N-CSR 1 fp0059026_ncsr.htm

 

UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549

 

FORM N-CSR

 

CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES

 

Investment Company Act file number 811-22668

 

ETF Series Solutions
(Exact name of registrant as specified in charter)

 

615 East Michigan Street

Milwaukee, WI 53202
(Address of principal executive offices) (Zip code)

 

Kristina Nelson

ETF Series Solutions

615 East Michigan Street

Milwaukee, WI 53202
(Name and address of agent for service)

 

(414)-765-6076

Registrant's telephone number, including area code

 

Date of fiscal year end: August 31

 

Date of reporting period: August 31, 2020

 

 

 

Item 1. Reports to Stockholders.

 

 

Roundhill Acquirers Deep Value ETF

 

Annual Report

 

August 31, 2020

 

Roundhill Acquirers Deep Value ETF

(Formerly known as Deep Value ETF)
Ticker: DEEP

  

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Fund’s shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the Fund’s reports from your financial intermediary, such as a broker-dealer or bank. Instead, the reports will be made available on a website, and you will be notified by mail each time a report is posted and provided with a website link to access the report.

 

If you already elected to receive shareholder reports electronically, you will not be affected by this change and you need not take any action. Please contact your financial intermediary to elect to receive shareholder reports and other Fund communications electronically.

 

You may elect to receive all future reports in paper free of charge. Please contact your financial intermediary to inform them that you wish to continue receiving paper copies of shareholder reports and for details about whether your election to receive reports in paper will apply to all funds held with your financial intermediary.

 

 

Roundhill Acquirers Deep Value ETF

 

TABLE OF CONTENTS

 

 

Page

Letter to Shareholders

1

Performance Summary

3

Portfolio Allocation

4

Schedule of Investments

5

Statement of Assets and Liabilities

7

Statement of Operations

8

Statements of Changes in Net Assets

9

Financial Highlights

10

Notes to Financial Statements

12

Report of Independent Registered Public Accounting Firm

21

Trustees and Officers

23

Expense Example

26

Review of Liquidity Risk Management Program

27

Federal Tax Information

28

Information About Portfolio Holdings

28

Information About Proxy Voting

28

Frequency Distribution of Premiums and Discounts

29

 

 

 

Roundhill Acquirers Deep Value ETF

 

Letter to Shareholders
(Unaudited)

 

 

Dear DEEP Shareholders,

 

Thank you for your investment in Roundhill Acquirers Deep Value ETF, (formerly known as Deep Value ETF), (the “Fund” or “DEEP”). The information presented in this report relates to the operations of DEEP for the fiscal period from September 1, 2019 through August 31, 2020 (the “current fiscal period”).

 

As a reminder, the Fund seeks to provide investment results that, before fees and expenses, correspond to the total return performance of the Acquirers Deep Value Index (the “Index”). Acquirers recently changed the Index to a small and microcap value-based index from a large capitalization value-based index. Acquirers will apply the same deep-value philosophy to the small and microcap Index. Acquirers begins its investment process with the “acquirer’s multiple,” the measure financial acquirers such as activists and buyout firms use to find potential targets. Acquirers takes a holistic approach to valuation, examining assets, earnings, and cash flows, to understand the economic reality of each company. An important part of this process is a forensic-accounting diligence of the financial statements, particularly the notes and management’s discussion and analysis, to find information that may impact investment decisions.

 

The Fund had negative performance during the current fiscal period. The market price for DEEP decreased 12.93% and the NAV decreased 12.95%, while the S&P 500® Index, a broad market index, gained 21.94% over the same period. The Fund’s Index returned negative 12.49%.

 

For the current fiscal period, the largest positive contributor to return was Cardinal Health, Inc. (CAH), adding 1.81% to the return of the Fund, gaining 28.53%, with an average weighting of 7.81%. The second largest contributor to return was Best Buy Company, Inc. (BBY), adding 1.52% to the return of the Fund, gaining 30.82% with an average weighting of 1.16%. The third largest contributor to return was BorgWarner, Inc. (BWA), adding 1.28% to the return of the Fund, gaining 12.37% with an average weighting of 3.96%.

 

For the current fiscal period, the largest negative contributor to return was Macy’s, Inc. (M), detracting 4.07% from the return of the Fund, declining 47.22% with an average weighting of 4.69%. The security contributing second-most negatively was DXC Technology Company (DXC), detracting 3.74% from the return of the Fund, and declining 50.70% with an average weighting of 4.68%. The third largest negative contributor to return was Delta Air Lines, Inc. (DAL), detracting 2.70% from the return of the Fund, and declining 50.35% with an average weight of 1.55%.

 

1

 

 

Roundhill Acquirers Deep Value ETF

 

Letter to Shareholders (Continued)
(Unaudited)

 

 

The Fund commenced operations on September 22, 2014, and has 950,000 outstanding shares as of August 31, 2020.

 

We appreciate your investment in Roundhill Acquirers Deep Value ETF.

 

Sincerely,

 

J. Garrett Stevens
Chief Executive Officer
Exchange Traded Concepts, Adviser to the Fund

 

Must be preceded or accompanied by a prospectus.

 

Investing involves risk. Principal loss is possible. The Fund has the same risks as the underlying securities traded on the exchange throughout the day. Redemptions are limited and often commissions are charged on each trade, and ETFs may trade at a premium or discount to their net asset value. The Fund is nondiversified, meaning it may concentrate its assets in fewer individual holdings than a diversified fund. Therefore, the Fund is more exposed to individual stock volatility than a diversified fund. As with all index funds, the performance of the Fund and its Index may differ from each other for a variety of reasons. For example, the Fund incurs operating expenses and portfolio transaction costs not incurred by the Index. In addition, the Fund may not be fully invested in the securities of the Index at all times or may hold securities not included in the Index. The Fund is not actively managed and may be affected by a general decline in market segments related to the index. Unlike mutual funds, ETFs may trade at a premium or discount to their net asset value.

 

Free Cash Flow – a measure of performance calculated as operating cash flow minus capital expenditures.

 

Acquirers Deep Value Index – The Index tracks the performance of a portfolio of 20 of the most undervalued, fundamentally strong stocks drawn from the largest 500 stocks listed in the United States meeting certain liquidity thresholds. The Index identifies potentially undervalued stocks by using The Acquirer’s Multiple®, which is a valuation metric developed and published in 2014 by Tobias Carlisle, Managing Member of the Index Provider. The initial universe of stocks is then valued holistically—assets, earnings, and cash flows are examined—in accordance with the Index methodology to understand the economic reality of each stock. Each stock is then ranked on the basis of such valuation. Potential components are further evaluated using statistical measures of fraud, earnings manipulation, and financial distress. Each potential component is then examined for a margin of safety in three ways: (a) a wide discount to a conservative valuation, (b) a strong, liquid balance sheet, and (c) a robust business capable of generating free cash flows. Finally, a forensic-accounting due diligence review is performed, in accordance with the Index methodology, with respect to each remaining potential component’s financial statements, particularly with respect to the notes and management’s discussion and analysis. The Index is formed from the 20 highest ranked components that pass each stage. Each stock will be weighted to approximately 5% of the Index value at the time of each quarterly reconstitution of the Index.

