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: 811-23078
Virtus ETF Trust II
(Exact name of registrant as specified in charter)
31 West 52nd Street, 16th Floor
New York, NY 10019
(Address of principal executive offices) (Zip code)
Virtus ETF Trust II
c/o Corporation Service Company
2711 Centerville Road, Suite 400
Wilmington, DE 19808
(Name and address of agent for service)
Registrant’s telephone number, including area code: (212) 593-4383
Date of fiscal year end: July 31
Date of reporting period: January 31, 2024
Form N-CSR is to be used by management investment companies to file reports with the Commission not later than 10 days after the transmission to stockholders of any report that is required to be transmitted to stockholders under Rule 30e-1 under the Investment Company Act of 1940 (17 CFR 270.30e-1). The Commission may use the information provided on Form N-CSR in its regulatory, disclosure review, inspection, and policymaking roles.
A registrant is required to disclose the information specified by Form N-CSR, and the Commission will make this information public. A registrant is not required to respond to the collection of information contained in Form N-CSR unless the Form displays a currently valid Office of Management and Budget (“OMB”) control number. Please direct comments concerning the accuracy of the information collection burden estimate and any suggestions for reducing the burden to Secretary, Securities and Exchange Commission, 100 F Street, NE, Washington, DC 20549. The OMB has reviewed this collection of information under the clearance requirements of 44 U.S.C. § 3507.
Item 1. Reports to Stockholders.
(a) | The Report to Shareholders is attached herewith. |
Virtus ETF Trust II
VIRTUS DUFF & PHELPS CLEAN ENERGY ETF
VIRTUS NEWFLEET ABS/MBS ETF
VIRTUS NEWFLEET SHORT DURATION CORE PLUS BOND ETF
VIRTUS NEWFLEET SHORT DURATION HIGH YIELD BOND ETF
(formerly, Virtus Newfleet High Yield Bond ETF)
VIRTUS SEIX SENIOR LOAN ETF
VIRTUS STONE HARBOR EMERGING MARKETS HIGH YIELD BOND ETF
VIRTUS TERRANOVA U.S. QUALITY MOMENTUM ETF
SEMI-ANNUAL REPORT
January 31, 2024
Table of Contents
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1
Dear Shareholder:
On behalf of Virtus ETF Advisers LLC (the “Adviser”), I am pleased to present the shareholder report for the Virtus ETF Trust II (the “Trust”) for the semiannual fiscal period ended January 31, 2024.
The Adviser is part of Virtus Investment Partners, a distinctive partnership of boutique investment managers singularly committed to the long-term success of individual and institutional investors.
The report provides financial statements and portfolio information for the following funds within the Trust:
·Virtus Duff & Phelps Clean Energy ETF (VCLN)
·Virtus Newfleet ABS/MBS ETF (VABS)
·Virtus Newfleet Short Duration Core Plus Bond ETF (SDCP) - This Fund commenced operations on November 15, 2023 and seeks to provide a high level of total return, including current income, while limiting fluctuations in net asset value by investing primarily in investment grade, short-duration bonds.
·Virtus Newfleet Short Duration High Yield Bond ETF (VSHY)
·Virtus Seix Senior Loan ETF (SEIX)
·Virtus Stone Harbor Emerging Markets High Yield Bond ETF (VEMY)
·Virtus Terranova U.S. Quality Momentum ETF (JOET)
On behalf of the Adviser and our fund Sub-Advisers, thank you for your investment. If you have questions, please contact your financial adviser, or call 1-888-383-0553. For more information about the funds and the other ETFs we offer, we invite you to visit our website, www.virtusetfs.com.
Sincerely,
William Smalley
President
Virtus ETF Trust II
This material must be accompanied or preceded by the prospectus.
2
We believe it is important for you to understand the impact of costs on your investment. All funds have operating expenses. As a shareholder of the Virtus Duff & Phelps Clean Energy ETF, Virtus Newfleet ABS/MBS ETF, Virtus Newfleet Short Duration Core Plus Bond ETF, Virtus Newfleet Short Duration High Yield Bond ETF, Virtus Seix Senior Loan ETF, Virtus Stone Harbor Emerging Markets High Yield Bond ETF and Virtus Terranova U.S. Quality Momentum ETF (each, a “Fund”) you may incur two types of costs: (1) transaction costs, which include brokerage commissions that you pay when purchasing or selling shares of the Fund; and (2) ongoing costs, which include advisory fees and other fund expenses, if any. The following example is intended to help you understand your ongoing costs (in dollars and cents) of investing in a Fund and to compare these costs with the ongoing costs of investing in other funds. The examples are based on an investment of $1,000 invested at the beginning of the period and held throughout the entire period (August 1, 2023 to January 31, 2024).
Actual expenses
The first line under each Fund in the table below 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 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 for your Fund under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical example for comparison purposes
The second line under each Fund in 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 each Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in each Fund and 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 under each Fund in the table is useful in comparing ongoing Fund costs only and will not help you determine the relative total costs of owning different funds.
In addition, if these transactional costs were included, your costs would have been higher.
| | Beginning | | Ending | | Annualized | | Expenses | |||||||||
Virtus Duff & Phelps Clean Energy ETF | | | | | | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $795.20 | | | | 0.59% | | | | $2.66 | | |
Hypothetical(1) | | | $1,000.00 | | | | $1,022.17 | | | | 0.59% | | | | $3.00 | | |
Virtus Newfleet ABS/MBS ETF | | | | | | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $1,042.30 | | | | 0.39% | | | | $2.00 | | |
Hypothetical(1) | | | $1,000.00 | | | | $1,023.18 | | | | 0.39% | | | | $1.98 | | |
Virtus Newfleet Short Duration Core Plus Bond ETF | | | | | | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $1,030.70 | | | | 0.35% | | | | $0.75(4) | | |
Hypothetical(1) | | | $1,000.00 | | | | $1,009.78 | | | | 0.35% | | | | $1.77 | | |
Virtus Newfleet Short Duration High Yield Bond ETF | | | | | | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $1,051.00 | | | | 0.46% | | | | $2.37 | | |
Hypothetical(1) | | | $1,000.00 | | | | $1,022.82 | | | | 0.46% | | | | $2.34 | | |
Virtus Seix Senior Loan ETF | | | | | | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $1,057.60 | | | | 0.57% | | | | $2.95 | | |
Hypothetical(1) | | | $1,000.00 | | | | $1,022.27 | | | | 0.57% | | | | $2.90 | | |
Virtus Stone Harbor Emerging Markets High Yield Bond ETF | | | | | | | | | | | | | | | | | |
Actual | | | $1,000.00 | | | | $1,066.80 | | | | 0.55% | | | | $2.86 | | |
Hypothetical(1) | | | $1,000.00 | | | | $1,022.37 | | | | 0.55% | | | | $2.80 | | |
Virtus Terranova U.S. Quality Momentum ETF | | | | | | | | | | | | | | | | | |
Actual | | | | $1,000.00 | | | | $1,062.80 | | | | 0.29% | | | | $1.50 | |
Hypothetical(1) | | | | $1,000.00 | | | | $1,023.68 | | | | 0.29% | | | | $1.48 | |
(1)Assuming 5% return before expenses.
(2)Annualized expense ratios reflect expenses net of waived fees or reimbursed expenses, if applicable.
(3)Expenses are calculated using each Fund’s annualized expense ratio, multiplied by the average account value for the period, multiplied by 184/366 (to reflect the six-month period).
(4) Actual expenses are calculated using the Fund’s annualized expense ratio, multiplied by the average account value for the period, multiplied by 77/366 (to reflect the period November 15, 2023 to January 31, 2024).
The accompanying notes are an integral part of these financial statements.
3
Security Description | | Shares | | Value |
COMMON STOCKS — 98.9% | | | | |
Energy — 4.2% | | | | |
Cameco Corp. (Canada) | | 2,906 | | $138,761 |
EnLink Midstream LLC | | 11,879 | | 143,261 |
Total Energy | | | | 282,022 |
Industrials — 33.3% | | | | |
ABB Ltd. (Switzerland) | | 2,422 | | 102,976 |
Array Technologies, Inc.* | | 5,119 | | 67,776 |
Bloom Energy Corp. Class A* | | 6,087 | | 68,905 |
Chart Industries, Inc.* | | 1,294 | | 151,036 |
Fluence Energy, Inc.* | | 5,779 | | 114,829 |
Hubbell, Inc. | | 627 | | 210,402 |
Nexans SA (France) | | 2,381 | | 218,073 |
NEXTracker, Inc. Class A* | | 2,481 | | 112,315 |
Plug Power, Inc.* | | 18,168 | | 80,848 |
Prysmian SpA (Italy) | | 4,805 | | 212,850 |
Shoals Technologies Group, Inc. Class A* | | 8,227 | | 108,350 |
Sungrow Power Supply Co., Ltd. | | 6,400 | | 69,878 |
Sunrun, Inc.* | | 14,499 | | 209,945 |
Vestas Wind Systems A/S (Denmark)* | | 10,061 | | 286,855 |
Xylem, Inc. | | 1,783 | | 200,481 |
Total Industrials | | | | 2,215,519 |
Information Technology — 15.4% | | | | |
Enphase Energy, Inc.* | | 2,658 | | 276,777 |
First Solar, Inc.* | | 1,946 | | 284,700 |
Infineon Technologies AG (Germany) | | 4,347 | | 158,527 |
SolarEdge Technologies, Inc.* | | 1,730 | | 115,045 |
TE Connectivity Ltd. | | 1,318 | | 187,406 |
Total Information Technology | | | | 1,022,455 |
Materials — 1.4% | | | | |
MP Materials Corp.* | | 5,744 | | 90,813 |
Utilities — 44.6% | | | | |
AES Corp. (The) | | 10,117 | | 168,752 |
Alliant Energy Corp. | | 3,377 | | 164,325 |
Atlantica Sustainable Infrastructure PLC (Spain) | | 3,503 | | 67,188 |
Clearway Energy, Inc. Class C | | 5,548 | | 134,483 |
Constellation Energy Corp. | | 1,159 | | 141,398 |
Security Description | | Shares | | Value |
COMMON STOCKS (continued) | | | | |
Utilities (continued) | | | | |
Dominion Energy, Inc. | | 2,974 | | $135,971 |
EDP - Energias de Portugal SA (Portugal) | | 56,834 | | 254,403 |
EDP Renovaveis SA (Spain) | | 9,019 | | 146,689 |
Encavis AG (Germany)* | | 9,434 | | 132,131 |
Entergy Corp. | | 1,316 | | 131,284 |
Fortum OYJ (Finland) | | 16,353 | | 224,265 |
Iberdrola SA (Spain)* | | 323 | | 3,873 |
Iberdrola SA (Spain) | | 18,773 | | 226,717 |
NextEra Energy, Inc. | | 3,192 | | 187,147 |
Orsted AS (Denmark)(1) | | 3,606 | | 204,674 |
RWE AG (Germany) | | 5,083 | | 188,581 |
Southern Co. (The) | | 2,817 | | 195,838 |
SSE PLC (United Kingdom) | | 8,116 | | 173,309 |
Verbund AG (Austria) | | 990 | | 80,937 |
Total Utilities | | | | 2,961,965 |
TOTAL INVESTMENTS — 98.9% | | | | |
(Cost $6,747,846) | | | | 6,572,774 |
Other Assets in Excess of Liabilities — 1.1% | | | | 74,190 |
Net Assets — 100.0% | | | | $6,646,964 |
*Non-income producing security.
(1)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid. At January 31, 2024, the aggregate value of these securities was $204,674, or 3.1% of net assets.
Portfolio Composition |
January 31, 2024 (unaudited) |
Asset Allocation as of 01/31/2024 (based on net assets)
Utilities | | 44.6 | % |
Industrials | | 33.3 | % |
Information Technology | | 15.4 | % |
Energy | | 4.2 | % |
Materials | | 1.4 | % |
Other Assets in Excess of Liabilities | | 1.1 | % |
Total | | 100.0 | % |
The following table summarizes valuation of the Fund’s investments under the fair value hierarchy levels as of January 31, 2024.
| | Level 1 | | Level 2 | | Level 3 | | Total | |
Asset Valuation Inputs | | | | | | | | | |
Common Stocks | | $6,568,901 | | $3,873 | | $— | | $6,572,774 | |
Total | | $6,568,901 | | $3,873 | | $— | | $6,572,774 | |
The accompanying notes are an integral part of these financial statements.
4
Security Description | | Principal | | Value |
MORTGAGE BACKED SECURITIES — 53.1% | ||||
Asset Backed Security — 10.6% | | | | |
Affirm Asset Securitization Trust, Class A, Series 2023-B, 6.82%, 09/15/28(1) | | $210,000 | | $214,702 |
Auxilior Term Funding, Class D, Series 2023-1A, 7.27%, 12/16/30(1) | | 210,000 | | 213,402 |
Avis Budget Rental Car Funding Aesop LLC, Class C, Series 2024-5A, 6.24%, 04/20/27(1) | | 190,000 | | 190,993 |
Momnt Technologies Trust, Class A, Series 2023-1A, 6.92%, 03/20/45(1) | | 200,000 | | 201,767 |
Reach ABS Trust, Class B, Series 2024-1A, 6.29%, 02/18/31(1) | | 190,000 | | 191,842 |
Total Asset Backed Security | | | | 1,012,706 |
Commercial Mortgage Backed Securities — 8.2% | ||||
Bx Trust, Class B, Series 2018-GW, 6.65%, (SOFR + 1.32%), 05/15/35(1)(2) | | 165,000 | | 163,858 |
Cent Trust, Class A, Series 2023-CITY, 7.95%, (SOFR + 2.62%), 09/15/38(1)(2) | | 150,000 | | 151,469 |
KNDL Mortgage Trust, Class A, Series 2019-KNSQ, 6.33%, (SOFR + 1.00%), 05/15/36(1)(2) | | 100,000 | | 99,808 |
Orl Trust 2023-Glks, Class A, Series 2023-GLKS, 7.68%, (SOFR + 2.35%), 10/19/36(1)(2) | | 212,000 | | 212,930 |
Thpt Mortgage Trust, Class A, Series 2023-THL, 7.23%, 12/10/34(1)(2)(3) | | 150,000 | | 155,202 |
Total Commercial Mortgage Backed Securities | | | | 783,267 |
Residential Mortgage Backed Securities — 34.3% | ||||
American Homes 4 Rent, Class B, Series 2015-SFR2, 4.30%, 10/17/52(1) | | 100,000 | | 98,029 |
AMSR Trust, Class A, Series 2020-SFR1, 1.82%, 04/17/37(1) | | 99,904 | | 95,869 |
Angel Oak Mortgage Trust, Class A2, Series 2021-3, 1.31%, 05/25/66(1)(2)(3) | | 58,596 | | 49,905 |
Angel Oak SB Commercial Mortgage Trust, Class A1, Series 2020-SBC1, 2.07%, 05/25/50(1)(2)(3) | | 83,952 | | 76,742 |
CAFL Issuer LLC, Class A1, Series 2021-RTL1, 2.24%, 03/28/29(1)(4) | | 150,000 | | 142,755 |
Colt Mortgage Loan Trust, Class A1, Series 2023-4, 7.16%, 10/25/68(1)(4) | | 99,089 | | 102,028 |
COLT Mortgage Loan Trust, Class A1, Series 2021-2R, 0.80%, 07/27/54(1) | | 50,241 | | 44,142 |
Corevest American Finance Trust, Class A1, Series 2020-1, 1.83%, 03/15/50(1) | | 70,892 | | 68,745 |
Ellington Financial Mortgage Trust, Class A1, Series 2020-1, 2.01%, 05/25/65(1)(2)(3) | | 134,493 | | 130,402 |
Ellington Financial Mortgage Trust, Class A1, Series 2020-2, 1.18%, 10/25/65(1)(2)(3) | | 149,486 | | 134,958 |
Ellington Financial Mortgage Trust, Class A2, Series 2021-1, 1.00%, 02/25/66(1)(2)(3) | | 42,723 | | 36,410 |
FirstKey Homes Trust, Class D, Series 2021-SFR1, 2.19%, 08/17/38(1) | | 130,000 | | 118,589 |
Galton Funding Mortgage Trust, Class A23, Series 2018-1, 3.50%, 11/25/57(1)(2)(3) | | 111,883 | | 101,711 |
INTOWN Mortgage Trust, Class A, Series 2022-STAY, 7.82%, (SOFR + 2.49%), 08/15/39(1)(2) | | 170,000 | | 171,055 |
JPMorgan Trust, Class A2, Series 2015-5, 6.81%, 05/25/45(1)(2)(3) | | 278,096 | | 273,505 |
LHOME Mortgage Trust, Class A1, Series 2021-RTL2, 3.09%, 06/25/26(1)(4) | | 33,950 | | 33,777 |
Security Description | | Principal | | Value |
MORTGAGE BACKED SECURITIES (continued) | ||||
Residential Mortgage Backed Securities (continued) | ||||
MetLife Securitization Trust, Class A1A, Series 2019-1A, 3.75%, 04/25/58(1)(2)(3) | | $106,242 | | $103,577 |
New Residential Mortgage Loan Trust, Class A3, Series 2017-2A, 4.00%, 03/25/57(1)(2)(3) | | 26,908 | | 25,566 |
Newrez Warehouse Securitization Trust, Class B, Series 2021-1, 6.35%, (SOFR + 1.01%), 05/25/55(1)(2) | | 138,667 | | 138,665 |
Progress Residential Trust, Class C, Series 2021-SFR1, 1.56%, 04/17/38(1) | | 310,000 | | 284,172 |
PRPM LLC, Class A1, Series 2021-2, 2.12%, 03/25/26(1)(2)(3) | | 73,750 | | 73,271 |
PRPM LLC, Class A1, Series 2021-RPL1, 1.32%, 07/25/51(1)(4) | | 92,646 | | 84,310 |
Residential Mortgage Loan Trust, Class A1, Series 2020-1, 2.38%, 01/26/60(1)(2)(3) | | 11,644 | | 11,141 |
SG Residential Mortgage Trust, Class A3, Series 2021-1, 1.56%, 07/25/61(1)(2)(3) | | 30,713 | | 24,744 |
Star Trust, Class A1, Series 2021-1, 1.22%, 05/25/65(1)(2)(3) | | 122,786 | | 108,853 |
Starwood Mortgage Residential Trust, Class A1, Series 2020-1, 2.28%, 02/25/50(1)(2)(3) | | 55,800 | | 52,482 |
VCAT LLC, Class A1, Series 2021-NPL4, 1.87%, 08/25/51(1)(4) | | 155,252 | | 150,641 |
VCAT LLC, Class A1, Series 2021-NPL6, 1.92%, 09/25/51(1)(4) | | 94,025 | | 91,952 |
Verus Securitization Trust, Class A1, Series 2021-R2, 0.92%, 02/25/64(1)(2)(3) | | 80,556 | | 71,016 |
Verus Securitization Trust, Class A1, Series 2020-4, 1.50%, 05/25/65(1)(4) | | 177,037 | | 167,007 |
Verus Securitization Trust 2023-8, Class A1, Series 2023-8, 6.26%, 12/25/68(1)(4) | | 98,292 | | 99,579 |
Visio Trust, Class A1, Series 2020-1R, 1.31%, 11/25/55(1) | | 112,642 | | 101,749 |
Total Residential Mortgage Backed Securities | | | | 3,267,347 |
Total Mortgage Backed Securities | | | | |
(Cost $5,105,891) | | | | 5,063,320 |
ASSET BACKED SECURITIES – 43.9% | | | | |
ACC Auto Trust, Class C, Series 2021-A, 3.79%, 04/15/27(1) | | 330,000 | | 326,835 |
ACC Trust, Class C, Series 2021-1, 2.08%, 12/20/24(1) | | 27,031 | | 26,791 |
Achv ABS Trust, Class B, Series 2023-3PL, 7.17%, 08/19/30(1) | | 200,000 | | 201,509 |
Adams Outdoor Advertising LP, Class A2, Series 2023-1, 6.97%, 07/15/53(1) | | 260,000 | | 265,609 |
American Credit Acceptance Receivables Trust, Class E, Series 2022-1, 3.64%, 03/13/28(1) | | 160,000 | | 151,689 |
Aqua Finance Trust, Class C, Series 2019-A, 4.01%, 07/16/40(1) | | 89,037 | | 82,276 |
Cajun Global LLC, Class A2, Series 2021-1, 3.93%, 11/20/51(1) | | 213,400 | | 193,647 |
CLI Funding VI LLC, Class A, Series 2020-1A, 2.08%, 09/18/45(1) | | 82,375 | | 74,277 |
CPS Auto Receivables Trust, Class E, Series 2019-D, 3.86%, 10/15/25(1) | | 45,314 | | 45,109 |
The accompanying notes are an integral part of these financial statements.
5
Schedule of Investments — Virtus Newfleet ABS/MBS ETF (continued)
January 31, 2024 (unaudited)
Security Description | | Principal | | Value |
ASSET BACKED SECURITIES (continued) | | | | |
FAT Brands Royalty LLC, Class A2, Series 2021-1A, 4.75%, 04/25/51(1) | | $69,300 | | $66,291 |
FHF Trust, Class A2, Series 2023-1A, 6.57%, 06/15/28(1) | | 21,370 | | 21,323 |
GLS Auto Receivables Issuer Trust, Class D, Series 2019-4A, 4.09%, 08/17/26(1) | | 120,000 | | 118,898 |
GLS Auto Receivables Issuer Trust, Class D, Series 2022-2A, 6.15%, 04/17/28(1) | | 135,000 | | 135,320 |
Hertz Vehicle Financing III LLC, Class C, Series 2022-1A, 2.63%, 06/25/26(1) | | 140,000 | | 133,835 |
Hertz Vehicle Financing LLC, Class D, Series 2022-4A, 6.56%, 09/25/26(1) | | 130,000 | | 126,708 |
HIN Timeshare Trust, Class C, Series 2020-A, 3.42%, 10/09/39(1) | | 72,336 | | 68,569 |
Hotwire Funding LLC, Class C, Series 2021-1, 4.46%, 11/20/51(1) | | 325,000 | | 277,368 |
Lendbuzz Securitization Trust, Class A2, Series 2023-2A, 7.09%, 10/16/28(1) | | 119,103 | | 120,122 |
Lobel Automobile Receivables Trust, Class B, Series 2023-1, 7.05%, 09/15/28(1) | | 130,000 | | 129,503 |
Mariner Finance Issuance Trust, Class A, Series 2020-AA, 2.19%, 08/21/34(1) | | 135,278 | | 132,537 |
Marlette Funding Trust, Class B, Series 2023-2A, 6.54%, 06/15/33(1) | | 128,000 | | 129,187 |
Merchants Fleet Funding LLC, Class A, Series 2023-1A, 7.21%, 05/20/36(1) | | 210,000 | | 212,095 |
Mercury Financial Credit Card Master Trust, Class A, Series 2023-1A, 8.04%, 09/20/27(1) | | 315,000 | | 318,937 |
NBC Funding LLC, Class A2, Series 2021-1, 2.99%, 07/30/51(1) | | 297,000 | | 272,618 |
Oportun Funding XIV LLC, Class B, Series 2021-A, 1.76%, 03/08/28(1) | | 139,214 | | 133,829 |
Upstart Securitization Trust, Class A, Series 2022-2, 4.37%, 05/20/32(1) | | 74,666 | | 74,382 |
Upstart Securitization Trust, Class B, Series 2021-3, 1.66%, 07/20/31(1) | | 117,491 | | 116,183 |
VFI ABS LLC, Class D, Series 2022-1A, 6.68%, 11/26/29(1) | | 100,000 | | 96,177 |
Security Description | | Principal | | Value |
ASSET BACKED SECURITIES (continued) | | | | |
ZAXBY’S Funding LLC, Class A2, Series 2021-1A, 3.24%, 07/30/51(1) | | $151,125 | | $133,248 |
Total Asset Backed Securities | | | | |
(Cost $4,327,096) | | | | 4,184,872 |
CORPORATE BOND – 2.9% | | | | |
Industrials – 2.9% | | | | |
Alaska Airlines Pass-Through Trust, Class A, Series 2020-1, 4.80%, 08/15/27(1) | | 282,989 | | 276,959 |
(Cost $279,738) | | | | |
TOTAL INVESTMENTS — 99.9% | | | | |
(Cost $9,712,725) | | | | 9,525,151 |
Other Assets in Excess of Liabilities — 0.1% | | | | 14,234 |
Net Assets — 100.0% | | | | $9,539,385 |
(1)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid. At January 31, 2024, the aggregate value of these securities was $9,525,151, or 99.9% of net assets.
(2)Variable rate instrument. The interest rate shown reflects the rate in effect at January 31, 2024.
(3)Adjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions.
(4)Represents step coupon bond. Rate shown reflects the rate in effect as of January 31, 2024.
Abbreviations:
SOFR — Secured Overnight Financing Rate
Portfolio Composition |
January 31, 2024 (unaudited) |
Asset Allocation as of 01/31/2024 (based on net assets)
Mortgage Backed Securities | | 53.1 | % |
Asset Backed Securities | | 43.9 | % |
Corporate Bond | | 2.9 | % |
Other Assets in Excess of Liabilities | | 0.1 | % |
Total | | 100.0 | % |
The following table summarizes valuation of the Fund’s investments under the fair value hierarchy levels as of January 31, 2024.
| | Level 1 | | Level 2 | | Level 3 | | Total |
Asset Valuation Inputs | | | | | | | | |
Mortgage Backed Securities | | $— | | $5,063,320 | | $— | | $5,063,320 |
Asset Backed Securities | | — | | 4,184,872 | | — | | 4,184,872 |
Corporate Bond | | — | | 276,959 | | — | | 276,959 |
Total | | $— | | $9,525,151 | | $— | | $9,525,151 |
Schedule of Investments — Virtus Newfleet Short Duration Core Plus Bond ETF
January 31, 2024 (unaudited)
The accompanying notes are an integral part of these financial statements.
