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 | 811-23305 | |||||
| AMERICAN CENTURY ETF TRUST | ||||||
| (Exact name of registrant as specified in charter) | ||||||
| 4500 MAIN STREET, KANSAS CITY, MISSOURI | 64111 | |||||
| (Address of principal executive offices) | (Zip Code) | |||||
CHARLES A. ETHERINGTON 4500 MAIN STREET, KANSAS CITY, MISSOURI 64111 | ||||||
| (Name and address of agent for service) | ||||||
| Registrant’s telephone number, including area code: | 816-531-5575 | |||||
| Date of fiscal year end: | 08-31 | |||||
| Date of reporting period: | 02-28-2018 | |||||
ITEM 1. REPORTS TO STOCKHOLDERS.
| Semiannual Report | |
| February 28, 2018 | |
American Century® Diversified Corporate Bond ETF (KORP) | |
American Century® STOXX® U.S. Quality Value ETF (VALQ) | |
| Table of Contents |
| President’s Letter | |
| Fund Characteristics | |
| Shareholder Fee Examples | |
| Schedules of Investments | |
| Statements of Assets and Liabilities | |
| Statements of Operations | |
| Statements of Changes in Net Assets | |
| Notes to Financial Statements | |
| Financial Highlights | |
| Approval of Management Agreement | |
| Additional Information | |
The iSTOXX American Century USA Quality Value Index is the intellectual property (including registered trademarks) of STOXX Limited, Zurich, Switzerland (“STOXX”), Deutsche Börse Group or their licensors, which is used under license. American Century STOXX U.S. Quality Value ETF is neither sponsored nor promoted, distributed or in any other manner supported by STOXX, Deutsche Börse Group or their licensors, research partners or data providers and STOXX, Deutsche Börse Group and their licensors, research partners or data providers do not give any warranty, and exclude any liability (whether in negligence or otherwise) with respect thereto generally or specifically in relation to any errors, omissions or interruptions in the iSTOXX American Century USA Quality Value Index or its data.
Any opinions expressed in this report reflect those of the author as of the date of the report, and do not necessarily represent the opinions of American Century Investments® or any other person in the American Century Investments organization. Any such opinions are subject to change at any time based upon market or other conditions and American Century Investments disclaims any responsibility to update such opinions. These opinions may not be relied upon as investment advice and, because investment decisions made by American Century Investments funds are based on numerous factors, may not be relied upon as an indication of trading intent on behalf of any American Century Investments fund. Security examples are used for representational purposes only and are not intended as recommendations to purchase or sell securities. Performance information for comparative indices and securities is provided to American Century Investments by third party vendors. To the best of American Century Investments’ knowledge, such information is accurate at the time of printing.
| President’s Letter |
Jonathan ThomasDear Investor:
Thank you for reviewing this semiannual report for the seven-week period from the ETFs’ inception to February 28, 2018. It provides a market overview (below), followed by a schedule of fund investments and other financial information. For additional commentary and information on ETF performance, plus other investment insights, we encourage you to visit our website, americancenturyetfs.com.
Upbeat Economic Data Drove Down Stock, Bond Returns
Although its duration was brief, the reporting period was packed with milestone market movements. For example, after rallying to another double-digit annual gain in 2017, followed by its largest monthly return in nearly two years in January, the S&P 500 Index plunged in early February to post its largest monthly decline in two years. Despite robust corporate earnings reports, U.S. stocks sold off sharply after the U.S. Department of Labor announced wages grew at their fastest year-over-year pace in nine years. This news, coupled with other positive economic data and rising inflation expectations, pushed interest rates higher and triggered fears that the Federal Reserve would pursue a more-aggressive rate-hike campaign than previously expected. Although volatility subsided somewhat by the end of February, and stocks recovered some of their earlier losses, returns remained negative for the reporting period.
It was a similar story for investment-grade corporate bonds, as rising interest rates weighed on returns despite generally positive underlying corporate fundamentals. Meanwhile, equity market volatility and the general “risk-off” sentiment prevalent in the financial markets pressured the high-yield corporate bond sector. Returns were negative, but the relative yield advantages of high-yield securities helped the sector outperform investment-grade corporates.
As recent events indicate, market volatility has returned from an extended period of relative dormancy. Meanwhile, global growth is accelerating, inflationary pressures are mounting, and Treasury yields are rising. Against this backdrop, investors likely will face new opportunities and challenges in the months ahead. We believe this scenario warrants a disciplined, diversified, and risk-aware approach, using professionally managed portfolios in pursuit of investment goals. We appreciate your continued trust and confidence in us.
Sincerely,
Jonathan Thomas
President and Chief Executive Officer
American Century Investments
2
| Fund Characteristics |
| FEBRUARY 28, 2018 | |
| Diversified Corporate Bond ETF | |
| Portfolio at a Glance | |
| Average Duration (effective) | 4.4 years |
| Weighted Average Life | 5.6 years |
| Types of Investments in Portfolio | % of net assets |
| Corporate Bonds | 97.3% |
| Temporary Cash Investments | 1.7% |
| Other Assets and Liabilities | 1.0% |
STOXX® U.S. Quality Value ETF | |
| Top Ten Holdings | % of net assets |
| AT&T, Inc. | 2.2% |
| Citigroup, Inc. | 2.0% |
| Bank of America Corp. | 1.8% |
| Apple, Inc. | 1.8% |
| International Business Machines Corp. | 1.8% |
| Pfizer, Inc. | 1.6% |
| Anthem, Inc. | 1.6% |
| Intel Corp. | 1.5% |
| HP, Inc. | 1.4% |
| Hewlett Packard Enterprise Co. | 1.4% |
| Top Five Industries | % of net assets |
| Health Care Providers and Services | 8.4% |
| Technology Hardware, Storage and Peripherals | 7.7% |
| Banks | 5.4% |
| Equity Real Estate Investment Trusts (REITs) | 4.7% |
| Food Products | 4.1% |
| Types of Investments in Portfolio | % of net assets |
| Common Stocks | 99.8% |
| Temporary Cash Investments | 0.1% |
| Other Assets and Liabilities | 0.1% |
3
| Shareholder Fee Examples |
Fund shareholders may incur two types of costs: (1) transaction costs, including brokerage commissions paid on purchases and sales of fund shares; and (2) ongoing costs, including management fees and other fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in your fund and to compare these costs with the ongoing cost of investing in other funds.
The example is based on an investment of $1,000 made at the beginning of the period and held for the entire period from September 1, 2017 to February 28, 2018 (except as noted).
