As filed with the U.S. Securities and Exchange Commission on July 10, 2023
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 811-22668
ETF Series Solutions
(Exact name of registrant as specified in charter)
615 East Michigan Street
Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)
Kristina R. Nelson
ETF Series Solutions
615 East Michigan Street
Milwaukee, WI 53202
(Name and address of agent for service)
(414)-516-1645
Registrant's telephone number, including area code
Date of fiscal year end: October 31
Date of reporting period: April 30, 2023
Item 1. Reports to Stockholders.
(a) |
Semi-Annual Report
April 30, 2023
(Unaudited)
iBET Sports Betting & Gaming ETF
Ticker: IBET
iBET Sports Betting & Gaming ETF
TABLE OF CONTENTS
Page | |
Letter to Shareholders | 1 |
Portfolio Allocation | 4 |
Schedule of Investments | 5 |
Statement of Assets and Liabilities | 8 |
Statement of Operations | 9 |
Statement of Changes in Net Assets | 10 |
Financial Highlights | 11 |
Notes to Financial Statements | 12 |
Expense Example | 22 |
Review of Liquidity Risk Management Program | 24 |
Approval of Sub-Advisory Agreement & Board Considerations | 25 |
Federal Tax Information | 28 |
Information About Portfolio Holdings | 28 |
Information About Proxy Voting | 28 |
Information About the Fund’s Trustees | 29 |
Frequency Distribution of Premiums and Discounts | 29 |
iBET Sports Betting & Gaming ETF
Letter to Shareholders
(Unaudited)
Dear Shareholders,
On behalf of the Inherent Wealth Fund team, we want to express our appreciation for the confidence you have placed in the iBET Sports Betting & Gaming ETF (“IBET” or the “Fund”). The following information pertains to the fiscal period of November 1, 2022 through April 30, 2023 (the “current fiscal period”). The Fund is an actively managed exchange-traded fund (“ETF”) that seeks to achieve its investment objective by investing, under normal circumstances, at least 80% of the Fund’s net assets, plus the amount of any borrowings for investment purposes, in securities of companies of any market capitalization, including foreign issuers, that are engaged in the Fund’s investment theme. A company is deemed to be engaged in the Fund’s theme if (i) it derives a significant portion of its revenue (greater than 50% of revenue) or market value (devotes at least 50% of its capital) from the theme of the betting, sports, sports entertainment, and/or iGaming industries and/or technology or (ii) it has stated its primary business to be in products, services, or technologies focused on the theme of betting, sports, sports entertainment, and iGaming.
The Fund had positive performance during the current fiscal period. The market price for IBET increased 21.21% and the Net Asset Value (“NAV”) increased 20.64%, while the Nasdaq 100 Index increased 16.67%. Meanwhile, outstanding shares at the end of the current fiscal period for the Fund was 120,000.
During the current fiscal period, some of the top performing securities in the fund include Las Vegas Sands Corporation (LVS) up 62.59%, DraftKings, Inc. – Class A (DKNG) up 38.67%, and Flutter Entertainment plc (FLTR-LN) up 37.78%. During the current fiscal period some of the worst performing securities in the fund include Caesars Entertainment, Inc. down -3.45%, and Penn Entertainment, Inc. down -10.60% in the period.
With the rise of interest rates there are concerns about a recession in the U.S. However, there have been several instances where the gaming industry has experienced growth during times of economic recession in the United States.
1. | Great Recession (2007-2009): During the Great Recession, the U.S. commercial casino industry saw a small increase in revenue from 2007 to 2008. According to the American Gaming Association, the industry generated $34.6 billion in revenue in 2007 and $34.8 billion in 2008 (a 0.6% increase). |
2. | Dot-com bubble burst (2000-2002): The early 2000s saw significant growth in the online gaming sector, due in part to the dot-com bubble burst and resulting economic recession. According to a report by ResearchAndMarkets.com, the global online gambling market grew at a compound annual growth rate (CAGR) of 13.2% from 2000 to 2004. |
1
iBET Sports Betting & Gaming ETF
Letter to Shareholders
(Unaudited) (Continued)
3. | 1990-1991 recession: During the early 1990s recession, the gaming industry in Atlantic City saw a boost in revenue due to the opening of new casinos. According to a report by the New Jersey Casino Control Commission, gross gaming revenue in Atlantic City increased from $2.12 billion in 1990 to $2.41 billion in 1991 (a 13.6% increase). |
As far as the global outlook, the gaming industry in Macau has experienced a strong recovery following the easing of COVID-19 border restrictions. In April 2023, gross gaming revenue (“GGR”) reached MOP$14.72 billion (US$1.82 billion), which was a 450% increase from April 2022, when Macau’s GGR was MOP$2.68 billion (US$332 million). This result was also 15.6% higher than the March 2023 GGR total of MOP$12.74 billion (US$1.58 billion), which had been the highest monthly GGR tally since January 2020. For the first four months of 2023 combined, Macau’s GGR is up 141% year-over-year to MOP$49.36 billion (US$6.12 billion). The change in fortunes for Macau’s casinos comes after the government announced the removal of almost all COVID-19 border restrictions, leading to an increase in visitation. The Macau government announced that visitor arrivals had reached a post-COVID record of 133,911 on Sunday, April 30, 2023.
In times of outsized volatility, such as those seen over the past six to twelve months and with market conditions responding to political unrest, and rising interest rates, iBET (IBET) uses an actively managed and thorough research strategy that seeks to filter out noise and identify those securities most likely to outperform.
We appreciate your investment in iBET (IBET).
Sincerely,
Jeffrey Kamys, CEO
Inherent Wealth Fund LLC, Adviser to the Fund
Must be preceded or accompanied by a prospectus.
Past performance does not guarantee future results.
Expansion of sports betting (both regulated and unregulated), including the award of additional licenses or expansion or relocation of existing sports betting companies, and competition from other leisure and entertainment activities, could impact these companies’ finances. Small and mid-capitalization companies may be more volatile and less liquid due to limited resources or product lines and more sensitive to economic factors. Fund investments are concentrated in an industry or group of industries, and the value of Fund shares may rise and fall more than more diversified funds. Investments in foreign securities involve social and political instability, market illiquidity, exchange rate fluctuation, high volatility and limited regulation risks. Emerging markets involve different and greater risks, as they are smaller, less liquid and more volatile than more develop countries. Depositary Receipts involve risks similar to those associated with investments in foreign securities, but may not provide a return that corresponds precisely with that of the underlying shares. Please see the prospectus for details of these and other risks.