6
Security Description | | Shares | | Value |
MORTGAGE BACKED SECURITIES — 54.3% | ||||
Asset Backed Security — 25.5% | | | | |
Affirm Asset Securitization Trust, Class A, Series 2023-B, 6.82%, 09/15/28(1) | | $150,000 | | $153,359 |
Auxilior Term Funding LLC, Class C, Series 2023-1A, 6.50%, 11/15/30(1) | | 120,000 | | 121,745 |
Carvana Auto Receivables Trust, Class C, Series 2023-N1, 5.92%, 07/10/29(1) | | 30,000 | | 30,006 |
Carvana Auto Receivables Trust, Class C, Series 2023-N4, 6.59%, 02/11/30(1) | | 200,000 | | 204,628 |
CPS Auto Receivables Trust, Class C, Series 2024-A, 5.74%, 04/15/30(1) | | 25,000 | | 25,228 |
Dext ABS LLC, Class B, Series 2023-2, 6.41%, 05/15/34(1) | | 30,000 | | 30,573 |
Diamond Resorts Owner Trust, Class A, Series 2021-1A, 1.51%, 11/21/33(1) | | 28,189 | | 26,554 |
Discover Card Execution Note Trust, Class A, Series 2023-A2, 4.93%, 06/15/28 | | 205,000 | | 206,865 |
DT Auto Owner Trust, Class C, Series 2023-3A, 6.40%, 05/15/29(1) | | 155,000 | | 157,025 |
Elara HGV Timeshare Issuer LLC, Class A, Series 2023-A, 6.16%, 02/25/38(1) | | 189,422 | | 194,087 |
Exeter Automobile Receivables Trust, Class B, Series 2023-1A, 5.72%, 04/15/27 | | 29,000 | | 28,995 |
Foursight Capital Automobile Receivables Trust, Class A3, Series 2023-1, 5.39%, 12/15/27(1) | | 300,000 | | 299,612 |
GLS Auto Select Receivables Trust, Class A3, Series 2023-2A, 6.38%, 02/15/29(1) | | 300,000 | | 310,161 |
Momnt Technologies Trust, Class A, Series 2023-1A, 6.92%, 03/20/45(1) | | 25,000 | | 25,221 |
OneMain Financial Issuance Trust, Class A, Series 2022-3A, 5.94%, 05/15/34(1) | | 200,000 | | 201,914 |
Oportun Issuance Trust, Class A, Series 2021-C, 2.18%, 10/08/31(1) | | 225,000 | | 209,088 |
Reach ABS Trust, Class B, Series 2024-1A, 6.29%, 02/18/31(1) | | 30,000 | | 30,291 |
United Auto Credit Securitization Trust, Class B, Series 2023-1, 5.91%, 07/10/28(1) | | 200,000 | | 199,618 |
Upstart Securitization Trust, Class A, Series 2023-1, 6.59%, 02/20/33(1) | | 152,550 | | 152,637 |
US Bank NA, Class B, Series 2023-1, 6.79%, 08/25/32(1) | | 25,114 | | 25,288 |
Total Asset Backed Security | | | | 2,632,895 |
Commercial Mortgage Backed Securities — 6.1% | ||||
BBCMS Mortgage Trust, Class A, Series 2018-TALL, 6.25%, (1-Month SOFR + 0.92%), 03/15/37(1)(2) | | 220,000 | | 209,882 |
Bx Trust, Class A, Series 2022-CLS, 5.76%, 10/13/27(1) | | 100,000 | | 101,712 |
Bx Trust, Class B, Series 2019-OC11, 3.61%, 12/09/41(1) | | 120,000 | | 108,358 |
Thpt Mortgage Trust, Class A, Series 2023-THL, 7.23%, 12/10/34(1)(2)(3) | | 200,000 | | 206,936 |
Total Commercial Mortgage Backed Securities | | | | 626,888 |
Mortgage Backed Security — 4.0% | | | | |
Federal Home Loan Mortgage Corporation, 6.00%, 10/01/38 | | 204,591 | | 208,749 |
Security Description | | Shares | | Value |
MORTGAGE BACKED SECURITIES (continued) | ||||
Mortgage Backed Security (continued) | ||||
Federal Home Loan Mortgage Corporation, 6.00%, 03/01/53 | | $200,136 | | $202,981 |
Total Mortgage Backed Security | | | | 411,730 |
Residential Mortgage Backed Securities — 18.7% | ||||
American Homes 4 Rent Trust, Class A, Series 2015-SFR1, 3.47%, 04/17/52(1) | | 312,915 | | 305,626 |
COLT Mortgage Loan Trust, Class A1, Series 2023-3, 7.18%, 09/25/68(1)(4) | | 293,639 | | 301,137 |
CSMC Trust, Class A1, Series 2020-RPL4, 2.00%, 01/25/60(1)(2)(3) | | 168,731 | | 150,752 |
Ellington Financial Mortgage Trust, Class A1, Series 2020-2, 1.18%, 10/25/65(1)(2)(3) | | 199,618 | | 180,217 |
Homes Trust, Class A1, Series 2023-NQM2, 6.46%, 02/25/68(1)(4) | | 300,971 | | 303,217 |
MetLife Securitization Trust, Class A1A, Series 2019-1A, 3.75%, 04/25/58(1)(2)(3) | | 292,409 | | 285,073 |
Star Trust, Class A1, Series 2021-1, 1.22%, 05/25/65(1)(2)(3) | | 337,168 | | 298,909 |
VCAT LLC, Class A1, Series 2021-NPL2, 2.12%, 03/27/51(1)(4) | | 36,861 | | 36,674 |
Verus Securitization Trust, Class A1, Series 2020-1, 3.42%, 01/25/60(1)(4) | | 23,157 | | 22,193 |
Verus Securitization Trust, Class A1, Series 2020-4, 1.50%, 05/25/65(1)(4) | | 52,378 | | 49,411 |
Total Residential Mortgage Backed Securities | | | | 1,933,209 |
Total Mortgage Backed Securities | | | | |
(Cost $5,497,756) | | | | 5,604,722 |
CORPORATE BONDS – 23.9% | | | | |
Communication Services – 1.1% | | | | |
CCO Holdings LLC / CCO Holdings Capital Corp., 5.00%, 02/01/28(1) | | 32,000 | | 30,096 |
CSC Holdings LLC, 5.25%, 06/01/24 | | 26,000 | | 25,986 |
Directv Financing LLC / Directv Financing Co-Obligor, Inc., 5.88%, 08/15/27(1) | | 28,000 | | 26,640 |
Sprint Capital Corp., 6.88%, 11/15/28 | | 30,000 | | 32,432 |
Total Communication Services | | | | 115,154 |
Consumer Discretionary – 2.1% | | | | |
Ashton Woods USA LLC / Ashton Woods Finance Co., 6.63%, 01/15/28(1) | | 32,000 | | 31,560 |
Caesars Entertainment, Inc., 8.13%, 07/01/27(1) | | 30,000 | | 30,806 |
Ford Motor Credit Co. LLC, 6.95%, 03/06/26 | | 30,000 | | 30,684 |
Newell Brands, Inc., 6.38%, 09/15/27 | | 31,000 | | 30,545 |
Nissan Motor Acceptance Co. LLC, 6.95%, 09/15/26(1) | | 25,000 | | 25,850 |
Prime Security Services Borrower LLC / Prime Finance, Inc., 6.25%, 01/15/28(1) | | 32,000 | | 31,740 |
Weekley Homes LLC / Weekley Finance Corp., 4.88%, 09/15/28(1) | | 33,000 | | 30,790 |
Total Consumer Discretionary | | | | 211,975 |
Consumer Staples – 0.6% | | | | |
Albertsons Cos., Inc. / Safeway, Inc. / New Albertsons LP / Albertsons LLC, 6.50%, 02/15/28(1) | | 30,000 | | 30,353 |
The accompanying notes are an integral part of these financial statements.
7
Schedule of Investments — Virtus Newfleet Short Duration Core Plus Bond ETF (continued)
January 31, 2024 (unaudited)
Security Description | | Shares | | Value |
CORPORATE BONDS (continued) | | | | |
Consumer Staples (continued) | | | | |
Coty, Inc./HFC Prestige Products, Inc./HFC Prestige International US LLC, 4.75%, 01/15/29(1) | | $32,000 | | $30,534 |
Total Consumer Staples | | | | 60,887 |
Energy – 1.7% | | | | |
Civitas Resources, Inc., 8.38%, 07/01/28(1) | | 30,000 | | 31,589 |
DT Midstream, Inc., 4.13%, 06/15/29(1) | | 34,000 | | 31,269 |
Energy Transfer LP, 4.20%, 04/15/27 | | 30,000 | | 29,305 |
Eqm Midstream Partners LP, 7.50%, 06/01/27(1) | | 30,000 | | 30,889 |
Kodiak Gas Services LLC, 7.25%, 02/15/29(1) | | 5,000 | | 5,066 |
Ngpl Pipeco LLC, 4.88%, 08/15/27(1) | | 30,000 | | 29,497 |
Western Midstream Operating LP, 4.05%, 02/01/30 | | 15,000 | | 14,033 |
Total Energy | | | | 171,648 |
Financials – 9.7% | | | | |
Allstate Corp. (The), Series B, 8.56%, (3-Month SOFR + 3.20%), 08/15/53(2) | | 30,000 | | 30,066 |
Bank of America Corp., 6.42%, (3-Month SOFR + 1.03%), 02/05/26(2) | | 50,000 | | 50,162 |
Bank of America Corp., 1.73%, (SOFR + 0.96%), 07/22/27(2) | | 55,000 | | 50,714 |
Bank of New York Mellon Corp. (The), Series G, 4.70%, (US 5 Year CMT T- Note + 4.36%), perpetual(2)(5) | | 30,000 | | 29,557 |
Blackstone Private Credit Fund, 2.63%, 12/15/26 | | 10,000 | | 9,084 |
Blackstone Private Credit Fund, 4.00%, 01/15/29 | | 10,000 | | 9,200 |
Blue Owl Credit Income Corp., 5.50%, 03/21/25 | | 10,000 | | 9,905 |
Capital One Financial Corp., 6.31%, (SOFR + 2.64%), 06/08/29(2) | | 20,000 | | 20,630 |
Capital One Financial Corp., 5.70%, (SOFR + 1.91%), 02/01/30(2) | | 5,000 | | 5,050 |
Charles Schwab Corp. (The), Series G, 5.38%, (US 5 Year CMT T-Note + 4.97%), perpetual(2)(5) | | 15,000 | | 14,826 |
Charles Schwab Corp. (The), Series H, 4.00%, (US 10 Year CMT T- Note + 3.08%), perpetual(2)(5) | | 20,000 | | 16,628 |
Citigroup, Inc., Series T, 6.25%, (3-Month SOFR + 4.78%), perpetual(2)(5) | | 31,000 | | 30,911 |
Citigroup, Inc., 6.84%, (3-Month SOFR + 1.51%), 07/01/26(2) | | 35,000 | | 35,256 |
Citigroup, Inc., 3.20%, 10/21/26 | | 15,000 | | 14,353 |
Citigroup, Inc., 6.63%, (SOFR + 1.28%), 02/24/28(2) | | 35,000 | | 35,127 |
Citizens Financial Group, Inc., 5.84%, (SOFR + 2.01%), 01/23/30(2) | | 4,000 | | 4,029 |
Corebridge Financial, Inc., 6.88%, (US 5 Year CMT T-Note + 3.85%), 12/15/52(2) | | 30,000 | | 30,119 |
Fifth Third Bancorp, 4.06%, (SOFR + 1.36%), 04/25/28(2) | | 25,000 | | 23,943 |
Goldman Sachs Group, Inc. (The), 3.49%, (3-Month SOFR + 1.43%), 05/15/26(2) | | 25,000 | | 25,192 |
Goldman Sachs Group, Inc. (The), Series G, 7.33%, (3-Month SOFR + 2.01%), 10/28/27(2) | | 35,000 | | 35,808 |
Security Description | | Shares | | Value |
CORPORATE BONDS (continued) | | | | |
Financials (continued) | | | | |
Hub International Ltd., 7.25%, 06/15/30(1) | | $5,000 | | $5,147 |
Huntington Bancshares, Inc./Oh, 6.21%, (SOFR + 2.02%), 08/21/29(2) | | 25,000 | | 25,855 |
JPMorgan Chase & Co., Series HH, 4.60%, (3-Month SOFR + 3.13%), perpetual(2)(5) | | 25,000 | | 24,418 |
JPMorgan Chase & Co., 1.58%, (SOFR + 0.89%), 04/22/27(2) | | 45,000 | | 41,780 |
JPMorgan Chase & Co., 6.53%, (SOFR + 1.18%), 02/24/28(2) | | 40,000 | | 40,126 |
Ladder Capital Finance Holdings LLLP / Ladder Capital Finance Corp., 4.25%, 02/01/27(1) | | 27,000 | | 25,026 |
MetLife, Inc., Series G, 3.85%, (US 5 Year CMT T- Note + 3.58%), perpetual(2)(5) | | 15,000 | | 14,386 |
Morgan Stanley, 6.30%, (SOFR + 2.24%), 10/18/28(2) | | 75,000 | | 78,450 |
MSCI, Inc., 3.63%, 09/01/30(1) | | 35,000 | | 31,459 |
OneMain Finance Corp., 6.88%, 03/15/25 | | 30,000 | | 30,136 |
Prudential Financial, Inc., 6.00%, (US 5 Year CMT T- Note + 3.23%), 09/01/52(2) | | 25,000 | | 24,924 |
State Street Corp., 5.75%, (SOFR + 1.35%), 11/04/26(2) | | 15,000 | | 15,231 |
State Street Corp., 5.68%, (SOFR + 1.48%), 11/21/29(2) | | 15,000 | | 15,518 |
State Street Corp., Series I, 6.70%, (US 5 Year CMT T- Note + 2.61%), perpetual(2)(5) | | 20,000 | | 20,000 |
Synchrony Financial, 3.70%, 08/04/26 | | 20,000 | | 18,994 |
Truist Financial Corp., 7.16%, (SOFR + 2.45%), 10/30/29(2) | | 30,000 | | 32,408 |
Wells Fargo & Co., 3.53%, (SOFR + 1.51%), 03/24/28(2) | | 55,000 | | 52,727 |
Wells Fargo & Co., Series U, 5.88%, perpetual(2)(3)(5) | | 30,000 | | 29,887 |
Total Financials | | | | 1,007,032 |
Health Care – 1.5% | | | | |
Dentsply Sirona, Inc., 3.25%, 06/01/30 | | 35,000 | | 31,370 |
HCA, Inc., 5.20%, 06/01/28 | | 30,000 | | 30,310 |
Illumina, Inc., 5.75%, 12/13/27 | | 25,000 | | 25,594 |
Universal Health Services, Inc., 1.65%, 09/01/26 | | 40,000 | | 36,779 |
Viatris, Inc., 2.30%, 06/22/27 | | 30,000 | | 27,339 |
Total Health Care | | | | 151,392 |
Industrials – 2.6% | | | | |
Alaska Airlines Pass-Through Trust, Class A, Series 2020-1, 4.80%, 08/15/27(1) | | 30,593 | | 29,942 |
Boeing Co. (The), 4.88%, 05/01/25 | | 25,000 | | 24,863 |
Concentrix Corp., 6.65%, 08/02/26 | | 15,000 | | 15,366 |
CoStar Group, Inc., 2.80%, 07/15/30(1) | | 35,000 | | 30,093 |
Hexcel Corp., 4.20%, 02/15/27 | | 30,000 | | 28,828 |
Huntington Ingalls Industries, Inc., 2.04%, 08/16/28 | | 30,000 | | 26,470 |
Regal Rexnord Corp., 6.05%, 02/15/26(1) | | 15,000 | | 15,165 |
Regal Rexnord Corp., 6.05%, 04/15/28(1) | | 15,000 | | 15,228 |
TransDigm, Inc., 6.75%, 08/15/28(1) | | 30,000 | | 30,528 |
The accompanying notes are an integral part of these financial statements.
8
Schedule of Investments — Virtus Newfleet Short Duration Core Plus Bond ETF (continued)
January 31, 2024 (unaudited)
Security Description | | Shares | | Value |
CORPORATE BONDS (continued) | | | | |
Industrials (continued) | | | | |
United Airlines, Inc., 4.38%, 04/15/26(1) | | $32,000 | | $30,898 |
Veralto Corp., 5.35%, 09/18/28(1) | | 25,000 | | 25,536 |
Total Industrials | | | | 272,917 |
Information Technology – 0.8% | | | | |
Booz Allen Hamilton, Inc., 3.88%, 09/01/28(1) | | 40,000 | | 37,889 |
Kyndryl Holdings, Inc., 2.70%, 10/15/28 | | 25,000 | | 22,008 |
Oracle Corp., 3.25%, 11/15/27 | | 25,000 | | 23,749 |
Total Information Technology | | | | 83,646 |
Materials – 0.6% | | | | |
Ardagh Packaging Finance PLC / Ardagh Holdings USA, Inc., 4.13%, 08/15/26(1) | | 28,000 | | 25,174 |
Silgan Holdings, Inc., 1.40%, 04/01/26(1) | | 35,000 | | 32,043 |
Total Materials | | | | 57,217 |
Real Estate – 0.9% | | | | |
Epr Properties, 4.95%, 04/15/28 | | 20,000 | | 19,237 |
GLP Capital LP / GLP Financing II, Inc., 5.25%, 06/01/25 | | 35,000 | | 34,865 |
VICI Properties LP / VICI Note Co., Inc., 4.63%, 06/15/25(1) | | 20,000 | | 19,717 |
VICI Properties LP / VICI Note Co., Inc., 4.50%, 01/15/28(1) | | 20,000 | | 19,193 |
Total Real Estate | | | | 93,012 |
Utilities – 2.3% | | | | |
American Electric Power Co., Inc., 5.70%, 08/15/25 | | 25,000 | | 25,205 |
Exelon Corp., 5.15%, 03/15/28 | | 25,000 | | 25,377 |
Ferrellgas LP / Ferrellgas Finance Corp., 5.38%, 04/01/26(1) | | 32,000 | | 31,554 |
FirstEnergy Transmission LLC, 2.87%, 09/15/28(1) | | 30,000 | | 27,425 |
NRG Energy, Inc., 3.75%, 06/15/24(1) | | 25,000 | | 24,755 |
Pacificorp, 5.10%, 02/15/29 | | 10,000 | | 10,125 |
Pacificorp, 5.30%, 02/15/31 | | 5,000 | | 5,076 |
Puget Energy, Inc., 2.38%, 06/15/28 | | 25,000 | | 22,389 |
Southern Co. (The), Series 21-A, 3.75%, (US 5 Year CMT T- Note + 2.92%), 09/15/51(2) | | 40,000 | | 37,384 |
Vistra Operations Co. LLC, 5.63%, 02/15/27(1) | | 31,000 | | 30,567 |
Total Utilities | | | | 239,857 |
Total Corporate Bonds | | | | |
(Cost $2,403,326) | | | | 2,464,737 |
ASSET BACKED SECURITIES – 9.6% | | | | |
American Credit Acceptance Receivables Trust, Class C, Series 2021-3, 0.98%, 11/15/27(1) | | 61,663 | | 61,423 |
Arbys Funding LLC, Class A2, Series 2020-1A, 3.24%, 07/30/50(1) | | 33,775 | | 31,169 |
Avis Budget Rental Car Funding AESOP LLC, Class A, Series 2020-2A, 2.02%, 02/20/27(1) | | 100,000 | | 94,367 |
CCG Receivables Trust, Class A2, Series 2023-1, 5.82%, 09/16/30(1) | | 194,117 | | 195,519 |
Security Description | | Shares | | Value |
ASSET BACKED SECURITIES (continued) | | | | |
Exeter Automobile Receivables Trust, Class B, Series 2023-2A, 5.61%, 09/15/27 | | $205,000 | | $204,873 |
HIN Timeshare Trust, Class C, Series 2020-A, 3.42%, 10/09/39(1) | | 112,522 | | 106,662 |
Mariner Finance Issuance Trust, Class A, Series 2020-AA, 2.19%, 08/21/34(1) | | 101,458 | | 99,402 |
Mercury Financial Credit Card Master Trust, Class A, Series 2023-1A, 8.04%, 09/20/27(1) | | 200,000 | | 202,500 |
Total Asset Backed Securities | | | | |
(Cost $985,088) | | | | 995,915 |
U.S. GOVERNMENT SECURITIES – 7.0% | | | | |
U.S. Treasury Note | | | | |
2.50%, 04/30/24 | | 310,000 | | 307,860 |
5.00%, 10/31/25 | | 305,000 | | 308,491 |
4.63%, 11/15/26 | | 100,000 | | 101,543 |
Total U.S. Government Securities | | | | |
(Cost $712,982) | | | | 717,894 |
FOREIGN BONDS – 2.7% | | | | |
Consumer Staples – 0.2% | | | | |
Bat Capital Corp., 4.70%, 04/02/27 (United Kingdom) | | 25,000 | | 24,826 |
Energy – 0.7% | | | | |
BP Capital Markets PLC, 4.88%, (US 5 Year CMT T- Note + 4.40%), perpetual (United Kingdom)(2)(5) | | 45,000 | | 42,708 |
Enbridge, Inc., 7.38%, (US 5 Year CMT T- Note + 3.71%), 01/15/83 (Canada)(2) | | 30,000 | | 30,018 |
Total Energy | | | | 72,726 |
Financials – 0.4% | | | | |
Brookfield Finance, Inc., 3.90%, 01/25/28 (Canada) | | 40,000 | | 38,712 |
Industrials – 0.5% | | | | |
Avolon Holdings Funding Ltd., 4.38%, 05/01/26 (Ireland)(1) | | 25,000 | | 24,262 |
Gfl Environmental, Inc., 5.13%, 12/15/26 (Canada)(1) | | 31,000 | | 30,296 |
Total Industrials | | | | 54,558 |
Information Technology – 0.3% | | | | |
Open Text Corp., 3.88%, 02/15/28 (Canada)(1) | | 33,000 | | 30,680 |
Materials – 0.3% | | | | |
INEOS Finance PLC, 6.75%, 05/15/28 (Luxembourg)(1) | | 32,000 | | 31,325 |
Utilities – 0.3% | | | | |
National Grid PLC, 5.60%, 06/12/28 (United Kingdom) | | 30,000 | | 30,896 |
Total Foreign Bonds | | | | |
(Cost $274,728) | | | | 283,723 |
TOTAL INVESTMENTS — 97.5% | | | | |
(Cost $9,873,880) | | | | 10,066,991 |
Other Assets in Excess of Liabilities — 2.5% | | | | 263,270 |
Net Assets — 100.0% | | | | $10,330,261 |
The accompanying notes are an integral part of these financial statements.
9
Schedule of Investments — Virtus Newfleet Short Duration Core Plus Bond ETF (continued)
January 31, 2024 (unaudited)
(1)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid. At January 31, 2024, the aggregate value of these securities was $6,748,755, or 65.3% of net assets.
(2)Variable rate instrument. The interest rate shown reflects the rate in effect at January 31, 2024.
(3)Adjustable rate security with an interest rate that is not based on a published reference index and spread. The rate is based on the structure of the agreement and current market conditions.
(4)Represents step coupon bond. Rate shown reflects the rate in effect as of January 31, 2024.
(5)Perpetual security with no stated maturity date.
Abbreviations:
CMT — Constant Maturity Treasury Index
SOFR — Secured Overnight Financing Rate
Portfolio Composition |
January 31, 2024 (unaudited) |
Asset Allocation as of 01/31/2024 (based on net assets)
Mortgage Backed Securities | | 54.3 | % |
Corporate Bonds | | 23.9 | % |
Asset Backed Securities | | 9.6 | % |
U.S. Government Securities | | 7.0 | % |
Foreign Bonds | | 2.7 | % |
Other Assets in Excess of Liabilities | | 2.5 | % |
Total | | 100.0 | % |
The following table summarizes valuation of the Fund’s investments under the fair value hierarchy levels as of January 31, 2024.
| | Level 1 | | Level 2 | | Level 3 | | Total |
Asset Valuation Inputs | | | | | | | | |
Mortgage Backed Securities | | $— | | $5,604,722 | | $— | | $5,604,722 |
Corporate Bonds | | — | | 2,464,737 | | — | | 2,464,737 |
Asset Backed Securities | | — | | 995,915 | | — | | 995,915 |
U.S. Government Securities | | — | | 717,894 | | — | | 717,894 |
Foreign Bonds | | — | | 283,723 | | — | | 283,723 |
Total | | $— | | $10,066,991 | | $— | | $10,066,991 |
Schedule of Investments — Virtus Newfleet Short Duration High Yield Bond ETF
January 31, 2024 (unaudited)
The accompanying notes are an integral part of these financial statements.
