAI with respect to the Fund under the Advisory Agreements; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided (or to be provided) by AAI under the Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Advisory Agreements, the investment parameters of the index of the Fund, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Fund.
The Independent Trustees reviewed information on the performance of the Fund and its benchmark. The Independent Trustees also evaluated the correlation and tracking error between the underlying index and the Fund’s performance. Based on their review, the Independent Trustees found that the nature and extent of services provided (or to be provided) to the Fund under the Advisory Agreements was appropriate and that the quality was satisfactory.
The Independent Trustees noted that the advisory fee for the Fund was a unitary fee pursuant to which AAI assumes all expenses of the Fund (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreements, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
With respect to the advisory fee rate, the Independent Trustees noted the following:
The net advisory fee rate for the Fund is higher than the median of its Broadridge expense group and the Fund’s expense ratio is higher than the median of its Broadridge expense group.
The Independent Trustees took into account, among other things, the unique features and performance of the Fund’s underlying index and the costs and benefits of linkage to the Barron’s name.
Based on the foregoing, and the other information available to them, the Independent Trustees concluded that the advisory fee rate for the Fund was reasonable under the circumstances and in light of the quality of the services provided.
The Independent Trustees considered other benefits available to AAI because of its relationship with the Fund and concluded that the advisory fees were reasonable taking into account any such benefits.
21 | May 31, 2018
Barron’s 400SM ETF
Board Considerations Regarding Approval of Investment Advisory Agreement | May 31, 2018 (Unaudited) |
The Independent Trustees also considered with respect to the Fund the information provided by AAI about the costs and profitability of AAI with respect to the Fund. The Independent Trustees reviewed and noted the relatively small size of the Fund in considering economies of scale that may be realized by AAI. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
In voting to renew the Existing Advisory Agreement and approve the New Advisory Agreement and Interim Advisory Agreement, the Independent Trustees concluded that the terms of each Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
22 | May 31, 2018
Page Intentionally Left Blank
TABLE OF CONTENTS |
Performance Overview | 1 |
Disclosure of Fund Expenses | 3 |
Schedules of Investments | 4 |
Statement of Assets and Liabilities | 6 |
Statement of Operations | 7 |
Statements of Changes in Net Assets | 8 |
Financial Highlights | 9 |
Notes to Financial Statements | 10 |
Additional Information | 16 |
Board Considerations Regarding Approval of Investment Advisory Agreement | 18 |
alpsfunds.com
BUZZ US Sentiment Leaders ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
The BUZZ US Sentiment Leaders ETF (the “Fund”) employs a “passive management” - or indexing - investment approach designed to seek investment results that correspond (before fees and expenses) generally to the performance of its underlying index, the BUZZ NextGen AI US Sentiment Leaders Index (the “Underlying Index”).
The Underlying Index utilizes a rules-based quantitative methodology developed by BUZZ Indexes Inc. (the “Index Provider”), which is designed to identify the U.S. common stocks with the most “positive insights” collected from social media networks. Such positive insights are a measure of the degree of positive company sentiment as well as the breadth of active discussion about each company by participants on social media networks. The Index Provider then selects the 75 companies with the highest positive insight scores for inclusion in the Underlying Index and weights the 75 constituent common stocks of the Underlying Index based on a proprietary scoring model.
Performance (as of May 31, 2018)
6 Months | 1 Year | Since Inception^ | |
BUZZ US Sentiment Leaders ETF - NAV | 12.05% | 27.83% | 18.18% |
BUZZ US Sentiment Leaders ETF - Market Price* | 12.29% | 28.30% | 18.38% |
BUZZ NextGen AI US Sentiment Leaders Total Return Index | 12.32% | 28.45% | 18.71% |
S&P 500® Total Return Index | 3.16% | 14.38% | 15.19% |
Total Expense Ratio (per the current prospectus) 0.75%
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. 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 may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.855.215.1425.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund’s Commencement date was April 19, 2016. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
BUZZ NextGen AI US Sentiment Leaders Total Return Index is comprised of 75 stocks with the highest “positive insight” rankings collected from online forums. These stocks must meet certain market capitalization and average daily trading volume requirements to be included in the index and are weighted based on a proprietary scoring model developed by BUZZ Indexes Inc.
S&P 500® Total Return Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
The indexes are reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. The indexes are not actively managed and do not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
Funds that invest in securities of medium capitalization companies involve greater risk than customarily is associated with investing in larger, more established companies. A medium capitalization company is defined as a company with a market capitalization between $2 billion and $10 billion. These companies’ securities may be more volatile and less liquid than those of more established companies. These securities may have returns that vary, sometimes significantly, from the overall securities market. Often medium capitalization companies and the industries in which they focus are still evolving and, as a result, they may be more sensitive to changing market conditions.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The BUZZ US Sentiment Leaders ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the BUZZ US Sentiment Leaders ETF.
ALPS Portfolio Solutions Distributor, Inc. is not affiliated with BUZZ Indexes Inc.
1 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018)
Netflix, Inc. | 3.22% |
Advanced Micro Devices, Inc. | 3.19% |
Twitter, Inc. | 3.18% |
Square, Inc. | 3.17% |
Micron Technology, Inc. | 3.14% |
Facebook, Inc. | 3.11% |
Microsoft Corp. | 3.06% |
Amazon.com, Inc. | 3.06% |
NVIDIA Corp. | 3.04% |
Apple, Inc. | 2.98% |
Total % of Top 10 Holdings | 31.15% |
Sector Allocation* (as of May 31, 2018)
Information Technology | 44.86% |
Consumer Discretionary | 17.63% |
Health Care | 13.65% |
Industrials | 8.83% |
Financials | 7.94% |
Consumer Staples | 2.84% |
Telecommunication Services | 2.52% |
Energy | 1.66% |
Money Market Fund | 0.07% |
Total | 100.00% |
* | % of Total Investments (excluding investments purchased with collateral from securities loaned). |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Underlying Index
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
2 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Disclosure of Fund Expenses | May 31, 2018 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, 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 a Fund and to compare these costs with the ongoing costs of investing in other funds. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through May 31, 2018.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values 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 ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. Therefore, the second line is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 12/1/17 | Ending 5/31/18 | Expense Ratio(a) | Expenses Paid During Period 5/31/18(b) | |
Actual | $1,000.00 | $1,120.50 | 0.75% | $3.97 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.19 | 0.75% | $3.78 |
(a) | Annualized, based on the Fund's most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. |
3 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.79%) | ||||||||
Consumer Discretionary (17.61%) | ||||||||
Amazon.com, Inc.(a) | 133 | $ | 216,740 | |||||
Booking Holdings, Inc.(a) | 37 | 78,030 | ||||||
Comcast Corp., Class A | 1,328 | 41,407 | ||||||
Ford Motor Co. | 7,946 | 91,776 | ||||||
Home Depot, Inc. | 364 | 67,904 | ||||||
McDonald's Corp. | 414 | 66,244 | ||||||
Netflix, Inc.(a) | 649 | 228,189 | ||||||
Starbucks Corp. | 795 | 45,053 | ||||||
Tesla, Inc.(a)(b) | 431 | 122,719 | ||||||
Under Armour, Inc., Class C(a)(b) | 3,497 | 66,163 | ||||||
Walt Disney Co. | 1,596 | 158,754 | ||||||
Wynn Resorts, Ltd. | 330 | 64,683 | ||||||
Total Consumer Discretionary | 1,247,662 | |||||||
Consumer Staples (2.83%) | ||||||||
Coca-Cola Co. | 982 | 42,226 | ||||||
Philip Morris International, Inc. | 489 | 38,895 | ||||||
Wal-Mart Stores, Inc. | 1,452 | 119,848 | ||||||
Total Consumer Staples | 200,969 | |||||||
Energy (1.66%) | ||||||||
Chevron Corp. | 383 | 47,607 | ||||||
Exxon Mobil Corp. | 861 | 69,948 | ||||||
Total Energy | 117,555 | |||||||
Financials (7.93%) | ||||||||
American Express Co. | 640 | 62,912 | ||||||
Bank of America Corp. | 3,764 | 109,306 | ||||||
Citigroup, Inc. | 606 | 40,414 | ||||||
Discover Financial Services | 2,387 | 176,304 | ||||||
Goldman Sachs Group, Inc. | 356 | 80,413 | ||||||
JPMorgan Chase & Co. | 864 | 92,457 | ||||||
Total Financials | 561,806 | |||||||
Health Care (13.63%) | ||||||||
AbbVie, Inc. | 684 | 67,675 | ||||||
Agilent Technologies, Inc. | 677 | 41,920 | ||||||
Align Technology, Inc.(a) | 139 | 46,141 | ||||||
Baxter International, Inc. | 778 | 55,114 | ||||||
Biogen, Inc.(a) | 155 | 45,564 | ||||||
Bristol-Myers Squibb Co. | 1,300 | 68,406 | ||||||
Celgene Corp.(a) | 905 | 71,205 | ||||||
CVS Health Corp. | 656 | 41,584 | ||||||
Exelixis, Inc.(a) | 1,872 | 38,807 | ||||||
Gilead Sciences, Inc. | 929 | 62,615 | ||||||
Intuitive Surgical, Inc.(a) | 95 | 43,669 | ||||||
Merck & Co., Inc. | 1,363 | 81,139 | ||||||
Pfizer, Inc. | 1,579 | 56,733 | ||||||
UnitedHealth Group, Inc. | 197 | 47,577 | ||||||
Valeant Pharmaceuticals International, Inc.(a) | 8,981 | 197,582 | ||||||
Total Health Care | 965,731 | |||||||
Industrials (8.82%) | ||||||||
Boeing Co. | 310 | 109,170 | ||||||
Caterpillar, Inc. | 440 | 66,840 |
Security Description | Shares | Value | ||||||
Industrials (continued) | ||||||||
CSX Corp. | 784 | $ | 50,686 | |||||
Eaton Corp. PLC | 575 | 44,034 | ||||||
General Electric Co. | 14,036 | 197,627 | ||||||
Lockheed Martin Corp. | 210 | 66,053 | ||||||
Raytheon Co. | 213 | 44,623 | ||||||
XPO Logistics, Inc.(a) | 438 | 46,099 | ||||||
Total Industrials | 625,132 | |||||||
Information Technology (44.79%) | ||||||||
Activision Blizzard, Inc. | 1,303 | 92,396 | ||||||
Advanced Micro Devices, Inc.(a)(b) | 16,455 | 225,927 | ||||||
Alphabet, Inc., Class A(a) | 163 | 179,300 | ||||||
Apple, Inc. | 1,128 | 210,789 | ||||||
Applied Materials, Inc. | 1,174 | 59,616 | ||||||
Cisco Systems, Inc. | 1,221 | 52,149 | ||||||
eBay, Inc.(a) | 1,766 | 66,613 | ||||||
Electronic Arts, Inc.(a) | 368 | 48,175 | ||||||
Facebook, Inc., Class A(a) | 1,148 | 220,163 | ||||||
First Solar, Inc.(a) | 949 | 64,162 | ||||||
GrubHub, Inc.(a) | 456 | 48,888 | ||||||
Intel Corp. | 2,495 | 137,724 | ||||||
International Business Machines Corp. | 452 | 63,872 | ||||||
Lam Research Corp. | 404 | 80,065 | ||||||
Mastercard, Inc., Class A | 274 | 52,093 | ||||||
Micron Technology, Inc.(a) | 3,857 | 222,125 | ||||||
Microsoft Corp. | 2,193 | 216,756 | ||||||
Nutanix, Inc., Class A(a) | 696 | 37,201 | ||||||
NVIDIA Corp. | 852 | 214,866 | ||||||
PayPal Holdings, Inc.(a) | 840 | 68,939 | ||||||
QUALCOMM, Inc. | 1,174 | 68,233 | ||||||
Snap, Inc., Class A(a)(b) | 10,750 | 122,442 | ||||||
Square, Inc., Class A(a) | 3,848 | 224,146 | ||||||
Symantec Corp. | 2,223 | 46,194 | ||||||
Twitter, Inc.(a) | 6,475 | 224,682 | ||||||
Visa, Inc., Class A | 966 | 126,276 | ||||||
Total Information Technology | 3,173,792 | |||||||
Telecommunication Services (2.52%) | ||||||||
AT&T, Inc. | 1,978 | 63,929 | ||||||
T-Mobile US, Inc.(a) | 1,078 | 60,044 | ||||||
Verizon Communications, Inc. | 1,143 | 54,487 | ||||||
Total Telecommunication Services | 178,460 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $6,602,525) | 7,071,107 |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (2.08%) | ||||||||||||
Money Market Fund (0.07%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | ||||||||||||
(Cost $4,887) | 1.669 | % | 4,887 | 4,887 |
4 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
7 Day Yield | Shares | Value | ||||||||||
Investments Purchased with Collateral from | ||||||||||||
Securities Loaned (2.01%) | ||||||||||||
State Street Navigator Securities Lending Prime Portfolio, 1.77% | ||||||||||||
(Cost $142,482) | 142,482 | 142,482 | ||||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $147,369) | 147,369 | |||||||||||
TOTAL INVESTMENTS (101.87%) | ||||||||||||
(Cost $6,749,894) | $ | 7,218,476 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (-1.87%) | (132,532 | ) | ||||||||||
NET ASSETS (100.00%) | $ | 7,085,944 |
(a) | Non-income producing security. |
(b) | Security, or a portion of the security position, is currently on loan. The total market value of securities on loan is $402,844. |
See Notes to Financial Statements.
5 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Statement of Assets and Liabilities | May 31, 2018 (Unaudited) |
ASSETS: | ||||
Investments, at value | $ | 7,218,476 | ||
Cash held in escrow account (Note 3) | 1,949 | |||
Dividends receivable | 14,387 | |||
Total Assets | 7,234,812 | |||
LIABILITIES: | ||||
Payable to adviser | 6,386 | |||
Payable for collateral upon return of securities loaned | 142,482 | |||
Total Liabilities | 148,868 | |||
NET ASSETS | $ | 7,085,944 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 5,692,907 | ||
Accumulated net investment income | 17,911 | |||
Accumulated net realized gain | 906,544 | |||
Net unrealized appreciation | 468,582 | |||
NET ASSETS | $ | 7,085,944 | ||
INVESTMENTS, AT COST | $ | 6,749,894 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 7,085,944 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 200,002 | |||
Net Asset Value, offering and redemption price per share | $ | 35.43 |
See Notes to Financial Statements.
6 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Statement of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
INVESTMENT INCOME: | ||||
Dividends | $ | 66,409 | ||
Securities lending income | 1,598 | |||
Total Investment Income | 68,007 | |||
EXPENSES: | ||||
Investment adviser fees | 39,653 | |||
Total Expenses | 39,653 | |||
NET INVESTMENT INCOME | 28,354 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 1,428,333 | |||
Net change in unrealized depreciation on investments | (596,578 | ) | ||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 831,755 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 860,109 |
See Notes to Financial Statements.
7 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Statements of Changes in Net Assets
For the Six (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 28,354 | $ | 48,030 | ||||
Net realized gain | 1,428,333 | 779,407 | ||||||
Net change in unrealized appreciation/(depreciation) | (596,578 | ) | 909,686 | |||||
Net increase in net assets resulting from operations | 860,109 | 1,737,123 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (50,001 | ) | (35,000 | ) | ||||
Total distributions | (50,001 | ) | (35,000 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 6,881,321 | 11,412,195 | ||||||
Cost of shares redeemed | (10,133,316 | ) | (8,755,528 | ) | ||||
Net increase/(decrease) from capital share transactions | (3,251,995 | ) | 2,656,667 | |||||
Net increase/(decrease) in net assets | (2,441,887 | ) | 4,358,790 | |||||
NET ASSETS: | ||||||||
Beginning of period | 9,527,831 | 5,169,041 | ||||||
End of period * | $ | 7,085,944 | $ | 9,527,831 | ||||
*Including accumulated net investment income of: | $ | 17,911 | $ | 39,558 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 300,002 | 200,002 | ||||||
Shares sold | 200,000 | 400,000 | ||||||
Shares redeemed | (300,000 | ) | (300,000 | ) | ||||
Shares outstanding, end of period | 200,002 | 300,002 |
See Notes to Financial Statements.
8 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Financial Highlights | For a Share Outstanding Throughout the Period Presented |
For the Six (Unaudited) | For the Year Ended November 30, 2017 | For the Period April 19, 2016 (Commencement of Operations) to November 30, 2016 | ||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 31.76 | $ | 25.84 | $ | 25.15 | ||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||
Net investment income (a) | 0.09 | 0.18 | 0.13 | |||||||||
Net realized and unrealized gain | 3.72 | 5.92 | 0.56 | |||||||||
Total from investment operations | 3.81 | 6.10 | 0.69 | |||||||||
DISTRIBUTIONS: | ||||||||||||
From net investment income | (0.14 | ) | (0.18 | ) | — | |||||||
Total distributions | (0.14 | ) | (0.18 | ) | — | |||||||
Net increase in net asset value | 3.67 | 5.92 | 0.69 | |||||||||
NET ASSET VALUE, END OF PERIOD | $ | 35.43 | $ | 31.76 | $ | 25.84 | ||||||
TOTAL RETURN(b) | 12.05 | % | 23.72 | % | 2.74 | % | ||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||
Net assets, end of period (000s) | $ | 7,086 | $ | 9,528 | $ | 5,169 | ||||||
Ratio of expenses to average net assets | 0.75 | %(c) | 0.75 | % | 0.75 | %(c) | ||||||
Ratio of net investment income to average net assets | 0.54 | %(c) | 0.64 | % | 0.87 | %(c) | ||||||
Portfolio turnover rate(d) | 188 | % | 260 | % | 157 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
9 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of May 31, 2018, the Trust consisted of twenty separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the BUZZ US Sentiment Leaders ETF (the “Fund”). Prior to March 31, 2017, the Fund was known as the Sprott BUZZ Social Media Insights ETF. The investment objective of the Fund is to seek investment results that correspond (before fees and expenses) generally to the performance of the BUZZ NextGen AI US Sentiment Leaders Index (the “Underlying Index”). The BUZZ US Sentiment Leaders ETF is considered a non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The Fund’s Shares (“Shares”) are listed on the NYSE Arca, Inc. (the “NYSE Arca”). The Fund issues and redeems Shares at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the New York Stock Exchange (the “NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“NASDAQ”) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the latest quoted sale price in such market.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
10 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
B. Fair Value Measurements
The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability; including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities and Limited Partnerships, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Fund’s investments as of May 31, 2018:
BUZZ US Sentiment Leaders ETF
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Observable | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 7,071,107 | $ | – | $ | – | $ | 7,071,107 | ||||||||
Short Term Investments | ||||||||||||||||
Money Market Fund | 4,887 | – | – | 4,887 | ||||||||||||
Investments Purchased with Collateral from | ||||||||||||||||
Securities Loaned | 142,482 | – | – | 142,482 | ||||||||||||
TOTAL | $ | 7,218,476 | $ | – | $ | – | $ | 7,218,476 |
* | For a detailed sector breakdown, see the accompanying Schedule of Investments. |
The Fund recognizes transfers between levels as of the end of the period. For the six months ended May 31, 2018, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
11 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
C. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
D. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid annually or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
E. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2018.
The tax character of the distribution paid by the Fund was as follows:
Ordinary Income | ||||
November 30, 2017 | ||||
BUZZ US Sentiment Leaders ETF | $ | 35,000 |
At November 30, 2017, the Funds had available for tax purposes unused capital loss carryforwards as follows:
Fund | Short-Term | Long-Term | ||||||
BUZZ US Sentiment Leaders ETF | $ | 407,724 | $ | 28,135 |
As of May 31, 2018, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
BUZZ US Sentiment Leaders ETF | ||||
Gross appreciation (excess of value over tax cost) | $ | 580,457 | ||
Gross depreciation (excess of tax cost over value) | (159,407 | ) | ||
Net unrealized appreciation (depreciation) | 421,050 | |||
Cost of investments for income tax purposes | $ | 6,797,426 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of May 31, 2018.
F. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the six months ended May 31, 2018, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
12 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
G. Lending of Portfolio Securities
The Fund has entered into a securities lending agreement with State Street Bank & Trust Co. (“SSB”), the Fund’s lending agent. The Fund may lend its portfolio securities only to borrowers that are approved by SSB. The Fund will limit such lending to not more than 33 1/3% of the value of its total assets. The Fund’s securities held at SSB as custodian shall be available to be lent except those securities the Fund or ALPS Advisors, Inc. specifically identifies in writing as not being available for lending. The borrower pledges and maintains with the Fund collateral consisting of cash (U.S. Dollars only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and cash equivalents (including irrevocable bank letters of credit) issued by a person other than the borrower or an affiliate of the borrower. The initial collateral received by the Fund is required to have a value of no less than 102% of the market value of the loaned securities for U.S equity securities and a value of no less than 105% of the market value for non-U.S. equity securities. The collateral is maintained thereafter, at a market value equal to not less than 102% of the current value of the U.S. equity securities on loan and not less than 105% of the current value of the non-U.S. equity securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to the Fund on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the customary time period for settlement of securities transactions.
Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments and is reflected in the Statement of Assets and Liabilities as a payable for collateral upon return of securities loaned. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Fund’s Statement of Assets and Liabilities as it is held by the lending agent on behalf of the Fund, and the Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.
The following is a summary of the Fund's securities lending agreement and related cash and non-cash collateral received as of May 31, 2018.
Market Value of Securities on Loan | Cash Collateral Received | Non-Cash Collateral Received | Total Collateral Received | |||||||||||||
BUZZ US Sentiment Leaders ETF | $ | 402,844 | $ | 142,482 | $ | 272,033 | $ | 414,515 |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged or securities loaned, and the remaining contractual maturity of those transactions as of May 31, 2018:
BUZZ US Sentiment Leaders ETF | Remaining contractual maturity of the agreement | |||||||||||||||||||
Securities Lending Transactions | Overnight & Continuous | Up to 30 days | 30-90 days | Greater than 90 days | Total | |||||||||||||||
Common Stocks | $ | 142,482 | $ | – | $ | – | $ | – | $ | 142,482 | ||||||||||
Total Borrowings | 142,482 | |||||||||||||||||||
Gross amount of recognized liabilities for securities lending (collateral received) | $ | 142,482 |
H. Risks Related to Social Media Analytics
The Underlying Index for the Fund utilizes a rules-based quantitative methodology developed by BUZZ Indexes Inc. (the “Index Provider”), which is designed to identify the U.S. common stocks with the most “positive insights” collected from social media networks. The ability to invest based on social media analytics is relatively new and untested. “Social media” is an umbrella term that encompasses various activities that integrate technology, social interaction and content creation. Social media may use many technologies, including, but not limited to, blogs, microblogs, wikis, photos and video sharing, podcasts, social networking, and virtual worlds. Some examples of social media sites may include, but are not limited to, the following: Facebook, Twitter, LinkedIn, Digg, Reddit, RSS, blogs, Investopedia, stock forums, etc. Investing in companies based on social media analytics involves the potential for market manipulation because social media posts may be made with an intent to inflate, or otherwise manipulate, the public perception of a stock or other investment. Although the Underlying Index attempts to mitigate the potential for such market manipulation by employing screens to identify posts which may be computer generated or deceptive, and by employing market capitalization and trading volume criteria to remove small and penny-cap stocks which may be more likely targets for such manipulation, there is no guarantee that the Underlying Index’s model will successfully reduce such risk. Furthermore, text and sentiment analysis of social media postings may prove inaccurate; that is, high positive sentiment may not correlate with positive change in the value of a company’s stock and low positive or negative sentiment may not correlate with negative change in the value of a company’s stock. Additionally, as data suppliers for the Index Provider’s algorithm, social media companies are susceptible to the following risks which may disrupt the Index Provider’s ability to receive meaningful data from such sites: permanent cessation of operations, disruption in service caused by hardware or software failure, interruptions or delays in service by third-party data center hosting facilities and maintenance providers, security breaches involving certain private, sensitive, proprietary and confidential information managed and transmitted by social media companies, and privacy concerns and laws, evolving Internet regulation and other foreign or domestic regulations that may limit or otherwise affect the operations of social media companies.
13 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as the Fund’s investment adviser pursuant to an Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.75% of the Fund’s average daily net assets. From time to time, the Adviser may waive all or a portion of its fee.
Capitalized terms used but not defined within this paragraph, shall have the respective meanings given to them in the Board Considerations Regarding Approval of Investment Advisory Agreement section of this Semi-Annual Report (“Board Considerations”). As discussed in the Board Considerations, the Adviser is an indirect wholly owned subsidiary of DST and on April 16, 2018, DST was acquired by SS&C resulting in a change of control of the Adviser. As discussed in the Board Considerations, in order for the Adviser to continue to serve as the investment adviser to the applicable Fund, among other approvals, the Board approved an Interim Advisory Agreement between the Adviser and the Trust, on behalf of the Funds. The Interim Advisory Agreement is effective for the earlier of 150 days from the close of the Transaction or the date of shareholder approval of the New Advisory Agreement. Under the terms of the Interim Advisory Agreement, the unitary management fee paid to the Adviser will be held in escrow until shareholder approval of the New Advisory Agreement is obtained and is reported as Cash held in escrow account on the Statement of Assets and Liabilities.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit, and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee for regularly scheduled meetings of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, both the Chairman of the Board and Chairman of the Audit Committee each receives a quarterly retainer of $2,000, in connection with their respective roles.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2018, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Fund | Purchases | Sales | ||||||
BUZZ US Sentiment Leaders ETF | $ | 19,300,217 | $ | 19,302,450 |
For the six months ended May 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
BUZZ US Sentiment Leaders ETF | $ | 6,881,634 | $ | 10,159,749 |
For the six months ended May 31, 2018, the BUZZ US Sentiment Leaders ETF had in-kind net realized gains of $1,426,009.
Gains on in-kind transactions are not considered taxable for federal income tax purposes and losses on in kind transactions are also not deductible for tax purposes.
14 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 Shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of the Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
15 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Additional Information | May 31, 2018 (Unaudited) |
PROXY VOTING RECORDS, POLICIES AND PROCEDURES
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-675-2639.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of the Fund’s portfolio holdings with the SEC on Form N-Q. Forms N-Q for the Fund are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s Forms N-Q are available without charge, upon request, by calling (toll-free) 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Fund designated the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2017:
Qualified Dividend Income | Dividend Received Deduction | |
BUZZ US Sentiment Leaders ETF | 100.00 % | 100.00 % |
In early 2018, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2017 via Form 1099. The Fund will notify shareholders in early 2019 of amounts paid to them by the Fund, if any, during the calendar year 2018.
LICENSING AGREEMENT
BUZZ NextGen AI US Sentiment Leaders Index (the “BUZZ Index”) is a product of BUZZ Indexes Inc. (“BUZZ Indexes”), and has been licensed to ALPS Advisors, Inc. for use in connection with the BUZZ US Sentiment Leaders ETF.
“BUZZ” is a trademark of BUZZ Indexes, which have been licensed by ALPS Advisors, Inc. for use in connection with the BUZZ Index.
BUZZ US Sentiment Leaders ETF is not sponsored, endorsed, sold or promoted by BUZZ Indexes, or its shareholders, or the licensor of the BUZZ Index and/or its affiliates and third party licensors. BUZZ Indexes makes no representation or warranty, express or implied, to the owners of the BUZZ US Sentiment Leaders ETF or any member of the public regarding the advisability of investing in securities generally or in BUZZ US Sentiment Leaders ETF, particularly or the ability of the BUZZ Index to track general market performance.
BUZZ Indexes’ only relationship to ALPS Advisors, Inc. with respect to the BUZZ Index is the licensing of the BUZZ Index and certain trademarks of BUZZ Indexes. The BUZZ Indexes are determined and composed by BUZZ Indexes without regard to ALPS Advisors, Inc. or the BUZZ US Sentiment Leaders ETF. BUZZ Indexes has no obligation to take the needs of ALPS Advisors, Inc. or the owners of BUZZ US Sentiment Leaders ETF into consideration in determining and composing the BUZZ Index.
BUZZ Indexes are not responsible for and have not participated in the determination of the prices of BUZZ US Sentiment Leaders ETF or the timing of the issuance or sale of securities of BUZZ US Sentiment Leaders ETF or in the determination or calculation of the equation by which BUZZ US Sentiment Leaders ETF securities may be converted into cash, surrendered, or redeemed, as the case may be. BUZZ Indexes have no obligation or liability in connection with the administration, marketing or trading of BUZZ US Sentiment Leaders ETF. There is no assurance that investment products based on the BUZZ Index will accurately track index performance or provide positive investment returns.
BUZZ Indexes is not an investment advisor and the inclusion of a security in the BUZZ Index is not a recommendation by BUZZ Indexes to buy, sell, or hold such security, nor should it be considered investment advice.
16 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Additional Information | May 31, 2018 (Unaudited) |
BUZZ INDEXES DOES NOT GUARANTEE THE ADEQUACY, ACCURACY, TIMELINESS AND/OR THE COMPLETENESS OF THE BUZZ INDEX OR ANY DATA RELATED THERETO OR ANY COMMUNICATION WITH RESPECT THERETO, INCLUDING BUT NOT LIMITED TO, ORAL OR WRITTEN COMMUNICATION (INCLUDING ELECTRONIC COMMUNICATIONS). BUZZ INDEXES SHALL NOT BE SUBJECT TO ANY DAMAGES OR LIABILITY FOR ANY ERRORS, OMISSIONS, OR DELAYS THEREIN. BUZZ INDEXES MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES, OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OR USE OR AS TO RESULTS TO BE OBTAINED BY ALPS ADVISORS, INC., OWNERS OF THE BUZZ US SENTIMENT LEADERS ETF, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE BUZZ INDEX OR WITH RESPECT TO ANY DATA RELATED THERETO. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT WHATSOEVER SHALL BUZZ INDEXES BE LIABLE FOR ANY INDIRECT, SPECIAL, INCIDENTAL, PUNITIVE, OR CONSEQUENTIAL DAMAGES INCLUDING BUT NOT LIMITED TO, LOSS OF PROFITS, TRADING LOSSES, LOST TIME OR GOODWILL, EVEN IF THEY HAVE BEEN ADVISED OF THE POSSIBILITY OF SUCH DAMAGES, WHETHER IN CONTRACT, TORT, STRICT LIABILITY, OR OTHERWISE. THERE ARE NO THIRD PARTY BENEFICIARIES OF ANY AGREEMENTS OR ARRANGEMENTS BETWEEN BUZZ INDEXES AND ALPS ADVISORS, INC., OTHER THAN THE LICENSORS OF BUZZ INDEXES.
The Adviser does not guarantee the accuracy and/or the completeness of the Underlying Index or any data included therein, and the Adviser shall have no liability for any errors, omissions or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by the Fund, owners of the Shares of the Fund or any other person or entity from the use of the Underlying Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect, or consequential damages (including lost profits) arising out of matters relating to the use of the Underlying Index, even if notified of the possibility of such damages.
17 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
At an in-person meeting held on March 5, 2018, the Board of Trustees of the Trust (the “Board” or the “Trustees”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve each of (i) the continuance of the investment advisory agreement between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect to the BUZZ US Sentiment Leaders ETF (“BUZ” or “the Fund”) (the “Existing Advisory Agreement”); (ii) a new investment advisory agreement between the Adviser and the Trust on behalf of the Fund (the “New Advisory Agreement”); and (iii) an interim investment advisory agreement between the Adviser and the Trust on behalf of the Fund (the “Interim Advisory Agreement” and together with the Existing Advisory Agreement and New Advisory Agreement, the “Advisory Agreements”). The Independent Trustees also met separately to consider the Advisory Agreements.
Consideration by the Board of the New Advisory Agreement and Interim Advisory Agreement was necessary because DST Systems, Inc. (“DST”), the ultimate parent company to the Adviser, had had entered into an agreement to be acquired by SS&C Technologies Holdings, Inc. (“SS&C”) (the “Transaction”). Because the Adviser would be acquired along with DST, the closing of the Transaction (the “Closing”) may be deemed a change in control with respect to the Adviser. The Closing occurred on April 16, 2018. This change in control with respect to the Adviser may be deemed to trigger an “assignment” of the Existing Advisory Agreement under the Investment Company Act of 1940, as amended (the “1940 Act”). As required by the 1940 Act, the Existing Advisory Agreement provides for its automatic termination in the event of an assignment, and therefore, the Existing Advisory Agreement automatically terminated upon Closing. In order for the Adviser to continue as the Fund’s investment adviser, the Board and the Fund’s shareholders must approve the New Advisory Agreement which would take effect, if approved, upon the date of such shareholder approval. As of the date of this report, the New Advisory Agreement has not received shareholder approval and efforts to secure such shareholder approval are ongoing. The Interim Advisory Agreement approved by the Board permits the Adviser to continue as investment adviser to the Fund from the date of the Closing until the Fund’s shareholders approve the New Advisory Agreement, subject to a maximum term of 150 days.
In evaluating the Advisory Agreements with respect to the Fund, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by AAI with respect to the Fund under the Advisory Agreements; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided (or to be provided) by AAI under the Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Advisory Agreements, the investment parameters of the index of the Fund, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Fund.
The Independent Trustees reviewed information on the performance of the Fund and its benchmark. The Independent Trustees also evaluated the correlation and tracking error between the underlying index and the Fund’s performance. Based on their review, the Independent Trustees found that the nature and extent of services provided (or to be provided) to the Fund under the Advisory Agreements was appropriate and that the quality was satisfactory.
The Independent Trustees noted that the advisory fee for the Fund was a unitary fee pursuant to which AAI assumes all expenses of the Fund (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
With respect to the advisory fee rate, the Independent Trustees noted the following:
The net advisory fee rate for the Fund is higher than the median of its Broadridge expense group and the Fund’s expense ratio is higher than the median of its Broadridge expense group.
The Independent Trustees took into account, among other things, the unique nature of the Fund’s underlying index.
Based on the foregoing, and the other information available to them, the Independent Trustees concluded that the advisory fee rate for the Fund was reasonable under the circumstances and in light of the quality of the services provided.
The Independent Trustees considered other benefits available to AAI because of its relationship with the Fund and concluded that the advisory fees were reasonable taking into account any such benefits.
18 | May 31, 2018
BUZZ US Sentiment Leaders ETF
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
The Independent Trustees also considered with respect to the Fund the information provided by AAI about the costs and profitability of AAI with respect to the Fund. The Independent Trustees reviewed and noted the relatively small size of the Fund in considering economies of scale that may be realized by AAI. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
In voting to renew the Existing Advisory Agreement and approve the New Advisory Agreement and Interim Advisory Agreement, the Independent Trustees concluded that the terms of each Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
19 | May 31, 2018
TABLE OF CONTENTS |
Performance Overview | 1 |
Disclosure of Fund Expenses | 3 |
Schedule of Investments | 4 |
Statement of Assets & Liabilities | 7 |
Statement of Operations | 8 |
Statements of Changes In Net Assets | 9 |
Financial Highlights | 10 |
Notes to Financial Statements | 11 |
Additional Information | 17 |
Board Considerations Regarding Approval of Investment Advisory Agreements | 18 |
alpsfunds.com
Cohen & Steers Global Realty Majors ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
The Cohen & Steers Global Realty Majors ETF (the “Fund”) seeks investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an index called the Cohen & Steers Global Realty Majors Index (the “Underlying Index”). The Fund will normally invest at least 90% of its total assets in common stocks and other equity securities (which may include American Depositary Receipts (“ADRs”), American Depositary Shares (“ADSs”) and Global Depositary Receipts (“GDRs”)) that comprise the Underlying Index.
The Underlying Index consists of the largest and most liquid securities within the global real estate universe that Cohen & Steers Capital Management, Inc. (“Cohen & Steers” or the “Index Provider”) believes are likely to lead the global securitization of real estate. The Underlying Index is free float and modified market-capitalization weighted, with a limit of 4.0% on any security’s weighting. Underlying Index constituents must have a free float adjusted market-capitalization of $750 million or greater for initial inclusion in the Underlying Index. Cohen & Steers considers country weights relative to each country’s GDP share representing the real estate securities universe and share of the private market for real estate, with up to 10% being allocated to securities of emerging markets. The Underlying Index is rebalanced quarterly.
Performance (as of May 31, 2018)
6 Months | 1 Year | 5 Year | 10 Year | Since Inception^ | |
Cohen & Steers Global Realty Majors ETF - NAV | -1.06% | 3.21% | 4.59% | 3.18% | 2.61% |
Cohen & Steers Global Realty Majors ETF - Market | -1.51% | 3.08% | 4.60% | 2.98% | 2.57% |
Cohen & Steers Global Realty Majors® Index | -0.67% | 3.96% | 5.36% | 3.94% | 3.42% |
FTSE EPRA/ NAREIT Developed Real Estate Index | 0.76% | 5.98% | 5.98% | 4.25% | 3.73% |
S&P 500® Total Return Index | 3.16% | 14.38% | 12.98% | 9.14% | 9.15% |
Total Expense Ratio (per the current Prospectus) 0.55%
Data quoted represents past performance, which is no guarantee of future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The Fund's portfolio holdings are subject to change without notice. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.513.5856.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | Fund Inception May 7, 2008. |
* | Market Price is based on the midpoint of the bid/ask spread at 4p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Risks of Investing in Real Estate Securities
Risks of investing in real estate securities are similar to those associated with direct investments in real estate, including falling property values due to increasing vacancies or declining rents resulting from economic, legal, political or technological developments, lack of liquidity, limited diversification and sensitivity to certain economic factors such as interest rate changes and market recessions. Foreign securities involve special risks, including currency fluctuations, lower liquidity, political and economic uncertainties, and differences in accounting standards. Some international securities may represent small- and medium-sized companies, which may be more susceptible to price volatility and less liquidity than larger companies.
Cohen & Steers Global Realty Majors® Index: A free-float adjusted, modified market capitalization-weighted index of global real estate equities. The modified market capitalization weighting approach and qualitative screening process emphasize those companies that, in the opinion of the Cohen & Steers investment committee, are leading the securitization of real estate globally.
FTSE EPRA/NAREIT Developed Real Estate Index: An unmanaged market-weighted total return index that consists of many companies from developed markets whose floats are larger than $100 million and which derive more than half of their revenue from property-related activities.
S&P 500® Total Return Index: The Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
The indexes are not actively managed and do not reflect any deductions for fees, expenses or taxes. Total return assumes reinvestment of any dividends and distributions realized during a given time period. One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The Cohen & Steers Global Realty Majors ETF is not suitable for all investors. An investor should consider investment objectives, risks, charges and expenses carefully before investing. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the Cohen & Steers Global Realty Majors ETF.
ALPS Portfolio Solutions Distributor, Inc. is not affiliated with Cohen & Steers.
1 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018)
Simon Property Group, Inc. | 4.03% |
American Tower Corp. | 3.99% |
ProLogis, Inc. | 3.80% |
Public Storage | 3.52% |
Equinix, Inc. | 3.49% |
Unibail-Rodamco SE | 3.35% |
Sun Hung Kai Properties, Ltd. | 2.95% |
Mitsubishi Estate Co., Ltd. | 2.80% |
Mitsui Fudosan Co., Ltd. | 2.76% |
Vonovia SE | 2.67% |
Total % of Top 10 Holdings | 33.36% |
* | % of Total Investments. |
Future holdings are subject to change.