2
iBET Sports Betting & Gaming ETF
Letter to Shareholders
(Unaudited) (Continued)
Investing involves risk. Principal loss is possible. The Fund invests in foreign securities which involve political, economic and currency risks, greater volatility and differences in accounting methods. These risks are greater for investments in emerging markets.
ETFs may trade at a premium or discount to their net asset value. Shares of ETFs are bought and sold at market price (rather than NAV) and not individually redeemed from the fund. Brokerage commissions will reduce returns.
Market returns are based on the exchange’s official close price at 4:00 p.m. Eastern time and do not represent the returns you would receive if you traded shares at other times.
The Letter to Shareholders seeks to describe some of the Adviser’s current opinions and views of the financial markets. Although the Adviser believes it has a reasonable basis for any opinions or views expressed, actual results may differ, sometimes significantly so, from those expected or expressed.
The Nasdaq 100 Index is made up of the 100 largest, most actively traded U.S. companies listed on the Nasdaq stock exchange.
Fund holdings and allocations are subject to change at any time and should not be considered a recommendation to buy or sell any security. Please see the Schedule of Investments in this report for a complete list of Fund holdings.
Inherent Wealth Fund LLC is the Adviser to iBET Sports Betting & Gaming ETF, which is distributed by Quasar Distributors, LLC (“Quasar”). Quasar is not affiliated with Inherent Wealth Fund LLC.
3
iBET Sports Betting & Gaming ETF
Portfolio Allocation
As of April 30, 2023 (Unaudited)
Industry Sub-Group | Percentage of |
Casino Hotels (a) | 40.3% |
Gambling (Non-Hotel) | 22.1 |
Casino Services | 10.4 |
Racetracks | 9.6 |
Internet Gambling | 7.5 |
Short-Term Investments | 3.0 |
Computer Software | 2.8 |
Entertainment Software | 2.7 |
Lottery Services | 2.4 |
Warrants (b) | 0.0 |
Liabilities in Excess of Other Assets | (0.8) |
100.0% |
(a) | To the extent that the Fund invests more heavily in particular industry sub-groups of the economy, its performance will be especially sensitive to developments that significantly affect those industry sub-groups. See Note 7 in Notes to Financial Statements. |
(b) | Represents less than 0.05% of net assets. |
4
iBET Sports Betting & Gaming ETF
Schedule of Investments
April 30, 2023 (Unaudited)
Shares | Security Description | Value | ||||||
COMMON STOCKS — 97.8% | ||||||||
Casino Hotels — 40.3% (b) | ||||||||
586 | Boyd Gaming Corporation | $ | 40,668 | |||||
5,000 | Galaxy Entertainment Group, Ltd. | 35,352 | ||||||
1,100 | Las Vegas Sands Corporation (a) | 70,234 | ||||||
4,000 | Melco Resorts & Entertainment, Ltd. - ADR (a) | 54,560 | ||||||
40,000 | MGM China Holdings, Ltd. (a) | 54,321 | ||||||
1,000 | MGM Resorts International | 44,920 | ||||||
18,800 | Sands China, Ltd. (a) | 66,701 | ||||||
65,000 | SJM Holdings, Ltd. (a) | 33,619 | ||||||
50,000 | Wynn Macau, Ltd. (a) | 53,697 | ||||||
500 | Wynn Resorts, Ltd. (a) | 57,140 | ||||||
511,212 | ||||||||
Casino Services — 10.4% | ||||||||
858 | Aristocrat Leisure, Ltd. | 21,523 | ||||||
832 | Caesars Entertainment, Inc. (a) | 37,681 | ||||||
700 | Light & Wonder, Inc. (a) | 42,204 | ||||||
1,500 | Universal Entertainment Corporation (a) | 31,410 | ||||||
132,818 | ||||||||
Computer Software — 2.8% | ||||||||
4,924 | Playtech plc (a) | 35,706 | ||||||
Entertainment Software — 2.7% | ||||||||
1,620 | Better Collective AS (a) | 34,280 | ||||||
Gambling (Non-Hotel) — 22.1% | ||||||||
3,636 | Betsson AB - Class B | 39,249 | ||||||
430 | Evolution AB | 57,252 | ||||||
460 | Flutter Entertainment plc (a) | 92,006 | ||||||
30,000 | Genting Singapore, Ltd. | 25,406 | ||||||
1,178 | International Game Technology plc | 33,149 | ||||||
680 | Red Rock Resorts, Inc. - Class A | 33,184 | ||||||
280,246 |
The accompanying notes are an integral part of these financial statements.
5
iBET Sports Betting & Gaming ETF
Schedule of Investments
April 30, 2023 (Unaudited) (Continued)
Shares | Security Description | Value | ||||||
COMMON STOCKS — 97.8% (Continued) | ||||||||
Internet Gambling — 7.5% | ||||||||
2,700 | DraftKings, Inc. - Class A (a) | $ | 59,157 | |||||
1,944 | Entain plc | 35,279 | ||||||
95 | NeoGames SA - SDR (a)(d)(e) | 1,278 | ||||||
95,714 | ||||||||
Lottery Services — 2.4% | ||||||||
1,764 | OPAP SA | 30,051 | ||||||
Racetracks — 9.6% | ||||||||
168 | Churchill Downs, Inc. | 49,145 | ||||||
1,800 | Penn Entertainment, Inc. (a) | 53,622 | ||||||
600 | Tokyotokeiba Company, Ltd. | 18,849 | ||||||
121,616 | ||||||||
TOTAL COMMON STOCKS (Cost $1,015,756) | 1,241,643 | |||||||
WARRANTS — 0.0% (c) | ||||||||
340 | PointsBet Holdings, Ltd., Expiration: 07/08/2024, Exercise Price: AUD $10.00 (a)(d)(e) | 0 | ||||||
TOTAL WARRANTS (Cost $0) | 0 | |||||||
SHORT-TERM INVESTMENTS — 3.0% | ||||||||
18,931 | First American Government Obligations Fund - Class X, 4.72% (f) | 18,931 | ||||||
18,931 | First American Treasury Obligations Fund - Class X, 4.76% (f) | 18,931 | ||||||
TOTAL SHORT-TERM INVESTMENTS (Cost $37,862) | 37,862 | |||||||
Total Investments (Cost $1,053,618) — 100.8% | 1,279,505 | |||||||
Liabilities in Excess of Other Assets — (0.8)% | (9,985 | ) | ||||||
NET ASSETS — 100.0% | $ | 1,269,520 |
Percentages are stated as a percent of net assets. | |
ADR | American Depositary Receipt. |
SDR | Swedish Depositary Receipt. |
(a) | Non-income producing security. |
The accompanying notes are an integral part of these financial statements.