 

Standard & Poor’s 500 (S&P 500® Index) – An index of 500 stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500® is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe.

 

You cannot invest directly in an index.

 

Past performance is not a guarantee of future results.

 

Fund holdings are subject to change and are not a recommendation to buy or sell any security. For a complete listing of the Fund’s holdings please view the schedule of investments.

 

Roundhill Acquirers Deep Value ETF is distributed by Quasar Distributors, LLC.

 

2

 

 

Roundhill Acquirers Deep Value ETF

 

Performance Summary
(Unaudited)

 

 

Growth of $10,000

 

 

Average Annualized Returns
August 31, 2020

1 Year

3 Year

5 Year

Since
Inception
9/22/2014

Roundhill Acquirers Deep Value ETF - NAV

-12.95%

-2.71%

4.46%

2.47%

Roundhill Acquirers Deep Value ETF - Market

-12.93%

-2.73%

4.52%

2.48%

Deep Value Index/Acquirers Deep Value Index (1)

-12.49%

-2.22%

5.08%

3.10%

S&P 500® Index

21.94%

14.52%

14.46%

12.20%

 

This chart illustrates the performance of a hypothetical $10,000 investment made on September 22, 2014, and is not intended to imply any future performance. The returns shown do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. The chart assumes reinvestment of capital gains and dividends.

 

(1)

Effective June 22, 2020, the Fund’s investment objective changed to track the performance, before fees and expenses, of the Acquirers Deep Value Index. Prior to June 22, 2020, the Fund’s investment objective was to track the price and total return performance, before fees and expenses, of the Deep Value Index. Performance shown for periods prior to June 22, 2020 is that of the Deep Value Index.

 

3

 

 

Roundhill Acquirers Deep Value ETF

 

Portfolio Allocation
As of August 31, 2020 (Unaudited)

 

 

Sector

Percentage of
Net Assets

Financials ♦

38.1%

Industrials

19.4

Information Technology

14.6

Consumer Discretionary

12.2

Health Care

9.7

Energy

5.8

Other Assets in Excess of Liabilities

0.1

Short-Term Investments

0.1

Total

100.0%

 

To the extent that the Fund invests more heavily in particular sectors of the economy, its performance will be especially sensitive to developments that significantly affect those sectors. See Note 7 in the Notes to Financial Statements.

 

The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.

 

4

 

 

Roundhill Acquirers Deep Value ETF

 

Schedule of Investments
August 31, 2020

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.8%

       
       

Consumer Discretionary — 12.2%

       
    13,224  

Best Buy Company, Inc.

  $ 1,466,673  
    30,376  

BorgWarner, Inc.

    1,232,962  
              2,699,635  
       

Energy — 5.8%

       
    165,809  

TechnipFMC plc

    1,276,729  
                 
       

Financials — 38.1%

       
    10,595  

Allstate Corporation

    985,335  
    42,943  

American Equity Investment Life Holding Company

    1,026,767  
    17,357  

Evercore, Inc. - Class A

    1,074,051  
    20,436  

First American Financial Corporation

    1,074,321  
    13,027  

LPL Financial Holdings, Inc.

    1,070,298  
    119,650  

MGIC Investment Corporation

    1,097,191  
    63,970  

Radian Group, Inc.

    987,697  
    44,335  

Synchrony Financial

    1,099,951  
              8,415,611  
       

Health Care — 9.7%

       
    11,145  

AmerisourceBergen Corporation

    1,081,399  
    3,660  

Biogen, Inc. (a)

    1,052,763  
              2,134,162  
       

Industrials — 19.4%

       
    2,677  

Lockheed Martin Corporation

    1,044,726  
    14,766  

ManpowerGroup, Inc.

    1,082,495  
    13,762  

Oshkosh Corporation

    1,059,812  
    29,091  

Southwest Airlines Company

    1,093,240  
              4,280,273  
       

Information Technology — 14.6%

       
    63,970  

HP, Inc.

    1,250,613  
    16,916  

Intel Corporation

    861,870  
    23,376  

NetApp, Inc.

    1,107,790  
              3,220,273  
       

TOTAL COMMON STOCKS (Cost $21,415,184)

    22,026,683  
                 

 

The accompanying notes are an integral part of these financial statements.

 

5

 

 

Roundhill Acquirers Deep Value ETF

 

Schedule of Investments
August 31, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

SHORT-TERM INVESTMENTS — 0.1%

       
    30,311  

First American Treasury Obligations Fund, Class X - 0.07%*

  $ 30,311  
       

TOTAL SHORT-TERM INVESTMENTS (Cost $30,311)

    30,311  
                 
       

TOTAL INVESTMENTS — 99.9% (Cost $21,445,495)

    22,056,994  
       

Other Assets in Excess of Liabilities — 0.1%

    30,977  
       

NET ASSETS — 100.0%

  $ 22,087,971  

 

Percentages are stated as a percentage of net assets.

 

(a)

Non-income producing security.

To the extent that the Fund invests more heavily in particular sectors of the economy, its performance will be especially sensitive to developments that significantly affect those sectors. See Note 7 in the Notes to Financial Statements.

*

Rate shown is the annualized seven-day yield as of August 31, 2020.

 

The Global Industry Classification Standard (GICS®) was developed by and/or is the exclusive property of MSCI, Inc. and Standard & Poor’s Financial Services LLC (“S&P”). GICS® is a service mark of MSCI, Inc. and S&P and has been licensed for use by the Fund’s Administrator, U.S. Bancorp Fund Services, LLC.

 

The accompanying notes are an integral part of these financial statements.

 

6

 

 

Roundhill Acquirers Deep Value ETF

 

Statement of Assets and Liabilities
August 31, 2020

 

 

ASSETS

       

Investments in securities, at value (cost $21,445,495)

  $ 22,056,994  

Dividends and interest receivable

    45,930  

Total assets

    22,102,924  
         

LIABILITIES

       

Management fees payable

    14,953  

Total liabilities

    14,953  
         

NET ASSETS

  $ 22,087,971  
         

Net assets consist of:

       

Paid-in capital

  $ 68,263,097  

Total distributable earnings (accumulated deficit)

    (46,175,126 )

Net assets

  $ 22,087,971  
         

Net Asset Value:

       

Net assets

  $ 22,087,971  

Shares outstanding ^

    950,000  

Net asset value, offering and redemption price per share

  $ 23.25  

 

^

No par value, unlimited number of shares authorized.

 

The accompanying notes are an integral part of these financial statements.