Actual Expenses
The table provides information about actual account values and actual expenses for each fund. You may use the information, together with the amount you invested, to estimate the expenses that you paid over the period. First, identify the fund you own. Then 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 under the heading “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The table also provides information about hypothetical account values and hypothetical expenses based on the actual expense ratio of your fund and an assumed rate of return of 5% per year before expenses, which is not the actual return of a fund. 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 your 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 table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
4
| Beginning Account Value 9/1/17 | Ending Account Value 2/28/18 | Expenses Paid During Period(1) 9/1/17 - 2/28/18 | Annualized Expense Ratio(1) | |
| Diversified Corporate Bond ETF | ||||
| Actual | $1,000 | $985.30(2) | $0.59(3) | 0.45% |
| Hypothetical | $1,000 | $1,022.56(4) | $2.26(4) | 0.45% |
STOXX® U.S. Quality Value ETF | ||||
| Actual | $1,000 | $977.80(2) | $0.38(3) | 0.29% |
| Hypothetical | $1,000 | $1,023.36(4) | $1.45(4) | 0.29% |
| (1) | Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 181, the number of days in the most recent fiscal half-year, divided by 365, to reflect the one-half year period. Annualized expense ratio reflects actual expenses, including any applicable fee waivers or expense reimbursements and excluding any acquired fund fees and expenses. |
| (2) | Ending account value based on actual return from January 11, 2018 (fund inception) through February 28, 2018. |
| (3) | Expenses are equal to the fund's annualized expense ratio listed in the table above, multiplied by the average account value over the period, multiplied by 49, the number of days in the period from January 11, 2018 (fund inception) through February 28, 2018, divided by 365, to reflect the period. Had the fund been available for the full period, the expenses paid during the period would have been higher. |
| (4) | Ending account value and expenses paid during the period assumes the fund had been available throughout the entire period and are calculated using the fund's annualized expense ratio listed in the table above. |
5
| Schedules of Investments |
FEBRUARY 28, 2018 (UNAUDITED)
Diversified Corporate Bond ETF
| Principal Amount | Value | |||||
| CORPORATE BONDS — 97.3% | ||||||
| Aerospace and Defense — 0.4% | ||||||
KLX, Inc., 5.875%, 12/1/22(1) | $ | 50,000 | $ | 51,688 | ||
| Auto Components — 1.2% | ||||||
Delphi Technologies plc, 5.00%, 10/1/25(1) | 55,000 | 54,673 | ||||
| Lear Corp., 3.80%, 9/15/27 | 100,000 | 96,630 | ||||
| 151,303 | ||||||
| Automobiles — 2.0% | ||||||
| Ally Financial, Inc., 4.625%, 5/19/22 | 55,000 | 56,031 | ||||
| General Motors Co., 4.875%, 10/2/23 | 90,000 | 94,514 | ||||
| General Motors Financial Co., Inc., 3.10%, 1/15/19 | 95,000 | 95,252 | ||||
| 245,797 | ||||||
| Banks — 15.7% | ||||||
Bank of America Corp., VRN, 3.00%, 12/20/22(1)(2) | 265,000 | 259,463 | ||||
| Capital One Financial Corp., 3.50%, 6/15/23 | 265,000 | 264,238 | ||||
| Citigroup, Inc., 4.05%, 7/30/22 | 255,000 | 261,132 | ||||
| Huntington Bancshares, Inc., 2.30%, 1/14/22 | 265,000 | 255,337 | ||||
| KeyCorp, MTN, 2.90%, 9/15/20 | 190,000 | 189,644 | ||||
| Regions Financial Corp., 2.75%, 8/14/22 | 265,000 | 258,614 | ||||
| SunTrust Bank, 2.45%, 8/1/22 | 200,000 | 193,549 | ||||
| Wells Fargo & Co., 4.125%, 8/15/23 | 260,000 | 266,426 | ||||
| 1,948,403 | ||||||
| Beverages — 0.9% | ||||||
| Molson Coors Brewing Co., 2.10%, 7/15/21 | 115,000 | 110,930 | ||||
| Biotechnology — 2.4% | ||||||
| AbbVie, Inc., 2.50%, 5/14/20 | 185,000 | 183,458 | ||||
| Biogen, Inc., 3.625%, 9/15/22 | 115,000 | 116,482 | ||||
| 299,940 | ||||||
| Building Products — 0.5% | ||||||
| Masco Corp., 4.375%, 4/1/26 | 65,000 | 66,781 | ||||
| Chemicals — 2.5% | ||||||
| Celanese US Holdings LLC, 4.625%, 11/15/22 | 75,000 | 78,301 | ||||
| Dow Chemical Co. (The), 3.00%, 11/15/22 | 95,000 | 93,684 | ||||
Rayonier AM Products, Inc., 5.50%, 6/1/24(1) | 55,000 | 55,000 | ||||
| Westlake Chemical Corp., 3.60%, 8/15/26 | 80,000 | 78,061 | ||||
| 305,046 | ||||||
| Commercial Services and Supplies — 0.4% | ||||||
| Covanta Holding Corp., 5.875%, 3/1/24 | 50,000 | 50,250 | ||||
| Construction and Engineering — 0.4% | ||||||
| MasTec, Inc., 4.875%, 3/15/23 | 55,000 | 55,137 | ||||
| Construction Materials — 1.0% | ||||||
BMC East LLC, 5.50%, 10/1/24(1) | 55,000 | 55,963 | ||||
6
| Principal Amount | Value | |||||
| Martin Marietta Materials, Inc., 3.50%, 12/15/27 | $ | 70,000 | $ | 67,382 | ||
| 123,345 | ||||||
| Consumer Finance — 7.6% | ||||||
| American Express Co., 2.50%, 8/1/22 | 265,000 | 256,299 | ||||
| Block Financial LLC, 5.50%, 11/1/22 | 90,000 | 95,319 | ||||
| CIT Group, Inc., 5.00%, 8/1/23 | 55,000 | 56,788 | ||||
| Discover Financial Services, 3.85%, 11/21/22 | 265,000 | 267,058 | ||||
| Synchrony Financial, 3.75%, 8/15/21 | 265,000 | 268,562 | ||||
| 944,026 | ||||||
| Containers and Packaging — 1.5% | ||||||
| Ball Corp., 4.375%, 12/15/20 | 50,000 | 51,313 | ||||
| Berry Global, Inc., 5.125%, 7/15/23 | 50,000 | 51,250 | ||||
| Packaging Corp. of America, 4.50%, 11/1/23 | 75,000 | 78,969 | ||||
| 181,532 | ||||||
| Diversified Financial Services — 6.2% | ||||||
Goldman Sachs Group, Inc. (The), VRN, 2.91%, 6/5/22(2) | 265,000 | 258,566 | ||||
| JPMorgan Chase & Co., 3.375%, 5/1/23 | 260,000 | 257,888 | ||||
| Morgan Stanley, MTN, 4.10%, 5/22/23 | 255,000 | 259,924 | ||||
| 776,378 | ||||||
| Diversified Telecommunication Services — 1.9% | ||||||
| AT&T, Inc., 4.45%, 4/1/24 | 175,000 | 180,604 | ||||
| CenturyLink, Inc., 7.50%, 4/1/24 | 55,000 | 55,412 | ||||
| 236,016 | ||||||
| Electronic Equipment, Instruments and Components — 0.8% | ||||||
| Avnet, Inc., 4.625%, 4/15/26 | 105,000 | 105,960 | ||||
| Energy Equipment and Services — 0.4% | ||||||
Transocean, Inc., 9.00%, 7/15/23(1) | 50,000 | 54,062 | ||||
| Equity Real Estate Investment Trusts (REITs) — 3.1% | ||||||
| American Tower Corp., 3.50%, 1/31/23 | 185,000 | 185,268 | ||||
| Boston Properties LP, 2.75%, 10/1/26 | 80,000 | 74,169 | ||||
| CyrusOne LP / CyrusOne Finance Corp., 5.00%, 3/15/24 | 55,000 | 55,550 | ||||
| DDR Corp., 3.625%, 2/1/25 | 75,000 | 72,556 | ||||
| 387,543 | ||||||
| Food and Staples Retailing — 0.4% | ||||||
| Dollar Tree, Inc., 5.75%, 3/1/23 | 50,000 | 52,094 | ||||
| Food Products — 1.5% | ||||||
Dean Foods Co., 6.50%, 3/15/23(1) | 55,000 | 53,900 | ||||
JBS USA LUX SA / JBS USA Finance, Inc., 5.75%, 6/15/25(1) | 60,000 | 57,600 | ||||
