N-CSR 1 fp0059536_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: September 30

 

Date of reporting period: September 30, 2020

 

 

 

Item 1. Reports to Stockholders.

 

 

 

Annual Report

September 30, 2020

 

American Customer Satisfaction ETF
Ticker: ACSI

 

Reverse Cap Weighted U.S. Large Cap ETF
Ticker: RVRS

 

Beginning on January 1, 2021, as permitted by regulations adopted by the U.S. Securities and Exchange Commission, paper copies of the Funds’ shareholder reports will no longer be sent by mail, unless you specifically request paper copies of the Funds’ 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.

 

 

Exponential ETFs

 

TABLE OF CONTENTS

 

 

Page

Letters to Shareholders

1

Performance Summaries

4

Portfolio Allocations

6

Schedules of Investments

7

Statements of Assets and Liabilities

25

Statements of Operations

26

Statements of Changes in Net Assets

27

Financial Highlights

29

Notes to Financial Statements

31

Report of Independent Registered Public Accounting Firm

41

Trustees and Officers

43

Expense Examples

46

Review of Liquidity Risk Management Program

48

Approval of Advisory Agreements & Board Considerations

49

Federal Tax Information

52

Information About Portfolio Holdings

52

Information About Proxy Voting

53

Frequency Distribution of Premiums and Discounts

53

 

 

Exponential ETFs

 

Letters to Shareholders
September 30, 2020 (Unaudited)

 

 

The American Customer Satisfaction ETF

 

The American Customer Satisfaction ETF (“ACSI” or the “Fund”) tracks the American Customer Satisfaction Investible Index (“ACSII” or the “Index”). The underlying strategy behind the Index was altered, beginning August 24, 2020, details below.

 

The Fund, via its index, uses an objective, rules-based methodology to measure the performance of U.S.-listed companies whose customers have been surveyed and who have been assigned a customer satisfaction score as part of the Customer Satisfaction Data (collectively, “ACSI Companies”). Construction of the Index begins with over 400 ACSI Companies across 46 industries and 10 economic sectors. The initial universe is then screened to eliminate companies whose stock is not principally listed on a U.S. exchange, whose market capitalization is less than $1 billion, or for which the Customer Satisfaction Data is statistically insignificant. The Index is comprised of ACSI Companies in the 25 industries (as classified by the Customer Satisfaction Data) with the highest customer retention, and the company(ies) with the highest ACSI Score (described below) in each such industry will be included in the Index (the “Index Companies”). One to three ACSI Companies from each industry are included in the Index based on the number of ACSI Companies in a given industry. The Index will generally be comprised of 25 to 35 companies at the time of each rebalance of the Index.

 

The Advisor believes that companies who possess higher satisfaction among their customers have higher cash flows, higher profitability, and higher relative stock appreciation over the long term. The source of this data – The American Customer Satisfaction Index – is recognized as a world leader in the measurement and analysis of customer satisfaction. It is the only national cross-industry measure of customer satisfaction in the United States.

 

The information presented in this report relates to the twelve-month period ended September 30, 2020 (the “current fiscal period”).

 

For the current fiscal period, ACSI generated a total return of 11.44% (NAV) and 11.66% (Market). This compares to the 12.12% total return of its Index, and the 15.15% total return of the benchmark, the S&P 500, for the same period.

 

From a sector perspective, Consumer Discretionary, Communication Services, and Information Technology were the leading contributors while Utilities, Financials, and Health Care were the leading detractors.

 

Reviewing individual stocks, leading contributors included Apple, Amazon, and Netflix, most of which had the highest customer satisfaction scores in their aggregate industries. Conversely, leading detractors included Alaska Air, Centerpoint Energy, and Citigroup.

 

1

 

 

Exponential ETFs

 

Letters to Shareholders
September 30, 2020 (Unaudited) (Continued)

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

The Reverse Cap Weighted U.S. Large Cap ETF (“RVRS” or the “Fund”) tracks the Reverse Cap Weighted U.S. Large Cap Index (“REVERSE” or the “Index”). The Fund, via its index, provides exposure to the companies in the S&P 500 Index. However, while traditional market cap weighted indexes such as the S&P 500 weight companies inside the index by their relative market capitalization, RVRS does the opposite, weighting companies by the inverse of their relative market cap. By investing smallest-to-biggest, the Fund tilts investment exposure to the smaller end of the market cap spectrum within the large cap space.

 

For the current fiscal period, RVRS generated a total return of -6.70% (NAV) and -6.60% (Market). This compares to the -6.84% total return of the Index, and the 15.15% total return of the benchmark, the S&P 500, for the same period.

 

Leading contributors to Fund performance include the Health Care, Industrials, and Information Technology sectors. From an individual stock perspective, L Brands, Rollins, and Abiomed were the top contributors.

 

Leading detractors to Fund performance include the Energy, Real Estate, and Financials sectors. From an individual stock perspective, Coty, Alliance Data Systems, and Macy’s were the top detractors.

 

Must be preceded or accompanied by a prospectus

 

Past performance is no guarantee of future results.

 

Diversification does not guarantee a profit or protect from loss in a declining market.

 

Fund holdings and/or sector allocations are subject to change at any time and are not recommendations to buy or sell any security. For a complete listing of the Funds’ holdings, please refer to the Schedules of Investments in this report.

 

The securities of large-capitalization companies may be relatively mature compared to smaller companies and therefore subject to slower growth during times of economic expansion. The Index relies heavily on proprietary quantitative models as well as information and data supplied by third parties (Models and Data). Because the Index is composed based on such Models and Data, when such Models and Data prove to be incorrect or incomplete, the Index and Fund may not perform as expected. 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. Investments involve risk. Principal loss is possible. The Funds have the same risks as the underlying securities traded on the exchange through 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. To the extent the Fund invests more heavily in particular sectors of the economy, the Fund’s performance may be more sensitive to developments that significantly affect those sectors.

 

American Customer Satisfaction Investable Index is an objective, rules-based methodology to measure the performance of (i) large capitalization U.S.-listed companies whose customers have been surveyed and who have been assigned a customer satisfaction score as part of the Customer Satisfaction Data (collectively, “ACSI

 

2

 

 

Exponential ETFs

 

Letters to Shareholders
September 30, 2020 (Unaudited) (Continued)

 

 

Companies”) and (ii) U.S. sector-specific exchange-traded funds (“ETFs”) used by the Index to supplement its exposure to sectors for which there are too few ACSI Companies to achieve the target sector weights at the time of each rebalance. The Index is sector-weighted to reflect the overall U.S. large cap market, and security-weighted based on the Customer Satisfaction Data. You cannot invest directly in an index.

 

The S&P 500 Index is a widely recognized capitalization-weighted Index of 500 common stock prices in U.S. companies.

 

Cash flow is the total amount of money being transferred into and out of a business, especially as affecting liquidity.

 

The Reverse Cap Weighted U.S. Large Cap Index is a rules-based, reverse capitalization weighted index comprised of the 500 largest U.S.-listed companies as measured by their free-float market capitalization contained within the S&P 500 universe. The Index seeks to provide exposure to the U.S. large-cap market but with greater emphasis on the smaller-end of the large-cap spectrum, unlike many traditional market capitalization weighted indexes that place a greater emphasis on the largest companies in the large-cap market. You cannot invest directly in an index.

 

Distributed by Foreside Fund Services, LLC.

 

3

 

 

American Customer Satisfaction ETF

 

Performance Summary
(Unaudited)

 

 

Growth of $10,000

 

 

Average Annual Returns
September 30, 2020

1 Year

Since Inception
(10/31/2016)

American Customer Satisfaction ETF – NAV

11.44%

12.14%

American Customer Satisfaction ETF – Market

11.66%

12.20%

American Customer Satisfaction Investable Index

12.12%

12.98%

S&P 500® Index

15.15%

14.69%

 

This chart illustrates the performance of a hypothetical $10,000 investment made on October 31, 2016 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.

 

4

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Performance Summary
(Unaudited)

 

 

Growth of $10,000

 

 

Average Annual Returns
September 30, 2020

1 Year

Since Inception
(10/31/2017)

Reverse Cap Weighted U.S. Large Cap ETF – NAV

-6.70%

1.92%

Reverse Cap Weighted U.S. Large Cap ETF – Market

-6.60%

1.95%

Reverse Cap Weighted U.S. Large Cap Index

-6.84%

2.04%

S&P 500® Index

15.15%

11.77%

 

This chart illustrates the performance of a hypothetical $10,000 investment made on October 31, 2017 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.