10
Security Description | | Principal | | Value |
CORPORATE BONDS — 80.0% | | | | |
Communication Services — 7.4% | | | | |
CCO Holdings LLC / CCO Holdings Capital Corp., 6.38%, 09/01/29(1) | | $2,000 | | $1,949 |
CCO Holdings LLC / CCO Holdings Capital Corp., 4.50%, 08/15/30(1) | | 5,000 | | 4,352 |
CSC Holdings LLC, 5.25%, 06/01/24 | | 30,000 | | 29,984 |
DIRECTV Financing LLC, 8.88%, 02/01/30(1) | | 5,000 | | 5,104 |
DISH DBS Corp., 5.88%, 11/15/24 | | 30,000 | | 27,875 |
DISH DBS Corp., 7.75%, 07/01/26 | | 60,000 | | 35,400 |
Gray Television, Inc., 7.00%, 05/15/27(1) | | 60,000 | | 58,717 |
Level 3 Financing, Inc., 3.63%, 01/15/29(1) | | 40,000 | | 12,000 |
Millennium Escrow Corp., 6.63%, 08/01/26(1) | | 45,000 | | 28,845 |
Rackspace Technology Global, Inc., 5.38%, 12/01/28(1) | | 50,000 | | 15,664 |
Univision Communications, Inc., 6.63%, 06/01/27(1) | | 25,000 | | 24,749 |
Total Communication Services | | | | 244,639 |
Consumer Discretionary — 15.0% | | | | |
Carnival Corp., 7.63%, 03/01/26(1) | | 43,000 | | 43,705 |
Carnival Corp., 7.00%, 08/15/29(1) | | 5,000 | | 5,203 |
Churchill Downs, Inc., 6.75%, 05/01/31(1) | | 30,000 | | 30,379 |
Clarios Global LP / Clarios US Finance Co., 8.50%, 05/15/27(1) | | 30,000 | | 29,974 |
Ford Motor Co., 3.25%, 02/12/32 | | 95,000 | | 78,692 |
Gates Global LLC / Gates Corp., 6.25%, 01/15/26(1) | | 35,000 | | 35,037 |
Legends Hospitality Holding Co. LLC / Legends Hospitality Co.-Issuer, Inc., 5.00%, 02/01/26(1) | | 40,000 | | 40,025 |
Light & Wonder International, Inc., 7.00%, 05/15/28(1) | | 40,000 | | 39,980 |
NCL Finance Ltd., 6.13%, 03/15/28(1) | | 20,000 | | 19,140 |
Newell Brands, Inc., 6.63%, 09/15/29 | | 44,000 | | 42,742 |
NMG Holding Co., Inc. / Neiman Marcus Group LLC, 7.13%, 04/01/26(1) | | 50,000 | | 48,813 |
PetSmart, Inc. / PetSmart Finance Corp., 7.75%, 02/15/29(1) | | 25,000 | | 24,186 |
Royal Caribbean Cruises Ltd., 9.25%, 01/15/29(1) | | 3,000 | | 3,224 |
Weekley Homes LLC / Weekley Finance Corp., 4.88%, 09/15/28(1) | | 60,000 | | 55,983 |
Total Consumer Discretionary | | | | 497,083 |
Consumer Staples — 2.2% | | | | |
Coty, Inc./HFC Prestige Products, Inc./HFC Prestige International US LLC, 6.63%, 07/15/30(1) | | 27,000 | | 27,526 |
H-Food Holdings LLC / Hearthside Finance Co., Inc., 8.50%, 06/01/26(1) | | 30,000 | | 2,100 |
HLF Financing Sarl LLC / Herbalife International, Inc., 4.88%, 06/01/29(1) | | 55,000 | | 43,030 |
Total Consumer Staples | | | | 72,656 |
Energy — 15.6% | | | | |
Antero Midstream Partners LP / Antero Midstream Finance Corp., 5.75%, 01/15/28(1) | | 36,000 | | 35,366 |
Ascent Resources Utica Holdings LLC / ARU Finance Corp., 8.25%, 12/31/28(1) | | 45,000 | | 46,058 |
CITGO Petroleum Corp., 7.00%, 06/15/25(1) | | 49,000 | | 49,029 |
Security Description | | Principal | | Value |
CORPORATE BONDS (continued) | | | | |
Energy (continued) | | | | |
Civitas Resources, Inc., 8.75%, 07/01/31(1) | | $32,000 | | $34,059 |
CrownRock LP / CrownRock Finance, Inc., 5.63%, 10/15/25(1) | | 35,000 | | 34,854 |
DT Midstream, Inc., 4.13%, 06/15/29(1) | | 40,000 | | 36,788 |
Energy Transfer LP, Series H, 6.50%, (US 5 Year CMT T- Note + 5.69%), perpetual(2)(3) | | 60,000 | | 58,127 |
Genesis Energy LP / Genesis Energy Finance Corp., 8.88%, 04/15/30 | | 16,000 | | 16,751 |
Helix Energy Solutions Group, Inc., 9.75%, 03/01/29(1) | | 25,000 | | 26,249 |
Hilcorp Energy I LP / Hilcorp Finance Co., 5.75%, 02/01/29(1) | | 35,000 | | 33,832 |
Hilcorp Energy I LP / Hilcorp Finance Co., 6.00%, 02/01/31(1) | | 15,000 | | 14,457 |
Kodiak Gas Services LLC, 7.25%, 02/15/29(1) | | 5,000 | | 5,066 |
Magnolia Oil & Gas Operating LLC / Magnolia Oil & Gas Finance Corp., 6.00%, 08/01/26(1) | | 40,000 | | 39,566 |
Nabors Industries Ltd., 7.25%, 01/15/26(1) | | 40,000 | | 39,034 |
Transocean, Inc., 11.50%, 01/30/27(1) | | 13,000 | | 13,595 |
Transocean, Inc., 8.75%, 02/15/30(1) | | 23,750 | | 24,629 |
Venture Global Calcasieu Pass LLC, 3.88%, 08/15/29(1) | | 5,000 | | 4,473 |
Viper Energy Partners LP, 7.38%, 11/01/31(1) | | 5,000 | | 5,176 |
Total Energy | | | | 517,109 |
Financials — 8.6% | | | | |
Blackstone Private Credit Fund, 6.25%, 01/25/31(1) | | 10,000 | | 9,958 |
Blue Owl Credit Income Corp., 6.65%, 03/15/31(1) | | 10,000 | | 9,920 |
BroadStreet Partners, Inc., 5.88%, 04/15/29(1) | | 50,000 | | 47,455 |
Citigroup, Inc., Series T, 6.25%, (3-Month SOFR + 4.78%), perpetual(2)(3) | | 35,000 | | 34,899 |
Global Atlantic Finance Co., 7.95%, 06/15/33(1) | | 38,000 | | 42,264 |
Hub International Ltd., 7.25%, 06/15/30(1) | | 5,000 | | 5,147 |
Ladder Capital Finance Holdings LLLP / Ladder Capital Finance Corp., 4.25%, 02/01/27(1) | | 60,000 | | 55,614 |
Nationstar Mortgage Holdings, Inc., 5.75%, 11/15/31(1) | | 23,000 | | 21,228 |
NCR Atleos Escrow Corp., 9.50%, 04/01/29(1) | | 22,000 | | 23,617 |
OneMain Finance Corp., 6.88%, 03/15/25 | | 35,000 | | 35,159 |
Total Financials | | | | 285,261 |
Health Care — 6.8% | | | | |
Adapthealth LLC, 5.13%, 03/01/30(1) | | 50,000 | | 39,161 |
Akumin, Inc., 7.00%, 11/01/25(1)(4) | | 30,000 | | 24,476 |
Bausch Health Cos., Inc., 6.13%, 02/01/27(1) | | 5,000 | | 3,169 |
Bausch Health Cos., Inc., 5.75%, 08/15/27(1) | | 20,000 | | 11,968 |
Catalent Pharma Solutions, Inc., 3.50%, 04/01/30(1) | | 30,000 | | 26,390 |
CHS/Community Health Systems, Inc., 6.88%, 04/15/29(1) | | 15,000 | | 10,212 |
CHS/Community Health Systems, Inc., 5.25%, 05/15/30(1) | | 40,000 | | 33,160 |
CHS/Community Health Systems, Inc., 4.75%, 02/15/31(1) | | 20,000 | | 15,893 |
The accompanying notes are an integral part of these financial statements.
11
Schedule of Investments — Virtus Newfleet Short Duration High Yield Bond ETF (continued)
January 31, 2024 (unaudited)
Security Description | | Principal | | Value |
CORPORATE BONDS (continued) | | | | |
Health Care (continued) | | | | |
Lannett Co., Inc., 7.75%, 04/15/26(1)(4)(5) | | $15,000 | | $1,078 |
LifePoint Health, Inc., 9.88%, 08/15/30(1) | | 30,000 | | 30,715 |
Medline Borrower LP, 5.25%, 10/01/29(1) | | 30,000 | | 27,999 |
Total Health Care | | | | 224,221 |
Industrials — 8.5% | | | | |
Beacon Roofing Supply, Inc., 6.50%, 08/01/30(1) | | 15,000 | | 15,235 |
Chart Industries, Inc., 9.50%, 01/01/31(1) | | 30,000 | | 32,022 |
Global Infrastructure Solutions, Inc., 7.50%, 04/15/32(1) | | 50,000 | | 46,117 |
Hertz Corp. (The), 5.00%, 12/01/29(1) | | 20,000 | | 15,823 |
LBM Acquisition LLC, 6.25%, 01/15/29(1) | | 23,000 | | 20,901 |
Neptune Bidco US, Inc., 9.29%, 04/15/29(1) | | 35,000 | | 33,459 |
Science Applications International Corp., 4.88%, 04/01/28(1) | | 39,000 | | 36,847 |
SRS Distribution, Inc., 6.13%, 07/01/29(1) | | 45,000 | | 42,626 |
TransDigm, Inc., 5.50%, 11/15/27 | | 40,000 | | 38,950 |
Total Industrials | | | | 281,980 |
Information Technology — 3.8% | | | | |
Commscope Technologies LLC, 6.00%, 06/15/25(1) | | 20,000 | | 15,918 |
Consensus Cloud Solutions, Inc., 6.00%, 10/15/26(1) | | 10,000 | | 9,490 |
Consensus Cloud Solutions, Inc., 6.50%, 10/15/28(1) | | 30,000 | | 26,972 |
Gtcr W-2 Merger Sub LLC, 7.50%, 01/15/31(1) | | 18,000 | | 18,712 |
Viasat, Inc., 5.63%, 09/15/25(1) | | 55,000 | | 53,186 |
Total Information Technology | | | | 124,278 |
Materials — 7.7% | | | | |
Asp Unifrax Holdings, Inc., 5.25%, 09/30/28(1) | | 62,000 | | 41,250 |
Graham Packaging Co., Inc., 7.13%, 08/15/28(1) | | 37,000 | | 33,060 |
Illuminate Buyer LLC / Illuminate Holdings IV, Inc., 9.00%, 07/01/28(1) | | 20,000 | | 19,568 |
LSB Industries, Inc., 6.25%, 10/15/28(1) | | 60,000 | | 57,046 |
Mauser Packaging Solutions Holding Co., 9.25%, 04/15/27(1) | | 30,000 | | 28,996 |
New Enterprise Stone & Lime Co., Inc., 9.75%, 07/15/28(1) | | 50,000 | | 50,504 |
Windsor Holdings III LLC, 8.50%, 06/15/30(1) | | 22,000 | | 22,677 |
Total Materials | | | | 253,101 |
Real Estate — 1.3% | | | | |
Ashton Woods USA LLC / Ashton Woods Finance Co., 4.63%, 04/01/30(1) | | 30,000 | | 27,180 |
MPT Operating Partnership LP / MPT Finance Corp., 3.50%, 03/15/31 | | 25,000 | | 15,342 |
Total Real Estate | | | | 42,522 |
Utilities — 3.1% | | | | |
Ferrellgas LP / Ferrellgas Finance Corp., 5.38%, 04/01/26(1) | | 30,000 | | 29,582 |
Ferrellgas LP / Ferrellgas Finance Corp., 5.88%, 04/01/29(1) | | 18,000 | | 17,654 |
NRG Energy, Inc., 7.00%, 03/15/33(1) | | 25,000 | | 26,409 |
Sunnova Energy Corp., 5.88%, 09/01/26(1) | | 35,000 | | 29,100 |
Total Utilities | | | | 102,745 |
Security Description | | Principal | | Value |
CORPORATE BONDS (continued) | | | | |
Total Corporate Bonds | | | | |
(Cost $2,801,924) | | | | $2,645,595 |
FOREIGN BONDS — 11.5% | | | | |
Communication Services — 0.3% | | | | |
Telesat Canada / Telesat LLC, 6.50%, 10/15/27 (Canada)(1) | | $20,000 | | 9,100 |
Consumer Discretionary — 2.1% | | | | |
Ontario Gaming GTA LP, 8.00%, 08/01/30 (Canada)(1) | | 25,000 | | 26,078 |
Raptor Acquisition Corp. / Raptor Co.-Issuer LLC, 4.88%, 11/01/26 (Canada)(1) | | 45,000 | | 43,224 |
Total Consumer Discretionary | | | | 69,302 |
Energy — 3.6% | | | | |
Coronado Finance Pty Ltd., 10.75%, 05/15/26 (Australia)(1) | | 50,000 | | 52,579 |
Northriver Midstream Finance LP, 5.63%, 02/15/26 (Canada)(1) | | 25,000 | | 24,384 |
Teine Energy Ltd., 6.88%, 04/15/29 (Canada)(1) | | 45,000 | | 42,854 |
Total Energy | | | | 119,817 |
Health Care — 1.8% | | | | |
Teva Pharmaceutical Finance Netherlands III BV, 3.15%, 10/01/26 (Israel) | | 65,000 | | 60,694 |
Industrials — 1.4% | | | | |
Trivium Packaging Finance BV, 8.50%, 08/15/27 (Netherlands)(1) | | 21,000 | | 20,514 |
VistaJet Malta Finance PLC / Vista Management Holding, Inc., 9.50%, 06/01/28 (Switzerland)(1) | | 28,000 | | 23,753 |
Total Industrials | | | | 44,267 |
Materials — 2.3% | | | | |
FMG Resources August 2006 Pty Ltd., 5.88%, 04/15/30 (Australia)(1) | | 43,000 | | 42,516 |
Taseko Mines Ltd., 7.00%, 02/15/26 (Canada)(1) | | 35,000 | | 34,419 |
Total Materials | | | | 76,935 |
Total Foreign Bonds | | | | |
(Cost $389,690) | | | | 380,115 |
TERM LOAN — 0.7% | | | | |
Manufacturing — 0.7% | | | | |
Arcline FM Holdings LLC, 13.86%, (3-Month SOFR + 8.51%), 06/15/29(2) | | 25,000 | | 24,328 |
TOTAL INVESTMENTS — 92.2% | | | | |
(Cost $3,216,289) | | | | 3,050,038 |
Other Assets in Excess of Liabilities — 7.8% | | | | 258,697 |
Net Assets — 100.0% | | | | $3,308,735 |
(1)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid. At January 31, 2024, the aggregate value of these securities was $2,551,095, or 77.1% of net assets.
(2)Variable rate instrument. The interest rate shown reflects the rate in effect at January 31, 2024.
(3)Perpetual security with no stated maturity date.
The accompanying notes are an integral part of these financial statements.
12
Schedule of Investments — Virtus Newfleet Short Duration High Yield Bond ETF (continued)
January 31, 2024 (unaudited)
(4)Security in default, interest payments are being received during the bankruptcy proceedings.
(5)Security valued at fair value as determined in good faith by or under the direction of the Trustees. This security is disclosed as a Level 3 security in the Fair Value Hierarchy table located after the Schedule of Investments.
Abbreviations:
CMT — Constant Maturity Treasury Index
SOFR — Secured Overnight Financing Rate
Portfolio Composition |
January 31, 2024 (unaudited) |
Asset Allocation as of 01/31/2024 (based on net assets)
Corporate Bonds | | 80.0 | % |
Foreign Bonds | | 11.5 | % |
Term Loan | | 0.7 | % |
Other Assets in Excess of Liabilities | | 7.8 | % |
Total | | 100.0 | % |
The following table summarizes valuation of the Fund’s investments under the fair value hierarchy levels as of January 31, 2024.
| | Level 1 | | Level 2 | | Level 3 | | Total |
Asset Valuation Inputs | | | | | | | | |
Corporate Bonds | | $— | | $2,644,517 | | $1,078 | | $2,645,595 |
Foreign Bonds | | — | | 380,115 | | — | | 380,115 |
Term Loan | | — | | 24,328 | | — | | 24,328 |
Total | | $— | | $3,048,960 | | $1,078 | | $3,050,038 |
Management has determined that the amount of Level 3 securities compared to total net assets is not material; therefore, the rollforward of Level 3 securities and assumptions are not shown for the period ended January 31, 2024.
The accompanying notes are an integral part of these financial statements.
13
Security Description | | Principal | | Value | |
TERM LOANS — 97.0% | | | | | |
Basic Materials — 7.3% | | | | | |
Arsenal AIC Parent LLC, 9.83%, (1-Month SOFR + 4.50%), 07/27/30(1) | | $847,875 | | $849,088 | |
Cyanco Intermediate 2 Corp., 10.09%, (1-Month SOFR + 4.75%), 06/29/28(1) | | 608,475 | | 608,983 | |
Domtar Corp., 10.95%, (1-Month SOFR + 5.61%), 11/30/28(1) | | 1,560,020 | | 1,534,350 | |
INEOS US Finance LLC, 8.93%, (1-Month SOFR + 3.60%), 02/18/30(1) | | 995,000 | | 985,358 | |
INEOS US Petrochem LLC, 9.68%, (1-Month SOFR + 4.35%), 03/31/29(1) | | 225,000 | | 224,156 | |
LSF11 A5 Holdco LLC, 9.68%, (1-Month SOFR + 4.35%), 10/15/28(1) | | 497,500 | | 498,124 | |
Manchester Acquisition Sub LLC, 11.28%, (3-Month SOFR + 5.90%), 11/16/26(1) | | 980,982 | | 875,120 | |
Mativ Holdings, Inc., 9.20%, (1-Month SOFR + 3.86%), 04/20/28(1) | | 482,624 | | 482,624 | |
SK Neptune Husky Group Sarl, 10.43%, (3-Month SOFR + 5.15%), 01/03/29(1) | | 862,908 | | 324,311 | |
Trinseo Materials Operating SCA, 8.15%, (3-Month SOFR + 2.76%), 05/03/28(1) | | 498,721 | | 382,936 | |
Tronox Finance LLC, 8.85%, (3-Month SOFR + 3.50%), 08/11/28(1) | | 650,000 | | 650,000 | |
Total Basic Materials | | | | 7,415,050 | |
Communications — 16.9% | | | | | |
ABG Intermediate Holdings 2 LLC, 8.93%, (1-Month SOFR + 3.60%), 12/10/28(1) | | 835,503 | | 838,573 | |
Altice Financing SA, 10.31%, (3-Month SOFR + 5.00%), 10/31/27(1) | | 646,734 | | 645,925 | |
Altice France SA, 10.81%, (3-Month SOFR + 5.50%), 08/15/28(1) | | 1,244,359 | | 1,134,184 | |
Ciena Corp., 7.34%, (1-Month SOFR + 2.00%), 10/20/30(1) | | 498,750 | | 500,984 | |
Cogeco Communications USA II LP, 0.00%, (SOFR + 0.00%), 09/15/30(2) | | 815,000 | | 794,014 | |
Cogeco Communications USA II LP, 8.58%, (1-Month SOFR + 3.25%), 09/15/30(1) | | 685,000 | | 667,361 | |
Connect Finco SARL, 8.83%, (1-Month SOFR + 3.50%), 12/11/26(1) | | 1,042,700 | | 1,043,091 | |
Consolidated Communications, Inc., 8.95%, (1-Month SOFR + 3.50%), 10/02/27(1) | | 400,000 | | 378,862 | |
Crown Subsea Communications Holding, Inc., 0.00%, (SOFR + 0.00%), 01/26/31(2) | | 600,000 | | 601,500 | |
CSC Holdings LLC, 7.95%, (1-Month SOFR + 2.50%), 04/15/27(1) | | 99,740 | | 95,243 | |
CSC Holdings LLC, 0.00%, (SOFR + 0.00%), 01/17/28(2) | | 100,000 | | 97,885 | |
CSC Holdings LLC, 9.83%, (1-Month SOFR + 4.50%), 01/17/28(1) | | 994,975 | | 973,936 | |
Digital Media Solutions LLC, 16.61%, (3-Month SOFR + 11.26%), 05/25/26(1) | | 453,682 | | 241,756 | |
LendingTree LLC, 9.20%, (1-Month SOFR + 3.86%), 09/15/28(1) | | 738,750 | | 686,114 | |
Lumen Technologies, Inc., 7.70%, (1-Month SOFR + 2.36%), 03/15/27(1) | | 990,453 | | 703,222 | |
Magnite, Inc., 0.00%, (SOFR + 0.00%), 01/30/31(2) | | 430,000 | | 424,896 |
Security Description | | Principal | | Value | |
TERM LOANS (continued) | | | | | |
Communications (continued) | | | | | |
Patagonia Holdco LLC, 11.12%, (3-Month SOFR + 5.75%), 08/01/29(1) | | $454,511 | | $417,923 | |
Planet US Buyer LLC, 0.00%, (SOFR + 0.00%), 01/31/31(2) | | 55,000 | | 54,863 | |
Radiate Holdco LLC, 8.70%, (1-Month SOFR + 3.25%), 09/25/26(1) | | 793,229 | | 645,422 | |
SBA Senior Finance II LLC, 7.34%, (1-Month SOFR + 2.00%), 01/20/31(1) | | 270,000 | | 269,831 | |
Sinclair Television Group, Inc., 7.95%, (1-Month SOFR + 2.61%), 09/30/26(1) | | 849,066 | | 830,705 | |
Sinclair Television Group, Inc., 0.00%, (SOFR + 0.00%), 04/01/28(2) | | 95,000 | | 86,735 | |
Sinclair Television Group, Inc., 8.45%, (1-Month SOFR + 3.11%), 04/01/28(1) | | 199,237 | | 181,903 | |
Summer BC Holdco B SARL, 0.00%, (SOFR + 0.00%), 12/04/26(2) | | 200,000 | | 199,542 | |
Summer BC Holdco B SARL, 10.11%, (3-Month SOFR + 4.76%), 12/04/26(1) | | 734,972 | | 733,289 | |
Venga Finance Sarl, 10.40%, (3-Month SOFR + 5.01%), 11/05/25(1) | | 739,497 | | 738,802 | |
Venga Finance Sarl, 0.00%, (SOFR + 0.00%), 11/03/28(2) | | 748,106 | | 747,403 | |
Virgin Media Bristol LLC, 8.79%, (6-Month SOFR + 3.35%), 03/31/31(1) | | 900,000 | | 889,767 | |
Zacapa SARL, 0.00%, (SOFR + 0.00%), 02/10/29(2) | | 250,000 | | 249,375 | |
Zacapa SARL, 9.36%, (SOFR + 4.04%), 03/22/29(1) | | 1,281,720 | | 1,278,516 | |
Total Communications | | | | 17,151,622 | |
Consumer, Cyclical — 9.6% | | | | | |
AAdvantage Loyalty IP Ltd., 10.33%, (3-Month SOFR + 5.01%), 04/20/28(1) | | 1,619,722 | | 1,662,127 | |
Allen Media LLC, 11.00%, (3-Month SOFR + 5.65%), 02/10/27(1) | | 693,566 | | 623,918 | |
Foundation Building Materials, Inc., 0.00%, (SOFR + 0.00%), 01/24/31(2) | | 350,000 | | 348,852 | |
Golden Entertainment, Inc., 8.19%, (1-Month SOFR + 2.85%), 05/19/30(1) | | 696,500 | | 697,371 | |
Light & Wonder International, Inc., 8.08%, (1-Month SOFR + 2.75%), 04/16/29(1) | | 1,000,000 | | 1,002,395 | |
Mileage Plus Holdings LLC, 10.77%, (3-Month SOFR + 5.40%), 06/21/27(1) | | 1,251,765 | | 1,291,796 | |
Oravel Stays Singapore Pte Ltd., 13.88%, (3-Month SOFR + 8.51%), 06/23/26(1) | | 620,530 | | 580,195 | |
Phinia, Inc., 9.43%, (1-Month SOFR + 4.10%), 06/08/28(1) | | 698,250 | | 699,996 | |
Playa Resorts Holding BV, 8.58%, (1-Month SOFR + 3.25%), 01/05/29(1) | | 1,485,000 | | 1,486,767 | |
Travel + Leisure Co., 8.69%, (1-Month SOFR + 3.35%), 12/14/29(1) | | 660,000 | | 661,650 | |
Windsor Holdings III LLC, 9.85%, (1-Month SOFR + 4.50%), 06/21/30(1) | | 698,250 | | 700,093 | |
Total Consumer, Cyclical | | | | 9,755,160 | |
Consumer, Non—cyclical — 11.1% | | | | | |
Adtalem Global Education, Inc., 8.95%, (1-Month SOFR + 3.61%), 08/14/28(1) | | 285,000 | | 284,721 | |
The accompanying notes are an integral part of these financial statements.