 

7

 

 

Roundhill Acquirers Deep Value ETF

 

Statement of Operations
For the Year Ended August 31, 2020

 

 

INVESTMENT INCOME

       

Dividends

  $ 6,535,776  

Interest

    7,452  

Total investment income

    6,543,228  
         

EXPENSES

       

Management fees

    1,325,404  

Total expenses

    1,325,404  

Less: fees waived (a)

    (871,748 )

Net expenses

    453,656  

Net investment income (loss)

    6,089,572  
         

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

       

Net realized gain (loss) on investments

    (82,229,404 )

Change in unrealized appreciation (depreciation) on investments

    43,247,291  

Net realized and unrealized gain (loss) on investments

    (38,982,113 )

Net increase (decrease) in net assets resulting from operations

  $ (32,892,541 )

 

(a)

See Note 3 in the Notes to Financial Statements.

 

The accompanying notes are an integral part of these financial statements.

 

8

 

 

Roundhill Acquirers Deep Value ETF

 

Statements of Changes in Net Assets

 

 

 

   

Year Ended
August 31, 2020

   

Year Ended
August 31, 2019

 

OPERATIONS

               

Net investment income (loss)

  $ 6,089,572     $ 7,883,461  

Net realized gain (loss) on investments

    (82,229,404 )     13,376,433  

Change in unrealized appreciation (depreciation) on investments

    43,247,291       (61,946,822 )

Net increase (decrease) in net assets resulting from operations

    (32,892,541 )     (40,686,928 )
                 

DISTRIBUTIONS TO SHAREHOLDERS

               

Net Distributions to Shareholders

    (8,944,701 )     (5,981,799 )

Total distributions to shareholders

    (8,944,701 )     (5,981,799 )
                 

CAPITAL SHARE TRANSACTIONS

               

Proceeds from shares sold

    155,973,230       206,892,820  

Payments for shares redeemed

    (361,857,920 )     (48,965,715 )

Net increase (decrease) in net assets derived from capital share transactions (a)

    (205,884,690 )     157,927,105  

Net increase (decrease) in net assets

  $ (247,721,932 )   $ 111,258,378  
                 

NET ASSETS

               

Beginning of year

  $ 269,809,903     $ 158,551,525  

End of year

  $ 22,087,971     $ 269,809,903  

 

(a)

A summary of capital share transactions is as follows:

 

   

Shares

   

Shares

 

Subscriptions

    4,950,000       6,550,000  

Redemptions

    (13,400,000 )     (1,600,000 )

Net increase (decrease)

    (8,450,000 )     4,950,000  

 

The accompanying notes are an integral part of these financial statements.

 

9

 

 

Roundhill Acquirers Deep Value ETF

 

Financial Highlights

For a capital share outstanding throughout the year

 

 

   

Year
Ended
August 31,
2020

   

Year
Ended
August 31,
2019

   

Year
Ended
August 31,
2018

   

Year
Ended
August 31,
2017

   

Year
Ended
August 31,
2016

 

Net asset value, beginning of year

  $ 28.70     $ 35.63     $ 28.60     $ 24.70     $ 22.62  
                                         

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

                                       

Net investment income (loss) (1)

    1.12       1.07       1.05       0.44       0.87  

Net realized and unrealized gain (loss) on investments

    (4.84 )     (7.18 )     6.86       3.84       2.38  

Total from investment operations

    (3.72 )     (6.11 )     7.91       4.28       3.25  
                                         

DISTRIBUTIONS TO SHAREHOLDERS:

                                       

Distributions from:

                                       

Net investment income

    (1.73 )     (0.82 )     (0.88 )     (0.38 )     (1.17 )

Total distributions

    (1.73 )     (0.82 )     (0.88 )     (0.38 )     (1.17 )
                                         

CAPITAL SHARE TRANSACTIONS:

                                       

Net asset value, end of year

  $ 23.25     $ 28.70     $ 35.63     $ 28.60     $ 24.70  
                                         

Total return

    -12.95 %     -17.24%       27.84 %     17.43 %     14.99 %
                                         

SUPPLEMENTAL DATA:

                                       

Net assets at end of year (000’s)

  $ 22,088     $ 269,810     $ 158,552     $ 97,252     $ 75,349  
                                         

RATIOS TO AVERAGE NET ASSETS:

                                       

Expenses before fees waived

    0.80 %     0.80 %     0.80 %     0.80 %     0.80 %

Expenses after fees waived

    0.27 %(2)     0.40 %(3)     0.48 %(4)     0.58 %(5)     0.80 %

Net investment income (loss) before fees waived

    3.14 %     2.97 %     2.84 %     1.43 %     3.83 %

Net investment income (loss) after fees waived

    3.67 %(2)     3.37 %(3)     3.16 %(4)     1.65 %(5)     3.83 %

Portfolio turnover rate (6)

    143 %     97 %     126 %     201 %     206 %

 

The accompanying notes are an integral part of these financial statements.

 

10

 

 

Roundhill Acquirers Deep Value ETF

 

Financial Highlights (Continued)
For a capital share outstanding throughout the year

 

 

(1)

Calculated based on average shares outstanding during the year.

(2)

Effective January 1, 2020 through June 22, 2020, the Adviser contractually agreed to waive 21 basis points (0.21%) of its management fees for the Fund. The Adviser voluntarily waived an additional 33 basis points (0.33%) of its management fee during the period from September 1, 2019 through June 22, 2020.

(3)

Effective January 1, 2019, the Adviser contractually agreed to waive 21 basis points (0.21%) of its management fees for the Fund until at least December 31, 2019. The Adviser voluntarily waived an additional 33 basis points (0.33%) of its management fee during the period from March 6, 2019 through August 31, 2019.

(4)

Effective January 1, 2018, the Adviser contractually agreed to waive 21 basis points (0.21%) of its management fees for the Fund until at least December 31, 2018. The Adviser voluntarily waived an additional 8 basis points (0.08%) during the year and voluntarily reimbursed the Fund an additional $30,758.

(5)

Effective January 1, 2017, the Adviser contractually agreed to waive 21 basis points (0.21%) of its management fees for the Fund until at least December 31, 2017. The Adviser voluntarily waived an additional 10 basis points (0.10%) of its management fees during the period from January 1, 2017 through August 31, 2017.

(6)

Excludes the impact of in-kind transactions.

 

The accompanying notes are an integral part of these financial statements.

 

11

 

 

Roundhill Acquirers Deep Value ETF

 

Notes to Financial Statements

August 31, 2020

 

 

NOTE 1 – ORGANIZATION

 

Roundhill Acquirers Deep Value ETF (the “Fund”) is a non-diversified series of ETF Series Solutions (“ESS” or the “Trust”), an open-end management investment company consisting of multiple investment series, organized as a Delaware statutory trust on February 9, 2012. The Trust is registered with the Securities and Exchange Commission (“SEC”) under the Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end management investment company and the offering of the Fund’s shares is registered under the Securities Act of 1933, as amended (the “Securities Act”). The investment objective of the Fund is to seek investment results that, before expenses and fees, track the Acquirers Deep Value Index (the “Index”). The Fund commenced operations on September 22, 2014. Effective June 22, 2020, Deep Value ETF changed its name to Roundhill Acquirers Deep Value ETF, and additionally changed its investment objective from seeking to track the price and total return performance, before fees and expenses, of the Deep Value Index to that of the Acquirers Deep Value Index.