Country Allocation* (as of May 31, 2018)
United States | 53.02% |
Hong Kong | 11.40% |
Japan | 8.92% |
Australia | 6.29% |
France | 5.80% |
Germany | 5.51% |
United Kingdom | 4.11% |
Singapore | 2.30% |
Canada | 1.14% |
Sweden | 0.49% |
Switzerland | 0.41% |
Spain | 0.38% |
Brazil | 0.23% |
Total | 100.00% |
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
2 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Disclosure of Fund Expenses | May 31, 2018 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, 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. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through May 31, 2018.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values 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 ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. Therefore, the second line is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 12/1/17 | Ending Account Value 5/31/18 | Expense Ratio(a) | Expenses Paid During Period 12/1/17 - 5/31/18(b) | |
Cohen & Steers Global Realty Majors ETF | ||||
Actual | $ 1,000.00 | $ 989.40 | 0.55% | $ 2.73 |
Hypothetical (5% return before expenses) | $ 1,000.00 | $ 1,022.19 | 0.55% | $ 2.77 |
(a) | Annualized, based on the Fund's most recent fiscal half-year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. |
3 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.02%) | ||||||||
Australia (6.23%) | ||||||||
Dexus | 65,403 | $ | 489,170 | |||||
Goodman Group | 103,940 | 734,168 | ||||||
The GPT Group | 116,360 | 442,626 | ||||||
OneMarket, Ltd.(a) | 6,192 | 7,164 | ||||||
Scentre Group, Ltd. | 345,298 | 1,091,531 | ||||||
Stockland | 157,878 | 495,490 | ||||||
Vicinity Centres | 208,344 | 420,686 | ||||||
Total Australia | 3,680,835 | |||||||
Brazil (0.23%) | ||||||||
Multiplan Empreendimentos Imobiliarios SA | 8,678 | 136,576 | ||||||
Canada (1.13%) | ||||||||
Allied Properties Real Estate Investment Trust | 6,028 | 197,632 | ||||||
Boardwalk Real Estate Investment Trust | 2,427 | 88,893 | ||||||
RioCan Real Estate Investment Trust | 20,821 | 378,170 | ||||||
Total Canada | 664,695 | |||||||
France (5.74%) | ||||||||
Fonciere Des Regions | 3,509 | 366,121 | ||||||
Gecina SA | 3,121 | 539,994 | ||||||
Klepierre | 13,438 | 523,447 | ||||||
Unibail-Rodamco SE | 8,716 | 1,961,880 | ||||||
Total France | 3,391,442 | |||||||
Germany (5.46%) | ||||||||
alstria office REIT-AG | 9,164 | 135,307 | ||||||
Deutsche Wohnen AG | 23,002 | 1,079,116 | ||||||
LEG Immobilien AG | 4,063 | 445,346 | ||||||
Vonovia SE | 33,092 | 1,561,376 | ||||||
Total Germany | 3,221,145 | |||||||
Hong Kong (11.30%) | ||||||||
China Overseas Land & Investment, Ltd. | 249,000 | 833,365 | ||||||
CK Asset Holdings, Ltd. | 170,000 | 1,419,701 | ||||||
Hang Lung Properties, Ltd. | 131,000 | 297,302 | ||||||
Hongkong Land Holdings, Ltd. | 76,400 | 554,664 | ||||||
Link REIT | 140,664 | 1,244,655 | ||||||
Sun Hung Kai Properties, Ltd. | 107,000 | 1,727,127 | ||||||
Wharf Real Estate Investment Co., Ltd. | 77,000 | 594,445 | ||||||
Total Hong Kong | 6,671,259 | |||||||
Japan (8.84%) | ||||||||
Japan Real Estate Investment Corp. | 87 | 456,653 | ||||||
Japan Retail Fund Investment Corp. | 168 | 304,851 | ||||||
Mitsubishi Estate Co., Ltd. | 90,300 | 1,640,234 | ||||||
Mitsui Fudosan Co., Ltd. | 64,300 | 1,616,588 | ||||||
Nippon Building Fund, Inc. | 93 | 521,487 | ||||||
Nippon Prologis REIT, Inc. | 143 | 298,396 |
4 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Japan (8.84%) (continued) | ||||||||
Nomura Real Estate Master Fund, Inc. | 273 | $ | 382,453 | |||||
Total Japan | 5,220,662 | |||||||
Singapore (2.28%) | ||||||||
Ascendas Real Estate Investment Trust | 155,805 | 308,386 | ||||||
CapitaLand Mall Trust | 178,047 | 275,279 | ||||||
CapitaLand, Ltd. | 165,000 | 426,411 | ||||||
City Developments, Ltd. | 40,100 | 335,752 | ||||||
Total Singapore | 1,345,828 | |||||||
Spain (0.38%) | ||||||||
Inmobiliaria Colonial Socimi SA | 20,878 | 221,864 | ||||||
Sweden (0.48%) | ||||||||
Castellum AB | 17,723 | 284,562 | ||||||
Switzerland (0.41%) | ||||||||
PSP Swiss Property AG | 2,615 | 239,584 | ||||||
United Kingdom (4.08%) | ||||||||
British Land Co. PLC | 64,502 | 581,357 | ||||||
Derwent London PLC | 7,198 | 287,921 | ||||||
Hammerson PLC | 51,449 | 374,114 | ||||||
Land Securities Group PLC | 48,729 | 602,176 | ||||||
Segro PLC | 64,563 | 561,823 | ||||||
Total United Kingdom | 2,407,391 | |||||||
United States (52.46%) | ||||||||
Alexandria Real Estate Equities, Inc. | 6,564 | 819,975 | ||||||
American Campus Communities, Inc. | 8,856 | 355,126 | ||||||
American Homes 4 Rent, Class A | 16,372 | 326,130 | ||||||
American Tower Corp. | 16,872 | 2,334,579 | ||||||
AvalonBay Communities, Inc. | 8,947 | 1,481,086 | ||||||
Boston Properties, Inc. | 10,011 | 1,219,039 | ||||||
Digital Realty Trust, Inc. | 13,305 | 1,430,021 | ||||||
Douglas Emmett, Inc. | 10,343 | 398,102 | ||||||
Duke Realty Corp. | 23,161 | 651,287 | ||||||
Equinix, Inc. | 5,140 | 2,039,809 | ||||||
Equity LifeStyle Properties, Inc. | 5,749 | 522,584 | ||||||
Equity Residential | 23,832 | 1,525,010 | ||||||
Essex Property Trust, Inc. | 4,281 | 1,023,287 | ||||||
Extra Space Storage, Inc. | 8,146 | 784,053 | ||||||
Federal Realty Investment Trust | 4,756 | 565,441 | ||||||
Highwoods Properties, Inc. | 6,702 | 320,557 | ||||||
Host Hotels & Resorts, Inc. | 47,641 | 1,030,475 | ||||||
Kilroy Realty Corp. | 6,452 | 491,320 | ||||||
National Retail Properties, Inc. | 9,985 | 413,679 | ||||||
Park Hotels & Resorts, Inc. | 13,015 | 419,343 | ||||||
ProLogis, Inc. | 34,570 | 2,224,580 | ||||||
Public Storage | 9,726 | 2,060,356 | ||||||
Realty Income Corp. | 18,435 | 982,586 | ||||||
Regency Centers Corp. | 9,654 | 560,704 | ||||||
Simon Property Group, Inc. | 14,711 | 2,356,996 | ||||||
SL Green Realty Corp. | 5,858 | 571,272 |
5 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
United States (52.46%) (continued) | ||||||||
UDR, Inc. | 17,438 | $ | 635,964 | |||||
Ventas, Inc. | 23,048 | 1,259,804 | ||||||
Vornado Realty Trust | 11,219 | 782,076 | ||||||
Welltower, Inc. | 23,991 | 1,383,081 | ||||||
Total United States | 30,968,322 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $51,523,167) | 58,454,165 |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.09%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | 1.669 | % | 55,710 | 55,710 | ||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $55,710) | 55,710 | |||||||||||
TOTAL INVESTMENTS (99.11%) | ||||||||||||
(Cost $51,578,877) | $ | 58,509,875 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.89%) | 525,271 | |||||||||||
NET ASSETS (100.00%) | $ | 59,035,146 |
(a) | Non-income producing security. |
See Notes to Financial Statements.
6 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Statement of Assets and Liabilities | May 31, 2018 (Unaudited) |
ASSETS: | ||||
Investments, at value | $ | 58,509,875 | ||
Cash held in escrow account (Note 3) | 12,634 | |||
Foreign currency, at value (Cost $396,429) | 396,429 | |||
Receivable for investments sold | 4,966 | |||
Foreign tax reclaims | 45,721 | |||
Dividends receivable | 106,786 | |||
Total Assets | 59,076,411 | |||
LIABILITIES: | ||||
Payable for investments purchased | 271 | |||
Payable to adviser | 40,994 | |||
Total Liabilities | 41,265 | |||
NET ASSETS | $ | 59,035,146 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 57,911,373 | ||
Accumulated net investment loss | (1,608,801 | ) | ||
Accumulated net realized loss | (4,196,853 | ) | ||
Net unrealized appreciation | 6,929,427 | |||
NET ASSETS | $ | 59,035,146 | ||
INVESTMENTS, AT COST | $ | 51,578,877 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 59,035,146 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 1,350,000 | |||
Net Asset Value, offering and redemption price per share | $ | 43.73 |
See Notes to Financial Statements.
7 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Statement of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 1,174,222 | ||
Total Investment Income | 1,174,222 | |||
EXPENSES: | ||||
Investment adviser fees | 171,806 | |||
Total Expenses | 171,806 | |||
NET INVESTMENT INCOME | 1,002,416 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 217,880 | |||
Net realized loss on foreign currency transactions | (1,303 | ) | ||
Total net realized gain | 216,577 | |||
Net change in unrealized depreciation on investments | (1,976,774 | ) | ||
Net change in unrealized depreciation on translation of assets and liabilities denominated in foreign currencies | (1,206 | ) | ||
Total net change in unrealized depreciation | (1,977,980 | ) | ||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (1,761,403 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (758,987 | ) |
(a) | Net of foreign tax withholding of $59,526. |
See Notes to Financial Statements.
8 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,002,416 | $ | 1,267,980 | ||||
Net realized gain | 216,577 | 5,272,774 | ||||||
Net change in unrealized appreciation/(depreciation) | (1,977,980 | ) | 2,684,359 | |||||
Net increase/(decrease) in net assets resulting from operations | (758,987 | ) | 9,225,113 | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (1,748,966 | ) | (1,968,767 | ) | ||||
Total distributions | (1,748,966 | ) | (1,968,767 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Cost of shares redeemed | (6,507,080 | ) | (19,756,525 | ) | ||||
Net decrease from share transactions | (6,507,080 | ) | (19,756,525 | ) | ||||
Net decrease in net assets | (9,015,033 | ) | (12,500,179 | ) | ||||
NET ASSETS: | ||||||||
Beginning of period | 68,050,179 | 80,550,358 | ||||||
End of period * | $ | 59,035,146 | $ | 68,050,179 | ||||
*Including accumulated net investment loss of: | $ | (1,608,801 | ) | $ | (862,251 | ) | ||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,500,000 | 1,950,000 | ||||||
Shares sold | – | – | ||||||
Shares redeemed | (150,000 | ) | (450,000 | ) | ||||
Shares outstanding, end of year | 1,350,000 | 1,500,000 |
See Notes to Financial Statements.
9 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Year Ended November 30, 2014 | For the Year Ended November 30, 2013 | |||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 45.37 | $ | 41.31 | $ | 42.25 | $ | 44.07 | $ | 39.32 | $ | 39.59 | ||||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||||||
Net investment income(a) | 0.70 | 0.75 | 1.24 | 1.41 | 0.92 | 0.94 | ||||||||||||||||||
Net realized and unrealized gain/(loss) | (1.17 | ) | 4.45 | (0.90 | ) | (1.57 | ) | 4.85 | 1.25 | |||||||||||||||
Total from investment operations | (0.47 | ) | 5.20 | 0.34 | (0.16 | ) | 5.77 | 2.19 | ||||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||||||
From net investment income | (1.17 | ) | (1.14 | ) | (1.28 | ) | (1.66 | ) | (1.02 | ) | (2.27 | ) | ||||||||||||
From tax return of capital | – | – | – | – | – | (0.19 | ) | |||||||||||||||||
Total distributions | (1.17 | ) | (1.14 | ) | (1.28 | ) | (1.66 | ) | (1.02 | ) | (2.46 | ) | ||||||||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | (1.64 | ) | 4.06 | (0.94 | ) | (1.82 | ) | 4.75 | (0.27 | ) | ||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 43.73 | $ | 45.37 | $ | 41.31 | $ | 42.25 | $ | 44.07 | $ | 39.32 | ||||||||||||
TOTAL RETURN(b) | (1.06 | )% | 12.77 | % | 0.61 | % | (0.38 | )% | 14.90 | % | 5.60 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||
Net assets, end of period (000s) | $ | 59,035 | $ | 68,050 | $ | 80,550 | $ | 99,298 | $ | 96,953 | $ | 108,137 | ||||||||||||
Ratio of expenses to average net assets | 0.55 | %(c) | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | 0.55 | % | ||||||||||||
Ratio of net investment income to average net assets | 3.20 | %(c) | 1.71 | % | 2.86 | % | 3.24 | % | 2.21 | % | 2.31 | % | ||||||||||||
Portfolio turnover rate(d) | 9 | % | 10 | % | 8 | % | 7 | % | 11 | % | 10 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year is not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
10 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of May 31, 2018, the Trust consisted of twenty separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the Cohen & Steers Global Realty Majors ETF (the “Fund”). The investment objective of the Fund is to seek investment results that correspond generally to the performance, before the Fund’s fees and expenses, of an index called the Cohen & Steers Global Realty Majors Index (the “Underlying Index”). The investment advisor uses a “passive” or indexing approach to try to achieve the Fund’s investment objective. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The Fund’s Shares (“Shares”) are listed on the NYSE Arca, Inc. (the "NYSE Arca"). The Fund issues and redeems Shares at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the New York Stock Exchange (the “NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“NASDAQ”) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and asked prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the latest quoted sale price in such market.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
11 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
B. Fair Value Measurements
The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund’s investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their NAV each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 - | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 - | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 - | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Fund’s investments as of May 31, 2018:
Investments in Securities at Value* | Level 1- Unadjusted Quoted Prices | Level 2- Other Significant Observable Inputs | Level 3- Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 58,454,165 | $ | – | $ | – | $ | 58,454,165 | ||||||||
Short Term Investments | 55,710 | – | – | 55,710 | ||||||||||||
TOTAL | $ | 58,509,875 | $ | – | $ | – | $ | 58,509,875 |
* | For a detailed geographical breakdown, see the accompanying Schedule of Investments. |
The Fund recognizes transfers between levels as of the end of the period. For the six months ended May 31, 2018, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
C. Foreign Securities
The Fund may directly purchase securities of non-U.S. issuers. Investing in securities of non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers, including, among others, less liquidity generally, greater market volatility than U.S. securities and less complete financial information than for U.S. issuers. In addition, adverse political, economic or social developments could undermine the value of the Fund’s investments or prevent the Fund from realizing the full value of its investments. Financial reporting standards for companies based in foreign markets differ from those in the United States. Finally, the value of the currency of the country in which the Fund has invested could decline relative to the value of the U.S. dollar, which may affect the value of the investment to U.S. investors.
12 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
D. Foreign Currency Translation
The books and records of the Fund are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.
E. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date, net of any foreign taxes withheld. Interest income, if any, is recorded on the accrual basis.
F. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid quarterly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
G. Real Estate Investment Trusts (“REITs”)
As part of its investments in real estate related securities, the Fund will invest in REITs and is subject to certain risks associated with direct investment in REITs. REITs possess certain risks which differ from an investment in common stocks. REITs are financial vehicles that pool investors’ capital to acquire, develop and/or finance real estate and provide services to their tenants. REITs may concentrate their investments in specific geographic areas or in specific property types, e.g., regional malls, shopping centers, office buildings, apartment buildings and industrial warehouses. REITs may be affected by changes in the value of their underlying properties and by defaults by borrowers or tenants. REITs depend generally on their ability to generate cash flow to make distributions to shareowners, and certain REITs have self-liquidation provisions by which mortgages held may be paid in full and distributions of capital returns may be made at any time.
As REITs generally pay a higher rate of dividends than most other operating companies, to the extent application of the Fund’s investment strategy results in the Fund investing in REIT shares, the percentage of the Fund’s dividend income received from REIT shares will likely exceed the percentage of the Fund’s portfolio that is comprised of REIT shares. Distributions received by the Fund from REITs may consist of dividends, capital gains and/or return of capital.
Dividend income from REITs is recognized on the ex-dividend date. The calendar year-end amounts of ordinary income, capital gains, and return of capital included in distributions received from the Fund’s investments in REITs are reported to the Fund after the end of the calendar year; accordingly, the Fund estimates these amounts for accounting purposes until the characterization of REIT distributions is reported to the Fund after the end of the calendar year. Estimates are based on the most recent REIT distribution information available.
The performance of a REIT may be affected by its failure to qualify for tax-free pass-through of income under the Internal Revenue Code of 1986, as amended (the “Code”), or its failure to maintain exemption from registration under the 1940 Act. Due to the Fund’s investments in REITs, the Fund may also make distributions in excess of the Fund’s earnings and capital gains. Distributions, if any, in excess of the Fund’s earnings and profits will first reduce the adjusted tax basis of a holder’s shares and, after that basis has been reduced to zero, will constitute capital gains to the shareholder.
H. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2018.
The tax character of the distribution paid during the fiscal year ended November 30, 2017 were as follows:
Ordinary Income | ||||
November 30, 2017 | ||||
Cohen & Steers Global Realty Majors ETF | $ | 1,968,767 |
13 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Under the Regulated Investment Company Modernization Act of 2010 (“the Modernization Act”), net capital losses recognized in tax years beginning after December 22, 2010 may be carried forward indefinitely, and the character of the losses is retained as short-term and/or long-term. Under the law in effect prior to the Modernization Act, net capital losses were carried forward for eight years and treated as short-term. As a transition rule, the Modernization Act requires that post-enactment net capital losses be used before pre-enactment net capital losses. Additionally, post-enactment capital losses that are carried forward will retain their character as either short-term or long-term losses rather than being considered all short-term as under previous law.
At November 30, 2017, the Fund had available for tax purposes unused pre-enactment capital loss carryforwards as follows:
Fund | Expiring in 2018 | |||
Cohen & Steers Global Realty Majors ETF | $ | 187,815 |
At November 30, 2017, the Fund had available for tax purposes unused post-enactment capital loss carryforwards as follows:
Fund | Short-Term | Long-Term | ||||||
Cohen & Steers Global Realty Majors ETF | $ | 1,135,828 | $ | 2,562,321 |
As of May 31, 2018, the cost of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Gross appreciation (excess of value over tax cost) | $ | 8,570,065 | ||
Gross depreciation (excess of tax cost over value) | (2,068,020 | ) | ||
Net unrealized appreciation (depreciation) | 6,502,045 | |||
Cost of investments for income tax purposes | $ | 52,007,830 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses due to wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of May 31, 2018
I. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the six months ended May 31, 2018, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
J. Lending of Portfolio Securities
The Fund has entered into a securities lending agreement with State Street Bank & Trust Co. (“SSB”), the Fund’s lending agent. The Fund may lend its portfolio securities only to borrowers that are approved by SSB. The Fund will limit such lending to not more than 33 1/3% of the value of its total assets. The Fund’s securities held at SSB as custodian shall be available to be lent except those securities the Fund or ALPS Advisors, Inc. specifically identifies in writing as not being available for lending. The borrower pledges and maintains with the Fund collateral consisting of cash (U.S. Dollars only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and cash equivalents (including irrevocable bank letters of credit) issued by a person other than the borrower or an affiliate of the borrower. The initial collateral received by the Fund is required to have a value of no less than 102% of the market value of the loaned securities for U.S equity securities and a value of no less than 105% of the market value for non-U.S. equity securities. The collateral is maintained thereafter, at a market value equal to not less than 102% of the current value of the U.S. equity securities on loan and not less than 105% of the current value of the non-U.S. equity securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to the Fund on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the customary time period for settlement of securities transactions.
14 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments and is reflected in the Statement of Assets and Liabilities as a payable for collateral upon return of securities loaned. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Fund’s Statement of Assets and Liabilities as it is held by the lending agent on behalf of the Fund, and the Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations. As of May 31, 2018, the Fund had no securities on loan.
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as the Fund’s investment adviser pursuant to an Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.55% of the Fund’s average daily net assets. From time to time, the Adviser may waive all or a portion of its fee.
Capitalized terms used but not defined within this paragraph, shall have the respective meanings given to them in the Board Considerations Regarding Approval of Investment Advisory Agreement section of this Semi-Annual Report (“Board Considerations”). As discussed in the Board Considerations, the Adviser is an indirect wholly owned subsidiary of DST and on April 16, 2018, DST was acquired by SS&C resulting in a change of control of the Adviser. As discussed in the Board Considerations, in order for the Adviser to continue to serve as the investment adviser to the applicable Fund, among other approvals, the Board approved an Interim Advisory Agreement between the Adviser and the Trust, on behalf of the Funds. The Interim Advisory Agreement is effective for the earlier of 150 days from the close of the Transaction or the date of shareholder approval of the New Advisory Agreement. Under the terms of the Interim Advisory Agreement, the unitary management fee paid to the Adviser will be held in escrow until shareholder approval of the New Advisory Agreement is obtained and is reported as Cash held in escrow account on the Statement of Assets and Liabilities.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all the Fund's expenses and to compensate the Adviser for providing services for the Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee for regularly scheduled meetings of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, both the Chairman of the Board and Chairman of the Audit Committee each receives a quarterly retainer of $2,000, in connection with their respective roles.
15 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Notes to Financial Statements | May 31, 2018 (Unaudited) |
4. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2018, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Purchases | Sales | ||||||
$ | 5,550,898 | $ | 6,770,075 |
For the six months ended May 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Purchases | Sales | ||||||
$ | – | $ | 6,479,660 |
For the six months ended May 31, 2018, the Cohen and Steers Global Realty Majors ETF had in-kind net realized gains of $1,254,241.
Gains on in-kind transactions are not considered taxable for federal income tax purposes and losses on in-kind transactions are also not deductible for tax purposes.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 Shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of the Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
6. SUBSEQUENT EVENTS
A Special Meeting of Shareholders of the Fund, a series of the Trust, was held at the offices of ALPS Fund Services, Inc., at 1290 Broadway, Suite 1100, Denver, CO 80203 on May 31, 2018 and adjourned to June 29, 2018. At the meeting, the following matters were voted on by the Shareholders. The results of the Special Meeting of Shareholders are noted below:
Proposal 1: To approve a new investment advisory agreement (the “New Advisory Agreement”) between the Trust, on behalf of the Fund, and the Adviser.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
Cohen & Steers Global Realty Majors ETF | 685,086 | 42,758 | Yes |
Proposal 2: To approve a proposal that would authorize the Adviser to enter into and materially amend sub-advisory agreements in the future with wholly-owned sub-advisers and unaffiliated sub-advisers, with the approval of the Board, but without obtaining additional Shareholder approval.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
Cohen & Steers Global Realty Majors ETF | 449,771 | 278,073 | No |
16 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Additional Information | May 31, 2018 (Unaudited) |
PROXY VOTING POLICIES AND PROCEDURES
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-675-2639.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of the Fund’s portfolio holdings with the SEC on Form N-Q. Forms N-Q for the Fund are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s Forms N-Q are available without charge, upon request, by calling (toll-free) 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Fund designated the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2017:
Qualified Dividend Income | Dividend Received Deduction | |
Cohen and Steers Global Realty Majors ETF | 15.06% | 0.00% |
In early 2018, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2017 via Form 1099. The Fund will notify shareholders in early 2019 of amounts paid to them by the Fund, if any, during the calendar year 2018.
LICENSING AGREEMENT
Cohen & Steers is the Index Provider for the Cohen & Steers Global Realty Majors ETF. Cohen & Steers is not affiliated with the Trust, the Adviser or the Distributor. ALPS, an affiliate of the Adviser, and the Trust have entered into a license agreement with Cohen & Steers to use the Index.
THE FUND IS NOT SPONSORED, MANAGED OR ADVISED BY COHEN & STEERS CAPTIAL MANAGEMENT, INC. (“C&S”). C&S MAKES NO REPRESENTATION OR WARRANTY, EXPRESS OR IMPLIED, TO THE SHAREHOLDERS OF THE FUND OR ANY MEMBER OF THE PUBLIC REGARDING THE ADVISABILITY OF INVESTING IN SECURITIES GENERALLY OR IN THE FUND PARTICULARLY OR THE ABILITY OF THE COHEN & STEERS GLOBAL REALTY MAJORS INDEX TO TRACK PERFORMANCE OF A MARKET OR SECTOR. C&S’S ONLY RELATIONSHIP TO ALPS IS IN RELATION TO THE LICENSING OF CERTAIN TRADEMARKS AND TRADE NAMES OF C&S AND OF ONE OR MORE C&S INDEXES, INCLUDING THE COHEN & STEERS GLOBAL REALTY MAJORS INDEX WHICH IS DETERMINED, COMPOSED AND CALCULATED BY C&S WITHOUT REGARD TO ALPS OR THE FUND. C&S HAS NO OBLIGATION TO TAKE THE NEEDS OF ALPS, THE FUND OR THE FUND SHAREHOLDERS INTO CONSIDERATION IN DETERMINING, COMPOSING OR CALCULATING THE COHEN & STEERS GLOBAL REALTY MAJORS INDEX. C&S IS NOT RESPONSIBLE FOR AND HAS NOT PARTICIPATED IN THE TIMING OF THE ISSUANCE OR SALE OF FUND SHARES OR IN THE DETERMINATION OR CALCULATION OF THE VALUATION OF THE FUND’S ASSETS. C&S HAS NO OBLIGATION OR LIABILITY IN CONNECTION WITH THE ADMINISTRATION, MARKETING OR PORTFOLIO MANAGEMENT OF THE FUND. C&S DOES NOT GUARANTEE THE ACCURACY AND/OR THE COMPLETENESS OF THE COHEN & STEERS GLOBAL REALTY MAJORS INDEX OR ANY DATA INCLUDED THEREIN AND C&S SHALL HAVE NO LIABILITY FOR ANY ERRORS, OMISSIONS, OR INTERRUPTIONS THEREIN. C&S MAKES NO WARRANTY, EXPRESS OR IMPLIED, AS TO RESULTS TO BE OBTAINED BY ALPS, THE FUND, FUND SHAREHOLDERS, OR ANY OTHER PERSON OR ENTITY FROM THE USE OF THE COHEN & STEERS GLOBAL REALTY MAJORS INDEX OR ANY DATA INCLUDED THEREIN. C&S MAKES NO EXPRESS OR IMPLIED WARRANTIES, AND EXPRESSLY DISCLAIMS ALL WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE OF USE WITH RESPECT TO THE COHEN & STEERS GLOBAL REALTY MAJORS INDEX OR ANY DATA INCLUDED THEREIN. WITHOUT LIMITING ANY OF THE FOREGOING, IN NO EVENT SHALL C&S HAVE ANY LIABILITY FOR ANY SPECIAL, PUNITIVE, INDIRECT OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS) RESULTING FROM THE USE OF THE COHEN & STEERS GLOBAL REALTY MAJORS INDEX OR ANY DATA INCLUDED THEREIN, EVEN IF NOTIFIED OF THE POSSIBILITY OF SUCH DAMAGES.
The Advisor does not guarantee the accuracy and/or the completeness of the Index or any data included therein, and the Advisor shall have no liability for any errors, omissions or interruptions therein. The Advisor makes no warranty, express or implied, as to results to be obtained by the Fund, owners of the Shares of the Fund or any other person or entity from the use of the Index or any data included therein. The Advisor makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Index or any data included therein. Without limiting any of the foregoing, in no event shall the Advisor have any liability for any special, punitive, direct, indirect or consequential damages (including lost profits) arising out of matters relating to the use of the Index even if notified of the possibility of such damages.
17 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
At an in-person meeting held on March 5, 2018, the Board of Trustees of the Trust (the “Board” or the “Trustees”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve each of (i) the continuance of the investment advisory agreement between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect to the Cohen & Steers Global Realty Majors ETF (“GRI” or “the Fund”) (the “Existing Advisory Agreement”); (ii) a new investment advisory agreement between the Adviser and the Trust on behalf of the Fund (the “New Advisory Agreement”); and (iii) an interim investment advisory agreement between the Adviser and the Trust on behalf of the Fund (the “Interim Advisory Agreement” and together with the Existing Advisory Agreement and New Advisory Agreement, the “Advisory Agreements”). The Independent Trustees also met separately to consider the Advisory Agreements.
Consideration by the Board of the New Advisory Agreement and Interim Advisory Agreement was necessary because DST Systems, Inc. (“DST”), the ultimate parent company to the Adviser, had had entered into an agreement to be acquired by SS&C Technologies Holdings, Inc. (“SS&C”) (the “Transaction”). Because the Adviser would be acquired along with DST, the closing of the Transaction (the “Closing”) may be deemed a change in control with respect to the Adviser. The Closing occurred on April 16, 2018. This change in control with respect to the Adviser may be deemed to trigger an “assignment” of the Existing Advisory Agreement under the Investment Company Act of 1940, as amended (the “1940 Act”). As required by the 1940 Act, the Existing Advisory Agreement provides for its automatic termination in the event of an assignment, and therefore, the Existing Advisory Agreement automatically terminated upon Closing. In order for the Adviser to continue as the Fund’s investment adviser, the Board and the Fund’s shareholders must approve the New Advisory Agreement which would take effect, if approved, upon the date of such shareholder approval. As of the date of this report, the New Advisory Agreement has not received shareholder approval and efforts to secure such shareholder approval are ongoing. The Interim Advisory Agreement approved by the Board permits the Adviser to continue as investment adviser to the Fund from the date of the Closing until the Fund’s shareholders approve the New Advisory Agreement, subject to a maximum term of 150 days.
In evaluating the Advisory Agreements with respect to the Fund, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by AAI with respect to the Fund under the Advisory Agreements; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided (or to be provided) by AAI under the Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Advisory Agreements, the investment parameters of the index of the Fund, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Fund.
The Independent Trustees reviewed information on the performance of the Fund and its benchmark. The Independent Trustees also evaluated the correlation and tracking error between the underlying index and the Fund’s performance. Based on their review, the Independent Trustees found that the nature and extent of services provided (or to be provided) to the Fund under the Advisory Agreements was appropriate and that the quality was satisfactory.
The Independent Trustees noted that the advisory fee for the Fund was a unitary fee pursuant to which AAI assumes all expenses of the Fund (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreements, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
With respect to the advisory fee rate, the Independent Trustees noted the following:
The net advisory fee rate for the Fund is higher than the median of its Broadridge expense group and the Fund’s expense ratio is at the median of its Broadridge expense group.
Based on the foregoing, and the other information available to them, the Independent Trustees concluded that the advisory fee rate for the Fund was reasonable under the circumstances and in light of the quality of the services provided.
The Independent Trustees considered other benefits available to AAI because of its relationship with the Fund and concluded that the advisory fees were reasonable taking into account any such benefits.
The Independent Trustees also considered with respect to the Fund the information provided by AAI about the costs and profitability of AAI with respect to the Fund. The Independent Trustees reviewed and noted the relatively small size of the Fund in considering economies of scale that may be realized by AAI. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
18 | May 31, 2018 |
Cohen & Steers Global Realty Majors ETF
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
In voting to renew the Existing Advisory Agreement and approve the New Advisory Agreement and Interim Advisory Agreement, the Independent Trustees concluded that the terms of each Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
19 | May 31, 2018 |
TABLE OF CONTENTS |
Performance Overview | |
RiverFront Dynamic Core Income ETF | 1 |
RiverFront Dynamic Unconstrained Income ETF | 3 |
RiverFront Dynamic US Dividend Advantage ETF | 5 |
RiverFront Dynamic US Flex-Cap ETF | 7 |
RiverFront Strategic Income Fund | 9 |
Disclosure of Fund Expenses | 11 |
Financial Statements | |
Schedule of Investments | |
RiverFront Dynamic Core Income ETF | 12 |
RiverFront Dynamic Unconstrained Income ETF | 17 |
RiverFront Dynamic US Dividend Advantage ETF | 21 |
RiverFront Dynamic US Flex-Cap ETF | 23 |
RiverFront Strategic Income Fund | 25 |
Statements of Assets and Liabilities | 28 |
Statements of Operations | 29 |
Statements of Changes in Net Assets | |
RiverFront Dynamic Core Income ETF | 30 |
RiverFront Dynamic Unconstrained Income ETF | 31 |
RiverFront Dynamic US Dividend Advantage ETF | 32 |
RiverFront Dynamic US Flex-Cap ETF | 33 |
RiverFront Strategic Income Fund | 34 |
Financial Highlights | 35 |
Notes to Financial Statements | 40 |
Additional Information | 49 |
Board Considerations Regarding Approval of Investment Advisory Agreement and Investment Sub-Advisory Agreements | 50 |
alpsfunds.com
RiverFront Dynamic Core Income ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
RiverFront Dynamic Core Income ETF (the “Fund”) seeks total return, with an emphasis on income as the source of that total return. The Fund seeks to achieve its investment objective by investing in a global portfolio of fixed income securities of various maturities, ratings and currency denominations.
Performance Overview
The Fund underperformed its benchmark by 0.21% over the six-month period ended 5/31/18, based on its returns at NAV. The primary source of underperformance was the Fund’s significant overweight to investment grade corporate bonds, which have been one of the worst performing sectors of the fixed income market during this attribution period. Specifically, spreads on the ICE BofA Merrill Lynch US Corporate Bond Index widened 19 basis points over this time. The negative impact of our corporate overweight was partially offset by the Fund’s shorter duration. As of 5/31/18, the Fund’s option-adjusted duration was 5.30 years compared to 5.98 years for its benchmark. Additionally, the average credit quality of the Fund was approximately A-, compared to AA for its benchmark.
Performance (as of May 31, 2018)
6 Months | 1 Year | Since Inception^ | |
RiverFront Dynamic Core Income ETF – NAV | -1.25% | -0.51% | 0.03% |
RiverFront Dynamic Core Income ETF – Market Price* | -1.33% | -0.67% | 0.05% |
Bloomberg Barclays U.S. Aggregate Bond Total Return Index | -1.04% | -0.37% | 0.06% |
Total Expense Ratio (per the current prospectus) 0.52%.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.759.5679.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced operations on June 14, 2016. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixed-rate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM pass-throughs), ABS, and CMBS (agency and non-agency). The index is reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. The index is not actively managed and does not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The RiverFront Dynamic Core Income ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the Distributor for the RiverFront Dynamic Core Income ETF.
1 | May 31, 2018
RiverFront Dynamic Core Income ETF |
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings*^ (as of May 31, 2018)
United States Treasury Strip Principal 0.00%, 02/15/38 | 2.63% |
United States Treasury Bond2.75%, 02/15/2028 | 1.83% |
United States Treasury Bond2.75%, 11/15/2047 | 1.67% |
IBM Credit LLC | 1.29% |
Bank of America Corp. | 1.27% |
United States Treasury Strip Principal | |
0.00%, 11/15/46 | 1.19% |
United States Treasury Inflation Indexed Bonds | |
2.13%, 02/15/2040 | 1.00% |
Flex, Ltd. | 0.96% |
KeyCorp | 0.94% |
Goldman Sachs Group, Inc. | 0.92% |
Total %of Top 10 Holdings | 13.70% |
* | % of Total Investments. |
^ | Excludes Money Market Fund |
Future holdings are subject to change.
Asset Allocation* (as of May 31, 2018)
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Fund’s benchmark
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
2 | May 31, 2018
RiverFront Dynamic Unconstrained Income ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
RiverFront Dynamic Unconstrained Income ETF (the “Fund”) seeks total return, with an emphasis on income as the source of that total return. The Fund seeks to achieve its investment objective by investing in a global portfolio of fixed income securities of various maturities, ratings and currency denominations.
Performance Overview
The Fund underperformed its benchmark by 1.78% over the six months ending 5/31/18, based on its return at NAV. The primary reason for the Fund’s underperformance versus its benchmark was its higher average credit quality. The average credit quality of the fund on 5/31/18 was approximately BB- rated, compared to B+ for its benchmark. This was due to a significant underweight to the lowest rated (CCC) bonds. Over the preceding six months, BB rated bonds fell (1.7%), B rated bonds returned 0.9%, and CCC rated bonds returned 3.6%.
Performance (as of May 31, 2018)
6 Months | 1 Year | Since Inception^ | |
RiverFront Dynamic Unconstrained Income ETF – NAV | -1.76% | 0.12% | 5.04% |
RiverFront Dynamic Unconstrained Income ETF – Market Price* | -1.75% | 0.20% | 5.15% |
BofA Merrill Lynch U.S. High Yield Master II Total Return Index | 0.02% | 2.29% | 7.68% |
Total Expense Ratio (per the current prospectus) 0.52%.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.759.5679.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced operations on June 14, 2016. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
BofA Merrill Lynch U.S. High Yield Master II Index tracks the performance of below-investment grade U.S. dollar-denominated corporate bonds issued in the U.S. Domestic market. The index is reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. The index is not actively managed and does not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The RiverFront Dynamic Unconstrained Income ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the Distributor for the RiverFront Dynamic Unconstrained Income ETF.
3 | May 31, 2018
RiverFront Dynamic Unconstrained Income ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings*^(as of May 31, 2018)
Bombardier, Inc. | 1.24% |
Kindred Healthcare, Inc. | 1.14% |
ServiceMaster Co. LLC | 1.13% |
CNH Industrial NV | 1.13% |
Teva Pharmaceutical Finance Netherlands III BV | 1.12% |
Avantor, Inc. | 1.10% |
Transocean, Inc. | 1.06% |
Berry Global, Inc. | 1.04% |
Vistra Energy Corp. | 1.03% |
Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc. | 1.03% |
Total % of Top 10 Holdings | 11.02% |
* | % of Total Investments. |
^ | Excludes Money Market Fund |
Future holdings are subject to change.
Asset Allocation* (as of May 31, 2018)
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Fund’s benchmark
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
4 | May 31, 2018
RiverFront Dynamic US Dividend Advantage ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
RiverFront Dynamic US Dividend Advantage ETF (the “Fund”) seeks to provide capital appreciation and dividend income. The Fund seeks to achieve its investment objective by investing at least 65% of its net assets in a portfolio of equity securities of publicly traded U.S. companies with the potential for dividend growth. Equity securities include common stocks and common or preferred shares of real estate investment trusts (“REITs”).
Performance Overview
The Fund outperformed its S&P 500 benchmark over the six-month period ended May 31, 2018, due largely to stock selection decisions, within a market which largely ignored short-term geo-political concerns and focused on earnings, cash flow and nominal growth.
Underweights in lagging staples helped offset the dampening impacts of exposure to under-performing dividend-oriented SMID financials. Overall, selection decisions detracted in small and mid-cap discretionary and industrials but were particularly additive in the large-cap industrials and technology spaces.
Performance (as of May 31, 2018)
6 Months | 1 Year | Since Inception^ | |
RiverFront Dynamic US Dividend Advantage ETF – NAV | 3.29% | 16.15% | 15.34% |
RiverFront Dynamic US Dividend Advantage ETF – Market Price* | 3.42% | 16.26% | 15.39% |
S&P 500® Total Return Index | 3.16% | 14.38% | 15.69% |
Total Expense Ratio (per the current prospectus) 0.52%.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.759.5679.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced operations on June 7, 2016. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
S&P 500® Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices. The index is reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. The index is not actively managed and does not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The RiverFront Dynamic US Dividend Advantage ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the Distributor for the RiverFront Dynamic US Dividend Advantage ETF.
5 | May 31, 2018
RiverFront Dynamic US Dividend Advantage ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018)
Apple, Inc. | 3.07% |
Amazon.com, Inc. | 2.82% |
Pfizer, Inc. | 2.42% |
JPMorgan Chase & Co. | 2.20% |
Netflix, Inc. | 2.06% |
Facebook, Inc. | 1.92% |
T Rowe Price Group, Inc. | 1.90% |
Texas Instruments, Inc. | 1.59% |
Bank of America Corp. | 1.51% |
Macy's, Inc. | 1.37% |
Total % of Top 10 Holdings | 20.86% |
* | % of Total Investments. |
Future holdings are subject to change.
Asset Allocation* (as of May 31, 2018)
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Fund’s benchmark
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
6 | May 31, 2018
RiverFront Dynamic US Flex-Cap ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
RiverFront Dynamic US Flex-Cap ETF (the “Fund”) seeks to provide capital appreciation. The Fund seeks to achieve its investment objective by investing at least 65% of its net assets in a portfolio of equity securities of publicly traded U.S. companies. Equity securities include common stocks and common or preferred shares of real estate investment trusts (“REITs”).
Performance Overview
The Fund outperformed its S&P 1500 benchmark over the six-month period ended May 31, 2018, due largely to stock selection decisions, within a market which largely ignored short-term geo-political concerns and focused on earnings, cash flow and nominal growth.
Underweights in lagging large-cap staples and an overweight to small and mid-cap energy helped offset the dampening impacts of exposure to under-performing small and mid-cap industrials. Selection decisions detracted in small and mid-cap discretionary and healthcare but were particularly additive in the large-cap technology and industrials, as well as small and mid-cap financials.
Performance (as of May 31, 2018)
6 Months | 1 Year | Since Inception^ | |
RiverFront Dynamic US Flex-Cap ETF – NAV | 4.11% | 16.87% | 17.01% |
RiverFront Dynamic US Flex-Cap ETF – Market Price* | 4.20% | 16.97% | 17.08% |
S&P Composite 1500® Total Return Index | 3.30% | 14.66% | 15.81% |
Total Expense Ratio (per the current prospectus) 0.52%.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.759.5679.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced operations on June 7, 2016. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
S&P Composite 1500® Index is the Standard & Poor’s broad-based unmanaged capitalization-weighted index comprising 1,500 stocks of Largecap, Mid-cap, and Small-cap U.S. companies. The index is reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. The index is not actively managed and does not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The RiverFront Dynamic US Flex-Cap ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the Distributor for the RiverFront Dynamic US Flex-Cap ETF.
7 | May 31, 2018
RiverFront Dynamic US Flex-Cap ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018)
Apple, Inc. | 4.05% |
Microsoft Corp. | 3.33% |
Amazon.com, Inc. | 2.84% |
Facebook, Inc. | 2.34% |
JPMorgan Chase & Co. | 1.79% |
Alphabet, Inc. | 1.78% |
Johnson & Johnson | 1.43% |
Transocean, Ltd. | 1.34% |
Bank of America Corp. | 1.29% |
Home Depot, Inc. | 1.29% |
Total % of Top 10 Holdings | 21.48% |
* | % of Total Investments. |
Future holdings are subject to change.
Asset Allocation* (as of May 31, 2018)
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Fund’s benchmark
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
8 | May 31, 2018
RiverFront Strategic Income Fund
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
The RiverFront Strategic Income Fund (the “Fund”) seeks total return, with an emphasis on income as the source of that total return. The Fund seeks to achieve its investment objective by investing in a global portfolio of fixed income securities of various maturities, ratings and currency denominations. The Fund intends to utilize various investment strategies in a broad array of fixed income sectors.