| Kraft Heinz Foods Co., 2.80%, 7/2/20 | 75,000 | 74,616 | ||||
| 186,116 | ||||||
| Gas Utilities — 4.0% | ||||||
| Andeavor Logistics LP / Tesoro Logistics Finance Corp., 5.25%, 1/15/25 | 140,000 | 143,857 | ||||
| EQT Midstream Partners LP, 4.125%, 12/1/26 | 145,000 | 139,463 | ||||
| Plains All American Pipeline LP / PAA Finance Corp., 5.75%, 1/15/20 | 70,000 | 73,242 | ||||
| Williams Partners LP, 4.30%, 3/4/24 | 140,000 | 143,708 | ||||
| 500,270 | ||||||
7
| Principal Amount | Value | |||||
| Health Care Equipment and Supplies — 2.6% | ||||||
| Becton Dickinson and Co., 2.40%, 6/5/20 | $ | 120,000 | $ | 118,112 | ||
MEDNAX, Inc., 5.25%, 12/1/23(1) | 55,000 | 56,444 | ||||
| Medtronic, Inc., 2.50%, 3/15/20 | 150,000 | 149,193 | ||||
| 323,749 | ||||||
| Health Care Providers and Services — 2.8% | ||||||
| AmerisourceBergen Corp., 3.50%, 11/15/21 | 115,000 | 115,863 | ||||
| Anthem, Inc., 3.30%, 1/15/23 | 70,000 | 69,523 | ||||
| DaVita, Inc., 5.125%, 7/15/24 | 50,000 | 49,750 | ||||
| Express Scripts Holding Co., 3.05%, 11/30/22 | 120,000 | 117,539 | ||||
| 352,675 | ||||||
| Hotels, Restaurants and Leisure — 1.2% | ||||||
| Eldorado Resorts, Inc., 6.00%, 4/1/25 | 55,000 | 56,925 | ||||
| Wyndham Worldwide Corp., 4.25%, 3/1/22 | 95,000 | 95,479 | ||||
| 152,404 | ||||||
| Household Durables — 1.7% | ||||||
| Century Communities, Inc., 5.875%, 7/15/25 | 55,000 | 54,725 | ||||
| DR Horton, Inc., 4.00%, 2/15/20 | 95,000 | 97,105 | ||||
| KB Home, 7.00%, 12/15/21 | 50,000 | 54,500 | ||||
| 206,330 | ||||||
| Industrial Conglomerates — 1.5% | ||||||
| Eaton Corp., 2.75%, 11/2/22 | 70,000 | 68,648 | ||||
| Hasbro, Inc., 3.50%, 9/15/27 | 125,000 | 118,557 | ||||
| 187,205 | ||||||
| Insurance — 3.1% | ||||||
Allstate Corp. (The), VRN, 5.75%, 8/15/23(2) | 65,000 | 69,550 | ||||
| American International Group, Inc., 4.875%, 6/1/22 | 65,000 | 68,931 | ||||
| International Lease Finance Corp., 5.875%, 8/15/22 | 90,000 | 98,389 | ||||
Prudential Financial, Inc., VRN, 5.625%, 6/15/23(2) | 65,000 | 68,656 | ||||
| Voya Financial, Inc., 3.65%, 6/15/26 | 75,000 | 73,722 | ||||
| 379,248 | ||||||
| Internet Software and Services — 1.6% | ||||||
| Expedia, Inc., 3.80%, 2/15/28 | 100,000 | 93,264 | ||||
Match Group, Inc., 5.00%, 12/15/27(1) | 55,000 | 55,564 | ||||
| VeriSign, Inc., 4.625%, 5/1/23 | 50,000 | 50,625 | ||||
| 199,453 | ||||||
| Media — 1.0% | ||||||
| Charter Communications Operating LLC / Charter Communications Operating Capital, 3.58%, 7/23/20 | 120,000 | 120,948 | ||||
| Metals and Mining — 2.5% | ||||||
| Allegheny Technologies, Inc., 5.95%, 1/15/21 | 50,000 | 51,188 | ||||
Cleveland-Cliffs, Inc., 5.75%, 3/1/25(1) | 60,000 | 58,462 | ||||
FMG Resources Pty Ltd., 4.75%, 5/15/22(1) | 50,000 | 50,150 | ||||
| Newmont Mining Corp., 3.50%, 3/15/22 | 75,000 | 75,267 | ||||
| Vale Overseas Ltd., 4.375%, 1/11/22 | 75,000 | 77,025 | ||||
| 312,092 | ||||||
| Multi-Utilities — 3.7% | ||||||
| Enel Americas SA, 4.00%, 10/25/26 | 110,000 | 108,773 | ||||
8
| Principal Amount | Value | |||||
| Exelon Corp., 3.50%, 6/1/22 | $ | 110,000 | $ | 109,970 | ||
| FirstEnergy Corp., 4.25%, 3/15/23 | 105,000 | 108,185 | ||||
NRG Energy, Inc., 5.75%, 1/15/28(1) | 55,000 | 54,439 | ||||
| Pacific Gas & Electric Co., 3.50%, 10/1/20 | 75,000 | 75,920 | ||||
| 457,287 | ||||||
| Oil, Gas and Consumable Fuels — 9.6% | ||||||
| Anadarko Petroleum Corp., 4.85%, 3/15/21 | 135,000 | 140,961 | ||||
| Carrizo Oil & Gas, Inc., 6.25%, 4/15/23 | 50,000 | 50,375 | ||||
| Cenovus Energy, Inc., 3.00%, 8/15/22 | 145,000 | 140,730 | ||||
| Cimarex Energy Co., 3.90%, 5/15/27 | 140,000 | 137,628 | ||||
| Concho Resources, Inc., 4.375%, 1/15/25 | 140,000 | 143,443 | ||||
| Diamondback Energy, Inc., 5.375%, 5/31/25 | 50,000 | 50,125 | ||||
| Hess Corp., 7.30%, 8/15/31 | 120,000 | 146,837 | ||||
| HollyFrontier Corp., 5.875%, 4/1/26 | 130,000 | 140,599 | ||||
Peabody Energy Corp., 6.375%, 3/31/25(1) | 55,000 | 57,544 | ||||
| Suburban Propane Partners LP / Suburban Energy Finance Corp., 5.50%, 6/1/24 | 50,000 | 49,000 | ||||
| Valero Energy Corp., 7.50%, 4/15/32 | 105,000 | 137,113 | ||||
| 1,194,355 | ||||||
| Paper and Forest Products — 0.6% | ||||||
| Fibria Overseas Finance Ltd., 5.50%, 1/17/27 | 70,000 | 73,857 | ||||
| Pharmaceuticals — 0.6% | ||||||
| Allergan Funding SCS, 3.00%, 3/12/20 | 70,000 | 69,991 | ||||
| Real Estate Management and Development — 0.8% | ||||||
| CBRE Services, Inc., 5.00%, 3/15/23 | 95,000 | 97,438 | ||||
| Semiconductors and Semiconductor Equipment — 1.7% | ||||||
| Broadcom Corp. / Broadcom Cayman Finance Ltd., 2.65%, 1/15/23 | 115,000 | 109,037 | ||||
Entegris, Inc., 4.625%, 2/10/26(1) | 44,000 | 43,450 | ||||
| Micron Technology, Inc., 5.50%, 2/1/25 | 55,000 | 57,338 | ||||
| 209,825 | ||||||
| Software — 2.4% | ||||||
| Activision Blizzard, Inc., 2.30%, 9/15/21 | 190,000 | 184,148 | ||||
| Citrix Systems, Inc., 4.50%, 12/1/27 | 110,000 | 109,416 | ||||
| 293,564 | ||||||
| Specialty Retail — 0.8% | ||||||
| Best Buy Co., Inc., 5.50%, 3/15/21 | 90,000 | 95,758 | ||||
| Technology Hardware, Storage and Peripherals — 2.8% | ||||||
Dell International LLC / EMC Corp., 4.42%, 6/15/21(1) | 70,000 | 71,492 | ||||
| Hewlett Packard Enterprise Co., 4.40%, 10/15/22 | 105,000 | 108,990 | ||||
j2 Cloud Services LLC / j2 Global Co-Obligor, Inc., 6.00%, 7/15/25(1) | 50,000 | 52,000 | ||||
Seagate HDD Cayman, 4.875%, 3/1/24(1) | 110,000 | 110,280 | ||||
| 342,762 | ||||||
| Wireless Telecommunication Services — 1.5% | ||||||
| Vodafone Group plc, 2.95%, 2/19/23 | 185,000 | 181,630 | ||||
TOTAL CORPORATE BONDS (Cost $12,283,116) | 12,083,188 | |||||
9
| Shares | Value | ||||
| TEMPORARY CASH INVESTMENTS — 1.7% | |||||
| State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $209,259) | 209,259 | $ | 209,259 | ||
TOTAL INVESTMENT SECURITIES — 99.0% (Cost $12,492,375) | 12,292,447 | ||||
| OTHER ASSETS AND LIABILITIES — 1.0% | 122,743 | ||||
| TOTAL NET ASSETS — 100.0% | $ | 12,415,190 | |||
| NOTES TO SCHEDULE OF INVESTMENTS | ||
| MTN | - | Medium Term Note |
| VRN | - | Variable Rate Note. Interest reset date is indicated. Rate shown is effective at the period end. |
| (1) | Security was purchased pursuant to Rule 144A under the Securities Act of 1933 and may be sold in transactions exempt from registration, normally to qualified institutional investors. The aggregate value of these securities at the period end was $1,252,174, which represented 10.1% of total net assets. |
| (2) | Coupon rate adjusts periodically based upon a predetermined schedule. Interest reset date is indicated. Rate shown is effective at the period end. |
See Notes to Financial Statements.