 

The end of the reporting period for the Fund is August 31, 2020, and the period covered by these Notes to Financial Statements is the fiscal year ended August 31, 2020 (the “current fiscal period”).

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

The Fund is an investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 946 Financial Services – Investment Companies.

 

The following is a summary of significant accounting policies consistently followed by the Fund. These policies are in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”).

 

 

A.

Security Valuation. All equity securities, including domestic and foreign common stocks, preferred stocks, and exchange traded funds that are traded on a national securities exchange, except those listed on the Nasdaq Global Market®, Nasdaq Global Select Market®, and the Nasdaq Capital Market® exchanges (collectively, “Nasdaq”) are valued at the last reported sale price on the exchange on which the security is principally traded. Securities traded on Nasdaq will be valued at the Nasdaq Official Closing Price (“NOCP”). If, on a particular day, an exchange-traded or Nasdaq security does not trade, then the mean between the most recent quoted bid and asked prices will be used. All equity securities that are not traded on a listed exchange are valued at the last sale price in the over-the counter market. If a non-exchange traded security does not trade on a particular day, then the mean between the last

 

12

 

 

Roundhill Acquirers Deep Value ETF

 

NOTES TO FINANCIAL STATEMENTS
August 31, 2020 (Continued)

 

 

quoted closing bid and asked price will be used. Prices denominated in foreign currencies are converted to U.S. dollar equivalents at the current exchange rate, which approximates fair value.

 

Investments in mutual funds, including money market funds, are valued at their net asset value (“NAV”) per share.

 

Securities for which quotations are not readily available are valued at their respective fair values in accordance with pricing procedures adopted by the Fund’s Board of Trustees (the “Board”). When a security is “fair valued,” consideration is given to the facts and circumstances relevant to the particular situation, including a review of various factors set forth in the pricing procedures adopted by the Board. The use of fair value pricing by the Fund may cause the NAV of its shares to differ significantly from the NAV that would be calculated without regard to such considerations.

 

As described above, the Fund utilizes various methods to measure the fair value of its investments on a recurring basis. U.S. GAAP establishes a hierarchy that prioritizes inputs to valuations methods. The three levels of inputs are:

 

 

Level 1 –

Unadjusted quoted prices in active markets for identical assets or liabilities that the Fund has the ability to access.

 

 

Level 2 –

Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.

 

 

Level 3 –

Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available; representing the Fund’s own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

 

The availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including, for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets, and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment exercised in determining fair value is greatest for instruments categorized in Level 3.

 

13

 

 

Roundhill Acquirers Deep Value ETF

 

NOTES TO FINANCIAL STATEMENTS
August 31, 2020 (Continued)

 

 

The inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes, the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the lowest level input that is significant to the fair value measurement in its entirety.

 

The following is a summary of the inputs used to value the Fund’s investments as of the end of the current fiscal period:

 

Assets^

 

Level 1

   

Level 2

   

Level 3

   

Total

 

Common Stocks

  $ 22,026,683     $     $     $ 22,026,683  

Short-Term Investments

    30,311                   30,311  

Total Investments in Securities

  $ 22,056,994     $     $     $ 22,056,994  

 

^

See Schedule of Investments for breakout of investments by sector classification.

 

During the current fiscal period, the Fund did not recognize any transfers to or from Level 3.

 

 

B.

Federal Income Taxes. The Fund’s policy is to comply with the provisions of Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies and to distribute substantially all net taxable investment income and net capital gains to shareholders. Therefore, no federal income tax provision is required. The Fund plans to file U.S. Federal and applicable state and local tax returns.

 

The Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed the Fund’s uncertain tax positions and concluded that no liability for unrecognized tax benefits should be recorded related to uncertain tax positions. Management is not aware of any tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will change materially in the next 12 months. Income and capital gain distributions are determined in accordance with federal income tax regulations, which may differ from U.S. GAAP. The Fund recognizes interest and penalties, if any, related to unrecognized tax benefits on uncertain tax positions as income tax expense in the Statement of Operations. During the current fiscal period, the Fund did not incur any interest or penalties.

 

 

C.

Security Transactions and Investment Income. Investment securities transactions are accounted for on the trade date. Gains and losses realized on sales of securities are determined on a specific identification basis. Dividend

 

14

 

 

Roundhill Acquirers Deep Value ETF

 

NOTES TO FINANCIAL STATEMENTS
August 31, 2020 (Continued)

 

 

income is recorded on the ex-dividend date. Interest income is recorded on an accrual basis. Withholding taxes on foreign dividends, if any, have been provided for in accordance with the Fund’s understanding of the applicable tax rules and regulations.

 

 

D.

Distributions to Shareholders. Distributions to shareholders from net investment income are declared and paid by the Fund on a quarterly basis and distributions from net realized gains on securities are declared and paid by the Fund on, at least, an annual basis. Distributions are recorded on the ex-dividend date.

 

 

E.

Use of Estimates. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the current fiscal period. Actual results could differ from those estimates.

 

 

F.

Share Valuation. The NAV per share of the Fund is calculated by dividing the sum of the value of the securities held by the Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of shares outstanding of the Fund, rounded to the nearest cent. The Fund’s shares will not be priced on the days on which the New York Stock Exchange (“NYSE”) is closed for trading. The offering and redemption price per share of the Fund is equal to the Fund’s NAV per share.

 

 

G.

Guarantees and Indemnifications. In the normal course of business, the Fund enters into contracts with service providers that contain general indemnification clauses. The Fund’s maximum exposure under these arrangements is unknown as this would involve future claims that may be against the Fund that have not yet occurred. However, based on experience, the Fund expects the risk of loss to be remote.

 

 

H.

Reclassification of Capital Accounts. U.S. GAAP requires that certain components of net assets relating to permanent differences be reclassified between financial and tax reporting. These reclassifications have no effect on net assets or NAV per share.

 

15

 

 

Roundhill Acquirers Deep Value ETF

 

NOTES TO FINANCIAL STATEMENTS
August 31, 2020 (Continued)

 

 

The permanent differences primarily relate to redemptions in kind. During the current fiscal period, the following table shows the reclassifications made:

 

Distributable Earnings
(Accumulated Deficit)

Paid-In Capital

$56,276,173

$(56,276,173)

 

During the current fiscal period, the Fund realized $56,276,173 in net capital losses resulting from in-kind redemptions, in which shareholders exchanged Fund shares for securities held by the Fund rather than for cash. Because such losses are not taxable to the Fund, they have been reclassified from distributable earnings (accumulated deficit) to paid-in capital.

 

 

I.

Subsequent Events. In preparing these financial statements, management has evaluated events and transactions for potential recognition or disclosure through the date the financial statements were issued. There were no events or transactions that occurred during the period subsequent to the end of the current fiscal period, that materially impacted the amounts or disclosures in the Fund’s financial statements.

 

 

J.