Performance Overview
RIGS outperformed its benchmark by 0.44% over the six-month period ending 5/31/18, based on its return at NAV. The primary sources of the Fund’s outperformance were its shorter duration and its higher yield. Over the preceding six months, the Fund continued to be invested primarily in shorter-maturity, higher quality, below investment grade rated bonds. The average credit quality of the Fund was approximately BB-rated, compared to AA-rated for its benchmark. This allowed the Fund to out-yield its benchmark by an average of over 1.3% while maintaining a duration over 2.5 years shorter than the benchmark. The Fund benefitted from its shorter duration as Treasury yields rose significantly over the period. As of 5/31/18, the duration of the Fund was about 2.9 years compared to about 5.9 years for its benchmark.
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | Since Inception^ | |
RiverFront Strategic Income Fund – NAV | -0.60% | 1.12% | 3.42% | 4.03% |
RiverFront Strategic Income Fund – Market Price* | -0.92% | 0.72% | 3.32% | 3.99% |
Bloomberg Barclays U.S. Aggregate Bond Total Return Index | -1.04% | -0.37% | 1.39% | 2.35% |
Total Expense Ratio (per the current prospectus) 0.47%. The Fund's management fee consists of a fee of 0.16% paid to the Fund's investment adviser and a fee of 0.30% paid to the Fund's sub-adviser. The Fund's sub-adviser has agreed to waive all of its 0.30% annual sub-advisory fee on a voluntary basis.
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For most current month-end performance data please visit www.alpsfunds.com or call 1.866.759.5679.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced Investment Operations on October 8, 2013. |
* | Market Price is based on the midpoint of the bid/ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times |
Duration is a measure of the sensitivity of the price (the value of principal) of a fixed-income investment to a change in interest rates. Duration is expressed as a number of years. The duration number is a calculation involving present value, yield, coupon, final maturity and call features. The bigger the duration number, the greater the interest-rate risk or reward for bond prices. Rising interest rates mean falling bond prices, while declining interest rates mean rising bond prices.
Bloomberg Barclays U.S. Aggregate Bond Index is a broad-based benchmark that measures the investment grade, U.S. dollar-denominated, fixedrate taxable bond market, including Treasuries, government-related and corporate securities, MBS (agency fixed-rate and hybrid ARM passthroughs), ABS, and CMBS (agency and non-agency). The index is reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. The index is not actively managed and does not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The RiverFront Strategic Income Fund is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the RiverFront Strategic Income Fund.
9 | May 31, 2018
RiverFront Strategic Income Fund
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings*^ (as of May 31, 2018)
Cheniere Corpus Christi Holdings LLC | 1.71% |
Newfield Exploration Co. | 1.64% |
Lamar Media Corp. | 1.61% |
CenturyLink, Inc. | 1.59% |
Vale Overseas, Ltd. | 1.56% |
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | 1.53% |
USG Corp. | 1.52% |
Concho Resources, Inc. | 1.52% |
DCP Midstream Operating LP | 1.50% |
Celanese US Holdings LLC | 1.49% |
Total % of Top 10 Holdings | 15.67% |
* | % of Total Investments. |
^ | Excludes Money Market Fund |
Future holdings are subject to change.
Asset Allocation* (as of May 31, 2018)
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Fund’s benchmark
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
10 | May 31, 2018
RiverFront ETFs
Disclosure of Fund Expenses | May 31, 2018 (Unaudited) |
Shareholder Expense Example: As a shareholder of a Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, 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 a Fund and to compare these costs with the ongoing costs of investing in other funds. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through May 31, 2018.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values 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 ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. Therefore, the second line is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 12/1/17 | Ending Account Value 5/31/18 | Expense Ratio(a) | Expenses Paid During Period 12/1/17 - 5/31/18(b) | |
RiverFront Dynamic Core Income ETF | ||||
Actual | $1,000.00 | $987.50 | 0.51% | $2.53 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.39 | 0.51% | $2.57 |
RiverFront Dynamic Unconstrained Income ETF | ||||
Actual | $1,000.00 | $982.40 | 0.51% | $2.52 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.39 | 0.51% | $2.57 |
RiverFront Dynamic US Dividend Advantage ETF | ||||
Actual | $1,000.00 | $1,032.90 | 0.52% | $2.64 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.34 | 0.52% | $2.62 |
RiverFront Dynamic US Flex-Cap ETF | ||||
Actual | $1,000.00 | $1,041.10 | 0.52% | $2.65 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.34 | 0.52% | $2.62 |
RiverFront Strategic Income Fund | ||||
Actual | $1,000.00 | $994.00 | 0.16% | $0.80 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,024.13 | 0.16% | $0.81 |
(a) | Annualized, based on the Fund's most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. |
11 | May 31, 2018
RiverFront Dynamic Core Income ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
CORPORATE BONDS (87.14%) | ||||||||
Communications (4.93%) | ||||||||
Alphabet, Inc. | ||||||||
2.00%, 08/15/2026 | $ | 250,000 | $ | 225,837 | ||||
AT&T, Inc. | ||||||||
4.10%, 02/15/2028(a) | 800,000 | 782,017 | ||||||
CBS Corp. | ||||||||
2.50%, 02/15/2023 | 197,000 | 186,420 | ||||||
3.50%, 01/15/2025 | 232,000 | 222,975 | ||||||
Charter Communications Operating LLC / Charter Communications Operating Capital | ||||||||
3.58%, 07/23/2020 | 600,000 | 601,708 | ||||||
Comcast Corp. | ||||||||
5.15%, 03/01/2020 | 700,000 | 725,998 | ||||||
Discovery Communications LLC | ||||||||
3.95%, 03/20/2028 | 500,000 | 473,978 | ||||||
Lamar Media Corp. | ||||||||
5.00%, 05/01/2023 | 360,000 | 366,300 | ||||||
Time Warner, Inc. | ||||||||
4.75%, 03/29/2021 | 150,000 | 155,990 | ||||||
2.95%, 07/15/2026 | 534,000 | 486,236 | ||||||
Verizon Communications, Inc. | ||||||||
3M US L + 0.55%, 05/22/2020(b) | 890,000 | 895,164 | ||||||
Virgin Media Secured Finance PLC | ||||||||
5.25%, 01/15/2021 | 250,000 | 257,680 | ||||||
Total Communications | 5,380,303 | |||||||
Consumer Discretionary (7.98%) | ||||||||
ADT Corp. | ||||||||
3.50%, 07/15/2022 | 50,000 | 46,250 | ||||||
Alibaba Group Holding, Ltd. | ||||||||
3.60%, 11/28/2024 | 625,000 | 618,785 | ||||||
Amazon.com, Inc. | ||||||||
3.15%, 08/22/2027(a) | 700,000 | 677,583 | ||||||
3.88%, 08/22/2037 | 250,000 | 251,160 | ||||||
Aramark Services, Inc. | ||||||||
5.13%, 01/15/2024 | 320,000 | 325,760 | ||||||
Delta Air Lines, Inc. | ||||||||
3.40%, 04/19/2021 | 500,000 | 501,258 | ||||||
eBay, Inc. | ||||||||
2.88%, 08/01/2021 | 375,000 | 371,690 | ||||||
3.45%, 08/01/2024 | 225,000 | 221,103 | ||||||
Ford Motor Credit Co. LLC | ||||||||
2.24%, 06/15/2018 | 175,000 | 174,989 | ||||||
3M US L + 1.00%, 01/09/2020 (b) | 400,000 | 403,243 | ||||||
4.14%, 02/15/2023 | 300,000 | 302,578 | ||||||
4.13%, 08/04/2025 | 200,000 | 196,937 | ||||||
General Motors Financial Co., Inc. | ||||||||
3.20%, 07/13/2020 | 175,000 | 174,714 | ||||||
3.70%, 05/09/2023 | 575,000 | 569,062 | ||||||
GLP Capital LP / GLP Financing II, Inc. | ||||||||
4.88%, 11/01/2020 | 238,000 | 242,165 |
Security Description | Principal Amount | Value | ||||||
Consumer Discretionary (continued) | ||||||||
Hilton Worldwide Finance LLC / Hilton Worldwide Finance Corp. | ||||||||
4.63%, 04/01/2025 | $ | 600,000 | $ | 580,500 | ||||
Lowe's Cos., Inc. | ||||||||
2.50%, 04/15/2026 | 400,000 | 368,986 | ||||||
3.10%, 05/03/2027 | 351,000 | 336,197 | ||||||
Marriott International, Inc. | ||||||||
4.00%, 04/15/2028 | 300,000 | 295,214 | ||||||
McDonald's Corp. | ||||||||
3.70%, 01/30/2026 | 695,000 | 697,316 | ||||||
3.50%, 03/01/2027 | 112,000 | 110,307 | ||||||
Newell Brands, Inc. | ||||||||
4.20%, 04/01/2026 | 500,000 | 492,086 | ||||||
Starbucks Corp. | ||||||||
3.85%, 10/01/2023 | 300,000 | 310,138 | ||||||
Toyota Motor Credit Corp. | ||||||||
3M US L + 0.39%, 01/11/2023(b) | 440,000 | 441,109 | ||||||
Total Consumer Discretionary | 8,709,130 | |||||||
Consumer Staples (3.53%) | ||||||||
Anheuser-Busch InBev Finance, Inc. | ||||||||
2.65%, 02/01/2021 | 950,000 | 941,739 | ||||||
Coca-Cola Co. | ||||||||
1.88%, 10/27/2020 | 200,000 | 196,087 | ||||||
Constellation Brands, Inc. | ||||||||
4.25%, 05/01/2023 | 525,000 | 539,349 | ||||||
4.75%, 12/01/2025 | 100,000 | 104,501 | ||||||
General Mills, Inc. | ||||||||
3.65%, 02/15/2024 | 180,000 | 178,527 | ||||||
Kellogg Co. | ||||||||
3.25%, 05/14/2021 | 500,000 | 501,639 | ||||||
Kraft Heinz Foods Co. | ||||||||
5.38%, 02/10/2020 | 390,000 | 406,033 | ||||||
PepsiCo, Inc. | ||||||||
3.10%, 07/17/2022 | 700,000 | 702,203 | ||||||
Procter & Gamble Co. | ||||||||
2.45%, 11/03/2026 | 300,000 | 279,511 | ||||||
Total Consumer Staples | 3,849,589 | |||||||
Energy (7.97%) | ||||||||
Andeavor | ||||||||
3.80%, 04/01/2028 | 250,000 | 241,161 | ||||||
Andeavor Logistics LP / Tesoro Logistics Finance Corp. | ||||||||
5.25%, 01/15/2025 | 310,000 | 318,913 | ||||||
BP Capital Markets PLC | ||||||||
3.72%, 11/28/2028 | 300,000 | 302,025 | ||||||
Chevron Corp. | ||||||||
2.90%, 03/03/2024 | 175,000 | 171,597 | ||||||
3.33%, 11/17/2025 | 500,000 | 496,648 | ||||||
Concho Resources, Inc. | ||||||||
3.75%, 10/01/2027 | 550,000 | 533,907 |
See Notes to Financial Statements.
12 | May 31, 2018
RiverFront Dynamic Core Income ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
Energy (continued) | ||||||||
ConocoPhillips Co. | ||||||||
4.95%, 03/15/2026 | $ | 450,000 | $ | 486,480 | ||||
Continental Resources, Inc. | ||||||||
4.50%, 04/15/2023 | 300,000 | 306,399 | ||||||
3.80%, 06/01/2024 | 300,000 | 293,740 | ||||||
4.38%, 01/15/2028 | 350,000 | 350,128 | ||||||
Enterprise Products Operating LLC | ||||||||
3.35%, 03/15/2023 | 850,000 | 842,943 | ||||||
Exxon Mobil Corp. | ||||||||
2.22%, 03/01/2021 | 225,000 | 221,903 | ||||||
3.04%, 03/01/2026 | 325,000 | 316,749 | ||||||
Kinder Morgan Energy Partners LP | ||||||||
4.25%, 09/01/2024 | 132,000 | 132,772 | ||||||
Kinder Morgan, Inc. / DE | ||||||||
3.05%, 12/01/2019 | 770,000 | 770,824 | ||||||
ONEOK Partners LP | ||||||||
3.38%, 10/01/2022 | 790,000 | 783,247 | ||||||
Sabine Pass Liquefaction LLC | ||||||||
5.63%, 02/01/2021 | 110,000 | 115,399 | ||||||
5.63%, 04/15/2023 | 700,000 | 748,598 | ||||||
Shell International Finance BV | ||||||||
2.88%, 05/10/2026 | 700,000 | 668,077 | ||||||
Targa Resources Partners LP / Targa Resources Partners Finance Corp | ||||||||
5.00%, 01/15/2028(a) | 175,000 | 164,885 | ||||||
Williams Partners LP | ||||||||
3.90%, 01/15/2025 | 450,000 | 440,446 | ||||||
Total Energy | 8,706,841 | |||||||
Financials (28.93%) | ||||||||
Aflac, Inc. | ||||||||
3.63%, 11/15/2024 | 700,000 | 700,345 | ||||||
American Express Credit Corp. | ||||||||
3M US L + 0.55%, 03/18/2019(b) | 150,000 | 150,535 | ||||||
1.88%, 05/03/2019 | 100,000 | 99,282 | ||||||
2.25%, 05/05/2021 | 300,000 | 292,983 | ||||||
American International Group, Inc. | ||||||||
4.13%, 02/15/2024 | 150,000 | 151,577 | ||||||
3.90%, 04/01/2026 | 250,000 | 244,612 | ||||||
Bank of America Corp. | ||||||||
3M US L + 0.77%, 02/05/2026(b) | 1,400,000 | 1,375,699 | ||||||
Bank of Montreal | ||||||||
2.35%, 09/11/2022 | 600,000 | 575,901 | ||||||
Bank of New York Mellon Corp. | ||||||||
2.45%, 11/27/2020 | 600,000 | 592,735 | ||||||
Berkshire Hathaway, Inc. | ||||||||
3.13%, 03/15/2026 | 300,000 | 291,629 | ||||||
Boston Properties LP | ||||||||
3.85%, 02/01/2023 | 900,000 | 909,747 | ||||||
Branch Banking & Trust Co. | ||||||||
2.10%, 01/15/2020 | 415,000 | 409,458 | ||||||
2.25%, 06/01/2020 | 450,000 | 443,546 |
Security Description | Principal Amount | Value | ||||||
Financials (continued) | ||||||||
Capital One Financial Corp. | ||||||||
3.50%, 06/15/2023 | $ | 750,000 | $ | 737,538 | ||||
Capital One NA | ||||||||
2.25%, 09/13/2021 | 350,000 | 337,729 | ||||||
Charles Schwab Corp. | ||||||||
2.65%, 01/25/2023 | 500,000 | 487,167 | ||||||
Chubb INA Holdings, Inc. | ||||||||
3.35%, 05/03/2026 | 585,000 | 572,391 | ||||||
Citigroup, Inc. | ||||||||
2.65%, 10/26/2020 | 350,000 | 345,550 | ||||||
2.70%, 03/30/2021 | 275,000 | 270,655 | ||||||
3M US L + 1.43%, 09/01/2023(b) | 650,000 | 663,709 | ||||||
Citizens Bank NA | ||||||||
2.25%, 03/02/2020 | 73,000 | 71,968 | ||||||
Cooperatieve Rabobank UA | ||||||||
4.63%, 12/01/2023 | 450,000 | 456,807 | ||||||
Credit Suisse Group Funding Guernsey, Ltd. | ||||||||
3.13%, 12/10/2020 | 175,000 | 174,199 | ||||||
3.45%, 04/16/2021 | 175,000 | 175,494 | ||||||
4.55%, 04/17/2026 | 300,000 | 302,006 | ||||||
Deutsche Bank AG / London | ||||||||
2.50%, 02/13/2019 | 125,000 | 124,293 | ||||||
Deutsche Bank AG / New York, NY | ||||||||
4.25%, 10/14/2021 | 450,000 | 446,626 | ||||||
3.95%, 02/27/2023 | 225,000 | 218,933 | ||||||
Discover Bank | ||||||||
7.00%, 04/15/2020 | 175,000 | 185,526 | ||||||
3.20%, 08/09/2021 | 175,000 | 173,151 | ||||||
Discover Financial Services | ||||||||
4.10%, 02/09/2027 | 99,000 | 96,164 | ||||||
Fidelity National Information Services, Inc. | ||||||||
2.25%, 08/15/2021 | 83,000 | 80,199 | ||||||
3.50%, 04/15/2023 | 152,000 | 150,658 | ||||||
Goldman Sachs Group, Inc. | ||||||||
3M US L + 0.75%, 02/23/2023(b) | 1,000,000 | 996,859 | ||||||
3M US L + 1.60%, 11/29/2023(b) | 350,000 | 363,475 | ||||||
Host Hotels & Resorts LP | ||||||||
4.00%, 06/15/2025 | 720,000 | 705,486 | ||||||
HSBC Holdings PLC | ||||||||
3.90%, 05/25/2026 | 580,000 | 571,197 | ||||||
HSBC USA, Inc. | ||||||||
2.35%, 03/05/2020 | 110,000 | 108,842 | ||||||
Huntington Bancshares, Inc. | ||||||||
3.15%, 03/14/2021 | 640,000 | 639,150 | ||||||
Huntington National Bank | ||||||||
3.25%, 05/14/2021 | 500,000 | 500,143 | ||||||
Intercontinental Exchange, Inc. | ||||||||
3.75%, 12/01/2025 | 500,000 | 502,205 | ||||||
3.10%, 09/15/2027 | 90,000 | 85,597 |
See Notes to Financial Statements.
13 | May 31, 2018
RiverFront Dynamic Core Income ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
Financials (continued) | ||||||||
International Lease Finance Corp. | ||||||||
8.25%, 12/15/2020 | $ | 740,000 | $ | 824,627 | ||||
5.88%, 08/15/2022 | 260,000 | 279,171 | ||||||
JPMorgan Chase & Co. | ||||||||
3.38%, 05/01/2023 | 550,000 | 540,461 | ||||||
3M US L + 1.23%, 10/24/2023(b) | 600,000 | 612,623 | ||||||
KeyCorp | ||||||||
5.10%, 03/24/2021 | 970,000 | 1,018,190 | ||||||
Lloyds Banking Group PLC | ||||||||
4.50%, 11/04/2024 | 340,000 | 338,296 | ||||||
3M US L + 1.205%, 11/07/2028(b) | 100,000 | 92,739 | ||||||
Manufacturers & Traders Trust Co. | ||||||||
3M US L + 0.27%, 01/25/2021(b) | 970,000 | 970,546 | ||||||
MetLife, Inc. | ||||||||
3.60%, 04/10/2024 | 500,000 | 500,907 | ||||||
Mitsubishi UFJ Financial Group, Inc. | ||||||||
3.85%, 03/01/2026 | 300,000 | 300,032 | ||||||
Mizuho Financial Group, Inc. | ||||||||
2.95%, 02/28/2022 | 400,000 | 391,974 | ||||||
3.17%, 09/11/2027 | 100,000 | 94,373 | ||||||
Morgan Stanley | ||||||||
5.63%, 09/23/2019 | 600,000 | 621,462 | ||||||
3M US L + 1.40%, 10/24/2023(b) | 600,000 | 614,304 | ||||||
National Australia Bank, Ltd. / New York | ||||||||
2.50%, 07/12/2026 | 300,000 | 271,938 | ||||||
PNC Financial Services Group, Inc. | ||||||||
3.15%, 05/19/2027 | 600,000 | 573,274 | ||||||
Prudential Financial, Inc. | ||||||||
7.38%, 06/15/2019 | 200,000 | 209,247 | ||||||
4.50%, 11/16/2021 | 130,000 | 135,412 | ||||||
Royal Bank of Canada | ||||||||
2.15%, 10/26/2020 | 500,000 | 489,531 | ||||||
Royal Bank of Scotland Group PLC | ||||||||
3M US L + 1.47%, 05/15/2023(b) | 625,000 | 630,670 | ||||||
3M US L + 1.48%, 05/15/2023(b) | 530,000 | 517,541 | ||||||
Simon Property Group LP | ||||||||
4.13%, 12/01/2021 | 660,000 | 677,899 | ||||||
3.38%, 10/01/2024 | 130,000 | 127,418 | ||||||
Starwood Property Trust, Inc. | ||||||||
5.00%, 12/15/2021 | 85,000 | 86,488 | ||||||
SunTrust Bank / Atlanta, GA | ||||||||
3.30%, 05/15/2026 | 300,000 | 286,544 | ||||||
UBS Group Funding Switzerland AG | ||||||||
3.49%, 05/23/2023(a) | 490,000 | 483,431 | ||||||
4.13%, 04/15/2026(a) | 100,000 | 99,440 | ||||||
US Bancorp | ||||||||
2.63%, 01/24/2022 | 300,000 | 295,717 | ||||||
3.00%, 03/15/2022 | 600,000 | 596,792 | ||||||
Visa, Inc. | ||||||||
3.15%, 12/14/2025 | 440,000 | 430,673 | ||||||
2.75%, 09/15/2027 | 180,000 | 169,641 |
Security Description | Principal Amount | Value | ||||||
Financials (continued) | ||||||||
Wells Fargo & Co. | ||||||||
2.13%, 04/22/2019 | $ | 440,000 | $ | 437,618 | ||||
2.55%, 12/07/2020 | 200,000 | 197,313 | ||||||
3M US L + 0.93%, 02/11/2022(b) | 300,000 | 303,255 | ||||||
Westpac Banking Corp. | ||||||||
3.65%, 05/15/2023 | 500,000 | 501,568 | ||||||
2.70%, 08/19/2026 | 100,000 | 92,407 | ||||||
Total Financials | 31,595,288 | |||||||
Health Care (9.08%) | ||||||||
AbbVie, Inc. | ||||||||
2.90%, 11/06/2022 | 1,000,000 | 977,938 | ||||||
Aetna, Inc. | ||||||||
3.50%, 11/15/2024 | 720,000 | 707,364 | ||||||
Allergan Funding SCS | ||||||||
3.00%, 03/12/2020 | 879,000 | 875,131 | ||||||
3.85%, 06/15/2024 | 300,000 | 295,060 | ||||||
Becton Dickinson & Co. | ||||||||
2.13%, 06/06/2019 | 296,000 | 293,597 | ||||||
Bristol-Myers Squibb Co. | ||||||||
1.75%, 03/01/2019 | 200,000 | 198,737 | ||||||
CVS Health Corp. | ||||||||
2.25%, 08/12/2019 | 550,000 | 546,401 | ||||||
3M US L + 0.63%, 03/09/2020 (b) | 450,000 | 452,146 | ||||||
Express Scripts Holding Co. | ||||||||
2.25%, 06/15/2019 | 80,000 | 79,543 | ||||||
4.75%, 11/15/2021 | 300,000 | 311,462 | ||||||
3.00%, 07/15/2023 | 800,000 | 761,418 | ||||||
Fresenius Medical Care US Finance II, Inc. | ||||||||
4.13%, 10/15/2020(a) | 650,000 | 658,723 | ||||||
Gilead Sciences, Inc. | ||||||||
4.40%, 12/01/2021 | 370,000 | 384,512 | ||||||
2.50%, 09/01/2023 | 100,000 | 96,086 | ||||||
HCA, Inc. | ||||||||
6.50%, 02/15/2020 | 465,000 | 487,088 | ||||||
Johnson & Johnson | ||||||||
2.45%, 03/01/2026 | 310,000 | 291,202 | ||||||
Medtronic, Inc. | ||||||||
3.50%, 03/15/2025 | 350,000 | 349,649 | ||||||
Merck & Co., Inc. | ||||||||
2.80%, 05/18/2023 | 420,000 | 413,746 | ||||||
Pfizer, Inc. | ||||||||
3.00%, 12/15/2026 | 800,000 | 773,161 | ||||||
Thermo Fisher Scientific, Inc. | ||||||||
3.65%, 12/15/2025 | 165,000 | 163,404 | ||||||
UnitedHealth Group, Inc. | ||||||||
2.88%, 03/15/2023 | 400,000 | 393,117 | ||||||
3.75%, 07/15/2025 | 400,000 | 402,598 | ||||||
Total Health Care | 9,912,083 |
See Notes to Financial Statements.
14 | May 31, 2018
RiverFront Dynamic Core Income ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
Industrials (8.88%) | ||||||||
Boeing Co. | ||||||||
6.00%, 03/15/2019 | $ | 150,000 | $ | 153,848 | ||||
Burlington Northern Santa Fe LLC | ||||||||
3.05%, 09/01/2022 | 640,000 | 635,476 | ||||||
Caterpillar Financial Services Corp. | ||||||||
2.75%, 08/20/2021 | 175,000 | 173,063 | ||||||
2.40%, 06/06/2022 | 450,000 | 437,965 | ||||||
CNH Industrial Capital LLC | ||||||||
4.88%, 04/01/2021 | 500,000 | 516,250 | ||||||
CNH Industrial NV | ||||||||
4.50%, 08/15/2023 | 370,000 | 377,752 | ||||||
CSX Corp. | ||||||||
3.40%, 08/01/2024 | 200,000 | 197,694 | ||||||
2.60%, 11/01/2026 | 100,000 | 91,197 | ||||||
FedEx Corp. | ||||||||
3.40%, 02/15/2028 | 450,000 | 433,375 | ||||||
General Dynamics Corp. | ||||||||
3.50%, 05/15/2025 | 500,000 | 499,826 | ||||||
2.63%, 11/15/2027 | 500,000 | 462,869 | ||||||
General Electric Co. | ||||||||
2.70%, 10/09/2022 | 450,000 | 437,660 | ||||||
3M US L + 0.38%, 05/05/2026(b) | 590,000 | 573,716 | ||||||
Honeywell International, Inc. | ||||||||
2.50%, 11/01/2026 | 500,000 | 462,192 | ||||||
John Deere Capital Corp. | ||||||||
3M US L + 0.16%, 01/08/2021(b) | 350,000 | 349,543 | ||||||
2.65%, 06/24/2024 | 554,000 | 531,608 | ||||||
Lockheed Martin Corp. | ||||||||
3.55%, 01/15/2026 | 950,000 | 942,607 | ||||||
Northrop Grumman Corp. | ||||||||
3.50%, 03/15/2021 | 35,000 | 35,515 | ||||||
3.25%, 01/15/2028 | 440,000 | 417,206 | ||||||
United Parcel Service, Inc. | ||||||||
2.50%, 04/01/2023 | 620,000 | 600,904 | ||||||
United Rentals North America, Inc. | ||||||||
4.63%, 07/15/2023 | 500,000 | 505,625 | ||||||
United Technologies Corp. | ||||||||
4.50%, 04/15/2020 | 71,000 | 73,166 | ||||||
2.80%, 05/04/2024 | 700,000 | 664,590 | ||||||
XPO Logistics, Inc. | ||||||||
6.13%, 09/01/2023(a) | 125,000 | 128,244 | ||||||
Total Industrials | 9,701,891 | |||||||
Materials (5.30%) | ||||||||
Ashland LLC | ||||||||
4.75%, 08/15/2022 | 300,000 | 301,875 | ||||||
Celanese US Holdings LLC | ||||||||
4.63%, 11/15/2022 | 226,000 | 233,607 | ||||||
Dow Chemical Co. | ||||||||
4.25%, 11/15/2020 | 525,000 | 539,939 | ||||||
3.00%, 11/15/2022 | 450,000 | 443,335 | ||||||
Glencore Funding LLC | ||||||||
3.00%, 10/27/2022(a) | 710,000 | 683,557 |
Security Description | Principal Amount | Value | ||||||
Materials (continued) | ||||||||
International Paper Co. | ||||||||
3.00%, 02/15/2027 | $ | 630,000 | $ | 574,665 | ||||
LyondellBasell Industries NV | ||||||||
5.75%, 04/15/2024 | 500,000 | 545,748 | ||||||
Monsanto Co. | ||||||||
2.13%, 07/15/2019 | 205,000 | 203,519 | ||||||
3.38%, 07/15/2024 | 39,000 | 37,892 | ||||||
Nutrien, Ltd. | ||||||||
3.50%, 06/01/2023 | 500,000 | 491,912 | ||||||
4.00%, 12/15/2026 | 150,000 | 147,199 | ||||||
Sherwin-Williams Co. | ||||||||
3.45%, 08/01/2025 | 500,000 | 485,997 | ||||||
3.45%, 06/01/2027 | 250,000 | 237,812 | ||||||
Steel Dynamics, Inc. | ||||||||
5.50%, 10/01/2024 | 250,000 | 255,625 | ||||||
USG Corp. | ||||||||
4.88%, 06/01/2027(a) | 500,000 | 499,525 | ||||||
Vale Overseas, Ltd. | ||||||||
6.25%, 08/10/2026 | 100,000 | 108,620 | ||||||
Total Materials | 5,790,827 | |||||||
Technology (7.28%) | ||||||||
Apple, Inc. | ||||||||
2.40%, 05/03/2023 | 730,000 | 706,829 | ||||||
3.20%, 05/11/2027 | 500,000 | 487,146 | ||||||
Broadcom Corp. / Broadcom Cayman Finance Ltd. | ||||||||
3.00%, 01/15/2022 | 400,000 | 390,774 | ||||||
3.63%, 01/15/2024 | 500,000 | 487,255 | ||||||
Cisco Systems, Inc. | ||||||||
4.95%, 02/15/2019 | 450,000 | 457,558 | ||||||
Corning, Inc. | ||||||||
2.90%, 05/15/2022 | 154,000 | 151,790 | ||||||
Dell International LLC / EMC Corp. | ||||||||
4.42%, 06/15/2021(a) | 500,000 | 509,695 | ||||||
Flex, Ltd. | ||||||||
5.00%, 02/15/2023 | 1,000,000 | 1,035,667 | ||||||
IBM Credit LLC | ||||||||
3M US L + 0.16%, 02/05/2021(b) | 1,400,000 | 1,403,666 | ||||||
Microsoft Corp. | ||||||||
4.10%, 02/06/2037 | 350,000 | 368,706 | ||||||
Moody's Corp. | ||||||||
4.50%, 09/01/2022 | 72,000 | 74,960 | ||||||
Oracle Corp. | ||||||||
3.40%, 07/08/2024 | 490,000 | 490,008 | ||||||
QUALCOMM, Inc. | ||||||||
2.60%, 01/30/2023 | 600,000 | 574,492 | ||||||
S&P Global, Inc. | ||||||||
4.00%, 06/15/2025 | 700,000 | 711,102 | ||||||
Xerox Corp. | ||||||||
3.63%, 03/15/2023 | 100,000 | 96,705 | ||||||
Total Technology | 7,946,353 |
See Notes to Financial Statements.
15 | May 31, 2018
RiverFront Dynamic Core Income ETF |
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
Utilities (3.26%) | ||||||||
CMS Energy Corp. | ||||||||
3.60%, 11/15/2025 | $ | 100,000 | $ | 98,606 | ||||
Consumers Energy Co. | ||||||||
3.13%, 08/31/2024 | 100,000 | 97,641 | ||||||
Dominion Energy, Inc. | ||||||||
5.20%, 08/15/2019 | 450,000 | 461,233 | ||||||
3.63%, 12/01/2024 | 600,000 | 593,604 | ||||||
Duke Energy Corp. | ||||||||
1.80%, 09/01/2021 | 908,000 | 867,735 | ||||||
Exelon Corp. | ||||||||
3.50%, 06/01/2022 | 250,000 | 248,126 | ||||||
3.40%, 04/15/2026 | 175,000 | 167,984 | ||||||
Exelon Generation Co. LLC | ||||||||
4.25%, 06/15/2022 | 154,000 | 158,226 | ||||||
Southern Co. | ||||||||
2.95%, 07/01/2023 | 890,000 | 865,957 | ||||||
Total Utilities | 3,559,112 | |||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $96,085,933) | 95,151,417 | |||||||
GOVERNMENT BONDS (8.68%) | ||||||||
United States Treasury Bond | ||||||||
2.75%, 02/15/2028 | 2,000,000 | 1,986,210 | ||||||
3.88%, 08/15/2040 | 402,300 | 463,659 | ||||||
2.75%, 11/15/2047 | 1,900,000 | 1,812,311 | ||||||
United States Treasury Inflation Indexed Bonds | ||||||||
2.13%, 02/15/2040 | 865,883 | 1,086,188 | ||||||
United States Treasury Strip Principal | ||||||||
0.00%, 02/15/2038(c) | 5,000,000 | 2,846,183 | ||||||
0.00%, 11/15/2046(c) | 3,000,000 | 1,285,912 | ||||||
TOTAL GOVERNMENT BONDS | ||||||||
(Cost $9,332,612) | 9,480,463 |
Security Description | 7 Day Yield | Shares | Value | |||||||||
SHORT TERM INVESTMENTS (3.45%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | ||||||||||||
(Cost $3,771,915) | 1.669 | % | 3,771,915 | 3,771,915 | ||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $3,771,915) | 3,771,915 | |||||||||||
TOTAL INVESTMENTS (99.27%) | ||||||||||||
(Cost $109,190,460) | $ | 108,403,795 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.73%) | 797,528 | |||||||||||
NET ASSETS (100.00%) | $ | 109,201,323 |
Investment Abbreviations:
LIBOR - London Interbank Offered Rate
LIBOR Rate:
3M US L - 3 Month LIBOR as of May 31, 2018 was 2.32%
(a) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate market value of those securities was $4,687,100, representing 4.29% of net assets. |
(b) | Floating or variable rate security. The reference rate is described above. The Rate in effect as of May 31, 2018 is based on the reference rate plus the displayed spread as of the security's last reset date. |
(c) | Zero coupon bond. |
See Notes to Financial Statements.
16 | May 31, 2018
RiverFront Dynamic Unconstrained Income ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
CORPORATE BONDS (94.21%) | ||||||||
Communications (14.11%) | ||||||||
Cablevision Systems Corp. | ||||||||
5.88%, 09/15/2022 | $ | 350,000 | $ | 350,000 | ||||
CCO Holdings LLC / CCO Holdings Capital Corp. | ||||||||
5.13%, 05/01/2027(a) | 250,000 | 234,688 | ||||||
CenturyLink, Inc. | ||||||||
6.45%, 06/15/2021 | 200,000 | 205,759 | ||||||
7.50%, 04/01/2024 | 160,000 | 164,904 | ||||||
Clear Channel Worldwide Holdings, Inc. | ||||||||
6.50%, 11/15/2022 | 350,000 | 359,188 | ||||||
Hughes Satellite Systems Corp. | ||||||||
6.63%, 08/01/2026 | 300,000 | 291,750 | ||||||
Lamar Media Corp. | ||||||||
5.75%, 02/01/2026 | 350,000 | 355,688 | ||||||
Level 3 Financing, Inc. | ||||||||
5.38%, 01/15/2024 | 360,000 | 351,900 | ||||||
Netflix, Inc. | ||||||||
5.50%, 02/15/2022 | 250,000 | 258,950 | ||||||
4.38%, 11/15/2026 | 100,000 | 94,501 | ||||||
Outfront Media Capital LLC / | ||||||||
Outfront Media Capital Corp. | ||||||||
5.25%, 02/15/2022 | 350,000 | 354,813 | ||||||
Sinclair Television Group, Inc. | ||||||||
5.13%, 02/15/2027(a) | 250,000 | 233,750 | ||||||
Sirius XM Radio, Inc. | ||||||||
4.63%, 05/15/2023(a) | 200,000 | 197,250 | ||||||
Sprint Communications, Inc. | ||||||||
6.00%, 11/15/2022 | 210,000 | 209,475 | ||||||
Sprint Corp. | ||||||||
7.13%, 06/15/2024 | 150,000 | 151,500 | ||||||
T-Mobile USA, Inc. | ||||||||
6.50%, 01/15/2024 | 350,000 | 366,624 | ||||||
Unitymedia GmbH | ||||||||
6.13%, 01/15/2025(a) | 350,000 | 362,774 | ||||||
Univision Communications, Inc. | ||||||||
5.13%, 05/15/2023(a) | 250,000 | 237,500 | ||||||
VeriSign, Inc. | ||||||||
4.75%, 07/15/2027 | 350,000 | 339,938 | ||||||
Viacom, Inc. | ||||||||
3M US L + 3.895%, 02/28/2057(b) | 10,000 | 9,808 | ||||||
Zayo Group LLC / Zayo Capital, Inc. | ||||||||
6.38%, 05/15/2025 | 25,000 | 25,438 | ||||||
5.75%, 01/15/2027(a) | 350,000 | 339,499 | ||||||
Ziggo BV | ||||||||
5.50%, 01/15/2027(a) | 350,000 | 335,020 | ||||||
Total Communications | 5,830,717 | |||||||
Consumer Discretionary (12.07%) | ||||||||
American Axle & Manufacturing, Inc. | ||||||||
6.25%, 04/01/2025 | 350,000 | 346,938 |
Security Description | Principal Amount | Value | ||||||
Consumer Discretionary (continued) | ||||||||
Aramark Services, Inc. | ||||||||
5.13%, 01/15/2024 | $ | 350,000 | $ | 356,299 | ||||
Avis Budget Car Rental LLC / Avis | ||||||||
Budget Finance, Inc. | ||||||||
5.50%, 04/01/2023 | 257,000 | 248,326 | ||||||
Dana Financing Luxembourg Sarl | ||||||||
5.75%, 04/15/2025(a) | 100,000 | 99,375 | ||||||
Dana, Inc. | ||||||||
5.50%, 12/15/2024 | 150,000 | 151,688 | ||||||
Goodyear Tire & Rubber Co. | ||||||||
5.00%, 05/31/2026 | 350,000 | 332,938 | ||||||
Hanesbrands, Inc. | ||||||||
4.63%, 05/15/2024(a) | 250,000 | 245,313 | ||||||
Hilton Worldwide Finance LLC / | ||||||||
Hilton Worldwide Finance Corp. | ||||||||
4.63%, 04/01/2025 | 250,000 | 241,875 | ||||||
International Game Technology PLC | ||||||||
6.25%, 02/15/2022(a) | 350,000 | 362,249 | ||||||
KB Home | ||||||||
7.50%, 09/15/2022 | 250,000 | 270,000 | ||||||
KFC Holding Co. / Pizza Hut Holdings | ||||||||
LLC / Taco Bell of America LLC | ||||||||
5.00%, 06/01/2024(a) | 250,000 | 247,500 | ||||||
L Brands, Inc. | ||||||||
5.25%, 02/01/2028 | 50,000 | 45,688 | ||||||
Lennar Corp. | ||||||||
4.13%, 01/15/2022 | 200,000 | 198,124 | ||||||
LKQ Corp. | ||||||||
4.75%, 05/15/2023 | 250,000 | 249,688 | ||||||
Mattamy Group Corp. | ||||||||
6.88%, 12/15/2023(a) | 300,000 | 310,125 | ||||||
PulteGroup, Inc. | ||||||||
5.50%, 03/01/2026 | 205,000 | 204,744 | ||||||
5.00%, 01/15/2027 | 40,000 | 38,350 | ||||||
Scotts Miracle-Gro Co. | ||||||||
5.25%, 12/15/2026 | 100,000 | 95,750 | ||||||
ServiceMaster Co. LLC | ||||||||
5.13%, 11/15/2024(a) | 475,000 | 461,343 | ||||||
Six Flags Entertainment Corp. | ||||||||
5.50%, 04/15/2027(a) | 250,000 | 243,050 | ||||||
Toll Brothers Finance Corp. | ||||||||
4.88%, 03/15/2027 | 250,000 | 238,125 | ||||||
Total Consumer Discretionary | 4,987,488 | |||||||
Consumer Staples (2.16%) | ||||||||
B&G Foods, Inc. | ||||||||
5.25%, 04/01/2025 | 300,000 | 282,750 | ||||||
Pinnacle Foods Finance LLC / | ||||||||
Pinnacle Foods Finance Corp. | ||||||||
5.88%, 01/15/2024 | 100,000 | 103,250 | ||||||
Spectrum Brands, Inc. | ||||||||
5.75%, 07/15/2025 | 250,000 | 248,750 |
See Notes to Financial Statements.