14
Schedule of Investments — Virtus Seix Senior Loan ETF (continued)
January 31, 2024 (unaudited)
Security Description | | Principal | | Value | |
TERM LOANS (continued) | | | | | |
Consumer, Non—cyclical (continued) | | | | | |
AHP Health Partners, Inc., 8.95%, (1-Month SOFR + 3.61%), 08/24/28(1) | | $977,500 | | $979,822 | |
Alpine US Bidco LLC, 9.59%, (1-Month SOFR + 4.25%), 12/16/30(1) | | 240,000 | | 238,933 | |
Catalent Pharma Solutions, Inc., 8.33%, (1-Month SOFR + 3.00%), 02/22/28(1) | | 500,000 | | 500,000 | |
Employbridge LLC, 10.34%, (3-Month SOFR + 5.01%), 07/19/28(1) | | 488,750 | | 417,881 | |
Fortrea Holdings, Inc., 9.08%, (1-Month SOFR + 3.75%), 06/12/30(1) | | 995,997 | | 997,616 | |
Fugue Finance LLC, 9.39%, (3-Month SOFR + 4.00%), 02/29/24(1) | | 744,375 | | 747,475 | |
Indivior Finance Sarl, 10.86%, (3-Month SOFR + 5.51%), 06/30/26(1) | | 487,500 | | 487,500 | |
MPH Acquisition Holdings LLC, 9.90%, (3-Month SOFR + 4.51%), 08/17/28(1) | | 733,125 | | 702,884 | |
National Mentor Holdings, Inc., 9.18%, (1-Month SOFR + 3.85%), 02/18/28(1) | | 453,279 | | 414,809 | |
National Mentor Holdings, Inc., 9.20%, (3-Month SOFR + 3.85%), 02/18/28(1) | | 111,276 | | 101,832 | |
National Mentor Holdings, Inc., 9.20%, (3-Month SOFR + 3.85%), 03/02/28(1) | | 2,174 | | 1,989 | |
Neptune Bidco US, Inc., 10.42%, (3-Month SOFR + 5.10%), 04/11/29(1) | | 249,372 | | 229,746 | |
OMNIA Partners LLC, 9.07%, (3-Month SOFR + 3.75%), 07/25/30(1) | | 500,000 | | 501,877 | |
PetIQ Holdings LLC, 10.17%, (6-Month SOFR + 4.68%), 04/13/28(1) | | 600,000 | | 595,500 | |
Primary Products Finance LLC, 9.48%, (3-Month SOFR + 4.15%), 10/25/28(1) | | 496,222 | | 496,929 | |
Sabre GLBL, Inc., 10.43%, (1-Month SOFR + 5.10%), 06/30/28(1) | | 970,392 | | 898,219 | |
Signal Parent, Inc., 8.93%, (1-Month SOFR + 3.60%), 04/03/28(1) | | 459,898 | | 415,716 | |
Star Parent, Inc., 9.35%, (3-Month SOFR + 4.00%), 09/19/30(1) | | 1,000,000 | | 978,125 | |
Surgery Center Holdings, Inc., 8.83%, (1-Month SOFR + 3.50%), 12/04/30(1) | | 255,000 | | 255,797 | |
TTF Holdings LLC, 9.45%, (1-Month SOFR + 4.11%), 03/31/28(1) | | 871,713 | | 872,802 | |
WestJet Loyalty LP, 0.00%, (SOFR + 0.00%), 02/01/31(2) | | 110,000 | | 108,900 | |
Total Consumer, Non-cyclical | | | | 11,229,073 | |
Diversified — 1.8% | | | | | |
Belfor Holdings, Inc., 9.08%, (1-Month SOFR + 3.75%), 10/25/30(1) | | 1,000,000 | | 1,001,250 | |
Clue Opco LLC, 0.00%, (SOFR + 0.00%), 09/20/30(2) | | 545,000 | | 535,236 | |
Clue Opco LLC, 9.83%, (1-Month SOFR + 4.50%), 09/20/30(1) | | 245,000 | | 240,611 | |
Total Diversified | | | | 1,777,097 | |
Energy — 8.4% | | | | | |
AL NGPL Holdings LLC, 8.83%, (3-Month SOFR + 3.50%), 04/13/28(1) | | 485,616 | | 486,376 | |
Buckeye Partners LP, 0.00%, (SOFR + 0.00%), 11/02/26(2) | | 500,000 | | 500,000 |
Security Description | | Principal | | Value | |
TERM LOANS (continued) | | | | | |
Energy (continued) | | | | | |
GIP III Stetson I LP, 0.00%, (SOFR + 0.00%), 10/31/28(2) | | $600,000 | | $603,564 | |
GIP III Stetson I LP, 9.68%, (1-Month SOFR + 4.35%), 10/31/28(1) | | 972,495 | | 978,271 | |
New Fortress Energy, Inc., 0.00%, (SOFR + 0.00%), 10/30/28(2) | | 150,000 | | 150,300 | |
New Fortress Energy, Inc., 10.32%, (3-Month SOFR + 5.00%), 10/30/28(1) | | 1,350,000 | | 1,352,700 | |
Oryx Midstream Services Permian Basin LLC, 0.00%, (SOFR + 0.00%), 10/05/28(2) | | 325,000 | | 324,188 | |
Oxbow Carbon LLC, 9.43%, (1-Month SOFR + 4.10%), 05/05/30(1) | | 625,627 | | 626,412 | |
Oxbow Carbon LLC, 9.45%, (3-Month SOFR + 4.10%), 05/05/30(1) | | 619,370 | | 620,147 | |
Par Petroleum LLC, 9.74%, (3-Month SOFR + 4.35%), 02/14/30(1) | | 942,875 | | 943,700 | |
WaterBridge Midstream Operating LLC, 0.00%, (SOFR + 0.00%), 06/18/26(2) | | 500,000 | | 500,590 | |
WaterBridge Midstream Operating LLC, 11.34%, (3-Month SOFR + 6.01%), 06/18/26(1) | | 212,054 | | 212,304 | |
WaterBridge Midstream Operating LLC, 11.34%, (3-Month SOFR + 6.01%), 06/22/26(1) | | 1,267,909 | | 1,269,405 | |
Total Energy | | | | 8,567,957 | |
Financials — 13.4% | | | | | |
Acrisure LLC, 9.89%, (3-Month SOFR + 4.50%), 10/20/30(1) | | 500,000 | | 502,500 | |
Altisource Sarl, 14.20%, (3-Month SOFR + 8.85%), 04/30/25(1) | | 454,027 | | 364,073 | |
Aragorn Parent Corp., 9.58%, (1-Month SOFR + 4.25%), 12/07/28(1) | | 160,000 | | 160,626 | |
Aretec Group, Inc., 9.93%, (1-Month SOFR + 4.60%), 03/07/30(1) | | 997,494 | | 998,880 | |
Asurion LLC, 9.68%, (1-Month SOFR + 4.35%), 08/19/28(1) | | 994,987 | | 985,316 | |
Asurion LLC, 10.70%, (1-Month SOFR + 5.36%), 01/20/29(1) | | 500,000 | | 475,430 | |
Citadel Securities LP, 7.97%, (1-Month SOFR + 2.61%), 07/25/30(1) | | 1,000,000 | | 999,755 | |
CTC Holdings LP, 0.00%, (SOFR + 0.00%), 02/15/29(2) | | 250,000 | | 248,438 | |
CTC Holdings LP, 10.52%, (3-Month SOFR + 5.15%), 02/15/29(1) | | 748,096 | | 743,421 | |
Cushman & Wakefield US Borrower LLC, 9.33%, (1-Month SOFR + 4.00%), 01/31/30(1) | | 1,000,000 | | 996,250 | |
DRW Holdings LLC, 0.00%, (SOFR + 0.00%), 02/23/28(2) | | 200,000 | | 198,375 | |
DRW Holdings LLC, 9.22%, (1-Month SOFR + 3.86%), 02/23/28(1) | | 843,939 | | 837,082 | |
FinCo I LLC, 8.31%, (3-Month SOFR + 3.00%), 06/27/28(1) | | 597,000 | | 598,791 | |
Guardian US Holdco LLC, (1-Month SOFR + 3.50%), 01/31/30(1) | | 696,500 | | 696,935 | |
Guardian US Holdco LLC, 0.00%, (SOFR + 0.00%), 01/31/30(2) | | 685,000 | | 685,428 | |
The accompanying notes are an integral part of these financial statements.
15
Schedule of Investments — Virtus Seix Senior Loan ETF (continued)
January 31, 2024 (unaudited)
Security Description | | Principal | | Value | |
TERM LOANS (continued) | | | | | |
Financials (continued) | | | | | |
Hightower Holding LLC, 9.59%, (3-Month SOFR + 4.26%), 04/16/28(1) | | $987,474 | | $987,480 | |
Mermaid Bidco, Inc., 9.63%, (3-Month SOFR + 4.25%), 12/22/27(1) | | 496,250 | | 496,563 | |
Nexus Buyer LLC, 0.00%, (SOFR + 0.00%), 12/11/28(2) | | 250,000 | | 245,938 | |
Nexus Buyer LLC, 9.83%, (1-Month SOFR + 4.50%), 12/11/28(1) | | 500,000 | | 491,875 | |
Nuvei Technologies Corp., 0.00%, (SOFR + 0.00%), 12/31/30(2) | | 485,000 | | 485,189 | |
Superannuation & Investments US LLC, 9.20%, (1-Month SOFR + 3.86%), 10/31/28(1) | | 980,000 | | 984,165 | |
Wec US Holdings Ltd., 8.09%, (1-Month SOFR + 2.75%), 01/21/31(1) | | 455,000 | | 453,150 | |
Total Financials | | | | 13,635,660 | |
Industrials — 15.3% | | | | | |
ASP LS Acquisition Corp., 10.40%, (6-Month SOFR + 4.93%), 04/30/28(1) | | 296,962 | | 271,509 | |
ASP LS Acquisition Corp., 13.40%, (6-Month SOFR + 7.93%), 04/30/29(1) | | 800,000 | | 662,668 | |
Barnes Group, Inc., 8.43%, (1-Month SOFR + 3.10%), 10/01/30(1) | | 1,795,500 | | 1,797,933 | |
Cobham Ultra SeniorCo Sarl, 9.36%, (6-Month SOFR + 3.93%), 08/06/29(1) | | 1,201,034 | | 1,189,774 | |
CPM Holdings, Inc., 9.85%, (1-Month SOFR + 4.50%), 09/30/30(1) | | 245,000 | | 245,408 | |
Creation Technologies, Inc., 0.00%, (SOFR + 0.00%), 09/14/28(2) | | 157,821 | | 153,481 | |
Creation Technologies, Inc., 11.09%, (3-Month SOFR + 5.76%), 09/14/28(1) | | 943,054 | | 917,120 | |
Dynasty Acquisition Co., Inc., 9.33%, (1-Month SOFR + 4.00%), 08/24/28(1) | | 557,200 | | 558,245 | |
Foley Products Co. LLC, 10.25%, (3-Month SOFR + 4.90%), 12/29/28(1) | | 479,761 | | 480,812 | |
Innio North America Holding, Inc., 0.00%, (SOFR + 0.00%), 10/31/28(2) | | 500,000 | | 501,720 | |
Kloeckner Pentaplast of America, Inc., 10.48%, (6-Month SOFR + 4.98%), 02/04/26(1) | | 887,090 | | 855,599 | |
LSF11 Trinity Bidco, Inc., 9.33%, (1-Month SOFR + 4.00%), 06/14/30(1) | | 980,756 | | 984,434 | |
Oscar Acquisitionco LLC, 9.95%, (3-Month SOFR + 4.60%), 04/29/29(1) | | 1,932,607 | | 1,920,799 | |
Pelican Products, Inc., 9.60%, (3-Month SOFR + 4.25%), 11/16/28(1) | | 940,756 | | 879,998 | |
Rand Parent LLC, 9.60%, (3-Month SOFR + 4.25%), 02/08/30(1) | | 1,588,499 | | 1,585,647 | |
Smyrna Ready Mix Concrete LLC, 8.84%, (1-Month SOFR + 3.50%), 04/02/29(1) | | 970,041 | | 971,253 | |
Standard Aero Ltd., 9.33%, (1-Month SOFR + 4.00%), 08/24/28(1) | | 238,800 | | 239,248 | |
TransDigm, Inc., 8.60%, (3-Month SOFR + 3.25%), 02/28/31(1) | | 200,000 | | 200,481 | |
Trident TPI Holdings, Inc., 9.85%, (3-Month SOFR + 4.50%), 09/15/28(1) | | 497,500 | | 497,605 | |
TTM Technologies, Inc., 8.10%, (1-Month SOFR + 2.75%), 06/30/30(1) | | 597,000 | | 597,746 | |
Total Industrials | | | | 15,511,480 |
Security Description | | Principal | | Value | |
TERM LOANS (continued) | | | | | |
Media/Telecom — Diversified Media — 1.0% | | | | | |
MH Sub I LLC, 0.00%, (SOFR + 0.00%), 04/25/28(2) | | $997,500 | | $978,563 | |
Technology — 9.1% | | | | | |
Amentum Government Services Holdings LLC, 9.34%, (1-Month SOFR + 4.00%), 02/10/29(1) | | 492,500 | | 493,424 | |
AppLovin Corp., 8.43%, (1-Month SOFR + 3.10%), 08/14/30(1) | | 1,094,500 | | 1,094,932 | |
Capstone Borrower, Inc., 9.10%, (3-Month SOFR + 3.75%), 05/18/30(1) | | 598,846 | | 598,283 | |
Cloud Software Group, Inc., 9.95%, (3-Month SOFR + 4.60%), 09/29/28(1) | | 1,735,796 | | 1,704,517 | |
Cloud Software Group, Inc., 9.95%, (2-Month SOFR + 4.60%), 09/29/28(1) | | 4,923 | | 4,834 | |
Conduent Business Services LLC, 9.70%, (1-Month SOFR + 4.36%), 10/07/28(1) | | 698,219 | | 681,856 | |
MKS Instruments, Inc., 0.00%, (SOFR + 0.00%), 08/29/29(2) | | 400,000 | | 398,460 | |
MKS Instruments, Inc., 7.82%, (1-Month SOFR + 2.50%), 08/29/29(1) | | 400,000 | | 398,460 | |
Peraton Corp., 9.18%, (1-Month SOFR + 3.85%), 02/01/28(1) | | 1,012,764 | | 1,012,905 | |
Peraton Corp., 13.22%, (3-Month SOFR + 7.85%), 02/01/29(1) | | 497,674 | | 497,883 | |
Project Alpha Intermediate Holding, Inc., 0.00%, (SOFR + 0.00%), 10/18/30(2) | | 500,000 | | 501,668 | |
Quartz Acquireco LLC, 8.83%, (1-Month SOFR + 3.50%), 04/14/30(1) | | 623,438 | | 623,438 | |
UST Global, Inc., 8.96%, (1-Month SOFR + 3.61%), 11/02/28(1) | | 983,376 | | 980,917 | |
Weld North Education LLC, 0.00%, (SOFR + 0.00%), 01/01/40(2) | | 205,000 | | 204,359 | |
Total Technology | | | | 9,195,936 | |
Utilities — 3.1% | | | | | |
Helix Gen Funding LLC, 10.10%, (1-Month SOFR + 4.75%), 12/03/27(1) | | 233,149 | | 234,345 | |
Invenergy Thermal Operating I LLC, 9.82%, (SOFR + 4.50%), 08/03/29(1) | | 53,571 | | 53,806 | |
Invenergy Thermal Operating I LLC, 9.93%, (SOFR + 4.61%), 08/03/29(1) | | 648,214 | | 651,050 | |
Lackawanna Energy Center LLC, 10.33%, (1-Month SOFR + 5.00%), 07/20/29(1) | | 1,264,777 | | 1,259,244 | |
NGL Energy Operating LLC, 0.00%, (SOFR + 0.00%), 01/27/31(2) | | 435,000 | | 434,865 | |
Talen Energy Supply LLC, 9.87%, (3-Month SOFR + 4.50%), 05/27/30(1) | | 498,619 | | 500,489 | |
Total Utilities | | | | 3,133,799 | |
Total Term Loans | | | | | |
(Cost $98,282,830) | | | | 98,351,397 | |
CORPORATE BONDS — 3.0% | | | | | |
Communications — 0.2% | | | | | |
Gray Television, Inc., 4.75%, 10/15/30(3) | | 300,000 | | 235,056 | |
Consumer, Cyclical — 0.8% | | | | | |
Foot Locker, Inc., 4.00%, 10/01/29(3) | | 1,000,000 | | 845,610 | |
The accompanying notes are an integral part of these financial statements.
16
Schedule of Investments — Virtus Seix Senior Loan ETF (continued)
January 31, 2024 (unaudited)
Security Description | | Principal | | Value | |
CORPORATE BONDS (continued) | | | | | |
Consumer, Non—cyclical — 0.1% | | | | | |
Emergent BioSolutions, Inc., 3.88%, 08/15/28(3) | | $250,000 | | $93,561 | |
Financials — 0.7% | | | | | |
SBA Communications Corp., 3.13%, 02/01/29 | | 750,000 | | 669,055 | |
Industrials — 0.5% | | | | | |
Graham Packaging Co., Inc., 7.13%, 08/15/28(3) | | 600,000 | | 536,106 | |
Technology — 0.7% | | | | | |
Crowdstrike Holdings, Inc., 3.00%, 02/15/29 | | 750,000 | | 670,921 | |
Total Corporate Bonds | | | | | |
(Cost $3,439,991) | | | | 3,050,309 | |
WARRANT — 0.0%(4) | | | | | |
Financials — 0.0%(4) | | | | | |
Altisource Sarl, expiring 02/14/28 | | | | | |
(Cost $–) | | 5,226 | | 15,155 | |
TOTAL INVESTMENTS — 100.0% | | | | | |
(Cost $101,722,821) | | | | 101,416,861 | |
Liabilities in Excess of Other Assets — (0.0)%(4) | | | | (23,135 | ) |
Net Assets — 100.0% | | | | $101,393,726 | |
(1)Variable rate instrument. The interest rate shown reflects the rate in effect at January 31, 2024.
(2)The loan will settle after January 31, 2024. The interest rate, based on the SOFR and the agreed upon spread on trade date, will be determined at the time of settlement.
(3)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid. At January 31, 2024, the aggregate value of these securities was $1,710,333, or 1.7% of net assets.
(4)Amount rounds to less than 0.05%.
Abbreviations:
SOFR — Secured Overnight Financing Rate
USD — United States Dollar
Portfolio Composition |
January 31, 2024 (unaudited) |
Asset Allocation as of 01/31/2024 (based on net assets)
Term Loans | | 97.0 | % |
Corporate Bonds | | 3.0 | % |
Warrant | | 0.0 | %* |
Liabilities in Excess of Other Assets | | (0.0 | %)* |
Total | | 100.0 | % |
*Amount rounds to less than 0.05%.
The following table summarizes valuation of the Fund’s investments under the fair value hierarchy levels as of January 31, 2024.
| | Level 1 | | Level 2 | | Level 3 | | Total |
Asset Valuation Inputs | | | | | | | | |
Term Loans | | $— | | $98,351,397 | | $— | | $98,351,397 |
Corporate Bonds | | — | | 3,050,309 | | — | | 3,050,309 |
Warrant | | — | | 15,155 | | — | | 15,155 |
Total | | $— | | $101,416,861 | | $— | | $101,416,861 |
Schedule of Investments — Virtus Stone Harbor Emerging Markets High Yield Bond ETF
January 31, 2024 (unaudited)
The accompanying notes are an integral part of these financial statements.
17
Security Description | | Principal | | Value |
FOREIGN BONDS – 97.0% | | | ||
Angola – 3.0% | | | ||
Angolan Government International Bond, 9.50%, 11/12/25(1) | | $65,000 | | $64,057 |
Angolan Government International Bond, 8.25%, 05/09/28(1) | | 40,000 | | 36,200 |
Angolan Government International Bond, 8.75%, 04/14/32(1) | | 31,000 | | 26,629 |
Angolan Government International Bond, 9.38%, 05/08/48(1) | | 78,000 | | 62,790 |
Total Angola | | | | 189,676 |
Argentina – 4.2% | | | ||
Argentine Republic Government International Bond, 0.75%, 07/09/30(2) | | 47,000 | | 19,105 |
Argentine Republic Government International Bond, 3.63%, 07/09/35(2) | | 306,000 | | 102,893 |
Provincia de Buenos Aire, 6.38%, 09/01/37(2) | | 51,000 | | 20,145 |
YPF SA, 8.75%, 04/04/24(1) | | 65,200 | | 65,004 |
YPF SA, 6.95%, 07/21/27 | | 38,000 | | 33,736 |
YPF SA, 9.50%, 01/17/31(1) | | 32,000 | | 32,078 |
Total Argentina | | | | 272,961 |
Armenia – 0.3% | | | ||
Republic of Armenia International Bond, 3.60%, 02/02/31(1) | | 24,000 | | 19,455 |
Azerbaijan – 0.7% | | | ||
Southern Gas Corridor CJSC, 6.88%, 03/24/26(1) | | 42,000 | | 42,610 |
Bahrain – 1.9% | | | ||
Bahrain Government International Bond, 5.63%, 09/30/31(1) | | 12,000 | | 11,220 |
Bahrain Government International Bond, 5.25%, 01/25/33(1) | | 50,000 | | 44,188 |
Bahrain Government International Bond, 5.63%, 05/18/34(1) | | 31,000 | | 27,590 |
Bapco Energies BSCC, 7.50%, 10/25/27 | | 36,000 | | 37,777 |
Total Bahrain | | | | 120,775 |
Bolivia – 0.3% | | | ||
Bolivian Government International Bond, 7.50%, 03/02/30 | | 30,000 | | 17,250 |
Brazil – 9.3% | | | ||
3r Lux Sarl, 9.75%, 02/05/31(1) | | 23,000 | | 22,960 |
Braskem Netherlands Finance BV, 4.50%, 01/10/28(1) | | 38,000 | | 32,955 |
Brazilian Government International Bond, 6.00%, 10/20/33 | | 170,000 | | 168,215 |
Iochpe-Maxion Austria GMBH / Maxion Wheels de Mexico S de RL de CV, 5.00%, 05/07/28(1) | | 57,000 | | 51,337 |
MC Brazil Downstream Trading Sarl, 7.25%, 06/30/31(1) | | 96,026 | | 74,391 |
Minerva Luxembourg SA, 4.38%, 03/18/31 | | 146,000 | | 120,085 |
MV24 Capital BV, 6.75%, 06/01/34(1) | | 71,766 | | 67,155 |
Samarco Mineracao SA, 9.50%, 06/30/31(1)(3) | | 77,000 | | 64,141 |
Total Brazil | | | | 601,239 |
Chile – 1.7% | | | ||
ATP Tower Holdings LLC / Andean Tower Partners Colombia Sas / Andean Telecom Par, 4.05%, 04/27/26(1) | | 118,000 | | 107,970 |
Security Description | | Principal | | Value |
FOREIGN BONDS (continued) | | | | |
China – 1.4% | | | ||
Prosus NV, 3.06%, 07/13/31 | | $113,000 | | $91,106 |
Colombia – 7.1% | | | ||
AI Candelaria Spain SA, 5.75%, 06/15/33 | | 84,000 | | 65,651 |
Banco Davivienda SA, 6.65%, (US 10 Year CMT T- Note + 5.10%), perpetual(4)(5) | | 44,000 | | 31,330 |
Colombia Government International Bond, 4.50%, 03/15/29 | | 34,000 | | 31,382 |
Colombia Government International Bond, 3.00%, 01/30/30 | | 92,000 | | 76,498 |
Colombia Government International Bond, 3.13%, 04/15/31 | | 66,000 | | 52,899 |
Colombia Government International Bond, 8.00%, 11/14/35 | | 49,000 | | 51,714 |
Colombia Government International Bond, 6.13%, 01/18/41 | | 30,000 | | 26,138 |
Colombia Government International Bond, 3.88%, 02/15/61 | | 15,000 | | 8,809 |
Geopark Ltd., 5.50%, 01/17/27 | | 74,000 | | 65,987 |
SierraCol Energy Andina LLC, 6.00%, 06/15/28(1) | | 58,000 | | 48,802 |
Total Colombia | | | | 459,210 |
Costa Rica – 1.0% | | | ||
Costa Rica Government International Bond, 6.13%, 02/19/31 | | 54,000 | | 54,810 |
Costa Rica Government International Bond, 7.16%, 03/12/45 | | 8,000 | | 8,260 |
Total Costa Rica | | | | 63,070 |
Dominican Republic – 3.0% | | | ||
Dominican Republic International Bond, 5.50%, 02/22/29 | | 86,000 | | 83,506 |
Dominican Republic International Bond, 4.88%, 09/23/32 | | 51,000 | | 45,722 |
Dominican Republic International Bond, 6.85%, 01/27/45 | | 68,000 | | 66,810 |
Total Dominican Republic | | | | 196,038 |
Ecuador – 1.7% | | | ||
Ecuador Government International Bond, 6.00%, 07/31/30(2) | | 117,000 | | 61,849 |
Ecuador Government International Bond, 3.50%, 07/31/35(2) | | 108,000 | | 44,199 |
Total Ecuador | | | | 106,048 |
Egypt – 4.1% | | | ||
Egypt Government International Bond, 5.75%, 05/29/24(1) | | 22,000 | | 21,725 |
Egypt Government International Bond, 5.88%, 06/11/25(1) | | 4,000 | | 3,670 |
Egypt Government International Bond, 5.25%, 10/06/25(1) | | 50,000 | | 44,062 |
Egypt Government International Bond, 3.88%, 02/16/26(1) | | 124,000 | | 100,905 |
Egypt Government International Bond, 7.63%, 05/29/32(1) | | 83,000 | | 56,647 |
Egypt Government International Bond, 8.50%, 01/31/47(1) | | 13,000 | | 7,995 |
The accompanying notes are an integral part of these financial statements.
18
Schedule of Investments — Virtus Stone Harbor Emerging Markets High Yield Bond ETF (continued)
January 31, 2024 (unaudited)
Security Description | | Principal | | Value |
FOREIGN BONDS (continued) | | | | |
Egypt (continued) | | | | |
Egypt Government International Bond, 7.90%, 02/21/48(1) | | $46,000 | | $27,542 |
Total Egypt | | | | 262,546 |
El Salvador – 2.4% | | | ||
El Salvador Government International Bond, 6.38%, 01/18/27 | | 10,000 | | 8,955 |
El Salvador Government International Bond, 8.25%, 04/10/32 | | 45,000 | | 38,655 |
El Salvador Government International Bond, 7.65%, 06/15/35 | | 116,000 | | 91,234 |
El Salvador Government International Bond, 9.50%, 07/15/52 | | 23,000 | | 19,430 |
Total El Salvador | | | | 158,274 |
Gabon – 0.6% | | | ||
Gabon Government International Bond, 6.95%, 06/16/25(1) | | 26,000 | | 25,053 |
Gabon Government International Bond, 7.00%, 11/24/31(1) | | 16,000 | | 13,120 |
Total Gabon | | | | 38,173 |
Ghana – 3.9% | | | ||
Ghana Government International Bond, 6.38%, 02/11/27(1)(6) | | 4,000 | | 1,815 |
Ghana Government International Bond, 10.75%, 10/14/30(1)(6) | | 20,000 | | 13,000 |
Ghana Government International Bond, 8.63%, 04/07/34(1)(6) | | 4,000 | | 1,795 |
Ghana Government International Bond, 8.95%, 03/26/51(1)(6) | | 71,000 | | 31,684 |
Kosmos Energy Ltd., 7.13%, 04/04/26 | | 139,000 | | 134,309 |
Tullow Oil PLC, 7.00%, 03/01/25(1) | | 72,000 | | 68,467 |
Total Ghana | | | | 251,070 |
Guatemala – 2.4% | | | ||
Guatemala Government Bond, 3.70%, 10/07/33(1) | | 35,000 | | 28,928 |
Guatemala Government Bond, 6.60%, 06/13/36(1) | | 52,000 | | 52,910 |
Guatemala Government Bond, 6.13%, 06/01/50 | | 11,000 | | 10,050 |
Investment Energy Resources Ltd., 6.25%, 04/26/29(1) | | 62,000 | | 59,069 |
Total Guatemala | | | | 150,957 |
Honduras – 1.1% | | | ||
Honduras Government International Bond, 6.25%, 01/19/27 | | 72,000 | | 68,688 |
Hong Kong – 1.7% | | | ||
Melco Resorts Finance Ltd., 5.38%, 12/04/29 | | 124,000 | | 110,360 |
India – 2.7% | | | ||
Adani Ports & Special Economic Zone Ltd., 3.38%, 07/24/24 | | 38,000 | | 37,491 |
Network I2i Ltd., 5.65%, (US 5 Year CMT T- Note + 4.28%), perpetual(1)(4)(5) | | 133,000 | | 131,857 |
Total India | | | | 169,348 |
Indonesia – 0.3% | | | ||
Indika Energy Capital IV Pte Ltd., 8.25%, 10/22/25 | | 19,000 | | 19,071 |
Security Description | | Principal | | Value |
FOREIGN BONDS (continued) | | | | |
Israel – 0.5% | | | ||
Energian Israel Finance Ltd., 4.88%, 03/30/26(1) | | $32,000 | | $29,600 |
Ivory Coast – 2.0% | | | ||
Ivory Coast Government International Bond, 5.75%, 12/31/32(2) | | 107,389 | | 103,947 |
Ivory Coast Government International Bond, 8.25%, 01/30/37(1) | | 25,000 | | 24,963 |
Total Ivory Coast | | | | 128,910 |
Jordan – 0.4% | | | ||
Jordan Government International Bond, 7.50%, 01/13/29(1) | | 28,000 | | 27,545 |
Kazakhstan – 1.2% | | | ||
KazMunayGas National Co. JSC, 6.38%, 10/24/48(1) | | 81,000 | | 74,887 |
Kenya – 1.1% | | | ||
Republic of Kenya Government International Bond, 7.00%, 05/22/27(1) | | 66,000 | | 60,844 |
Republic of Kenya Government International Bond, 8.00%, 05/22/32(1) | | 12,000 | | 10,560 |
Total Kenya | | | | 71,404 |
Lebanon – 0.2% | | | ||
Lebanon Government International Bond, 8.25%, 04/12/21(6) | | 200,000 | | 11,950 |
Macau – 3.2% | | | ||
Sands China Ltd., 5.40%, 08/08/28 | | 89,000 | | 87,407 |
Studio City Finance Ltd., 5.00%, 01/15/29(1) | | 138,000 | | 117,990 |
Total Macau | | | | 205,397 |
Mexico – 10.1% | | | ||
Banco Mercantil del Norte SA, 6.75%, (US 5 Year CMT T- Note + 4.97%), perpetual(4)(5) | | 126,000 | | 125,093 |
Banco Mercantil del Norte SA, 6.75%, (US 5 Year CMT T- Note + 4.97%), perpetual(1)(4)(5) | | 49,000 | | 48,647 |
Braskem Idesa Sapi, 6.99%, 02/20/32(1) | | 22,000 | | 14,482 |
Cemex SAB de CV, 5.13%, (US 5 Year CMT T- Note + 4.53%), perpetual(4)(5) | | 102,000 | | 97,308 |
Cemex SAB de CV, 9.13%, (US 5 Year CMT T- Note + 5.16%), perpetual(1)(4)(5) | | 18,000 | | 19,133 |
Petroleos Mexicanos, 5.35%, 02/12/28 | | 124,000 | | 108,800 |
Petroleos Mexicanos, 8.75%, 06/02/29 | | 28,000 | | 27,051 |
Petroleos Mexicanos, 5.95%, 01/28/31 | | 139,000 | | 109,219 |
Petroleos Mexicanos, 6.63%, 06/15/35 | | 34,000 | | 25,614 |
Petroleos Mexicanos, 6.75%, 09/21/47 | | 101,000 | | 64,799 |
Petroleos Mexicanos, 6.95%, 01/28/60 | | 20,000 | | 12,840 |
Total Mexico | | | | 652,986 |
Mongolia – 0.1% | | | ||
Mongolia Government International Bond, 8.65%, 01/19/28(1) | | 5,000 | | 5,252 |
Nigeria – 4.4% | | | ||
IHS Netherlands Holdco BV, 8.00%, 09/18/27(1) | | 20,000 | | 18,428 |
Nigeria Government International Bond, 6.50%, 11/28/27(1) | | 55,000 | | 50,029 |
Nigeria Government International Bond, 6.13%, 09/28/28(1) | | 184,000 | | 160,540 |
The accompanying notes are an integral part of these financial statements.