6
iBET Sports Betting & Gaming ETF
Schedule of Investments
April 30, 2023 (Unaudited) (Continued)
(b) | To the extent that the Fund invests more heavily in particular industry sub-groups of the economy, its performance will be especially sensitive to developments that significantly affect those industry sub-groups. See Note 7 in Notes to Financial Statements. |
(c) | Represents less than 0.05% of net assets. |
(d) | These securities have been deemed illiquid according to the Fund’s liquidity guidelines. The value of these securities is $1,278, which represents 0.10% of net assets. |
(e) | Value determined using significant unobservable inputs. Classified as Level 3 in the fair value hierarchy. |
(f) | Rate shown is the annualized seven-day yield as of April 30, 2023. |
The accompanying notes are an integral part of these financial statements.
7
iBET Sports Betting & Gaming ETF
Statement of Assets and Liabilities
April 30, 2023 (Unaudited)
ASSETS | ||||
Investments in securities, at value (Cost $1,053,618) | $ | 1,279,505 | ||
Foreign currency, at value (Cost $78) | 79 | |||
Dividends and interest receivable | 212 | |||
Receivable for securities sold | 32,966 | |||
Total assets | 1,312,762 | |||
LIABILITIES | ||||
Payable for securities purchased | 42,422 | |||
Management fees payable | 820 | |||
Total liabilities | 43,242 | |||
NET ASSETS | $ | 1,269,520 | ||
Net Assets Consist of: | ||||
Paid-in capital | $ | 1,242,468 | ||
Total distributable earnings (accumulated deficit) | 27,052 | |||
Net assets | $ | 1,269,520 | ||
Net Asset Value: | ||||
Net assets | $ | 1,269,520 | ||
Shares outstanding ^ | 120,000 | |||
Net asset value, offering and redemption price per share | $ | 10.58 |
^ | No par value, unlimited number of shares authorized. |
The accompanying notes are an integral part of these financial statements.
8
iBET Sports Betting & Gaming ETF
Statement of Operations
For the Six-Months Ended April 30, 2023 (Unaudited)
INCOME | ||||
Dividends(1) | $ | 6,248 | ||
Interest | 413 | |||
Total investment income | 6,661 | |||
EXPENSES | ||||
Management fees | 5,013 | |||
Total expenses | 5,013 | |||
Net investment income (loss) | 1,648 | |||
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS | ||||
Net realized gain (loss) on: | ||||
Investments | (192,941 | ) | ||
In-kind redemptions | 49,900 | |||
Foreign currency | (1,170 | ) | ||
Change in unrealized appreciation (depreciation) on: | ||||
Investments | 384,778 | |||
Foreign currency | (18 | ) | ||
Net realized and unrealized gain (loss) on investments | 240,549 | |||
Net increase (decrease) in net assets resulting from operations | $ | 242,197 |
(1) | Net of foreign taxes withheld of $153. |
The accompanying notes are an integral part of these financial statements.
9
iBET Sports Betting & Gaming ETF
Statement of Changes in Net Assets
Six-Months Ended | Period Ended | |||||||
OPERATIONS | ||||||||
Net investment income (loss) | $ | 1,648 | $ | 1,431 | ||||
Net realized gain (loss) on investments | (144,211 | ) | (55,599 | ) | ||||
Change in unrealized appreciation (depreciation) on investments | 384,760 | (158,891 | ) | |||||
Net increase (decrease) in net assets resulting from operations | 242,197 | (213,059 | ) | |||||
DISTRIBUTIONS TO SHAREHOLDERS | ||||||||
Net distributions to shareholders | (1,884 | ) | (202 | ) | ||||
Total distributions to shareholders | (1,884 | ) | (202 | ) | ||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Proceeds from shares sold | 179,190 | 1,266,674 | ||||||
Payments for shares redeemed | (203,686 | ) | — | |||||
Transaction fees (Note 6) | — | 290 | ||||||
Net increase (decrease) in net assets derived from capital share transactions (a) | (24,496 | ) | 1,266,964 | |||||
Net increase (decrease) in net assets | $ | 215,817 | $ | 1,053,703 | ||||
NET ASSETS | ||||||||
Beginning of period | $ | 1,053,703 | $ | — | ||||
End of period | $ | 1,269,520 | $ | 1,053,703 |
(a) | A summary of capital share transactions is as follows: |
Shares | Shares | |||||||
Shares sold | 20,000 | 120,000 | ||||||
Shares redeemed | (20,000 | ) | — | |||||
Net increase (decrease) | — | 120,000 |
(1) | Fund commenced operations on November 15, 2021. The information presented is for the period from November 15, 2021 to October 31, 2022. |
The accompanying notes are an integral part of these financial statements.