New Accounting Pronouncements. In August 2018, FASB issued Accounting Standards Update 2018-13, Fair Value Measurement (Topic 820): Disclosure Framework—Changes to the Disclosure Requirements for Fair Value Measurement (“ASU 2018-13”). The primary focus of ASU 2018-13 is to improve the effectiveness of the disclosure requirements for fair value measurements. The changes affect all companies that are required to include fair value measurement disclosures. In general, the amendments in ASU 2018-13 are effective for all entities for fiscal years and interim periods within those fiscal years, beginning after December 15, 2019. An entity is permitted to early adopt the removed or modified disclosures upon the issuance of ASU 2018-13 and may delay adoption of the additional disclosures, which are required for public companies only, until their effective date. Management has evaluated the impact of these changes and has adopted the disclosure framework.

 

NOTE 3 – COMMITMENTS AND OTHER RELATED PARTY TRANSACTIONS

 

Exchange Traded Concepts, LLC (the “Adviser”), serves as the investment adviser to the Fund. Pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between the Trust, on behalf of the Fund, and the Adviser, the Adviser provides investment advice to the Fund and oversees the day-to-day operations of the Fund, subject to the direction and control of the Board and the officers of the Trust. Under

 

16

 

 

Roundhill Acquirers Deep Value ETF

 

NOTES TO FINANCIAL STATEMENTS
August 31, 2020 (Continued)

 

 

the Advisory Agreement, the Adviser is also responsible for arranging transfer agency, custody, fund administration and accounting, and other non-distribution related services necessary for the Fund to operate. Under the Advisory Agreement, the Adviser has agreed to pay all expenses of the Fund, except for: the fee paid to the Adviser pursuant to the Advisory Agreement, interest charges on any borrowings, taxes, brokerage commissions and other expenses incurred in placing orders for the purchase and sale of securities and other investment instruments, acquired fund fees and expenses, accrued deferred tax liability, extraordinary expenses, and distribution (12b-1) fees and expenses. For services provided to the Fund, the Fund pays the Adviser 0.80% at an annual rate based on the Fund’s average daily net assets with a fee waiver of 0.21% through June 22, 2020. Effective June 22, 2020, with consent from the Fund’s Board of Trustees, the Adviser’s contractual fee waiver was terminated. The adviser additionally voluntarily waived 0.33% of its adviser fees from September 1, 2019 to June 22, 2020. Neither of the waivers are recoupable in future fiscal periods.

 

U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services (“Fund Services” or “Administrator”), acts as the Fund’s Administrator and, in that capacity, performs various administrative and accounting services for the Fund. The Administrator prepares various federal and state regulatory filings, reports and returns for the Fund, including regulatory compliance monitoring and financial reporting; prepares reports and materials to be supplied to the Board and monitors the activities of the Fund’s Custodian, transfer agent and fund accountant. Fund Services also serves as the transfer agent and fund accountant to the Fund. U.S. Bank N.A. (the “Custodian”), an affiliate of Fund Services, serves as the Fund’s Custodian.

 

A Trustee and all officers of the Trust are affiliated with the Administrator and Custodian.

 

NOTE 4 – PURCHASES AND SALES OF SECURITIES

 

During the current fiscal period, purchases and sales of securities by the Fund, excluding short-term securities and in-kind transactions, were $235,131,234 and $236,728,556, respectively.

 

During the current fiscal period, there were no purchases or sales of U.S. Government securities.

 

During the current fiscal period, in-kind transactions associated with creations and redemptions were $155,117,635 and $360,905,574, respectively.

 

17

 

 

Roundhill Acquirers Deep Value ETF

 

NOTES TO FINANCIAL STATEMENTS
August 31, 2020 (Continued)

 

 

NOTE 5 – INCOME TAX INFORMATION

 

The components of distributable earnings (accumulated deficit) and cost basis of investments and net unrealized appreciation (depreciation) for federal income tax purposes at August 31, 2020 were as follows:

 

Tax cost of investments

  $ 21,501,397  

Gross tax unrealized appreciation

  $ 1,155,699  

Gross tax unrealized depreciation

    (600,102 )

Net tax unrealized appreciation (depreciation)

    555,597  

Undistributed ordinary income

    50,123  

Undistributed long-term capital gains

     

Other accumulated gain(loss)

    (46,780,846 )

Distributable earnings (accumulated deficit)

  $ (46,175,126 )

 

The difference between the cost basis for financial statement and federal income tax purposes is due primarily to timing differences in recognizing wash sales.

 

A regulated investment company may elect for any taxable year to treat any portion of any qualified late year loss as arising on the first day of the next taxable year. Qualified late year losses are certain capital and ordinary losses which occur during the portion of the Fund’s taxable year subsequent to October 31 and December 31, respectively. For the taxable year ended August 31, 2020, the Fund did not elect to defer any post-October capital losses or late-year ordinary losses.

 

As of August 31, 2020, the Fund had a short-term capital loss carryforward of $32,348,080 and a long-term capital loss carryforward of $14,432,766. These amounts do not have an expiration date.

 

The tax character of distributions paid by the Fund during the years ended August 31, 2020 and August 31, 2019 were as follows:

 

 

Year Ended
August 31, 2020

Year Ended
August 31, 2019

Ordinary Income

$8,944,701

$5,981,799

 

NOTE 6 – SHARE TRANSACTIONS

 

Shares of the Fund are listed and traded on New York Stock Exchange Arca, Inc. (“NYSE Arca”). Market prices for the shares may be different from their NAV. The Fund issues and redeems shares on a continuous basis at NAV generally in blocks of 50,000 shares, called “Creation Units.” Creation Units are issued and redeemed principally

 

18

 

 

Roundhill Acquirers Deep Value ETF

 

NOTES TO FINANCIAL STATEMENTS
August 31, 2020 (Continued)

 

 

in-kind for securities included in a specified universe. Once created, shares generally trade in the secondary market at market prices that change throughout the day. Except when aggregated in Creation Units, shares are not redeemable securities of the Fund. Creation Units may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a Depository Trust Company participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem the shares directly from the Fund. Rather, most retail investors may purchase shares in the secondary market with the assistance of a broker and are subject to customary brokerage commissions or fees.

 

The Fund currently offers one class of shares, which has no front end sales load, no deferred sales charge, and no redemption fee. A fixed transaction fee is imposed for the transfer and other transaction costs associated with the purchase or sale of Creation Units. The standard fixed transaction fee for the Fund is $250, payable to the Custodian. The fixed transaction fee may be waived on certain orders if the Fund’s Custodian has determined to waive some or all of the costs associated with the order or another party, such as the Adviser, has agreed to pay such fee. In addition, a variable fee may be charged on all cash transactions or substitutes for Creation Units of up to a maximum of 2% as a percentage of the value of the Creation Units subject to the transaction. Variable fees are imposed to compensate the Fund for the transaction costs associated with cash transactions. Variable fees received by the Fund, if any, are displayed in the Capital Shares Transactions section of the Statements of Changes in Net Assets. The Fund may issue an unlimited number of shares of beneficial interest, with no par value. All shares of the Fund have equal rights and privileges.