19
Schedule of Investments — Virtus Stone Harbor Emerging Markets High Yield Bond ETF (continued)
January 31, 2024 (unaudited)
Security Description | | Principal | | Value |
FOREIGN BONDS (continued) | | | | |
Nigeria (continued) | | | | |
Nigeria Government International Bond, 7.38%, 09/28/33(1) | | $60,000 | | $49,575 |
Total Nigeria | | | | 278,572 |
Oman – 0.8% | | | ||
Oman Government International Bond, 6.00%, 08/01/29(1) | | 21,000 | | 21,525 |
Oman Government International Bond, 7.38%, 10/28/32(1) | | 29,000 | | 32,371 |
Total Oman | | | | 53,896 |
Pakistan – 0.9% | | | ||
Pakistan Government International Bond, 6.00%, 04/08/26(1) | | 71,000 | | 55,222 |
Peru – 0.5% | | | ||
Petroleos del Peru SA, 4.75%, 06/19/32 | | 45,000 | | 32,857 |
Senegal – 0.5% | | | ||
Senegal Government International Bond, 6.25%, 05/23/33(1) | | 38,000 | | 32,965 |
Serbia – 0.7% | | | ||
Serbia International Bond, 6.50%, 09/26/33(1) | | 41,000 | | 42,029 |
South Africa – 4.1% | | | ||
Eskom Holdings SOC Ltd., 8.45%, 08/10/28(1) | | 61,000 | | 61,229 |
Eskom Holdings SOC Ltd., 6.35%, 08/10/28(1) | | 27,000 | | 26,325 |
Republic of South Africa Government International Bond, 5.88%, 04/20/32 | | 55,000 | | 50,617 |
Sasol Financing USA LLC, 6.50%, 09/27/28 | | 131,000 | | 124,149 |
Total South Africa | | | | 262,320 |
Sri Lanka – 1.0% | | | ||
Sri Lanka Government International Bond, 7.85%, 03/14/29(1)(6) | | 131,000 | | 66,515 |
Tanzania – 0.9% | | | ||
HTA Group Ltd., 7.00%, 12/18/25(1) | | 60,000 | | 59,391 |
Tunisia – 0.1% | | | ||
Tunisian Republic, 5.75%, 01/30/25(1) | | 8,000 | | 6,860 |
Turkey – 5.7% | | | ||
Akbank TAS, 6.80%, 02/06/26(1) | | 29,000 | | 29,114 |
Aydem Yenilenebilir Enerji AS, 7.75%, 02/02/27(1) | | 48,000 | | 45,248 |
Istanbul Metropolitan Municipality, 10.50%, 12/06/28(1) | | 51,000 | | 53,993 |
Turk Telekomunikasyon AS, 6.88%, 02/28/25(1) | | 84,000 | | 83,698 |
Turkey Government International Bond, 9.38%, 03/14/29 | | 67,000 | | 72,276 |
Turkey Government International Bond, 5.95%, 01/15/31 | | 81,000 | | 73,832 |
Turkey Government International Bond, 5.75%, 05/11/47 | | 22,000 | | 16,148 |
Total Turkey | | | | 374,309 |
Security Description | | Principal | | Value |
FOREIGN BONDS (continued) | | | | |
Ukraine – 0.8% | | | ||
Ukraine Government International Bond, 7.75%, 09/01/28(1)(6) | | $200,000 | | $50,800 |
Venezuela – 1.5% | | | ||
Petroleos de Venezuela SA, 9.00%, 11/17/23(6) | | 750,000 | | 91,875 |
Venezuela Government International Bond, 12.75%, 08/23/22(6) | | 50,000 | | 7,388 |
Total Venezuela | | | | 99,263 |
Vietnam – 1.1% | | | ||
Mong Duong Finance Holdings BV, 5.13%, 05/07/29 | | 54,415 | | 51,082 |
Mong Duong Finance Holdings BV, 5.13%, 05/07/29(1) | | 18,446 | | 17,316 |
Total Vietnam | | | | 68,398 |
Zambia – 0.4% | | | ||
Zambia Government International Bond, 5.38%, 09/20/24(1)(6) | | 42,000 | | 23,930 |
TOTAL INVESTMENTS - 97.0% | | | | |
(Cost $5,981,158) | | | | 6,231,153 |
Other Assets in Excess of Liabilities - 3.0% | | | | 195,383 |
Net Assets - 100.0% | | | | $6,426,536 |
(1)Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may not be resold subject to that rule except to qualified institutional buyers. Unless otherwise noted, 144A securities are deemed to be liquid. At January 31, 2024, the aggregate value of these securities was $3,012,782, or 46.9% of net assets.
(2)Represents step coupon bond. Rate shown reflects the rate in effect as of January 31, 2024.
(3)Payment in-kind security.
(4)Variable rate instrument. The interest rate shown reflects the rate in effect at January 31, 2024.
(5)Perpetual security with no stated maturity date.
(6)Security in default, no interest payments are being received during the bankruptcy proceedings.
Abbreviations:
CMT — Constant Maturity Treasury Index
PIK — Payment in-Kind
Portfolio Composition | |||
January 31, 2024 (unaudited) | | ||
Asset Allocation as of 01/31/2024 (based on net assets) | | ||
Foreign Bonds | | 97.0 | % |
Other Assets in Excess of Liabilities | | 3.0 | % |
Total | | 100.0 | % |
The following table summarizes valuation of the Fund’s investments under the fair value hierarchy levels as of January 31, 2024.
| | Level 1 | | Level 2 | | Level 3 | | Total |
Asset Valuation Inputs | | | | | | | | |
Foreign Bonds | | $— | | $6,231,153 | | $— | | $6,231,153 |
Total | | $— | | $6,231,153 | | $— | | $6,231,153 |
The accompanying notes are an integral part of these financial statements.
20
Security Description | | Shares | | Value |
COMMON STOCKS – 99.2% | | | | |
Communication Services – 4.7% | | | | |
Alphabet, Inc. Class A* | | 4,557 | | $638,436 |
Electronic Arts, Inc. | | 4,814 | | 662,310 |
Liberty Broadband Corp. Class C* | | 8,408 | | 659,608 |
Live Nation Entertainment, Inc.* | | 7,443 | | 661,311 |
Meta Platforms, Inc. Class A* | | 1,739 | | 678,453 |
Trade Desk, Inc. (The) Class A* | | 9,547 | | 653,301 |
Total Communication Services | | | | 3,953,419 |
Consumer Discretionary – 10.3% | | | | |
Airbnb, Inc. Class A* | | 4,708 | | 678,611 |
Chipotle Mexican Grill, Inc.* | | 289 | | 696,134 |
Coupang, Inc. (South Korea)* | | 45,301 | | 634,214 |
Darden Restaurants, Inc. | | 4,145 | | 673,894 |
DR Horton, Inc. | | 4,681 | | 668,962 |
Expedia Group, Inc.* | | 4,512 | | 669,265 |
Garmin Ltd. | | 5,274 | | 630,190 |
Lennar Corp. Class A | | 4,540 | | 680,319 |
Lululemon Athletica, Inc.* | | 1,405 | | 637,617 |
MercadoLibre, Inc. (Brazil)* | | 381 | | 652,200 |
NVR, Inc.* | | 97 | | 686,303 |
Tesla, Inc.* | | 3,204 | | 600,077 |
Ulta Beauty, Inc.* | | 1,396 | | 700,862 |
Total Consumer Discretionary | | | | 8,608,648 |
Consumer Staples – 1.6% | | | | |
Costco Wholesale Corp. | | 974 | | 676,813 |
Monster Beverage Corp.* | | 12,057 | | 663,376 |
Total Consumer Staples | | | | 1,340,189 |
Energy – 6.6% | | | | |
Coterra Energy, Inc. | | 27,203 | | 676,811 |
Diamondback Energy, Inc. | | 4,423 | | 679,992 |
Enterprise Products Partners LP | | 24,760 | | 662,578 |
Marathon Petroleum Corp. | | 4,352 | | 720,691 |
ONEOK, Inc. | | 9,713 | | 662,912 |
Phillips 66 | | 5,110 | | 737,424 |
Pioneer Natural Resources Co. | | 3,057 | | 702,590 |
Valero Energy Corp. | | 5,189 | | 720,752 |
Total Energy | | | | 5,563,750 |
Financials – 14.5% | | | | |
American Express Co. | | 3,612 | | 725,073 |
Ameriprise Financial, Inc. | | 1,728 | | 668,442 |
Apollo Global Management, Inc. | | 7,030 | | 705,812 |
Arch Capital Group Ltd.* | | 8,340 | | 687,466 |
Blackstone, Inc. | | 5,631 | | 700,778 |
Brown & Brown, Inc. | | 8,491 | | 658,562 |
Chubb Ltd. | | 2,788 | | 683,060 |
Discover Financial Services | | 6,671 | | 703,924 |
FleetCor Technologies, Inc.* | | 2,323 | | 673,508 |
Interactive Brokers Group, Inc. Class A | | 7,330 | | 650,538 |
KKR & Co., Inc. | | 7,977 | | 690,649 |
MarketAxess Holdings, Inc. | | 2,459 | | 554,529 |
Mastercard, Inc. Class A | | 1,527 | | 685,974 |
NU Holdings Ltd. Class A (Brazil)* | | 74,861 | | 644,553 |
Security Description | | Shares | | Value |
COMMON STOCKS (continued) | ||||
Financials (continued) | ||||
Progressive Corp. (The) | | 3,934 | | $701,236 |
S&P Global, Inc. | | 1,501 | | 672,973 |
Tradeweb Markets, Inc. Class A | | 6,852 | | 653,612 |
Visa, Inc. Class A | | 2,470 | | 674,952 |
Total Financials | | | | 12,135,641 |
Health Care – 8.8% | | | | |
Align Technology, Inc.* | | 2,515 | | 672,310 |
Dexcom, Inc.* | | 5,271 | | 639,636 |
Eli Lilly & Co. | | 1,064 | | 686,929 |
ICON PLC* | | 2,538 | | 662,088 |
IDEXX Laboratories, Inc.* | | 1,261 | | 649,516 |
Intuitive Surgical, Inc.* | | 1,804 | | 682,309 |
Regeneron Pharmaceuticals, Inc.* | | 702 | | 661,832 |
STERIS PLC | | 3,091 | | 676,774 |
Veeva Systems, Inc. Class A* | | 3,164 | | 656,245 |
Vertex Pharmaceuticals, Inc.* | | 1,524 | | 660,471 |
West Pharmaceutical Services, Inc. | | 1,905 | | 710,622 |
Total Health Care | | | | 7,358,732 |
Industrials – 17.5% | | | | |
AMETEK, Inc. | | 4,058 | | 657,599 |
Caterpillar, Inc. | | 2,320 | | 696,719 |
Cintas Corp. | | 1,110 | | 671,073 |
Copart, Inc.* | | 13,527 | | 649,837 |
Delta Air Lines, Inc. | | 17,627 | | 689,921 |
Expeditors International of Washington, Inc. | | 5,214 | | 658,685 |
Fastenal Co. | | 9,639 | | 657,669 |
HEICO Corp. | | 3,741 | | 671,846 |
JB Hunt Transport Services, Inc. | | 3,261 | | 655,396 |
Old Dominion Freight Line, Inc. | | 1,699 | | 664,343 |
PACCAR, Inc. | | 6,633 | | 665,887 |
Parker–Hannifin Corp. | | 1,428 | | 663,306 |
Paychex, Inc. | | 5,455 | | 664,037 |
Quanta Services, Inc. | | 3,426 | | 664,815 |
Rockwell Automation, Inc. | | 2,202 | | 557,722 |
Rollins, Inc. | | 15,152 | | 656,233 |
Trane Technologies PLC | | 2,647 | | 667,176 |
Uber Technologies, Inc.* | | 10,417 | | 679,917 |
United Airlines Holdings, Inc.* | | 16,547 | | 684,715 |
United Rentals, Inc. | | 1,159 | | 724,839 |
WW Grainger, Inc. | | 765 | | 685,165 |
Xylem, Inc. | | 5,890 | | 662,272 |
Total Industrials | | | | 14,649,172 |
Information Technology – 27.2% | | | | |
Accenture PLC Class A | | 1,812 | | 659,351 |
Adobe, Inc.* | | 1,122 | | 693,149 |
Advanced Micro Devices, Inc.* | | 3,978 | | 667,071 |
Amphenol Corp. Class A | | 6,841 | | 691,625 |
Analog Devices, Inc. | | 3,327 | | 639,982 |
Apple, Inc. | | 3,433 | | 633,045 |
Applied Materials, Inc. | | 4,011 | | 659,007 |
Arista Networks, Inc.* | | 2,557 | | 661,445 |
The accompanying notes are an integral part of these financial statements.
21
Schedule of Investments - Virtus Terranova U.S. Quality Momentum ETF (continued)
January 31, 2024 (unaudited)
Security Description | | Shares | | Value |
COMMON STOCKS (continued) | ||||
Information Technology (continued) | | | | |
Autodesk, Inc.* | | 2,651 | | $672,850 |
Broadcom, Inc. | | 546 | | 644,280 |
Cadence Design Systems, Inc.* | | 2,267 | | 653,939 |
Check Point Software Technologies Ltd. (Israel)* | | 4,266 | | 677,995 |
Cisco Systems, Inc. | | 12,944 | | 649,530 |
Cognizant Technology Solutions Corp. Class A | | 8,689 | | 670,096 |
Gartner, Inc.* | | 1,437 | | 657,341 |
Gen Digital, Inc. | | 28,426 | | 667,443 |
Intuit, Inc. | | 1,054 | | 665,422 |
KLA Corp. | | 1,082 | | 642,751 |
Lam Research Corp. | | 807 | | 665,912 |
Microchip Technology, Inc. | | 7,283 | | 620,366 |
Microsoft Corp. | | 1,680 | | 667,934 |
Monolithic Power Systems, Inc. | | 1,044 | | 629,240 |
NVIDIA Corp. | | 1,119 | | 688,487 |
NXP Semiconductors NV (China) | | 2,992 | | 630,025 |
ON Semiconductor Corp.* | | 8,730 | | 620,965 |
Palantir Technologies, Inc. Class A* | | 38,662 | | 622,072 |
Palo Alto Networks, Inc.* | | 1,947 | | 659,079 |
Salesforce, Inc.* | | 2,421 | | 680,519 |
ServiceNow, Inc.* | | 889 | | 680,441 |
Skyworks Solutions, Inc. | | 6,103 | | 637,519 |
Synopsys, Inc.* | | 1,221 | | 651,220 |
Teledyne Technologies, Inc.* | | 1,516 | | 634,401 |
Texas Instruments, Inc. | | 3,843 | | 615,341 |
Tyler Technologies, Inc.* | | 1,509 | | 637,930 |
Zoom Video Communications, Inc. Class A* | | 9,622 | | 621,677 |
Total Information Technology | | | | 22,869,450 |
Security Description | | Shares | | Value |
COMMON STOCKS (continued) | ||||
Materials – 5.7% | | | | |
Celanese Corp. | | 4,579 | | $669,862 |
Freeport–McMoRan, Inc. | | 17,553 | | 696,679 |
LyondellBasell Industries NV Class A | | 7,084 | | 666,746 |
Martin Marietta Materials, Inc. | | 1,339 | | 680,774 |
Nucor Corp. | | 3,901 | | 729,214 |
Steel Dynamics, Inc. | | 5,769 | | 696,261 |
Vulcan Materials Co. | | 3,007 | | 679,612 |
Total Materials | | | | 4,819,148 |
Real Estate – 2.3% | | | | |
Extra Space Storage, Inc. | | 4,550 | | 657,202 |
Host Hotels & Resorts, Inc. | | 34,201 | | 657,343 |
Public Storage | | 2,296 | | 650,204 |
Total Real Estate | | | | 1,964,749 |
Total Common Stocks | | | | |
(Cost $73,162,634) | | | | 83,262,898 |
TOTAL INVESTMENTS – 99.2% | | | | |
(Cost $73,162,634) | | | | 83,262,898 |
Other Assets in Excess of Liabilities – 0.8% | | | | 655,229 |
Net Assets – 100.0% | | | | $83,918,127 |
*Non-income producing security.
Portfolio Composition | | ||
January 31, 2024 (unaudited) | | ||
Asset Allocation as of 01/31/2024 (based on net assets) | | ||
Information Technology | | 27.2 | % |
Industrials | | 17.5 | % |
Financials | | 14.5 | % |
Consumer Discretionary | | 10.3 | % |
Health Care | | 8.8 | % |
Energy | | 6.6 | % |
Materials | | 5.7 | % |
Communication Services | | 4.7 | % |
Real Estate | | 2.3 | % |
Consumer Staples | | 1.6 | % |
Other Assets in Excess of Liabilities | | 0.8 | % |
Total | | 100.0 | % |
The following table summarizes valuation of the Fund’s investments under the fair value hierarchy levels as of January 31, 2024.
| | Level 1 | | Level 2 | | Level 3 | | Total |
Asset Valuation Inputs | | | | | | | | |
Common Stocks | | $83,262,898 | | $— | | $— | | $83,262,898 |
Total | | $83,262,898 | | $— | | $— | | $83,262,898 |
The accompanying notes are an integral part of these financial statements.
22
| | Virtus | | Virtus | | Virtus | | Virtus | |
Assets: | | | | | | | | | |
Investments, at cost | | $6,747,846 | | $9,712,725 | | $9,873,880 | | $3,216,289 | |
Investments, at value | | 6,572,774 | | 9,525,151 | | 10,066,991 | | 3,050,038 | |
Cash | | 67,890 | | 371,492 | | 273,400 | | 202,580 | |
Foreign currency(a) | | 2 | | — | | — | | — | |
Receivables: | | | | | | | | | |
Dividends and interest | | 8,154 | | 28,335 | | 64,277 | | 60,832 | |
Tax reclaim | | 5,473 | | — | | — | | — | |
Due from Adviser | | 830 | | 1,668 | | 870 | | 7,335 | |
Investment securities sold | | — | | — | | — | | 6,442 | |
Prepaid expenses | | 58 | | 88 | | — | | 32,246 | |
Total Assets | | 6,655,181 | | 9,926,734 | | 10,405,538 | | 3,359,473 | |
| | | | | | | | | |
Liabilities: | | | | | | | | | |
Payables: | | | | | | | | | |
Investment securities purchased | | — | | 379,977 | | 69,077 | | 14,828 | |
Advisory fees | | 8,217 | | 7,372 | | 6,200 | | 3,590 | |
Transfer agent fees | | — | | — | | — | | 3,099 | |
Accounting and administration fees | | — | | — | | — | | 1,329 | |
Custody fees | | — | | — | | — | | 9,964 | |
Professional fees | | — | | — | | — | | 9,939 | |
Pricing fees | | — | | — | | — | | 2,495 | |
Report to shareholder fees | | — | | — | | — | | 2,066 | |
Trustee fees | | — | | — | | — | | 249 | |
Exchange listing fees | | — | | — | | — | | 3,014 | |
Other accrued expenses | | — | | — | | — | | 165 | |
Total Liabilities | | 8,217 | | 387,349 | | 75,277 | | 50,738 | |
Net Assets | | $6,646,964 | | $9,539,385 | | $10,330,261 | | $3,308,735 | |
| | | | | | | | | |
Net Assets Consist of: | | | | | | | | | |
Paid-in capital | | $8,475,073 | | $10,372,516 | | $10,111,806 | | $6,705,638 | |
Total distributable earnings (accumulated deficit) | | (1,828,109 | ) | (833,131 | ) | 218,455 | | (3,396,903 | ) |
Net Assets | | $6,646,964 | | $9,539,385 | | $10,330,261 | | $3,308,735 | |
Shares outstanding (unlimited number of shares of beneficial interest authorized, no par value) | | 400,004 | | 400,004 | | 400,004 | | 154,000 | |
Net asset value per share | | $16.62 | | $23.85 | | $25.83 | | $21.49 | |
| | | | | | | | | |
(a) Foreign currency, at cost | | $2 | | $— | | $— | | $— | |
The accompanying notes are an integral part of these financial statements.
23
Statements of Assets and Liabilities (continued)
January 31, 2024 (unaudited)
| | Virtus | | Virtus | | Virtus | |
Assets: | | | | | | | |
Investments, at cost | | $101,722,821 | | $5,981,158 | | $73,162,634 | |
Investments, at value | | 101,416,861 | | 6,231,153 | | 83,262,898 | |
Cash | | 6,814,181 | | 66,478 | | 228,136 | |
Receivables: | | | | | | | |
Investment securities sold | | 4,442,132 | | 109,323 | | 34,037,964 | |
Dividends and interest | | 672,873 | | 97,626 | | 45,011 | |
Capital shares sold | | — | | — | | 14,226,075 | |
Tax reclaim | | — | | — | | 647 | |
Prepaid expenses | | 1,437 | | 44 | | 102 | |
Total Assets | | 113,347,484 | | 6,504,624 | | 131,800,833 | |
| | | | | | | |
Liabilities: | | | | | | | |
Payables: | | | | | | | |
Investment securities purchased | | 11,857,961 | | 72,899 | | 33,854,495 | |
Capital shares payable | | — | | — | | 13,986,334 | |
Advisory fees | | 95,797 | | 5,189 | | 41,877 | |
Total Liabilities | | 11,953,758 | | 78,088 | | 47,882,706 | |
Net Assets | | $101,393,726 | | $6,426,536 | | $83,918,127 | |
| | | | | | | |
Net Assets Consist of: | | | | | | | |
Paid-in capital | | $104,587,605 | | $6,217,060 | | $99,703,763 | |
Total distributable earnings (accumulated deficit) | | (3,193,879 | ) | 209,476 | | (15,785,636 | ) |
Net Assets | | $101,393,726 | | $6,426,536 | | $83,918,127 | |
Shares outstanding (unlimited number of shares of | | 4,225,004 | | 250,004 | | 2,700,004 | |
Net asset value per share | | $24.00 | | $25.71 | | $31.08 | |
The accompanying notes are an integral part of these financial statements.
24
| | Virtus | | Virtus | | Virtus | | Virtus | |
Investment Income: | | | | | | | | | |
Dividend income (net of foreign withholding taxes) | | $50,144 | | $— | | $— | | $— | |
Interest income | | 1,576 | | 263,559 | | 117,967 | | 141,121 | |
Total Investment Income | | 51,720 | | 263,559 | | 117,967 | | 141,121 | |
| | | | | | | | | |
Expenses: | | | | | | | | | |
Advisory fees | | 20,771 | | 26,305 | | 8,621 | | 6,903 | |
Custody fees | | — | | — | | — | | 170 | |
Exchange listing fees | | — | | — | | — | | 3,014 | |
Professional fees | | — | | — | | — | | 14,893 | |
Insurance fees | | — | | — | | — | | 71 | |
Accounting and administration fees | | — | | — | | — | | 5,087 | |
Transfer agent fees | | — | | — | | — | | 4,011 | |
Trustee fees | | — | | — | | — | | 3,200 | |
Report to shareholders fees | | — | | — | | — | | 2,155 | |
Tax expense | | — | | — | | — | | 165 | |
Pricing fees | | — | | — | | — | | 6,661 | |
Other expenses | | — | | — | | — | | 132 | |
Total Expenses | | 20,771 | | 26,305 | | 8,621 | | 46,462 | |
Less expense waivers/reimbursements | | (2,203 | ) | (5,368 | ) | (1,078 | ) | (38,373 | ) |
Net Expenses | | 18,568 | | 20,937 | | 7,543 | | 8,089 | |
Net Investment Income | | 33,152 | | 242,622 | | 110,424 | | 133,032 | |
| | | | | | | | | |
Net Realized Gain (Loss) on: | | | | | | | | | |
Investments | | (1,037,859 | ) | (213,336 | ) | 6,369 | | (100,871 | ) |
Foreign currency transactions | | (609 | ) | — | | — | | — | |
Total Net Realized Gain (Loss) | | (1,038,468 | ) | (213,336 | ) | 6,369 | | (100,871 | ) |
| | | | | | | | | |
Change in Net Unrealized Appreciation (Depreciation) on: | | | | | | | | ||
Investments | | (110,853 | ) | 399,969 | | 193,111 | | 134,523 | |
Foreign currency translations | | (50 | ) | — | | — | | — | |
Total Change in Net Unrealized Appreciation (Depreciation) | | (110,903 | ) | 399,969 | | 193,111 | | 134,523 | |
Net Realized and Change in Unrealized Gain (Loss) | | (1,149,371 | ) | 186,633 | | 199,480 | | 33,652 | |
Net Increase (Decrease) in Net Assets Resulting from Operations | | $(1,116,219 | ) | $429,255 | | $309,904 | | $166,684 | |
Foreign withholding taxes | | $1,317 | | $— | | $— | | $— | |
1From November 15, 2023 (commencement of operations) through January 31, 2024.