10
iBET Sports Betting & Gaming ETF
Financial Highlights
For a capital share outstanding throughout the period
Six-Months Ended | Period Ended | |||||||
Net asset value, beginning of period | $ | 8.78 | $ | 15.05 | ||||
INCOME (LOSS) FROM INVESTMENT OPERATIONS: | ||||||||
Net investment income (loss) (2) | 0.01 | 0.02 | ||||||
Net realized and unrealized gain (loss) on investments (7) | 1.80 | (6.28 | ) | |||||
Total from investment operations | 1.81 | (6.26 | ) | |||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
Distributions from: | ||||||||
Net investment income | (0.01 | ) | (0.01 | ) | ||||
Total distributions to shareholders | (0.01 | ) | (0.01 | ) | ||||
�� | ||||||||
CAPITAL SHARE TRANSACTIONS | ||||||||
Transaction fees (Note 6) | — | 0.00 | (3) | |||||
Net asset value, end of period | $ | 10.58 | $ | 8.78 | ||||
Total return | 20.64 | %(4) | -41.61 | %(4) | ||||
SUPPLEMENTAL DATA: | ||||||||
Net assets at end of period (000’s) | $ | 1,270 | $ | 1,054 | ||||
RATIOS TO AVERAGE NET ASSETS: | ||||||||
Expenses to average net assets | 0.79 | %(5) | 0.79 | %(5) | ||||
Net investment income (loss) to average net assets | 0.26 | %(5) | 0.22 | %(5) | ||||
Portfolio turnover rate (6) | 78 | %(4) | 47 | %(4) |
(1) | Commencement of operations on November 15, 2021. |
(2) | Calculated based on average shares outstanding during the period. |
(3) | Represents less than $0.005 per share. |
(4) | Not annualized. |
(5) | Annualized. |
(6) | Excludes the impact of in-kind transactions. |
(7) | Realized and unrealized gains and losses per share in this caption are balancing amounts necessary to reconcile the change in net asset value per share for the period, and may not reconcile with the aggregate gains and losses in the Statement of Operations due to share transactions for the period. |
The accompanying notes are an integral part of these financial statements.
11
iBET Sports Betting & Gaming ETF
Notes to Financial Statements
April 30, 2023 (Unaudited)
NOTE 1 – ORGANIZATION
iBET Sports Betting & Gaming ETF (the “Fund”) is a non-diversified series of ETF Series Solutions (“ESS” or the “Trust”), an open-end management investment company consisting of multiple investment series, organized as a Delaware statutory trust on February 9, 2012. The Trust is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and the offering of the Fund’s shares is registered under the Securities Act of 1933, as amended (the “Securities Act”). The investment objective of the Fund is to seek capital appreciation. The Fund commenced operations on November 15, 2021.
The end of the reporting period for the Fund is April 30, 2023, and the period covered by these Notes to Financial Statements is the six-month period from November 1, 2022 through April 30, 2023 (the “current fiscal period”).
NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES
The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 Financial Services - Investment Companies.
The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).
A. | Security Valuation. All equity securities, including domestic and foreign common stocks, preferred stocks and exchange-traded funds that are traded on a national securities exchange, except those listed on the Nasdaq Global Market®, Nasdaq Global Select Market®, and the Nasdaq Capital Market® exchanges (collectively, “Nasdaq”), are valued at the last reported sale price on the exchange on which the security is principally traded. Securities traded on Nasdaq will be valued at the Nasdaq Official Closing Price (“NOCP”). If, on a particular day, an exchange-traded or Nasdaq security does not trade, then the mean between the most recent quoted bid and asked prices will be used. All equity securities that are not traded on a listed exchange are valued at the last sale price in the over-the-counter market. If a non-exchange traded security does not trade on a particular day, then the mean between the last quoted closing bid and asked price will be used. Prices denominated in foreign currencies are converted to U.S. dollar equivalents at the current exchange rate, which approximates fair value. |
12
iBET Sports Betting & Gaming ETF
NOTES TO FINANCIAL STATEMENTS
April 30, 2023 (Unaudited) (Continued)
Investments in mutual funds, including money market funds, are valued at their net asset value (“NAV”) per share.
Securities for which quotations are not readily available are valued at their respective fair values in accordance with pricing procedures adopted by the Fund’s Board of Trustees (the “Board”). When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the pricing procedures adopted by the Board. The use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would be calculated without regard to such considerations.
As described above, the Fund utilizes various methods to measure the fair value of its investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuation methods. The three levels of inputs are:
Level 1 – | Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access. |
Level 2 – | Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data. |
Level 3 – | Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available. |
The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.
13
iBET Sports Betting & Gaming ETF
NOTES TO FINANCIAL STATEMENTS
April 30, 2023 (Unaudited) (Continued)
The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.
The following is a summary of the inputs used to value the Fund’s investments as of the end of the current fiscal period:
Assets^ | Level 1 | Level 2 | Level 3 | Total | ||||||||||||
Common Stocks | $ | 1,240,365 | $ | — | $ | 1,278 | $ | 1,241,643 | ||||||||
Warrants | — | — | 0 | 0 | ||||||||||||
Short-Term Investments | 37,862 | — | — | 37,862 | ||||||||||||
Total Investments in Securities | $ | 1,278,227 | $ | — | $ | 1,278 | $ | 1,279,505 |
^ | See Schedule of Investments for breakout of investments by industry sub-group. |
The following is a reconciliation of investments in which significant unobservable inputs (Level 3) were used in determining fair value:
Balance | Net Realized | Change | Purchases | |||||||||||||
Common Stocks | $ | 1,457 | $ | — | $ | (179 | ) | $ | — | |||||||
Warrants | $ | 435 | $ | — | $ | (435 | ) | $ | — |
Sales | Transfers | Transfers | Balance | |||||||||||||
Common Stocks | $ | — | $ | — | $ | — | $ | 1,278 | ||||||||
Warrants | $ | — | $ | — | $ | — | $ | 0 |
14
iBET Sports Betting & Gaming ETF
NOTES TO FINANCIAL STATEMENTS
April 30, 2023 (Unaudited) (Continued)
The following is a summary of quantitative information about Level 3 Fair Value Measurements:
Fair Value | Valuation | Unobservable | Impact to | |
Common Stocks | $ 1,278 | Market comparable companies | Discount for lack of marketability | Decrease |
* | NeoGames SA - SDR has been valued between SEK $116.42 and SEK $188.91 per share throughout the period. |
Fair Value | Valuation | Unobservable | Impact to | |
Warrants | $ 0 | Discount for lack of marketability | Decrease |
* | PointsBet Holdings, Ltd. Warrants have been valued between AUD $0.00 and AUD $2.00 per share throughout the period. |
During the current fiscal period, the Fund did not recognize any transfers to or from Level 3.