17 | May 31, 2018
RiverFront Dynamic Unconstrained Income ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
Consumer Staples (continued) | ||||||||
TreeHouse Foods, Inc. | ||||||||
6.00%, 02/15/2024(a) | $ | 250,000 | $ | 257,038 | ||||
Total Consumer Staples | 891,788 | |||||||
Energy (11.97%) | ||||||||
Andeavor Logistics LP / Tesoro | ||||||||
Logistics Finance Corp. | ||||||||
5.25%, 01/15/2025 | 250,000 | 257,188 | ||||||
Cheniere Corpus Christi Holdings LLC | ||||||||
7.00%, 06/30/2024 | 350,000 | 384,565 | ||||||
CNX Resources Corp. | ||||||||
5.88%, 04/15/2022 | 250,000 | 252,813 | ||||||
Continental Resources, Inc. | ||||||||
4.38%, 01/15/2028 | 350,000 | 350,129 | ||||||
DCP Midstream Operating LP | ||||||||
4.75%, 09/30/2021(a) | 250,000 | 253,749 | ||||||
3.88%, 03/15/2023 | 100,000 | 96,500 | ||||||
Energy Transfer Equity LP | ||||||||
5.50%, 06/01/2027 | 250,000 | 254,063 | ||||||
Ensco PLC | ||||||||
4.50%, 10/01/2024 | 50,000 | 41,813 | ||||||
7.75%, 02/01/2026 | 200,000 | 191,250 | ||||||
Genesis Energy LP / Genesis Energy | ||||||||
Finance Corp. | ||||||||
6.25%, 05/15/2026 | 100,000 | 94,250 | ||||||
Gulfport Energy Corp. | ||||||||
6.00%, 10/15/2024 | 300,000 | 283,500 | ||||||
Nabors Industries, Inc. | ||||||||
5.75%, 02/01/2025(a) | 50,000 | 47,438 | ||||||
Newfield Exploration Co. | ||||||||
5.75%, 01/30/2022 | 200,000 | 210,750 | ||||||
Parsley Energy LLC / Parsley Finance Corp. | ||||||||
5.38%, 01/15/2025(a) | 300,000 | 297,750 | ||||||
Range Resources Corp. | ||||||||
5.00%, 08/15/2022 | 310,000 | 308,450 | ||||||
5.00%, 03/15/2023 | 35,000 | 34,125 | ||||||
SESI LLC | ||||||||
7.13%, 12/15/2021 | 50,000 | 51,000 | ||||||
SM Energy Co. | ||||||||
6.13%, 11/15/2022 | 50,000 | 51,000 | ||||||
Sunoco LP / Sunoco Finance Corp. | ||||||||
5.50%, 02/15/2026(a) | 250,000 | 237,188 | ||||||
Targa Resources Partners LP / Targa | ||||||||
Resources Partners Finance Corp | ||||||||
5.00%, 01/15/2028(a) | 250,000 | 235,550 | ||||||
Transocean, Inc. | ||||||||
9.00%, 07/15/2023(a) | 400,000 | 432,499 | ||||||
Whiting Petroleum Corp. | ||||||||
6.63%, 01/15/2026(a) | 300,000 | 307,500 |
Security Description | Principal Amount | Value | ||||||
Energy (continued) | ||||||||
WPX Energy, Inc. | ||||||||
6.00%, 01/15/2022 | $ | 69,000 | $ | 72,795 | ||||
5.75%, 06/01/2026 | 200,000 | 199,872 | ||||||
Total Energy | 4,945,737 | |||||||
Financials (11.00%) | ||||||||
Aircastle, Ltd. | ||||||||
5.00%, 04/01/2023 | 125,000 | 127,813 | ||||||
4.13%, 05/01/2024 | 240,000 | 234,300 | ||||||
Ally Financial, Inc. | ||||||||
5.75%, 11/20/2025 | 350,000 | 358,138 | ||||||
CIT Group, Inc. | ||||||||
5.00%, 08/15/2022 | 136,000 | 138,550 | ||||||
5.25%, 03/07/2025 | 325,000 | 330,687 | ||||||
Equinix, Inc. | ||||||||
5.75%, 01/01/2025 | 350,000 | 357,875 | ||||||
First Data Corp. | ||||||||
5.38%, 08/15/2023(a) | 350,000 | 355,810 | ||||||
Icahn Enterprises LP / Icahn | ||||||||
Enterprises Finance Corp. | ||||||||
5.88%, 02/01/2022 | 350,000 | 354,813 | ||||||
Iron Mountain, Inc. | ||||||||
5.75%, 08/15/2024 | 350,000 | 346,045 | ||||||
iStar, Inc. | ||||||||
5.25%, 09/15/2022 | 250,000 | 243,438 | ||||||
Jefferies Financial Group, Inc. | ||||||||
5.50%, 10/18/2023 | 350,000 | 364,576 | ||||||
Mack-Cali Realty LP | ||||||||
4.50%, 04/18/2022 | 100,000 | 97,694 | ||||||
MGM Growth Properties Operating | ||||||||
Partnership LP / MGP Finance Co.-Issuer, Inc. | ||||||||
5.63%, 05/01/2024 | 400,000 | 405,999 | ||||||
MPT Operating Partnership LP / MPT | ||||||||
Finance Corp. | ||||||||
5.00%, 10/15/2027 | 250,000 | 235,640 | ||||||
Park Aerospace Holdings, Ltd. | ||||||||
5.25%, 08/15/2022(a) | 350,000 | 346,500 | ||||||
Springleaf Finance Corp. | ||||||||
5.63%, 03/15/2023 | 250,000 | 247,500 | ||||||
Total Financials | 4,545,378 | |||||||
Health Care (10.70%) | ||||||||
Avantor, Inc. | ||||||||
6.00%, 10/01/2024(a) | 450,000 | 448,875 | ||||||
Centene Corp. | ||||||||
6.13%, 02/15/2024 | 250,000 | 263,438 | ||||||
Centene Escrow I Corp. | ||||||||
5.38%, 06/01/2026(a) | 250,000 | 253,300 | ||||||
DaVita, Inc. | ||||||||
5.00%, 05/01/2025 | 350,000 | 332,605 | ||||||
Encompass Health Corp. | ||||||||
5.75%, 11/01/2024 | 250,000 | 254,688 |
See Notes to Financial Statements.
18 | May 31, 2018
RiverFront Dynamic Unconstrained Income ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
Health Care (continued) | ||||||||
Envision Healthcare Corp. | ||||||||
6.25%, 12/01/2024(a) | $ | 250,000 | $ | 265,050 | ||||
HCA, Inc. | ||||||||
5.00%, 03/15/2024 | 350,000 | 353,395 | ||||||
Kindred Healthcare, Inc. | ||||||||
6.38%, 04/15/2022 | 450,000 | 463,936 | ||||||
Kinetic Concepts, Inc. / KCI USA, Inc. | ||||||||
7.88%, 02/15/2021(a) | 350,000 | 360,063 | ||||||
LifePoint Health, Inc. | ||||||||
5.38%, 05/01/2024 | 250,000 | 242,188 | ||||||
Tenet Healthcare Corp. | ||||||||
4.75%, 06/01/2020 | 250,000 | 252,425 | ||||||
Teva Pharmaceutical Finance | ||||||||
Netherlands III BV | ||||||||
6.75%, 03/01/2028 | 450,000 | 457,470 | ||||||
Valeant Pharmaceuticals | ||||||||
International, Inc. | ||||||||
7.50%, 07/15/2021(a) | 325,000 | 332,312 | ||||||
5.50%, 03/01/2023(a) | 150,000 | 140,377 | ||||||
Total Health Care | 4,420,122 | |||||||
Industrials (6.15%) | ||||||||
Bombardier, Inc. | ||||||||
7.75%, 03/15/2020(a) | 475,000 | 506,468 | ||||||
CNH Industrial NV | ||||||||
4.50%, 08/15/2023 | 451,000 | 460,447 | ||||||
Terex Corp. | ||||||||
5.63%, 02/01/2025(a) | 250,000 | 248,438 | ||||||
TransDigm, Inc. | ||||||||
6.00%, 07/15/2022 | 350,000 | 355,688 | ||||||
United Rentals North America, Inc. | ||||||||
5.75%, 11/15/2024 | 200,000 | 206,750 | ||||||
5.88%, 09/15/2026 | 150,000 | 153,938 | ||||||
WESCO Distribution, Inc. | ||||||||
5.38%, 06/15/2024 | 250,000 | 250,938 | ||||||
XPO Logistics, Inc. | ||||||||
6.50%, 06/15/2022(a) | 350,000 | 359,713 | ||||||
Total Industrials | 2,542,380 | |||||||
Materials (17.86%) | ||||||||
AK Steel Corp. | ||||||||
7.50%, 07/15/2023 | 300,000 | 316,875 | ||||||
ArcelorMittal | ||||||||
6.00%, 08/05/2020 | 250,000 | 259,063 | ||||||
Ardagh Packaging Finance PLC / | ||||||||
Ardagh Holdings USA, Inc. | ||||||||
7.25%, 05/15/2024(a) | 400,000 | 418,999 | ||||||
Ball Corp. | ||||||||
5.25%, 07/01/2025 | 400,000 | 408,999 | ||||||
Berry Global, Inc. | ||||||||
4.50%, 02/15/2026(a) | 450,000 | 421,874 | ||||||
BWAY Holding Co. | ||||||||
5.50%, 04/15/2024(a) | 350,000 | 346,500 |
Security Description | Principal Amount | Value | ||||||
Materials (continued) | ||||||||
Cascades, Inc. | ||||||||
5.50%, 07/15/2022(a) | $ | 337,000 | $ | 337,843 | ||||
Chemours Co. | ||||||||
7.00%, 05/15/2025 | 250,000 | 269,375 | ||||||
Crown Americas LLC / Crown | ||||||||
Americas Capital Corp. V | ||||||||
4.25%, 09/30/2026 | 250,000 | 226,875 | ||||||
FMG Resources August 2006 Ptv, Ltd. | ||||||||
5.13%, 03/15/2023(a) | 350,000 | 346,063 | ||||||
Freeport-McMoRan, Inc. | ||||||||
3.88%, 03/15/2023 | 250,000 | 240,940 | ||||||
Glencore Funding LLC | ||||||||
4.00%, 03/27/2027(a) | 250,000 | 239,240 | ||||||
Kinross Gold Corp. | ||||||||
4.50%, 07/15/2027(a) | 350,000 | 322,000 | ||||||
Koppers, Inc. | ||||||||
6.00%, 02/15/2025(a) | 395,000 | 401,419 | ||||||
NOVA Chemicals Corp. | ||||||||
5.25%, 06/01/2027(a) | 250,000 | 237,500 | ||||||
Owens-Brockway Glass Container, Inc. | ||||||||
5.00%, 01/15/2022(a) | 350,000 | 350,875 | ||||||
Plastipak Holdings, Inc. | ||||||||
6.25%, 10/15/2025(a) | 350,000 | 336,000 | ||||||
Rayonier AM Products, Inc. | ||||||||
5.50%, 06/01/2024(a) | 375,000 | 358,125 | ||||||
Reynolds Group Issuer, Inc. / | ||||||||
Reynolds Group Issuer LLC | ||||||||
5.13%, 07/15/2023(a) | 340,000 | 334,475 | ||||||
Sealed Air Corp. | ||||||||
5.13%, 12/01/2024(a) | 250,000 | 254,688 | ||||||
Silgan Holdings, Inc. | ||||||||
4.75%, 03/15/2025 | 150,000 | 142,875 | ||||||
Steel Dynamics, Inc. | ||||||||
5.00%, 12/15/2026 | 250,000 | 247,825 | ||||||
SunCoke Energy Partners LP / | ||||||||
SunCoke Energy Partners Finance Corp. | ||||||||
7.50%, 06/15/2025(a) | 250,000 | 255,000 | ||||||
USG Corp. | ||||||||
4.88%, 06/01/2027(a) | 300,000 | 299,715 | ||||||
Total Materials | 7,373,143 | |||||||
Technology (3.96%) | ||||||||
Anixter, Inc. | ||||||||
5.50%, 03/01/2023 | 250,000 | 259,063 | ||||||
CommScope Technologies LLC | ||||||||
6.00%, 06/15/2025(a) | 300,000 | 302,249 | ||||||
5.00%, 03/15/2027(a) | 100,000 | 93,750 | ||||||
Dell International LLC / EMC Corp. | ||||||||
5.88%, 06/15/2021(a) | 150,000 | 154,369 | ||||||
7.13%, 06/15/2024(a) | 100,000 | 107,473 | ||||||
6.02%, 06/15/2026(a) | 100,000 | 105,696 |
See Notes to Financial Statements.
19 | May 31, 2018
RiverFront Dynamic Unconstrained Income ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
Technology (continued) | ||||||||
j2 Cloud Services LLC / j2 Global Co.- Obligor, Inc. | ||||||||
6.00%, 07/15/2025(a) | $ | 327,000 | $ | 329,453 | ||||
NCR Corp. | ||||||||
5.00%, 07/15/2022 | 285,000 | 282,150 | ||||||
Total Technology | 1,634,203 | |||||||
Utilities (4.23%) | ||||||||
AES Corp. / VA | ||||||||
5.13%, 09/01/2027 | 250,000 | 246,875 | ||||||
AmeriGas Partners LP / AmeriGas | ||||||||
Finance Corp. | ||||||||
5.75%, 05/20/2027 | 350,000 | 331,625 | ||||||
Calpine Corp. | ||||||||
5.38%, 01/15/2023 | 350,000 | 334,688 | ||||||
NRG Energy, Inc. | ||||||||
6.63%, 01/15/2027 | 400,000 | 415,000 | ||||||
Vistra Energy Corp. | ||||||||
7.38%, 11/01/2022 | 400,000 | 421,160 | ||||||
Total Utilities | 1,749,348 | |||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $39,561,577) | 38,920,304 |
Security Description | 7 Day Yield | Shares | Value | |||||||||
SHORT TERM INVESTMENTS (4.39%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | ||||||||||||
(Cost $1,814,988) | 1.669 | % | 1,814,988 | 1,814,988 | ||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $1,814,988) | 1,814,988 | |||||||||||
TOTAL INVESTMENTS (98.60%) | ||||||||||||
(Cost $41,376,565) | $ | 40,735,292 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (1.40%) | 579,119 | |||||||||||
NET ASSETS (100.00%) | $ | 41,314,411 |
Investment Abbreviations:
LIBOR - London Interbank Offered Rate
LIBOR Rate:
3M US L - 3 Month LIBOR as of May 31, 2018 was 2.32%
(a) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate market value of those securities was $15,948,360, representing 38.60% of net assets. |
(b) | Floating or variable rate security. The reference rate is described above. The Rate in effect as of May 31, 2018 is based on the reference rate plus the displayed spread as of the security's last reset date. |
See Notes to Financial Statements.
20 | May 31, 2018
RiverFront Dynamic US Dividend Advantage ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.72%) | ||||||||
Consumer Discretionary (16.19%) | ||||||||
Amazon.com, Inc.(a) | 1,966 | $ | 3,203,833 | |||||
Best Buy Co., Inc. | 13,959 | 952,702 | ||||||
Dana, Inc. | 25,539 | 569,520 | ||||||
Ford Motor Co. | 74,939 | 865,545 | ||||||
Garmin, Ltd. | 9,782 | 587,800 | ||||||
General Motors Co. | 16,199 | 691,697 | ||||||
H&R Block, Inc. | 33,346 | 915,348 | ||||||
John Wiley & Sons, Inc., Class A | 8,876 | 601,793 | ||||||
Lowe's Cos., Inc. | 4,173 | 396,477 | ||||||
Macy's, Inc. | 44,587 | 1,556,532 | ||||||
Meredith Corp. | 15,114 | 760,990 | ||||||
Modine Manufacturing Co.(a) | 36,882 | 663,876 | ||||||
Netflix, Inc.(a) | 6,644 | 2,336,030 | ||||||
NVR, Inc.(a) | 229 | 684,834 | ||||||
Office Depot, Inc. | 329,373 | 777,320 | ||||||
Target Corp. | 14,739 | 1,074,326 | ||||||
Thor Industries, Inc. | 5,636 | 521,894 | ||||||
TripAdvisor, Inc.(a) | 24,544 | 1,279,724 | ||||||
Total Consumer Discretionary | 18,440,241 | |||||||
Consumer Staples (3.38%) | ||||||||
Clorox Co. | 5,339 | 645,111 | ||||||
Kellogg Co. | 12,882 | 829,472 | ||||||
Philip Morris International, Inc. | 9,141 | 727,075 | ||||||
Walgreens Boots Alliance, Inc. | 8,618 | 537,677 | ||||||
Walmart, Inc. | 13,384 | 1,104,716 | ||||||
Total Consumer Staples | 3,844,051 | |||||||
Energy (6.18%) | ||||||||
Archrock, Inc. | 57,534 | 664,518 | ||||||
Chevron Corp. | 9,633 | 1,197,382 | ||||||
Exxon Mobil Corp. | 16,740 | 1,359,957 | ||||||
Helmerich & Payne, Inc. | 9,305 | 617,666 | ||||||
Occidental Petroleum Corp. | 11,098 | 934,452 | ||||||
ONEOK, Inc. | 14,215 | 968,894 | ||||||
Phillips 66 | 4,800 | 559,152 | ||||||
Williams Cos., Inc. | 27,564 | 740,369 | ||||||
Total Energy | 7,042,390 | |||||||
Financials (19.56%) | ||||||||
Ameriprise Financial, Inc. | 6,056 | 839,543 | ||||||
Bank of America Corp. | 58,909 | 1,710,717 | ||||||
CME Group, Inc. | 4,728 | 770,191 | ||||||
Discover Financial Services | 11,491 | 848,725 | ||||||
Everest Re Group, Ltd. | 4,555 | 1,026,196 | ||||||
Fifth Third Bancorp | 23,402 | 715,633 | ||||||
Goldman Sachs Group, Inc. | 5,054 | 1,141,598 | ||||||
Hartford Financial Services Group, Inc. | 19,479 | 1,019,336 | ||||||
JPMorgan Chase & Co. | 23,382 | 2,502,109 | ||||||
Legg Mason, Inc. | 20,830 | 776,334 | ||||||
M&T Bank Corp. | 4,107 | 706,733 |
Security Description | Shares | Value | ||||||
Financials (continued) | ||||||||
Mercury General Corp. | 9,821 | $ | 462,667 | |||||
MetLife, Inc. | 19,654 | 903,887 | ||||||
Navient Corp. | 87,627 | 1,210,129 | ||||||
New York Community Bancorp, Inc. | 40,121 | 465,002 | ||||||
Old Republic International Corp. | 35,957 | 754,378 | ||||||
People's United Financial, Inc. | 44,050 | 810,961 | ||||||
Prudential Financial, Inc. | 6,985 | 676,427 | ||||||
SunTrust Banks, Inc. | 13,296 | 897,613 | ||||||
Synchrony Financial | 21,709 | 751,783 | ||||||
T Rowe Price Group, Inc. | 17,739 | 2,153,869 | ||||||
Wells Fargo & Co. | 21,068 | 1,137,461 | ||||||
Total Financials | 22,281,292 | |||||||
Health Care (11.69%) | ||||||||
AbbVie, Inc. | 15,055 | 1,489,543 | ||||||
Aetna, Inc. | 7,043 | 1,240,484 | ||||||
AmerisourceBergen Corp. | 14,115 | 1,159,406 | ||||||
Amgen, Inc. | 7,904 | 1,419,716 | ||||||
Cardinal Health, Inc. | 9,456 | 492,563 | ||||||
CVS Health Corp. | 8,565 | 542,935 | ||||||
Eli Lilly & Co. | 14,235 | 1,210,544 | ||||||
Gilead Sciences, Inc. | 20,796 | 1,401,650 | ||||||
HCA Healthcare, Inc. | 8,573 | 884,219 | ||||||
Owens & Minor, Inc. | 44,738 | 729,229 | ||||||
Pfizer, Inc. | 76,367 | 2,743,867 | ||||||
Total Health Care | 13,314,156 | |||||||
Industrials (7.61%) | ||||||||
AO Smith Corp. | 8,613 | 543,222 | ||||||
Boeing Co. | 2,567 | 903,995 | ||||||
Cummins, Inc. | 4,679 | 666,243 | ||||||
Eaton Corp. PLC | 17,611 | 1,348,651 | ||||||
Lennox International, Inc. | 3,984 | 809,987 | ||||||
Lockheed Martin Corp. | 2,076 | 652,985 | ||||||
Matson, Inc. | 28,593 | 979,024 | ||||||
Pitney Bowes, Inc. | 52,396 | 466,324 | ||||||
Regal Beloit Corp. | 7,270 | 577,602 | ||||||
RR Donnelley & Sons Co. | 84,535 | 527,498 | ||||||
Ryder System, Inc. | 11,126 | 746,332 | ||||||
Triumph Group, Inc. | 21,215 | 449,758 | ||||||
Total Industrials | 8,671,621 | |||||||
Information Technology (20.47%) | ||||||||
Accenture PLC, Class A | 8,644 | 1,346,217 | ||||||
Apple, Inc. | 18,650 | 3,485,125 | ||||||
Broadcom, Inc. | 5,672 | 1,429,741 | ||||||
Cadence Design Systems, Inc.(a) | 19,495 | 827,563 | ||||||
CommVault Systems, Inc.(a) | 15,573 | 1,064,415 | ||||||
CSG Systems International, Inc. | 17,323 | 716,826 | ||||||
Facebook, Inc., Class A(a) | 11,383 | 2,183,031 | ||||||
InterDigital, Inc. | 9,182 | 724,001 | ||||||
International Business Machines | ||||||||
Corp. | 3,677 | 519,597 | ||||||
Intuit, Inc. | 6,431 | 1,296,490 |
See Notes to Financial Statements.
21 | May 31, 2018
RiverFront Dynamic US Dividend Advantage ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Information Technology (continued) | ||||||||
j2 Global, Inc. | 9,651 | $ | 814,930 | |||||
Juniper Networks, Inc. | 21,729 | 578,861 | ||||||
Lam Research Corp. | 3,091 | 612,574 | ||||||
Manhattan Associates, Inc.(a) | 22,331 | 971,845 | ||||||
Microchip Technology, Inc. | 12,991 | 1,265,064 | ||||||
Micron Technology, Inc.(a) | 16,572 | 954,381 | ||||||
National Instruments Corp. | 19,336 | 804,764 | ||||||
Red Hat, Inc.(a) | 7,488 | 1,216,201 | ||||||
Texas Instruments, Inc. | 16,188 | 1,811,599 | ||||||
Western Digital Corp. | 8,145 | 680,189 | ||||||
Total Information Technology | 23,303,414 | |||||||
Materials (2.76%) | ||||||||
A Schulman, Inc. | 13,059 | 571,331 | ||||||
CF Industries Holdings, Inc. | 18,503 | 761,213 | ||||||
LyondellBasell Industries NV, Class A | 8,589 | 962,999 | ||||||
RPM International, Inc. | 17,108 | 846,846 | ||||||
Total Materials | 3,142,389 | |||||||
Real Estate (4.02%) | ||||||||
Core Civic, Inc. | 41,249 | 887,678 | ||||||
DDR Corp. | 39,801 | 604,577 | ||||||
Hospitality Properties Trust | 22,376 | 647,785 | ||||||
RMR Group, Inc., Class A | 7,070 | 534,492 | ||||||
Tanger Factory Outlet Centers, Inc. | 26,286 | 564,886 | ||||||
Uniti Group, Inc. | 33,445 | 701,342 | ||||||
Washington Prime Group, Inc. | 88,425 | 642,850 | ||||||
Total Real Estate | 4,583,610 | |||||||
Telecommunication Services (2.67%) | ||||||||
AT&T, Inc. | 30,177 | 975,321 | ||||||
CenturyLink, Inc. | 42,319 | 771,052 | ||||||
Verizon Communications, Inc. | 27,173 | 1,295,337 | ||||||
Total Telecommunication Services | 3,041,710 | |||||||
Utilities (5.19%) | ||||||||
AES Corp. | 48,006 | 612,077 | ||||||
Dominion Energy, Inc. | 11,887 | 763,027 | ||||||
Duke Energy Corp. | 10,177 | 785,257 | ||||||
Entergy Corp. | 11,863 | 959,834 | ||||||
FirstEnergy Corp. | 23,595 | 812,140 | ||||||
PPL Corp. | 27,474 | 750,590 | ||||||
SCANA Corp. | 15,710 | 570,273 | ||||||
Southern Co. | 14,635 | 657,112 | ||||||
Total Utilities | 5,910,310 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $109,660,100) | 113,575,184 |
Security Description | 7 Day Yield | Shares | Value | |||||||||
SHORT TERM INVESTMENTS (0.01%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | ||||||||||||
(Cost $8,804) | 1.669 | % | 8,804 | $ | 8,804 | |||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $8,804) | 8,804 | |||||||||||
TOTAL INVESTMENTS (99.73%) | ||||||||||||
(Cost $109,668,904) | $ | 113,583,988 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (0.27%) | 311,608 | |||||||||||
NET ASSETS (100.00%) | $ | 113,895,596 |
(a) | Non income producing security. |
See Notes to Financial Statements.
22 | May 31, 2018
RiverFront Dynamic US Flex-Cap ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.82%) | ||||||||
Consumer Discretionary (14.73%) | ||||||||
Amazon.com, Inc.(a) | 2,045 | $ | 3,332,572 | |||||
Bed Bath & Beyond, Inc. | 26,806 | 486,797 | ||||||
Booking Holdings, Inc.(a) | 197 | 415,457 | ||||||
Comcast Corp., Class A | 27,811 | 867,147 | ||||||
Dana, Inc. | 20,855 | 465,067 | ||||||
Dollar General Corp. | 7,403 | 647,614 | ||||||
Fossil Group, Inc.(a) | 40,790 | 892,485 | ||||||
Helen of Troy, Ltd.(a) | 7,088 | 636,502 | ||||||
Home Depot, Inc. | 8,143 | 1,519,077 | ||||||
Lowe's Cos., Inc. | 9,351 | 888,439 | ||||||
McDonald's Corp. | 7,736 | 1,237,837 | ||||||
Michael Kors Holdings, Ltd.(a) | 10,576 | 606,957 | ||||||
Modine Manufacturing Co.(a) | 28,625 | 515,250 | ||||||
Netflix, Inc.(a) | 3,262 | 1,146,919 | ||||||
Office Depot, Inc. | 267,246 | 630,701 | ||||||
Signet Jewelers, Ltd. | 15,657 | 673,251 | ||||||
Time Warner, Inc. | 9,755 | 918,531 | ||||||
TJX Cos., Inc. | 9,315 | 841,331 | ||||||
Winnebago Industries, Inc. | 16,670 | 604,288 | ||||||
Total Consumer Discretionary | 17,326,222 | |||||||
Consumer Staples (6.43%) | ||||||||
British American Tobacco PLC | 11,150 | 570,880 | ||||||
Coca-Cola Co. | 28,717 | 1,234,831 | ||||||
Coca-Cola European Partners PLC | 14,250 | 541,073 | ||||||
Conagra Brands, Inc. | 17,573 | 651,255 | ||||||
Constellation Brands, Inc., Class A | 2,759 | 615,478 | ||||||
Mondelez International, Inc., Class A | 11,442 | 449,327 | ||||||
PepsiCo, Inc. | 5,412 | 542,553 | ||||||
Sysco Corp. | 11,410 | 741,992 | ||||||
Unilever NV | 21,231 | 1,184,053 | ||||||
Walmart, Inc. | 12,475 | 1,029,687 | ||||||
Total Consumer Staples | 7,561,129 | |||||||
Energy (6.36%) | ||||||||
Chevron Corp. | 2,539 | 315,598 | ||||||
Cloud Peak Energy, Inc.(a) | 133,281 | 482,477 | ||||||
Ensco PLC, Class A | 114,070 | 741,455 | ||||||
Exxon Mobil Corp. | 6,573 | 533,991 | ||||||
ION Geophysical Corp.(a) | 19,679 | 482,136 | ||||||
Kinder Morgan, Inc. | 19,119 | 318,905 | ||||||
National Oilwell Varco, Inc. | 18,355 | 760,264 | ||||||
Noble Corp. PLC(a) | 122,258 | 679,754 | ||||||
Oceaneering International, Inc. | 31,003 | 738,801 | ||||||
Oil States International, Inc.(a) | 24,196 | 856,538 | ||||||
Transocean, Ltd.(a) | 124,526 | 1,575,254 | ||||||
Total Energy | 7,485,173 | |||||||
Financials (15.08%) | ||||||||
American Equity Investment Life Holding Co. | 19,537 | 692,391 | ||||||
Bank of America Corp. | 52,348 | 1,520,185 |
Security Description | Shares | Value | ||||||
Financials (continued) | ||||||||
BB&T Corp. | 13,591 | $ | 713,528 | |||||
Brighthouse Financial, Inc.(a) | 11,591 | 546,052 | ||||||
Capital One Financial Corp. | 8,473 | 796,462 | ||||||
Capstead Mortgage Corp. | 85,046 | 778,171 | ||||||
CME Group, Inc. | 4,930 | 803,097 | ||||||
Comerica, Inc. | 6,753 | 636,740 | ||||||
Enova International, Inc.(a) | 28,531 | 958,641 | ||||||
Everest Re Group, Ltd. | 2,893 | 651,764 | ||||||
Genworth Financial, Inc., Class A(a) | 218,966 | 753,243 | ||||||
JPMorgan Chase & Co. | 19,653 | 2,103,067 | ||||||
M&T Bank Corp. | 3,687 | 634,459 | ||||||
Maiden Holdings, Ltd. | 76,654 | 670,723 | ||||||
MetLife, Inc. | 16,645 | 765,504 | ||||||
Navient Corp. | 45,127 | 623,204 | ||||||
Principal Financial Group, Inc. | 10,636 | 593,489 | ||||||
Prudential Financial, Inc. | 7,141 | 691,534 | ||||||
Regions Financial Corp. | 34,924 | 637,014 | ||||||
Synchrony Financial | 19,771 | 684,670 | ||||||
Walker & Dunlop, Inc. | 10,022 | 562,435 | ||||||
Wells Fargo & Co. | 6,312 | 340,785 | ||||||
Westwood Holdings Group, Inc. | 9,985 | 579,430 | ||||||
Total Financials | 17,736,588 | |||||||
Health Care (10.13%) | ||||||||
Abbott Laboratories | 16,794 | 1,033,335 | ||||||
Allergan PLC | 5,085 | 766,818 | ||||||
Cigna Corp. | 3,724 | 630,734 | ||||||
DaVita, Inc.(a) | 10,337 | 690,925 | ||||||
DENTSPLY SIRONA, Inc. | 12,668 | 554,985 | ||||||
Eli Lilly & Co. | 11,242 | 956,020 | ||||||
Endo International PLC(a) | 171,752 | 1,080,320 | ||||||
Express Scripts Holding Co.(a) | 11,543 | 875,075 | ||||||
Gilead Sciences, Inc. | 14,781 | 996,239 | ||||||
HCA Healthcare, Inc. | 5,929 | 611,517 | ||||||
Humana, Inc. | 3,269 | 951,214 | ||||||
Johnson & Johnson | 14,030 | 1,678,268 | ||||||
Medtronic PLC | 12,629 | 1,090,135 | ||||||
Total Health Care | 11,915,585 | |||||||
Industrials (10.88%) | ||||||||
AECOM(a) | 17,529 | 578,457 | ||||||
ArcBest Corp. | 17,054 | 809,212 | ||||||
Arconic, Inc. | 40,220 | 709,883 | ||||||
Avis Budget Group, Inc.(a) | 12,651 | 493,262 | ||||||
Boeing Co. | 4,177 | 1,470,973 | ||||||
Caterpillar, Inc. | 6,163 | 936,221 | ||||||
Cummins, Inc. | 4,074 | 580,097 | ||||||
Esterline Technologies Corp.(a) | 13,483 | 983,585 | ||||||
FedEx Corp. | 3,354 | 835,548 | ||||||
Honeywell International, Inc. | 7,006 | 1,036,258 | ||||||
Lockheed Martin Corp. | 2,656 | 835,418 | ||||||
Marten Transport, Ltd. | 26,624 | 607,027 | ||||||
Old Dominion Freight Line, Inc. | 4,751 | 740,966 | ||||||
Saia, Inc.(a) | 8,279 | 682,190 |
See Notes to Financial Statements.
23 | May 31, 2018
RiverFront Dynamic US Flex-Cap ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Industrials (continued) | ||||||||
SkyWest, Inc. | 11,399 | $ | 649,743 | |||||
United Rentals, Inc.(a) | 5,326 | 849,870 | ||||||
Total Industrials | 12,798,710 | |||||||
Information Technology (23.81%) | ||||||||
Adobe Systems, Inc.(a) | 5,328 | 1,328,164 | ||||||
Alphabet, Inc., Class A(a) | 1,901 | 2,091,100 | ||||||
Alphabet, Inc., Class C(a) | 1,152 | 1,249,908 | ||||||
Apple, Inc. | 25,485 | 4,762,381 | ||||||
Applied Materials, Inc. | 9,952 | 505,363 | ||||||
CACI International, Inc., Class A(a) | 4,305 | 717,428 | ||||||
Cognizant Technology Solutions Corp., Class A | 9,933 | 748,452 | ||||||
ExlService Holdings, Inc.(a) | 10,208 | 578,692 | ||||||
Facebook, Inc., Class A(a) | 14,308 | 2,743,988 | ||||||
Mastercard, Inc., Class A | 7,144 | 1,358,217 | ||||||
Microchip Technology, Inc. | 9,798 | 954,129 | ||||||
Micron Technology, Inc.(a) | 24,751 | 1,425,410 | ||||||
Microsoft Corp. | 39,575 | 3,911,592 | ||||||
NCR Corp.(a) | 19,316 | 581,412 | ||||||
Oracle Corp. | 10,536 | 492,242 | ||||||
PayPal Holdings, Inc.(a) | 14,550 | 1,194,119 | ||||||
Skyworks Solutions, Inc. | 6,724 | 663,054 | ||||||
Tech Data Corp.(a) | 7,433 | 645,259 | ||||||
Total System Services, Inc. | 7,684 | 654,600 | ||||||
Virtusa Corp.(a) | 13,947 | 677,127 | ||||||
Western Digital Corp. | 8,841 | 738,312 | ||||||
Total Information Technology | 28,020,949 | |||||||
Materials (5.87%) | ||||||||
Ingevity Corp.(a) | 8,526 | 649,170 | ||||||
Koppers Holdings, Inc.(a) | 18,833 | 758,970 | ||||||
Kraton Corp.(a) | 11,317 | 549,101 | ||||||
Monsanto Co. | 6,832 | 870,806 | ||||||
Packaging Corp. of America | 5,394 | 633,795 | ||||||
Reliance Steel & Aluminum Co. | 8,291 | 775,789 | ||||||
RPM International, Inc. | 13,253 | 656,024 | ||||||
Schweitzer-Mauduit International, Inc. | 14,137 | 619,342 | ||||||
Sensient Technologies Corp. | 8,701 | 585,142 | ||||||
SunCoke Energy, Inc.(a) | 59,897 | 811,005 | ||||||
Total Materials | 6,909,144 | |||||||
Real Estate (2.28%) | ||||||||
CBL & Associates Properties, Inc.(b) | 141,929 | 718,161 | ||||||
DDR Corp. | 38,235 | 580,790 | ||||||
Pennsylvania Real Estate Investment Trust | 58,633 | 645,549 | ||||||
Washington Prime Group, Inc. | 100,876 | 733,368 | ||||||
Total Real Estate | 2,677,868 | |||||||
Telecommunication Services (0.99%) | ||||||||
AT&T, Inc. | 8,513 | 275,140 |
Security Description | Shares | Value | ||||||
Telecommunication Services (continued) | ||||||||
Iridium Communications, Inc.(a) | 58,763 | $ | 893,198 | |||||
Total Telecommunication Services | 1,168,338 | |||||||
Utilities (3.26%) | ||||||||
American Electric Power Co., Inc. | 10,506 | 713,883 | ||||||
Avangrid, Inc. | 13,121 | 696,594 | ||||||
Consolidated Edison, Inc. | 4,058 | 311,370 | ||||||
Exelon Corp. | 18,852 | 780,284 | ||||||
Great Plains Energy, Inc. | 21,496 | 729,574 | ||||||
SCANA Corp. | 16,779 | 609,078 | ||||||
Total Utilities | 3,840,783 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $112,152,196) | 117,440,489 |
Security Description | 7 Day Yield | Shares | Value | |||||||||
SHORT TERM INVESTMENTS (0.33%) | ||||||||||||
Money Market Fund (0.01%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | ||||||||||||
(Cost $15,175) | 1.669 | % | 15,175 | 15,175 | ||||||||
Investments Purchased with Collateral from Securities Loaned (0.32%) | ||||||||||||
State Street Navigator Securities Lending Government Money Market Portfolio, 1.77% | ||||||||||||
(Cost $378,824) | 378,824 | 378,824 | ||||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $393,999) | 393,999 | |||||||||||
TOTAL INVESTMENTS (100.15%) | ||||||||||||
(Cost $112,546,195) | $ | 117,834,488 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (-0.15%) | (187,676 | ) | ||||||||||
NET ASSETS (100.00%) | $ | 117,646,811 |
(a) | Non income producing security. |
(b) | Security, or a portion of the security position, is currently on loan. The total market value of securities on loan is $348,518. |
See Notes to Financial Statements.
24 | May 31, 2018
RiverFront Strategic Income Fund
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
CORPORATE BONDS (89.52%) | ||||||||
Communications (12.49%) | ||||||||
Cablevision Systems Corp. | ||||||||
8.00%, 04/15/2020 | $ | 1,500,000 | $ | 1,586,250 | ||||
CenturyLink, Inc. | ||||||||
5.63%, 04/01/2020 | 3,540,000 | 3,597,525 | ||||||
Charter Communications Operating LLC / Charter Communications Operating Capital | ||||||||
3.58%, 07/23/2020 | 2,000,000 | 2,005,692 | ||||||
DISH DBS Corp. | ||||||||
7.88%, 09/01/2019 | 3,000,000 | 3,115,500 | ||||||
Hughes Satellite Systems Corp. | ||||||||
6.50%, 06/15/2019 | 300,000 | 310,500 | ||||||
7.63%, 06/15/2021 | 1,500,000 | 1,603,125 | ||||||
Lamar Media Corp. | ||||||||
5.00%, 05/01/2023 | 3,575,000 | 3,637,563 | ||||||
5.38%, 01/15/2024 | 500,000 | 508,750 | ||||||
Sprint Communications, Inc. | ||||||||
9.00%, 11/15/2018(a) | 1,113,000 | 1,141,325 | ||||||
7.00%, 08/15/2020 | 3,050,000 | 3,164,832 | ||||||
T-Mobile USA, Inc. | ||||||||
6.50%, 01/15/2024 | 3,025,000 | 3,168,688 | ||||||
VeriSign, Inc. | ||||||||
5.25%, 04/01/2025 | 3,150,000 | 3,232,688 | ||||||
Virgin Media Secured Finance PLC | ||||||||
5.25%, 01/15/2021 | 1,500,000 | 1,546,080 | ||||||
Total Communications | 28,618,518 | |||||||
Consumer Discretionary (14.26%) | ||||||||
ADT Corp. | ||||||||
6.25%, 10/15/2021 | 2,000,000 | 2,070,000 | ||||||
Aramark Services, Inc. | ||||||||
5.13%, 01/15/2024 | 2,992,000 | 3,045,856 | ||||||
DR Horton, Inc. | ||||||||
4.38%, 09/15/2022 | 3,140,000 | 3,221,891 | ||||||
GLP Capital LP / GLP Financing II, Inc. | ||||||||
4.88%, 11/01/2020 | 2,000,000 | 2,035,000 | ||||||
Goodyear Tire & Rubber Co. | ||||||||
5.13%, 11/15/2023 | 2,936,000 | 2,928,660 | ||||||
Hanesbrands, Inc. | ||||||||
4.63%, 05/15/2024(a) | 2,334,000 | 2,290,238 | ||||||
Hilton Worldwide Finance LLC / Hilton Worldwide Finance Corp. | ||||||||
4.63%, 04/01/2025 | 2,650,000 | 2,563,875 | ||||||
International Game Technology PLC | ||||||||
6.25%, 02/15/2022(a) | 2,499,000 | 2,586,465 | ||||||
KB Home | ||||||||
4.75%, 05/15/2019 | 1,700,000 | 1,719,210 | ||||||
KFC Holding Co. / Pizza Hut Holdings LLC / Taco Bell of America LLC | ||||||||
5.00%, 06/01/2024(a) | 2,587,000 | 2,561,130 | ||||||
Lennar Corp. | ||||||||
4.50%, 11/15/2019 | 1,000,000 | 1,012,500 |
Security Description | Principal Amount | Value | ||||||
Consumer Discretionary (continued) | ||||||||
Scotts Miracle-Gro Co. | ||||||||
6.00%, 10/15/2023 | $ | 581,000 | $ | 604,966 | ||||
5.25%, 12/15/2026 | 2,783,000 | 2,664,723 | ||||||
Service Corp. International | ||||||||
5.38%, 01/15/2022 | 3,145,000 | 3,190,208 | ||||||
5.38%, 05/15/2024 | 175,000 | 177,188 | ||||||
Total Consumer Discretionary | 32,671,910 | |||||||
Consumer Staples (3.36%) | ||||||||
Pinnacle Foods Finance LLC / Pinnacle Foods Finance Corp. | ||||||||
5.88%, 01/15/2024 | 1,689,000 | 1,743,893 | ||||||
Spectrum Brands, Inc. | ||||||||
5.75%, 07/15/2025 | 2,884,000 | 2,869,580 | ||||||
TreeHouse Foods, Inc. | ||||||||
6.00%, 02/15/2024(a) | 3,000,000 | 3,084,450 | ||||||
Total Consumer Staples | 7,697,923 | |||||||
Energy (17.97%) | ||||||||
Andeavor | ||||||||
5.38%, 10/01/2022 | 3,044,000 | 3,119,796 | ||||||
Cheniere Corpus Christi Holdings LLC | ||||||||
7.00%, 06/30/2024 | 3,517,000 | 3,864,338 | ||||||
Concho Resources, Inc. | ||||||||
4.38%, 01/15/2025 | 3,380,000 | 3,426,571 | ||||||
Continental Resources, Inc. | ||||||||
5.00%, 09/15/2022 | 3,020,000 | 3,069,326 | ||||||
DCP Midstream Operating LP | ||||||||
5.35%, 03/15/2020(a) | 3,304,000 | 3,394,860 | ||||||
Energy Transfer Equity LP | ||||||||
7.50%, 10/15/2020 | 2,000,000 | 2,160,000 | ||||||
Kinder Morgan Energy Partners LP | ||||||||
5.00%, 10/01/2021 | 3,000,000 | 3,125,513 | ||||||
MPLX LP | ||||||||
5.50%, 02/15/2023 | 3,000,000 | 3,071,280 | ||||||
Nabors Industries, Inc. | ||||||||
5.00%, 09/15/2020 | 2,900,000 | 2,943,500 | ||||||
Newfield Exploration Co. | ||||||||
5.75%, 01/30/2022 | 3,530,000 | 3,719,738 | ||||||
Range Resources Corp. | ||||||||
5.75%, 06/01/2021 | 1,547,000 | 1,597,278 | ||||||
5.00%, 08/15/2022 | 2,352,000 | 2,340,239 | ||||||
Southwestern Energy Co. | ||||||||
4.10%, 03/15/2022 | 1,569,000 | 1,533,698 | ||||||
Targa Resources Partners LP / Targa Resources Partners Finance Corp. | ||||||||
5.25%, 05/01/2023 | 2,725,000 | 2,752,250 | ||||||
6.75%, 03/15/2024 | 990,000 | 1,044,470 | ||||||
Total Energy | 41,162,857 |
See Notes to Financial Statements.