10
FEBRUARY 28, 2018 (UNAUDITED)
STOXX® U.S. Quality Value ETF
| Shares | Value | ||||
| COMMON STOCKS — 99.8% | |||||
| Aerospace and Defense — 2.5% | |||||
| Boeing Co. (The) | 42 | $ | 15,213 | ||
| Huntington Ingalls Industries, Inc. | 56 | 14,672 | |||
| Lockheed Martin Corp. | 49 | 17,269 | |||
| Orbital ATK, Inc. | 294 | 38,826 | |||
| Spirit AeroSystems Holdings, Inc., Class A | 637 | 58,152 | |||
| Textron, Inc. | 238 | 14,244 | |||
| United Technologies Corp. | 105 | 14,148 | |||
| 172,524 | |||||
| Air Freight and Logistics — 0.2% | |||||
| FedEx Corp. | 56 | 13,799 | |||
| Airlines — 2.2% | |||||
| Alaska Air Group, Inc. | 609 | 39,280 | |||
| American Airlines Group, Inc. | 266 | 14,430 | |||
| Delta Air Lines, Inc. | 259 | 13,960 | |||
JetBlue Airways Corp.(1) | 679 | 14,293 | |||
| Southwest Airlines Co. | 238 | 13,766 | |||
United Continental Holdings, Inc.(1) | 826 | 55,995 | |||
| 151,724 | |||||
| Auto Components — 0.2% | |||||
| Goodyear Tire & Rubber Co. (The) | 462 | 13,370 | |||
| Automobiles — 0.2% | |||||
| Thor Industries, Inc. | 105 | 13,545 | |||
| Banks — 5.4% | |||||
| Bank of America Corp. | 3,920 | 125,832 | |||
| BB&T Corp. | 252 | 13,696 | |||
| Citigroup, Inc. | 1,806 | 136,335 | |||
| Fifth Third Bancorp | 420 | 13,881 | |||
| Huntington Bancshares, Inc. | 875 | 13,738 | |||
| IBERIABANK Corp. | 168 | 13,574 | |||
| JPMorgan Chase & Co. | 119 | 13,745 | |||
| Popular, Inc. | 686 | 28,819 | |||
| Regions Financial Corp. | 847 | 16,440 | |||
| 376,060 | |||||
| Beverages — 0.6% | |||||
| Coca-Cola Co. (The) | 889 | 38,423 | |||
| PepsiCo, Inc. | 28 | 3,072 | |||
| 41,495 | |||||
| Biotechnology — 1.4% | |||||
| AbbVie, Inc. | 119 | 13,784 | |||
| Amgen, Inc. | 77 | 14,150 | |||
Celgene Corp.(1) | 147 | 12,807 | |||
| Gilead Sciences, Inc. | 532 | 41,884 | |||
United Therapeutics Corp.(1) | 105 | 12,164 | |||
| 94,789 | |||||
| Building Products — 0.2% | |||||
| Owens Corning | 203 | 16,504 | |||
11
| Shares | Value | ||||
| Capital Markets — 1.0% | |||||
| Ameriprise Financial, Inc. | 84 | $ | 13,141 | ||
| Apollo Global Management LLC | 812 | 26,634 | |||
| Bank of New York Mellon Corp. (The) | 245 | 13,972 | |||
| Lazard Ltd., Class A | 315 | 17,000 | |||
| 70,747 | |||||
| Chemicals — 1.1% | |||||
| Eastman Chemical Co. | 140 | 14,151 | |||
| Huntsman Corp. | 469 | 15,134 | |||
| LyondellBasell Industries NV, Class A | 462 | 49,998 | |||
| 79,283 | |||||
| Communications Equipment — 0.8% | |||||
| Cisco Systems, Inc. | 441 | 19,748 | |||
| Juniper Networks, Inc. | 938 | 24,069 | |||
| Motorola Solutions, Inc. | 133 | 14,118 | |||
| 57,935 | |||||
| Construction and Engineering — 0.7% | |||||
| EMCOR Group, Inc. | 182 | 13,888 | |||
| Fluor Corp. | 364 | 20,712 | |||
| Jacobs Engineering Group, Inc. | 217 | 13,250 | |||
| 47,850 | |||||
| Consumer Finance — 0.8% | |||||
| Ally Financial, Inc. | 546 | 15,234 | |||
| American Express Co. | 147 | 14,334 | |||
| Capital One Financial Corp. | 140 | 13,710 | |||
| Discover Financial Services | 175 | 13,795 | |||
| 57,073 | |||||
| Containers and Packaging — 0.4% | |||||
| Bemis Co., Inc. | 308 | 13,580 | |||
| Packaging Corp. of America | 119 | 14,185 | |||
| 27,765 | |||||
| Diversified Financial Services — 0.8% | |||||
Berkshire Hathaway, Inc., Class B(1) | 70 | 14,504 | |||
| Voya Financial, Inc. | 847 | 43,214 | |||
| 57,718 | |||||
| Diversified Telecommunication Services — 3.7% | |||||
| AT&T, Inc. | 4,144 | 150,427 | |||
| CenturyLink, Inc. | 3,115 | 55,042 | |||
| Verizon Communications, Inc. | 1,092 | 52,132 | |||
| 257,601 | |||||
| Electric Utilities — 3.9% | |||||
| Alliant Energy Corp. | 91 | 3,517 | |||
| American Electric Power Co., Inc. | 259 | 16,985 | |||
| Edison International | 861 | 52,168 | |||
| Entergy Corp. | 182 | 13,799 | |||
| Eversource Energy | 56 | 3,192 | |||
| FirstEnergy Corp. | 420 | 13,579 | |||
| Hawaiian Electric Industries, Inc. | 140 | 4,614 | |||
| NextEra Energy, Inc. | 28 | 4,260 | |||
| OGE Energy Corp. | 441 | 13,821 | |||
| PG&E Corp. | 1,708 | 70,182 | |||
12
| Shares | Value | ||||
| Pinnacle West Capital Corp. | 294 | $ | 22,626 | ||
| PPL Corp. | 1,337 | 38,305 | |||
| Westar Energy, Inc. | 245 | 11,939 | |||
| Xcel Energy, Inc. | 77 | 3,333 | |||
| 272,320 | |||||
| Electrical Equipment — 0.4% | |||||
| Eaton Corp. plc | 175 | 14,122 | |||
| Regal Beloit Corp. | 182 | 13,159 | |||
| 27,281 | |||||
| Electronic Equipment, Instruments and Components — 1.0% | |||||
| Corning, Inc. | 462 | 13,435 | |||
Flex Ltd.(1) | 805 | 14,570 | |||
| Jabil, Inc. | 1,057 | 28,634 | |||
| TE Connectivity Ltd. | 140 | 14,433 | |||
| 71,072 | |||||
| Equity Real Estate Investment Trusts (REITs) — 4.7% | |||||
| CoreCivic, Inc. | 637 | 13,243 | |||
Equity Commonwealth(1) | 476 | 14,004 | |||
| Host Hotels & Resorts, Inc. | 2,443 | 45,342 | |||
| Iron Mountain, Inc. | 609 | 19,159 | |||
| Lamar Advertising Co., Class A | 308 | 20,473 | |||
| LaSalle Hotel Properties | 952 | 23,353 | |||
| Liberty Property Trust | 84 | 3,298 | |||
| National Retail Properties, Inc. | 728 | 27,111 | |||
| Park Hotels & Resorts, Inc. | 497 | 12,917 | |||
| Public Storage | 217 | 42,193 | |||
| Simon Property Group, Inc. | 224 | 34,386 | |||
| Ventas, Inc. | 938 | 45,324 | |||
| Vornado Realty Trust | 49 | 3,257 | |||
| Weingarten Realty Investors | 504 | 13,674 | |||
| Weyerhaeuser Co. | 98 | 3,433 | |||
| 321,167 | |||||
| Food and Staples Retailing — 3.1% | |||||
| CVS Health Corp. | 1,407 | 95,296 | |||
| Kroger Co. (The) | 483 | 13,099 | |||
| Walgreens Boots Alliance, Inc. | 196 | 13,502 | |||
| Walmart, Inc. | 1,001 | 90,100 | |||
| 211,997 | |||||
| Food Products — 4.1% | |||||
| Archer-Daniels-Midland Co. | 2,114 | 87,774 | |||
| Bunge Ltd. | 196 | 14,784 | |||
| Campbell Soup Co. | 294 | 12,657 | |||
| Conagra Brands, Inc. | 385 | 13,910 | |||
| Flowers Foods, Inc. | 658 | 13,647 | |||
| General Mills, Inc. | 182 | 9,200 | |||
| Hershey Co. (The) | 35 | 3,439 | |||
| Ingredion, Inc. | 105 | 13,717 | |||
| J.M. Smucker Co. (The) | 203 | 25,639 | |||
| Kellogg Co. | 49 | 3,244 | |||
| Tyson Foods, Inc., Class A | 1,127 | 83,826 | |||
| 281,837 | |||||
13
| Shares | Value | ||||
| Gas Utilities — 0.1% | |||||
| National Fuel Gas Co. | 126 | $ | 6,228 | ||
| Health Care Equipment and Supplies — 0.4% | |||||
| Danaher Corp. | 140 | 13,689 | |||
| Medtronic plc | 168 | 13,422 | |||
| 27,111 | |||||
| Health Care Providers and Services — 8.4% | |||||
| Aetna, Inc. | 77 | 13,634 | |||
| Anthem, Inc. | 462 | 108,745 | |||
Centene Corp.(1) | 658 | 66,734 | |||
| Cigna Corp. | 175 | 34,281 | |||
DaVita, Inc.(1) | 665 | 47,893 | |||
Express Scripts Holding Co.(1) | 1,295 | 97,708 | |||
| HCA Healthcare, Inc. | 175 | 17,369 | |||
| Humana, Inc. | 175 | 47,568 | |||
Laboratory Corp. of America Holdings(1) | 77 | 13,298 | |||
| McKesson Corp. | 91 | 13,580 | |||
MEDNAX, Inc.(1) | 504 | 27,710 | |||
| Patterson Cos., Inc. | 434 | 13,706 | |||
| UnitedHealth Group, Inc. | 63 | 14,248 | |||
| Universal Health Services, Inc., Class B | 119 | 13,590 | |||
WellCare Health Plans, Inc.(1) | 266 | 51,580 | |||
| 581,644 | |||||
| Hotels, Restaurants and Leisure — 1.9% | |||||
| Carnival Corp. | 196 | 13,114 | |||
| Cracker Barrel Old Country Store, Inc. | 42 | 6,556 | |||
| Darden Restaurants, Inc. | 217 | 20,005 | |||
| Las Vegas Sands Corp. | 469 | 34,148 | |||