 

5

 

 

Exponential ETFs

 

Portfolio Allocation
As of September 30, 2020 (Unaudited)

 

 

American Customer Satisfaction ETF

 

Sector

Percentage of Net
Assets

Information Technology (a)

26.7%

Consumer Staples

19.1

Consumer Discretionary

16.2

Financials

11.7

Communication Services

9.4

Industrials

9.1

Health Care

3.9

Utilities

3.8

Short-Term Investments

0.1

Other Assets in Excess of Liabilities (b)

0.0

Total

100.0%

 

(a)

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 8 in Notes to Financial Statements.

(b)

Represents less than 0.05% of net assets.

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Sector

Percentage of Net
Assets

Consumer Discretionary

17.6%

Industrials

14.9

Financials

13.3

Information Technology

12.6

Health Care

8.7

Energy

8.2

Real Estate

7.6

Materials

6.2

Utilities

4.9

Consumer Staples

4.2

Communication Services

1.5

Other Assets in Excess of Liabilities

0.2

Short-Term Investments

0.1

Total

100.0%

 

6

 

 

American Customer Satisfaction ETF

 

Schedule of Investments
September 30, 2020

 

 

 

Shares

 

Security Description

 

Value

 
     

COMMON STOCKS — 99.9%

       
       

Communication Services — 9.4%

       
    23,966  

Pinterest, Inc. (a)

  $ 994,829  
    13,657  

T-Mobile US, Inc. (a)

    1,561,814  
    26,844  

Verizon Communications, Inc.

    1,596,950  
    132,811  

Vonage Holdings Corporation (a)

    1,358,656  
              5,512,249  
       

Consumer Discretionary — 16.2%

       
    668  

Chipotle Mexican Grill, Inc. (a)

    830,798  
    18,243  

Etsy, Inc. (a)

    2,218,896  
    49,941  

Hanesbrands, Inc.

    786,571  
    27,513  

Hilton Worldwide Holdings, Inc.

    2,347,409  
    44,732  

L Brands, Inc.

    1,422,925  
    5,215  

Ulta Beauty, Inc. (a)

    1,168,056  
    6,063  

Walt Disney Company

    752,297  
              9,526,952  
       

Consumer Staples — 19.1%

       
    5,718  

Costco Wholesale Corporation

    2,029,890  
    35,720  

CVS Health Corporation

    2,086,048  
    17,631  

Hershey Company

    2,527,228  
    9,310  

PepsiCo, Inc.

    1,290,366  
    19,006  

Procter & Gamble Company

    2,641,644  
    4,809  

Walmart, Inc.

    672,827  
              11,248,003  
       

Financials — 11.7%

       
    22,452  

Allstate Corporation

    2,113,631  
    3,098  

Berkshire Hathaway, Inc. - Class B (a)

    659,688  
    60,450  

Charles Schwab Corporation

    2,190,104  
    20,383  

Citigroup, Inc.

    878,711  
    27,302  

Truist Financial Corporation

    1,038,841  
              6,880,975  
       

Health Care — 3.9%

       
    5,552  

Humana, Inc.

    2,297,917  
       

Industrials — 9.1%

       
    11,311  

FedEx Corporation

    2,844,943  
    67,697  

Southwest Airlines Company

    2,538,637  
              5,383,580  

 

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

 

7

 

 

American Customer Satisfaction ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.9% (Continued)

       
       

Information Technology — 26.7 (b)

       
    1,644  

Alphabet, Inc. - Class C (a)

  $ 2,416,022  
    1,839  

Amazon.com, Inc. (a)

    5,790,515  
    43,180  

Apple, Inc.

    5,000,676  
    3,959  

Microsoft Corporation

    832,697  
    3,442  

Netflix, Inc. (a)

    1,721,103  
              15,761,013  
       

Utilities — 3.8%

       
    7,537  

Atmos Energy Corporation

    720,462  
    38,343  

CenterPoint Energy, Inc.

    741,937  
    2,821  

NextEra Energy, Inc.

    782,997  
              2,245,396  
       

TOTAL COMMON STOCKS (Cost $56,199,285)

    58,856,085  
                 
       

SHORT-TERM INVESTMENTS — 0.0%

       
    53,726  

First American Government Obligations Fund, Class X, 0.07% (c)

    53,726  
       

TOTAL SHORT-TERM INVESTMENTS (Cost $53,276)

    53,726  
       

TOTAL INVESTMENTS — 100.0% (Cost $56,253,011)

    58,909,811  
       

Other Assets in Excess of Liabilities — 0.0% (d)

    1,904  
       

NET ASSETS — 100.0%

  $ 58,911,715  

 

Percentages are stated as a percent of net assets.

The Fund’s security classifications are defined by the Fund Advisor.

(a)

Non-income producing security.

(b)

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.

(c)

Rate shown is the annualized seven-day yield as of September 30, 2020.

(d)

Represents less than 0.05%.

 

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

 

8

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7%

       
       

Communication Services — 1.5%

       
    64  

AT&T, Inc.

  $ 1,825  
    3,999  

CenturyLink, Inc.

    40,350  
    9  

Charter Communications, Inc. - Class A (a)

    5,619  
    1,625  

DISH Network Corporation - Class A (a)

    47,174  
    971  

Live Nation Entertainment, Inc. (a)

    52,317  
    115  

Motorola Solutions, Inc.

    18,033  
    60  

T-Mobile US, Inc. (a)

    6,862  
    31  

Verizon Communications, Inc.

    1,844  
    988  

ViacomCBS, Inc. - Class B

    27,674  
              201,698  
       

Consumer Discretionary — 17.6%

       
    280  

Advance Auto Parts, Inc.

    42,980  
    228  

Aptiv plc

    20,903  
    14  

AutoZone, Inc. (a)

    16,487  
    178  

Best Buy Company, Inc.

    19,810  
    3  

Booking Holdings, Inc. (a)

    5,132  
    1,247  

BorgWarner, Inc.

    48,309  
    252  

CarMax, Inc. (a)

    23,161  
    2,807  

Carnival Corporation

    42,610  
    10  

Chipotle Mexican Grill, Inc. (a)

    12,437  
    60  

Comcast Corporation - Class A

    2,776  
    300  

D.R. Horton, Inc.

    22,689  
    445  

Darden Restaurants, Inc.

    44,829  
    1,277  

Discovery, Inc. - Class A (a)

    27,800  
    823  

Discovery, Inc. - Class C (a)

    16,131  
    49  

Dollar General Corporation

    10,272  
    231  

Dollar Tree, Inc. (a)

    21,100  
    80  

Domino’s Pizza, Inc.

    34,023  
    305  

Etsy, Inc. (a)

    37,097  
    342  

Expedia Group, Inc.

    31,358  
    2,459  

Ford Motor Company

    16,377  
    380  

Fox Corporation - Class A

    10,575  
    799  

Fox Corporation - Class B

    22,348  
    7,252  

Gap, Inc.

    123,502  
    296  

Garmin, Ltd.

    28,079  

 

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

 

9

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Consumer Discretionary — 17.6% (Continued)

    425  

General Motors Company

  $ 12,576  
    334  

Genuine Parts Company

    31,787  
    5,568  

Hanesbrands, Inc.

    87,696  
    574  

Hasbro, Inc.

    47,481  
    199  

Hilton Worldwide Holdings, Inc.

    16,979  
    6  

Home Depot, Inc.

    1,666  
    3,697  

Interpublic Group of Companies, Inc.

    61,629  
    2,172  

L Brands, Inc.

    69,091  
    507  

Las Vegas Sands Corporation

    23,657  
    1,956  

Leggett & Platt, Inc.

    80,529  
    310  

Lennar Corporation - Class A

    25,321  
    1,486  

LKQ Corporation (a)

    41,207  
    26  

Lowe’s Companies, Inc.

    4,312  
    157  

Marriott International, Inc. - Class A

    14,535  
    14  

McDonald’s Corporation

    3,073  
    1,939  

MGM Resorts International

    42,173  
    895  

Mohawk Industries, Inc. (a)

    87,343  
    4,577  

Newell Brands, Inc.

    78,541  
    962  

News Corporation - Class A

    13,487  
    3,080  

News Corporation - Class B

    43,058  
    29  

NIKE, Inc. - Class B

    3,641  
    4,891  

Norwegian Cruise Line Holdings, Ltd. (a)

    83,685  
    9  

NVR, Inc. (a)

    36,748  
    737  

Omnicom Group, Inc.

    36,481  
    28  

O’Reilly Automotive, Inc. (a)

    12,910  
    919  

PulteGroup, Inc.

    42,540  
    1,603  

PVH Corporation

    95,603  
    1,732  

Ralph Lauren Corporation

    117,724  
    148  

Ross Stores, Inc.