 

NOTE 7 – PRINCIPAL RISKS

 

Non-Diversification Risk. Because the Fund is “non-diversified,” it may invest a greater percentage of its assets in the securities of a single issuer or a small number of issuers than if it was a diversified fund. As a result, a decline in the value of an investment in a single issuer could cause the Fund’s overall value to decline to a greater degree than if the Fund held a more diversified portfolio. This may increase the Fund’s volatility and cause the performance of a relatively smaller number of issuers to have a greater impact on the Fund’s performance.

 

Sector Risk. To the extent that the Fund invests more heavily in particular sectors of the economy, its performance will be especially sensitive to developments that significantly affect those sectors.

 

19

 

 

Roundhill Acquirers Deep Value ETF

 

NOTES TO FINANCIAL STATEMENTS
August 31, 2020 (Continued)

 

 

COVID-19 Risk. The recent global outbreak of COVID-19 has disrupted economic markets and the prolonged economic impact is uncertain. The operational and financial performance of the issuers of securities in which the Fund invests depends on future developments, including the duration and spread of the outbreak, and such uncertainty may in turn impact the value of the Fund’s investments.

 

20

 

 

Roundhill Acquirers Deep Value ETF

 

Report of Independent Registered Public Accounting Firm

 

 

To the Shareholders of Roundhill Acquirers Deep Value ETF (formerly known as Deep Value ETF) and Board of Trustees of ETF Series Solutions

 

Opinion on the Financial Statements

 

We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Roundhill Acquirers Deep Value ETF (the “Fund”), a series of ETF Series Solutions, as of August 31, 2020, the related statement of operations for the year then ended, the statements of changes in net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, including the related notes (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of August 31, 2020, the results of its operations for the year then ended, the changes in its net assets for each of the two years in the period then ended, and the financial highlights for each of the five years in the period then ended, in conformity with accounting principles generally accepted in the United States of America.

 

Basis for Opinion

 

These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (“PCAOB”) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement whether due to error or fraud.

 

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of August 31, 2020, by correspondence with the custodian. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

 

21

 

 

Roundhill Acquirers Deep Value ETF

 

Report of Independent Registered Public Accounting Firm
(Continued)

 

 

We have served as the auditor of one or more of Exchange Traded Concepts, LLC’s investment companies since 2012.

 

 

COHEN & COMPANY, LTD.
Milwaukee, Wisconsin
October 30, 2020

 

22

 

 

Roundhill Acquirers Deep Value ETF

 

Trustees and Officers
(Unaudited)

 

 

Additional information about each Trustee of the Trust is set forth below. The address of each Trustee of the Trust is c/o U.S. Bank Global Fund Services, 615 E. Michigan Street, Milwaukee, WI 53202.

 

Name and
Year of Birth

Position
Held with
the Trust

Term of
Office and
Length of
Time Served

Principal Occupation(s)
During Past 5 Years

Number of
Portfolios in
Fund Complex
Overseen by
Trustee

Other
Directorships Held
by Trustee During
Past 5 Years

Independent Trustees

Leonard M. Rush, CPA Born: 1946

Lead Independent Trustee and Audit Committee Chairman

Indefinite term; since 2012

Retired; formerly Chief Financial Officer, Robert W. Baird & Co. Incorporated (wealth management firm) (2000–2011).

46

Independent Trustee, Managed Portfolio Series (39 portfolios) (since 2011).

David A. Massart Born: 1967

Trustee

Indefinite term; since 2012

Co-Founder, President, and Chief Investment Strategist, Next Generation Wealth Management, Inc. (since 2005).

46

Independent Trustee, Managed Portfolio Series (39 portfolios) (since 2011).

Janet D. Olsen
Born: 1956

Trustee

Indefinite term; since 2018

Retired; formerly Managing Director and General Counsel, Artisan Partners Limited Partnership (investment adviser) (2000–2013); Executive Vice President and General Counsel, Artisan Partners Asset Management Inc. (2012–2013); Vice President and General Counsel, Artisan Funds, Inc. (investment company) (2001–2012).

46

Independent Trustee, PPM Funds (9 portfolios) (since 2018).

Interested Trustee

Michael A. Castino Born: 1967

Trustee and Chairman

Indefinite term; Trustee since 2014; Chairman since 2013

Senior Vice President, U.S. Bancorp Fund Services, LLC (since 2013); Managing Director of Index Services, Zacks Investment Management (2011–2013).

46

None

 

23

 

 

Roundhill Acquirers Deep Value ETF

 

Trustees and Officers
(Unaudited) (Continued)

 

 

The officers of the Trust conduct and supervise its daily businesses. The address of each officer of the Trust is c/o U.S. Bank Global Fund Services, 615 E. Michigan Street, Milwaukee, WI 53202. Additional information about the Trust’s officers is as follows.

 

Name and
Year of Birth

Position(s)
Held with
the Trust

Term of Office and
Length of Time
Served

Principal Occupation(s)
During Past 5 Years

Principal Officers of the Trust

Kristina R. Nelson
Born: 1982

President

Indefinite term; since 2019

Senior Vice President, U.S. Bancorp Fund Services, LLC (since 2020); Vice President, U.S. Bancorp Fund Services, LLC (2014–2020); Assistant Vice President, U.S. Bancorp Fund Services, LLC (2013–2014).

Michael D. Barolsky Born: 1981

Vice President and Secretary

Indefinite term; since 2014 (other roles since 2013)

Senior Vice President, U.S. Bancorp Fund Services, LLC (since 2019); Vice President, U.S. Bancorp Fund Services, LLC (2012-2019); Associate, Thompson Hine LLP (law firm) (2008–2012).

James R. Butz
Born: 1982

Chief Compliance Officer

Indefinite term; since 2015

Senior Vice President, U.S. Bancorp Fund Services, LLC (since 2015); Vice President, U.S. Bancorp Fund Services, LLC (2014–2015); Assistant Vice President, U.S. Bancorp Fund Services, LLC (2011–2014).

Kristen M. Weitzel, CPA Born: 1977

Treasurer

Indefinite term; since 2014 (other roles since 2013)

Vice President, U.S. Bancorp Fund Services, LLC (since 2015); Assistant Vice President, U.S. Bancorp Fund Services, LLC (2011–2015); Manager, PricewaterhouseCoopers LLP (accounting firm) (2005–2011).

Brett M. Wickmann Born: 1982

Assistant Treasurer

Indefinite term; since 2017

Vice President, U.S. Bancorp Fund Services, LLC (since 2017); Assistant Vice President, U.S. Bancorp Fund Services, LLC (2012–2017).

Elizabeth A. Winske Born: 1983

Assistant Treasurer

Indefinite term; since 2017

Vice President, U.S. Bancorp Fund Services, LLC (since 2020); Assistant Vice President, U.S. Bancorp Fund Services, LLC (2016–2020); Officer, U.S. Bancorp Fund Services, LLC (2012–2016).