| McDonald's Corp. | 28 | 4,417 | |||
| Royal Caribbean Cruises Ltd. | 105 | 13,293 | |||
| Six Flags Entertainment Corp. | 210 | 13,459 | |||
| Wyndham Worldwide Corp. | 112 | 12,967 | |||
| Yum China Holdings, Inc. | 336 | 14,556 | |||
| 132,515 | |||||
| Household Durables — 1.6% | |||||
| Garmin Ltd. | 609 | 36,077 | |||
| Tupperware Brands Corp. | 133 | 6,524 | |||
| Whirlpool Corp. | 399 | 64,809 | |||
| 107,410 | |||||
| Household Products — 2.2% | |||||
| Clorox Co. (The) | 266 | 34,335 | |||
| Colgate-Palmolive Co. | 308 | 21,243 | |||
| Kimberly-Clark Corp. | 420 | 46,586 | |||
| Procter & Gamble Co. (The) | 595 | 46,720 | |||
| 148,884 | |||||
| Independent Power and Renewable Electricity Producers — 0.7% | |||||
| AES Corp. (The) | 1,316 | 14,305 | |||
Calpine Corp.(1) | 2,100 | 31,962 | |||
| 46,267 | |||||
| Industrial Conglomerates — 0.4% | |||||
| Carlisle Cos., Inc. | 126 | 12,967 | |||
14
| Shares | Value | ||||
| Honeywell International, Inc. | 91 | $ | 13,751 | ||
| 26,718 | |||||
| Insurance — 3.3% | |||||
| Aflac, Inc. | 161 | 14,310 | |||
| Allstate Corp. (The) | 147 | 13,562 | |||
| Everest Re Group Ltd. | 56 | 13,454 | |||
| FNF Group | 91 | 3,634 | |||
| Hartford Financial Services Group, Inc. (The) | 252 | 13,318 | |||
| Old Republic International Corp. | 1,694 | 33,931 | |||
| Principal Financial Group, Inc. | 273 | 17,016 | |||
| Prudential Financial, Inc. | 882 | 93,774 | |||
| Travelers Cos., Inc. (The) | 98 | 13,622 | |||
| Unum Group | 266 | 13,555 | |||
| 230,176 | |||||
| Internet and Direct Marketing Retail — 0.2% | |||||
Liberty Interactive Corp. QVC Group, Class A(1) | 497 | 14,348 | |||
| Internet Software and Services — 1.3% | |||||
Akamai Technologies, Inc.(1) | 287 | 19,361 | |||
SINA Corp.(1) | 588 | 68,755 | |||
| 88,116 | |||||
| IT Services — 4.1% | |||||
| Accenture plc, Class A | 119 | 19,160 | |||
| Booz Allen Hamilton Holding Corp. | 497 | 18,851 | |||
Euronet Worldwide, Inc.(1) | 175 | 14,852 | |||
| Genpact Ltd. | 448 | 14,054 | |||
| International Business Machines Corp. | 784 | 122,171 | |||
| MAXIMUS, Inc. | 210 | 14,066 | |||
| Paychex, Inc. | 308 | 20,060 | |||
Teradata Corp.(1) | 518 | 19,073 | |||
| Visa, Inc., Class A | 154 | 18,933 | |||
| Western Union Co. (The) | 1,036 | 20,533 | |||
| 281,753 | |||||
| Leisure Products — 0.6% | |||||
| Brunswick Corp. | 476 | 27,227 | |||
| Polaris Industries, Inc. | 119 | 13,565 | |||
| 40,792 | |||||
| Machinery — 1.0% | |||||
| AGCO Corp. | 196 | 13,054 | |||
| Allison Transmission Holdings, Inc. | 329 | 13,038 | |||
| Caterpillar, Inc. | 91 | 14,072 | |||
| Cummins, Inc. | 84 | 14,126 | |||
| Ingersoll-Rand plc | 154 | 13,675 | |||
| 67,965 | |||||
| Media — 1.8% | |||||
| Cinemark Holdings, Inc. | 182 | 7,746 | |||
| Comcast Corp., Class A | 350 | 12,674 | |||
Discovery Communications, Inc., Class A(1) | 1,729 | 42,049 | |||
| Omnicom Group, Inc. | 49 | 3,735 | |||
| Time Warner, Inc. | 147 | 13,665 | |||
| Viacom, Inc., Class B | 1,232 | 41,075 | |||
| 120,944 | |||||
15
| Shares | Value | ||||
| Metals and Mining — 1.2% | |||||
Alcoa Corp.(1) | 861 | $ | 38,719 | ||
Freeport-McMoRan, Inc.(1) | 763 | 14,192 | |||
| United States Steel Corp. | 735 | 31,980 | |||
| 84,891 | |||||
| Multi-Utilities — 2.2% | |||||
| Ameren Corp. | 308 | 16,724 | |||
| CenterPoint Energy, Inc. | 1,708 | 46,202 | |||
| CMS Energy Corp. | 77 | 3,269 | |||
| Consolidated Edison, Inc. | 623 | 46,657 | |||
| DTE Energy Co. | 35 | 3,527 | |||
| MDU Resources Group, Inc. | 504 | 13,250 | |||
| Public Service Enterprise Group, Inc. | 280 | 13,560 | |||
| Vectren Corp. | 140 | 8,435 | |||
| 151,624 | |||||
| Multiline Retail — 2.3% | |||||
| Kohl's Corp. | 651 | 43,025 | |||
| Macy's, Inc. | 1,092 | 32,116 | |||
| Target Corp. | 1,106 | 83,403 | |||
| 158,544 | |||||
| Oil, Gas and Consumable Fuels — 2.7% | |||||
| Chevron Corp. | 119 | 13,319 | |||
| Exxon Mobil Corp. | 728 | 55,139 | |||
| HollyFrontier Corp. | 301 | 12,892 | |||
| Marathon Oil Corp. | 847 | 12,298 | |||
| Marathon Petroleum Corp. | 203 | 13,004 | |||
| Phillips 66 | 147 | 13,284 | |||
| Valero Energy Corp. | 749 | 67,725 | |||
| 187,661 | |||||
| Personal Products — 0.5% | |||||
Herbalife Ltd.(1) | 203 | 18,696 | |||
| Nu Skin Enterprises, Inc., Class A | 196 | 13,799 | |||
| 32,495 | |||||
| Pharmaceuticals — 3.1% | |||||
| Bristol-Myers Squibb Co. | 56 | 3,707 | |||
| Eli Lilly & Co. | 42 | 3,235 | |||
| Johnson & Johnson | 315 | 40,912 | |||
| Merck & Co., Inc. | 1,015 | 55,034 | |||
| Pfizer, Inc. | 3,136 | 113,868 | |||
| 216,756 | |||||
| Professional Services — 0.2% | |||||
| ManpowerGroup, Inc. | 112 | 13,268 | |||
| Real Estate Management and Development — 1.2% | |||||
CBRE Group, Inc., Class A(1) | 308 | 14,399 | |||
| Jones Lang LaSalle, Inc. | 427 | 68,580 | |||
| 82,979 | |||||
| Semiconductors and Semiconductor Equipment — 3.9% | |||||
| Applied Materials, Inc. | 273 | 15,722 | |||
Cirrus Logic, Inc.(1) | 322 | 14,268 | |||
| Intel Corp. | 2,135 | 105,234 | |||
Micron Technology, Inc.(1) | 1,596 | 77,901 | |||
16
| Shares | Value | ||||
ON Semiconductor Corp.(1) | 623 | $ | 14,902 | ||
Qorvo, Inc.(1) | 511 | 41,243 | |||
| 269,270 | |||||
| Software — 1.2% | |||||
| CA, Inc. | 546 | 19,165 | |||
| Microsoft Corp. | 210 | 19,692 | |||
Nuance Communications, Inc.(1) | 840 | 13,490 | |||
| Oracle Corp.(New York) | 385 | 19,508 | |||
| Symantec Corp. | 511 | 13,434 | |||
| 85,289 | |||||
| Specialty Retail — 2.2% | |||||
AutoNation, Inc.(1) | 252 | 12,653 | |||
| Bed Bath & Beyond, Inc. | 1,253 | 26,864 | |||
| Best Buy Co., Inc. | 812 | 58,821 | |||
| Foot Locker, Inc. | 581 | 26,674 | |||
| Gap, Inc. (The) | 420 | 13,264 | |||
| Williams-Sonoma, Inc. | 259 | 13,406 | |||
| 151,682 | |||||
| Technology Hardware, Storage and Peripherals — 7.7% | |||||
| Apple, Inc. | 693 | 123,437 | |||
| Hewlett Packard Enterprise Co. | 5,264 | 97,858 | |||
| HP, Inc. | 4,270 | 99,875 | |||
NCR Corp.(1) | 861 | 28,413 | |||
| NetApp, Inc. | 924 | 55,948 | |||
| Seagate Technology plc | 1,092 | 58,313 | |||
| Western Digital Corp. | 819 | 71,286 | |||
| 535,130 | |||||
| Textiles, Apparel and Luxury Goods — 1.7% | |||||
Michael Kors Holdings Ltd.(1) | 651 | 40,967 | |||
| PVH Corp. | 91 | 13,130 | |||
| Ralph Lauren Corp. | 434 | 45,935 | |||
| Tapestry, Inc. | 273 | 13,898 | |||
| 113,930 | |||||
| Thrifts and Mortgage Finance — 0.7% | |||||
MGIC Investment Corp.(1) | 966 | 13,321 | |||
| New York Community Bancorp, Inc. | 1,512 | 20,593 | |||
| Radian Group, Inc. | 644 | 13,215 | |||
| 47,129 | |||||
| Tobacco — 1.2% | |||||
| Altria Group, Inc. | 406 | 25,558 | |||
| Philip Morris International, Inc. | 532 | 55,088 | |||
| 80,646 | |||||
| Trading Companies and Distributors — 0.4% | |||||
HD Supply Holdings, Inc.(1) | 378 | 13,702 | |||
| W.W. Grainger, Inc. | 49 | 12,816 | |||
| 26,518 | |||||
TOTAL COMMON STOCKS (Cost $7,064,350) | 6,894,139 | ||||
17
| Shares | Value | ||||
| TEMPORARY CASH INVESTMENTS — 0.1% | |||||
| State Street Institutional U.S. Government Money Market Fund, Premier Class (Cost $9,837) | 9,837 | $ | 9,837 | ||
TOTAL INVESTMENT SECURITIES — 99.9% (Cost $7,074,187) | 6,903,976 | ||||
| OTHER ASSETS AND LIABILITIES — 0.1% | 4,825 | ||||
| TOTAL NET ASSETS — 100.0% | $ | 6,908,801 | |||
| NOTES TO SCHEDULE OF INVESTMENTS | ||
| (1) | Non-income producing. |
See Notes to Financial Statements.