B. | Foreign Currency. Investment securities and other assets and liabilities denominated in foreign currencies are translated into U.S. dollar amounts at the date of valuation. Purchases and sales of investment securities and income and expense items denominated in foreign currencies are translated into U.S. dollar amounts on the respective dates of such transactions. The Fund does not isolate that portion of the results of operations resulting from changes in foreign exchange rates on investments and currency gains or losses realized between the trade and settlement dates on securities transactions from the fluctuations arising from changes in market prices of securities held. Such fluctuations are included with the net realized and unrealized gain or loss from investments. The Fund reports net realized foreign exchange gains or losses that arise from sales of foreign currencies, currency gains or losses realized between the trade and settlement dates on foreign currency transactions, and the difference between the amounts of dividends, interest, and foreign |
15
iBET Sports Betting & Gaming ETF
NOTES TO FINANCIAL STATEMENTS
April 30, 2023 (Unaudited) (Continued)
withholding taxes recorded on the Fund’s books and the U.S. dollar equivalent of the amounts actually received or paid. Net unrealized foreign exchange gains and losses arise from changes in the values of assets and liabilities, other than investments in securities at fiscal period end, resulting from changes in exchange rates.
C. | Federal Income Taxes. The Fund’s policy is to comply with the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute substantially all of its net investment income and net capital gains to shareholders. Therefore, no federal income tax provision is required. The Fund plans to file U.S. Federal and applicable state and local tax returns. |
The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management 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. Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits on uncertain tax positions as income tax expenses in the Statement of Operations. During the current fiscal period, the Fund did not incur any interest or penalties.
D. | Security Transactions and Investment Income. Investment securities transactions are accounted for on the trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Dividend income is recorded on the ex-dividend date. Non-cash dividends included in dividend income or separately disclosed, if any, are recorded at the fair value of the security received. Withholding taxes on foreign dividends and foreign taxes on capital gains, if any, have been provided for in accordance with the Fund’s understanding of the applicable tax rules and regulations. Interest income is recorded on an accrual basis. |
Distributions received from the Fund’s investments in Real Estate Investment Trusts (“REITs”) may be characterized as ordinary income, net capital gain, or a return of capital. The proper characterization of REIT distributions is generally not known until after the end of each calendar year. As such, the Fund must use estimates in reporting the character of its income and distributions received during the current calendar year for financial statement purposes. The actual character of distributions to the Fund’s shareholders will be reflected on the
16
iBET Sports Betting & Gaming ETF
NOTES TO FINANCIAL STATEMENTS
April 30, 2023 (Unaudited) (Continued)
Form 1099 received by shareholders after the end of the calendar year. Due to the nature of REIT investments, a portion of the distributions received by the Fund’s shareholders may represent a return of capital.
E. | Distributions to Shareholders. Distributions to shareholders from net investment income, if any, are declared and paid at least annually by the Fund. Distributions to shareholders of net realized gains on securities are declared and paid by the Fund on an annual basis. Distributions are recorded on the ex-dividend date. |
F. | Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the current fiscal period. Actual results could differ from those estimates. |
G. | Share Valuation. The NAV per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding of the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on the days on which the New York Stock Exchange (“NYSE”) is closed for trading. The offering and redemption price per share of the Fund is equal to the Fund’s NAV per share. |
H. | Guarantees and Indemnifications. In the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote. |
I. | Reclassification of Capital Accounts. U.S. GAAP requires that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or NAV per share. |
For the fiscal period ended October 31, 2022, there were no permanent differences.
J. | Subsequent Events. In preparing these financial statements, management has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued. There were no events |
17
iBET Sports Betting & Gaming ETF
NOTES TO FINANCIAL STATEMENTS
April 30, 2023 (Unaudited) (Continued)
or transactions that occurred during the period subsequent to the end of the current fiscal period that materially impacted the amounts or disclosures in the Fund’s financial statements.
NOTE 3 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS
Inherent Wealth Fund LLC (the “Adviser”), serves as the investment adviser to the Fund. Pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between the Trust, on behalf of the Fund, and the Adviser, the Adviser provides investment advice to the Fund and oversees the day-to-day operations of the Fund, subject to the direction and control of the Board and the officers of the Trust. Under the Advisory Agreement, the Adviser is also responsible for arranging, in consultation with Penserra Capital Management, LLC (the “Sub-Adviser”), transfer agency, custody, fund administration and accounting, and all other non-distribution related services necessary for the Fund to operate. Under the Advisory Agreement, the Adviser has agreed to pay all expenses of the Fund, except for: the fee paid to the Adviser pursuant to the Advisory Agreement, interest charges on any borrowings, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution (12b-1) fees and expenses. For services provided to the Fund, the Fund pays the Adviser a unified management fee, which is calculated daily and paid monthly, at an annual rate of 0.79% based on the Fund’s average daily net assets. The Adviser is responsible for paying the Sub-Adviser.
U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services (“Fund Services” or “Administrator”), acts as the Fund’s Administrator and, in that capacity, performs various administrative and accounting services for the Fund. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund, including regulatory compliance monitoring and financial reporting; prepares reports and materials to be supplied to the trustees; monitors the activities of the Fund’s Custodian, transfer agent and fund accountant. Fund Services also serves as the transfer agent and fund accountant to the Fund. U.S. Bank N.A. (the “Custodian”), an affiliate of Fund Services, serves as the Fund’s Custodian.
A Trustee and all officers of the Trust are affiliated with the Administrator and Custodian.
NOTE 4 – PURCHASES AND SALES OF SECURITIES
During the current fiscal period, purchases and sales of securities by the Fund, excluding short-term securities and in-kind transactions, were $989,092 and $1,008,187, respectively.
18
iBET Sports Betting & Gaming ETF
NOTES TO FINANCIAL STATEMENTS
April 30, 2023 (Unaudited) (Continued)
During the current fiscal period, there were no purchases or sales of U.S. Government securities.
During the current fiscal period, in-kind transactions associated with creations and redemptions were $168,009 and $194,541, respectively.
NOTE 5 – INCOME TAX INFORMATION
The amount and character of tax basis distributions and composition of net assets, including distributable earnings (accumulated deficit) are finalized at fiscal year-end; accordingly, tax basis balances have not been determined for the current fiscal period.