The accompanying notes are an integral part of these financial statements.
25
Statements of Operations (continued)
For the Six Months Ended January 31, 2024 (unaudited)
| | Virtus | | Virtus | | Virtus | |
Investment Income: | | | | | | | |
Dividend income (net of foreign withholding taxes) | | $— | | $— | | $558,581 | |
Interest income | | 4,677,588 | | 279,381 | | 14,552 | |
Total Investment Income | | 4,677,588 | | 279,381 | | 573,133 | |
| | | | | | | |
Expenses: | | | | | | | |
Advisory fees | | 262,846 | | 16,389 | | 128,026 | |
Line of credit fees | | 4,611 | | — | | — | |
Total Expenses | | 267,457 | | 16,389 | | 128,026 | |
Less expense waivers/reimbursements | | (4,611 | ) | — | | — | |
Net Expenses | | 262,846 | | 16,389 | | 128,026 | |
Net Investment Income | | 4,414,742 | | 262,992 | | 445,107 | |
| | | | | | | |
Net Realized Gain (Loss) on: | | | | | | | |
Investments | | (81,517 | ) | (26,389 | ) | (3,525,859 | ) |
In-kind redemptions | | — | | — | | 5,088,181 | |
Total Net Realized Gain (Loss) | | (81,517 | ) | (26,389 | ) | 1,562,322 | |
| | | | | | | |
Change in Net Unrealized Appreciation (Depreciation) on: | | | | | | | |
Investments | | 861,005 | | 224,859 | | 1,654,224 | |
Total Change in Net Unrealized Appreciation | | 861,005 | | 224,859 | | 1,654,224 | |
Net Realized and Change in Unrealized Gain | | 779,488 | | 198,470 | | 3,216,546 | |
Net Increase in Net Assets Resulting from Operations | | $5,194,230 | | $461,462 | | $3,661,653 | |
Foreign withholding taxes | | $— | | $— | | $1,029 | |
The accompanying notes are an integral part of these financial statements.
26
| | Virtus Duff & Phelps Clean Energy ETF | | Virtus Newfleet ABS/MBS ETF | | ||||
| | For the | | For the | | For the | | For the | |
Increase (Decrease) in Net Assets Resulting | | | | | | | | | |
Net investment income | | $33,152 | | $30,101 | | $242,622 | | $424,010 | |
Net realized loss | | (1,038,468 | ) | (425,461 | ) | (213,336 | ) | (178,420 | ) |
Net change in unrealized appreciation (depreciation) | | (110,903 | ) | (101,321 | ) | 399,969 | | 83,338 | |
Net increase (decrease) in net assets resulting from operations | | (1,116,219 | ) | (496,681 | ) | 429,255 | | 328,928 | |
Distributions to Shareholders | | (33,193 | ) | (23,238 | ) | (253,551 | ) | (408,549 | ) |
| | | | | | | | | |
Shareholder Transactions: | | | | | | | | | |
Proceeds from shares sold | | 4,647,095 | | — | | — | | — | |
Cost of shares redeemed | | — | | — | | (3,522,243 | ) | — | |
Net increase (decrease) in net assets resulting from shareholder transactions | | 4,647,095 | | — | | (3,522,243 | ) | — | |
Increase (decrease) in net assets | | 3,497,683 | | (519,919 | ) | (3,346,539 | ) | (79,621 | ) |
| | | | | | | | | |
Net Assets: | | | | | | | | | |
Beginning of period/year | | 3,149,281 | | 3,669,200 | | 12,885,924 | | 12,965,545 | |
End of period/year | | $6,646,964 | | $3,149,281 | | $9,539,385 | | $12,885,924 | |
| | | | | | | | | |
Changes in Shares Outstanding: | | | | | | | | | |
Shares outstanding, beginning of period/year | | 150,004 | | 150,004 | | 550,004 | | 550,004 | |
Shares sold | | 250,000 | | — | | — | | — | |
Shares redeemed | | — | | — | | (150,000 | ) | — | |
Shares outstanding, end of period/year | | 400,004 | | 150,004 | | 400,004 | | 550,004 | |
Statements of Changes in Net Assets (continued)
The accompanying notes are an integral part of these financial statements.
27
| | Virtus Newfleet Short Duration Core Plus | | Virtus Newfleet Short Duration | | ||
| | For the Period | | For the | | For the | |
Increase (Decrease) in Net Assets Resulting from Operations: | | | | | | | |
Net investment income | | $110,424 | | $133,032 | | $282,991 | |
Net realized gain (loss) | | 6,369 | | (100,871 | ) | (85,261 | ) |
Net change in unrealized appreciation | | 193,111 | | 134,523 | | 63,111 | |
Net increase in net assets resulting from operations | | 309,904 | | 166,684 | | 260,841 | |
Distributions to Shareholders | | (91,449 | ) | (134,173 | ) | (292,764 | ) |
| | | | | | | |
Shareholder Transactions: | | | | | | | |
Proceeds from shares sold | | 10,111,806 | | — | | — | |
Cost of shares redeemed | | — | | (1,062,972 | ) | — | |
Net increase (decrease) in net assets resulting from shareholder transactions | | 10,111,806 | | (1,062,972 | ) | — | |
Increase (decrease) in net assets | | 10,330,261 | | (1,030,461 | ) | (31,923 | ) |
| | | | | | | |
Net Assets: | | | | | | | |
Beginning of period/year | | — | | 4,339,196 | | 4,371,119 | |
End of period/year | | $10,330,261 | | $3,308,735 | | $4,339,196 | |
| | | | | | | |
Changes in Shares Outstanding: | | | | | | | |
Shares outstanding, beginning of period/year | | — | | 204,000 | | 204,000 | |
Shares sold | | 400,004 | | — | | — | |
Shares redeemed | | — | | (50,000 | ) | — | |
Shares outstanding, end of period/year | | 400,004 | | 154,000 | | 204,000 | |
1Commencement of operations.
Statements of Changes in Net Assets (continued)
The accompanying notes are an integral part of these financial statements.
28
| | Virtus Seix Senior Loan ETF | | Virtus Stone Harbor Emerging Markets High Yield Bond ETF | | ||||
| | For the | | For the | | For the | | For the Period | |
Increase (Decrease) in Net Assets Resulting | | | | | | | | | |
Net investment income | | $4,414,742 | | $6,537,393 | | $262,992 | | $239,288 | |
Net realized loss | | (81,517 | ) | (2,232,007 | ) | (26,389 | ) | (8,962 | ) |
Net change in unrealized appreciation | | 861,005 | | 2,489,005 | | 224,859 | | 25,136 | |
Net increase in net assets resulting from operations | | 5,194,230 | | 6,794,391 | | 461,462 | | 255,462 | |
Distributions to Shareholders | | (4,346,111 | ) | (6,048,769 | ) | (280,007 | ) | (228,126 | ) |
| | | | | | | | | |
Shareholder Transactions: | | | | | | | | | |
Proceeds from shares sold | | 23,260,032 | | 55,997,491 | | 2,463,994 | | 3,753,751 | |
Cost of shares redeemed | | — | | (53,309,847 | ) | — | | — | |
Net increase in net assets resulting from shareholder transactions | | 23,260,032 | | 2,687,644 | | 2,463,994 | | 3,753,751 | |
Increase in net assets | | 24,108,151 | | 3,433,266 | | 2,645,449 | | 3,781,087 | |
| | | | | | | | | |
Net Assets: | | | | | | | | | |
Beginning of period/year | | 77,285,575 | | 73,852,309 | | 3,781,087 | | — | |
End of period/year | | $101,393,726 | | $77,285,575 | | $6,426,536 | | $3,781,087 | |
| | | | | | | | | |
Changes in Shares Outstanding: | | | | | | | | | |
Shares outstanding, beginning of period/year | | 3,250,004 | | 3,150,004 | | 150,004 | | — | |
Shares sold | | 975,000 | | 2,375,000 | | 100,000 | | 150,004 | |
Shares redeemed | | — | | (2,275,000 | ) | — | | — | |
Shares outstanding, end of period/year | | 4,225,004 | | 3,250,004 | | 250,004 | | 150,004 | |
1Commencement of operations.
Statements of Changes in Net Assets (continued)
The accompanying notes are an integral part of these financial statements.
29
| | Virtus Terranova U.S. Quality Momentum ETF | | ||
| | For the | | For the | |
Increase (Decrease) in Net Assets Resulting from Operations: | | | | | |
Net investment income | | $445,107 | | $1,306,061 | |
Net realized gain | | 1,562,322 | | 48,785 | |
Net change in unrealized appreciation | | 1,654,224 | | 8,346,992 | |
Net increase in net assets resulting from operations | | 3,661,653 | | 9,701,838 | |
Distributions to Shareholders | | (1,115,017 | ) | (1,252,089 | ) |
| | | | | |
Shareholder Transactions: | | | | | |
Proceeds from shares sold | | 19,514,274 | | 80,905,739 | |
Cost of shares redeemed | | (38,905,913 | ) | (76,108,495 | ) |
Net increase (decrease) in net assets resulting from shareholder transactions | | (19,391,639 | ) | 4,797,244 | |
Increase (decrease) in net assets | | (16,845,003 | ) | 13,246,993 | |
| | | | | |
Net Assets: | | | | | |
Beginning of period/year | | 100,763,130 | | 87,516,137 | |
End of period/year | | $83,918,127 | | $100,763,130 | |
| | | | | |
Changes in Shares Outstanding: | | | | | |
Shares outstanding, beginning of period/year | | 3,400,004 | | 3,200,004 | |
Shares sold | | 650,000 | | 2,900,000 | |
Shares redeemed | | (1,350,000 | ) | (2,700,000 | ) |
Shares outstanding, end of period/year | | 2,700,004 | | 3,400,004 | |
The accompanying notes are an integral part of these financial statements.
30
| | Virtus Duff & Phelps Clean Energy ETF | | ||||
| | For the | | For the | | For the Period | |
Per Share Data for a Share Outstanding throughout | | | | | | | |
Net asset value, beginning of period | | $20.99 | | $24.46 | | $25.55 | |
Investment operations: | | | | | | | |
Net investment income2 | | 0.09 | | 0.20 | | 0.14 | |
Net realized and unrealized loss | | (4.38 | ) | (3.52 | ) | (1.12 | ) |
Total from investment operations | | (4.29 | ) | (3.32 | ) | (0.98 | ) |
| | | | | | | |
Less Distributions from: | | | | | | | |
Net investment income | | (0.08 | ) | (0.15 | ) | (0.11 | ) |
Total distributions | | (0.08 | ) | (0.15 | ) | (0.11 | ) |
Net Asset Value, End of period | | $16.62 | | $20.99 | | $24.46 | |
Net Asset Value Total Return3 | | (20.48 | )% | (13.55 | )% | (3.76 | )% |
Net assets, end of period (000’s omitted) | | $6,647 | | $3,149 | | $3,669 | |
| | | | | | | |
RATIOS/SUPPLEMENTAL DATA: | | | | | | | |
Ratios to Average Net Assets: | | | | | | | |
Expenses, net of expense waivers | | 0.59 | %4 | 0.59 | % | 0.59 | %4 |
Expenses, prior to expense waivers | | 0.66 | %4 | 0.66 | % | 0.66 | %4 |
Net investment income | | 1.05 | %4 | 0.89 | % | 0.62 | %4 |
Portfolio turnover rate5 | | 50 | %6 | 58 | % | 39 | %6 |
1Commencement of operations.
2Based on average shares outstanding.
3Net Asset Value Total Return is calculated assuming an initial investment made at the net asset value on the first day of the period, reinvestment of dividends and distributions at net asset value during the period, and redemptions at net asset value on the last day of the period. Total return calculated for a period of less than one year is not annualized.
4Annualized.
5Portfolio turnover excludes the value of portfolio securities received or delivered as a result of in-kind creations or redemptions of the Fund’s capital shares.
6Not annualized.
The accompanying notes are an integral part of these financial statements.
31
Financial Highlights (continued)
| | Virtus Newfleet ABS/MBS ETF | | ||||||
| | For the | | For the | | For the | | For the Period | |
Per Share Data for a Share Outstanding throughout | | | | | | | | | |
Net asset value, beginning of period | | $23.43 | | $23.57 | | $25.03 | | $25.00 | |
Investment operations: | | | | | | | | | |
Net investment income2 | | 0.53 | | 0.77 | | 0.38 | | 0.17 | |
Net realized and unrealized gain (loss) | | 0.45 | | (0.17 | ) | (1.41 | ) | 0.04 | |
Total from investment operations | | 0.98 | | 0.60 | | (1.03 | ) | 0.21 | |
| | | | | | | | | |
Less Distributions from: | | | | | | | | | |
Net investment income | | (0.56 | ) | (0.74 | ) | (0.43 | ) | (0.18 | ) |
Total distributions | | (0.56 | ) | (0.74 | ) | (0.43 | ) | (0.18 | ) |
Net Asset Value, End of period | | $23.85 | | $23.43 | | $23.57 | | $25.03 | |
Net Asset Value Total Return3 | | 4.23 | % | 2.62 | % | (4.12 | )% | 0.85 | % |
Net assets, end of period (000’s omitted) | | $9,539 | | $12,886 | | $12,966 | | $15,017 | |
| | | | | | | | | |
RATIOS/SUPPLEMENTAL DATA: | | | | | | | | | |
Ratios to Average Net Assets: | | | | | | | | | |
Expenses, net of expense waivers | | 0.39 | %4 | 0.39 | % | 0.39 | % | 0.39 | %4 |
Expenses, prior to expense waivers | | 0.49 | %4 | 0.49 | % | 0.49 | % | 0.49 | %4 |
Net investment income | | 4.52 | %4 | 3.32 | % | 1.56 | % | 1.49 | %4 |
Portfolio turnover rate5 | | 31 | %6 | 42 | % | 47 | % | 24 | %6 |
1Commencement of operations.
2Based on average shares outstanding.
3Net Asset Value Total Return is calculated assuming an initial investment made at the net asset value on the first day of the period, reinvestment of dividends and distributions at net asset value during the period, and redemptions at net asset value on the last day of the period. Total return calculated for a period of less than one year is not annualized.
4Annualized.
5Portfolio turnover excludes the value of portfolio securities received or delivered as a result of in-kind creations or redemptions of the Fund’s capital shares.
6Not annualized.
The accompanying notes are an integral part of these financial statements.
32
Financial Highlights (continued)
| | Virtus | |
| | For the Period | |
Per Share Data for a Share Outstanding throughout the period presented: | | | |
Net asset value, beginning of period | | $25.00 | |
Investment operations: | | | |
Net investment income2 | | 0.28 | |
Net realized and unrealized gain | | 0.78 | |
Total from investment operations | | 1.06 | |
| | | |
Less Distributions from: | | | |
Net investment income | | (0.23 | ) |
Total distributions | | (0.23 | ) |
Net Asset Value, End of period | | $25.83 | |
Net Asset Value Total Return3 | | 3.07 | % |
Net assets, end of period (000’s omitted) | | $10,330 | |
| | | |
RATIOS/SUPPLEMENTAL DATA: | | | |
Ratios to Average Net Assets: | | | |
Expenses, net of expense waivers | | 0.35 | % |
Expenses, prior to expense waivers | | 0.40 | % |
Net investment income | | 5.12 | % |
Portfolio turnover rate4 | | 9 | %5 |
1Commencement of operations.
2Based on average shares outstanding.
3Net Asset Value Total Return is calculated assuming an initial investment made at the net asset value on the first day of the period, reinvestment of dividends and distributions at net asset value during the period, and redemptions at net asset value on the last day of the period. Total return calculated for a period of less than one year is not annualized.
4Portfolio turnover excludes the value of portfolio securities received or delivered as a result of in-kind creations or redemptions of the Fund’s capital shares.
5Not annualized.
The accompanying notes are an integral part of these financial statements.
33
Financial Highlights (continued)
| | Virtus Newfleet Short Duration High Yield Bond ETF | | ||||||||||
| | For the | | For the | | For the | | For the | | For the | | For the | |
Per Share Data for a Share Outstanding throughout | | | | | | | | | | | | | |
Net asset value, beginning of period | | $21.27 | | $21.43 | | $24.69 | | $23.51 | | $23.93 | | $24.61 | |
Investment operations: | | | | | | | | | | | | | |
Net investment income1 | | 0.80 | | 1.39 | | 1.29 | | 1.04 | | 0.90 | | 1.32 | |
Net realized and unrealized | | 0.26 | | (0.11 | ) | (3.27 | ) | 1.21 | | (0.42 | ) | (0.57 | ) |
Total from investment operations | | 1.06 | | 1.28 | | (1.98 | ) | 2.25 | | 0.48 | | 0.75 | |
| | | | | | | | | | | | | |
Less Distributions from: | | | | | | | | | | | | | |
Net investment income | | (0.84 | ) | (1.44 | ) | (1.28 | ) | (1.07 | ) | (0.90 | ) | (1.43 | ) |
Total distributions | | (0.84 | ) | (1.44 | ) | (1.28 | ) | (1.07 | ) | (0.90 | ) | (1.43 | ) |
Net Asset Value, End of period | | $21.49 | | $21.27 | | $21.43 | | $24.69 | | $23.51 | | $23.93 | |
Net Asset Value Total Return2 | | 5.10 | % | 6.31 | % | (8.29 | )% | 9.78 | % | 2.10 | % | 3.14 | % |
Net assets, end of period | | $3,309 | | $4,339 | | $4,371 | | $6,272 | | $7,148 | | $12,061 | |
| | | | | | | | | | | | | |
RATIOS/SUPPLEMENTAL DATA: | | | | | | | | | | | | | |
Ratios to Average Net Assets: | | | | | | | | | | | | | |
Expenses, net of expense waivers | | 0.46 | %3 | 0.49 | % | 0.49 | % | 0.62 | % | 0.68 | % | 0.68 | % |
Expenses, prior to expense waivers | | 2.63 | %3 | 2.88 | % | 2.32 | % | 1.88 | % | 2.43 | % | 1.03 | % |
Net investment income | | 7.52 | %3 | 6.62 | % | 5.51 | % | 4.27 | % | 3.85 | % | 5.43 | % |
Portfolio turnover rate4 | | 14 | %5 | 46 | % | 67 | % | 121 | % | 124 | % | 82 | % |
1Based on average shares outstanding.
2Net Asset Value Total Return is calculated assuming an initial investment made at the net asset value on the first day of the period, reinvestment of dividends and distributions at net asset value during the period, and redemptions at net asset value on the last day of the period. Total return calculated for a period of less than one year is not annualized.
3Annualized.
4Portfolio turnover excludes the value of portfolio securities received or delivered as a result of in-kind creations or redemptions of the Fund’s capital shares.
5Not annualized.
The accompanying notes are an integral part of these financial statements.
34
Financial Highlights (continued)
| | Virtus Seix Senior Loan ETF | | ||||||||||
| | For the | | For the | | For the | | For the | | For the | | For the Period | |
Per Share Data for a Share Outstanding throughout | | | | | | | | | | | | | |
Net asset value, beginning of period | | $23.78 | | $23.45 | | $25.06 | | $24.26 | | $25.02 | | $25.00 | |
Investment operations: | | | | | | | | | | | | | |
Net investment income2 | | 1.15 | | 1.91 | | 1.12 | | 0.79 | | 1.19 | | 0.29 | |
Net realized and unrealized | | 0.19 | | 0.23 | | (1.57 | ) | 0.86 | | (0.68 | ) | (0.03 | ) |
Total from investment operations | | 1.34 | | 2.14 | | (0.45 | ) | 1.65 | | 0.51 | | 0.26 | |
| | | | | | | | | | | | | |
Less Distributions from: | | | | | | | | | | | | | |
Net investment income | | (1.12 | ) | (1.81 | ) | (1.03 | ) | (0.85 | ) | (1.15 | ) | (0.24 | ) |
Net realized gains | | — | | — | | (0.13 | ) | — | | (0.12 | ) | — | |
Total distributions | | (1.12 | ) | (1.81 | ) | (1.16 | ) | (0.85 | ) | (1.27 | ) | (0.24 | ) |
Net Asset Value, End of period | | $24.00 | | $23.78 | | $23.45 | | $25.06 | | $24.26 | | $25.02 | |
Net Asset Value Total Return3 | | 5.76 | % | 9.46 | % | (1.93 | )% | 6.94 | % | 2.11 | % | 1.08 | % |
Net assets, end of period | | $101,394 | | $77,286 | | $73,852 | | $38,839 | | $7,277 | | $6,255 | |
| | | | | | | | | | | | | |
RATIOS/SUPPLEMENTAL DATA: | | | | | | | | | | | | | |
Ratios to Average Net Assets: | | | | | | | | | | | | | |
Expenses, net of expense waivers | | 0.57 | %4,5 | 0.62 | %6 | 0.57 | % | 0.57 | % | 0.57 | % | 0.57 | %4 |
Expenses, prior to expense waivers | | 0.58 | %4,5 | 0.63 | %6 | 0.57 | % | 0.57 | % | 0.57 | % | 0.57 | %4 |
Net investment income | | 9.57 | %4 | 8.12 | % | 4.58 | % | 3.20 | % | 4.93 | % | 4.39 | %4 |
Portfolio turnover rate7 | | 130 | %8 | 364 | % | 592 | % | 851 | % | 546 | % | 544 | %8 |
1Commencement of operations.
2Based on average shares outstanding.
3Net Asset Value Total Return is calculated assuming an initial investment made at the net asset value on the first day of the period, reinvestment of dividends and distributions at net asset value during the period, and redemptions at net asset value on the last day of the period. Total return calculated for a period of less than one year is not annualized.
4Annualized.
5The ratios of expenses to average net assets include line of credit fees of 0.01%.
6The ratios of expenses to average net assets include interest expense fees of 0.05%.
7Portfolio turnover excludes the value of portfolio securities received or delivered as a result of in-kind creations or redemptions of the Fund’s capital shares.
8Not annualized.
The accompanying notes are an integral part of these financial statements.
35
Financial Highlights (continued)
| | Virtus Stone Harbor Emerging Markets High Yield Bond ETF | | ||
| | For the | | For the Period | |
Per Share Data for a Share Outstanding throughout each period presented: | | | | | |
Net asset value, beginning of period | | $25.21 | | $25.00 | |
Investment operations: | | | | | |
Net investment income2 | | 1.10 | | 1.60 | |
Net realized and unrealized gain | | 0.52 | | 0.13 | |
Total from investment operations | | 1.62 | | 1.73 | |
| | | | | |
Less Distributions from: | | | | | |
Net investment income | | (1.12 | ) | (1.52 | ) |
Total distributions | | (1.12 | ) | (1.52 | ) |
Net Asset Value, End of period | | $25.71 | | $25.21 | |
Net Asset Value Total Return3 | | 6.68 | % | 7.22 | % |
Net assets, end of period (000’s omitted) | | $6,427 | | $3,781 | |
| | | | | |
RATIOS/SUPPLEMENTAL DATA: | | | | | |
Ratios to Average Net Assets: | | | | | |
Expenses | | 0.55 | %4 | 0.58 | %4,5 |
Net investment income | | 8.83 | %4 | 10.24 | %4 |
Portfolio turnover rate6 | | 54 | %7 | 57 | %7 |
1Commencement of operations.
2Based on average shares outstanding.
3Net Asset Value Total Return is calculated assuming an initial investment made at the net asset value on the first day of the period, reinvestment of dividends and distributions at net asset value during the period, and redemptions at net asset value on the last day of the period. Total return calculated for a period of less than one year is not annualized.
4Annualized.
5The ratios of expenses to average net assets includes tax expense fees of 0.03%.
6Portfolio turnover excludes the value of portfolio securities received or delivered as a result of in-kind creations or redemptions of the Fund’s capital shares.
7Not annualized.
Financial Highlights (continued)
The accompanying notes are an integral part of these financial statements.
36
| | Virtus Terranova U.S. Quality Momentum ETF | | ||||||
| | For the | | For the | | For the | | For the Period | |
Per Share Data for a Share Outstanding throughout each period presented: | | | | | | | | | |
Net asset value, beginning of period | | $29.64 | | $27.35 | | $30.28 | | $24.92 | |
Investment operations: | | | | | | | | | |
Net investment income2 | | 0.15 | | 0.36 | | 0.26 | | 0.12 | |
Net realized and unrealized gain (loss) | | 1.70 | | 2.26 | | (3.05 | ) | 5.26 | |
Total from investment operations | | 1.85 | | 2.62 | | (2.79 | ) | 5.38 | |
| | | | | | | | | |
Less Distributions from: | | | | | | | | | |
Net investment income | | (0.41 | ) | (0.33 | ) | (0.14 | ) | (0.02 | ) |
Total distributions | | (0.41 | ) | (0.33 | ) | (0.14 | ) | (0.02 | ) |
Net Asset Value, End of period | | $31.08 | | $29.64 | | $27.35 | | $30.28 | |
Net Asset Value Total Return3 | | 6.28 | % | 9.72 | % | (9.27 | )% | 21.58 | % |
Net assets, end of period (000’s omitted) | | $83,918 | | $100,763 | | $87,516 | | $84,775 | |
| | | | | | | | | |
RATIOS/SUPPLEMENTAL DATA: | | | | | | | | | |
Ratios to Average Net Assets: | | | | | | | | | |
Expenses | | 0.29 | %4 | 0.29 | % | 0.29 | % | 0.29 | %4 |
Net investment income | | 1.01 | %4 | 1.31 | % | 0.88 | % | 0.62 | %4 |
Portfolio turnover rate5 | | 40 | %6 | 121 | % | 117 | % | 89 | %6 |
1Commencement of operations.
2Based on average shares outstanding.
3Net Asset Value Total Return is calculated assuming an initial investment made at the net asset value on the first day of the period, reinvestment of dividends and distributions at net asset value during the period, and redemptions at net asset value on the last day of the period. Total return calculated for a period of less than one year is not annualized.
4Annualized.
5Portfolio turnover excludes the value of portfolio securities received or delivered as a result of in-kind creations or redemptions of the Fund’s capital shares.
6Not annualized.
37
1.ORGANIZATION
Virtus ETF Trust II (the “Trust”) was organized as a Delaware statutory trust on July 14, 2015 and is registered with the U.S. Securities and Exchange Commission (the “SEC”) as an open-end management investment company under the Investment Company Act of 1940, as amended (the “1940 Act”).
As of January 31, 2024, seven funds of the Trust are offered for sale. Virtus Duff & Phelps Clean Energy ETF, Virtus Newfleet ABS/MBS ETF, Virtus Newfleet Short Duration Core Plus Bond ETF, Virtus Newfleet Short Duration High Yield Bond ETF, Virtus Seix Senior Loan ETF, Virtus Stone Harbor Emerging Markets High Yield Bond ETF and Virtus Terranova U.S. Quality Momentum ETF (each a “Fund” and, collectively, the “Funds”), each a separate investment portfolio of the Trust, are presented in this semi-annual report. The offering of each Fund’s shares is registered under the Securities Act of 1933, as amended (the “Securities Act”).