25 | May 31, 2018
RiverFront Strategic Income Fund
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
Financials (10.61%) | ||||||||
AerCap Ireland Capital DAC / AerCap Global Aviation Trust | ||||||||
4.63%, 10/30/2020 | $ | 3,381,000 | $ | 3,467,301 | ||||
Aircastle, Ltd. | ||||||||
6.25%, 12/01/2019 | 3,000,000 | 3,112,500 | ||||||
Ally Financial, Inc. | ||||||||
4.75%, 09/10/2018 | 2,530,000 | 2,542,017 | ||||||
4.25%, 04/15/2021 | 1,000,000 | 1,010,000 | ||||||
CIT Group, Inc. | ||||||||
5.00%, 08/15/2022 | 3,285,000 | 3,346,594 | ||||||
Icahn Enterprises LP / Icahn Enterprises Finance Corp. | ||||||||
6.00%, 08/01/2020 | 2,000,000 | 2,038,750 | ||||||
Iron Mountain, Inc. | ||||||||
4.38%, 06/01/2021(a) | 1,700,000 | 1,719,635 | ||||||
iStar, Inc. | ||||||||
5.00%, 07/01/2019 | 300,000 | 299,594 | ||||||
4.63%, 09/15/2020 | 2,850,000 | 2,817,937 | ||||||
Navient Corp. | ||||||||
5.50%, 01/15/2019 | 2,400,000 | 2,430,600 | ||||||
Starwood Property Trust, Inc. | ||||||||
5.00%, 12/15/2021 | 1,500,000 | 1,526,250 | ||||||
Total Financials | 24,311,178 | |||||||
Health Care (3.37%) | ||||||||
Centene Corp. | ||||||||
5.63%, 02/15/2021 | 1,500,000 | 1,543,815 | ||||||
DaVita, Inc. | ||||||||
5.75%, 08/15/2022 | 3,000,000 | 3,065,625 | ||||||
HCA, Inc. | ||||||||
5.88%, 03/15/2022 | 2,949,000 | 3,107,509 | ||||||
Total Health Care | 7,716,949 | |||||||
Industrials (4.13%) | ||||||||
United Rentals North America, Inc. | ||||||||
5.75%, 11/15/2024 | 3,040,000 | 3,142,600 | ||||||
WESCO Distribution, Inc. | ||||||||
5.38%, 12/15/2021 | 3,275,000 | 3,344,594 | ||||||
XPO Logistics, Inc. | ||||||||
6.50%, 06/15/2022(a) | 2,900,000 | 2,980,475 | ||||||
Total Industrials | 9,467,669 | |||||||
Materials (20.17%) | ||||||||
AK Steel Corp. | ||||||||
7.50%, 07/15/2023 | 2,890,000 | 3,052,563 | ||||||
ArcelorMittal | ||||||||
6.00%, 08/05/2020 | 1,000,000 | 1,036,250 | ||||||
Ashland LLC | ||||||||
4.75%, 08/15/2022 | 2,865,000 | 2,882,906 | ||||||
Ball Corp. | ||||||||
5.00%, 03/15/2022 | 3,116,000 | 3,217,270 |
Security Description | Principal Amount | Value | ||||||
Materials (continued) | ||||||||
Cascades, Inc. | ||||||||
5.50%, 07/15/2022(a) | $ | 1,494,000 | $ | 1,497,735 | ||||
5.75%, 07/15/2023(a) | 2,112,000 | 2,101,439 | ||||||
Celanese US Holdings LLC | ||||||||
5.88%, 06/15/2021 | 3,170,000 | 3,376,849 | ||||||
Crown Americas LLC / Crown Americas Capital Corp. IV | ||||||||
4.50%, 01/15/2023 | 2,973,000 | 2,902,689 | ||||||
Freeport-McMoRan, Inc. | ||||||||
3.10%, 03/15/2020 | 1,500,000 | 1,485,000 | ||||||
Glencore Funding LLC | ||||||||
4.63%, 04/29/2024(a) | 2,315,000 | 2,356,001 | ||||||
Graphic Packaging International LLC | ||||||||
4.75%, 04/15/2021 | 645,000 | 651,450 | ||||||
4.88%, 11/15/2022 | 2,151,000 | 2,167,133 | ||||||
Huntsman International LLC | ||||||||
4.88%, 11/15/2020 | 3,025,000 | 3,100,625 | ||||||
Owens-Brockway Glass Container, Inc. | ||||||||
5.00%, 01/15/2022(a) | 3,165,000 | 3,172,913 | ||||||
Reynolds Group Issuer, Inc. / Reynolds Group Issuer LLC | ||||||||
5.75%, 10/15/2020 | 1,453,662 | 1,464,564 | ||||||
Sealed Air Corp. | ||||||||
6.50%, 12/01/2020(a) | 1,500,000 | 1,586,250 | ||||||
Steel Dynamics, Inc. | ||||||||
4.13%, 09/15/2025 | 3,360,000 | 3,192,000 | ||||||
USG Corp. | ||||||||
5.50%, 03/01/2025(a) | 3,294,000 | 3,433,995 | ||||||
Vale Overseas, Ltd. | ||||||||
5.88%, 06/10/2021 | 3,340,000 | 3,528,709 | ||||||
Total Materials | 46,206,341 | |||||||
Technology (1.21%) | ||||||||
Flex, Ltd. | ||||||||
5.00%, 02/15/2023 | 2,670,000 | 2,765,231 | ||||||
Total Technology | 2,765,231 | |||||||
Utilities (1.95%) | ||||||||
AES Corp. | ||||||||
4.00%, 03/15/2021 | 1,000,000 | 1,002,900 | ||||||
AmeriGas Partners LP / AmeriGas Finance Corp. | ||||||||
5.63%, 05/20/2024 | 2,387,000 | 2,375,065 | ||||||
DPL, Inc. | ||||||||
7.25%, 10/15/2021 | 1,000,000 | 1,093,750 | ||||||
Total Utilities | 4,471,715 | |||||||
TOTAL CORPORATE BONDS | ||||||||
(Cost $206,057,419) | 205,090,291 |
See Notes to Financial Statements.
26 | May 31, 2018
RiverFront Strategic Income Fund
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Principal Amount | Value | ||||||
GOVERNMENT BONDS (1.11%) | ||||||||
United States Treasury Inflation Indexed Bonds | ||||||||
2.13%, 02/15/2040 | ||||||||
$ | 2,020,393 | $ | 2,534,438 | |||||
TOTAL GOVERNMENT BONDS | ||||||||
(Cost $2,453,845) | 2,534,438 |
Security Description | 7 Day Yield | Shares | Value | |||||||||
SHORT TERM | ||||||||||||
INVESTMENTS (8.09%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | ||||||||||||
(Cost $18,534,598) | 1.669 | % | 18,534,598 | 18,534,598 | ||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $18,534,598) | 18,534,598 | |||||||||||
TOTAL INVESTMENTS (98.72%) | ||||||||||||
(Cost $227,045,862) | $ | 226,159,327 | ||||||||||
NET OTHER ASSETS AND LIABILITIES (1.28%) | 2,938,515 | |||||||||||
NET ASSETS (100.00%) | $ | 229,097,842 |
(a) | Securities exempt from registration under Rule 144A of the Securities Act of 1933. These securities may be sold in the ordinary course of business in transactions exempt from registration, normally to qualified institutional buyers. At period end, the aggregate market value of those securities was $33,906,911, representing 14.80% of net assets. |
See Notes to Financial Statements.
27 | May 31, 2018
RiverFront ETFs |
Statement of Assets and Liabilities | May 31, 2018 (Unaudited) |
RiverFront Dynamic Core Income ETF | RiverFront Dynamic Unconstrained Income ETF | RiverFront Dynamic US Dividend Advantage ETF | RiverFront Dynamic US Flex-Cap ETF | RiverFront Strategic Income Fund | ||||||||||||||||
ASSETS: | ||||||||||||||||||||
Investments, at value | $ | 108,403,795 | $ | 40,735,292 | $ | 113,583,988 | $ | 117,834,488 | $ | 226,159,327 | ||||||||||
Cash held in escrow account (Note 3) | 17,767 | 7,911 | 23,012 | 22,149 | 14,116 | |||||||||||||||
Interest receivable | 841,732 | 596,881 | – | – | 2,969,660 | |||||||||||||||
Dividend receivable | – | – | 362,105 | 241,939 | – | |||||||||||||||
Total Assets | 109,263,294 | 41,340,084 | 113,969,105 | 118,098,576 | 229,143,103 | |||||||||||||||
LIABILITIES: | ||||||||||||||||||||
Payable to adviser | 61,971 | 25,673 | 73,509 | 72,941 | 45,261 | |||||||||||||||
Payable for collateral upon return of | ||||||||||||||||||||
securities loaned | – | – | – | 378,824 | – | |||||||||||||||
Total Liabilities | 61,971 | 25,673 | 73,509 | 451,765 | 45,261 | |||||||||||||||
NET ASSETS | $ | 109,201,323 | $ | 41,314,411 | $ | 113,895,596 | $ | 117,646,811 | $ | 229,097,842 | ||||||||||
NET ASSETS CONSIST OF: | ||||||||||||||||||||
Paid-in capital | $ | 110,648,223 | $ | 41,950,667 | $ | 107,226,126 | $ | 111,179,255 | $ | 239,180,430 | ||||||||||
Accumulated net investment income/(loss) | 35,273 | (2,630 | ) | 102,625 | 99,339 | (96,214 | ) | |||||||||||||
Accumulated net realized gain/(loss) | (695,508 | ) | 7,647 | 2,651,761 | 1,079,924 | (9,099,839 | ) | |||||||||||||
Net unrealized appreciation/(depreciation) | (786,665 | ) | (641,273 | ) | 3,915,084 | 5,288,293 | (886,535 | ) | ||||||||||||
NET ASSETS | $ | 109,201,323 | $ | 41,314,411 | $ | 113,895,596 | $ | 117,646,811 | $ | 229,097,842 | ||||||||||
INVESTMENTS, AT COST | $ | 109,190,460 | $ | 41,376,565 | $ | 109,668,904 | $ | 112,546,195 | $ | 227,045,862 | ||||||||||
PRICING OF SHARES | ||||||||||||||||||||
Net Assets | $ | 109,201,323 | $ | 41,314,411 | $ | 113,895,596 | $ | 117,646,811 | $ | 229,097,842 | ||||||||||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 4,550,000 | 1,650,000 | 3,550,002 | 3,500,002 | 9,350,000 | |||||||||||||||
Net Asset Value, offering and redemption price per share | $ | 24.00 | $ | 25.04 | $ | 32.08 | $ | 33.61 | $ | 24.50 |
See Notes to Financial Statements.
28 | May 31, 2018
RiverFront ETFs |
Statement of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
RiverFront Dynamic Core Income ETF | RiverFront Dynamic Unconstrained Income ETF | RiverFront Dynamic US Dividend Advantage ETF | RiverFront Dynamic US Flex-Cap ETF | RiverFront Strategic Income Fund | ||||||||||||||||
INVESTMENT INCOME: | ||||||||||||||||||||
Interest | $ | 1,144,872 | $ | 613,088 | $ | – | $ | – | $ | 6,523,664 | ||||||||||
Dividends(a) | 23,860 | 5,545 | 1,297,682 | 707,293 | 123,069 | |||||||||||||||
Securities Lending Income | – | – | 282 | 3,499 | – | |||||||||||||||
Total Investment Income | 1,168,732 | 618,633 | 1,297,964 | 710,792 | 6,646,733 | |||||||||||||||
EXPENSES | ||||||||||||||||||||
Investment adviser and sub-adviser fees (Note 3) | 195,169 | 62,294 | 231,291 | 193,860 | 692,596 | |||||||||||||||
Total Expenses before waiver/reimbursement | 195,169 | 62,294 | 231,291 | 193,860 | 692,596 | |||||||||||||||
Less fees waived/reimbursed by sub-adviser (Note 3) | – | – | – | (451,693 | ) | |||||||||||||||
Net Expenses | 195,169 | 62,294 | 231,291 | 193,860 | 240,903 | |||||||||||||||
NET INVESTMENT INCOME | 973,563 | 556,339 | 1,066,673 | 516,932 | 6,405,830 | |||||||||||||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||||||||||||||||||
Net realized gain/(loss) on investments | (619,633 | ) | 7,648 | 3,251,528 | 2,077,104 | (617,011 | ) | |||||||||||||
Net realized gain/(loss) on foreign currency transactions | – | – | 69 | (8 | ) | – | ||||||||||||||
NET REALIZED GAIN/(LOSS) | (619,633 | ) | 7,648 | 3,251,597 | 2,077,096 | (617,011 | ) | |||||||||||||
Net change in unrealized appreciation/(depreciation) on investments | (831,757 | ) | (802,863 | ) | (2,477,891 | ) | 387,565 | (8,337,699 | ) | |||||||||||
NET CHANGE IN UNREALIZED APPRECIATION/(DEPRECIATION) | (831,757 | ) | (802,863 | ) | (2,477,891 | ) | 387,565 | (8,337,699 | ) | |||||||||||
NET REALIZED AND UNREALIZED GAIN/(LOSS) ON INVESTMENTS | (1,451,390 | ) | (795,215 | ) | 773,706 | 2,464,661 | (8,954,710 | ) | ||||||||||||
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS | $ | (477,827 | ) | $ | (238,876 | ) | $ | 1,840,379 | $ | 2,981,593 | $ | (2,548,880 | ) |
(a) | Net of foreign tax withholding in the amounts of $330, $0, $686, $2,083 and $0 respectively. |
See Notes to Financial Statements.
29 | May 31, 2018
RiverFront Dynamic Core Income ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 973,563 | $ | 629,408 | ||||
Net realized loss | (619,633 | ) | (27,864 | ) | ||||
Net change in unrealized appreciation/(depreciation) | (831,757 | ) | 168,683 | |||||
Net Increase/(Decrease) in net assets resulting from operations | (477,827 | ) | 770,227 | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (946,303 | ) | (621,587 | ) | ||||
Total distributions | (946,303 | ) | (621,587 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 84,252,027 | 41,731,911 | ||||||
Shares redeemed | (21,588,276 | ) | – | |||||
Net increase from share transactions | 62,663,751 | 41,731,911 | ||||||
Net increase in net assets | 61,239,621 | 41,880,551 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 47,961,702 | 6,081,151 | ||||||
End of period* | $ | 109,201,323 | $ | 47,961,702 | ||||
*Including accumulated net investment income of: | $ | 35,273 | $ | 8,013 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,950,000 | 250,000 | ||||||
Shares sold | 3,500,000 | 1,700,000 | ||||||
Shares redeemed | (900,000 | ) | – | |||||
Shares outstanding, end of period | 4,550,000 | 1,950,000 |
See Notes to Financial Statements.
30 | May 31, 2018
RiverFront Dynamic Unconstrained Income ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 556,339 | $ | 409,270 | ||||
Net realized gain | 7,648 | 40,613 | ||||||
Net change in unrealized appreciation/(depreciation) | (802,863 | ) | 43,582 | |||||
Net Increase/(Decrease) in net assets resulting from operations | (238,876 | ) | 493,465 | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (560,325 | ) | (408,541 | ) | ||||
From net realized gains | (39,065 | ) | – | |||||
Total distributions | (599,390 | ) | (408,541 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 30,393,376 | 9,141,531 | ||||||
Shares redeemed | – | (2,576,982 | ) | |||||
Net increase from share transactions | 30,393,376 | 6,564,549 | ||||||
Net increase in net assets | 29,555,110 | 6,649,473 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 11,759,301 | 5,109,828 | ||||||
End of period* | $ | 41,314,411 | $ | 11,759,301 | ||||
*Including accumulated net investment income/(loss) of: | $ | (2,630 | ) | $ | 1,356 | |||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 450,000 | 200,000 | ||||||
Shares sold | 1,200,000 | 350,000 | ||||||
Shares redeemed | – | (100,000 | ) | |||||
Shares outstanding, end of period | 1,650,000 | 450,000 |
See Notes to Financial Statements.
31 | May 31, 2018
RiverFront Dynamic US Dividend Advantage ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,066,673 | $ | 774,486 | ||||
Net realized gain | 3,251,597 | 553,688 | ||||||
Net change in unrealized appreciation/(depreciation) | (2,477,891 | ) | 5,893,754 | |||||
Net increase in net assets resulting from operations | 1,840,379 | 7,221,928 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (989,745 | ) | (753,106 | ) | ||||
Total distributions | (989,745 | ) | (753,106 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 94,179,382 | 49,651,673 | ||||||
Shares redeemed | (40,778,365 | ) | (9,773,232 | ) | ||||
Net increase from share transactions | 53,401,017 | 39,878,441 | ||||||
Net increase in net assets | 54,251,651 | 46,347,263 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 59,643,945 | 13,296,682 | ||||||
End of period* | $ | 113,895,596 | $ | 59,643,945 | ||||
*Including accumulated net investment income of: | $ | 102,625 | $ | 25,697 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,900,002 | 500,002 | ||||||
Shares sold | 2,950,000 | 1,750,000 | ||||||
Shares redeemed | (1,300,000 | ) | (350,000 | ) | ||||
Shares outstanding, end of period | 3,550,002 | 1,900,002 |
See Notes to Financial Statements.
32 | May 31, 2018
RiverFront Dynamic US Flex-Cap ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 516,932 | $ | 271,035 | ||||
Net realized gain | 2,077,096 | 210,656 | ||||||
Net change in unrealized appreciation | 387,565 | 4,586,573 | ||||||
Net increase in net assets resulting from operations | 2,981,593 | 5,068,264 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (434,804 | ) | (254,258 | ) | ||||
Total distributions | (434,804 | ) | (254,258 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 100,238,815 | 36,346,437 | ||||||
Shares redeemed | (25,715,063 | ) | (8,637,056 | ) | ||||
Net increase from share transactions | 74,523,752 | 27,709,381 | ||||||
Net increase in net assets | 77,070,541 | 32,523,387 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 40,576,270 | 8,052,883 | ||||||
End of period* | $ | 117,646,811 | $ | 40,576,270 | ||||
*Including accumulated net investment income of: | $ | 99,339 | $ | 17,211 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,250,002 | 300,002 | ||||||
Shares sold | 3,050,000 | 1,250,000 | ||||||
Shares redeemed | (800,000 | ) | (300,000 | ) | ||||
Shares outstanding, end of period | 3,500,002 | 1,250,002 |
See Notes to Financial Statements.
33 | May 31, 2018
RiverFront Strategic Income Fund
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 6,405,830 | $ | 14,069,184 | ||||
Net realized gain/(loss) | (617,011 | ) | 1,790,752 | |||||
Net change in unrealized appreciation/(depreciation) | (8,337,699 | ) | 136,438 | |||||
Net Increase/(Decrease) in net assets resulting from operations | (2,548,880 | ) | 15,996,374 | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (6,537,675 | ) | (14,055,252 | ) | ||||
Total distributions | (6,537,675 | ) | (14,055,252 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 35,106,861 | 49,315,186 | ||||||
Shares redeemed | (134,691,730 | ) | (40,002,027 | ) | ||||
Net increase/(decrease) from share transactions | (99,584,869 | ) | 9,313,159 | |||||
Net increase/(decrease) in net assets | (108,671,424 | ) | 11,254,281 | |||||
NET ASSETS: | ||||||||
Beginning of period | 337,769,266 | 326,514,985 | ||||||
End of period* | $ | 229,097,842 | $ | 337,769,266 | ||||
*Including accumulated net investment income/(loss) of: | $ | (96,214 | ) | $ | 35,631 | |||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 13,400,000 | 13,050,000 | ||||||
Shares sold | 1,400,000 | 1,950,000 | ||||||
Shares redeemed | (5,450,000 | ) | (1,600,000 | ) | ||||
Shares outstanding, end of period | 9,350,000 | 13,400,000 |
See Notes to Financial Statements.
34 | May 31, 2018
RiverFront Dynamic Core Income ETF |
Financial Highlights | For a share outstanding throughout the periods presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Period June 14, 2016 (Commencement) to November 30, 2016 | ||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 24.60 | $ | 24.32 | $ | 25.00 | ||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||
Net investment income(a) | 0.31 | 0.53 | 0.24 | |||||||||
Net realized and unrealized gain/(loss) | (0.62 | ) | 0.23 | (0.68 | ) | |||||||
Total from investment operations | (0.31 | ) | 0.76 | (0.44 | ) | |||||||
DISTRIBUTIONS: | ||||||||||||
From net investment income | (0.29 | ) | (0.48 | ) | (0.24 | ) | ||||||
Total distributions | (0.29 | ) | (0.48 | ) | (0.24 | ) | ||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | (0.60 | ) | 0.28 | (0.68 | ) | |||||||
NET ASSET VALUE, END OF PERIOD | $ | 24.00 | $ | 24.60 | $ | 24.32 | ||||||
TOTAL RETURN(b) | (1.25 | )% | 3.15 | % | (1.77 | )% | ||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||
Net assets, end of period (000s) | $ | 109,201 | $ | 47,962 | $ | 6,081 | ||||||
Ratio of expenses excluding waiver/reimbursement to average net assets | 0.51 | %(c) | 0.51 | % | 0.51 | %(c) | ||||||
Ratio of expenses including waiver/reimbursement to average net assets | 0.51 | %(c) | 0.51 | % | 0.51 | %(c) | ||||||
Ratio of net investment income including expenses waiver/reimbursement to average net assets | 2.54 | %(c) | 2.15 | % | 2.12 | %(c) | ||||||
Portfolio turnover rate(d) | 11 | % | 18 | % | 26 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and the redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at the actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
35 | May 31, 2018
RiverFront Dynamic Unconstrained Income ETF
Financial Highlights | For a share outstanding throughout the periods presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Period June 14, 2016 (Commencement) to November 30, 2016 | ||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 26.13 | $ | 25.55 | $ | 25.00 | ||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||
Net investment income(a) | 0.58 | 1.22 | 0.63 | |||||||||
Net realized and unrealized gain/(loss) | (1.03 | ) | 0.56 | 0.55 | ||||||||
Total from investment operations | (0.45 | ) | 1.78 | 1.18 | ||||||||
DISTRIBUTIONS: | ||||||||||||
From net investment income | (0.55 | ) | (1.20 | ) | (0.63 | ) | ||||||
From net realized gains | (0.09 | ) | – | – | ||||||||
Total distributions | (0.64 | ) | (1.20 | ) | (0.63 | ) | ||||||
NET INCREASE/(DECREASE) IN NET ASSET VALUE | (1.09 | ) | 0.58 | 0.55 | ||||||||
NET ASSET VALUE, END OF PERIOD | $ | 25.04 | $ | 26.13 | $ | 25.55 | ||||||
TOTAL RETURN(b) | (1.76 | )% | 7.06 | % | 4.72 | % | ||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||
Net assets, end of period (000s) | $ | 41,314 | $ | 11,759 | $ | 5,110 | ||||||
Ratio of expenses excluding waiver/reimbursement to average net assets | 0.51 | %(c) | 0.51 | % | 0.51 | %(c) | ||||||
Ratio of expenses including waiver/reimbursement to average net assets | 0.51 | %(c) | 0.51 | % | 0.51 | %(c) | ||||||
Ratio of net investment income including expenses waiver/reimbursement to average net assets | 4.55 | %(c) | 4.65 | % | 5.31 | %(c) | ||||||
Portfolio turnover rate(d) | 10 | % | 30 | % | 11 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and the redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at the actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
36 | May 31, 2018
RiverFront Dynamic US Dividend Advantage ETF
Financial Highlights | For a share outstanding throughout the periods presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Period June 7, 2016 (Commencement) to November 30, 2016 | ||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 31.39 | $ | 26.59 | $ | 25.14 | ||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||
Net investment income(a) | 0.38 | 0.63 | 0.26 | |||||||||
Net realized and unrealized gain | 0.65 | 4.76 | 1.40 | |||||||||
Total from investment operations | 1.03 | 5.39 | 1.66 | |||||||||
DISTRIBUTIONS: | ||||||||||||
From net investment income | (0.34 | ) | (0.59 | ) | (0.21 | ) | ||||||
Total distributions | (0.34 | ) | (0.59 | ) | (0.21 | ) | ||||||
NET INCREASE IN NET ASSET VALUE | 0.69 | 4.80 | 1.45 | |||||||||
NET ASSET VALUE, END OF PERIOD | $ | 32.08 | $ | 31.39 | $ | 26.59 | ||||||
TOTAL RETURN(b) | 3.29 | % | 20.49 | % | 6.64 | % | ||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||
Net assets, end of period (000s) | $ | 113,896 | $ | 59,644 | $ | 13,297 | ||||||
Ratio of expenses excluding waiver/reimbursement to average net assets | 0.52 | %(c) | 0.52 | % | 0.52 | %(c) | ||||||
Ratio of expenses including waiver/reimbursement to average net assets | 0.52 | %(c) | 0.52 | % | 0.52 | %(c) | ||||||
Ratio of net investment income including expenses waiver/reimbursement to average net assets | 2.40 | %(c) | 2.19 | % | 2.13 | %(c) | ||||||
Portfolio turnover rate(d) | 56 | % | 54 | % | 45 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and the redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at the actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
37 | May 31, 2018
RiverFront Dynamic US Flex-Cap ETF
Financial Highlights | For a share outstanding throughout the periods presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Period June 7, 2016 (Commencement) to November 30, 2016 | ||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 32.46 | $ | 26.84 | $ | 25.13 | ||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||
Net investment income(a) | 0.23 | 0.31 | 0.17 | |||||||||
Net realized and unrealized gain | 1.10 | 5.59 | 1.70 | |||||||||
Total from investment operations | 1.33 | 5.90 | 1.87 | |||||||||
DISTRIBUTIONS: | ||||||||||||
From net investment income | (0.18 | ) | (0.28 | ) | (0.16 | ) | ||||||
Total distributions | (0.18 | ) | (0.28 | ) | (0.16 | ) | ||||||
NET INCREASE IN NET ASSET VALUE | 1.15 | 5.62 | 1.71 | |||||||||
NET ASSET VALUE, END OF PERIOD | $ | 33.61 | $ | 32.46 | $ | 26.84 | ||||||
TOTAL RETURN(b) | 4.11 | % | 22.08 | % | 7.45 | % | ||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||
Net assets, end of period (000s) | $ | 117,647 | $ | 40,576 | $ | 8,053 | ||||||
Ratio of expenses excluding waiver/reimbursement to average net assets | 0.52 | %(c) | 0.52 | % | 0.52 | %(c) | ||||||
Ratio of expenses including waiver/reimbursement to average net assets | 0.52 | %(c) | 0.52 | % | 0.52 | %(c) | ||||||
Ratio of net investment income including expenses waiver/reimbursement to average net assets | 1.39 | %(c) | 1.05 | % | 1.34 | %(c) | ||||||
Portfolio turnover rate(d) | 68 | % | 86 | % | 41 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and the redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at the actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
38 | May 31, 2018
RiverFront Strategic Income Fund
Financial Highlights | For a share outstanding throughout the periods presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Year Ended November 30, 2014 | For the Period October 8, 2013 (Commencement) to November 30, 2013 | |||||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.21 | $ | 25.02 | $ | 24.36 | $ | 25.02 | $ | 24.90 | $ | 24.42 | ||||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||||||
Net investment income(a) | 0.53 | 1.11 | 1.05 | 0.88 | 0.83 | 0.11 | ||||||||||||||||||
Net realized and unrealized gain/(loss) | (0.68 | ) | 0.19 | 0.71 | (0.65 | ) | 0.11 | 0.40 | ||||||||||||||||
Total from investment operations | (0.15 | ) | 1.30 | 1.76 | 0.23 | 0.94 | 0.51 | |||||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||||||
From net investment income | (0.56 | ) | (1.11 | ) | (1.10 | ) | (0.87 | ) | (0.82 | ) | (0.03 | ) | ||||||||||||
From net realized gains | – | – | – | (0.02 | ) | – | – | |||||||||||||||||
Total distributions | (0.56 | ) | (1.11 | ) | (1.10 | ) | (0.89 | ) | (0.82 | ) | (0.03 | ) | ||||||||||||
NET INCREASE / (DECREASE) IN NET ASSET VALUE | (0.71 | ) | 0.19 | 0.66 | (0.66 | ) | 0.12 | 0.48 | ||||||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 24.50 | $ | 25.21 | $ | 25.02 | $ | 24.36 | $ | 25.02 | $ | 24.90 | ||||||||||||
TOTAL RETURN(b) | (0.60 | )% | 5.29 | % | 7.38 | % | 0.91 | % | 3.80 | % | 2.08 | % | ||||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||||||
Net assets, end of period (000s) | $ | 229,098 | $ | 337,769 | $ | 326,515 | $ | 464,007 | $ | 369,065 | $ | 97,102 | ||||||||||||
Ratio of expenses excluding waiver/reimbursement to average net assets | 0.46 | %(c) | 0.46 | % | 0.46 | % | 0.46 | % | 0.46 | % | 0.46 | %(c) | ||||||||||||
Ratio of expenses including waiver/reimbursement to average net assets | 0.16 | %(c)(d) | 0.16 | %(d) | 0.17 | %(d) | 0.22 | % | 0.22 | % | 0.22 | %(c) | ||||||||||||
Ratio of net investment income including expenses waiver/reimbursement to average net assets | 4.25 | %(c) | 4.41 | % | 4.26 | % | 3.54 | % | 3.30 | % | 3.28 | %(c) | ||||||||||||
Portfolio turnover rate(e) | 17 | % | 32 | % | 52 | % | 36 | % | 27 | % | 0 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and the redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at the actual reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Effective July 1, 2016, the Fund’s management fee consists of a fee of 0.16% paid to the Fund’s investment adviser and a fee of 0.30% paid to the Fund’s sub-adviser. The Fund’s sub-adviser has agreed to waive all of its 0.30% annual sub-advisory fee on a voluntary basis. |
(e) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
39 | May 31, 2018
RiverFront ETFs
Notes to Financial Statements | May 31, 2018 (Unaudited) |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of May 31, 2018, the Trust consists of twenty separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the RiverFront Dynamic Core Income ETF, the RiverFront Dynamic Unconstrained Income ETF, the RiverFront Dynamic US Dividend Advantage ETF, the RiverFront Dynamic US Flex-Cap ETF, and the RiverFront Strategic Income Fund (each a “Fund” and collectively, the “Funds”).
The investment objective of the RiverFront Dynamic Core Income ETF Fund is to seek total return, with an emphasis on income as the source of that total return. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The investment objective of the RiverFront Dynamic Unconstrained Income ETF Fund is to seek total return, with an emphasis on income as the source of that total return. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The investment objective of the RiverFront Dynamic US Dividend Advantage ETF Fund is to seek to provide capital appreciation and dividend income. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The investment objective of the RiverFront Dynamic US Flex-Cap ETF Fund is to seek to provide capital appreciation. The Fund is considered nondiversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The investment objective of the RiverFront Strategic Income Fund is to seek total return, with an emphasis on income as the source of that total return. The Fund is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
Each Fund’s Shares (“Shares”) are listed on the NYSE Arca, Inc. Each Fund issues and redeems Shares at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities and/or cash. Except when aggregated in Creation Units, Shares are not redeemable securities of a Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
A. Portfolio Valuation
Each Fund’s NAV is determined daily, as of the close of regular trading on the New York Stock Exchange (the “NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of each Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
40 | May 31, 2018
RiverFront ETFs
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“NASDAQ”) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the last quoted sale price in such market.
Corporate bonds and United States government bonds are typically valued at the mean between the evaluated bid and ask prices formulated by an independent pricing service.
Each Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Funds may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of a Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
B. Fair Value Measurements
Each Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Funds’ investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. For corporate bonds, pricing vendors utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type as well as broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances. The RiverFront Dynamic Core Income ETF, the RiverFront Dynamic Unconstrained Income ETF, and the RiverFront Strategic Income Fund may invest a significant portion of their assets in below investment grade securities. The value of these securities can be more volatile due to changes in the credit quality of the issuer and is sensitive to changes in economic, market and regulatory conditions.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of each Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
41 | May 31, 2018
RiverFront ETFs |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Funds’ investments as of May 31, 2018:
RiverFront Dynamic Core Income ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Corporate Bonds* | $ | – | $ | 95,151,417 | $ | – | $ | 95,151,417 | ||||||||
Government Bonds | – | 9,480,463 | – | 9,480,463 | ||||||||||||
Short Term Investments | 3,771,915 | – | – | 3,771,915 | ||||||||||||
TOTAL | $ | 3,771,915 | $ | 104,631,880 | $ | – | $ | 108,403,795 |
RiverFront Dynamic Unconstrained Income ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Corporate Bonds* | $ | – | $ | 38,920,304 | $ | – | $ | 38,920,304 | ||||||||
Short Term Investments | 1,814,988 | – | – | 1,814,988 | ||||||||||||
TOTAL | $ | 1,814,988 | $ | 38,920,304 | $ | – | $ | 40,735,292 |
RiverFront Dynamic US Dividend Advantage ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 113,575,184 | $ | – | $ | – | $ | 113,575,184 | ||||||||
Short Term Investments | 8,804 | – | – | 8,804 | ||||||||||||
TOTAL | $ | 113,583,988 | $ | – | $ | – | $ | 113,583,988 |
RiverFront Dynamic US Flex-Cap ETF
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks* | $ | 117,440,489 | $ | – | $ | – | $ | 117,440,489 | ||||||||
Short Term Investments Money Market Fund | 15,175 | – | – | 15,175 | ||||||||||||
Investments Purchased with Collateral from Securities Loaned | 378,824 | – | – | 378,824 | ||||||||||||
TOTAL | $ | 117,834,488 | $ | – | $ | – | $ | 117,834,488 |
42 | May 31, 2018
RiverFront ETFs |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
RiverFront Strategic Income Fund
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Corporate Bonds* | $ | – | $ | 205,090,291 | $ | – | $ | 205,090,291 | ||||||||
Government Bonds | – | 2,534,438 | – | 2,534,438 | ||||||||||||
Short Term Investments | 18,534,598 | – | – | 18,534,598 | ||||||||||||
TOTAL | $ | 18,534,598 | $ | 207,624,729 | $ | – | $ | 226,159,327 |
* | For a detailed sector breakdown, see the accompanying Schedule of Investments. |
The Funds recognize transfers between levels as of the end of the period. For the six months ended May 31, 2018, the Funds did not have any transfers between Level 1 and Level 2 securities. The Funds did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
C. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis, including amortization of premiums and accretion of discounts.
D. Dividends and Distributions to Shareholders
Dividends from net investment income for each Fund, if any, are declared and paid monthly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Funds, if any, are distributed at least annually.
E. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Funds’ capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2018.
The tax character of the distributions paid by the Funds during the fiscal year ended November 30, 2017 were as follows:
Ordinary Income | ||||
November 30, 2017 | ||||
RiverFront Dynamic Core Income ETF | $ | 621,587 | ||
RiverFront Dynamic Unconstrained Income ETF | 408,541 | |||
RiverFront Dynamic US Dividend Advantage ETF | 753,106 | |||
RiverFront Dynamic US Flex-Cap ETF | 254,258 | |||
RiverFront Strategic Income Fund | 14,055,252 | |||
43 | May 31, 2018
RiverFront ETFs |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
As of May 31, 2018, the cost of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
RiverFront Dynamic Core Income ETF | RiverFront Dynamic Unconstrained Income ETF | RiverFront Dynamic US Dividend Advantage ETF | RiverFront Dynamic US Flex-Cap ETF | RiverFront Strategic Income Fund | ||||||||||||||||
Gross appreciation (excess of value over tax cost) | $ | 325,030 | $ | 112,387 | $ | 8,159,625 | $ | 9,007,396 | $ | 1,949,741 | ||||||||||
Gross depreciation (excess of tax cost over value) | (1,112,443 | ) | (753,660 | ) | (4,246,049 | ) | (3,719,103 | ) | (2,843,836 | ) | ||||||||||
Net unrealized appreciation/(depreciation) | (787,413 | ) | (641,273 | ) | 3,913,576 | 5,288,293 | (894,095 | ) | ||||||||||||
Cost of investments for income tax purposes | $ | 109,191,208 | $ | 41,376,565 | $ | 109,670,412 | $ | 112,546,195 | $ | 227,053,422 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of May 31, 2018.
At November 30, 2017 the Funds post-enactment capital losses deferred to the next tax year were as follows:
Fund | Short-Term | Long-Term | ||||||
RiverFront Dynamic Core Income ETF | $ | 74,857 | $ | 1,018 | ||||
RiverFront Dynamic Unconstrained Income ETF | – | – | ||||||
RiverFront Dynamic US Dividend Advantage ETF | 594,757 | – | ||||||
RiverFront Dynamic US Flex-Cap ETF | 997,172 | – | ||||||
RiverFront Strategic Income Fund | 5,325,853 | 3,149,414 |
F. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as each Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Each Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Funds’ tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the six months ended May 31, 2018, the Funds did not have a liability for any unrecognized tax benefits. Each Fund files U.S. federal, state, and local tax returns as required. Each Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
G. Lending of Portfolio Securities
The Funds have entered into a securities lending agreement with State Street Bank & Trust Co. (“SSB”), the Funds’ lending agent. Each Fund may lend its portfolio securities only to borrowers that are approved by SSB. Each Fund will limit such lending to not more than 33 1/3% of the value of its total assets. Each Fund’s securities held at SSB as custodian shall be available to be lent except those securities the Fund or ALPS Advisors, Inc. specifically identifies in writing as not being available for lending. The borrower pledges and maintains with the Fund collateral consisting of cash (U.S. Dollars only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and cash equivalents (including irrevocable bank letters of credit) issued by a person other than the borrower or an affiliate of the borrower. The initial collateral received by each Fund is required to have a value of no less than 102% of the market value of the loaned securities for U.S equity securities and a value of no less than 105% of the market value for non-U.S. equity securities. The collateral is maintained thereafter, at a market value equal to not less than 102% of the current value of the U.S. equity securities on loan and not less than 105% of the current value of the non-U.S. equity securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to each Fund on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the customary time period for settlement of securities transactions.
44 | May 31, 2018
RiverFront ETFs |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments and is reflected in the Statements of Assets and Liabilities as a payable for collateral upon return of securities loaned. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Fund’s Statements of Assets and Liabilities as it is held by the lending agent on behalf of the Fund, and the Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.
The following is a summary of the securities lending agreement and related cash and non-cash collateral received as of May 31, 2018:
Market Value of Securities on Loan | Cash Collateral Received | Non-Cash Collateral Received | Total Collateral Received | |||||||||||||
RiverFront Dynamic US Flex-Cap ETF | $ | 348,518 | $ | 378,824 | $ | – | $ | 378,824 |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Funds benefit from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Funds could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged or securities loaned, and the remaining contractual maturity of those transactions as of May 31, 2018:
RiverFront Dynamic US Flex-Cap ETF | Remaining contractual maturity of the agreement | ||||||||||||||||||
Securities Lending Transactions | Overnight & Continuous | Up to 30 days | 30-90 days | Greater than 90 days | Total | ||||||||||||||
Common Stocks | $ | 378,824 | $ | – | $ | – | $ | – | $ | 378,824 | |||||||||
Total Borrowings | 378,824 | ||||||||||||||||||
Gross amount of recognized liabilities for securities lending (collateral received) | $ | 378,824 |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as each Fund’s investment adviser pursuant to an Advisory Agreement with the Trust on behalf of each Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, each Fund pays the Adviser an annual management fee for the services and facilities it provides as a percentage of the relevant Fund’s average daily net assets as set out below:
Fund | Advisory Fee |
RiverFront Dynamic Core Income ETF | 0.51%(a) |
RiverFront Dynamic Unconstrained Income ETF | 0.51%(a) |
RiverFront Dynamic US Dividend Advantage ETF | 0.52%(b) |
RiverFront Dynamic US Flex-Cap ETF | 0.52%(b) |
RiverFront Strategic Income Fund | 0.16% |
(a) | The unitary advisory fee as a percentage of net assets is subject to the following breakpoints: (i) 0.51% for average net assets up to $600 million, (ii) 0.48% for average net assets equal to or greater than $600 million. |
(b) | The unitary advisory fee as a percentage of net assets is subject to the following breakpoints: (i) 0.52% for average net assets up to $600 million, (ii) 0.49% for average net assets equal to or greater than $600 million. |
Capitalized terms used but not defined within this paragraph, shall have the respective meanings given to them in the Board Considerations Regarding Approval of Investment Advisory Agreement section of this Semi-Annual Report (“Board Considerations”). As discussed in the Board Considerations, the Adviser is an indirect wholly owned subsidiary of DST and on April 16, 2018, DST was acquired by SS&C resulting in a change of control of the Adviser. As discussed in the Board Considerations, in order for the Adviser to continue to serve as the investment adviser to the applicable Funds, among other approvals, the Board approved an Interim Advisory Agreement between the Adviser and the Trust, on behalf of the Funds. The Interim Advisory Agreement is effective for the earlier of 150 days from the close of the Transaction or the date of shareholder approval of the New Advisory Agreement. Under the terms of the Interim Advisory Agreement, the unitary management fee paid to the Adviser will be held in escrow until shareholder approval of the New Advisory Agreement is obtained and is reported as Cash held in escrow account on the Statement of Assets and Liabilities.