The components of distributable earnings (accumulated deficit) and cost basis of investments for federal income tax purposes as of October 31, 2022, were as follows:
Tax cost of investments | $ | 1,219,053 | ||
Gross tax unrealized appreciation | $ | 44,301 | ||
Gross tax unrealized depreciation | (209,518 | ) | ||
Net tax unrealized appreciation (depreciation) | (165,217 | ) | ||
Undistributed ordinary income | 761 | |||
Undistributed long-term capital gain (loss) | — | |||
Other accumulated gain (loss) | (48,805 | ) | ||
Distributable earnings (accumulated deficit) | $ | (213,261 | ) |
The difference between the cost basis for financial statements and federal income tax purposes is primarily attributable to wash sales.
A regulated investment company may elect for any taxable year to treat any portion of any qualified late year loss as arising on the first day of the next taxable year. Qualified late year losses are certain capital and ordinary losses which occur during the portion of the Fund’s taxable year subsequent to October 31 and December 31, respectively. For the taxable period ended October 31, 2022 the Fund did not elect to defer any post-October losses or late-year ordinary losses.
As of October 31, 2022, the Fund had a short-term capital loss carryforward of $48,805. This amount does not have an expiration date.
The tax character of distributions paid by the Fund during the fiscal period ended October 31, 2022 is $202 of ordinary income.
NOTE 6 – SHARE TRANSACTIONS
Shares of the Fund are listed and traded on the Nasdaq Stock Market, LLC. (“Nasdaq”). Market prices for the shares may be different from their NAV. The Fund issues and redeems shares on a continuous basis at NAV generally in large blocks of
19
iBET Sports Betting & Gaming ETF
NOTES TO FINANCIAL STATEMENTS
April 30, 2023 (Unaudited) (Continued)
shares, called “Creation Units.” Creation Units are issued and redeemed principally in-kind for securities included in a specified universe. Once created, shares generally trade in the secondary market at market prices that change throughout the day. Except when aggregated in Creation Units, shares are not redeemable securities of the Fund. Creation Units may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a Depository Trust Company participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem shares directly from the Fund. Rather, most retail investors may purchase shares in the secondary market with the assistance of a broker and are subject to customary brokerage commissions or fees.
The Fund currently offers one class of shares, which has no front-end sales load, no deferred sales charge, and no redemption fee. A fixed transaction fee is imposed for the transfer and other transaction costs associated with the purchase or sale of Creation Units. The standard fixed transaction fee for the Fund is $500, payable to the Custodian. The fixed transaction fee may be waived on certain orders if the Fund’s Custodian has determined to waive some or all of the costs associated with the order or another party, such as the Adviser, has agreed to pay such fee. In addition, a variable fee, payable to the Fund, may be charged on all cash transactions or substitutes for Creation Units of up to a maximum of 2% as a percentage of the value of the Creation Units subject to the transaction. Variable fees received by the Fund, if any, are displayed in the Capital Share Transactions section of the Statement of Changes in Net Assets. The Fund may issue an unlimited number of shares of beneficial interest, with no par value. Shares of the Fund have equal rights and privileges.
NOTE 7 – RISKS
Concentration Risk. To the extent the Fund invests more heavily in particular industries, groups of industries, or sectors of the economy, its performance will be especially sensitive to developments that significantly affect those industries, groups of industries, or sectors of the economy, and the value of shares may rise and fall more than the value of shares that invest in securities of companies in a broader range of industries or sectors.
20
iBET Sports Betting & Gaming ETF
NOTES TO FINANCIAL STATEMENTS
April 30, 2023 (Unaudited) (Continued)
Foreign Securities Risk. Investments in non-U.S. securities involve certain risks that may not be present with investments in U.S. securities. For example, investments in non-U.S. securities may be subject to risk of loss due to foreign currency fluctuations or to political or economic instability. Investments in non-U.S. securities also may be subject to withholding or other taxes and may be subject to additional trading, settlement, custodial, and operational risks. These and other factors can make investments in the Fund more volatile and potentially less liquid than other types of investments.
21
iBET Sports Betting & Gaming ETF
Expense Example
For the Six-Months Ended April 30, 2023 (Unaudited)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period as indicated in the following Expense Example Table.
Actual Expenses
The first line of the table provides information about actual account values based on actual returns and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then, multiply the result by the number in the first line under the heading entitled “Expenses Paid During the Period’’ to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the table provides information about hypothetical account values based on a hypothetical return and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of Fund shares. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.
22
iBET Sports Betting & Gaming ETF
Expense Example
For the Six-Months Ended April 30, 2023 (Unaudited) (Continued)
Beginning | Ending | Expenses Paid | |
Actual | $1,000.00 | $ 1,206.40 | $4.32 |
Hypothetical (5% annual return before expenses) | $1,000.00 | $ 1,020.88 | $3.96 |
(1) | The dollar amounts shown as expenses paid during the period are equal to the annualized expense ratio, 0.79%, multiplied by the average account value during the period, multiplied by 181/365, to reflect the one-half year period. |
23
iBET Sports Betting & Gaming ETF
Review of Liquidity Risk Management Program
(Unaudited)
Pursuant to Rule 22e-4 under the Investment Company Act of 1940, the Trust, on behalf of the series of the Trust covered by this shareholder report (the “Series”), has adopted a liquidity risk management program to govern the Trust’s approach to managing liquidity risk. Rule 22e-4 seeks to promote effective liquidity risk management, thereby reducing the risk that a fund will be unable to meet its redemption obligations and mitigating dilution of the interests of fund shareholders. The Trust’s liquidity risk management program is tailored to reflect the Series’ particular risks, but not to eliminate all adverse impacts of liquidity risk, which would be incompatible with the nature of such Series.
The investment adviser to the Series has adopted and implemented its own written liquidity risk management program (the “Program”) tailored specifically to assess and manage the liquidity risk of the Series.
At a recent meeting of the Board of Trustees of the Trust, the Trustees received a report pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the period ended December 31, 2022. The report concluded that the Program is reasonably designed to assess and manage the Series’ liquidity risk and has operated adequately and effectively to manage such risk. The report reflected that there were no liquidity events that impacted the Series’ ability to timely meet redemptions without dilution to existing shareholders. The report further noted that no material changes have been made to the Program since its implementation.
There can be no assurance that the Program will achieve its objectives in the future. Please refer to the prospectus for more information regarding the Series’ exposure to liquidity risk and other principal risks to which an investment in the Series may be subject.