Funds | | Investment objective(s) |
Virtus Duff & Phelps Clean Energy ETF | | Seeks capital appreciation. |
Virtus Newfleet ABS/MBS ETF | | Seeks income. |
Virtus Newfleet Short Duration Core Plus Bond ETF | | Seeks to provide a high level of total return, including current income, while limiting fluctuations in net asset value. |
Virtus Newfleet Short Duration High Yield Bond ETF | | Seeks to provide a high level of current income and, secondarily, capital appreciation. |
Virtus Seix Senior Loan ETF | | Seeks to provide a high level of current income. |
Virtus Stone Harbor Emerging Markets High Yield Bond ETF | | Seeks current income and, secondarily, capital appreciation. |
Virtus Terranova U.S. Quality Momentum ETF | | Seeks investment results that correspond, before fees and expenses, to the price and yield performance of the Terranova U.S. Quality Momentum Index. |
The Virtus Newfleet Short Duration Core Plus Bond ETF commenced operations on November 15, 2023.
Effective November 28, 2023, the Virtus Newfleet High Yield Bond ETF changed its name to Virtus Newfleet Short Duration High Yield Bond ETF and its ticker symbol to “VSHY”.
There is no guarantee that a Fund will achieve its objective(s).
Virtus Duff & Phelps Clean Energy ETF, Virtus Seix Senior Loan ETF and Virtus Stone Harbor Emerging Markets High Yield Bond ETF each are “non-diversified” Funds, as defined under the 1940 Act.
2.SIGNIFICANT ACCOUNTING POLICIES
Each Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standard Codification Topic 946 Financial Services — Investment Companies. Each Fund prepares its financial statements in accordance with generally accepted accounting principles (“GAAP”) in the United States of America and follows the significant accounting policies described below.
(a)Use of Estimates
Management makes certain 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 and reported amounts of increases and decreases in net assets from operations during the reporting period. Actual results could differ from those estimates.
(b)Indemnification
In the normal course of business, the Funds may enter into contracts that contain a variety of representations which provide general indemnifications for certain liabilities. The Funds’ maximum exposure under these arrangements is unknown. However, the Funds have not had prior claims or losses pursuant to these contracts and expect the risk of loss to be remote.
(c)Security Valuation
A description of the valuation techniques applied to the Funds’ major categories of assets and liabilities measured at fair value on a recurring basis is as follows:
Equity securities are valued at the official closing price (typically last sale) on the exchange on which the securities are primarily traded. Securities regularly traded in an over-the-counter market are valued at the latest quoted sale price in such market or in the case of the New York Stock Exchange (“NYSE”), at the NYSE Official Closing Price. Such valuations are typically categorized as Level 1 in the
38
Notes to Financial Statements (continued)
January 31, 2024 (unaudited)
fair value hierarchy. The Board of Trustees of the Trust (the “Board”) has designated Virtus ETF Advisers LLC (the “Adviser”) to serve as its valuation designee, pursuant to Rule 2a-5 under the 1940 Act, to perform the fair value determinations relating to any or the Funds investments. Accordingly, if market quotations are not readily available, or if it is determined that a quotation of a security does not represent fair value, then the security is valued by the Adviser at fair value as determined in good faith using procedures approved by the Board. Such valuations are typically categorized as Level 2 or Level 3 in the fair value hierarchy.
Debt securities, including restricted securities, are valued based on evaluated quotations received from independent pricing services or from dealers who make markets in such securities. For most bond types, the pricing service utilizes matrix pricing that considers one or more of the following factors: yield or price of bonds of comparable quality, coupon, maturity, current cash flows, type, and current day trade information, as well as dealer-supplied prices. Pricing services generally value fixed income securities assuming orderly transactions of an institutional round lot size, but a fund may hold or transact in such securities in smaller, odd lot sizes. Odd lots may trade at lower prices than institutional round lots. Such valuations are typically categorized as Level 2 in the fair value hierarchy. Debt securities that are not widely traded, are illiquid, or are internally fair valued using procedures adopted by the Board are generally categorized as Level 3 in the hierarchy.
Investments in other open-end investment companies are valued based on their net asset value each business day and are typically categorized as Level 1 in the fair value hierarchy.
(d)Fair Value Measurement
Accounting Standards Codification, Fair Value Measurements and Disclosures (“ASC 820”) defines fair value, establishes a framework for measuring fair value in accordance with GAAP, and requires disclosure about fair value measurements. It also provides guidance on determining when there has been a significant decrease in the volume and level of activity for an asset or liability, when a transaction is not orderly, and how that information must be incorporated into fair value measurement. Under ASC 820, various inputs are used in determining the value of the Funds’ investments. The Adviser, on behalf of the Fund, utilizes a fair value hierarchy which prioritizes the inputs to valuation techniques used to measure fair value into three broad levels. These inputs are summarized in the following hierarchy:
•Level 1 — Unadjusted quoted prices in active markets for identical assets or liabilities that the Funds have the ability to access.
•Level 2 — Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar securities, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
•Level 3 — Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Funds’ own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.
The inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those securities. The hierarchy classification of inputs used to value each Fund’s investments at January 31, 2024, is disclosed at the end of each Fund’s Schedule of Investments.
(e)Security Transactions and Investment Income
Security transactions are accounted for on the trade date. Realized gains and losses on sales of investment securities are calculated using specific identification. Dividend income is recognized on the ex-dividend date. Expenses and interest income are recognized on the accrual basis. Amortization of premium and accretion of discount on debt securities are included in interest income. Each Fund amortizes premiums and accretes discounts using the effective interest method. Premiums on callable debt securities are amortized to interest income to the earliest call date using the effective interest method.
(f)Expenses
Each Fund pays all of its expenses not assumed by its Sub-Adviser, if any, as defined in Note 3, or the Adviser. General Trust expenses that are allocated among and charged to the assets of the Funds are done so on a basis that the Board deems fair and equitable, which may be on a basis of relative net assets of each Fund or the nature of the services performed and relative applicability to each Fund.
(g)Distributions to Shareholders
Distributions are recorded by the Funds on the ex-dividend date. Income and capital gain distributions are determined in accordance with income tax regulations that may differ from GAAP in the United States of America.
39
Notes to Financial Statements (continued)
January 31, 2024 (unaudited)
(h)When-issued Purchases and Forward Commitments (Delayed Delivery)
The Funds may engage in when-issued or forward commitment transactions. Securities purchased on a when-issued or forward commitment basis are also known as delayed delivery transactions. Delayed delivery transactions involve a commitment by a Fund to purchase or sell a security at a future date, ordinarily up to 90 days later. When-issued or forward commitments enable a Fund to lock in what is believed to be an attractive price or yield on a particular security for a period of time, regardless of future changes in interest rates. The Funds record when-issued and delayed delivery securities on the trade date. The Funds maintain collateral for the securities purchased. Securities purchased on a when-issued or delayed delivery basis begin earning interest on the settlement date.
(i)Loan Agreements
The Funds may invest in direct debt instruments which are interests in amounts owed by a corporate, governmental, or other borrower to lenders or lending syndicates. Loan agreements are generally non-investment grade and often involve borrowers that are highly leveraged. The Funds may invest in obligations of borrowers who are in bankruptcy proceedings. Loan agreements are typically senior in the corporate capital structure of the borrower. A loan is often administered by a bank or other financial institution (the “lender”) that acts as agent for all holders. The lender administers the terms of the loan, as specified in the loan agreement. A Fund’s investment in loans may be in the form of participations in loans or assignments of all or a portion of loans from third parties. When investing in loan participations, a Fund has the right to receive payments of principal, interest and any fees to which it is entitled only from the lender selling the loan participation and only upon receipt by the lender of payments from the borrower. A Fund generally has no right to enforce compliance with the terms of the loan agreement with the borrower. As a result, a Fund may be subject to the credit risk of both the borrower and the lender that is selling the loan agreement. When a Fund purchases assignments from lenders, it acquires direct rights against the borrower on the loan.
A Fund may invest in multiple series or tranches of a loan, which may have varying terms and carry different associated risks. Loan agreements may involve foreign borrowers, and investments may be denominated in foreign currencies. Direct indebtedness of emerging countries involves a risk that the government entities responsible for the repayment of the debt may be unable, or unwilling, to pay the principal and interest when due.
The loan agreements have floating rate loan interests which generally pay interest at rates that are periodically determined by reference to a base lending rate plus a premium. The base lending rates are generally SOFR (Secured Overnight Financing Rate), the prime rate offered by one or more U.S. banks or the certificate of deposit rate. When a loan agreement is purchased, a Fund may pay an assignment fee. On an ongoing basis, a Fund may receive a commitment fee based on the undrawn portion of the underlying line of credit portion of a loan agreement. Prepayment penalty fees are received upon the prepayment of a loan agreement by a borrower. Prepayment penalty, facility, commitment, consent and amendment fees are recorded to income as earned or paid.
3.INVESTMENT MANAGEMENT, RELATED PARTIES AND OTHER AGREEMENTS
Investment Advisory Agreement
The Trust, on behalf of each Fund, has entered into an Investment Advisory Agreement (collectively, the “Advisory Agreement”) with the Adviser, an indirect wholly owned subsidiary of Virtus Investment Partners, Inc. (Ticker: VRTS) (together with its affiliates, “Virtus”). Pursuant to the Advisory Agreement, the Adviser has overall supervisory responsibility for the general management and investment of the Funds’ securities portfolios. The Adviser has agreed to pay all of the ordinary operating expenses of each of the Virtus Duff & Phelps Clean Energy ETF, Virtus Newfleet ABS/MBS ETF, Virtus Newfleet Short Duration Core Plus Bond ETF, Virtus Newfleet Short Duration High Yield Bond ETF, Virtus Seix Senior Loan ETF, Virtus Stone Harbor Emerging Markets High Yield Bond ETF and Virtus Terranova U.S. Quality Momentum ETF, except for the following expenses, each of which is paid by the applicable Fund: the Adviser’s fee; payments under any 12b-1 plan; taxes and other governmental fees; brokerage fees, commissions and other transaction expenses; interest and other costs of borrowing; litigation or arbitration expenses; acquired fund fees and expenses; and extraordinary or other
40
Notes to Financial Statements (continued)
January 31, 2024 (unaudited)
non-routine expenses of the Fund. The Adviser is entitled to receive a fee from each Fund based on each Fund’s average daily net assets, computed and accrued daily and payable monthly, at an annual rate as follows:
Funds | | Rate | |
Virtus Duff & Phelps Clean Energy ETF | | 0.66 | %(1) |
Virtus Newfleet ABS/MBS ETF | | 0.49 | %(2) |
Virtus Newfleet Short Duration Core Plus Bond ETF | | 0.40 | %(3) |
Virtus Newfleet Short Duration High Yield Bond ETF | | 0.39 | % |
Virtus Seix Senior Loan ETF | | 0.57 | %(4) |
Virtus Stone Harbor Emerging Markets High Yield Bond ETF | | 0.55 | % |
Virtus Terranova U.S. Quality Momentum ETF | | 0.29 | % |
1The Adviser has contractually agreed to waive a portion of the Fund’s management fee equal to 0.07% of the Fund’s average daily net assets through at least November 28, 2024, which will have the effect of reducing the Fund’s expenses (the “Fee Waiver Agreement”). While the Adviser or the Fund may discontinue the Fee Waiver Agreement after the contractual period, it may only be terminated during its term by either party upon written notice; provided that such termination shall require the approval of the Fund’s Board of Trustees.
2The Adviser has contractually agreed to waive a portion of the Fund’s management fee equal to 0.10% of the Fund’s average daily net assets through at least November 28, 2024, which will have the effect of reducing the Fund’s expenses (the “Fee Waiver Agreement”). While the Adviser or the Fund may discontinue the Fee Waiver Agreement after the contractual period, it may only be terminated during its term by either party upon written notice; provided that such termination shall require the approval of the Fund’s Board of Trustees.
3The Adviser has contractually agreed to waive a portion of the Fund’s management fee equal to 0.05% of the Fund’s average daily net assets through at least November 30, 2025, which will have the effect of reducing the Fund’s expenses (the “Fee Waiver Agreement”). While the Adviser or the Fund may discontinue the Fee Waiver Agreement after the contractual period, it may only be terminated during its term by either party upon written notice; provided that such termination shall require the approval of the Fund’s Board of Trustees.
4The Adviser has contractually agreed to waive a portion of the Fund’s management fee equal to 0.01% of the Fund’s average daily net assets through at least November 28, 2024, which will have the effect of reducing the Fund’s expenses (the “Fee Waiver Agreement”). While the Adviser or the Fund may discontinue the Fee Waiver Agreement after the contractual period, it may only be terminated during its term by either party upon written notice; provided that such termination shall require the approval of the Fund’s Board of Trustees.
Effective November 13, 2023, the Virtus Newfleet Short Duration High Yield Bond ETF adopted a unified management fee (“Unified Fee”). The Unified Fee will continue to be paid at the current annual rate of 0.39% of the Fund’s average daily net assets, except that, as a Unified Fee, the Adviser will pay all of the ordinary operating expenses of the Fund, except for the following expenses, each of which is paid by the Fund: the Advisory Fee; payments under any 12b-1 plan; taxes and other governmental fees; brokerage fees, commissions and other transaction expenses; interest and other costs of borrowing; litigation or arbitration expenses; acquired fund fees and expenses; and extraordinary or other non-routine expenses of the Fund. Prior to November 13, 2023, the Adviser received a monthly advisory fee at the annual rate of 0.39% of the Fund’s average daily net assets.
The Advisory Agreement may be terminated by the Trust on behalf of each Fund with the approval of each Fund’s Board or by a vote of the majority of the Funds’ shareholders. The Advisory Agreement may also be terminated by the Adviser by not more than 60 days’ nor less than 30 days’ written notice.
41
Notes to Financial Statements (continued)
January 31, 2024 (unaudited)
Sub-Advisory Agreement
Each Sub-Adviser provides investment advice and management services to its respective Fund. Pursuant to an investment sub-advisory agreement among the Trust, the respective Sub-Adviser and the Adviser, the Adviser pays each Fund’s Sub-Adviser a sub-advisory fee calculated as shown below.
Funds | | Sub-Advisers | | Sub-Advisory Fees |
Virtus Duff & Phelps Clean Energy ETF | | Duff & Phelps Investment Management Co.(1) | | 50% of the net advisory fee(2) |
Virtus Newfleet ABS/MBS ETF | | Virtus Fixed Income Advisers, LLC, operating through its division Newfleet Asset Management(1) | | 50% of the net advisory fee(2) |
Virtus Newfleet Short Duration | |
| |
|
Virtus Newfleet Short Duration High Yield Bond ETF | |
| |
|
Virtus Seix Senior Loan ETF | | Virtus Fixed Income Advisers, LLC, operating through its division Seix Investment Advisors(1) | | 50% of the net advisory fee(2) |
Virtus Stone Harbor Emerging Markets High Yield Bond ETF | |
| |
|
(1)An indirect wholly-owned subsidiary of Virtus.
(2)Net advisory fee: The advisory fee paid by the Fund to the Adviser for investment advisory services under the Adviser’s investment advisory agreement with the Fund, after deducting the payment of all of the ordinary operating expenses of the Fund under the Adviser’s unified fee arrangement. In the event that the Adviser waives all or a portion of its fee pursuant to an applicable waiver agreement, then the Sub-Adviser will waive its fee in the same proportion as the Adviser.
(3)Net advisory fee: The advisory fee paid by the Fund to the Adviser for investment advisory services under the Adviser’s investment advisory agreement with the Fund, after accounting for any applicable fee waiver and/or expense limitation agreement, which will not include reimbursement of the Adviser for any expenses or recapture of prior waivers. In the event the Adviser waives its entire fee and also assumes expenses of the Fund pursuant to an applicable expense limitation agreement, the Sub- Adviser will similarly waive its entire fee and will share in the expense assumption by promptly paying to the Adviser (or its designee) 50% of the assumed amount. If during the term of the Sub-Advisory Agreement the Adviser later recaptures some or all of fees waived or expenses reimbursed by the Adviser and the Sub-Adviser together, then the Adviser will pay to the Sub-Adviser 50% of the amount recaptured.
Principal Underwriter
Pursuant to the terms of a Distribution Agreement with the Trust, VP Distributors, LLC (the “Distributor”) serves as the Funds’ principal underwriter. The Distributor receives compensation from the Adviser for the statutory underwriting services it provides to the Funds. The Distributor will not distribute shares in less than Creation Units (as hereinafter defined), and does not maintain a secondary market in shares. The shares are traded in the secondary market. The Distributor is an indirect wholly-owned subsidiary of Virtus.
Distribution and Service (12b-1 Plan)
The Board of Trustees has adopted a distribution and service plan under which each of Virtus Duff & Phelps Clean Energy ETF, Virtus Newfleet ABS/MBS ETF, Virtus Newfleet Short Duration Core Plus Bond ETF, Virtus Seix Senior Loan ETF, Virtus Stone Harbor Emerging Markets High Yield Bond ETF and Virtus Terranova U.S. Quality Momentum ETF is authorized to pay an amount up to 0.25% of its average daily net assets each year to finance activities primarily intended to result in the sale of Creation Units of the Funds or the provision of investor services. No 12b-1 fees are currently paid by the Funds and there are no current plans to impose these fees.
Operational Administrator
Virtus ETF Solutions LLC (the “Administrator”) serves as the Funds’ operational administrator. The Administrator supervises the overall administration of the Trust and the Funds including, among other responsibilities, the coordination and day-to-day oversight of the Funds’ operations, the service providers’ communications with the Funds and each other and assistance with Trust, Board and contractual matters related to the Funds and other series of the Trust. The Administrator also provides persons satisfactory to the Board to serve as officers of the Trust. The Administrator is an indirect wholly-owned subsidiary of Virtus.
42
Notes to Financial Statements (continued)
January 31, 2024 (unaudited)
Accounting Services Administrator, Custodian and Transfer Agent
The Bank of New York Mellon (“BNY Mellon”) provides administrative, accounting, tax and financial reporting for the maintenance and operations of the Trust as the Funds’ accounting services administrator. BNY Mellon also serves as the custodian for the Funds’ assets, and serves as transfer agent and dividend paying agent for the Funds.
Affiliated Shareholders
At January 31, 2024, Virtus Partners, Inc. held shares of the following funds which may be sold at any time that aggregated to the following:
Funds | | Shares | | % of shares | |
Virtus Duff & Phelps Clean Energy ETF | | 65,500 | | 16.4% | |
Virtus Newfleet ABS/MBS ETF | | 200,000 | | 50.0% | |
Virtus Newfleet Short Duration Core Plus Bond ETF | | 392,000 | | 98.0% | |
Virtus Seix Senior Loan ETF | | 764,000 | | 18.1% | |
Virtus Stone Harbor Emerging Markets High Yield Bond ETF | | 98,800 | | 39.5% | |
4.CREATION AND REDEMPTION TRANSACTIONS
The Funds issue and redeem shares on a continuous basis at net asset value in aggregate blocks of shares or multiples thereof called “Creation Units.” The Funds’ Creation Units may be issued and redeemed generally for cash or an in-kind deposit of securities held by the Funds. In each instance of cash creations or redemptions, the Trust may impose transaction fees based on transaction expenses related to the particular exchange that will be higher than the transaction fees associated with in-kind purchases or redemptions. Only “Authorized Participants” who have entered into contractual arrangements with the Distributor may purchase or redeem shares directly from the Funds. An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors will not qualify as Authorized Participants or have the resources to buy and sell whole Creation Units. Therefore, they will be unable to purchase or redeem the shares directly from the Funds. Rather, most retail investors will purchase shares in the secondary market with the assistance of a broker and will be subject to customary brokerage commissions or fees.
Authorized participants pay a fixed transaction fee of $500 to the shareholder servicing agent when purchasing and redeeming Creation Units of the Funds. The transaction fee is used to defray the costs associated with the issuance and redemption of Creation Units.
5.FEDERAL INCOME TAX
Each Fund intends to qualify as a “regulated investment company” under Sub-chapter M of the Internal Revenue Code of 1986 (the “Code”), as amended. Each Fund intends to distribute substantially all of its net investment income and net capital gains to shareholders. Therefore, no federal income or excise tax provision is required. Accounting for Uncertainty in Income Taxes as issued by the Financial Accounting Standards Board provides guidance for how uncertain tax positions should be recognized, measured, presented and disclosed in the financial statements, and requires the evaluation of tax positions taken or expected to be taken in the course of preparing a Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” of being sustained by the applicable tax authority. Tax positions not deemed to meet the more-likely-than-not threshold would be recorded as a tax benefit or expense in the current year. Interest and penalties related to income taxes would be recorded as income tax expense. Management of the Funds is required to analyze all open tax years (2021, 2022 and 2023), as defined by IRS statute of limitations, for all major jurisdictions, including federal tax authorities and certain state tax authorities. As of January 31, 2024, the Funds did not have a liability for any unrecognized tax benefits or uncertain tax positions that would require recognition in the financial statements. The Funds have no examination in progress and are not aware of any tax positions for which it is reasonably possible that the amounts of unrecognized tax benefits will significantly change in the next twelve months.
The Funds recognize interest accrued related to unrecognized tax benefits and penalties as income tax expense. For the period ended January 31, 2024, the Funds had no accrued penalties or interest.
43
Notes to Financial Statements (continued)
January 31, 2024 (unaudited)
At July 31, 2023, the adjusted cost basis of investments and gross unrealized appreciation and depreciation of investments for federal income tax purposes were as follows:
Funds | | Federal | | Gross | | Gross | | Net | |
Virtus Duff & Phelps Clean Energy ETF | | $3,189,158 | | $329,703 | | $(494,065 | ) | $(164,362 | ) |
Virtus Newfleet ABS/MBS ETF | | 13,444,659 | | 32,571 | | (620,114 | ) | (587,543 | ) |
Virtus Newfleet Short Duration High Yield Bond ETF | | 4,640,240 | | 42,221 | | (343,648 | ) | (301,427 | ) |
Virtus Seix Senior Loan ETF | | 78,535,227 | | 861,644 | | (2,028,609 | ) | (1,166,965 | ) |
Virtus Stone Harbor Emerging Markets High Yield Bond ETF | | 3,710,082 | | 117,909 | | (96,861 | ) | 21,048 | |
Virtus Terranova U.S. Quality Momentum ETF | | 91,146,379 | | 9,010,440 | | (1,095,395 | ) | 7,915,045 | |
Capital losses incurred after October 31 (“Post-October Losses”) and ordinary losses incurred after December 31 (“Late Year Ordinary Losses”) within the taxable year are deemed to arise on the first business day of the Funds’ next taxable year. During the fiscal year ended July 31, 2023, the Funds did not incur and or elect to defer Post-October Losses and Late Year Ordinary Losses.
At July 31, 2023, for Federal income tax purposes, the following Funds had capital loss carryforwards available to offset future capital gains for an unlimited period. To the extent that these loss carryforwards are utilized, capital gains so offset will not be distributed to shareholders:
Funds | | Short-Term | | Long-Term | | Total |
Virtus Duff & Phelps Clean Energy ETF | | $229,499 | | $293,559 | | $523,058 |
Virtus Newfleet ABS/MBS ETF | | 123,613 | | 342,330 | | 465,943 |
Virtus Newfleet Short Duration High Yield Bond ETF | | 583,189 | | 2,551,368 | | 3,134,557 |
Virtus Seix Senior Loan ETF | | 1,563,411 | | 1,582,820 | | 3,146,231 |
Virtus Stone Harbor Emerging Markets High Yield Bond ETF | | 5,770 | | — | | 5,770 |
Virtus Terranova U.S. Quality Momentum ETF | | 23,564,745 | | 3,381,897 | | 26,946,642 |
6.INVESTMENT TRANSACTIONS
Purchases and sales of investments (excluding short-term investments), subscriptions in-kind and redemptions in-kind for the period ended January 31, 2024 were as follows:
Funds | | Purchases | | Sales | | Subscriptions | | Redemptions |
Virtus Duff & Phelps Clean Energy ETF | | $3,565,627 | | $3,101,804 | | $4,228,741 | | $— |
Virtus Newfleet ABS/MBS ETF | | 3,309,187 | | 6,860,886 | | — | | — |
Virtus Newfleet Short Duration Core Plus Bond ETF | | 9,330,000 | | 644,504 | | — | | — |
Virtus Newfleet Short Duration High Yield Bond ETF | | 484,373 | | 1,762,862 | | — | | — |
Virtus Seix Senior Loan ETF | | 138,712,536 | | 117,393,794 | | — | | — |
Virtus Stone Harbor Emerging Markets High Yield Bond ETF | | 2,991,834 | | 3,064,305 | | 2,058,598 | | — |
Virtus Terranova U.S. Quality Momentum ETF | | 35,964,859 | | 35,059,312 | | 19,520,757 | | 39,417,678 |
Purchases and sales of investments in long-term U.S. Government Securities for the period ended January 31, 2024 were as follows:
Fund | | Purchases | | Sales |
Virtus Newfleet Short Duration Core Plus Bond ETF | | $824,699 | | $12,660 |
7.BORROWINGS
The Virtus Seix Senior Loan ETF entered into a Lending Agreement (the “Agreement”) with a commercial bank (the “Bank”) that allows the Fund to borrow cash from the Bank. Borrowings under the Agreement is collateralized by investments of the Fund. If the Fund defaults with respect to any of its obligations under the Agreement, the Bank may foreclose on assets of the Fund and/or the Fund may be required to repay immediately, in part or in full, the loan balance outstanding under the Agreement, necessitating the sale of securities at potentially inopportune times. Interest is charged at the Secured Overnight Financing Rate (“SOFR”) plus an additional percentage rate on the amount borrowed. The Agreement has an on-demand commitment term. For the period ended January 31, 2024, the Fund did not have outstanding borrowings.
44
Notes to Financial Statements (continued)
January 31, 2024 (unaudited)
8.INVESTMENT RISKS
As with any investment, an investment in a Fund could result in a loss or the performance of a Fund could be inferior to that of other investments. An investor should consider a Fund’s investment objectives, risks, and charges and expenses carefully before investing. Each Fund’s prospectus and statement of additional information contain this and other important information. Local, regional or global events such as war or military conflict, acts of terrorism, the spread of infectious illness or other public health issue, recessions, or other events could have a significant impact on a Fund and its investments, including hampering the ability of each Fund’s portfolio manager(s) to invest each Fund’s assets as intended.