    13,811  
    488  

Royal Caribbean Cruises, Ltd.

    31,588  
    53  

Starbucks Corporation

    4,554  
    7,811  

Tapestry, Inc.

    122,086  
    43  

Target Corporation

    6,769  
    287  

Tiffany & Company

    33,249  
    128  

TJX Companies, Inc.

    7,123  

 

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

 

10

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Consumer Discretionary — 17.6% (Continued)

    195  

Tractor Supply Company

  $ 27,951  
    140  

Ulta Beauty, Inc. (a)

    31,357  
    5,602  

Under Armour, Inc. - Class A (a)

    62,910  
    6,803  

Under Armour, Inc. - Class C (a)

    66,942  
    311  

V.F. Corporation

    21,848  
    15  

Walt Disney Company

    1,861  
    262  

Whirlpool Corporation

    48,179  
    612  

Wynn Resorts, Ltd.

    43,948  
    168  

Yum! Brands, Inc.

    15,338  
              2,435,772  
       

Consumer Staples — 4.2%

       
    130  

Altria Group, Inc.

    5,023  
    384  

Archer-Daniels-Midland Company

    17,852  
    390  

Brown-Forman Corporation - Class B

    29,375  
    1,114  

Campbell Soup Company

    53,884  
    214  

Church & Dwight Company, Inc.

    20,054  
    80  

Clorox Company

    16,814  
    51  

Coca-Cola Company

    2,518  
    93  

Colgate-Palmolive Company

    7,175  
    679  

Conagra Brands, Inc.

    24,247  
    74  

Constellation Brands, Inc. - Class A

    14,024  
    10  

Costco Wholesale Corporation

    3,550  
    97  

CVS Health Corporation

    5,665  
    44  

Estee Lauder Companies, Inc. - Class A

    9,603  
    193  

General Mills, Inc.

    11,904  
    140  

Hershey Company

    20,068  
    626  

Hormel Foods Corporation

    30,605  
    290  

J.M. Smucker Company

    33,501  
    376  

Kellogg Company

    24,286  
    58  

Kimberly-Clark Corporation

    8,564  
    630  

Kraft Heinz Company

    18,868  
    467  

Kroger Company

    15,836  
    807  

Lamb Weston Holdings, Inc.

    53,480  
    91  

McCormick & Company, Inc.

    17,663  
    1,656  

Molson Coors Brewing Company - Class B

    55,575  

 

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

 

11

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Consumer Staples — 4.2% (Continued)

    96  

Mondelez International, Inc. - Class A

  $ 5,515  
    183  

Monster Beverage Corporation (a)

    14,677  
    17  

PepsiCo, Inc.

    2,356  
    51  

Philip Morris International, Inc.

    3,824  
    10  

Procter & Gamble Company

    1,390  
    251  

Sysco Corporation

    15,617  
    399  

Tyson Foods, Inc. - Class A

    23,733  
    467  

Walgreens Boots Alliance, Inc.

    16,775  
    21  

Walmart, Inc.

    2,938  
              586,959  
       

Energy — 8.2%

       
    5,685  

Apache Corporation

    53,837  
    3,301  

Baker Hughes Company

    43,870  
    3,415  

Cabot Oil & Gas Corporation

    59,284  
    37  

Chevron Corporation

    2,664  
    906  

Concho Resources, Inc.

    39,973  
    332  

ConocoPhillips

    10,903  
    10,735  

Devon Energy Corporation

    101,553  
    2,296  

Diamondback Energy, Inc.

    69,156  
    422  

EOG Resources, Inc.

    15,167  
    71  

Exxon Mobil Corporation

    2,437  
    2,036  

Halliburton Company

    24,534  
    753  

Hess Corporation

    30,820  
    5,893  

HollyFrontier Corporation

    116,151  
    1,285  

Kinder Morgan, Inc.

    15,844  
    23,838  

Marathon Oil Corporation

    97,497  
    621  

Marathon Petroleum Corporation

    18,220  
    7,980  

National Oilwell Varco, Inc.

    72,299  
    10,030  

Noble Energy, Inc.

    85,757  
    3,641  

Occidental Petroleum Corporation

    36,446  
    1,438  

ONEOK, Inc.

    37,359  
    301  

Phillips 66

    15,604  
    284  

Pioneer Natural Resources Company

    24,421  
    886  

Schlumberger, Ltd.

    13,786  
    17,754  

TechnipFMC plc

    112,028  

 

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

 

12

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Energy 8.2% (Continued)

    428  

Valero Energy Corporation

  $ 18,541  
    880  

Williams Companies, Inc.

    17,292  
              1,135,443  
       

Financials — 13.3%

       
    481  

Aflac, Inc.

    17,484  
    166  

Allstate Corporation

    15,627  
    62  

American Express Company

    6,215  
    598  

American International Group, Inc.

    16,463  
    155  

Ameriprise Financial, Inc.

    23,887  
    48  

Aon plc - Class A

    9,902  
    222  

Arthur J. Gallagher & Company

    23,439  
    510  

Assurant, Inc.

    61,868  
    88  

Bank of America Corporation

    2,120  
    399  

Bank of New York Mellon Corporation

    13,702  
    6  

Berkshire Hathaway, Inc. - Class B (a)

    1,278  
    9  

BlackRock, Inc.

    5,072  
    186  

Capital One Financial Corporation

    13,366  
    508  

Cboe Global Markets, Inc.

    44,572  
    302  

Charles Schwab Corporation

    10,941  
    64  

Chubb, Ltd.

    7,432  
    469  

Cincinnati Financial Corporation

    36,568  
    73  

Citigroup, Inc.

    3,147  
    1,432  

Citizens Financial Group, Inc.

    36,201  
    44  

CME Group, Inc.

    7,362  
    1,913  

Comerica, Inc.

    73,172  
    458  

Discover Financial Services

    26,463  
    696  

E*TRADE Financial Corporation

    34,835  
    246  

Everest Re Group, Ltd.

    48,595  
    1,374  

Fifth Third Bancorp

    29,294  
    203  

First Republic Bank

    22,139  
    3,769  

Franklin Resources, Inc.

    76,699  
    663  

Globe Life, Inc.

    52,974  
    32  

Goldman Sachs Group, Inc.

    6,431  
    764  

Hartford Financial Services Group, Inc.

    28,161  
    4,555  

Huntington Bancshares, Inc.

    41,769  

 

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

 

13

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Financials — 13.3% (Continued)

    89  

Intercontinental Exchange, Inc.

  $ 8,904  
    9,364  

Invesco, Ltd.

    106,843  
    13  

JPMorgan Chase & Company

    1,252  
    2,821  

KeyCorp

    33,655  
    1,724  

Lincoln National Corporation

    54,013  
    1,411  

Loews Corporation

    49,032  
    318  

M&T Bank Corporation

    29,285  
    58  

MarketAxess Holdings, Inc.

    27,932  
    68  

Marsh & McLennan Companies, Inc.

    7,800  
    391  

MetLife, Inc.

    14,533  
    35  

Moody’s Corporation

    10,145  
    137  

Morgan Stanley

    6,624  
    45  

MSCI, Inc.

    16,055  
    234  

Nasdaq, Inc.

    28,714  
    308  

Northern Trust Corporation

    24,015  
    8,859  

People’s United Financial, Inc.

    91,336  
    81  

PNC Financial Services Group, Inc.

    8,903  
    948  

Principal Financial Group, Inc.

    38,176  
    91  

Progressive Corporation

    8,615  
    238  

Prudential Financial, Inc.

    15,118  
    638  

Raymond James Financial, Inc.

    46,421  
    3,421  

Regions Financial Corporation

    39,444  
    16  

S&P Global, Inc.

    5,770  
    278  

State Street Corporation

    16,494  
    131  

SVB Financial Group (a)

    31,521  
    1,242  

Synchrony Financial

    32,503  
    115  

T. Rowe Price Group, Inc.

    14,745  
    131  

Travelers Companies, Inc.

    14,173  
    222  

Truist Financial Corporation

    8,447  
    5,674  

Unum Group

    95,493  
    220  

US Bancorp

    7,887  
    193  

Wells Fargo & Company

    4,537  
    82  

Willis Towers Watson plc

    17,123  
    821  

WR Berkley Corporation

    50,204  

 

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

 

14

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Financials — 13.3% (Continued)

    2,459  

Zions Bancorporation

  $ 71,852  
              1,834,742  
       

Health Care — 8.7%

       
    24  

Abbott Laboratories

    2,612  
    27  

AbbVie, Inc.

    2,365  
    133  

ABIOMED, Inc. (a)

    36,849  
    158  

Agilent Technologies, Inc.