24
iBET Sports Betting & Gaming ETF
Approval of Sub-Advisory Agreement & Board Considerations
(Unaudited)
Pursuant to Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), at a meeting held on April 5-6, 2023 (the “Meeting”), the Board of Trustees (the “Board”) of ETF Series Solutions (the “Trust”) approved the continuance of the Investment Sub-Advisory Agreement (the “Sub-Advisory Agreement”) between Inherent Wealth Fund LLC (the “Adviser”) and Penserra Capital Management, LLC (the “Sub-Adviser”) with respect to the iBET Sports Betting and Gaming ETF, a series of the Trust (the “Fund”).
Prior to the Meeting, the Board, including the Trustees who are not parties to the Sub-Advisory Agreement or “interested persons” of any party thereto, as defined in the 1940 Act (the “Independent Trustees”), reviewed written materials (the “Materials”), including information from the Sub-Adviser regarding, among other things: (i) the nature, extent, and quality of the services provided to the Fund by the Sub-Adviser; (ii) the historical performance of the Fund; (iii) the cost of the services provided and the profits realized by the Sub-Adviser or its affiliates from services rendered to the Fund; (iv) comparative fee and expense data for the Fund and other investment companies with similar investment objectives; (v) the extent to which any economies of scale realized by the Sub-Adviser in connection with its services to the Fund are shared with Fund shareholders; (vi) any other financial benefits to the Sub-Adviser and its affiliates resulting from services rendered to the Fund; and (vii) other factors the Board deemed to be relevant.
The Board also considered that the Sub-Adviser, along with other service providers of the Fund, had provided written and oral updates on the firm over the course of the year with respect to its role as sub-adviser to the Fund, and the Board considered that information alongside the Materials in its consideration of whether the Sub-Advisory Agreement should be continued. The Board also noted that the Sub-Adviser provides investment sub-advisory services to other series of the Trust and, over the course of the year, the Sub-Adviser provided written and oral updates to the Board with respect to its sub-advisory services to those Funds. Additionally, a representative from the Sub-Adviser provided an oral overview of the Fund’s strategy, the services provided to the Fund by the Sub-Adviser, and additional information about the Sub-Adviser’s personnel and business operations. The Board then discussed the Materials and the Sub-Adviser’s oral presentation, as well as any other relevant information received by the Board at the Meeting and at prior meetings, including the Adviser’s 15(c) presentation at the October 13-14, 2021, quarterly Board meeting, and deliberated on the approval of the continuation of the Sub-Advisory Agreement in light of this information.
Nature, Extent, and Quality of Services Provided. The Trustees considered the scope of services provided under the Sub-Advisory Agreement, noting that the Sub-Adviser had provided and would continue to provide investment management services to the Fund. In considering the nature, extent, and quality of the services provided
25
iBET Sports Betting & Gaming ETF
Approval of Sub-Advisory Agreement & Board Considerations
(Unaudited) (Continued)
by the Sub-Adviser, the Board considered the quality of the Sub-Adviser’s compliance program and past reports from the Trust’s Chief Compliance Officer (“CCO”) regarding the CCO’s review of the Sub-Adviser’s compliance program. The Board also considered its previous experience with the Sub-Adviser providing investment management services to the Fund, as well as other series of the Trust. The Board noted that it had received a copy of the Sub-Adviser’s registration form and financial statements, as well as the Sub-Adviser’s response to a detailed series of questions that included, among other things, information about the Sub-Adviser’s decision-making process, the background and experience of the firm’s key personnel, and the firm’s compliance policies, marketing practices, and brokerage information.
The Board noted the responsibilities that the Sub-Adviser has as the Fund’s investment sub-adviser, including: responsibility for the general management of the day-to-day investment and reinvestment of the assets of the Fund; determining the daily baskets of deposit securities and cash components; executing portfolio security trades for purchases and redemptions of the Fund’s shares conducted on a cash-in-lieu basis; oversight of general portfolio compliance with applicable securities laws, regulations, and investment restrictions; responsibility for quarterly reporting to the Board; and implementation of Board directives as they relate to the Fund. The Board also considered the Sub-Adviser’s resources and capacity with respect to portfolio management, compliance, and operations given the number of funds and/or accounts for which it provides sub-advisory services.
Historical Performance. The Trustees next considered the Fund’s performance. The Board noted that the Fund slightly outperformed its broad-based benchmark, the Nasdaq-100 Index, for the one-year period ended December 31, 2022, but significantly underperformed the same benchmark over the since inception period. The Nasdaq-100 Index is made up of the 100 largest, most actively traded U.S. companies listed on the Nasdaq stock exchange. In comparing the Fund’s performance to that of the benchmark, the Board noted that the Fund, unlike its benchmark, invests more narrowly, actively selecting equity securities of companies that are heavily engaged in sports betting or gaming activities. The Board also noted that the Fund commenced operations less than fourteen months prior to December 31, 2022, which was a relatively short period of time over which to evaluate the Fund’s performance and draw meaningful conclusions about its management.
Cost of Services Provided and Economies of Scale. The Board reviewed the sub-advisory fees paid by the Adviser to the Sub-Adviser for its services to the Fund. The Board considered that the fees paid to the Sub-Adviser are paid by the Adviser and noted that the fee reflected an arm’s-length negotiation between the Adviser and the Sub-Adviser. The Board further determined that the fees reflected an appropriate allocation of the advisory fee paid to each firm given the work performed by each
26
iBET Sports Betting & Gaming ETF
Approval of Sub-Advisory Agreement & Board Considerations
(Unaudited) (Continued)
firm and noted that the fees were generally in line with those charged by the Sub-Adviser in connection with other ETFs managed by the Sub-Adviser. The Board noted that the Sub-Adviser has an affiliated broker-dealer that executes a limited amount of the brokerage transactions for certain series of the Trust and, consequently, the Sub-Adviser indirectly benefits from commissions paid to such affiliated broker-dealer. The Board noted that the Sub-Adviser had provided its financial statements for the Board’s review. The Board also evaluated the compensation and benefits received by the Sub-Adviser from its relationship with the Fund, taking into account analyses of the Sub-Adviser’s profitability with respect to the Fund at various Fund asset levels.