Jason E. Shlensky
Born: 1987

Assistant Treasurer

Indefinite term; since 2019

Assistant Vice President, U.S. Bancorp Fund Services, LLC (since 2019); Officer, U.S. Bancorp Fund Services, LLC (2014–2019).

 

24

 

 

Roundhill Acquirers Deep Value ETF

 

Trustees and Officers
(Unaudited) (Continued)

 

 

Name and
Year of Birth

Position(s)
Held with
the Trust

Term of Office and
Length of Time
Served

Principal Occupation(s)
During Past 5 Years

Isabella K. Gentile
Born: 1994

Assistant Secretary

Indefinite term; since 2020

Regulatory Administration Attorney, U.S. Bancorp Fund Services, LLC (since 2019), Regulatory Administration Intern, U.S. Bancorp Fund Services, LLC (2018-2019) and Law Student (2016-2019).

 

The Statement of Additional Information (“SAI”) includes additional information about the Trustees and is available without charge, upon request, by calling toll-free at (800) 617-0004, by accessing the SEC’s website at www.sec.gov, or by accessing the Fund’s website at www.roundhillinvestments.com/etf/deep.

 

25

 

 

Roundhill Acquirers Deep Value ETF

 

Expense Example

For the Six-Months Ended August 31, 2020 (Unaudited)

 

 

As a shareholder of the Fund you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The example is based on an investment of $1,000 invested at the beginning of the period and held for the entire six-month period as indicated below in the Expense Example table.

 

Actual Expenses

 

The first line of the table provides information about actual account values based on actual returns and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then, multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period’’ to estimate the expenses you paid on your account during this period.

 

Hypothetical Example for Comparison Purposes

 

The second line of the table provides information about hypothetical account values based on a hypothetical return and hypothetical expenses based on the Fund’s actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the Fund’s actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account balance or expenses you paid for the period. You may use this information to compare the ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of the other funds. Please note that the expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transactional costs, such as brokerage commissions paid on purchases and sales of Fund shares. Therefore, the second line of the table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. If these transactional costs were included, your costs would have been higher.

 

 

Beginning
Account Value
March 1, 2020

Ending
Account Value
August 31, 2020

Expenses
Paid During
the Period
(1)

Actual

$1,000.00

$ 891.70

$1.90

Hypothetical (5% annual return before expenses)

$1,000.00

$1,023.13

$2.03

 

(1)

The dollar amounts shown as expenses paid during the period are equal to the annualized six-month net expense ratio, 0.40%, multiplied by the average account value during the period, multiplied by 184/366 to reflect the one-half year period.

 

26

 

 

Roundhill Acquirers Deep Value ETF

 

Review of Liquidity Risk Management Program
(Unaudited)

 

 

Pursuant to Rule 22e-4 under the Investment Company Act of 1940, the Trust, on behalf of the series of the Trust covered by this shareholder report (the “Series”), has adopted a liquidity risk management program to govern the Trust’s approach to managing liquidity risk. Rule 22e-4 seeks to promote effective liquidity risk management, thereby reducing the risk that a fund will be unable to meet its redemption obligations and mitigating dilution of the interests of fund shareholders. The Trust’s liquidity risk management program is tailored to reflect the Series’ particular risks, but not to eliminate all adverse impacts of liquidity risk, which would be incompatible with the nature of such Series.

 

The investment adviser to the Series has adopted and implemented its own written liquidity risk management program (the “Program”) tailored specifically to assess and manage the liquidity risk of the Series.

 

At a recent meeting of the Board of Trustees of the Trust, the Trustees received a report pertaining to the operation, adequacy, and effectiveness of implementation of the Program for the period ended December 31, 2019. The report concluded that the Program is reasonably designed to assess and manage the Series’ liquidity risk and has operated adequately and effectively to manage such risk. The report reflected that there were no liquidity events that impacted the Series’ ability to timely meet redemptions without dilution to existing shareholders. The report further noted that no material changes have been made to the Program since its implementation.

 

There can be no assurance that the Program will achieve its objectives in the future. Please refer to the prospectus for more information regarding the Series’ exposure to liquidity risk and other principal risks to which an investment in the Series may be subject.

 

27

 

 

Roundhill Acquirers Deep Value ETF

 

Federal Tax Information

(Unaudited)

 

 

For the fiscal year ended August 31, 2020, certain dividends paid by the Fund may be subject to a maximum rate of 23.8%, as provided for by the Jobs and Growth Tax relief Reconciliation Act of 2003. The percentage of dividends declared from ordinary income designated as qualified dividend income was 100.00%.

 

For corporate shareholders, the percent of ordinary income distributions qualifying for the corporate dividend received deduction for the fiscal year ended August 31, 2020 was 100.00%.

 

The percentage of taxable ordinary income distributions that are designated as short-term capital gain distributions under Internal Revenue Section 871(k)(2)(C) for the Fund was 0.00%.

 

Information About Portfolio Holdings
(Unaudited)

 

 

The Fund files its complete schedules of portfolio holdings for its first and third fiscal quarters with the SEC on Part F of Form N-PORT. The Fund’s Part F of Form N-PORT is available without charge, upon request, by calling toll-free at (800) 617-0004. Furthermore, you may obtain the Part F of Form N-PORT on the SEC’s website at www.sec.gov. The Fund’s portfolio holdings are posted on its website at www.roundhillinvestments.com/etf/deep daily.

 

Information About Proxy Voting
(Unaudited)

 

 

A description of the policies and procedures the Fund uses to determine how to vote proxies relating to portfolio securities is provided in the SAI. The SAI is available without charge, upon request, by calling toll-free at (800) 617-0004, by accessing the SEC’s website at www.sec.gov, or by accessing the Fund’s website at www.roundhillinvestments.com/etf/deep.

 

When available, information regarding how the Fund voted proxies relating to portfolio securities during the twelve-months ending June 30 is available by calling toll-free at (800) 617-0004 or by accessing the SEC’s website at www.sec.gov.

 

28

 

 

Roundhill Acquirers Deep Value ETF

 

Frequency Distribution of Premiums and Discounts

(Unaudited)

 

 

Information regarding how often shares of the Fund trade on an exchange at a price above (i.e., at a premium) or below (i.e., at a discount) the NAV of the Fund is available, without charge, on the Fund’s website at www.roundhillinvestments.com/etf/deep.

 

29

 

 

Adviser

Exchange Traded Concepts, LLC
10900 Hefner Pointe Drive, Suite 207
Oklahoma City, Oklahoma 73120

 

Index Provider

Acquirers Funds, LLC
21515 Hawthorne Boulevard, Suite 200 PMP#82
Torrance, California 90503

 

Distributor

Quasar Distributors, LLC
111 East Kilbourn Avenue, Suite 2200
Milwaukee, Wisconsin 53202

 

Custodian

U.S. Bank National Association
1555 North Rivercenter Drive, Suite 302
Milwaukee, Wisconsin 53212

 

Transfer Agent

U.S. Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, Wisconsin 53202

 

Independent Registered Public Accounting Firm

Cohen & Company Ltd.
342 North Water Street, Suite 830
Milwaukee, Wisconsin 53202

 

Legal Counsel

Morgan, Lewis, & Bockius, LLP
1111 Pennsylvania Avenue, NW
Washington, DC 20004

 

Roundhill Acquirers Deep Value ETF

Symbol – DEEP
CUSIP – 26922A701

 

 

 

Item 2. Code of Ethics.