    15,949  
    161  

Alexion Pharmaceuticals, Inc. (a)

    18,423  
    68  

Align Technology, Inc. (a)

    22,260  
    333  

AmerisourceBergen Corporation

    32,274  
    14  

Amgen, Inc.

    3,558  
    23  

Anthem, Inc.

    6,178  
    134  

Baxter International, Inc.

    10,776  
    29  

Becton Dickinson and Company

    6,748  
    38  

Biogen, Inc. (a)

    10,780  
    91  

Bio-Rad Laboratories, Inc. - Class A (a)

    46,907  
    186  

Boston Scientific Corporation (a)

    7,107  
    60  

Bristol-Myers Squibb Company

    3,617  
    633  

Cardinal Health, Inc.

    29,719  
    395  

Catalent, Inc. (a)

    33,836  
    222  

Centene Corporation (a)

    12,949  
    289  

Cerner Corporation

    20,892  
    39  

Cigna Corporation

    6,607  
    89  

Cooper Companies, Inc.

    30,004  
    19  

Danaher Corporation

    4,091  
    755  

DaVita, Inc. (a)

    64,666  
    1,048  

DENTSPLY SIRONA, Inc.

    45,829  
    30  

DexCom, Inc. (a)

    12,367  
    105  

Edwards Lifesciences Corporation (a)

    8,381  
    25  

Eli Lilly & Company

    3,700  
    84  

Gilead Sciences, Inc.

    5,308  
    94  

HCA Healthcare, Inc.

    11,720  
    744  

Henry Schein, Inc. (a)

    43,732  
    524  

Hologic, Inc. (a)

    34,830  
    22  

Humana, Inc.

    9,106  

 

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

 

15

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Health Care — 8.7% (Continued)

    39  

IDEXX Laboratories, Inc. (a)

  $ 15,331  
    27  

Illumina, Inc. (a)

    8,345  
    300  

Incyte Corporation (a)

    26,922  
    7  

Intuitive Surgical, Inc. (a)

    4,967  
    93  

IQVIA Holdings, Inc. (a)

    14,660  
    7  

Johnson & Johnson

    1,042  
    154  

Laboratory Corporation of America Holdings (a)

    28,993  
    120  

McKesson Corporation

    17,872  
    35  

Medtronic plc

    3,637  
    27  

Merck & Company, Inc.

    2,240  
    21  

Mettler-Toledo International, Inc. (a)

    20,281  
    3,540  

Mylan NV (a)

    52,498  
    315  

PerkinElmer, Inc.

    39,536  
    1,296  

Perrigo Company plc

    59,499  
    66  

Pfizer, Inc.

    2,422  
    287  

Quest Diagnostics, Inc.

    32,859  
    13  

Regeneron Pharmaceuticals, Inc. (a)

    7,277  
    105  

ResMed, Inc.

    18,000  
    216  

STERIS plc

    38,057  
    36  

Stryker Corporation

    7,501  
    65  

Teleflex, Inc.

    22,127  
    8  

Thermo Fisher Scientific, Inc.

    3,532  
    5  

UnitedHealth Group, Inc.

    1,559  
    460  

Universal Health Services, Inc. - Class B

    49,229  
    168  

Varian Medical Systems, Inc. (a)

    28,896  
    25  

Vertex Pharmaceuticals, Inc. (a)

    6,803  
    174  

Waters Corporation (a)

    34,048  
    91  

West Pharmaceutical Services, Inc.

    25,016  
    113  

Zimmer Biomet Holdings, Inc.

    15,384  
    41  

Zoetis, Inc.

    6,780  
              1,199,453  
       

Industrials — 14.9%

       
    30  

3M Company

    4,805  
    1,434  

A.O. Smith Corporation

    75,715  
    2,235  

Alaska Air Group, Inc.

    81,868  

 

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

 

16

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Industrials — 14.9% (Continued)

    499  

Allegion plc

  $ 49,356  
    4,855  

American Airlines Group, Inc.

    59,668  
    201  

AMETEK, Inc.

    19,979  
    30  

Boeing Company

    4,958  
    357  

C.H. Robinson Worldwide, Inc.

    36,482  
    592  

Carrier Global Corporation

    18,080  
    39  

Caterpillar, Inc.

    5,817  
    48  

Cintas Corporation

    15,976  
    209  

Copart, Inc. (a)

    21,978  
    105  

CSX Corporation

    8,155  
    75  

Cummins, Inc.

    15,837  
    33  

Deere & Company

    7,314  
    710  

Delta Air Lines, Inc.

    21,712  
    264  

Dover Corporation

    28,602  
    109  

Eaton Corporation plc

    11,121  
    158  

Emerson Electric Company

    10,360  
    136  

Equifax, Inc.

    21,338  
    356  

Expeditors International of Washington, Inc.

    32,225  
    372  

Fastenal Company

    16,774  
    38  

FedEx Corporation

    9,558  
    4,060  

Flowserve Corporation

    110,797  
    270  

Fortive Corporation

    20,577  
    489  

Fortune Brands Home & Security, Inc.

    42,308  
    86  

General Dynamics Corporation

    11,905  
    1,268  

General Electric Company

    7,900  
    23  

Honeywell International, Inc.

    3,786  
    3,744  

Howmet Aerospace, Inc.

    62,600  
    519  

Huntington Ingalls Industries, Inc.

    73,049  
    192  

IDEX Corporation

    35,023  
    196  

IHS Markit, Ltd.

    15,388  
    42  

Illinois Tool Works, Inc.

    8,115  
    996  

Ingersoll Rand, Inc. (a)

    35,458  
    294  

J.B. Hunt Transport Services, Inc.

    37,156  
    415  

Jacobs Engineering Group, Inc.

    38,499  
    368  

Johnson Controls International plc

    15,033  

 

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

 

17

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Industrials — 14.9% (Continued)

    139  

Kansas City Southern

  $ 25,135  
    64  

L3Harris Technologies, Inc.

    10,870  
    13  

Lockheed Martin Corporation

    4,983  
    548  

Masco Corporation

    30,211  
    5,491  

Nielsen Holdings plc

    77,862  
    41  

Norfolk Southern Corporation

    8,774  
    26  

Northrop Grumman Corporation

    8,203  
    123  

Old Dominion Freight Line, Inc.

    22,253  
    279  

Otis Worldwide Corporation

    17,415  
    180  

PACCAR, Inc.

    15,350  
    84  

Parker-Hannifin Corporation

    16,997  
    1,369  

Pentair plc

    62,659  
    1,235  

Quanta Services, Inc.

    65,282  
    85  

Raytheon Technologies Corporation

    4,891  
    249  

Republic Services, Inc.

    23,244  
    1,405  

Robert Half International, Inc.

    74,381  
    76  

Rockwell Automation, Inc.

    16,772  
    1,048  

Rollins, Inc.

    56,791  
    26  

Roper Technologies, Inc.

    10,273  
    367  

Snap-on, Inc.

    53,997  
    503  

Southwest Airlines Company

    18,862  
    112  

Stanley Black & Decker, Inc.

    18,166  
    123  

Teledyne Technologies, Inc. (a)

    38,156  
    1,332  

Textron, Inc.

    48,072  
    140  

Trane Technologies plc

    16,975  
    33  

TransDigm Group, Inc.

    15,679  
    20  

Union Pacific Corporation

    3,937  
    1,066  

United Airlines Holdings, Inc. (a)

    37,044  
    25  

United Parcel Service, Inc. - Class B

    4,166  
    204  

United Rentals, Inc. (a)

    35,598  
    84  

Verisk Analytics, Inc.

    15,566  
    79  

W.W. Grainger, Inc.

    28,185  
    536  

Wabtec Corporation

    33,168  
    101  

Waste Management, Inc.

    11,430  

 

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

 

18

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Industrials — 14.9% (Continued)

    383  

Xylem, Inc.

  $ 32,218  
              2,058,837  
       

Information Technology — 12.6%

       
    13  

Accenture plc - Class A

    2,938  
    95  

Activision Blizzard, Inc.

    7,690  
    5  

Adobe, Inc. (a)

    2,452  
    58  

Advanced Micro Devices, Inc. (a)

    4,755  
    239  

Akamai Technologies, Inc. (a)

    26,419  
    130  

Amphenol Corporation- Class A

    14,075  
    90  

Analog Devices, Inc.

    10,507  
    52  

ANSYS, Inc. (a)

    17,016  
    2  

Apple, Inc.

    232  
    144  

Applied Materials, Inc.

    8,561  
    188  

Arista Networks, Inc. (a)

    38,903  
    37  

Autodesk, Inc. (a)

    8,547  
    56  

Automatic Data Processing, Inc.