18
| Statements of Assets and Liabilities |
| FEBRUARY 28, 2018 (UNAUDITED) | ||||||
| Diversified Corporate Bond ETF | STOXX® U.S. Quality Value ETF | |||||
| Assets | ||||||
| Investment securities, at value (cost of $12,492,375 and $7,074,187, respectively) | $ | 12,292,447 | $ | 6,903,976 | ||
| Cash | — | 474 | ||||
| Receivable for investments sold | — | 62 | ||||
| Interest and dividends receivable | 127,039 | 14,477 | ||||
| 12,419,486 | 6,918,989 | |||||
| Liabilities | ||||||
| Payable for investments purchased | — | 8,653 | ||||
| Accrued management fees | 4,296 | 1,535 | ||||
| 4,296 | 10,188 | |||||
| Net Assets | $ | 12,415,190 | $ | 6,908,801 | ||
| Shares outstanding (unlimited number of shares authorized) | 252,000 | 175,001 | ||||
| Net Asset Value Per Share | $ | 49.27 | $ | 39.48 | ||
| Net Assets Consist of: | ||||||
| Capital paid in | $ | 12,610,446 | $ | 7,110,593 | ||
| Undistributed net investment income | 47,718 | 17,725 | ||||
| Accumulated net realized loss | (43,046 | ) | (49,306 | ) | ||
| Net unrealized depreciation | (199,928 | ) | (170,211 | ) | ||
| $ | 12,415,190 | $ | 6,908,801 | |||
See Notes to Financial Statements.
19
| Statements of Operations |
FOR THE PERIOD ENDED FEBRUARY 28, 2018 (UNAUDITED)(1) | ||||||
| Diversified Corporate Bond ETF | STOXX® U.S. Quality Value ETF | |||||
| Investment Income (Loss) | ||||||
| Income: | ||||||
| Interest | $ | 55,115 | — | |||
| Dividends | — | $ | 20,207 | |||
| 55,115 | 20,207 | |||||
| Expenses: | ||||||
| Management fees | 7,397 | 2,482 | ||||
| Net investment income (loss) | 47,718 | 17,725 | ||||
| Realized and Unrealized Gain (Loss) | ||||||
| Net realized gain (loss) on investment transactions | (43,046 | ) | (49,306 | ) | ||
| Change in net unrealized appreciation (depreciation) on investments | (199,928 | ) | (170,211 | ) | ||
| Net realized and unrealized gain (loss) | (242,974 | ) | (219,517 | ) | ||
| Net Increase (Decrease) in Net Assets Resulting from Operations | $ | (195,256 | ) | $ | (201,792 | ) |
| (1) | January 11, 2018 (fund inception) through February 28, 2018. |
See Notes to Financial Statements.
20
| Statements of Changes in Net Assets |
PERIOD ENDED FEBRUARY 28, 2018 (UNAUDITED)(1) | ||||||
| Diversified Corporate Bond ETF | STOXX® U.S. Quality Value ETF | |||||
| Increase (Decrease) in Net Assets | ||||||
| Operations | ||||||
| Net investment income (loss) | $ | 47,718 | $ | 17,725 | ||
| Net realized gain (loss) | (43,046 | ) | (49,306 | ) | ||
| Change in net unrealized appreciation (depreciation) | (199,928 | ) | (170,211 | ) | ||
| Net increase (decrease) in net assets resulting from operations | (195,256 | ) | (201,792 | ) | ||
| Capital Share Transactions | ||||||
| Proceeds from shares sold | 12,610,446 | 7,110,593 | ||||
| Net increase (decrease) in net assets from capital share transactions | 12,610,446 | 7,110,593 | ||||
| Net increase (decrease) in net assets | 12,415,190 | 6,908,801 | ||||
| Net Assets | ||||||
| End of period | $ | 12,415,190 | $ | 6,908,801 | ||
| Undistributed net investment income | $ | 47,718 | $ | 17,725 | ||
| Transactions in Shares of the Fund | ||||||
| Sold | 252,000 | 175,001 | ||||
| Net increase (decrease) in shares of the fund | 252,000 | 175,001 | ||||
| (1) | January 11, 2018 (fund inception) through February 28, 2018. |
See Notes to Financial Statements.
21
| Notes to Financial Statements |
FEBRUARY 28, 2018 (UNAUDITED)
1. Organization
American Century ETF Trust (the trust) was registered as a Delaware statutory trust in 2017 and is registered under the Investment Company Act of 1940, as amended (the 1940 Act), as an open-end management investment company. American Century Diversified Corporate Bond ETF (Diversified Corporate Bond ETF) and American Century STOXX® U.S. Quality Value ETF (STOXX® U.S. Quality Value ETF) (collectively, the funds) are two funds in a series issued by the trust. Diversified Corporate Bond ETF's investment objective is to seek to provide current income. STOXX® U.S. Quality Value ETF's investment objective is to seek to provide investment results that closely correspond, before fees and expenses, to the performance of the iSTOXX® American Century USA Quality Value Index. Shares of each fund are listed for trading on the NYSE Arca, Inc. The funds commenced sale on January 11, 2018, the funds’ inception date.
2. Significant Accounting Policies
The following is a summary of significant accounting policies consistently followed by the funds in preparation of their financial statements. Each fund is an investment company and follows accounting and reporting guidance in accordance with accounting principles generally accepted in the United States of America. This may require management to make certain estimates and assumptions at the date of the financial statements. Actual results could differ from these estimates. Management evaluated the impact of events or transactions occurring through the date the financial statements were issued that would merit recognition or disclosure.
Investment Valuations — The fund determines the fair value of its investments and computes its net asset value per share at the close of regular trading (usually 4 p.m. Eastern time) on the New York Stock Exchange (NYSE) on each day the NYSE is open. The Board of Trustees has adopted valuation policies and procedures to guide the investment advisor in the fund’s investment valuation process and to provide methodologies for the oversight of the fund’s pricing function.
Equity securities that are listed or traded on a domestic securities exchange are valued at the last reported sales price or at the official closing price as provided by the exchange. Equity securities traded on foreign securities exchanges are generally valued at the closing price of such securities on the exchange where primarily traded or at the close of the NYSE, if that is earlier. If no last sales price is reported, or if local convention or regulation so provides, the mean of the latest bid and asked prices may be used. Securities traded over-the-counter are valued at the mean of the latest bid and asked prices, the last sales price, or the official closing price.
Fixed income securities are valued at the evaluated mean as provided by independent pricing services or at the mean of the most recent bid and asked prices as provided by investment dealers. Corporate bonds are valued using market models that consider trade data, quotations from dealers and active market makers, relevant yield curve and spread data, creditworthiness, trade data or market information on comparable securities, and other relevant security specific information.
Open-end management investment companies are valued at the reported net asset value per share.
If the funds determine that the market price for an investment is not readily available or the valuation methods mentioned above do not reflect an investment’s fair value, such investment is valued as determined in good faith by the Board of Trustees or its delegate, in accordance with policies and procedures adopted by the Board of Trustees. In its determination of fair value, the funds may review several factors including, but not limited to, market information regarding the specific investment or comparable investments and correlation with other investment types, futures indices or general market indicators. Circumstances that may cause the funds to use these procedures to value an investment include, but are not limited to: an investment has been declared in default or is distressed; trading in a security has been suspended during the trading day or a security is not actively trading on its principal exchange; prices received from a regular pricing source are deemed unreliable; or there is a foreign market holiday and no trading occurred.
The funds monitor for significant events occurring after the close of an investment’s primary exchange but before each fund’s net asset value per share is determined. Significant events may include, but are not limited to: corporate announcements and transactions; governmental action and political unrest that could impact a specific
22
investment or an investment sector; or armed conflicts, natural disasters and similar events that could affect investments in a specific country or region.
Security Transactions — Security transactions are accounted for as of the trade date. Net realized gains and losses are determined on the identified cost basis, which is also used for federal income tax purposes.
Investment Income — Dividend income less foreign taxes withheld, if any, is recorded as of the ex-dividend date. Distributions received on securities that represent a return of capital or long-term capital gain are recorded as a reduction of cost of investments and/or as a realized gain. The funds may estimate the components of distributions received that may be considered nontaxable distributions or long-term capital gain distributions for income tax purposes. Interest income is recorded on the accrual basis and includes accretion of discounts and amortization of premiums.