Emerging market countries typically have economic and political systems that are less fully developed, and can be expected to be less stable than those of more developed countries. For example, the economies of such countries can be subject to rapid and unpredictable rates of inflation or deflation.
Since these markets are often small, they may be more likely to suffer sharp and frequent price changes or long-term price depression because of adverse publicity, investor perceptions or the actions of a few large investors. They may also have policies that restrict investment by foreigners, or that prevent foreign investors from withdrawing their money at will.
Certain emerging markets may also face other significant internal or external risks, including the risk of war and civil unrest. Each of these factors can affect the value and liquidity of the assets of a Fund. Failure to generate adequate earnings from foreign trade would make it difficult for an emerging market country to service foreign debt. Disruptions resulting from social and political factors may cause the securities markets of emerging market countries to close. If this were to occur, the liquidity and value of a Fund’s assets invested in corporate debt obligations of emerging market companies would decline.
The imposition of sanctions, exchange controls (including repatriation restrictions), confiscation of assets and property, trade restrictions (including tariffs) and other government restrictions by the U.S. or other governments, or from problems in registration, settlement or custody, may also result in losses. The type and severity of sanctions and other similar measures, including counter sanctions and other retaliatory actions, that may be imposed could vary broadly in scope, and their impact is impossible to predict. For example, the imposition of sanctions and other similar measures could, among other things, cause a decline in the value and/or liquidity of securities issued by the sanctioned country or companies located in or economically tied to the sanctioned country and increase market volatility and disruption in the sanctioned country and throughout the world. Sanctions and other similar measures could limit or prevent a Fund from buying and selling securities (in the sanctioned country and other markets), significantly delay or prevent the settlement of securities transactions, and significantly impact a Fund’s liquidity and performance.
Sanctions threatened or imposed may result in a decline in the value and liquidity of a Fund’s assets. The securities of the Fund may be deemed to have a zero value. A Fund may make investments that are illiquid or that may become less liquid in response to market developments or adverse investor perceptions. Illiquid investments may be more difficult to value. Liquidity risk may also refer to the risk that a Fund will not be able to pay redemption proceeds within the allowable time period or without significant dilution to remaining investors’ interests because of unusual market conditions, an unusually high volume of redemption requests, or other reasons. To meet redemption requests, a Fund may be forced to sell investments at an unfavorable time and/or under unfavorable conditions. If a Fund is forced to sell securities at an unfavorable time and/or under unfavorable conditions, such sales may adversely affect a Fund’s NAV and dilute remaining investors’ interests. Liquidity risk may be the result of, among other things, the reduced number and capacity of traditional market participants to make a market in fixed income securities or the lack of an active market. The potential for liquidity risk may be magnified by a rising interest rate environment or other circumstances where investor redemptions from fixed income funds may be higher than normal, potentially causing increased supply in the market due to selling activity. These risks may be more pronounced in connection with the Funds’ investments in securities of issuers located in emerging market countries. Redemptions by large shareholders may have a negative impact on a Fund’s liquidity.
For all these reasons, investments in emerging markets may be considered speculative. To the extent that a Fund invests a significant portion of its assets in a particular emerging market, the Fund will be more vulnerable to financial, economic, political and other developments in that country, and conditions that negatively impact that country will have a greater impact on the Fund as compared with a fund that does not have its holdings concentrated in a particular country.
9.CREDIT RISK
Junk Bonds or High Yield Securities: High yield securities are generally subject to greater levels of credit quality risk than investment grade securities. The retail secondary market for these “junk bonds” may be less liquid than that of higher-rated fixed income securities, and adverse conditions could make it difficult at times to sell these securities or could result in lower prices than higher-rated fixed income securities. These risks can reduce the value of a Fund’s shares and the income it earns.
45
Notes to Financial Statements (continued)
January 31, 2024 (unaudited)
In July 2017, the head of the United Kingdom Financial Conduct Authority (“FCA”) announced the intention to phase out the use of LIBOR by the end of 2021. However, after subsequent announcements by the FCA, the LIBOR administrator and other regulators, certain of the most widely used LIBORs continued until approximately June 30, 2023. The ICE Benchmark Administration Limited, which is regulated and authorized by FCA, and the administrator of LIBOR, ceased publishing certain LIBOR settings on December 31, 2021. On April 3, 2023, the FCA announced its decision to require LIBOR’s administrator to continue to publish the 1-month, 3-month, and 6-month U.S. dollar settings under an unrepresentative synthetic methodology until September 30, 2024. On March 15, 2022, the Adjustable Interest Act (LIBOR) Act (the “LIBOR Act”) was enacted into law which directs the Federal Reserve Board, as a fallback mechanism, to identify benchmark rates based on SOFR that will replace LIBOR in certain financial contracts after June 30, 2023. On December 16, 2022, the Federal Reserve adopted regulations implementing the LIBOR Act. The Funds may be exposed to financial instruments tied to LIBOR to determine payment obligations, financing terms, hedging strategies or investment value. The expected discontinuation of LIBOR could have a significant impact on the financial markets and may present a material risk for certain market participants, including the Funds. Abandonment of or modifications to LIBOR could lead to significant short- and long-term uncertainty and market instability. The risks associated with this discontinuation and transition may be exacerbated if the work necessary to effect an orderly transition to an alternative reference rate is not completed in a timely manner. It remains uncertain the effects such changes will have on the Funds, issuers of instruments in which the Funds invest, and the financial markets generally.
10.10% SHAREHOLDERS
As of January 31, 2024, the Funds had individual shareholder account(s) and/or omnibus shareholder account(s) (comprised of a group of individual shareholders), which individually amounted to more than 10% of the total shares outstanding of the Funds as detailed below:
Funds | | % of Shares | | Number of |
Virtus Duff & Phelps Clean Energy ETF | | 77% | | 1 |
Virtus Newfleet ABS/MBS ETF | | 62 | | 2 |
Virtus Newfleet Short Duration Core Plus Bond ETF | | 98 | | 1* |
Virtus Newfleet Short Duration High Yield Bond ETF | | 71 | | 4 |
Virtus Seix Senior Loan ETF | | 83 | | 3 |
Virtus Stone Harbor Emerging Markets High Yield Bond ETF | | 94 | | 3 |
Virtus Terranova U.S. Quality Momentum ETF | | 62 | | 2 |
*Includes affiliated shareholder accounts
11.Recent Accounting Pronouncements
In March 2020, the FASB issued Accounting Standards Update (“ASU”) No. 2020-04 (“ASU 2020-04”), Reference Rate Reform (Topic 848) – Facilitation of the Effects of Reference Rate Reform on Financial Reporting. The amendments in ASU 2020-04 provide optional temporary financial reporting relief from the effect of certain types of contract modifications due to the planned discontinuation of the LIBOR and other interbank-offered reference rates as of the end of 2021. In March 2021, the administrator for LIBOR announced the extension of the publication of a majority of the USD LIBOR settings to June 30, 2023. On December 21, 2022, the FASB issued ASU 2022-06 to defer the sunset date of ASC 848 until December 31, 2024. ASU 2020-04 is effective for certain reference rate-related contract modifications that occur during the period March 12, 2020 through December 31, 2024. Management is currently evaluating the impact, if any, of ASU 2020-04 and ASU 2020-06, but does not believe there will be a material impact.
12.NEW REGULATORY PRONOUNCEMENT
In October 2022, the SEC adopted a rule and form amendments relating to tailored shareholder reports for mutual funds and ETFs; and fee information in investment company advertisements. The rule and form amendments will require mutual funds and ETFs to transmit streamlined shareholder reports that highlight key information to investors. The rule amendments will require that certain more in-depth information be made available online and available for delivery free of charge to investors on request. The amendments became effective in January 2023 and there is an 18-month transition period after the effective date of the amendment with a compliance date of July 2024.
13.SUBSEQUENT EVENTS
Management has evaluated the impact of all subsequent events on the Funds through the date the financial statements were available for issuance, and has determined that there are no subsequent events requiring recognition or disclosure in these financial statements.
46
Board Considerations (Virtus ETF Trust II – FYE 7/31)
During executive session, the Independent Trustees of Virtus ETF Trust II (the “Trust”) considered the following factors in connection with their approval of the continuance of the advisory and sub-advisory agreements as listed below for the Trust.
November 13, 2023 Annual Consideration of Advisory and Sub-Advisory Agreements for:
Virtus Duff & Phelps Clean Energy ETF (“VCLN”)
Virtus Newfleet ABS/MBS ETF (“VABS”)
Virtus Newfleet Short Duration High Yield Bond ETF (“VSHY”) (formerly, Virtus Newfleet High Yield Bond ETF)
Virtus Seix Senior Loan ETF (“SEIX”)
Virtus Terranova U.S. Quality Momentum ETF (“JOET”) (no sub-adviser – Advisory Agreement only)
(each, a “Fund” and collectively, the “Funds”)
On November 13, 2023, at a meeting (the “Meeting”) at which all of the Trustees were present and could hear and be heard, including all of the Trustees who were not “interested persons” (as that term is defined in the Investment Company Act of 1940) of the Trust (the “Independent Trustees”), the Board of Trustees (the “Board”) of the Trust, including the Independent Trustees voting separately, reviewed and unanimously approved for each of the respective Funds the continuance of an investment advisory agreement between Virtus ETF Advisers LLC (the “Adviser”) and the Trust (each, an “Advisory Agreement” and collectively, the “Advisory Agreements”), and an investment sub-advisory agreement among each Sub-Adviser,1 the Adviser and the Trust (each, a “Sub-Advisory Agreement” and collectively, the “Sub-Advisory Agreements”).
At the Meeting, the Board received and reviewed information provided by the Adviser and each Sub-Adviser in response to requests of the Board and its counsel, including a memorandum from the Adviser that included a description of the Adviser’s business, a copy of the Adviser’s Form ADV, and certain other information about the Adviser to be considered in connection with the Trustees’ review process (the “Adviser Memorandum”), and a memorandum from each Sub-Adviser that included a description of the Sub-Adviser’s business, a copy of the Sub-Adviser’s Form ADV and certain other information about the Sub-Adviser to be considered in connection with the Trustees’ review process (each, a “Sub-Adviser Memorandum”). The Board also engaged with representatives of the Adviser to discuss the Funds.
Advisory Agreements
In deciding on whether to approve the continuance of the Advisory Agreements with the Adviser on behalf of the Funds, the Board considered numerous factors, including:
The nature, extent, and quality of the services provided by the Adviser. The Board considered the responsibilities the Adviser has under the respective Advisory Agreement, and the services provided by the Adviser to the Funds, including, without limitation, the management, oversight, and administrative services that the Adviser and its employees provide to the Funds, the Adviser’s coordination of services for the Funds by the Trust’s service providers, and its compliance procedures and practices, and its efforts to promote the Fund. The Board noted that many of the Trust’s executive officers are employees of the Adviser and serve the Trust without additional compensation from the Funds. The Board also considered the information in the Adviser Memorandum, including descriptions of the Adviser’s investment advisory services and its related non-advisory business. The Board concluded that the quality, extent, and nature of the services provided by the Adviser are satisfactory and adequate for the Funds.
Investment performance of the Funds and the Adviser. The Board evaluated the investment management experience of the Adviser, in light of the services it has provided to each Fund. In this regard, the Board received information from the Adviser regarding, among other things, the Adviser’s experience in organizing, managing and overseeing the Funds, coordinating their operation and administration, and, with respect to the Adviser’s portfolio management of JOET, its experience in carrying out the day-to-day management of the Fund’s portfolio. In particular, the Board received and reviewed information dated as of August 31, 2023, comparing each Fund’s performance to its applicable peer group. In conducting its review, the Board considered the fact that VCLN, VABS, VSHY and SEIX were sub-advised funds, and thus their performance results were specifically relevant to their respective Sub-Adviser’s portfolio management capabilities. With respect to the Adviser’s portfolio management of JOET, the Board considered that the Fund utilized an index-based strategy, and thus took into account both the Fund’s performance relative to its peer group as well as the Adviser’s performance in tracking the relevant index (i.e., tracking error).
Specifically, with respect to JOET, the Board noted that the Fund underperformed the average and median performance of its peer group for the one-year period. Notwithstanding its underperformance over the one-year period, the Board considered that the Fund tracked its underlying index with minimal tracking error of less than 300 basis points, which was primarily attributable to trading as well as
1 The Sub-Advisers include Duff & Phelps Investment Management Co. and Virtus Fixed Income Advisers, LLC (“VFIA”).
47
Approval of Advisory Agreements & Board Considerations (unaudited) (continued)
Fund fees and expenses. After consideration of these factors, the Board determined that the Adviser possessed adequate capabilities and experience for the management of each Fund, and that JOET, the Fund to which the Adviser provided portfolio management services, had satisfactory performance and tracking error results.
The costs of the services provided and profits realized by the Adviser from its relationship with the Funds. The Board examined and evaluated the arrangements between the Adviser and the Funds under the Advisory Agreements. The Board considered that VCLN, VABS, SEIX and JOET utilize a “unified fee” structure in which a Fund’s ordinary operating expenses (subject to customary exclusions) are paid from the Adviser’s management fee. The Board also considered that effective November 28, 2023, VSHY would be implementing a “unified fee” structure. The Board noted that, under the unified fee arrangement, the Adviser would likely supplement a portion of the cost of operating each Fund for some period of time and considered the benefits that would accrue to the Funds.
The Board also considered potential benefits to the Adviser in managing the Funds, including promotion of the Adviser’s name, and the interests of the Adviser in providing management and oversight services to the Funds. In addition, at the Meeting, the Board compared the management fees and net expense ratios of the Funds to the management fees and net expense ratios of other funds considered by the Adviser to have similar investment objectives and strategies to the Funds and comparable assets under management (“AUM”). Specifically, the Board noted that the management fee for VCLN was above the median and average, but below the maximum, management fees of its peer group, and that the expense ratio was below the median and average expense ratios of its peer group. The Board considered that VCLN was included in a peer group of miscellaneous funds, which included funds that did not necessarily have similar objectives and strategies to the Fund, when evaluating its management fee and expense ratio relative to its peers. The Board further noted that the management fee for VSHY was equal to the median and below the average management fees of its peer group, but the expense ratio was above the median and average, but below the maximum, expense ratios of its peer group. The Board considered VSHY’s unique investment process relative to its peers in evaluating its overall expense ratio. For JOET and SEIX, the Board noted that the management fees and expense ratios were below the median and average management fees and expense ratios of their respective peer groups. For VABS, the Board noted that the management fee and expense ratio were above the average and median, but below the maximum, management fees and expense ratios of its peer group. The Board also considered that VABS was included in a peer group comprised of U.S. short-term bond funds, due to a lack of peers focusing on mortgage-backed and asset-backed securities, when evaluating its management fee and expense ratio relative to its peers.
Following these comparisons and upon further consideration and discussion of the foregoing, the Board concluded that the fees paid to the Adviser by the Funds are appropriate and representative of arm’s-length negotiations.
The extent to which economies of scale would be realized as the Funds grow and whether management fee levels reflect these economies of scale for the benefit of the Funds’ investors. The Board considered the AUM and operational history of each of the Funds, together with the fees paid to the Adviser. The Board considered that VCLN, VABS, SEIX and JOET are subject to a unified fee. The Board also considered that effective November 28, 2023, VSHY would be implementing a unified fee. The Board considered that each of VCLN, VABS, SEIX and JOET experienced benefits, and that VSHY would experience benefits, from the unified fee arrangement and that each Fund would continue to do so even after the Adviser reaches firm-wide profitability. Accordingly, the Board concluded that each Fund’s fee arrangement provides benefits, and for VSHY will provide benefits, through the unified fee structure, and that, at each Fund’s current and projected asset levels, each Fund’s arrangement with the Adviser is appropriate.
Other benefits derived by the Adviser from its relationship with the Funds. The Board considered material “fall-out” or ancillary benefits that accrue to the Adviser as a result of its relationship with the Funds (other than the advisory fee). The Board noted that affiliates of the Adviser serve as principal underwriter and operational administrator for the Funds, and that the association could result in non-quantifiable reputational benefits for those entities. Based on the foregoing information, the Board concluded that such potential benefits are immaterial to its consideration and approval of the continuance of the Advisory Agreements.
Conclusion. The Board did not identify any single factor as being of paramount importance, and different Trustees may have given different weight to different factors. The Board reviewed with counsel to the Independent Trustees the legal standards applicable to its consideration of the Advisory Agreements. Based on its review, including consideration of each of the factors referenced above, the Board determined, in the exercise of its reasonable business judgment, that the Advisory Agreements were fair and reasonable in light of the services performed or to be performed, expenses incurred or to be incurred and such other matters as the Board considered relevant.
After full consideration of the above factors as well as other factors, the Board, including the Independent Trustees, unanimously approved the continuance of the Advisory Agreements on behalf of each Fund.
48
Approval of Advisory Agreements & Board Considerations (unaudited) (continued)
Sub-Advisory Agreements
In deciding on whether to approve the continuance of the Sub-Advisory Agreements with each Sub-Adviser on behalf of the respective Fund, the Board considered numerous factors, including:
The nature, extent, and quality of the services provided by the Sub-Advisers. The Board considered the responsibilities the Sub-Advisers have under the Sub-Advisory Agreements and the services provided by the Sub-Advisers including, without limitation, the investment advisory services and each Sub-Adviser’s compliance procedures and practices, and its efforts to promote the Fund. The Board also considered that VFIA, in managing VABS and VSHY, operates through its Newfleet Asset Management division (“Newfleet”), and in managing SEIX, operates through its Seix Investment Advisors division (“Seix”). After reviewing the foregoing information and further information in the materials, including each Sub-Adviser Memorandum (which included descriptions of each Sub-Adviser’s business and each Sub-Adviser’s Form ADV), the Board concluded that the quality, extent, and nature of the services provided by the Sub-Advisers are satisfactory and adequate for the Funds.
Investment performance of the Funds and the Sub-Advisers. The Board evaluated the experience of each Sub-Adviser in carrying out the day-to-day management of the respective Fund’s portfolio. The Board also considered the ability of VFIA to provide day-to-day portfolio management of its Funds’ portfolios through Newfleet and Seix. In particular, the Board received and reviewed information from the Adviser regarding the performance of each Sub-Adviser in implementing the investment objective and strategies for the respective Fund.
Specifically, with respect to VSHY, the Board noted that the Fund underperformed the average and median performance of its peer group for the three-year and five-year periods, but outperformed the average and median performance of its peer group for the one-year period. The Board considered that VSHY implemented a strategy change in 2021 and the impact of such change on the Fund’s relative performance comparisons. With respect to SEIX, the Board noted that the Fund underperformed the median performance of its peer group for the one-year period, but outperformed the average of its peer group for the one-year period and outperformed the average and median performance of its peer group for the three-year period. With respect to VABS and VCLN, the Board noted that the Funds outperformed the average and median performance of their respective peer groups for the one-year period. After consideration of these factors, the Board determined that each Sub-Adviser continued to be an appropriate sub-adviser to the respective Fund, and that each Fund had satisfactory performance.
The costs of the services provided and profits realized by the Sub-Advisers from their relationship with the respective Funds. The Board examined and evaluated the arrangements between the respective Sub-Adviser and the Adviser under the Sub-Advisory Agreements. The Board considered the fact that VCLN, VABS and SEIX utilize a “unified fee” structure in which a Fund’s ordinary operating expenses (subject to customary exclusions) are paid from the Adviser’s management fee. The Board also considered that effective November 28, 2023, VSHY would be implementing a unified fee. The Board considered the extent to which each Sub-Adviser bears a portion of Fund expenses. The Board noted that, under the unified fee arrangement, the Sub-Advisers would likely supplement a portion of the cost of operating the Funds for some period of time and considered the benefits that would accrue to the Funds.
The Board considered the Sub-Advisers’ staffing, personnel, and methods of operating; the Sub-Advisers’ compliance policies and procedures; the financial condition of the Sub-Advisers and the level of commitment to the Funds by the Sub-Advisers; the current and projected asset levels of the Funds; and the overall expenses of the Funds. The Board also considered potential benefits to the Sub-Advisers in sub-advising the respective Fund, including promotion of the Sub-Advisers’ names.
The Board compared the fees and expenses of the Funds (including the sub-advisory fee) to other funds considered by the Adviser to have investment objectives and strategies similar to the Funds and comparable AUM, as noted above. The Board also noted that VFIA recently rebranded after a merger of several Virtus-affiliated investment advisers (including the predecessors to Newfleet and Seix) into a single entity, which, post-merger, operate as separate divisions within VFIA. Following these comparisons and upon further consideration and discussion of the foregoing, the Board concluded that the fees paid to the Sub-Advisers (pursuant to the Sub-Advisory Agreements) are appropriate and representative of arm’s-length negotiations.
The extent to which economies of scale would be realized as the Funds grow and whether sub-advisory fee levels reflect these economies of scale for the benefit of the Funds’ investors. The Board considered the AUM and operational history of each of the sub-advised Funds, together with the fees paid to the respective Sub-Adviser. The Board considered that VCLN, VABS and SEIX are subject to a unified fee. The Board also considered that effective November 28, 2023, VSHY would be implementing a unified fee. The Board considered that each of VCLN, VABS and SEIX have experienced benefits, and that VSHY would experience benefits, from the unified fee arrangement, particularly where the Sub-Adviser is paying or contributing to Fund expenses in excess of its sub-advisory fee. The Board considered that the applicable Fund would continue to experience such benefits even after such Fund’s assets grow to a level where the Sub-Adviser is no longer required to contribute to the Fund’s expenses in excess of the amount received by the Sub-Adviser under its Sub-Advisory Agreement. Accordingly, the Board concluded that each Fund’s fee arrangement provides benefits, and for VSHY will provide benefits, through the unified fee structure, and that, at each Fund’s current and projected asset levels, each Fund’s arrangement with its respective Sub-Adviser is appropriate.
49
Approval of Advisory Agreements & Board Considerations (unaudited) (continued)
Other benefits derived by the Sub-Advisers from their relationships with the Funds. The Board considered material “fall-out” or ancillary benefits that accrue to the Sub-Advisers as a result of their relationships with their respective Funds (other than the sub-advisory fees). For example, the Board noted that the Sub-Advisers may obtain reputational benefits from the success of one or more Funds or other Virtus ETFs. Based on their review and other considerations, the Board concluded that such potential benefits are immaterial to its consideration and approval of the continuance of the Sub-Advisory Agreements.
Conclusion. The Board did not identify any single factor as being of paramount importance, and different Trustees may have given different weight to different factors. The Board reviewed with counsel to the Independent Trustees the legal standards applicable to its consideration of each Sub-Advisory Agreement. Based on its review, including consideration of each of the factors referenced above, the Board determined, in the exercise of its reasonable business judgment, that the sub-advisory arrangements, as outlined in each Sub-Adviser’s Sub-Advisory Agreement, were fair and reasonable in light of the services performed or to be performed, expenses incurred or to be incurred, and such other matters as the Board considered relevant.
After full consideration of the above factors as well as other factors, the Board, including the Independent Trustees, unanimously approved the continuance of each of the Sub-Advisory Agreements with the respective Sub-Adviser on behalf of each Fund.
50
INFORMATION ABOUT PORTFOLIO HOLDINGS
The Trust files a complete schedule of portfolio holdings for each Fund with the SEC for the first and third quarters of each fiscal year as an exhibit to its reports on Form N-PORT-P. Form N-PORT-P is available on the SEC’s website at https://www.sec.gov.
The Funds’ premium/discount information for the most recently completed calendar year, and the most recently completed calendar quarters since that year is available by visiting www.virtusetfs.com or by calling (888) 383-4184.
INFORMATION ABOUT PROXY VOTING
A description of the policies and procedures the Funds use to determine how to vote proxies relating to portfolio securities is provided in the Statement of Additional Information (“SAI”). The SAI is available without charge upon request by calling toll-free at (888) 383-0553, by accessing the SEC’s website at www.sec.gov or by accessing the Funds’ website at www.virtusetfs.com.
Information regarding how the Funds voted proxies relating to portfolio securities during the most recent twelve-month period ended June 30th is available by calling toll-free at (888) 383-0553 or by accessing the SEC’s website at www.sec.gov.
8572(03/24)
c/o VP Distributors, LLC
One Financial Plaza
Hartford, Connecticut 06103
(b) Not applicable
Item 2. Code of Ethics.
Not applicable.
Item 3. Audit Committee Financial Expert.
Not applicable.
Item 4. Principal Accountant Fees and Services.
Not applicable.
Item 5. Audit Committee of Listed Registrants.
Not applicable.
Item 6. Investments.
(a) | Schedule of Investments in securities of unaffiliated issuers as of the close of the reporting period is included as part of the report to shareholders filed under Item 1(a) of this Form. |
(b) | Not applicable. |
Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.
Not applicable.
Item 8. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable.
Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.
Not applicable.
Item 10. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the procedures by which the shareholders may recommend nominees to the registrant’s board of trustees, where those changes were implemented after the registrant 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 and principal financial officers, or persons performing similar functions, 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 (the “1940 Act”) (17 CFR 270.30a-3(c))) are effective, as of a date within 90 days of the filing date of the report that includes the disclosure required by this paragraph, based on their evaluation of these controls and procedures required by Rule 30a-3(b) under the 1940 Act (17 CFR 270.30a-3(b)) and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934, as amended (17 CFR 240.13a-15(b) or 240.15d-15(b)). |
(b) | There were no changes in the registrant’s internal control over financial reporting (as defined in Rule 30a-3(d) under the 1940 Act (17 CFR 270.30a-3(d))) that occurred during the period covered by this report that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.
Not applicable.
Item 13. Exhibits.
(a)(1) | Not applicable. |
(a)(2) | Certifications pursuant to Rule 30a-2(a) under the 1940 Act and Section 302 of the Sarbanes-Oxley Act of 2002 are attached hereto. |
(a)(2)(1) | Not applicable. |
(a)(2)(2) | Not applicable. |
(b) | Certifications pursuant to Rule 30a-2(b) under the 1940 Act and Section 906 of the Sarbanes- Oxley Act of 2002 are attached hereto. |
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) | Virtus ETF Trust II |
By (Signature and Title)* | /s/ William J. Smalley |
William J. Smalley, President and Principal Executive Officer (Principal Executive Officer) |
Date | April 4, 2024 |
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
By (Signature and Title)* | /s/ William J. Smalley |
William J. Smalley, President and Principal Executive Officer (Principal Executive Officer) |
Date | April 4, 2024 |
By (Signature and Title)* | /s/ Brinton W. Frith |
Brinton W. Frith, Treasurer and Principal Financial Officer/Principal Accounting Officer (Principal Financial Officer/Principal Accounting Officer) |
Date | April 4, 2024 |
* Print the name and title of each signing officer under his or her signature.