    7,811  
    9  

Broadcom, Inc.

    3,279  
    217  

Broadridge Financial Solutions, Inc.

    28,644  
    146  

Cadence Design Systems, Inc. (a)

    15,568  
    246  

CDW Corporation

    29,404  
    65  

Cisco Systems, Inc.

    2,560  
    197  

Citrix Systems, Inc.

    27,129  
    191  

Cognizant Technology Solutions Corporation - Class A

    13,259  
    585  

Corning, Inc.

    18,960  
    4,248  

DXC Technology Company

    75,827  
    249  

eBay, Inc.

    12,973  
    97  

Electronic Arts, Inc. (a)

    12,650  
    463  

F5 Networks, Inc. (a)

    56,843  
    3  

Facebook, Inc. - Class A (a)

    786  
    36  

Fidelity National Information Services, Inc.

    5,299  
    84  

Fiserv, Inc. (a)

    8,656  
    96  

FleetCor Technologies, Inc. (a)

    22,858  
    2,822  

FLIR Systems, Inc.

    101,169  
    246  

Fortinet, Inc. (a)

    28,981  
    298  

Gartner, Inc. (a)

    37,235  

 

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

 

19

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Information Technology — 12.6% (Continued)

    51  

Global Payments, Inc.

  $ 9,057  
    3,867  

Hewlett Packard Enterprise Company

    36,234  
    865  

HP, Inc.

    16,426  
    43  

Intel Corporation

    2,227  
    32  

International Business Machines Corporation

    3,893  
    16  

Intuit, Inc.

    5,219  
    464  

IPG Photonics Corporation (a)

    78,866  
    224  

Jack Henry & Associates, Inc.

    36,420  
    2,553  

Juniper Networks, Inc.

    54,889  
    271  

Keysight Technologies, Inc. (a)

    26,769  
    80  

KLA-Tencor Corporation

    15,499  
    28  

Lam Research Corporation

    9,289  
    437  

Leidos Holdings, Inc.

    38,959  
    5  

Mastercard, Inc. - Class A

    1,691  
    364  

Maxim Integrated Products, Inc.

    24,610  
    155  

Microchip Technology, Inc.

    15,928  
    191  

Micron Technology, Inc. (a)

    8,969  
    1  

Microsoft Corporation

    210  
    957  

NetApp, Inc.

    41,955  
    5  

Netflix, Inc. (a)

    2,500  
    1,415  

NortonLifeLock, Inc.

    29,489  
    3  

NVIDIA Corporation

    1,624  
    75  

Oracle Corporation

    4,477  
    244  

Paychex, Inc.

    19,464  
    125  

Paycom Software, Inc. (a)

    38,912  
    12  

PayPal Holdings, Inc. (a)

    2,364  
    285  

Qorvo, Inc. (a)

    36,768  
    30  

QUALCOMM, Inc.

    3,530  
    8  

salesforce.com, Inc. (a)

    2,011  
    943  

Seagate Technology plc

    46,462  
    12  

ServiceNow, Inc. (a)

    5,820  
    142  

Skyworks Solutions, Inc.

    20,661  
    69  

Synopsys, Inc. (a)

    14,765  
    153  

Take-Two Interactive Software, Inc. (a)

    25,279  
    144  

TE Connectivity, Ltd.

    14,075  

 

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

 

20

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Information Technology — 12.6% (Continued)

    446  

Teradyne, Inc.

  $ 35,439  
    30  

Texas Instruments, Inc.

    4,284  
    364  

Twitter, Inc. (a)

    16,198  
    104  

Tyler Technologies, Inc. (a)

    36,250  
    109  

VeriSign, Inc. (a)

    22,329  
    6  

Visa, Inc. - Class A

    1,200  
    1,038  

Western Digital Corporation

    37,939  
    2,098  

Western Union Company

    44,960  
    7,349  

Xerox Holdings Corporation

    137,941  
    181  

Xilinx, Inc.

    18,867  
    126  

Zebra Technologies Corporation - Class A (a)

    31,810  
              1,734,514  
       

Materials — 6.2%

       
    23  

Air Products & Chemicals, Inc.

    6,851  
    484  

Albemarle Corporation

    43,212  
    2,401  

Amcor plc

    26,531  
    386  

Avery Dennison Corporation

    49,346  
    207  

Ball Corporation

    17,206  
    346  

Celanese Corporation

    37,178  
    1,943  

CF Industries Holdings, Inc.

    59,670  
    711  

Corteva, Inc.

    20,484  
    267  

Dow, Inc.

    12,562  
    182  

DuPont de Nemours, Inc.

    10,097  
    542  

Eastman Chemical Company

    42,341  
    44  

Ecolab, Inc.

    8,793  
    300  

FMC Corporation

    31,773  
    1,236  

Freeport-McMoRan, Inc.

    19,331  
    282  

International Flavors & Fragrances, Inc.

    34,531  
    764  

International Paper Company

    30,973  
    14  

Linde plc

    3,334  
    343  

LyondellBasell Industries NV - Class A

    24,178  
    159  

Martin Marietta Materials, Inc.

    37,422  
    3,886  

Mosaic Company

    70,997  
    135  

Newmont Mining Corporation

    8,566  
    689  

Nucor Corporation

    30,909  

 

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

 

21

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Materials — 6.2% (Continued)

    425  

Packaging Corporation of America

  $ 46,346  
    131  

PPG Industries, Inc.

    15,992  
    1,857  

Sealed Air Corporation

    72,070  
    12  

Sherwin-Williams Company

    8,361  
    221  

Vulcan Materials Company

    29,954  
    1,675  

WestRock Company

    58,190  
              857,198  
       

Real Estate — 7.6%

       
    141  

Alexandria Real Estate Equities, Inc.

    22,560  
    17  

American Tower Corporation

    4,109  
    2,191  

Apartment Investment & Management Company - Class A

    73,881  
    124  

AvalonBay Communities, Inc.

    18,518  
    419  

Boston Properties, Inc.

    33,646  
    589  

CBRE Group, Inc. - Class A (a)

    27,666  
    42  

Crown Castle International Corporation

    6,993  
    85  

Digital Realty Trust, Inc.

    12,475  
    847  

Duke Realty Corporation

    31,254  
    9  

Equinix, Inc.

    6,841  
    396  

Equity Residential

    20,327  
    139  

Essex Property Trust, Inc.

    27,910  
    302  

Extra Space Storage, Inc.

    32,311  
    987  

Federal Realty Investment Trust

    72,485  
    1,060  

Healthpeak Properties, Inc.

    28,779  
    4,549  

Host Hotels & Resorts, Inc.

    49,084  
    1,745  

Iron Mountain, Inc.

    46,749  
    6,598  

Kimco Realty Corporation

    74,293  
    286  

Mid-America Apartment Communities, Inc.

    33,162  
    64  

Prologis, Inc.

    6,440  
    67  

Public Storage

    14,922  
    320  

Realty Income Corporation

    19,440  
    1,563  

Regency Centers Corporation

    59,425  
    45  

SBA Communications Corporation

    14,332  
    303  

Simon Property Group, Inc.

    19,598  
    2,581  

SL Green Realty Corporation

    119,681  
    1,243  

UDR, Inc.

    40,534  

 

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

 

22

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Real Estate — 7.6% (Continued)

    621  

Ventas, Inc.

  $ 26,057  
    2,157  

Vornado Realty Trust

    72,712  
    293  

Welltower, Inc.

    16,141  
    742  

Weyerhaeuser Company

    21,162  
              1,053,487  
       

Utilities — 4.9%

       
    2,243  

AES Corporation

    40,621  
    645  

Alliant Energy Corporation

    33,314  
    297  

Ameren Corporation

    23,487  
    148  

American Electric Power Company, Inc.

    12,096  
    123  

American Water Works Company, Inc.

    17,820  
    392  

Atmos Energy Corporation

    37,471  
    2,126  

CenterPoint Energy, Inc.

    41,138  
    420  

CMS Energy Corporation

    25,792  
    256  

Consolidated Edison, Inc.

    19,917  
    89  

Dominion Energy, Inc.

    7,025  
    170  

DTE Energy Company

    19,557  
    95  

Duke Energy Corporation

    8,413  
    443  

Edison International

    22,522  
    239  

Entergy Corporation

    23,549  
    749  

Evergy, Inc.

    38,064  
    176  

Eversource Energy

    14,705  
    341  

Exelon Corporation

    12,194  
    976  

FirstEnergy Corporation

    28,021  
    13  

NextEra Energy, Inc.

    3,608  
    2,406  

NiSource, Inc.