Income Tax Status — It is each fund’s policy to distribute substantially all net investment income and net realized gains to shareholders and to otherwise qualify as a regulated investment company under provisions of the Internal Revenue Code. Accordingly, no provision has been made for income taxes. The funds file U.S. federal, state, local and non-U.S. tax returns as applicable. The fund's tax returns are subject to examination by the relevant taxing authority until expiration of the applicable statute of limitations, which is generally three years from the date of filing but can be longer in certain jurisdictions. At this time, management believes there are no uncertain tax positions which, based on their technical merit, would not be sustained upon examination and for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly change in the next twelve months.
Distributions to Shareholders — Distributions from net investment income, if any, are declared and paid monthly for Diversified Corporate Bond ETF. Distributions from net investment income, if any, are declared and paid quarterly for STOXX® U.S. Quality Value ETF. Distributions from net realized gains, if any, are generally declared and paid annually for both funds.
Indemnifications — Under the trust’s organizational documents, its officers and trustees are indemnified against certain liabilities arising out of the performance of their duties to the funds. In addition, in the normal course of business, the funds enter into contracts that provide general indemnifications. The maximum exposure under these arrangements is unknown as this would involve future claims that may be made against a fund. The risk of material loss from such claims is considered by management to be remote.
3. Fees and Transactions with Related Parties
Certain officers and trustees of the trust are also officers and/or directors of American Century Companies, Inc. (ACC). The trust's investment advisor, American Century Investment Management, Inc. (ACIM) and the trust’s administrator, American Century Services, LLC, are wholly owned, directly or indirectly, by ACC.
Management Fees — The trust has entered into a management agreement with ACIM, under which ACIM provides the funds with investment advisory and management services in exchange for a single, unified management fee (the fee). The agreement provides that all expenses of managing and operating the funds, except brokerage and other transaction fees and expenses relating to the acquisition and disposition of portfolio securities, acquired fund fees and expenses, interest, taxes, litigation expenses, extraordinary expenses and expenses incurred in connection with the provision of shareholder and distribution services under a plan adopted pursuant to Rule 12b-1 under the 1940 Act, if any, will be paid by ACIM. The fee is computed and accrued daily based on each fund's daily net assets and paid monthly in arrears.
The annual management fee for each fund is as follows:
| Annual Management Fee | |
| Diversified Corporate Bond ETF | 0.45% |
STOXX® U.S. Quality Value ET | 0.29% |
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4. Investment Transactions
Purchases and sales of investment securities, excluding short-term investments and in-kind transactions, for the period January 11, 2018 (fund inception) through February 28, 2018 were as follows:
| Purchases | Sales | |
| Diversified Corporate Bond ETF | $5,288,889 | $2,837,083 |
STOXX® U.S. Quality Value ETF | $2,290,408 | $2,281,375 |
Securities received or delivered in-kind through subscriptions and redemptions and in-kind net realized gain (loss) for the period January 11, 2018 (fund inception) through February 28, 2018 were as follows:
| In-kind Subscriptions | In-kind Redemptions | In-kind Net Realized Gain/(Loss)* | |
| Diversified Corporate Bond ETF | $9,784,122 | — | — |
STOXX® U.S. Quality Value ETF | $7,104,957 | — | — |
*Net realized gain (loss) on in-kind transactions are not considered taxable for federal income tax purposes.
5. Capital Share Transactions
Each fund’s shares may only be purchased and sold on a national securities exchange through a broker-dealer. The price of each fund’s shares is based on market price, and because ETF shares trade at market prices rather than net asset value (NAV), shares may trade at a price greater than NAV (a premium) or less than NAV (a discount). Each fund issues and redeems shares that have been aggregated into blocks of 50,000 shares or multiples thereof for Diversified Corporate Bond ETF and 25,000 shares or multiples thereof for STOXX® U.S. Quality Value ETF (Creation Units) to authorized participants who have entered into agreements with the funds’ distributor. Diversified Corporate Bond ETF will generally issue and redeem Creation Units in return for a basket of cash and/or securities that the fund specifies each day. STOXX® U.S. Quality Value ETF will generally issue and redeem Creation Units in return for a basket of securities (and an amount of cash) that the fund specifies each day.
6. Fair Value Measurements
The funds’ investments valuation process is based on several considerations and may use multiple inputs to determine the fair value of the investments held by the funds. In conformity with accounting principles generally accepted in the United States of America, the inputs used to determine a valuation are classified into three broad levels.
| • | Level 1 valuation inputs consist of unadjusted quoted prices in an active market for identical investments. |
| • | Level 2 valuation inputs consist of direct or indirect observable market data (including quoted prices for comparable investments, evaluations of subsequent market events, interest rates, prepayment speeds, credit risk, etc.). These inputs also consist of quoted prices for identical investments initially expressed in local currencies that are adjusted through translation into U.S. dollars. |
| • | Level 3 valuation inputs consist of unobservable data (including a fund’s own assumptions). |
The level classification is based on the lowest level input that is significant to the fair valuation measurement. The valuation inputs are not necessarily an indication of the risks associated with investing in these securities or other financial instruments. There were no significant transfers between levels during the period.
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The following is a summary of the level classifications as of period end. The Schedules of Investments provides additional information on the funds’ portfolio holdings.
Diversified Corporate Bond ETF
| Level 1 | Level 2 | Level 3 | ||||||
| Assets | ||||||||
| Investment Securities | ||||||||
| Corporate Bonds | — | $ | 12,083,188 | — | ||||
| Temporary Cash Investments | $ | 209,259 | — | — | ||||
| $ | 209,259 | $ | 12,083,188 | — | ||||
STOXX® U.S. Quality Value ETF
| Level 1 | Level 2 | Level 3 | |||||
| Assets | |||||||
| Investment Securities | |||||||
| Common Stocks | $ | 6,894,139 | — | — | |||
| Temporary Cash Investments | 9,837 | — | — | ||||
| $ | 6,903,976 | — | — | ||||
7. Risk Factors
To the extent STOXX® U.S. Quality Value ETF concentrates in a specific industry or a group of industries, it may be subject to greater risks and market fluctuations than a portfolio investing in a broader range of industries
The funds’ investment process may result in high portfolio turnover, which could mean high transaction costs, affecting both performance and capital gains tax liabilities to investors.
8. Federal Tax Information
The book-basis character of distributions made during the year from net investment income or net realized gains may differ from their ultimate characterization for federal income tax purposes. These differences reflect the differing character of certain income items and net realized gains and losses for financial statement and tax purposes, and may result in reclassification among certain capital accounts on the financial statements.
As of period end, the components of investments for federal income tax purposes were as follows:
| Diversified Corporate Bond ETF | STOXX® U.S. Quality Value ETF | |||||
| Federal tax cost of investments | $ | 12,493,934 | $ | 7,091,335 | ||
| Gross tax appreciation of investments | $ | 1,262 | $ | 95,631 | ||
| Gross tax depreciation of investments | (202,749 | ) | (282,990 | ) | ||
| Net tax appreciation (depreciation) of investments | $ | (201,487 | ) | $ | (187,359 | ) |
The difference between book-basis and tax-basis unrealized appreciation (depreciation) is attributable primarily to the tax deferral of losses on wash sales.
9. Recently Issued Accounting Standards
In March 2017, the Financial Accounting Standards Board (FASB) issued Accounting Standards Update No.2017-08, “Receivables - Nonrefundable Fees and Other Costs (Subtopic 310-20), Premium Amortization on Purchased Callable Debt Securities” (ASU 2017-08). ASU 2017-08 amends the amortization period for certain purchased callable debt securities held at a premium, shortening such period to the earliest call date. The amendments are effective for fiscal years, and interim periods within those fiscal years, beginning after December 15, 2018. Management is currently evaluating the impact that adopting ASU 2017-08 will have on the financial statements.
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| Financial Highlights |
| For a Share Outstanding Throughout the Period Indicated | ||||||||||||
| Per-Share Data | Ratios and Supplemental Data | |||||||||||
| Income From Investment Operations: | Ratio to Average Net Assets of: | |||||||||||
Net Asset Value, Beginning of Period | Net Investment Income (Loss)(1) | Net Realized and Unrealized Gain (Loss) | Total From Investment Operations | Net Asset Value, End of Period | Total Return(2) | Operating Expenses | Net Investment Income (Loss) | Portfolio Turnover Rate(5) | Net Assets, End of Period (in thousands) | |||
| Diversified Corporate Bond ETF | ||||||||||||
2018(3) | $50.00 | 0.19 | (0.92) | (0.73) | $49.27 | (1.47)% | 0.45%(4) | 2.90%(4) | 23% | $12,415 | ||
STOXX® U.S. Quality Value ETF | ||||||||||||
2018(3) | $40.37 | 0.11 | (1.00) | (0.89) | $39.48 | (2.22)% | 0.29%(4) | 2.07%(4) | 36% | $6,909 | ||
| Notes to Financial Highlights |
| (1) | Computed using average shares outstanding throughout the period. |
| (2) | Total returns are calculated based on the net asset value of the last business day. Total returns for periods less than one year are not annualized. |
| (3) | January 11, 2018 (fund inception) through February 28, 2018 (unaudited). |
| (4) | Annualized. |
| (5) | Excludes securities received or delivered in-kind. |
See Notes to Financial Statements.
| Approval of Management Agreement |
The Funds’ Board of Trustees unanimously approved the initial management agreement pursuant to which American Century Investment Management, Inc. (the “Advisor”) acts as the investment advisor for the Funds. Under Section 15(c) of the Investment Company Act, new contracts for investment advisory services are required to be approved by a majority of a fund’s independent trustees and to be evaluated on an annual basis thereafter.