45 | May 31, 2018
RiverFront ETFs |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Out of the advisory fee, the Adviser pays substantially all expenses of each Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses such as litigation and other expenses not incurred in the ordinary course of the Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of each Fund’s expenses and to compensate the Adviser for providing services for the Funds.
RiverFront Investment Group, LLC acts as each Fund’s sub-adviser (“Sub-Adviser”) pursuant to a sub-advisory agreement with the Trust (the ‘‘SubAdvisory Agreement’’). Pursuant to the Sub-Advisory Agreement, the Adviser pays the Sub-Adviser a sub-advisory fee out of the Adviser’s advisory fee for the services it provides besides RiverFront Strategic Income Fund, in which the Fund directly pays the Sub-Adviser. The fee is payable on a monthly basis at the annual rate of the relevant Fund’s average daily net assets as set out below:
Fund | Sub-Advisory Fee |
RiverFront Dynamic Core Income ETF | 0.35% |
RiverFront Dynamic Unconstrained Income ETF | 0.35% |
RiverFront Dynamic US Dividend Advantage ETF | 0.35% |
RiverFront Dynamic US Flex-Cap ETF | 0.35% |
RiverFront Strategic Income Fund | 0.30% |
For the RiverFront Strategic Income Fund, the Sub-Adviser has agreed to waive all of its sub-advisory fee on a voluntary basis.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Funds.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee for regularly scheduled meetings of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, both the Chairman of the Board and Chairman of the Audit Committee each receives a quarterly retainer of $2,000, in connection with their respective roles.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2018, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Fund | Purchases | Sales | ||||||
RiverFront Dynamic Core Income ETF | $ | 422,413 | $ | 7,567,768 | ||||
RiverFront Dynamic Unconstrained Income ETF | 2,346,321 | 3,621,467 | ||||||
RiverFront Dynamic US Dividend Advantage ETF | 48,848,234 | 49,195,717 | ||||||
RiverFront Dynamic US Flex-Cap ETF | 50,323,340 | 50,558,303 | ||||||
RiverFront Strategic Income Fund | 39,812,606 | 48,254,634 |
For the six months ended May 31, 2018, the cost of U.S. Government security purchases and proceeds from U.S. Government security sales were as follows:
Fund | Purchases | Sales | ||||||
RiverFront Dynamic Core Income ETF | $ | 8,553,577 | $ | 292,969 | ||||
RiverFront Strategic Income Fund | 6,657,359 | 6,312,609 |
For the six months ended May 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
RiverFront Dynamic Core Income ETF | $ | 80,433,599 | $ | 21,357,250 | ||||
RiverFront Dynamic Unconstrained Income ETF | 29,737,308 | – | ||||||
RiverFront Dynamic US Dividend Advantage ETF | 94,111,720 | 40,456,063 | ||||||
RiverFront Dynamic US Flex-Cap ETF | 100,274,395 | 25,571,616 | ||||||
RiverFront Strategic Income Fund | 34,538,019 | 128,396,230 |
46 | May 31, 2018
RiverFront ETFs |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
For the six months ended May 31, 2018, the in-kind net realized gains/(losses) were as follows:
Fund | Net Realized Gain/(Loss) | |||
RiverFront Dynamic Core Income ETF | $ | (537,816 | ) | |
RiverFront Dynamic Unconstrained Income ETF | – | |||
RiverFront Dynamic US Dividend Advantage ETF | 6,449,549 | |||
RiverFront Dynamic US Flex-Cap ETF | 4,572,876 | |||
RiverFront Strategic Income Fund | (672,829 | ) | ||
Gains on in-kind transactions are not considered taxable for federal income tax purposes.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 Shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from each Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of each Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
6. RELATED PARTY TRANSACTIONS
The Fund engaged in cross trades between other funds in the Trust during the six months ended May 31, 2018 pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which the Adviser serves as the investment adviser. The Board previously adopted procedures that apply to transactions between the Funds of the Trust pursuant to Rule 17a-7. These transactions related to cross trades during the period complied with the requirements set forth by Rule 17a-7 and the Trust’s procedures.
Transactions related to cross trades during the six months ended May 31, 2018, were as follows:
Fund | Purchase cost paid | Sale proceeds received | Realized gain/(loss) on sales | |||||||||
Riverfront Dynamic US Dividend Advantage ETF | $ | 1,949,853 | $ | 851,302 | $ | (130,543 | ) | |||||
Riverfront Dynamic US Flex-Cap ETF | $ | 851,302 | $ | 1,949,853 | $ | (62,749 | ) |
7. RECENT ACCOUNTING PRONOUNCEMENT
In March 2017, the Financial Accounting Standards Board issued Accounting Standards Update “Premium Amortization on Purchased Callable Debt Securities” which amends the amortization period for a callable debt security held at a premium from the maturity date to the earliest call date. The guidance is effective for annual periods beginning after December 15, 2018, and interim periods within those annual periods. At this time, management is evaluating the implications of these changes on the funds.
47 | May 31, 2018
RiverFront ETFs |
Notes to Financial Statements | May 31, 2018 (Unaudited) |
8. SHAREHOLDER MEETING
A Special Meeting of Shareholders of the Funds, each a series of the Trust, was held at the offices of ALPS Fund Services, Inc., at 1290 Broadway, Suite 1100, Denver, CO 80203 on May 31, 2018. At the meeting, the following matters were voted on by the Shareholders. The results of the Special Meeting of Shareholders are noted below:
Proposal 1: To approve a new investment advisory agreement (the “New Advisory Agreement”) between the Trust, on behalf of each Fund, and the Adviser.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
RiverFront Dynamic Core Income ETF | 3,186,991 | 5,902 | Yes |
RiverFront Dynamic Unconstrained Income ETF | 1,342,954 | 3,662 | Yes |
RiverFront Dynamic US Dividend Advantage ETF | 3,050,155 | 3,793 | Yes |
RiverFront Dynamic US Flex-Cap ETF | 2,810,467 | 3,399 | Yes |
RiverFront Strategic Income Fund | 5,510,712 | 69,717 | Yes |
Proposal 2: To approve a new sub-advisory agreement (the “New RiverFront Sub-Advisory Agreement”) among the Trust, on behalf of each Fund, the Adviser and the current Sub-Adviser.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
RiverFront Dynamic Core Income ETF | 3,187,034 | 5,859 | Yes |
RiverFront Dynamic Unconstrained Income ETF | 1,342,954 | 3,662 | Yes |
RiverFront Dynamic US Dividend Advantage ETF | 3,050,101 | 3,847 | Yes |
RiverFront Dynamic US Flex-Cap ETF | 2,810,396 | 3,470 | Yes |
Proposal 3: To approve a proposal that would authorize the Adviser to enter into and materially amend sub-advisory agreements in the future with wholly-owned sub-advisers and unaffiliated sub-advisers, with the approval of the Board, but without obtaining additional Shareholder approval.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
RiverFront Dynamic Core Income ETF | 2,984,836 | 208,057 | Yes |
RiverFront Dynamic Unconstrained Income ETF | 1,298,956 | 47,660 | Yes |
RiverFront Dynamic US Dividend Advantage ETF | 2,855,776 | 198,172 | Yes |
RiverFront Dynamic US Flex-Cap ETF | 2,685,763 | 128,103 | Yes |
RiverFront Strategic Income Fund | 4,358,882 | 1,221,547 | Yes |
48 | May 31, 2018
RiverFront ETFs |
Additional Information | May 31, 2018 (Unaudited) |
PROXY VOTING RECORDS, POLICIES AND PROCEDURES
Information regarding how each Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Funds’ proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-675-2639.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. Forms N-Q for each Fund are available on the SEC’s website at www.sec.gov. Each Fund’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Each Fund’s Forms N-Q are available without charge, upon request, by calling (toll-free) 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Funds designate the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2017:
Qualified Dividend Income | Dividend Received Deduction | |
Riverfront Dynamic US Dividend Advantage ETF | 100.00 % | 99.16% |
Riverfront Dynamic US Flex-Cap ETF | 100.00% | 100.00% |
In early 2018, if applicable, shareholders of record received this information for the distributions paid to them by the Funds during the calendar year 2017 via Form 1099. The Funds will notify shareholders in early 2019 of amounts paid to them by the Funds, if any, during the calendar year 2018.
49 | May 31, 2018
RiverFront ETFs |
Board Considerations Regarding Approval of Investment Advisory Agreement and Investment Sub-Advisory Agreements | May 31, 2018 (Unaudited) |
RIGS/RFFC/RFUN/RFDA/RFCI
At an in-person meeting held on March 5, 2018, the Board of Trustees of the Trust (the “Board” or the “Trustees”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve the continuance of each of (i) the investment advisory agreements between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect to the RiverFront Dynamic Unconstrained Income ETF (“RFUN”), the RiverFront Dynamic Core Income ETF (“RFCI”), the RiverFront Dynamic US Dividend Advantage ETF (“RFDA”), the RiverFront Dynamic US Flex-Cap ETF (“RFFC”) and the RiverFront Strategic Income Fund (“RIGS”) (each a “Fund” and collectively “the RiverFront ETFs”) (the “Existing Advisory Agreements”), the investment sub-advisory agreement between the Trust and RiverFront Investment Group, LLC (“RiverFront”) with respect to RIGS (the “RIGS Sub-Advisory Agreement”) and the investment sub-advisory agreement between the Adviser and RiverFront with respect to RFUN, RFCI, RFDA and RFFC (the “Existing RiverFront Sub-Advisory Agreement”); (ii) a new investment advisory agreement between the Adviser and the Trust on behalf of each Fund (the “New Advisory Agreement”); (iii) a new sub- advisory agreement between the Adviser and RiverFront with respect to RFUN, RFCI, RFDA and RFFC (the “New RiverFront Sub-Advisory Agreement”); (iv) an interim investment advisory agreement between the Adviser and the Trust on behalf of each Fund (the “Interim Advisory Agreement”); and (iv) an interim sub-advisory agreement between the RiverFront and the Adviser with respect to RFUN, RFCI, RFDA and RFFC (the “Interim RiverFront Sub-Advisory Agreement”). The Independent Trustees also met separately to consider the Existing Advisory Agreements, the New Advisory Agreement and the Interim Advisory Agreement (the “Advisory Agreements”) as well as the RIGS Sub-Advisory Agreement, the Existing RiverFront Sub-Advisory Agreement, the New RiverFront Sub-Advisory Agreement and the Interim RiverFront Sub-Advisory Agreement (the “Sub-Advisory Agreements”).
Consideration by the Board of the New Advisory Agreement, Interim Advisory Agreement, RIGS Sub-Advisory Agreement, New RiverFront Sub-Advisory Agreement and Interim RiverFront Sub-Advisory Agreement was necessary because DST Systems, Inc. (“DST”), the ultimate parent company to the Adviser, had had entered into an agreement to be acquired by SS&C Technologies Holdings, Inc. (“SS&C”) (the “Transaction”). Because the Adviser would be acquired along with DST, the closing of the Transaction (the “Closing”) may be deemed a change in control with respect to the Adviser. The Closing occurred on April 16, 2018. This change in control with respect to the Adviser may be deemed to trigger an “assignment” of the Existing Advisory Agreements and the Existing RiverFront Sub-Advisory Agreement under the Investment Company Act of 1940, as amended (the “1940 Act”). As required by the 1940 Act, the Existing Advisory Agreements and Existing RiverFront Sub-Advisory Agreement provide for their automatic termination in the event of an assignment, and therefore, the Existing Advisory Agreements and the Existing RiverFront Sub-Advisory Agreement automatically terminated upon Closing. In order for the Adviser to continue as the Fund’s investment adviser and RiverFront to continue as the sub-adviser to RFUN, RFCI, RFDA and RFFC, the Board and the Funds’ shareholders must approve the New Advisory Agreement and New RiverFront Sub-Advisory Agreement, which would take effect, if approved, upon the date of such shareholder approval. As of the date of this report, the New Advisory Agreement and New RiverFront Sub-Advisory Agreement have received shareholder approval.
In evaluating the Advisory Agreements with respect to each of the Funds, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by AAI with respect to the applicable Fund under the Advisory Agreements; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided (or to be provided) by AAI under the Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Advisory Agreements, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Funds.
The Independent Trustees reviewed information on the performance of each Fund and its Broadridge performance group. Based on their review, the Independent Trustees found that the nature and extent of services provided (or to be provided) to each Fund under the Advisory Agreements was appropriate and that the quality was satisfactory.
The Independent Trustees noted that the advisory fees for each Fund were unitary fees pursuant to which AAI assumes all expenses of the Funds (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreements, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
50 | May 31, 2018
RiverFront ETFs |
Board Considerations Regarding Approval of Investment Advisory Agreement and Investment Sub-Advisory Agreements | May 31, 2018 (Unaudited) |
With respect to advisory fee rates, the Independent Trustees noted the following:
The net advisory fee rate for RFFC is higher than the median of its Broadridge expense group; however, its expense ratio is below the median of its Broadridge expense group. With respect to RIGS, RFUN, RFCI and RFDA, the net advisory fee rate for each of these Funds is lower than the median of its respective Broadridge expense groups. The Funds’ respective expense ratios, however, are (i) in the case of RFUN and RFCI, slightly lower than the median for its respective Broadridge expense group and (ii) in the case of RIGS and RFDA, below the median of its respective Broadridge expense group.
Based on the foregoing, and the other information available to them, the Independent Trustees concluded that the advisory fee rate for each of the Funds was reasonable under the circumstances and in light of the quality of the services provided.
The Independent Trustees considered other benefits available to AAI because of its relationship with the Funds and concluded that the advisory fees were reasonable taking into account any such benefits.
The Independent Trustees also considered with respect to each Fund the information provided by AAI about the costs and profitability of AAI with respect to each of the Funds. The Independent Trustees reviewed and noted the relatively small sizes of the Funds (other than RIGS) in considering economies of scale that may be realized by AAI. With respect to RIGS, the Independent Trustees noted that the Fund had not experienced significant growth in assets over the prior year. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
In voting to renew each Existing Advisory Agreement and approve each New Advisory Agreement and Interim Advisory Agreement, the Independent Trustees concluded that the terms of each Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
Existing RiverFront Sub-Advisory Agreement, RIGS Sub-advisory Agreement, New RiverFront Sub-Advisory Agreement and Interim RiverFront Sub-Advisory Agreement
In evaluating the Sub-Advisory Agreements, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by RiverFront with respect to the RiverFront ETFs under the Sub-Advisory Agreements; (ii) the advisory fees and other expenses paid by the RiverFront ETFs compared to those of similar funds managed by other investment advisers; (iii) the profitability to RiverFront of its sub-advisory relationship with the RiverFront ETFs and the reasonableness of compensation to RiverFront; (iv) the extent to which economies of scale would be realized if, and as, the RiverFront ETFs’ assets increase, and whether the fee level in the Sub-Advisory Agreements reflects these economies of scale; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided (or to be provided) by RiverFront under the Sub-Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Sub-Advisory Agreements, the RiverFront ETFs’ respective performance, financial information regarding RiverFront, information describing RiverFront’s current organization and the background and experience of the persons responsible for the day-to-day management of the RiverFront ETFs. Based upon their review, the Independent Trustees concluded that RiverFront was qualified to oversee the portfolio management of the RiverFront ETFs and that the services provided (or to be provided) by RiverFront to the RiverFront ETFs are satisfactory.
The Independent Trustees considered that the contractual sub-advisory fee to be paid to RiverFront from RIGS was 0.30% of RIGS’ average daily net assets out of a total management fee of 0.46% of RIGS’ average daily net assets. The Independent Trustees considered that RiverFront is contractually obligated to waive its fee through March 31, 2018, and has agreed to continue to waive its fee thereafter on a voluntary basis. The Independent Trustees considered that the contractual sub-advisory fee to be paid to RiverFront with respect to each of RFUN, RFCI, RFDA and RFFC was 0.35% of each Fund’s average daily net assets out of a total management fee of 0.51% with respect to each of RFUN’s and RFCI’s average daily net assets, respectively, and 0.52% with respect to each of RFDA’s and RFFC’s average daily net assets, respectively. Based on the consideration of all factors deemed relevant by them, the Independent Trustees concluded that the sub-advisory fees received by RiverFront under the SubAdvisory Agreements were reasonable under the circumstances and in light of the quality of services provided.
With respect to the costs of services provided and profits realized by RiverFront, the Independent Trustees considered the resources involved in managing the RiverFront ETFs as well as the fact that RiverFront, with respect to RIGS, is contractually obligated to waive its fee through March 31, 2018 and has agreed to continue to waive its fee thereafter on a voluntary basis. Based on their review of the profitability of each of the RiverFront ETFs to RiverFront, the Independent Trustees concluded that the profitability of each RiverFront ETF to RiverFront was not unreasonable.
51 | May 31, 2018
RiverFront ETFs |
Board Considerations Regarding Approval of Investment Advisory Agreement and Investment Sub-Advisory Agreements | May 31, 2018 (Unaudited) |
The Independent Trustees also considered other benefits that have been and may be realized by RiverFront from its relationships with each RiverFront ETF and concluded that the sub-advisory fees with respect to each RiverFront ETF were reasonable taking into account such benefits.
The Independent Trustees considered the extent to which economies of scale may be realized if RIGS’ assets increase to its previous levels and continue to grow in size and whether fee levels reflect a reasonable sharing of such economies of scale for the benefit of the Fund’s investors. Given that RiverFront is currently waiving its entire fee through March 31, 2018, and will continue to waive its fee thereafter on a voluntary basis, the Independent Trustees concluded that economies of scale were not being achieved by RiverFront with respect to RIGS. They also noted that RIGS has experienced fluctuations in assets, which makes it difficult to quantify the potential variability in net assets and thus determine the sustainability of any potential economies of scale which may exist. The Independent Trustees also noted that RFUN, RFCI, RFDA and RFFC were all launched during June 2016 and have not yet reached significant scale in terms of assets. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis with respect to each RiverFront ETF.
In voting to approve each of the Sub-Advisory Agreements, the Independent Trustees concluded that the terms of each Sub-Advisory Agreement are reasonable and fair in light of the services performed, expenses incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
52 | May 31, 2018
TABLE OF CONTENTS |
Performance Overview | |
Sprott Gold Miners ETF | 1 |
Sprott Junior Gold Miners ETF | 3 |
Disclosure of Fund Expenses | 5 |
Financial Statements | |
Schedules of Investments | |
Sprott Gold Miners ETF | 6 |
Sprott Junior Gold Miners ETF | 7 |
Statements of Assets and Liabilities | 8 |
Statements of Operations | 9 |
Statements of Changes in Net Assets | |
Sprott Gold Miners ETF | 10 |
Sprott Junior Gold Miners ETF | 11 |
Financial Highlights | 12 |
Notes to Financial Statements | 14 |
Additional Information | 21 |
Board Considerations Regarding Approval of Investment Advisory Agreements | 23 |
alpsfunds.com
Sprott Gold Miners ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
Sprott Gold Miners ETF (the “Fund”) employs a “passive management”—or indexing—investment approach designed to seek investment results that correspond (before fees and expenses) generally to the performance of the Sprott Zacks Gold Miners Index (the “Underlying Index”).
The Underlying Index was created by Zacks Index Services to provide a means of generally tracking the performance of gold and silver mining companies whose stocks are traded on major U.S. exchanges. The Underlying Index uses a transparent, rules-based methodology that is designed to identify the stocks of 25 gold and silver mining companies with the highest beta† to the spot price of gold, with each stock’s weighting in the index adjusted based on its quarterly revenue growth on a year-over-year basis and the quality of its balance sheet, as measured by long-term debt to equity. The Underlying Index is rebalanced on a quarterly basis to incorporate the latest financial data into the screening process. At least 80% of the Underlying Index (by weight) must consist of gold mining companies while no more than 20% may consist of silver mining companies.
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | Since Inception^ | |
Sprott Gold Miners ETF - NAV | 0.12% | -1.91% | 4.73% | -5.36% |
Sprott Gold Miners ETF - Market Price* | 0.17% | -1.66% | 4.77% | -5.32% |
Sprott Zacks Gold Miners Total Return Index | 0.44% | -1.25% | 5.46% | -4.67% |
S&P 500® Total Return Index | 3.16% | 14.38% | 10.97% | 10.70% |
Total Expense Ratio (per the current prospectus) 0.57%
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.855.215.1425.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
† | Beta is defined as a sensitivity measure based on regression against the spot gold price movement during the trailing 36 months. |
^ | The Fund’s Commencement date was July 15, 2014. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Sprott Zacks Gold Miners Total Return Index is comprised of approximately 25 stocks selected, based on investment and other criteria, from a universe of gold and silver mining companies whose stock is listed on a major U.S. exchange. The stocks are selected using a proprietary, quantitative rules-based methodology developed by Zacks Index Services.
S&P 500® Total Return Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
The indexes are reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. The indexes are not actively managed and do not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund is concentrated in the gold and silver mining industry. As a result, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the gold and silver mining industry. Also, gold and silver mining companies are highly dependent on the price of gold and silver bullion. These prices may fluctuate substantially over short periods of time so the Fund’s Share price may be more volatile than other types of investments.
Funds that emphasize investments in small-cap and mid-cap companies will generally experience greater price volatility.
Funds investing in foreign and emerging markets will also generally experience greater price volatility.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The Sprott Gold Miners ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the Sprott Gold Miners ETF.
ALPS Portfolio Solutions Distributor, Inc. is not affiliated with Sprott or Zacks Index Services, a division of Zacks Investment Management.
1 | May 31, 2018
Sprott Gold Miners ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018)
Randgold Resources, Ltd. | 12.79% |
Agnico Eagle Mines, Ltd. | 11.55% |
Goldcorp, Inc. | 10.85% |
Newmont Mining Corp. | 10.08% |
IAMGOLD Corp. | 5.08% |
Royal Gold, Inc. | 4.48% |
Cia de Minas Buenaventura SAA | 4.43% |
Barrick Gold Corp. | 4.43% |
Alamos Gold, Inc. | 4.04% |
Yamana Gold, Inc. | 3.53% |
Total % of Top 10 Holdings | 71.26% |
Country Allocation* (as of May 31, 2018)
Canada | 57.43% |
United States | 17.81% |
Jersey | 12.80% |
South Africa | 7.53% |
Peru | 4.43% |
Total | 100.00% |
* | % of Total Investments (excluding investments purchased with collateral from securities loaned) |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Underlying Index
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
2 | May 31, 2018
Sprott Junior Gold Miners ETF
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
Sprott Junior Gold Miners ETF (the “Fund”) employs a “passive management”—or indexing—investment approach designed to seek investment results that correspond (before fees and expenses) generally to the performance of the Sprott Zacks Junior Gold Miners Index (the “Underlying Index”).
The Underlying Index was created by Zacks Index Services to provide a means of generally tracking the performance of “junior” gold and silver mining companies whose stocks are traded on major U.S. or Canadian exchanges. Junior companies include early stage mining companies that are in the exploration stage only or that hold properties that might not ultimately produce gold or silver. The Underlying Index uses a transparent, rules-based methodology that is designed to identify between 30 to 40 junior gold and silver stocks with market capitalization between $250 million and $2 billion. Excluding companies with market capitalization below $250 million aims to exclude very early stage exploration companies whose historical success rate is low. Each stock’s weighting in the Underlying Index is adjusted based on 2 company factors: 1) Revenue Growth and 2) Price Momentum. The Underlying Index is reconstituted on a semi-annual basis, in November and May, to incorporate the latest factor scores into the selection and weighting process. At least 80% of the Underlying Index (by weight) must consist of junior gold mining companies while no more than 20% may consist of junior silver mining companies.
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | Since Inception^ | |
Sprott Junior Gold Miners ETF - NAV | -6.06% | -5.04% | 3.55% | 7.40% |
Sprott Junior Gold Miners ETF - Market Price* | -5.85% | -4.94% | 3.57% | 7.44% |
Sprott Zacks Junior Gold Miners Total Return Index | -5.76% | -4.39% | 4.48% | 8.37% |
S&P 500® Total Return Index | 3.16% | 14.38% | 10.97% | 10.83% |
Total Expense Ratio (per the current prospectus) 0.57%
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.855.215.1425.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund’s Commencement date was March 31, 2015. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
Sprott Zacks Junior Gold Miners Total Return Index is comprised of between 30 to 40 stocks selected, based on investment and other criteria, from a universe of gold and silver mining companies whose stocks are listed on a major U.S. or Canadian exchange. The stocks are selected using a proprietary, quantitative rules-based methodology developed by Zacks Index Services.
S&P 500® Total Return Index is the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
The indexes are reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. The indexes are not actively managed and do not reflect any deductions for fees, expenses or taxes. One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund is concentrated in the gold and silver mining industry. As a result, the Fund will be sensitive to changes in, and its performance will depend to a greater extent on, the overall condition of the gold and silver mining industry. Also, gold and silver mining companies are highly dependent on the price of gold and silver bullion. These prices may fluctuate substantially over short periods of time so the Fund’s Share price may be more volatile than other types of investments.
Funds that emphasize investments in small-cap and mid-cap companies will generally experience greater price volatility. Micro-cap stocks involve substantially greater risks of loss and price fluctuations because their earnings and revenues tend to be less predictable. These companies may be newly formed or in the early stages of development, with limited product lines, markets or financial resources and may lack management depth.
Funds investing in foreign and emerging markets will also generally experience greater price volatility.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The Sprott Junior Gold Miners ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the Sprott Junior Gold Miners ETF.
ALPS Portfolio Solutions Distributor, Inc. is not affiliated with Sprott or Zacks Index Services, a division of Zacks Investment Management.
3 | May 31, 2018
Sprott Junior Gold Miners ETF
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018)
OceanaGold Corp. | 6.97% |
Centerra Gold, Inc. | 6.76% |
Coeur Mining, Inc. | 6.51% |
Pretium Resources, Inc. | 5.98% |
Endeavour Mining Corp. | 5.66% |
Tahoe Resources, Inc. | 4.81% |
Osisko Gold Royalties, Ltd. | 4.81% |
Sibanye Gold, Ltd. | 4.34% |
New Gold, Inc. | 3.89% |
First Majestic Silver Corp. | 3.78% |
Total % of Top 10 Holdings | 53.51% |
Country Allocation* (as of May 31, 2018)
Canada | 77.51% |
United States | 10.20% |
South Africa | 6.63% |
United Kingdom | 5.66% |
Total | 100.00% |
* | % of Total Investments (excluding investments purchased with collateral from securities loaned) |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Underlying Index
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
4 | May 31, 2018
Sprott ETFs
Disclosure of Fund Expenses | May 31, 2018 (Unaudited) |
Shareholder Expense Example: As a shareholder of a Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, 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 a Fund and to compare these costs with the ongoing costs of investing in other funds. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through May 31, 2018.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values 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 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 ongoing costs of investing in each Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. Therefore, the second line is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 12/1/17 | Ending Account Value 5/31/18 | Expense Ratio(a) | Expenses Paid During Period 12/1/17 - 5/31/18(b) | |
Sprott Gold Miners ETF | ||||
Actual | $1,000.00 | $1,001.20 | 0.57% | $2.84 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.09 | 0.57% | $2.87 |
Sprott Junior Gold Miners ETF | ||||
Actual | $1,000.00 | $939.40 | 0.57% | $2.76 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.09 | 0.57% | $2.87 |
(a) | Annualized, based on the Fund's most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. |
5 | May 31, 2018
Sprott Gold Miners ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.95%) | ||||||||
Gold Mining (93.33%) | ||||||||
Agnico Eagle Mines, Ltd. | 458,920 | $ | 20,628,454 | |||||
Alamos Gold, Inc., Class A | 1,300,972 | 7,207,385 | ||||||
AngloGold Ashanti, Ltd., Sponsored ADR | 537,316 | 4,631,664 | ||||||
B2Gold Corp.(a) | 2,229,451 | 6,086,401 | ||||||
Barrick Gold Corp. | 599,738 | 7,910,544 | ||||||
Cia de Minas Buenaventura SAA, ADR | 511,653 | 7,915,272 | ||||||
Gold Fields, Ltd., Sponsored ADR | 1,166,840 | 4,165,619 | ||||||
Goldcorp, Inc. | 1,353,110 | 19,376,535 | ||||||
Harmony Gold Mining Co., Ltd., Sponsored ADR(b) | 1,391,337 | 2,365,273 | ||||||
IAMGOLD Corp.(a) | 1,453,482 | 9,069,728 | ||||||
Kinross Gold Corp.(a) | 1,469,506 | 5,290,221 | ||||||
McEwen Mining, Inc.(b) | 1,884,882 | 4,240,984 | ||||||
Newmont Mining Corp. | 462,104 | 17,989,709 | ||||||
Randgold Resources, Ltd., ADR | 287,297 | 22,845,857 | ||||||
Royal Gold, Inc. | 89,189 | 7,996,686 | ||||||
Sandstorm Gold, Ltd.(a)(b) | 878,273 | 3,978,577 | ||||||
Seabridge Gold, Inc.(a)(b) | 240,716 | 2,671,948 | ||||||
Sibanye Gold, Ltd., Sponsored ADR(a)(b) | 885,733 | 2,285,191 | ||||||
SSR Mining, Inc.(a)(b) | 361,917 | 3,702,411 | ||||||
Yamana Gold, Inc. | 2,165,141 | 6,300,560 | ||||||
Total Gold Mining | 166,659,019 | |||||||
Silver Mining (6.62%) | ||||||||
Coeur Mining, Inc.(a) | 186,076 | 1,499,772 | ||||||
First Majestic Silver Corp.(a)(b) | 261,797 | 1,856,141 | ||||||
Fortuna Silver Mines, Inc.(a) | 368,810 | 2,039,519 | ||||||
Pan American Silver Corp. | 244,969 | 4,333,502 | ||||||
Silvercorp Metals, Inc. | 723,300 | 2,090,337 | ||||||
Total Silver Mining | 11,819,271 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $174,845,891) | 178,478,290 |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (4.88%) | ||||||||||||
Money Market Fund (0.04%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | ||||||||||||
(Cost $74,814) | 1.669 | % | 74,814 | 74,814 | ||||||||
Investments Purchased with Collateral from Securities Loaned (4.84%) | ||||||||||||
State Street Navigator Securities Lending Prime Portfolio, 1.77% | ||||||||||||
(Cost $8,647,273) | 8,647,273 | 8,647,273 | ||||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $8,722,087) | 8,722,087 |
7 Day Yield | Shares | Value | ||||||||||
TOTAL INVESTMENTS (104.83%) | ||||||||||||
(Cost $183,567,978) | $ | 187,200,377 | ||||||||||
NET LIABILITIES LESS OTHER ASSETS (-4.83%) | (8,637,931 | ) | ||||||||||
NET ASSETS (100.00%) | $ | 178,562,446 |
(a) | Non-income producing security. |
(b) | Security, or a portion of the security position, is currently on loan. The total market value of securities on loan is $8,130,611. |
See Notes to Financial Statements.
6 | May 31, 2018
Sprott Junior Gold Miners ETF
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.99%) | ||||||||
Gold Mining (78.19%) | ||||||||
Alacer Gold Corp.(a) | 1,888,885 | $ | 3,467,181 | |||||
Argonaut Gold, Inc.(a)(b) | 738,320 | 1,343,849 | ||||||
Asanko Gold, Inc.(a) | 1,555,700 | 1,883,734 | ||||||
Centerra Gold, Inc.(a) | 1,805,149 | 9,481,000 | ||||||
China Gold International Resources Corp., Ltd.(a)(b) | 2,604,196 | 5,141,710 | ||||||
Continental Gold, Inc.(a)(b) | 383,581 | 1,079,802 | ||||||
Detour Gold Corp.(a) | 362,973 | 2,869,407 | ||||||
Eldorado Gold Corp.(a)(b) | 1,617,402 | 1,811,490 | ||||||
Endeavour Mining Corp.(a)(b) | 457,620 | 7,937,586 | ||||||
Gold Resource Corp. | 362,100 | 2,259,504 | ||||||
Gold Standard Ventures Corp.(a)(b) | 541,132 | 822,521 | ||||||
Golden Star Resources, Ltd.(a)(b) | 1,596,899 | 1,122,620 | ||||||
Guyana Goldfields, Inc.(a) | 736,470 | 2,777,525 | ||||||
Harmony Gold Mining Co., Ltd., Sponsored ADR(b) | 1,888,395 | 3,210,271 | ||||||
New Gold, Inc.(a) | 2,385,813 | 5,463,512 | ||||||
Novagold Resources, Inc.(a)(b) | 661,391 | 3,201,132 | ||||||
OceanaGold Corp. | 3,976,204 | 9,782,578 | ||||||
Osisko Gold Royalties, Ltd. | 658,926 | 6,743,751 | ||||||
Premier Gold Mines, Ltd.(a) | 436,948 | 909,887 | ||||||
Pretium Resources, Inc.(a)(b) | 1,162,050 | 8,390,001 | ||||||
Roxgold, Inc.(a) | 2,396,900 | 2,255,297 | ||||||
Sandstorm Gold, Ltd.(a)(b) | 399,239 | 1,808,553 | ||||||
Seabridge Gold, Inc.(a)(b) | 120,630 | 1,338,993 | ||||||
SEMAFO, Inc.(a) | 711,904 | 1,938,162 | ||||||
Sibanye Gold, Ltd., Sponsored ADR(a)(b) | 2,362,900 | 6,096,282 | ||||||
SSR Mining, Inc.(a) | 511,151 | 5,229,075 | ||||||
Tahoe Resources, Inc. | 1,287,102 | 6,744,414 | ||||||
Teranga Gold Corp.(a) | 687,700 | 2,853,483 | ||||||
Torex Gold Resources, Inc.(a) | 175,243 | 1,711,072 | ||||||
Total Gold Mining | 109,674,392 | |||||||
Precious Metals (1.49%) | ||||||||
Leagold Mining Corp.(a) | 965,600 | 2,092,655 | ||||||
Total Precious Metals | 2,092,655 | |||||||
Silver Mining (20.31%) | ||||||||
Coeur Mining, Inc.(a) | 1,132,852 | 9,130,787 | ||||||
Endeavour Silver Corp.(a) | 766,074 | 2,152,668 | ||||||
First Majestic Silver Corp.(a)(b) | 748,713 | 5,308,375 | ||||||
Fortuna Silver Mines, Inc.(a) | 949,797 | 5,252,377 | ||||||
Hecla Mining Co. | 762,302 | 2,866,255 | ||||||
MAG Silver Corp.(a) | 163,658 | 1,907,198 | ||||||
Silvercorp Metals, Inc. | 639,534 | 1,869,377 | ||||||
Total Silver Mining | 28,487,037 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $148,188,063) | 140,254,084 |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (14.49%) | ||||||||||||
Money Market Fund (0.04%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | ||||||||||||
(Cost $59,050) | 1.669 | % | 59,050 | $ | 59,050 | |||||||
Investments Purchased with Collateral from Securities Loaned (14.45%) | ||||||||||||
State Street Navigator Securities Lending Prime Portfolio, 1.77% | ||||||||||||
(Cost $20,275,105) | 20,275,105 | 20,275,105 | ||||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $20,334,155) | 20,334,155 | |||||||||||
TOTAL INVESTMENTS (114.48%) | ||||||||||||
(Cost $168,522,218) | $ | 160,588,239 | ||||||||||
NET LIABILITIES LESS OTHER ASSETS (-14.48%) | (20,318,715 | ) | ||||||||||
NET ASSETS (100.00%) | $ | 140,269,524 |
(a) | Non-income producing security. |
(b) | Security, or a portion of the security position, is currently on loan. The total market value of securities on loan is $20,435,498. |
See Notes to Financial Statements.
7 | May 31, 2018
Sprott ETFs
Statements of Assets and Liabilities | May 31, 2018 (Unaudited) |
Sprott Gold Miners ETF | Sprott Junior Gold Miners ETF | |||||||
ASSETS: | ||||||||
Investments, at value | $ | 187,200,377 | $ | 160,588,239 | ||||
Cash held in escrow account (Note 3) | 39,293 | 32,840 | ||||||
Foreign tax reclaims | 14,157 | 4,743 | ||||||
Dividends receivable | 81,231 | 21,755 | ||||||
Total Assets | 187,335,058 | 160,647,577 | ||||||
LIABILITIES: | ||||||||
Payable to adviser | 125,339 | 102,948 | ||||||
Payable for collateral upon return of securities loaned | 8,647,273 | 20,275,105 | ||||||
Total Liabilities | 8,772,612 | 20,378,053 | ||||||
NET ASSETS | $ | 178,562,446 | $ | 140,269,524 | ||||
NET ASSETS CONSIST OF: | ||||||||
Paid-in capital | $ | 253,569,839 | $ | 171,065,820 | ||||
Accumulated net investment income/(loss) | 514,377 | (795,934 | ) | |||||
Accumulated net realized loss | (79,154,169 | ) | (22,066,358 | ) | ||||
Net unrealized appreciation/(depreciation) | 3,632,399 | (7,934,004 | ) | |||||
NET ASSETS | $ | 178,562,446 | $ | 140,269,524 | ||||
INVESTMENTS, AT COST | $ | 183,567,978 | $ | 168,522,218 | ||||
PRICING OF SHARES | ||||||||
Net Assets | $ | 178,562,446 | $ | 140,269,524 | ||||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 9,050,000 | 4,750,000 | ||||||
Net Asset Value, offering and redemption price per share | $ | 19.73 | $ | 29.53 |
See Notes to Financial Statements.
8 | May 31, 2018
Sprott ETFs
Statements of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
Sprott Gold Miners ETF | Sprott Junior Gold Miners ETF | |||||||
INVESTMENT INCOME: | ||||||||
Dividends(a) | $ | 947,730 | $ | 93,686 | ||||
Securities lending income | 88,209 | 125,259 | ||||||
Total Investment Income | 1,035,939 | 218,945 | ||||||
EXPENSES: | ||||||||
Investment adviser fees | 508,595 | 421,057 | ||||||
Total Expense | 508,595 | 421,057 | ||||||
NET INVESTMENT INCOME/(LOSS) | 527,344 | (202,112 | ) | |||||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||||||
Net realized loss on investments | (3,080,373 | ) | (8,320,461 | ) | ||||
Net realized gain on foreign currency transactions | – | 2,417 | ||||||
Net realized gain/(loss) | (3,080,373 | ) | (8,318,044 | ) | ||||
Net change in unrealized appreciation/(depreciation) on investments | 2,294,380 | (622,470 | ) | |||||
Net change in unrealized appreciation on translation of assets and liabilities denominated in foreign currencies | – | 65 | ||||||
Net change in unrealized appreciation/(depreciation) | 2,294,380 | (622,405 | ) | |||||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (785,993 | ) | (8,940,449 | ) | ||||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (258,649 | ) | $ | (9,142,561 | ) |
(a) | Net of foreign tax withholding in the amounts of $53,957 and $12,481 respectively. |
See Notes to Financial Statements.
9 | May 31, 2018
Sprott Gold Miners ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 527,344 | $ | 387,681 | ||||
Net realized loss | (3,080,373 | ) | (18,766,501 | ) | ||||
Net change in unrealized appreciation | 2,294,380 | 24,893,190 | ||||||
Net increase/(decrease) in net assets resulting from operations | (258,649 | ) | 6,514,370 | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (1,074,960 | ) | (35,497 | ) | ||||
Total distributions | (1,074,960 | ) | (35,497 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 22,162,752 | 30,281,812 | ||||||
Cost of shares redeemed | (6,812,107 | ) | (56,080,225 | ) | ||||
Net increase/(decrease) from capital share transactions | 15,350,645 | (25,798,413 | ) | |||||
Net increase/(decrease) in net assets | 14,017,036 | (19,319,540 | ) | |||||
NET ASSETS: | ||||||||
Beginning of period | 164,545,410 | 183,864,950 | ||||||
End of period * | $ | 178,562,446 | $ | 164,545,410 | ||||
*Including accumulated net investment income of: | $ | 514,377 | $ | 1,061,993 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 8,300,000 | 9,600,000 | ||||||
Shares sold | 1,100,000 | 1,500,000 | ||||||
Shares redeemed | (350,000 | ) | (2,800,000 | ) | ||||
Shares outstanding, end of period | 9,050,000 | 8,300,000 |
See Notes to Financial Statements.