 

The registrant has adopted a code of ethics that applies to the registrant’s President (principal executive officer) and Treasurer (principal financial officer). The registrant has not made any substantive amendments to its code of ethics during the period covered by this report. The registrant has not granted any waivers from any provisions of the code of ethics during the period covered by this report. Filed herewith.

 

Item 3. Audit Committee Financial Expert.

 

The registrant’s board has determined that there is at least one audit committee financial expert serving on its audit committee. Mr. Leonard Rush is the “audit committee financial expert” and is considered to be “independent” as each term is defined in Item 3 of Form N-CSR.

 

Item 4. Principal Accountant Fees and Services.

 

The registrant has engaged its principal accountant to perform audit services, audit-related services, tax services and other services during the past two fiscal years. “Audit services” refer to performing an audit of the registrant's annual financial statements or services that are normally provided by the accountant in connection with statutory and regulatory filings or engagements for those fiscal years. “Audit-related services” refer to the assurance and related services by the principal accountant that are reasonably related to the performance of the audit. “Tax services” refer to professional services rendered by the principal accountant for tax compliance, tax advice, and tax planning. There were no “Other services” provided by the principal accountant. The following table details the aggregate fees billed or expected to be billed for each of the last two fiscal years for audit fees, audit-related fees, tax fees and other fees by the principal accountant.

 

  FYE  08/31/2020 FYE  08/31/2019
Audit Fees $14,000 $14,000
Audit-Related Fees N/A N/A
Tax Fees $3,000 $3,000
All Other Fees N/A N/A

 

The audit committee has adopted pre-approval policies and procedures that require the audit committee to pre-approve all audit and non-audit services of the registrant, including services provided to any entity affiliated with the registrant.

 

The percentage of fees billed by Cohen & Company, Ltd. applicable to non-audit services pursuant to waiver of pre-approval requirement were as follows:

 

 

  FYE  08/31/2020 FYE  08/31/2019
Audit-Related Fees 0% 0%
Tax Fees 0% 0%
All Other Fees 0% 0%

 

 

 

 

All of the principal accountant’s hours spent on auditing the registrant’s financial statements were attributed to work performed by full-time permanent employees of the principal accountant. (If more than 50 percent of the accountant’s hours were spent to audit the registrant's financial statements for the most recent fiscal year, state how many hours were attributed to work performed by persons other than the principal accountant's full-time, permanent employees.)

 

The following table indicates the non-audit fees billed or expected to be billed by the registrant’s accountant for services to the registrant and to the registrant’s investment adviser (and any other controlling entity, etc.—not sub-adviser) for the last two years. The audit committee of the board of trustees/directors has considered whether the provision of non-audit services that were rendered to the registrant's investment adviser is compatible with maintaining the principal accountant's independence and has concluded that the provision of such non-audit services by the accountant has not compromised the accountant’s independence.

 

Non-Audit Related Fees FYE  08/31/2020 FYE  08/31/2019
Registrant N/A N/A
Registrant’s Investment Adviser N/A N/A

 

Item 5. Audit Committee of Listed Registrants.

 

The registrant is an issuer as defined in Rule 10A-3 under the Securities Exchange Act of 1934, (the “Act”) and has a separately-designated standing audit committee established in accordance with Section 3(a)(58)(A) of the Act. The independent members of the committee are as follows: David A. Massart, Leonard M. Rush and Janet D. Olsen.

 

Item 6. Investments.

 

Schedule of Investments is included as part of the report to shareholders filed under Item 1 of this Form.

 

Item 7. Disclosure of Proxy Voting Policies and Procedures for Closed-End Management Investment Companies.

 

Not applicable to open-end investment companies.

 

Item 8. Portfolio Managers of Closed-End Management Investment Companies.

 

Not applicable to open-end investment companies.

 

Item 9. Purchases of Equity Securities by Closed-End Management Investment Company and Affiliated Purchasers.

 

Not applicable to open-end investment companies.

 

Item 10. Submission of Matters to a Vote of Security Holders.

 

There have been no material changes to the procedures by which shareholders may recommend nominees to the registrant’s board of trustees.

 

 

 

Item 11. Controls and Procedures.

 

(a)The Registrant’s President (principal executive officer) and Treasurer (principal financial officer) have reviewed the Registrant's disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940 (the “Act”)) as of a date within 90 days of the filing of this report, as required by Rule 30a-3(b) under the Act and Rules 13a-15(b) or 15d-15(b) under the Securities Exchange Act of 1934. Based on their review, such officers have concluded that the disclosure controls and procedures are effective in ensuring that information required to be disclosed in this report is appropriately recorded, processed, summarized and reported and made known to them by others within the Registrant and by the Registrant’s service provider.

 

(b)There were no changes in the Registrant's internal control over financial reporting (as defined in Rule 30a-3(d) under the Act) that occurred during the second fiscal half-year of the period covered by this report that has materially affected, or is reasonably likely to materially affect, the Registrant's internal control over financial reporting.

 

Item 12. Disclosure of Securities Lending Activities for Closed-End Management Investment Companies.

 

Not applicable to open-end investment companies.

 

Item 13. Exhibits.

 

(a)(1) Any code of ethics or amendment thereto, that is the subject of the disclosure required by Item 2, to the extent that the registrant intends to satisfy Item 2 requirements through filing an exhibit. Filed herewith

 

(2) A separate certification for each principal executive officer and principal financial officer pursuant to Section 302 of the Sarbanes-Oxley Act of 2002. Filed herewith.

 

(3) Any written solicitation to purchase securities under Rule 23c-1 under the Act sent or given during the period covered by the report by or on behalf of the registrant to 10 or more persons. Not applicable to open-end investment companies.

 

(4) Change in the registrant’s independent public accountant. There was no change in the registrant’s independent public accountant for the period covered by this report.

 

(b)Certifications pursuant to Section 906 of the Sarbanes-Oxley Act of 2002. Furnished herewith.

 

 

 

SIGNATURES

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

 

(Registrant)ETF Series Solutions    
       
 By (Signature and Title)* /s/ Kristina R. Nelson  
    Kristina R. Nelson, President (principal executive officer)  
       
 Date11/5/2020    

 

Pursuant to the requirements of the Securities Exchange Act of 1934 and the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.

 

 By (Signature and Title)* /s/ Kristina R. Nelson  
    Kristina R. Nelson, President (principal executive officer)  
       
 Date11/5/2020    
       
 By (Signature and Title)* /s/ Kristen M. Weitzel  
    Kristen M. Weitzel, Treasurer (principal financial officer)  
       
 Date11/5/2020    

 

* Print the name and title of each signing officer under his or her signature.