    52,932  
    1,681  

NRG Energy, Inc.

    51,674  
    775  

Pinnacle West Capital Corporation

    57,776  
    743  

PPL Corporation

    20,217  
    340  

Public Service Enterprise Group, Inc.

    18,670  
    108  

Sempra Energy

    12,783  
    158  

Southern Company

    8,567  
    156  

WEC Energy Group, Inc.

    15,116  

 

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

 

23

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Schedule of Investments
September 30, 2020 (Continued)

 

 

 

Shares

 

Security Description

 

Value

 
       

COMMON STOCKS — 99.7% (Continued)

       

Utilities — 4.9% (Continued)

    178  

Xcel Energy, Inc.

  $ 12,284  
              679,333  
       

TOTAL COMMON STOCKS (Cost $15,094,459)

    13,777,436  
                 
       

SHORT-TERM INVESTMENTS — 0.1%

       
    13,007  

First American Government Obligations Fund, Class X, 0.07% (b)

    13,007  
       

TOTAL SHORT-TERM INVESTMENTS (Cost $13,007)

    13,007  
       

TOTAL INVESTMENTS — 99.8% (Cost $15,107,466)

    13,790,443  
       

Other Assets in Excess of Liabilities — 0.2%

    20,821  
       

NET ASSETS — 100.0%

  $ 13,811,264  

 

Percentages are stated as a percent of net assets.

The Fund’s security classifications are defined by the Fund Advisor.

(a)

Non-income producing security.

(b)

Rate shown is the annualized seven-day yield as of September 30, 2020.

 

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

 

24

 

 

Exponential ETFs

 

Statements of Assets and Liabilities
September 30, 2020

 

 

ASSETS

 

American Customer
Satisfaction ETF

   

Reverse Cap
Weighted U.S.
Large Cap ETF

 

Investments in securities, at value*

  $ 58,909,811     $ 13,790,443  

Dividends and interest receivable

    33,148       24,223  

Total assets

  $ 58,942,959     $ 13,814,666  
                 

LIABILITIES

               

Management fees payable

    31,244       3,402  

Total liabilities

    31,244       3,402  
                 

NET ASSETS

  $ 58,911,715     $ 13,811,264  
                 

Net assets consist of:

               

Paid-in capital

  $ 64,123,398     $ 16,256,230  

Total distributable earnings (accumulated deficit)

    (5,211,683 )     (2,444,966 )

Net assets

  $ 58,911,715     $ 13,811,264  
                 

Net asset value:

               

Net assets

  $ 58,911,715     $ 13,811,264  

Shares outstanding^

    1,575,000       900,000  

Net asset value, offering and redemption price per share

  $ 37.40     $ 15.35  
                 

*Identified Cost:

               

Investments in securities

  $ 56,253,011     $ 15,107,466  

 

^

No par value, unlimited number of shares authorized.

 

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

 

25

 

 

Exponential ETFs

 

Statements of Operations
For the Year Ended September 30, 2020

 

 

INCOME

 

American Customer
Satisfaction ETF

   

Reverse Cap
Weighted U.S.
Large Cap ETF

 

Dividends*

  $ 1,131,849     $ 241,411  

Interest

    527       118  

Total investment income

    1,132,376       241,529  
                 

EXPENSES

               

Management fees

    364,516       30,344  

Total expenses

    364,516       30,344  

Net investment income (loss)

    767,860       211,185  
                 

REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS

               

Net realized gain (loss) on investments

    4,001,858       (456,757 )

Change in unrealized appreciation (depreciation) on investments

    781,175       (516,362 )

Net realized and unrealized gain (loss) on investments

    4,783,033       (973,119 )

Net increase (decrease) in net assets resulting from operations

  $ 5,550,893     $ (761,934 )

 

*

Net of foreign taxes withheld of $0 and $15, respectively.

 

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

 

26

 

 

American Customer Satisfaction ETF

 

Statements of Changes in Net Assets

 

 

   

Year Ended
September 30,
2020

   

Year Ended
September 30,
2019

 

OPERATIONS

               

Net investment income (loss)

  $ 767,860     $ 903,616  

Net realized gain (loss) on investments

    4,001,858       5,106,590  

Change in unrealized appreciation (depreciation) on investments

    781,175       (4,906,985 )

Net increase (decrease) in net assets resulting from operations

    5,550,893       1,103,221  
                 

DISTRIBUTIONS TO SHAREHOLDERS

               

Net distributions to shareholders

    (991,046 )     (778,066 )

Total distributions to shareholders

    (991,046 )     (778,066 )
                 

CAPITAL SHARE TRANSACTIONS

               

Proceeds from shares sold

    66,550,165       34,660,945  

Payments for shares redeemed

    (70,197,213 )     (34,834,770 )

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

    (3,647,048 )     (173,825 )

Net increase (decrease) in net assets

  $ 912,799     $ 151,330  
                 

NET ASSETS

               

Beginning of year

  $ 57,998,916     $ 57,847,586  

End of year

  $ 58,911,715     $ 57,998,916  

 

(a)

A summary of capital share transactions is as follows:

 

   

Shares

   

Shares

 

Subscriptions

    1,900,000       1,050,000  

Redemptions

    (2,025,000 )     (1,050,000 )

Net increase (decrease)

    (125,000 )      

 

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

 

27

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Statements of Changes in Net Assets

 

 

   

Year Ended
September 30,
2020

   

Year Ended
September 30,
2019

 

OPERATIONS

               

Net investment income (loss)

  $ 211,185     $ 155,608  

Net realized gain (loss) on investments

    (456,757 )     812,775  

Change in unrealized appreciation (depreciation) on investments

    (516,362 )     (755,788 )

Net increase (decrease) in net assets resulting from operations

    (761,934 )     212,595  
                 

DISTRIBUTIONS TO SHAREHOLDERS

               

Net distributions to shareholders

    (177,756 )     (88,215 )

Total distributions to shareholders

    (177,756 )     (88,215 )
                 

CAPITAL SHARE TRANSACTIONS

               

Proceeds from shares sold

    14,509,230       13,069,455  

Payments for shares redeemed

    (8,970,335 )     (9,883,650 )

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

    5,538,895       3,185,805  

Net increase (decrease) in net assets

  $ 4,599,205     $ 3,310,185  
                 

NET ASSETS

               

Beginning of year

  $ 9,212,059     $ 5,901,874  

End of year

  $ 13,811,264     $ 9,212,059  

 

(a)

A summary of capital share transactions is as follows:

 

   

Shares

   

Shares

 

Subscriptions

    950,000       800,000  

Redemptions

    (600,000 )     (600,000 )

Net increase (decrease)

    350,000       200,000  

 

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

 

28

 

 

American Customer Satisfaction ETF

 

Financial Highlights

For a capital share outstanding throughout the year/period

 

 

   

Year Ended
September 30,
2020

   

Year Ended
September 30,
2019

   

Year Ended
September 30,
2018

   

Period Ended
September 30,
2017
(1)

 

Net asset value, beginning of year/period

  $ 34.12     $ 34.03     $ 29.18     $ 25.00  
                                 

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

                               

Net investment income (loss) (2)

    0.47       0.52       0.45       0.40  

Net realized and unrealized gain (loss) on investments

    3.39       0.03 (7)      4.77       3.83  

Total from investment operations

    3.86       0.55       5.22       4.23  
                                 

DISTRIBUTIONS TO SHAREHOLDERS:

                               

Distributions from:

                               

Net investment income

    (0.58 )     (0.46 )     (0.37 )     (0.05 )

Total distributions

    (0.58 )     (0.46 )     (0.37 )     (0.05 )
                                 

Capital share transactions:

                               

Transaction fees

                0.00 (6)       

Net asset value, end of year/period

  $ 37.40     $ 34.12     $ 34.03     $ 29.18  
                                 

Total return

    11.44 %     1.86 %     18.02 %     16.92 %(3)
                                 

SUPPLEMENTAL DATA:

                               

Net assets at end of year/period (000’s)

  $ 58,912     $ 57,999     $ 57,848     $ 40,849  
                                 

RATIOS TO AVERAGE NET ASSETS:

                               

Expenses to average net assets

    0.65 %     0.65 %     0.65 %     0.65 %(4)

Net investment income (loss) to average net assets

    1.37 %     1.59 %     1.41 %     1.56 %(4)

Portfolio turnover rate (5)

    67 %     36 %     72 %     38 %(3)

 

(1)

Commencement of operations on October 31, 2016.

(2)

Calculated based on average shares outstanding during the period.

(3)

Not annualized.

(4)

Annualized.

(5)

Excludes the impact of in-kind transactions.

(6)

Represents less than $0.005.