10 | May 31, 2018
Sprott Junior Gold Miners ETF
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment loss | $ | (202,112 | ) | $ | (294,722 | ) | ||
Net realized gain/(loss) | (8,318,044 | ) | 5,266,703 | |||||
Net change in unrealized depreciation | (622,405 | ) | (8,013,072 | ) | ||||
Net decrease in net assets resulting from operations | (9,142,561 | ) | (3,041,091 | ) | ||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From net investment income | (223,107 | ) | (815,000 | ) | ||||
Total distributions | (223,107 | ) | (815,000 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 7,569,156 | 151,798,691 | ||||||
Cost of shares redeemed | (7,484,427 | ) | (46,248,833 | ) | ||||
Net increase from capital share transactions | 84,729 | 105,549,858 | ||||||
Net increase/(decrease) in net assets | (9,280,939 | ) | 101,693,767 | |||||
NET ASSETS: | ||||||||
Beginning of period | 149,550,463 | 47,856,696 | ||||||
End of period * | $ | 140,269,524 | $ | 149,550,463 | ||||
*Including accumulated net investment loss of: | $ | (795,934 | ) | $ | (370,715 | ) | ||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 4,750,000 | 1,450,000 | ||||||
Shares sold | 250,000 | 4,700,000 | ||||||
Shares redeemed | (250,000 | ) | (1,400,000 | ) | ||||
Shares outstanding, end of period | 4,750,000 | 4,750,000 |
See Notes to Financial Statements.
11 | May 31, 2018
Sprott Gold Miners ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Period July 15, 2014 (Commencement of Operations) to November 30, 2014 | ||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 19.82 | $ | 19.15 | $ | 12.97 | $ | 17.44 | $ | 25.00 | ||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income (a) | 0.06 | 0.04 | (0.00 | )(b) | 0.10 | 0.02 | ||||||||||||||
Net realized and unrealized gain/(loss) | (0.03 | ) | 0.63 | 6.37 | (4.52 | ) | (7.58 | ) | ||||||||||||
Total from investment operations | 0.03 | 0.67 | 6.37 | (4.42 | ) | (7.56 | ) | |||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||
From net investment income | (0.12 | ) | (0.00 | )(b) | (0.19 | ) | (0.05 | ) | – | |||||||||||
Total distributions | (0.12 | ) | (0.00 | )(b) | (0.19 | ) | (0.05 | ) | – | |||||||||||
Net increase/(decrease) in net asset value | (0.09 | ) | 0.67 | 6.18 | (4.47 | ) | (7.56 | ) | ||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 19.73 | $ | 19.82 | $ | 19.15 | $ | 12.97 | $ | 17.44 | ||||||||||
TOTAL RETURN(c) | 0.12 | % | 3.52 | % | 49.82 | % | (25.44 | )% | (30.24 | )% | ||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||
Net assets, end of period (000s) | $ | 178,562 | $ | 164,545 | $ | 183,865 | $ | 112,158 | $ | 88,956 | ||||||||||
Ratio of expenses to average net assets | 0.57 | %(d) | 0.57 | % | 0.57 | % | 0.57 | % | 0.57 | %(d) | ||||||||||
Ratio of net investment income/(loss) to average net assets | 0.59 | %(d) | 0.21 | % | (0.01 | )% | 0.61 | % | 0.31 | %(d) | ||||||||||
Portfolio turnover rate(e) | 25 | % | 101 | % | 74 | % | 78 | % | 36 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Less than $0.005 per share. |
(c) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(d) | Annualized. |
(e) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
12 | May 31, 2018
Sprott Junior Gold Miners ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Period March 31, 2015 (Commencement of Operations) to November 30, 2015 | |||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 31.48 | $ | 33.00 | $ | 19.65 | $ | 24.18 | ||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||
Net investment income/(loss) (a) | (0.04 | ) | (0.09 | ) | (0.05 | ) | 0.04 | |||||||||
Net realized and unrealized gain/(loss) | (1.86 | ) | (0.87 | ) | 13.56 | (4.57 | ) | |||||||||
Total from investment operations | (1.90 | ) | (0.96 | ) | 13.51 | (4.53 | ) | |||||||||
DISTRIBUTIONS: | ||||||||||||||||
From net investment income | (0.05 | ) | (0.56 | ) | (0.16 | ) | – | |||||||||
Total distributions | (0.05 | ) | (0.56 | ) | (0.16 | ) | – | |||||||||
Net increase/(decrease) in net asset value | (1.95 | ) | (1.52 | ) | 13.35 | (4.53 | ) | |||||||||
NET ASSET VALUE, END OF PERIOD | $ | 29.53 | $ | 31.48 | $ | 33.00 | $ | 19.65 | ||||||||
TOTAL RETURN(b) | (6.06 | )% | (2.99 | )% | 69.35 | % | (18.73 | )% | ||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||
Net assets, end of period (000s) | $ | 140,270 | $ | 149,550 | $ | 47,857 | $ | 23,579 | ||||||||
Ratio of expenses to average net assets | 0.57 | %(c) | 0.57 | % | 0.57 | % | 0.57 | %(c) | ||||||||
Ratio of net investment income/(loss) to average net assets | (0.27 | )%(c) | (0.26 | )% | (0.14 | )% | 0.29 | %(c) | ||||||||
Portfolio turnover rate(d) | 23 | % | 74 | % | 61 | % | 71 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
13 | May 31, 2018
Sprott ETFs
Notes to Financial Statements | May 31, 2018 (Unaudited) |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”). As of May 31, 2018, the Trust consisted of twenty separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains to the Sprott Gold Miners ETF and the Sprott Junior Gold Miners ETF (each a “Fund” and collectively, the “Funds”).
The investment objective of the Sprott Gold Miners ETF is to seek investment results that correspond (before fees and expenses) generally to the performance of its underlying index, the Sprott Zacks Gold Miners Index (the “Underlying Index”). The investment advisor uses a “passive” or indexing approach to try to achieve the Fund’s investment objective. The Sprott Gold Miners ETF is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The investment objective of the Sprott Junior Gold Miners ETF is to seek investment results that correspond (before fees and expenses) generally to the performance of its underlying index, the Sprott Zacks Junior Gold Miners Index (the “Underlying Index”). The investment advisor uses a “passive” or indexing approach to try to achieve the Fund’s investment objective. The Sprott Junior Gold Miners ETF is considered non-diversified and may invest a greater portion of assets in securities of individual issuers than a diversified fund. As a result, changes in the market value of a single investment could cause greater fluctuations in share price than would occur in a diversified fund.
The Funds’ Shares (“Shares”) are listed on the New York Stock Exchange (“NYSE”) Arca. Each Fund issues and redeems Shares, at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities included in the specified Underlying Index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Funds in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. Each Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
A. Portfolio Valuation
Each Fund’s NAV is determined daily, as of the close of regular trading on the NYSE, normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“NASDAQ”) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the last quoted sale price in such market.
The Funds’ investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Funds may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
14 | May 31, 2018
Sprott ETFs
Notes to Financial Statements | May 31, 2018 (Unaudited) |
B. Fair Value Measurements
Each Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Funds’ investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of each Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Funds’ investments at May 31, 2018:
Sprott Gold Miners ETF
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 178,478,290 | $ | – | $ | – | $ | 178,478,290 | ||||||||
Short Term Investments | ||||||||||||||||
Money Market Fund | 74,814 | – | – | 74,814 | ||||||||||||
Investments Purchased with Collateral from | ||||||||||||||||
Securities Loaned | 8,647,273 | – | – | 8,647,273 | ||||||||||||
TOTAL | $ | 187,200,377 | $ | – | $ | – | $ | 187,200,377 |
15 | May 31, 2018
Sprott ETFs
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Sprott Junior Gold Miners ETF
Investments in Securities at Value* | Level 1 - Unadjusted Quoted Prices | Level 2 - Other Significant Observable Inputs | Level 3 - Significant Unobservable Inputs | Total | ||||||||||||
Common Stocks | $ | 140,254,084 | $ | – | $ | – | $ | 140,254,084 | ||||||||
Short Term Investments | ||||||||||||||||
Money Market Fund | 59,050 | – | – | 59,050 | ||||||||||||
Investments Purchased with Collateral from | ||||||||||||||||
Securities Loaned | 20,275,105 | – | – | 20,275,105 | ||||||||||||
TOTAL | $ | 160,588,239 | $ | – | $ | – | $ | 160,588,239 |
* | For a detailed sector breakdown, see the accompanying Schedule of Investments. |
The Funds recognize transfers between levels as of the end of the period. For the six months ended May 31, 2018, the Funds did not have any transfers between Level 1 and Level 2 securities. The Funds did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
C. Gold and Silver Mining Industry Risk
The Funds are concentrated in the gold and silver mining industry. As a result, these Funds will be sensitive to changes in, and their performance will depend to a greater extent on, the overall condition of the gold and silver mining industry. Competitive pressures may have a significant effect on the financial condition of such companies in the gold and silver mining industry. Also, gold and silver mining companies are highly dependent on the price of gold and silver bullion. These prices may fluctuate substantially over short periods of time so a Fund’s Share price may be more volatile than other types of investments. In times of significant inflation or great economic uncertainty, gold, silver and other precious metals may outperform traditional investments such as bonds and stocks. However, in times of stable economic growth, traditional equity and debt investments could offer greater appreciation potential and the value of gold, silver and other precious metals may be adversely affected, which could in turn affect a Fund’s returns. The production and sale of precious metals by governments or central banks or other large holders can be affected by various economic, financial, social and political factors, which may be unpredictable and may have a significant impact on the supply and prices of precious metals. Economic and political conditions in those countries that are the largest producers of gold may have a direct effect on the production and marketing of gold and on sales of central bank gold holdings. Some gold and precious metals mining operation companies may hedge their exposure to falls in gold and precious metals prices by selling forward future production, which may result in lower returns during periods when the price of gold and precious metals increases. The gold and precious metals industry can be significantly affected by events relating to international political developments, the success of exploration projects, commodity prices and tax and government regulations. If a natural disaster or other event with a significant economic impact occurs in a region where the companies in which each Fund invests operate, such disaster or event could negatively affect the profitability of such companies and, in turn, the Funds’ investment in them.
D. Foreign Investment Risk
The Funds’ investments in non-U.S. issuers may involve unique risks compared to investing in securities of U.S. issuers, including, among others, greater market volatility than U.S. securities and less complete financial information than for U.S. issuers. In addition, adverse political, economic or social developments could undermine the value of a Fund’s investments or prevent a Fund from realizing the full value of its investments. Financial reporting standards for companies based in foreign markets differ from those in the United States. Finally, the value of the currency of the country in which a Fund has invested could decline relative to the value of the U.S. dollar, which may affect the value of the investment to U.S. investors. The Funds will not enter into transactions to hedge against declines in the value of a Fund’s assets that are denominated in a foreign currency.
Countries with emerging markets may have relatively unstable governments and may present the risks of nationalization of businesses, restrictions on foreign ownership and prohibitions on the repatriation of assets. The economies of emerging markets countries also may be based on only a few industries, making them more vulnerable to changes in local or global trade conditions and more sensitive to debt burdens or inflation rates.
E. Foreign Currency Translation
The books and records of the Funds are maintained in U.S. dollars. Investment valuations and other assets and liabilities initially expressed in foreign currencies are converted each business day into U.S. dollars based upon current exchange rates. The portion of realized and unrealized gains or losses on investments due to fluctuations in foreign currency exchange rates is not separately disclosed and is included in realized and unrealized gains or losses on investments, when applicable.
16 | May 31, 2018
Sprott ETFs
Notes to Financial Statements | May 31, 2018 (Unaudited) |
F. Concentration Risk
Each Fund seeks to track its respective Underlying Index, which itself may have concentration in certain regions, economies, countries, markets, industries or sectors. Based on the current composition of their respective Underlying Indexes, the Funds will be concentrated in the gold and silver mining industry. Underperformance or increased risk in such concentrated areas may result in underperformance or increased risk in each Fund.
G. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
H. Dividends and Distributions to Shareholders
Dividends from net investment income for each Fund, if any, are declared and paid annually or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Funds, if any, are distributed at least annually.
I. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Funds’ capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2018.
The tax character of the distributions paid by the Funds were as follows:
Ordinary Income | ||||
November 30, 2017 | ||||
Sprott Gold Miners ETF | $ | 35,497 | ||
Sprott Junior Gold Miners ETF | 815,342 |
At November 30, 2017, the Funds had available for tax purposes unused capital loss carryforwards as follows:
Fund | Short-Term | Long-Term | ||||||
Sprott Gold Miners ETF | $ | 57,151,739 | $ | 18,695,050 | ||||
Sprott Junior Gold Miners ETF | 11,262,272 | 1,790,432 |
As of May 31, 2018, the costs of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Sprott Gold Miners ETF | Sprott Junior Gold Miners ETF | |||||||
Gross appreciation (excess of value over tax cost) | $ | 15,416,570 | $ | 5,086,651 | ||||
Gross depreciation (excess of tax cost over value) | (11,994,797 | ) | (13,610,384 | ) | ||||
Net unrealized appreciation (depreciation) | 3,421,773 | (8,523,733 | ) | |||||
Cost of investments for income tax purposes | $ | 183,778,604 | $ | 169,111,972 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of May 31, 2018.
J. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as each Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. Each Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
17 | May 31, 2018
Sprott ETFs
Notes to Financial Statements | May 31, 2018 (Unaudited) |
As of and during the six months ended May 31, 2018, the Funds did not have a liability for any unrecognized tax benefits. Each Fund files U.S. federal, state, and local tax returns as required. Each Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Tax returns for open years for the Sprott Gold Miners ETF and the Sprott Junior Gold Miners ETF have incorporated no uncertain tax positions that require a provision for income taxes.
K. Lending of Portfolio Securities
The Funds have entered into a securities lending agreement with State Street Bank & Trust Co. (“SSB”), the Funds’ lending agent. The Funds may lend their portfolio securities only to borrowers that are approved by SSB. Each Fund will limit such lending to not more than 33 1/3% of the value of its total assets. Each Fund’s securities held at SSB as custodian shall be available to be lent except those securities the Fund or ALPS Advisors, Inc. specifically identifies in writing as not being available for lending. The borrower pledges and maintains with each Fund collateral consisting of cash (U.S. Dollars only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and by cash equivalents (including irrevocable bank letters of credit issued by a person other than the borrower or an affiliate of the borrower). The initial collateral received by each Fund is required to have a value of no less than 102% of the market value of the loaned securities for U.S. equity securities and a value of no less than 105% of the market value for non-U.S. equity securities. The collateral is maintained thereafter, at a market value equal to not less than 102% of the current value of the U.S. equity securities on loan and not less than 105% of the current value of the non-U.S. equity securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to each Fund on the next business day. During the term of the loan, each Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the customary time period for settlement of securities transactions.
Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in each Fund’s Schedule of Investments and is reflected in the Statements of Assets and Liabilities as a payable for collateral upon return of securities loaned. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in a Fund’s Statements of Assets and Liabilities as it is held by the lending agent on behalf of each Fund, and each Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.
The following is a summary of each Fund’s securities lending agreements and related cash and non-cash collateral received as of May 31, 2018:
Market Value of Securities on Loan | Cash Collateral Received | Non-Cash Collateral Received | Total Collateral Received | |||||||||||||
Sprott Gold Miners ETF | $ | 8,130,611 | $ | 8,647,273 | $ | 66,125 | $ | 8,713,398 | ||||||||
Sprott Junior Gold Miners ETF | 20,435,498 | 20,275,105 | 1,336,760 | 21,611,865 |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, each Fund benefits from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Funds could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
The following tables reflect a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged or securities loaned, and the remaining contractual maturity of those transactions as of May 31, 2018:
Remaining contractual maturity of the agreements | ||||||||||||||||||||
Sprott Gold Miners ETF | ||||||||||||||||||||
Securities Lending Transactions | Overnight & Continuous | Up to 30 days | 30-90 days | Greater than 90 days | Total | |||||||||||||||
Common Stocks | $ | 8,647,273 | $ | – | $ | – | $ | – | $ | 8,647,273 | ||||||||||
Total Borrowings | 8,647,273 | |||||||||||||||||||
Gross amount of recognized liabilities for securities lending (collateral received) | $ | 8,647,273 |
18 | May 31, 2018
Sprott ETFs
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Sprott Junior Gold Miners ETF | Remaining contractual maturity of the agreements | |||||||||||||||||||
Securities Lending Transactions | Overnight & Continuous | Up to 30 days | 30-90 days | Greater than 90 days | Total | |||||||||||||||
Common Stocks | $ | 20,275,105 | $ | – | $ | – | $ | – | $ | 20,275,105 | ||||||||||
Total Borrowings | 20,275,105 | |||||||||||||||||||
Gross amount of recognized liabilities for securities lending (collateral received) | $ | 20,275,105 |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as the Funds’ investment adviser pursuant to an advisory agreement with the Trust on behalf of each Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, each Fund pays the Adviser a unitary fee for the services and facilities it provides, payable on a monthly basis as a percentage of each Fund’s average daily net assets as set forth below. From time to time, the Adviser may waive all or a portion of its fee.
Fund | Advisory Fee |
Sprott Gold Miners ETF | 0.57% |
Sprott Junior Gold Miners ETF | 0.57% |
Capitalized terms used but not defined within this paragraph, shall have the respective meanings given to them in the Board Considerations Regarding Approval of Investment Advisory Agreement section of this Semi-Annual Report (“Board Considerations”). As discussed in the Board Considerations, the Adviser is an indirect wholly owned subsidiary of DST and on April 16, 2018, DST was acquired by SS&C resulting in a change of control of the Adviser. As discussed in the Board Considerations, in order for the Adviser to continue to serve as the investment adviser to the applicable Funds, among other approvals, the Board approved an Interim Advisory Agreement between the Adviser and the Trust, on behalf of the Funds. The Interim Advisory Agreement is effective for the earlier of 150 days from the close of the Transaction or the date of shareholder approval of the New Advisory Agreement. Under the terms of the Interim Advisory Agreement, the unitary management fee paid to the Adviser will be held in escrow until shareholder approval of the New Advisory Agreement is obtained and is reported as Cash held in escrow account on the Statement of Assets and Liabilities.
Out of the unitary management fee, the Adviser pays substantially all expenses for each Fund, including the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses, such as litigation, not incurred in the ordinary course of each Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all of the Funds’ expenses and to compensate the Adviser for providing services for the Funds.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator to the Funds.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee for regularly scheduled meetings of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, both the Chairman of the Board and Chairman of the Audit Committee each receives a quarterly retainer of $2,000, in connection with their respective roles.
19 | May 31, 2018
Sprott ETFs
Notes to Financial Statements | May 31, 2018 (Unaudited) |
4. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2018, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Fund | Purchases | Sales | ||||||
Sprott Gold Miners ETF | $ | 44,066,859 | $ | 44,555,010 | ||||
Sprott Junior Gold Miners ETF | 34,403,611 | 34,767,000 |
For the six months ended May 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
Sprott Gold Miners ETF | $ | 22,162,341 | $ | 6,813,483 | ||||
Sprott Junior Gold Miners ETF | 7,569,194 | 7,484,562 |
For the six months ended May 31, 2018, the Sprott Gold Miners ETF and the Sprott Junior Gold Miners ETF had in-kind net realized gains of $933,256 and $549,288 respectively.
Gains on in-kind transactions are not considered taxable for federal income tax purposes and losses on in kind transactions are also not deductible for tax purposes.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by each Fund only in Creation Unit size aggregations of 50,000 Shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Funds. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of each Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
6. RELATED PARTY TRANSACTIONS
Each Fund engaged in cross trades between other funds in the Trust during the six months ended May 31, 2018 pursuant to Rule 17a-7 under the 1940 Act. Cross trading is the buying or selling of portfolio securities between funds to which the Adviser serves as the investment adviser. The Board previously adopted procedures that apply to transactions between the Funds of the Trust pursuant to Rule 17a-7. These transactions related to cross trades during the period complied with the requirements set forth by Rule 17a-7 and the Trust’s procedures.
Transactions related to cross trades during the six months ended May 31, 2018 was as follows:
Fund | Purchase cost paid | Sale proceeds received | Realized gain/(loss) on sales | |||||||||
Sprott Gold Miners ETF | $ | 1,580,329 | $ | 959,533 | $ | (43,892 | ) | |||||
Sprott Junior Gold Miners ETF | $ | 959,533 | $ | 481,859 | $ | (2,380,438 | ) |
20 | May 31, 2018
Sprott ETFs
Additional Information | May 31, 2018 (Unaudited) |
PROXY VOTING RECORDS, POLICIES AND PROCEDURES
Information regarding how each Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Funds’ proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-675-2639.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of each Fund’s portfolio holdings with the SEC on Form N-Q. Form N-Q for each Fund will be available on the SEC’s website at www.sec.gov. Each Fund’s Form N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. Each Fund’s Form N-Q will be available without charge, upon request, by calling (toll-free) 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Funds designate the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2017:
Qualified Dividend Income | Dividend Received Deduction | |
Sprott Gold Miners ETF | 86.63% | 24.78% |
Sprott Gold Miners Junior ETF | 76.06% | 0.00% |
In early 2018, if applicable, shareholders of record received this information for the distribution paid to them by the Funds during the calendar year 2017 via Form 1099. The Funds will notify shareholders in early 2019 of amounts paid to them by the Funds, if any, during the calendar year 2018.
LICENSING AGREEMENTS
Sprott Gold Miners ETF
Zacks Investment Management, Inc. (the “Licensor”) has entered into a license agreement with Sprott Asset Management LP (“Sprott”) to use the “Sprott” name and certain related intellectual property in connection with the underlying index, the Sprott Zacks Gold Miners Index (the “Underlying Index”) (the “Sprott License Agreement”). Pursuant to the Sprott License Agreement, Sprott in turn has entered into a sublicense agreement with ALPS Advisers, Inc. to use the Underlying Index (the “Sublicense Agreement”) in connection with the Sprott Gold Miners ETF (the “Product”).
The following disclosure relates to the Licensor and Sprott:
The Product(s) is not sponsored, endorsed, sold or promoted by ZACKS INVESTMENT MANAGEMENT, INC. (“Licensor”) Licensor makes no representation or warranty, express or implied, regarding the advisability of investing in securities generally or in the Product(s) particularly or the ability of the Index to track general market performance. Licensor’s only relationship to the Licensee is the licensing of the Index which is determined and composed by Licensor without regard to the Licensee or the owners of the Product(s). Licensor has no obligation to take the needs of the Licensee or the owners of the Product(s) into consideration in determining or composing the Index. Licensor shall not be liable to any person for any error in the Index nor shall it be under any obligation to advise any person of any error therein.
The Fund is not sponsored by Sprott. Sprott makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in securities or commodities generally or in the Fund particularly and does not guarantee the quality, accuracy or completeness of the Underlying Index or any Underlying Index data included herein or derived therefrom and assume no liability in connection with their use. The Underlying Index is determined and composed without regard to the Adviser or the Fund. Sprott has no obligation to take the needs of the Adviser, the Fund or the shareholders of the Fund into consideration in connection with the foregoing. Sprott is not responsible for and has not participated in the determination of pricing or the timing of the issuance or sale of the Shares of the Fund or in the determination or calculation of the NAV of the Fund. Sprott has no obligation or liability in connection with the administration or trading of the Fund.
21 | May 31, 2018
Sprott ETFs
Additional Information | May 31, 2018 (Unaudited) |
Sprott does not guarantee the accuracy and/or completeness of the Underlying Index or any data included therein, and Sprott shall have no liability for any errors, omissions, or interruptions therein. Sprott makes no warranty, express or implied, as to results to be obtained by the Adviser, the Fund, Fund shareholders or any other person or entity from the use of the Underlying Index or any data included therein. Sprott makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall Sprott have any liability for any special, punitive, indirect, or consequential damages (including lost profits) arising out of matters relating to the use of the Underlying Index, even if notified of the possibility of such damages.
Sprott Junior Gold Miners ETF
Zacks Investment Management, Inc. (the “Licensor”) has entered into a license agreement with Sprott Asset Management LP (“Sprott”) to use the “Sprott” name and certain related intellectual property in connection with the underlying index, the Sprott Zacks Junior Gold Miners Index (the “Underlying Index”) (the “Sprott License Agreement”). Pursuant to the Sprott License Agreement, Sprott in turn has entered into a sublicense agreement with ALPS Advisers, Inc. to use the Underlying Index (the “Sublicense Agreement”) in connection with the Sprott Junior Gold Miners ETF (the “Product”).
The following disclosure relates to the Licensor and Sprott:
The Product(s) is not sponsored, endorsed, sold or promoted by ZACKS INVESTMENT MANAGEMENT, INC. (“Licensor”) Licensor makes no representation or warranty, express or implied, regarding the advisability of investing in securities generally or in the Product(s) particularly or the ability of the Index to track general market performance. Licensor’s only relationship to the Licensee is the licensing of the Index which is determined and composed by Licensor without regard to the Licensee or the owners of the Product(s). Licensor has no obligation to take the needs of the Licensee or the owners of the Product(s) into consideration in determining or composing the Index. Licensor shall not be liable to any person for any error in the Index nor shall it be under any obligation to advise any person of any error therein.
The Fund is not sponsored by Sprott. Sprott makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in securities or commodities generally or in the Fund particularly and does not guarantee the quality, accuracy or completeness of the Underlying Index or any Underlying Index data included herein or derived therefrom and assume no liability in connection with their use. The Underlying Index is determined and composed without regard to the Adviser or the Fund. Sprott has no obligation to take the needs of the Adviser, the Fund or the shareholders of the Fund into consideration in connection with the foregoing. Sprott is not responsible for and has not participated in the determination of pricing or the timing of the issuance or sale of the Shares of the Fund or in the determination or calculation of the NAV of the Fund. Sprott has no obligation or liability in connection with the administration or trading of the Fund.
Sprott does not guarantee the accuracy and/or completeness of the Underlying Index or any data included therein, and Sprott shall have no liability for any errors, omissions, or interruptions therein. Sprott makes no warranty, express or implied, as to results to be obtained by the Adviser, the Fund, Fund shareholders or any other person or entity from the use of the Underlying Index or any data included therein. Sprott makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Underlying Index or any data included therein. Without limiting any of the foregoing, in no event shall Sprott have any liability for any special, punitive, indirect, or consequential damages (including lost profits) arising out of matters relating to the use of the Underlying Index, even if notified of the possibility of such damages.
22 | May 31, 2018
Sprott ETFs
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
At an in-person meeting held on March 5, 2018, the Board of Trustees of the Trust (the “Board” or the “Trustees”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve each of (i) the continuance of the investment advisory agreements between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect to the Sprott Gold Miners ETF (“SGDM”) and Sprott Junior Gold Miners ETF (“SGDJ”), (each “a Fund” and collectively the “Funds”) (the “Existing Advisory Agreements”); (ii) a new investment advisory agreement between the Adviser and the Trust on behalf of each Fund (the “New Advisory Agreement”); and (iii) an interim investment advisory agreement between the Adviser and the Trust on behalf of each Fund (the “Interim Advisory Agreement” and together with the Existing Advisory Agreements and New Advisory Agreement, the “Advisory Agreements”). The Independent Trustees also met separately to consider the Advisory Agreements.
Consideration by the Board of the New Advisory Agreement and Interim Advisory Agreement was necessary because DST Systems, Inc. (“DST”), the ultimate parent company to the Adviser, had had entered into an agreement to be acquired by SS&C Technologies Holdings, Inc. (“SS&C”) (the “Transaction”). Because the Adviser would be acquired along with DST, the closing of the Transaction (the “Closing”) may be deemed a change in control with respect to the Adviser. The Closing occurred on April 16, 2018. This change in control with respect to the Adviser may be deemed to trigger an “assignment” of the Existing Advisory Agreements under the Investment Company Act of 1940, as amended (the “1940 Act”). As required by the 1940 Act, the Existing Advisory Agreements provide for their automatic termination in the event of an assignment, and therefore, the Existing Advisory Agreements automatically terminated upon Closing. In order for the Adviser to continue as the Funds’ investment adviser, the Board and the Funds’ shareholders must approve the New Advisory Agreement which would take effect, if approved, upon the date of such shareholder approval. As of the date of this report, the New Advisory Agreement has not received shareholder approval and efforts to secure such shareholder approval are ongoing. The Interim Advisory Agreement approved by the Board permits the Adviser to continue as investment adviser to the Funds from the date of the Closing until the Funds’ shareholders approve the New Advisory Agreement, subject to a maximum term of 150 days.
In evaluating the Advisory Agreements with respect to each Fund, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by AAI with respect to the applicable Fund under the Advisory Agreements; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided (or to be provided) by AAI under the Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Advisory Agreements, the investment parameters of the index of each Fund, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Funds.
The Independent Trustees reviewed information on the performance of each Fund and its applicable benchmark. The Independent Trustees also evaluated the correlation and tracking error between each underlying index and its corresponding Fund’s performance. Based on their review, the Independent Trustees found that the nature and extent of services provided (or to be provided) to each Fund under the Advisory Agreements was appropriate and that the quality was satisfactory.
The Independent Trustees noted that the advisory fees for each Fund were unitary fees pursuant to which AAI assumes all expenses of the Funds (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreements, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
With respect to advisory fee rates, the Independent Trustees noted the following:
The net advisory fee rate for each of the Funds is equal to the median of its Broadridge expense group and the Funds’ respective expense ratios are equal to the median for their respective Broadridge expense group.
Based on the foregoing, and the other information available to them, the Independent Trustees concluded that the advisory fee rate for each of the Funds was reasonable under the circumstances and in light of the quality of the services provided.
The Independent Trustees considered other benefits available to AAI because of its relationship with the Funds and concluded that the advisory fees were reasonable taking into account any such benefits.
The Independent Trustees also considered with respect to each Fund the information provided by AAI about the costs and profitability of AAI with respect to each of the Funds. The Independent Trustees reviewed and noted the relatively small sizes of the Funds in considering economies of scale that may be realized by AAI. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
23 | May 31, 2018
Sprott ETFs
Board Considerations Regarding Approval of Investment Advisory Agreements | May 31, 2018 (Unaudited) |
In voting to renew each Existing Advisory Agreement and approve each New Advisory Agreement and Interim Advisory Agreement, the Independent Trustees concluded that the terms of each Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
24 | May 31, 2018
TABLE OF
CONTENTS
Performance Overview | 1 |
Disclosure of Fund Expenses | 3 |
Financial Statements | |
Schedule of Investments | 4 |
Statement of Assets and Liabilities | 7 |
Statement of Operations | 8 |
Statements of Changes in Net Assets | 9 |
Financial Highlights | 10 |
Notes to Financial Statements | 11 |
Additional Information | 17 |
Board Considerations Regarding Approval of Investment Advisory Agreement | 18 |
www.alpsfunds.com
Workplace Equality Portfolio
Performance Overview | May 31, 2018 (Unaudited) |
Investment Objective
The Workplace Equality Portfolio (the “Fund”) seeks investment results that correspond (before fees and expenses) generally to the price and yield performance of its underlying index, the Workplace Equality Index™ (the “Underlying Index”).
The Underlying Index is designed to provide a means of tracking the performance of companies which support workplace equality for lesbian, gay, bisexual and transgender (“LGBT”) employees. The Underlying Index consists of approximately 200 publicly traded stocks of U.S. and foreign companies which support equality for LGBT employees through their workplace practices, including non-discrimination policies regarding sexual orientation and gender identity and providing full benefits to for same-sex spouses, domestic partners and transgender individuals. The Underlying Index is compiled by Segall Bryant & Hamill, LLC (“SBH” or the “Index Provider”). The Index Provider uses publicly available lists and screening sources such as the National Gay & Lesbian Chamber of Commerce®, Diversity Inc. Top 50®, Stonewall® or other screening sources, to identify companies with workplace policies that meet the Underlying Index’s criteria for equality for LGBT employees as described above (as well as market capitalization and liquidity requirements). The Index Provider also utilizes its own proprietary database for index screening. The criteria are subject to change in response to changes in law.
Performance (as of May 31, 2018)
6 Months | 1 Year | 3 Year | Since Inception^ | |
Workplace Equality Portfolio - NAV | 0.89% | 10.40% | 9.42% | 10.28% |
Workplace Equality Portfolio - Market Price* | 1.28% | 10.89% | 9.58% | 10.39% |
Workplace Equality IndexTM | 1.24% | 11.16% | 10.23% | 11.11% |
S&P 500® Total Return Index | 3.16% | 14.38% | 10.97% | 11.65% |
Total Expense Ratio (per the current prospectus) 0.75%
Performance data quoted represents past performance. Past performance does not guarantee future results. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.844.375.8383.
NAV is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund Commencement date was February 25, 2014. |
* | Market Price is based on the midpoint of the bid-ask spread at 4 p.m. ET and does not represent the returns an investor would receive if shares were traded at other times. |
The Workplace Equality IndexTM: an equal weighted index of companies that support lesbian, gay, bisexual and transgender (LGBT) equality in their workplace.
The S&P 500® Total Return Index: the Standard & Poor’s composite index of 500 stocks, a widely recognized, unmanaged index of common stock prices.
The indexes are not actively managed and do not reflect any deductions for fees, expenses or taxes. The indexes are reported on a total return basis, which assumes reinvestment of any dividends and distributions realized during a given time period. One cannot invest directly in an index. Index performance does not reflect Fund performance.
The Fund invests in stocks of companies which meet the Underlying Index's criteria for supporting workplace equality for LGBT employees. The trend of companies supporting workplace equality in this fashion is relatively recent, and there may be a limited number of companies which meet the Underlying Index's criteria.
The Fund’s shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 50,000 shares.
The Workplace Equality Portfolio is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the Workplace Equality Portfolio.
ALPS Portfolio Solutions Distributor, Inc. is not affiliated with SBH.
1 | May 31, 2018
Workplace Equality Portfolio
Performance Overview | May 31, 2018 (Unaudited) |
Top 10 Holdings* (as of May 31, 2018) | |
Tiffany & Co. | 0.57% |
Sears Holdings Corp. | 0.52% |
Macy's, Inc. | 0.51% |
Navigant Consulting, Inc. | 0.50% |
Park Hotels & Resorts, Inc. | 0.50% |
Genworth Financial, Inc. | 0.49% |
American Eagle Outfitters, Inc. | 0.49% |
Booz Allen Hamilton Holding Corp. | 0.48% |
Barnes & Noble, Inc. | 0.48% |
Intuit, Inc. | 0.48% |
Total % of Top 10 Holdings | 5.02% |
* | % of Total Investments (excluding investments purchased with collateral from securities loaned) |
Sector Allocation* (as of May 31, 2018) | |
Consumer Discretionary | 21.85% |
Financials | 21.09% |
Information Technology | 15.76% |
Health Care | 11.26% |
Industrials | 11.07% |
Consumer Staples | 8.27% |
Utilities | 2.97% |
Materials | 2.95% |
Telecommunication Services | 1.93% |
Real Estate | 1.75% |
Energy | 0.92% |
Money Market Fund | 0.18% |
Total | 100.00% |
Future holdings are subject to change.
Growth of $10,000 (as of May 31, 2018)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
The chart above represents historical performance of a hypothetical investment of $10,000 in the Fund over the life of the Fund. Past performance does not guarantee future results. This chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares
2 | May 31, 2018
Workplace Equality Portfolio
Disclosure of Fund Expenses | May 31, 2018 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur two types of costs: (1) transaction costs which may include creation and redemption fees or brokerage charges, 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. It is based on an investment of $1,000 invested at the beginning of the (six month) period and held through May 31, 2018.