In advance of the Board’s consideration, the Advisor provided information concerning the funds. The materials circulated and the discussions held detailed the investment objective and strategy proposed to be utilized by the Advisor, the Funds’ characteristics and key attributes, the rationale for launching the Funds, the experience of the staff designated to manage the Funds, the proposed pricing, and the markets in which the Funds would be sold. The information considered and the discussions held included, but were not limited to:
| • | the nature, extent, and quality of investment management and other services to be provided by the Advisor to the Funds; |
| • | the wide range of other programs and services the Advisor would provide to each Fund and its shareholders on a routine and non-routine basis; |
| • | each Fund’s proposed investment objective and strategy, including a discussion of each Fund's anticipated investment performance and proposed benchmark; |
| • | the cost of owning each Fund compared to the cost of owning similar funds; |
| • | the Advisor’s compliance policies, procedures, and regulatory experience; and |
| • | any collateral benefits derived by the Advisor from the management of the Funds. |
Part of the Board’s analysis of fee levels involves reviewing certain evaluative data compiled by an independent provider and comparing each Fund's fee to the total expense ratio of peer funds. The annual management fee charged to shareholders of the American Century Diversified Corporate Bond ETF was below the median of the total expense ratios of its peer universe, while the annual management fee charged to shareholders of the American Century STOXX® U.S. Quality Value ETF was above the median of the total expense ratios of its peer universe and within the range of a more focused comparative set.
When considering the approval of the management agreement for the Funds, the independent Trustees considered the entrepreneurial risk that the Advisor assumes in launching a new fund. In particular, they considered the fact that the Advisor will assume a substantial part of the start-up costs of the Funds and the risk that the Funds will not grow to a level that will become profitable to the Advisor. The Board considered the position that the Funds would take in the lineup of the American Century Investments’ family of funds and the benefits to shareholders of existing funds of the broadened product offering. Finally, while not specifically discussed, but important in the decision to approve the management agreement, is the Trustees’ familiarity with the Advisor. A majority of the Board oversees and evaluates on a continuous basis the nature and quality of all services the Advisor performs for other funds within the American Century Investments’ complex. As such, the Trustees have confidence in the Advisor’s integrity and competence in providing services to the Funds.
The independent Trustees considered all of the information provided by the Advisor and the independent Trustees’ independent counsel in connection with the approval, and evaluated such information for the Funds. In connection with their review, the Trustees did not identify any single factor as being all-important or controlling, and each Trustee may have attributed different levels of importance to different factors. The independent Trustees concluded that the overall arrangements between the Funds and the Advisor, as provided in the management agreement, were fair and reasonable in light of the services to be provided and should be approved.
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| Additional Information |
Retirement Account Information
As required by law, distributions you receive from certain retirement accounts are subject to federal income tax withholding, unless you elect not to have withholding apply*. Tax will be withheld on the total amount withdrawn even though you may be receiving amounts that are not subject to withholding, such as nondeductible contributions. In such case, excess amounts of withholding could occur. You may adjust your withholding election so that a greater or lesser amount will be withheld.
Remember, even if you elect not to have income tax withheld, you are liable for paying income tax on the taxable portion of your withdrawal. If you elect not to have income tax withheld or you don’t have enough income tax withheld, you may be responsible for payment of estimated tax. You may incur penalties under the estimated tax rules if your withholding and estimated tax payments are not sufficient. You can reduce or defer the income tax on a distribution by directly or indirectly rolling such distribution over to another IRA or eligible plan. You should consult your tax advisor for additional information.
State tax will be withheld if, at the time of your distribution, your address is within one of the mandatory withholding states and you have federal income tax withheld (or as otherwise required by state law). State taxes will be withheld from your distribution in accordance with the respective state rules.
*Some 403(b), 457 and qualified retirement plan distributions may be subject to 20% mandatory withholding, as they are subject to special tax and withholding rules. Your plan administrator or plan sponsor is required to provide you with a special tax notice explaining those rules at the time you request a distribution. If applicable, federal and/or state taxes may be withheld from your distribution amount.
Proxy Voting Policies
A description of the policies that the funds' investment advisor uses in exercising the voting rights associated with the securities purchased and/or held by the funds is available without charge, upon request, by calling 1-833-ACI-ETFS. It is also available on the "About Us" page of American Century Investments’ website at americancentury.com and on the Securities and Exchange Commission’s website at sec.gov. Information regarding how the investment advisor voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 is available on the "About Us" page at americancentury.com. It is also available at sec.gov.
Quarterly Portfolio Disclosure
The funds file their complete schedule of portfolio holdings with the Securities and Exchange Commission (SEC) for the first and third quarters of each fiscal year on Form N-Q. The funds' Forms N-Q are available on the SEC’s website at sec.gov, and may be reviewed and copied at the SEC’s Public Reference Room in Washington, DC. Information on the operation of the Public Reference Room may be obtained by calling 1-800-SEC-0330. The funds also make their complete schedule of portfolio holdings for the most recent quarter of their fiscal year available on their website at americancenturyetfs.com and, upon request, by calling 1-833-ACI-ETFS.
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| ||
| Contact Us | americancenturyetfs.com | |
| American Century Sales Representatives, Financial Professionals, Broker Dealers, Insurance Companies, Banks and Trust Companies | 1-833-ACI-ETFS | |
| Telecommunications Relay Service for the Deaf | 711 | |
| American Century ETF Trust | ||
Investment Advisor: American Century Investment Management, Inc. Kansas City, Missouri | ||
| This report and the statements it contains are submitted for the general information of our shareholders. The report is not authorized for distribution to prospective investors unless preceded or accompanied by an effective prospectus. | ||
| ©2018 American Century Proprietary Holdings, Inc. All rights reserved. CL-SAN-93830 1804 | ||
ITEM 2. CODE OF ETHICS.
Not applicable for semiannual report filings.
ITEM 3. AUDIT COMMITTEE FINANCIAL EXPERT.
Not applicable for semiannual report filings.
ITEM 4. PRINCIPAL ACCOUNTANT FEES AND SERVICES.
Not applicable for semiannual report filings.
ITEM 5. AUDIT COMMITTEE OF LISTED REGISTRANTS.
Not applicable for semiannual report filings.
ITEM 6. INVESTMENTS.
| (a) | The schedule of investments is included as part of the report to stockholders filed under Item 1 of this Form. |
| (b) | Not applicable. |
ITEM 7. DISCLOSURE OF PROXY VOTING POLICIES AND PROCEDURES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
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.
During the reporting period, there were no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board.
ITEM 11. CONTROLS AND PROCEDURES.
| (a) | The registrant's principal executive officer and principal financial officer have concluded that the registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940) are effective based on their evaluation of these controls and procedures as of a date within 90 days of the filing date of this report. |
| (b) | There were no changes in the registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Investment Company Act of 1940) that occurred during the period covered by this report that have materially affected, or are reasonably likely to materially affect, the registrant's internal control over financial reporting. |
ITEM 12. DISCLOSURE OF SECURITIES LENDING ACTIVITIES FOR CLOSED-END MANAGEMENT INVESTMENT COMPANIES.
Not applicable.
ITEM 13. EXHIBITS.
| (a)(1) | Not applicable for semiannual report filings. |
| (a)(2) | Separate certifications by the registrant’s principal executive officer and principal financial officer, pursuant to Section 302 of the Sarbanes-Oxley Act of 2002 and Rule 30a-2(a) under the Investment Company Act of 1940, are filed and attached hereto as EX-99.CERT. |
| (a)(3) | Not applicable. |
| (b) | A certification by the registrant’s chief executive officer and chief financial officer, pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, is furnished and attached hereto as EX- 99.906CERT. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
| Registrant: | American Century ETF Trust | |||
| By: | /s/ Jonathan S. Thomas | |||
| Name: | Jonathan S. Thomas | |||
| Title: | President | |||
| Date: | April 24, 2018 | |||
Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
| By: | /s/ Jonathan S. Thomas | ||
| Name: | Jonathan S. Thomas | ||
| Title: | President | ||
| (principal executive officer) | |||
| Date: | April 24, 2018 | ||
| By: | /s/ C. Jean Wade | ||
| Name: | C. Jean Wade | ||
| Title: | Vice President, Treasurer, and | ||
| Chief Financial Officer | |||
| (principal financial officer) | |||
| Date: | April 24, 2018 | ||