(7)

Net realized and unrealized gain (loss) per share in the caption are balancing amounts necessary to reconcile the change in the net asset value per share for the period, and may not reconcile with the aggregate gain (loss) in the Statements of Operations due to share transactions for the period.

 

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

 

29

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Financial Highlights

For a capital share outstanding throughout the period/year

 

 

   

Year Ended
September 30,
2020

   

Year Ended
September 30,
2019

   

Period Ended
September 30,
2018
(1)

 

Net asset value, beginning of period/year

  $ 16.75     $ 16.86     $ 15.00  
                         

INCOME (LOSS) FROM INVESTMENT OPERATIONS:

                       

Net investment income (loss) (2)

    0.32       0.29       0.25  

Net realized and unrealized gain (loss) on investments

    (1.40 )     (0.24 )(6)     1.66  

Total from investment operations

    (1.08 )     0.05       1.91  
                         

DISTRIBUTIONS TO SHAREHOLDERS:

                       

Distributions from:

                       

Net investments income

    (0.32 )     (0.16 )     (0.05 )

Total distributions

    (0.32 )     (0.16 )     (0.05 )
                         

Net asset value, end of year/period

  $ 15.35     $ 16.75     $ 16.86  
                         

Total return

    -6.70 %     0.46 %     12.78 %(3)
                         

SUPPLEMENTAL DATA:

                       

Net assets at end of year/period (000’s)

  $ 13,811     $ 9,212     $ 5,902  
                         

RATIOS TO AVERAGE NET ASSETS:

                       

Expenses to average net assets

    0.29 %     0.29 %     0.29 %(4)

Net investment income (loss) to average net assets

    2.04 %     1.80 %     1.66 %(4)

Portfolio turnover rate (5)

    42 %     24 %     36 %(3)

 

(1)

Commencement of operations on October 31, 2017.

(2)

Calculated based on average shares outstanding during the period.

(3)

Not annualized.

(4)

Annualized.

(5)

Excludes the impact of in-kind transactions.

(6)

Net realized and unrealized gain (loss) per share in the caption are balancing amounts necessary to reconcile the change in the net asset value per share for the period, and may not reconcile with the aggregate gain (loss) in the Statements of Operations due to share transactions for the period.

 

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

 

30

 

 

Exponential ETFs

 

Notes to Financial Statements
September 30, 2020

 

 

NOTE 1 – ORGANIZATION

 

American Customer Satisfaction ETF and Reverse Cap Weighted U.S. Large Cap ETF (individually each a “Fund” or collectively the “Funds”) are 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 Funds’ shares is registered under the Securities Act of 1933, as amended (the “Securities Act”). The investment objective of the American Customer Satisfaction ETF is to track the performance, before fees and expenses, of the American Customer Satisfaction Investable Index. The investment objective of the Reverse Cap Weighted U.S. Large Cap ETF is to track the performance, before fees and expenses, of the Reverse Cap Weighted U.S. Large Cap Index. American Customer Satisfaction ETF commenced operations on October 31, 2016, and Reverse Cap Weighted U.S. Large Cap ETF commenced operations on October 31, 2017.

 

The end of the reporting period for the Funds is September 30, 2020, and the period covered by these Notes to Financial Statements is the fiscal year ended September 30, 2020 (the “current fiscal period”).

 

NOTE 2 – SIGNIFICANT ACCOUNTING POLICIES

 

The Funds are investment companies and accordingly follow 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 Funds. 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 Stock Market®, Nasdaq Global Select Markets® and Nasdaq Capital Market® Exchange (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

 

31

 

 

Exponential ETFs

 

NOTES TO FINANCIAL STATEMENTS
September 30, 2020 (Continued)

 

 

security does not trade on a particular day, then the mean between the last quoted closing bid and asked price will be used. Prices denominated in foreign currencies are converted to U.S. dollar equivalents at the current exchange rate, which approximates fair value.

 

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 Funds’ 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 Funds may cause the NAV of their shares to differ significantly from the NAV that would be calculated without regard to such considerations.

 

As described above, the Funds utilize various methods to measure the fair value of their 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 Funds have the ability to access.

 

 

Level 2 —

Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either directly or indirectly. These inputs may include quoted prices for the identical instrument on an inactive market, prices for similar 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 Funds’ own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would be based on the best information available.

 

The 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

 

32

 

 

Exponential ETFs

 

NOTES TO FINANCIAL STATEMENTS
September 30, 2020 (Continued)

 

 

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.

 

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 Funds’ investments as of the end of the current fiscal period:

 

American Customer Satisfaction ETF

 

Assets^

 

Level 1

   

Level 2

   

Level 3

   

Total

 

Common Stocks

  $ 58,856,085     $     $     $ 58,856,085  

Short-Term Investments

    53,726                   53,726  

Total Investments in Securities

  $ 58,909,811     $     $     $ 58,909,811  

 

Reverse Cap Weighted U.S. Large Cap ETF

 

Assets^

 

Level 1

   

Level 2

   

Level 3

   

Total

 

Common Stocks

  $ 13,777,436     $     $     $ 13,777,436  

Short-Term Investments

    13,007                   13,007  

Total Investments in Securities

  $ 13,790,443     $     $     $ 13,790,443  

 

^

See Schedules of Investments for breakout of investments by sector classifications.

 

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

 

 

B.

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

 

33

 

 

Exponential ETFs

 

NOTES TO FINANCIAL STATEMENTS
September 30, 2020 (Continued)

 

 

Each Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained. Management has analyzed each 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 Funds recognize interest and penalties, if any, related to unrecognized tax benefits on uncertain tax positions as income tax expenses in the Statements of Operations. During the current fiscal period, the Funds 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 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 Funds’ understanding of the applicable tax rules and regulations.

 

Distributions received from investments in real estate investment trusts (“REITs”) may be characterized as ordinary income, net capital gain, or a return of capital. The proper characterization of REIT distributions is generally not known until after the end of each calendar year. As such, the Funds must use estimates in reporting the character of income and distributions received in the current calendar year for financial statement purposes. The actual character of distributions to a Fund’s shareholders will be reflected on the Form 1099 received by shareholders after the end of the calendar year. Due to the nature of REIT investments, a portion of the distributions received by a Fund’s shareholders may represent a return of capital.

 

 

D.

Distributions to Shareholders. Distributions to shareholders from net investment income and net realized gains on securities are declared and paid by the Funds on 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 and disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported amounts of revenues and expenses during the current fiscal period. Actual results could differ from those estimates.

 

34

 

 

Exponential ETFs

 

NOTES TO FINANCIAL STATEMENTS
September 30, 2020 (Continued)

 

 

 

F.

Share Valuation. The NAV per share of each Fund is calculated by dividing the sum of the value of the securities held by each Fund, plus cash and other assets, minus all liabilities (including estimated accrued expenses) by the total number of outstanding shares for each Fund, rounded to the nearest cent. The Funds’ 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 each Fund is equal to each Fund’s NAV per share.

 

 

G.

Reclassifications 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.

 

The permanent differences primarily relate to redemptions in kind. For the fiscal year ended September 30, 2020, the following table shows the reclassifications made:

 

   

Distributable Earnings
(Accumulated Deficit)

   

Paid-In
Capital

 

American Customer Satisfaction ETF

  $ (10,116,802 )   $ 10,116,802  

Reverse Cap Weighted U.S. Large Cap ETF

    (480,835 )     480,835  

 

During the fiscal year ended September 30, 2020, the Funds realized the following net capital gains resulting from in-kind redemptions, in which shareholders exchanged Fund shares for securities held by the Funds rather than for cash. Because such gains are not taxable to the Funds, and are not distributed to shareholders, they have been reclassified from distributable earnings (accumulated deficit) to paid in capital.

 

American Customer Satisfaction ETF

  $ 10,116,802  

Reverse Cap Weighted U.S. Large Cap ETF

    480,835  

 

 

H.

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

 

 

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

 

35

 

 

Exponential ETFs

 

NOTES TO FINANCIAL STATEMENTS
September 30, 2020 (Continued)

 

 

or transactions that occurred during the period subsequent to the end of the current fiscal period that materially impacted the amounts or disclosures in the Fund’s financial statements.

 

 

J.