The Board also noted that it had previously undertaken a review of the Fund’s fees and expenses at the quarterly Board meeting held on October 13-14, 2021. The Board observed that although the Fund’s net expense ratio at the time was within the range of the Fund’s Morningstar category – US Fund Consumer Cyclical (the “Category Peer Group”), the Fund’s management fee and net expense ratio were higher than those of the two gaming ETFs identified by the Adviser to be the Fund’s most direct competitors (the “Selected Peer Group”). However, the Board took into consideration that two of the three ETFs identified as peer funds in the Category Peer Group focused primarily on investments in the hotel and restaurant industry, respectively. Further, the Board considered that the only comparable gaming ETFs selected for inclusion in the Selected Peer Group were passively managed index funds.
The Board expressed the view that it currently appeared that the Sub-Adviser might realize economies of scale in managing the Fund as assets grow in size. The Board further noted that because the Fund pays the Adviser a unified fee, any benefits from the sub-advisory fee schedule, which includes asset-level breakpoints, would accrue to the Adviser, rather than the Fund’s shareholders. Consequently, the Board determined that it would monitor fees as the Fund grows to determine whether economies of scale were being effectively shared with the Fund and its shareholders.
Conclusion. No single factor was determinative of the Board’s decision to approve the continuation of the Sub-Advisory Agreement; rather, the Board based its determination on the total mix of information available to it. Based on a consideration of all the factors in their totality, the Board, including the Independent Trustees, unanimously determined that the Sub-Advisory Agreement, including the compensation payable under the agreement, was fair and reasonable to the Fund. The Board, including the Independent Trustees, unanimously determined that the approval of the continuation of the Sub-Advisory Agreement was in the best interests of the Fund and its shareholders.
27
iBET Sports Betting & Gaming ETF
Federal Tax Information
(Unaudited)
For the fiscal period ended October 31, 2022, certain dividends paid by the Fund may be subject to a maximum tax rate of 23.8%, as provided by the Jobs and Growth Tax Relief Reconciliation Act of 2003.
The percent of dividends declared from ordinary income designated as qualified dividend income was 100.00%.
For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividends received deduction for the fiscal period ended October 31, 2022 was 100.00%.
The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(C) was 0.00%.
Information About Portfolio Holdings
(Unaudited)
The Fund files its complete schedules of portfolio holdings for its first and third fiscal quarters with the SEC on Part F of Form N-PORT. The Fund’s Part F of Form N-PORT is available without charge, upon request, by calling toll-free at (800) 617-0004 or by accessing the Fund’s website at www.inherentwealthfund.com/etf/ibet. Furthermore, you may obtain the Part F of Form N-PORT on the SEC’s website at www.sec.gov. The Fund’s portfolio holdings are posted on its website at www.inherentwealthfund.com/etf/ibet daily.
Information About Proxy Voting
(Unaudited)
A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is provided in the Statement of Additional Information (“SAI”). The SAI is available without charge, upon request, by calling toll-free at (800) 617-0004, by accessing the SEC’s website at www.sec.gov, or by accessing the Fund’s website at www.inherentwealthfund.com/etf/ibet.
When available, information regarding how the Fund voted proxies relating to portfolio securities during the twelve-months ending June 30 is available by calling toll-free at (800) 617-0004 or by accessing the SEC’s website at www.sec.gov.
28
iBET Sports Betting & Gaming ETF
Information About the Fund’s Trustees
(Unaudited)
The SAI includes additional information about the Fund’s Trustees and is available without charge, upon request, by calling (800) 617-0004 or by accessing the SEC’s website at www.sec.gov or by accessing the Fund’s website at www.inherentwealthfund.com/etf/ibet.
Frequency Distribution of Premiums and Discounts
(Unaudited)
Information regarding how often shares of the Fund trade on the exchange at a price above (i.e. at a premium) or below (i.e. at a discount) the NAV of the Fund is available, without charge, on the Fund’s website at www.inherentwealthfund.com/etf/ibet.
29
Adviser
Inherent Wealth Fund LLC
Four Embarcadero Center, Suite 1400
San Francisco, California 94111
Sub-Adviser
Penserra Capital Management, LLC
4 Orinda Way, Suite 100-A
Orinda, California 94563
Distributor
Quasar Distributors, LLC
111 East Kilbourn Avenue, Suite 2200
Milwaukee, Wisconsin 53202
Custodian
U.S. Bank National Association
1555 North Rivercenter Drive, Suite 302
Milwaukee, Wisconsin 53212
Transfer Agent
U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202
Independent Registered Public Accounting Firm
Cohen & Company, Ltd.
342 North Water Street, Suite 830
Milwaukee, Wisconsin 53202
Legal Counsel
Morgan, Lewis & Bockius LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004
iBET Sports Betting & Gaming ETF
Symbol – IBET
CUSIP – 26922B782
(b) | Not applicable. |
Item 2. Code of Ethics.
Not applicable for semi-annual reports.
Item 3. Audit Committee Financial Expert.
Not applicable for semi-annual reports.
Item 4. Principal Accountant Fees and Services.
Not applicable for semi-annual reports.
Item 5. Audit Committee of Listed Registrants.
Not applicable for semi-annual reports.
Item 6. Investments.
(a) | Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to open-end investment companies.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable to open-end investment companies.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.
Item 11. Controls and Procedures.
(a) | The Registrant’s President (principal executive officer) and Treasurer (principal financial officer) have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider. |
(b) | There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the Registrant's internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies
Not applicable to open-end investment companies.
Item 13. Exhibits.
(a) | (1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Not Applicable. |
(2) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.
(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.
(4) Change in the registrant’s independent public accountant. There was no change in the registrant’s independent public accountant for the period covered by this report.
(b) | Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
(Registrant) | ETF Series Solutions | |
By (Signature and Title)* | /s/ Kristina R. Nelson | |
Kristina R. Nelson, President (principal executive officer) | ||
Date | 7/7/2023 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ Kristina R. Nelson | |
Kristina R. Nelson, President (principal executive officer) | ||
Date | 7/7/2023 | |
By (Signature and Title)* | /s/ Kristen M. Weitzel | |
Kristen M. Weitzel, Treasurer (principal financial officer) | ||
Date | 7/7/2023 |
* | Print the name and title of each signing officer under his or her signature. |