Actual Return: The first line of the table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the table provides information about hypothetical account values 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. Yomay use this information to compare ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as creation and redemption fees or brokerage charges. Therefore, the second line is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning Account Value 12/1/17 | Ending Account Value 5/31/18 | Expense Ratio(a) | Expenses Paid During Period 12/1/17 - 5/31/18(b) | |
Workplace Equality Portfolio | ||||
Actual | $1,000.00 | $1,008.90 | 0.75% | $3.76 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.19 | 0.75% | $3.78 |
(a) | Annualized, based on the Fund's most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (182), divided by 365. |
3 | May 31, 2018
Workplace Equality Portfolio
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
COMMON STOCKS (99.67%) | ||||||||
Consumer Discretionary (21.81%) | ||||||||
Abercrombie & Fitch Co., Class A | 4,088 | $ | 97,499 | |||||
American Eagle Outfitters, Inc. | 4,712 | 104,606 | ||||||
Aramark | 2,201 | 85,443 | ||||||
Barnes & Noble, Inc. | 17,675 | 103,399 | ||||||
Best Buy Co., Inc. | 1,307 | 89,203 | ||||||
Caesars Entertainment Corp.(a) | 7,264 | 88,258 | ||||||
CBS Corp., Class B | 1,769 | 89,104 | ||||||
Choice Hotels International, Inc. | 1,087 | 87,340 | ||||||
Comcast Corp., Class A | 2,571 | 80,164 | ||||||
Darden Restaurants, Inc. | 964 | 84,263 | ||||||
Ford Motor Co. | 8,160 | 94,248 | ||||||
GameStop Corp., Class A(b) | 5,893 | 77,788 | ||||||
Gap, Inc. | 2,856 | 79,911 | ||||||
General Motors Co. | 2,384 | 101,797 | ||||||
Groupon, Inc.(a) | 19,825 | 95,358 | ||||||
Hilton Grand Vacations, Inc.(a) | 2,054 | 81,667 | ||||||
Hilton Worldwide Holdings, Inc. | 1,103 | 89,023 | ||||||
Home Depot, Inc. | 506 | 94,394 | ||||||
Hyatt Hotels Corp., Class A | 1,146 | 93,663 | ||||||
InterContinental Hotels Group PLC, ADR(b) | 1,464 | 94,443 | ||||||
Interpublic Group of Cos., Inc. | 3,831 | 86,581 | ||||||
L Brands, Inc. | 2,262 | 76,704 | ||||||
Macy's, Inc. | 3,134 | 109,408 | ||||||
Marriott International, Inc., Class A | 637 | 86,224 | ||||||
Mattel, Inc.(b) | 6,522 | 101,221 | ||||||
McDonald's Corp. | 556 | 88,966 | ||||||
MGM Resorts International | 2,529 | 79,537 | ||||||
Netflix, Inc.(a) | 281 | 98,800 | ||||||
Newell Brands, Inc. | 3,165 | 74,631 | ||||||
NIKE, Inc., Class B | 1,390 | 99,802 | ||||||
Nordstrom, Inc. | 1,844 | 90,411 | ||||||
Office Depot, Inc. | 38,709 | 91,353 | ||||||
Pearson PLC, Sponsored ADR | 8,514 | 101,998 | ||||||
Royal Caribbean Cruises, Ltd. | 724 | 76,005 | ||||||
Sears Holdings Corp.(a)(b) | 39,864 | 112,018 | ||||||
Sirius XM Holdings, Inc.(b) | 14,094 | 100,067 | ||||||
Sony Corp., Sponsored ADR | 1,811 | 85,280 | ||||||
Starbucks Corp. | 1,522 | 86,252 | ||||||
Tapestry, Inc. | 1,723 | 75,330 | ||||||
Target Corp. | 1,278 | 93,153 | ||||||
TEGNA, Inc. | 7,199 | 74,654 | ||||||
Tesla, Inc.(a)(b) | 276 | 78,585 | ||||||
Tiffany & Co. | 943 | 123,326 | ||||||
Time Warner, Inc. | 952 | 89,640 | ||||||
TJX Cos., Inc. | 1,109 | 100,165 | ||||||
Toyota Motor Corp., Sponsored ADR | 692 | 88,555 | ||||||
Viacom, Inc., Class B | 2,888 | 78,265 | ||||||
Visteon Corp.(a) | 744 | 92,970 | ||||||
Walt Disney Co. | 875 | 87,036 | ||||||
Whirlpool Corp. | 563 | 81,494 | ||||||
Wyndham Worldwide Corp. | 777 | 84,258 | ||||||
Wynn Resorts, Ltd. | 485 | 95,065 | ||||||
Total Consumer Discretionary | 4,699,325 |
Security Description | Shares | Value | ||||||
Consumer Staples (8.26%) | ||||||||
Altria Group, Inc. | 1,446 | $ | 80,600 | |||||
Avon Products, Inc.(a) | 31,223 | 56,201 | ||||||
Brown-Forman Corp., Class B | 1,695 | 95,869 | ||||||
Campbell Soup Co. | 2,084 | 70,106 | ||||||
Clorox Co. | 710 | 85,789 | ||||||
Coca-Cola Co. | 2,069 | 88,967 | ||||||
Colgate-Palmolive Co. | 1,302 | 82,143 | ||||||
Diageo PLC, Sponsored ADR | 665 | 97,436 | ||||||
Estee Lauder Cos., Inc., Class A | 625 | 93,400 | ||||||
General Mills, Inc. | 1,836 | 77,645 | ||||||
Hershey Co. | 894 | 80,496 | ||||||
Hormel Foods Corp. | 2,711 | 97,298 | ||||||
Kellogg Co. | 1,378 | 88,729 | ||||||
Kimberly-Clark Corp. | 824 | 83,100 | ||||||
Kraft Heinz Co. | 1,379 | 79,265 | ||||||
Kroger Co. | 3,821 | 92,965 | ||||||
Mondelez International, Inc., Class A | 2,132 | 83,724 | ||||||
PepsiCo, Inc. | 818 | 82,005 | ||||||
Procter & Gamble Co. | 1,148 | 83,999 | ||||||
Unilever NV, NY Shares | 1,704 | 95,032 | ||||||
Walgreens Boots Alliance, Inc. | 1,365 | 85,162 | ||||||
Total Consumer Staples | 1,779,931 | |||||||
Energy (0.92%) | ||||||||
Chevron Corp. | 781 | 97,079 | ||||||
Royal Dutch Shell PLC, Class A, Sponsored ADR | 1,459 | 101,517 | ||||||
Total Energy | 198,596 | |||||||
Financials (21.06%) | ||||||||
American Express Co. | 975 | 95,842 | ||||||
American International Group, Inc. | 1,653 | 87,262 | ||||||
Ameriprise Financial, Inc. | 577 | 79,990 | ||||||
Aon PLC | 622 | 86,999 | ||||||
Aviva PLC, Sponsored ADR | 6,461 | 87,676 | ||||||
Bank of America Corp. | 2,811 | 81,631 | ||||||
Bank of Montreal | 1,196 | 92,570 | ||||||
Bank of New York Mellon Corp. | 1,646 | 90,119 | ||||||
Barclays PLC, Sponsored ADR | 7,738 | 82,642 | ||||||
BlackRock, Inc. | 161 | 86,011 | ||||||
Brighthouse Financial, Inc.(a) | 1,713 | 80,699 | ||||||
Capital One Financial Corp. | 920 | 86,480 | ||||||
Charles Schwab Corp. | 1,624 | 90,327 | ||||||
Chubb, Ltd. | 646 | 84,426 | ||||||
Citigroup, Inc. | 1,230 | 82,029 | ||||||
CNA Financial Corp. | 1,732 | 81,369 | ||||||
Comerica, Inc. | 920 | 86,747 | ||||||
Credit Suisse Group AG, Sponsored ADR(b) | 4,986 | 76,784 | ||||||
Deutsche Bank AG | 5,747 | 63,677 | ||||||
Discover Financial Services | 1,196 | 88,337 | ||||||
FactSet Research Systems, Inc. | 423 | 85,027 | ||||||
Fifth Third Bancorp | 2,690 | 82,260 | ||||||
Franklin Resources, Inc. | 2,572 | 86,342 | ||||||
Genworth Financial, Inc., Class A(a) | 30,886 | 106,248 | ||||||
Goldman Sachs Group, Inc. | 338 | 76,347 |
4 | May 31, 2018
Workplace Equality Portfolio
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Financials (continued) | ||||||||
Hartford Financial Services Group, Inc. | 1,677 | $ | 87,757 | |||||
HSBC Holdings PLC, Sponsored ADR(b) | 1,832 | 88,632 | ||||||
Huntington Bancshares, Inc. | 5,628 | 83,688 | ||||||
JPMorgan Chase & Co. | 783 | 83,789 | ||||||
KeyCorp | 4,316 | 83,903 | ||||||
M&T Bank Corp. | 474 | 81,566 | ||||||
Marsh & McLennan Cos., Inc. | 1,076 | 86,478 | ||||||
MetLife, Inc. | 1,923 | 88,439 | ||||||
Moody's Corp. | 541 | 92,278 | ||||||
Morgan Stanley | 1,577 | 79,071 | ||||||
Northern Trust Corp. | 850 | 87,142 | ||||||
PNC Financial Services Group, Inc. | 571 | 81,887 | ||||||
Principal Financial Group, Inc. | 1,456 | 81,245 | ||||||
Progressive Corp. | 1,465 | 90,962 | ||||||
Prudential Financial, Inc. | 828 | 80,184 | ||||||
Royal Bank of Canada | 1,154 | 87,231 | ||||||
S&P Global, Inc. | 468 | 92,430 | ||||||
State Street Corp. | 852 | 81,886 | ||||||
Sun Life Financial, Inc. | 2,134 | 88,198 | ||||||
SunTrust Banks, Inc. | 1,268 | 85,603 | ||||||
T Rowe Price Group, Inc. | 782 | 94,950 | ||||||
Thomson Reuters Corp. | 2,285 | 88,704 | ||||||
Toronto-Dominion Bank | 1,591 | 92,898 | ||||||
Travelers Cos., Inc. | 642 | 82,510 | ||||||
UBS Group AG | 4,925 | 74,959 | ||||||
US Bancorp | 1,693 | 84,633 | ||||||
Voya Financial, Inc. | 1,710 | 88,817 | ||||||
Wells Fargo & Co. | 1,642 | 88,652 | ||||||
Total Financials | 4,536,333 | |||||||
Health Care (11.24%) | ||||||||
AbbVie, Inc. | 816 | 80,735 | ||||||
Aetna, Inc. | 517 | 91,059 | ||||||
Anthem, Inc. | 402 | 89,011 | ||||||
AstraZeneca PLC, Sponsored ADR | 2,664 | 98,648 | ||||||
athenahealth, Inc.(a) | 634 | 95,398 | ||||||
Baxter International, Inc. | 1,334 | 94,501 | ||||||
Biogen, Inc.(a) | 314 | 92,304 | ||||||
Boston Scientific Corp.(a) | 3,242 | 98,524 | ||||||
Bristol-Myers Squibb Co. | 1,362 | 71,669 | ||||||
Cardinal Health, Inc. | 1,276 | 66,467 | ||||||
Cigna Corp. | 540 | 91,460 | ||||||
CVS Health Corp. | 1,371 | 86,908 | ||||||
Danaher Corp. | 883 | 87,664 | ||||||
Eli Lilly & Co. | 1,133 | 96,350 | ||||||
Express Scripts Holding Co.(a) | 1,183 | 89,683 | ||||||
GlaxoSmithKline PLC, Sponsored ADR | 2,446 | 99,112 | ||||||
Henry Schein, Inc.(a) | 1,327 | 91,828 | ||||||
Humana, Inc. | 333 | 96,896 | ||||||
Johnson & Johnson | 692 | 82,777 | ||||||
McKesson Corp. | 593 | 84,170 | ||||||
Medtronic PLC | 1,132 | 97,714 | ||||||
Merck & Co., Inc. | 1,633 | 97,213 | ||||||
Novartis AG, Sponsored ADR | 1,103 | 82,196 |
Security Description | Shares | Value | ||||||
Health Care (continued) | ||||||||
Pfizer, Inc. | 2,469 | $ | 88,711 | |||||
Sanofi, Sponsored ADR | 2,215 | 84,768 | ||||||
Thermo Fisher Scientific, Inc. | 435 | 90,598 | ||||||
UnitedHealth Group, Inc. | 393 | 94,913 | ||||||
Total Health Care | 2,421,277 | |||||||
Industrials (11.05%) | ||||||||
3M Co. | 382 | 75,342 | ||||||
Alaska Air Group, Inc. | 1,388 | 84,404 | ||||||
American Airlines Group, Inc. | 1,636 | 71,231 | ||||||
Arconic, Inc. | 3,721 | 65,676 | ||||||
Boeing Co. | 273 | 96,140 | ||||||
Cummins, Inc. | 575 | 81,874 | ||||||
Eaton Corp. PLC | 1,124 | 86,076 | ||||||
Fortive Corp. | 1,156 | 84,030 | ||||||
General Electric Co. | 6,289 | 88,549 | ||||||
Harris Corp. | 581 | 87,423 | ||||||
Herman Miller, Inc. | 2,402 | 78,665 | ||||||
Huron Consulting Group, Inc.(a) | 2,478 | 100,359 | ||||||
IHS Markit, Ltd.(a) | 1,846 | 90,971 | ||||||
JetBlue Airways Corp.(a) | 4,051 | 76,523 | ||||||
Lockheed Martin Corp. | 271 | 85,240 | ||||||
ManpowerGroup, Inc. | 746 | 67,140 | ||||||
Navigant Consulting, Inc.(a) | 4,435 | 108,037 | ||||||
Nielsen Holdings PLC | 2,697 | 81,368 | ||||||
Northrop Grumman Corp. | 264 | 86,394 | ||||||
Owens Corning | 1,110 | 70,174 | ||||||
Raytheon Co. | 432 | 90,504 | ||||||
Rockwell Automation, Inc. | 505 | 88,582 | ||||||
Rockwell Collins, Inc. | 666 | 91,582 | ||||||
Southwest Airlines Co. | 1,504 | 76,824 | ||||||
Steelcase, Inc., Class A | 6,335 | 91,224 | ||||||
United Continental Holdings, Inc.(a) | 1,286 | 89,493 | ||||||
United Technologies Corp. | 708 | 88,373 | ||||||
WW Grainger, Inc. | 320 | 98,877 | ||||||
Total Industrials | 2,381,075 | |||||||
Information Technology (15.74%) | ||||||||
Accenture PLC, Class A | 575 | 89,551 | ||||||
Adobe Systems, Inc.(a) | 410 | 102,205 | ||||||
Alphabet, Inc., Class C(a) | 78 | 84,629 | ||||||
Apple, Inc. | 506 | 94,556 | ||||||
Automatic Data Processing, Inc. | 775 | 100,766 | ||||||
Booz Allen Hamilton Holding Corp. | 2,308 | 104,068 | ||||||
Broadridge Financial Solutions, Inc. | 843 | 97,324 | ||||||
CA, Inc. | 2,529 | 90,386 | ||||||
Cars.com, Inc.(a) | 3,037 | 77,990 | ||||||
Cisco Systems, Inc. | 2,054 | 87,726 | ||||||
Conduent, Inc.(a) | 4,596 | 88,473 | ||||||
Convergys Corp. | 3,838 | 90,730 | ||||||
Corning, Inc. | 3,058 | 83,086 | ||||||
eBay, Inc.(a) | 2,120 | 79,966 | ||||||
Electronic Arts, Inc.(a) | 699 | 91,506 | ||||||
Facebook, Inc., Class A(a) | 490 | 93,972 | ||||||
Hewlett Packard Enterprise Co. | 4,795 | 73,076 | ||||||
HP, Inc. | 3,844 | 84,683 | ||||||
Intel Corp. | 1,774 | 97,925 |
5 | May 31, 2018
Workplace Equality Portfolio
Schedule of Investments | May 31, 2018 (Unaudited) |
Security Description | Shares | Value | ||||||
Information Technology (continued) | ||||||||
International Business Machines Corp. | 566 | $ | 79,981 | |||||
Intuit, Inc. | 507 | 102,211 | ||||||
Mastercard, Inc., Class A | 498 | 94,680 | ||||||
Microsoft Corp. | 958 | 94,689 | ||||||
NCR Corp.(a) | 2,606 | 78,441 | ||||||
NetApp, Inc. | 1,418 | 96,878 | ||||||
Nokia OYJ, Sponsored ADR | 15,681 | 90,793 | ||||||
NVIDIA Corp. | 361 | 91,041 | ||||||
Oracle Corp. | 1,725 | 80,592 | ||||||
PayPal Holdings, Inc.(a) | 1,093 | 89,703 | ||||||
QUALCOMM, Inc. | 1,510 | 87,761 | ||||||
Salesforce.com, Inc.(a) | 720 | 93,118 | ||||||
Symantec Corp. | 3,314 | 68,865 | ||||||
Tech Data Corp.(a) | 1,041 | 90,369 | ||||||
Texas Instruments, Inc. | 822 | 91,990 | ||||||
Twitter, Inc.(a) | 2,523 | 87,548 | ||||||
Visa, Inc., Class A | 731 | 95,556 | ||||||
Xerox Corp. | 2,910 | 79,094 | ||||||
Yelp, Inc.(a) | 1,953 | 83,686 | ||||||
Total Information Technology | 3,389,614 | |||||||
Materials (2.95%) | ||||||||
Alcoa Corp.(a) | 1,922 | 92,391 | ||||||
Ball Corp. | 2,254 | 83,285 | ||||||
Chemours Co. | 1,830 | 89,652 | ||||||
DowDuPont, Inc. | 1,329 | 85,202 | ||||||
Ecolab, Inc. | 660 | 94,123 | ||||||
Monsanto Co. | 770 | 98,144 | ||||||
Praxair, Inc. | 590 | 92,193 | ||||||
Total Materials | 634,990 | |||||||
Real Estate (1.74%) | ||||||||
CBRE Group, Inc., Class A(a) | 1,905 | 87,992 | ||||||
Jones Lang LaSalle, Inc. | 523 | 85,646 | ||||||
Park Hotels & Resorts, Inc. | 3,341 | 107,647 | ||||||
Weyerhaeuser Co. | 2,533 | 94,557 | ||||||
Total Real Estate | 375,842 | |||||||
Telecommunication Services (1.93%) | ||||||||
AT&T, Inc. | 2,510 | 81,123 | ||||||
BT Group PLC, Sponsored ADR(b) | 5,673 | 77,096 | ||||||
Sprint Corp.(a)(b) | 17,465 | 89,770 | ||||||
T-Mobile US, Inc.(a) | 1,395 | 77,702 | ||||||
Verizon Communications, Inc. | 1,870 | 89,143 | ||||||
Total Telecommunication Services | 414,834 | |||||||
Utilities (2.97%) | ||||||||
American Electric Power Co., Inc. | 1,347 | 91,529 | ||||||
Edison International | 1,409 | 87,583 | ||||||
Exelon Corp. | 2,405 | 99,543 | ||||||
PG&E Corp. | 2,040 | 88,393 | ||||||
Portland General Electric Co. | 2,287 | 97,563 | ||||||
PPL Corp. | 3,240 | 88,517 |
Security Description | Shares | Value | ||||||
Utilities (continued) | ||||||||
Sempra Energy | 805 | $ | 85,757 | |||||
Total Utilities | 638,885 | |||||||
TOTAL COMMON STOCKS | ||||||||
(Cost $19,130,022) | 21,470,702 |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (2.31%) | ||||||||||||
Money Market Fund (0.18%) | ||||||||||||
State Street Institutional Treasury Plus Money Market Fund | ||||||||||||
(Cost $38,805) | 1.669 | % | 38,805 | 38,805 | ||||||||
Investments Purchased with Collateral | ||||||||||||
from Securities Loaned (2.13%) | ||||||||||||
State Street Navigator Securities Lending Prime Portfolio, 1.77% | ||||||||||||
(Cost $459,899) | 459,899 | 459,899 | ||||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $498,704) | 498,704 | |||||||||||
TOTAL INVESTMENTS (101.98%) | ||||||||||||
(Cost 19,628,726) | $ | 21,969,406 | ||||||||||
NET LIABILITIES LESS OTHER ASSETS (-1.98%) | (427,368 | ) | ||||||||||
NET ASSETS (100.00%) | $ | 21,542,038 |
(a) | Non-income producing security. |
(b) | Security, or a portion of the security position, is currently on loan. The total market value of securities on loan is $645,770. |
See Notes to Financial Statements.
6 | May 31, 2018
Workplace Equality Portfolio
Statement of Assets and Liabilities | May 31, 2018 (Unaudited) |
ASSETS: | ||||
Investments, at value | $ | 21,969,406 | ||
Cash held in escrow account (Note 3) | 5,733 | |||
Foreign tax reclaims | 86 | |||
Dividends receivable | 45,686 | |||
Total Assets | 22,020,911 | |||
LIABILITIES: | ||||
Payable to adviser | 18,974 | |||
Payable for collateral upon return of securities loaned | 459,899 | |||
Total Liabilities | 478,873 | |||
NET ASSETS | $ | 21,542,038 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 18,276,021 | ||
Accumulated net investment income | 121,127 | |||
Accumulated net realized gain on investments | 804,206 | |||
Net unrealized appreciation on investments | 2,340,684 | |||
NET ASSETS | $ | 21,542,038 | ||
INVESTMENTS, AT COST | $ | 19,628,726 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 21,542,038 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 600,000 | |||
Net Asset Value, offering and redemption price per share | $ | 35.90 |
See Notes to Financial Statements.
7 | May 31, 2018
Workplace Equality Portfolio
Statement of Operations | For the Six Months Ended May 31, 2018 (Unaudited) |
INVESTMENT INCOME: | ||||
Dividends(a) | $ | 216,392 | ||
Securities lending income | 6,310 | |||
Total Investment Income | 222,702 | |||
EXPENSES: | ||||
Investment adviser fees | 74,367 | |||
Total Expenses | 74,367 | |||
NET INVESTMENT INCOME | 148,335 | |||
REALIZED AND UNREALIZED GAIN/(LOSS) | ||||
Net realized gain on investments | 920,083 | |||
Net realized loss on foreign currency transactions | (56 | ) | ||
Net realized gain | 920,027 | |||
Net change in unrealized depreciation on investments | (1,084,565 | ) | ||
Net change in unrealized appreciation on translation of assets and liabilities denominated in foreign currencies | 8 | |||
Net change in unrealized depreciation | (1,084,557 | ) | ||
NET REALIZED AND UNREALIZED LOSS ON INVESTMENTS | (164,530 | ) | ||
NET DECREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | (16,195 | ) |
(a) | Net of foreign tax withholding $3,776. |
See Notes to Financial Statements.
8 | May 31, 2018
Workplace Equality Portfolio
Statements of Changes in Net Assets
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | |||||||
OPERATIONS: | ||||||||
Net investment income | $ | 148,335 | $ | 201,164 | ||||
Net realized gain | 920,027 | 572,823 | ||||||
Net change in unrealized appreciation/(depreciation) | (1,084,557 | ) | 2,027,738 | |||||
Net increase/(decrease) in net assets resulting from operations | (16,195 | ) | 2,801,725 | |||||
DISTRIBUTIONS: | ||||||||
Dividends to shareholders from net investment income | (212,000 | ) | (183,001 | ) | ||||
Net decrease in net assets from distributions | (212,000 | ) | (183,001 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | 7,460,781 | 4,813,655 | ||||||
Cost of shares redeemed | (3,692,322 | ) | (1,553,228 | ) | ||||
Net increase from capital share transactions | 3,768,459 | 3,260,427 | ||||||
Net increase in net assets | 3,540,264 | 5,879,151 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 18,001,774 | 12,122,623 | ||||||
End of period* | $ | 21,542,038 | $ | 18,001,774 | ||||
*Including accumulated net investment income of: | $ | 121,127 | $ | 184,792 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 500,000 | 400,000 | ||||||
Shares sold | 200,000 | 150,000 | ||||||
Shares redeemed | (100,000 | ) | (50,000 | ) | ||||
Shares outstanding, end of period | 600,000 | 500,000 |
See Notes to Financial Statements.
9 | May 31, 2018
Workplace Equality Portfolio
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Six Months Ended May 31, 2018 (Unaudited) | For the Year Ended November 30, 2017 | For the Year Ended November 30, 2016 | For the Year Ended November 30, 2015 | For the Period February 25, 2014 (Commencement of Operations) to November 30, 2014 | ||||||||||||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 36.00 | $ | 30.31 | $ | 27.69 | $ | 27.92 | $ | 25.00 | ||||||||||
INCOME/(LOSS) FROM INVESTMENT OPERATIONS: | ||||||||||||||||||||
Net investment income(a) | 0.27 | 0.45 | 0.46 | 0.36 | 0.28 | |||||||||||||||
Net realized and unrealized gain/(loss) | 0.05 | 5.70 | 2.55 | (0.20 | ) | 2.64 | ||||||||||||||
Total from investment operations | 0.32 | 6.15 | 3.01 | 0.16 | 2.92 | |||||||||||||||
DISTRIBUTIONS: | ||||||||||||||||||||
From net investment income | (0.42 | ) | (0.46 | ) | (0.39 | ) | (0.39 | ) | - | |||||||||||
Total distributions | (0.42 | ) | (0.46 | ) | (0.39 | ) | (0.39 | ) | - | |||||||||||
Net increase/(decrease) in net asset value | (0.10 | ) | 5.69 | 2.62 | (0.23 | ) | 2.92 | |||||||||||||
NET ASSET VALUE, END OF PERIOD | $ | 35.90 | $ | 36.00 | $ | 30.31 | $ | 27.69 | $ | 27.92 | ||||||||||
TOTAL RETURN(b) | 0.89 | % | 20.56 | % | 11.04 | % | 0.59 | % | 11.68 | % | ||||||||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||||||||||||||
Net assets, end of period (000s) | $ | 21,542 | $ | 18,002 | $ | 12,123 | $ | 9,691 | $ | 6,979 | ||||||||||
Ratio of expenses to average net assets | 0.75 | %(c) | 0.75 | % | 0.75 | % | 0.75 | % | 0.75 | %(c) | ||||||||||
Ratio of net investment income to average net assets | 1.50 | %(c) | 1.38 | % | 1.69 | % | 1.31 | % | 1.42 | %(c) | ||||||||||
Portfolio turnover rate(d) | 7 | % | 22 | % | 34 | % | 26 | % | 8 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
See Notes to Financial Statements.
10 | May 31, 2018
Workplace Equality Portfolio
Notes to Financial Statements | May 31, 2018 (Unaudited) |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of May 31, 2018, the Trust consisted of twenty separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the Workplace Equality Portfolio (the “Fund”). The investment objective of the Fund is to seek investment results that correspond generally, before fees and expenses, to the price and yield of the Workplace Equality IndexTM. The investment advisor uses a “passive” or indexing approach to try to achieve the Fund’s investment objective. The Fund has elected to qualify as a diversified series of the Trust under the 1940 Act.
The Fund’s Shares (“Shares”) are listed on the NYSE Arca, Inc. The Fund issues and redeems Shares at net asset value (“NAV”) in blocks of 50,000 Shares, each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities included in the Underlying Index. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board Accounting Standards Codification Topic 946.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the New York Stock Exchange (the “NYSE”), normally 4:00 p.m. Eastern time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“NASDAQ”) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the latest quoted sale price in such market.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board of Trustees (the “Board”). When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by or under the direction of the Board. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
11 | May 31, 2018
Workplace Equality Portfolio
Notes to Financial Statements | May 31, 2018 (Unaudited) |
B. Fair Value Measurements
The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability; including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund's investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
The following is a summary of the inputs used to value the Fund’s investments as of May 31, 2018:
Investments in Securities at Value | Level 1 - Unadjusted Quoted Prices | Level 2 -Other Significant Observable Inputs | Level 3 - Significant Unobservable | Total | ||||||||||||
Common Stocks* | $ | 21,470,702 | $ | — | $ | — | $ | 21,470,702 | ||||||||
Short Term Investments | ||||||||||||||||
Money Market Fund | 38,805 | — | — | 38,805 | ||||||||||||
Investments Purchased with Collateral from | ||||||||||||||||
Securities Loaned | 459,899 | — | — | 459,899 | ||||||||||||
TOTAL | $ | 21,969,406 | $ | — | $ | — | $ | 21,969,406 |
* | For a detailed sector breakdown, see the accompanying Schedule of Investments. |
The Fund recognizes transfers between levels as of the end of the period. For the six months ended May 31, 2018, the Fund did not have any transfers between Level 1 and Level 2 securities. The Fund did not have any securities that used significant unobservable inputs (Level 3) in determining fair value.
C. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the highest cost basis. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis.
12 | May 31, 2018
Workplace Equality Portfolio
Notes to Financial Statements | May 31, 2018 (Unaudited) |
D. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid annually or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
E. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. The amounts and characteristics of tax basis distributions and composition of distributable earnings/(accumulated losses) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined as of May 31, 2018.
At November 30, 2017, the Fund had available for tax purposes unused post-enactment capital loss carryforwards as follows:
Fund | Short-Term | Long-Term | ||||||
Workplace Equality Portfolio | $ | — | $ | 66,172 |
The tax character of the distributions paid during the fiscal years ended November 30, 2017 were as follows:
Ordinary Income | ||||
November 30, 2017 | ||||
Workplace Equality Portfolio | $ | 183,001 |
As of May 31, 2018, the cost of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
Workplace Equality Portfolio | ||||
Gross appreciation (excess of value over tax cost) | $ | 3,579,412 | ||
Gross depreciation (excess of tax cost over value) | (1,279,279 | ) | ||
Net unrealized appreciation (depreciation) | $ | 2,300,133 | ||
Cost of investments for income tax purposes | $ | 19,669,273 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales. In addition, certain tax cost basis adjustments are finalized at fiscal year-end and therefore have not been determined as of May 31, 2018.
F. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the six months ended May 31, 2018, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
13 | May 31, 2018
Workplace Equality Portfolio
Notes to Financial Statements | May 31, 2018 (Unaudited) |
G. Lending of Portfolio Securities
The Fund has entered into a securities lending agreement with State Street Bank & Trust Co. (“SSB”), the Fund’s lending agent. The Fund may lend its portfolio securities only to borrowers that are approved by SSB. The Fund will limit such lending to not more than 33 1/3% of the value of its total assets. The Fund’s securities held at SSB as custodian shall be available to be lent except those securities the Fund or ALPS Advisors, Inc. specifically identifies in writing as not being available for lending. The borrower pledges and maintains with the Fund collateral consisting of cash (U.S. Dollars only), securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, and cash equivalents (including irrevocable bank letters of credit) issued by a person other than the borrower or an affiliate of the borrower. The initial collateral received by the Fund is required to have a value of no less than 102% of the market value of the loaned securities for U.S equity securities and a value of no less than 105% of the market value for non-U.S. equity securities. The collateral is maintained thereafter, at a market value equal to not less than 102% of the current value of the U.S. equity securities on loan and not less than 105% of the current value of the non-U.S. equity securities on loan. The market value of the loaned securities is determined at the close of each business day and any additional required collateral is delivered to the Fund on the next business day. During the term of the loan, the Fund is entitled to all distributions made on or in respect of the loaned securities. Loans of securities are terminable at any time and the borrower, after notice, is required to return borrowed securities within the customary time period for settlement of securities transactions.
Any cash collateral received is reinvested in a money market fund managed by SSB as disclosed in the Fund’s Schedule of Investments and is reflected in the Statements of Assets and Liabilities as a payable for collateral upon return of securities loaned. Non-cash collateral, in the form of securities issued or guaranteed by the U.S. government or its agencies or instrumentalities, is not disclosed in the Fund’s Statements of Assets and Liabilities as it is held by the lending agent on behalf of the Fund, and the Fund does not have the ability to re-hypothecate these securities. Income earned by the Fund from securities lending activity is disclosed in the Statement of Operations.
The following is a summary of the Fund's securities lending agreement and related cash and non-cash collateral received as of May 31, 2018:
Market Value on Loan | Cash Received | Non-Cash Collateral Received | Total Collateral Received | |||||||||||||
Workplace Equality Portfolio | $ | 645,770 | $ | 459,899 | $ | 228,496 | $ | 688,395 |
The risks of securities lending include the risk that the borrower may not provide additional collateral when required or may not return the securities when due. To mitigate these risks, the Fund benefits from a borrower default indemnity provided by SSB. SSB’s indemnity allows for full replacement of securities lent wherein SSB will purchase the unreturned loaned securities on the open market by applying the proceeds of the collateral, or to the extent such proceeds are insufficient or the collateral is unavailable, SSB will purchase the unreturned loan securities at SSB’s expense. However, the Fund could suffer a loss if the value of the investments purchased with cash collateral falls below the value of the cash collateral received.
The following table reflects a breakdown of transactions accounted for as secured borrowings, the gross obligation by the type of collateral pledged or securities loaned, and the remaining contractual maturity of those transactions as of May 31, 2018:
Workplace Equality Portfolio | Remaining contractual maturity of the agreement | |||||||||||||||||
Securities Lending Transactions | Overnight & Continuous | Up to 30 days | 30-90 days | Greater than 90 days | Total | |||||||||||||
Common Stocks | $ | 459,899 | $ | – | $ | — | $ | — | $ | 459,899 | ||||||||
Total Borrowings | 459,899 | |||||||||||||||||
Gross amount of recognized liabilities for securities lending (collateral received) | $ | 459,899 |
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. (the “Adviser”) acts as the Fund’s investment adviser pursuant to an Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Adviser a unitary fee for the services and facilities it provides payable on a monthly basis at the annual rate of 0.75% of the Fund’s average daily net assets. From time to time, the Adviser may waive all or a portion of its fee.
14 | May 31, 2018
Workplace Equality Portfolio
Notes to Financial Statements | May 31, 2018 (Unaudited) |
Capitalized terms used but not defined within this paragraph, shall have the respective meanings given to them in the Board Considerations Regarding Approval of Investment Advisory Agreement section of this Semi-Annual Report (“Board Considerations”). As discussed in the Board Considerations, the Adviser is an indirect wholly owned subsidiary of DST and on April 16, 2018, DST was acquired by SS&C resulting in a change of control of the Adviser. As discussed in the Board Considerations, in order for the Adviser to continue to serve as the investment adviser to the applicable Fund, among other approvals, the Board approved an Interim Advisory Agreement between the Adviser and the Trust, on behalf of the Funds. The Interim Advisory Agreement is effective for the earlier of 150 days from the close of the Transaction or the date of shareholder approval of the New Advisory Agreement. Under the terms of the Interim Advisory Agreement, the unitary management fee paid to the Adviser will be held in escrow until shareholder approval of the New Advisory Agreement is obtained and is reported as Cash held in escrow account on the Statement of Assets and Liabilities.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the licensing fees to the Index provider, the cost of transfer agency, custody, fund administration, legal, audit, independent trustees and other services, except for interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund’s business. The Adviser’s unitary management fee is designed to pay substantially all the Fund’s expenses and to compensate the Adviser for providing services for the Fund.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Each Trustee who is not an officer or employee of the Adviser, any sub-adviser or any of their affiliates (“Independent Trustees”) receives (1) a quarterly retainer of $5,000, (2) a per meeting fee for regularly scheduled meetings of $3,750, (3) $1,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, both the Chairman of the Board and Chairman of the Audit Committee each receives a quarterly retainer of $2,000, in connection with their respective roles.
4. PURCHASES AND SALES OF SECURITIES
For the six months ended May 31, 2018, the cost of purchases and proceeds from sales of investment securities, excluding in-kind transactions and short-term investments, were as follows:
Fund | Purchases | Sales | ||||||
Workplace Equality Portfolio | $ | 1,368,022 | $ | 2,766,566 |
For the six months ended May 31, 2018, the cost of in-kind purchases and proceeds from in-kind sales were as follows:
Fund | Purchases | Sales | ||||||
Workplace Equality Portfolio | $ | 7,456,738 | $ | 2,367,615 |
For the six months ended May 31, 2018, the Workplace Equality Portfolio had in-kind net realized gain of $872,050.
Gains on in-kind transactions are not considered taxable for federal income tax purposes and losses on in kind transactions are also not deductible for tax purposes.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 Shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of the Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
15 | May 31, 2018
Workplace Equality Portfolio
Notes to Financial Statements | May 31, 2018 (Unaudited) |
6. SHAREHOLDER MEETING
A Special Meeting of Shareholders of the Fund, a series of the Trust, was held at the offices of ALPS Fund Services, Inc., at 1290 Broadway, Suite 1100, Denver, CO 80203 on May 31, 2018. At the meeting, the following matters were voted on by the Shareholders. The results of the Special Meeting of Shareholders are noted below:
Proposal 1: To approve a new investment advisory agreement (the “New Advisory Agreement”) between the Trust, on behalf of the Fund, and the Adviser.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
Workplace Equality Portfolio | 264,300 | 13,129 | Yes |
Proposal 2: To approve a proposal that would authorize the Adviser to enter into and materially amend sub-advisory agreements in the future with wholly-owned sub-advisers and unaffiliated sub-advisers, with the approval of the Board, but without obtaining additional Shareholder approval.
Shares Voted In Favor | Shares Voted Against/Withheld or Abstentions | Proposal Approved | |
Workplace Equality Portfolio | 43,272 | 234,157 | No |
16 | May 31, 2018
Workplace Equality Portfolio
Additional Information | May 31, 2018 (Unaudited) |
PROXY VOTING RECORDS, POLICIES AND PROCEDURES
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-675-2639.
PORTFOLIO HOLDINGS
The Trust is required to disclose, after its first and third fiscal quarters, the complete schedule of the Fund’s portfolio holdings with the SEC on Form N-Q. Forms N-Q for the Fund are available on the SEC’s website at www.sec.gov. The Fund’s Forms N-Q may also be reviewed and copied at the SEC’s Public Reference Room in Washington, D.C. and information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The Fund’s Forms N-Q are available without charge, upon request, by calling (toll-free) 1-866-675-2639 or by writing to ALPS ETF Trust at 1290 Broadway, Suite 1100, Denver, Colorado 80203.
TAX INFORMATION
The Fund designates the following for federal income tax purposes for distributions made during the calendar year ended December 31, 2017:
Qualified Dividend Income | Dividend Received Deduction | |
Workplace Equality Portfolio | 100.00% | 100.00% |
In early 2018, if applicable, shareholders of record received this information for the distribution paid to them by the Fund during the calendar year 2017 via Form 1099. The Fund will notify shareholders in early 2019 of amounts paid to them by the Fund, if any, during the calendar year 2018.
LICENSING AGREEMENT
Segall Bryant & Hamill, LLC ("SBH") has entered into an index licensing agreement with ALPS Advisors Inc. (the “Adviser”) to allow the Adviser’s use of the Workplace Equality Index™, the underlying index of the Workplace Equality Portfolio (the “Fund”). The following disclosure relates to such licensing agreement:
SBH is the designer of the construction and methodology for the Index. “SBH” and “Workplace Equality Index™” are service marks or trademarks of SBH. SBH acts as brand licensor for the Index. SBH is not responsible for the descriptions of the Index or the Fund that appear herein. SBH is not affiliated with the Trust, the Adviser or the Distributor.
The Fund is not sponsored, endorsed or promoted by SBH. SBH makes no representation or warranty, express or implied, to the owners of the Fund or any member of the public regarding the advisability of investing in securities or commodities generally or in the Fund particularly and does not guarantee the quality, accuracy or completeness of the Index or any Index data included herein or derived there from and assume no liability in connection with their use. The Index is determined and composed without regard to the Adviser or the Fund. SBH has no obligation to take the needs of the Adviser, the Fund or the shareholders of the Fund into consideration in connection with the foregoing. SBH is not responsible for and has not participated in the determination of pricing or the timing of the issuance or sale of the Shares of the Fund or in the determination or calculation of the NAV of the Fund. SBH has no obligation or liability in connection with the administration or trading of the Fund.
SBH does not guarantee the accuracy and/or completeness of the Index or any data included therein, and SBH shall have no liability for any errors, omissions, or interruptions therein. SBH makes no warranty, express or implied, as to results to be obtained by the Adviser, the Fund, Fund shareholders or any other person or entity from the use of the Index or any data included therein. SBH makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Index or any data included therein. Without limiting any of the foregoing, in no event shall SBH have any liability for any special, punitive, indirect, or consequential damages (including lost profits) arising out of matters relating to the use of the Index, even if notified of the possibility of such damages.
The Adviser does not guarantee the accuracy and/or the completeness of the Index or any data included therein, and the Adviser shall have no liability for any errors, omissions or interruptions therein. The Adviser makes no warranty, express or implied, as to results to be obtained by the Fund, owners of the Shares of the Fund or any other person or entity from the use of the Index or any data included therein. The Adviser makes no express or implied warranties, and expressly disclaims all warranties of merchantability or fitness for a particular purpose or use with respect to the Index or any data included therein. Without limiting any of the foregoing, in no event shall the Adviser have any liability for any special, punitive, direct, indirect, or consequential damages (including lost profits) arising out of matters relating to the use of the Index, even if notified of the possibility of such damages.
17 | May 31, 2018
Workplace Equality Portfolio
Board Considerations Regarding Approval of | May 31, 2018 (Unaudited) |
Investment Advisory Agreement |
At an in-person meeting held on March 5, 2018, the Board of Trustees of the Trust (the “Board” or the “Trustees”), including the Trustees who are not “interested persons” of the Trust within the meaning of the 1940 Act, as amended (the “Independent Trustees”), evaluated a proposal to approve each of (i) the continuance of the investment advisory agreement between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect to the Workplace Equality Portfolio (“EQLT” or “the Fund”) (the “Existing Advisory Agreement”); (ii) a new investment advisory agreement between the Adviser and the Trust on behalf of the Fund (the “New Advisory Agreement”); and (iii) an interim investment advisory agreement between the Adviser and the Trust on behalf of the Fund (the “Interim Advisory Agreement” and together with the Existing Advisory Agreement and New Advisory Agreement, the “Advisory Agreements”). The Independent Trustees also met separately to consider the Advisory Agreements.
Consideration by the Board of the New Advisory Agreement and Interim Advisory Agreement was necessary because DST Systems, Inc. (“DST”), the ultimate parent company to the Adviser, had had entered into an agreement to be acquired by SS&C Technologies Holdings, Inc. (“SS&C”) (the “Transaction”). Because the Adviser would be acquired along with DST, the closing of the Transaction (the “Closing”) may be deemed a change in control with respect to the Adviser. The Closing occurred on April 16, 2018. This change in control with respect to the Adviser may be deemed to trigger an “assignment” of the Existing Advisory Agreement under the Investment Company Act of 1940, as amended (the “1940 Act”). As required by the 1940 Act, the Existing Advisory Agreement provides for its automatic termination in the event of an assignment, and therefore, the Existing Advisory Agreement automatically terminated upon Closing. In order for the Adviser to continue as the Fund’s investment adviser, the Board and the Fund’s shareholders must approve the New Advisory Agreement which would take effect, if approved, upon the date of such shareholder approval. As of the date of this report, the New Advisory Agreement has received shareholder approval.
In evaluating the Advisory Agreements with respect to the Fund, the Independent Trustees considered various factors, including (i) the nature, extent and quality of the services provided (or to be provided) by AAI with respect to the Fund under the Advisory Agreements; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided (or to be provided) by AAI under the Advisory Agreements, the Independent Trustees considered and reviewed information concerning the services provided (or to be provided) under the Advisory Agreements, the investment parameters of the index of the Fund, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Fund.
The Independent Trustees reviewed information on the performance of the Fund and its benchmark. The Independent Trustees also evaluated the correlation and tracking error between the underlying index and the Fund’s performance. Based on their review, the Independent Trustees found that the nature and extent of services provided (or to be provided) to the Fund under the Advisory Agreements was appropriate and that the quality was satisfactory.
The Independent Trustees noted that the advisory fee for the Fund was a unitary fee pursuant to which AAI assumes all expenses of the Fund (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreements, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
With respect to the advisory fee rate, the Independent Trustees noted the following:
The net advisory fee rate for the Fund is higher than the median of its Broadridge expense group and the Fund’s expense ratio is higher than the median of its Broadridge expense group.
The Independent Trustees took into account, among other things, the uniqueness of EQLT’s underlying index (and the fees charged by the index provider for licensing its index) and AAI’s view that “socially responsible” funds (which the Broadridge peer group did not include) would be EQLT’s closest competitors in the marketplace.
Based on the foregoing, and the other information available to them, the Independent Trustees concluded that the advisory fee rate for the Fund was reasonable under the circumstances and in light of the quality of the services provided.
The Independent Trustees considered other benefits available to AAI because of its relationship with the Fund and concluded that the advisory fees were reasonable taking into account any such benefits.
18 | May 31, 2018
Workplace Equality Portfolio
Board Considerations Regarding Approval of | May 31, 2018 (Unaudited) |
Investment Advisory Agreement |
The Independent Trustees also considered with respect to the Fund the information provided by AAI about the costs and profitability of AAI with respect to the Fund. The Independent Trustees reviewed and noted the relatively small size of the Fund in considering economies of scale that may be realized by AAI. The Independent Trustees determined that they would continue to evaluate whether further economies of scale have been achieved on an ongoing basis.
In voting to renew the Existing Advisory Agreement and approve the New Advisory Agreement and Interim Advisory Agreement, the Independent Trustees concluded that the terms of each Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the Independent Trustees considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
19 | May 31, 2018
Item 2. | Code of Ethics. |
Not Applicable to this Report.
Item 3. | Audit Committee Financial Expert. |
Not Applicable to this Report.
Item 4. | Principal Accountant Fees and Services. |
Not Applicable to this Report.
Item 5. | Audit Committee of Listed Registrants. |
Not applicable to Registrant.
Item 6. | Investments. |
(a) Schedule of Investments is included as part of the Report to Stockholders filed under Item 1 of this Form N-CSR.
(b) Not applicable
Item 7. | Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies. |
Not applicable to Registrant.
Item 8. | Portfolio Managers of Closed-End Management Investment Companies. |
Not applicable to Registrant.
Item 9. | Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers. |
Not applicable to Registrant.
Item 10. | Submission of Matters to a Vote of Security Holders. |
No material changes to the procedures by which the shareholders may recommend nominees to the Registrant’s Board of Trustees have been implemented after the Registrant’s last provided disclosure in response to the requirements of Item 407(c)(2)(iv) of Regulation S-K (17 CFR 229.407) (as required by Item 22(b)(15) of Schedule 14A (17 CFR 240.14a-101)), or this Item.
Item 11. | Controls and Procedures. |
(a) | The Registrant’s principal executive officer and principal financial officer have concluded that the Registrant’s disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. |
(b) | There was no change in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940, as amended) during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. | Disclosure of Securities Lending Activities for Closed-End Management Investment Companies. |
Not applicable.
Item 13. | Exhibits. |
(a)(1) | Not applicable to this Report. |
(a)(2) | The certifications required by Rule 30a-2(a) of the Investment Company Act of 1940, as amended, and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99.Cert. |
(a)(3) | Not applicable. |
(a)(4) | Not applicable. |
(b) | The certifications by the Registrant’s principal executive officer and principal financial officer, as required by Rule 30a-2(b) of the Investment Company Act of 1940, as amended, and Section 906 of the Sarbanes-Oxley Act of 2002 are attached hereto as Exhibit 99.906Cert. |
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.
ALPS ETF TRUST
By: | /s/ Edmund J. Burke | |
Edmund J. Burke (Principal Executive Officer) | ||
President | ||
Date: | August 6, 2018 |
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: | /s/ Edmund J. Burke | |
Edmund J. Burke (Principal Executive Officer) | ||
President | ||
Date: | August 6, 2018 | |
By: | /s/ Jeremy O. May | |
Jeremy O. May (Principal Financial Officer) | ||
Treasurer | ||
Date: | August 6, 2018 |