New Accounting Pronouncements. In August 2018, FASB issued Accounting Standards Update (“ASU”) 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

 

CSat Investment Advisory, L.P. d/b/a Exponential ETFs (the “Advisor”), serves as the investment advisor and index provider to the Funds. Pursuant to an Investment Advisory Agreement (“Advisory Agreement”) between the Trust, on behalf of the Funds, and the Advisor, the Advisor provides investment advice to the Funds and oversees the day-to-day operations of the Funds, subject to the direction and control of the Board and the officers of the Trust. Under the Advisory Agreement, the Advisor also arranges for the transfer agency, custody, fund administration and accounting, and other non-distribution related services necessary for the Funds to operate. Under the Advisory Agreement, the Advisor has agreed to pay all expenses of each Fund, except for: the fee paid to the Advisor pursuant to the Advisory Agreement, interest charges on any borrowings, dividends and other expenses on securities sold short, 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 Funds, American Customer Satisfaction ETF pays the Advisor 0.65% and Reverse Cap Weighted U.S. Large Cap ETF pays the Advisor 0.294% at an annual rate based on each Fund’s average daily net assets.

 

U.S. Bancorp Fund Services, LLC, doing business as U.S. Bank Global Fund Services, LLC (“Fund Services” or “Administrator”), acts as the Funds’ Administrator and, in that capacity, performs various administrative and accounting services for the Funds. The Administrator prepares various federal and state regulatory filings, reports and returns for the Funds, including regulatory compliance monitoring and financial reporting;

 

36

 

 

Exponential ETFs

 

NOTES TO FINANCIAL STATEMENTS
September 30, 2020 (Continued)

 

 

prepares reports and materials to be supplied to the Board; monitors the activities of the Funds’ Custodian, transfer agent and fund accountant. Fund Services also serves as the transfer agent and fund accountant to the Funds. U.S. Bank N.A. (the “Custodian”), an affiliate of Fund Services, serves as the Funds’ 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 Funds, excluding short-term securities and in-kind transactions, were as follows:

 

   

Purchases

   

Sales

 

American Customer Satisfaction ETF

  $ 37,549,298     $ 37,310,429  

Reverse Cap Weighted U.S. Large Cap ETF

    4,853,615       4,420,849  

 

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

 

During the current fiscal period, in-kind transactions associated with creations and redemptions for the Funds were as follows:

 

   

Purchases

   

Sales

 

American Customer Satisfaction ETF

  $ 65,992,518     $ 69,999,161  

Reverse Cap Weighted U.S. Large Cap ETF

    13,948,808       8,791,853  

 

37

 

 

Exponential ETFs

 

NOTES TO FINANCIAL STATEMENTS
September 30, 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 as of September 30, 2020 were as follows:

 

   

American
Customer
Satisfaction ETF

   

Reverse Cap
Weighted U.S.
Large Cap ETF

 

Tax cost of investments

  $ 57,128,548     $ 15,448,619  

Gross tax unrealized appreciation

  $ 5,101,920     $ 597,663  

Gross tax unrealized depreciation

    (3,320,657 )     (2,255,840 )

Net tax unrealized appreciation (depreciation)

    1,781,263       (1,658,177 )

Undistributed ordinary income

    477,342       149,966  

Undistributed long- term capital gains

           

Other accumulated gain (loss)

    (7,470,288 )     (936,755 )

Distributable earnings (accumulated deficit)

  $ (5,211,683 )   $ (2,444,966 )

 

The differences between the cost basis for financial statement and federal income tax purposes are primarily due 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 Funds’ taxable year subsequent to October 31 and December 31, respectively. For the taxable year ended September 30, 2020, the Funds did not elect to defer any post-October capital losses or late-year ordinary losses.

 

As of September 30, 2020, the Funds had the following capital loss carryforwards with an indefinite expiration:

 

   

Short-Term

   

Long-Term

 

American Customer Satisfaction ETF

  $ 4,133,319     $ 3,336,969  

Reverse Cap Weighted U.S. Large Cap ETF

    514,944       421,811  

 

38

 

 

Exponential ETFs

 

NOTES TO FINANCIAL STATEMENTS
September 30, 2020 (Continued)

 

 

The tax character of distributions paid by the Funds during the fiscal year ended September 30, 2020 was as follows:

 

   

Ordinary Income

   

Capital Gains

 

American Customer Satisfaction ETF

  $ 991,046     $  

Reverse Cap Weighted U.S. Large Cap ETF

    177,756        

 

The tax character of distributions paid by the Funds during the fiscal year ended September 30, 2019 was as follows:

 

   

Ordinary Income

   

Capital Gains

 

American Customer Satisfaction ETF

  $ 778,066     $  

Reverse Cap Weighted U.S. Large Cap ETF

    88,215        

 

NOTE 6 – SHARE TRANSACTIONS

 

Shares of the Funds are listed and trade on Cboe BZX Exchange, Inc. (“Cboe”). Market prices for the shares may be different from their NAV. The Funds issue and redeem shares on a continuous basis at NAV generally in blocks of 25,000 shares for American Customer Satisfaction ETF and 50,000 shares for Reverse Cap Weighted U.S. Large Cap ETF, called “Creation Units.” Creation Units are issued and redeemed principally in-kind for securities included in a specified universe. Once created, shares generally trade in the secondary market at market prices that change throughout the day. Except when aggregated in Creation Units, shares are not redeemable securities of the Funds. Creation Units may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a Depository Trust Company participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem shares directly from the Funds. 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 Funds each currently offer 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 American Customer Satisfaction ETF is $250 and for Reverse Cap Weighted U.S. Large Cap ETF is $500, payable to the Custodian. The fixed transaction fee may be waived on certain orders if

 

39

 

 

Exponential ETFs

 

NOTES TO FINANCIAL STATEMENTS
September 30, 2020 (Continued)

 

 

the Funds’ Custodian has determined to waive some or all of the creation order costs associated with the order, or another party, such as the Advisor, 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 received by the Funds, if any, are displayed in the Capital Shares Transactions section of the Statements of Changes in Net Assets. The Funds may issue an unlimited number of shares of beneficial interest, with no par value. All shares of the Funds have equal rights and privileges.

 

NOTE 7 – BENEFICIAL OWNERSHIP

 

The beneficial ownership, either directly or indirectly, of 25% or more of the voting securities of a fund creates presumption of control of a fund, under Section 2(a)(9) of the Investment Company Act of 1940. As of the end of the current fiscal period, an owner of the Advisor holds more than 25% of the total outstanding shares of the American Customer Satisfaction ETF.

 

NOTE 8 – RISKS

 

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

 

Investment Company Risk. The American Customer Satisfaction ETF invests in investment companies. The risks of investment in investment companies, such as ETFs, typically reflect the risks of the types of instruments in which the investment companies invest. By investing in another investment company, the Fund becomes a shareholder of that investment company and bears its proportionate share of the fees and expenses of the other investment company. The Fund may be subject to statutory limits with respect to the amount it can invest in other ETFs, which may adversely affect the Fund’s ability to achieve its investment objective. Investments in ETFs are also subject to the following risks: (i) the market price of an ETF’s shares may trade above or below its net asset value; (ii) an active trading market for an ETF’s shares may not develop or be maintained; and (iii) trading of an ETF’s shares may be halted for a number of reasons.

 

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 Funds invest depends on future developments, including the duration and spread of the outbreak, and such uncertainty may in turn impact the value of the Funds’ investments.

 

40

 

 

Exponential ETFs

 

Report of Independent Registered Public Accounting Firm

 

 

To the Shareholders of American Customer Satisfaction ETF and Reverse Cap Weighted U.S. Large Cap ETF and Board of Trustees of ETF Series Solutions

 

Opinion on the Financial Statements

 

We have audited the accompanying statements of assets and liabilities, including the schedules of investments, of American Customer Satisfaction ETF and Reverse Cap Weighted U.S. Large Cap ETF (the “Funds”), each a series of ETF Series Solutions, as of September 30, 2020, the related statements of operations, the statements of changes in net assets and the financial highlights for each of the periods indicated below, 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 each of the Funds as of September 30, 2020, the results of their operations, the changes in their net assets, and the financial highlights for each of the periods indicated below in conformity with accounting principles generally accepted in the United States of America.

 

Fund Name

Statements of
Operations

Statements
of Changes in
Net Assets

Financial Highlights

American Customer Satisfaction ETF

For the year ended September 30, 2020

For the years ended September 30, 2020 and 2019

For the years ended September 30, 2020, 2019, and 2018 and for the period from October 31, 2016 (commencement of operations) through September 30, 2017

Reverse Cap Weighted U.S. Large Cap ETF

For the year ended September 30, 2020

For the years ended September 30, 2020 and 2019

For the years ended September 30, 2020 and 2019, and for the period from October 31, 2017 (commencement of operations) through September 30, 2018

 

Basis for Opinion

 

These financial statements are the responsibility of the Funds’ management. Our responsibility is to express an opinion on the Funds’ 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 Funds in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

 

41

 

 

Exponential ETFs

 

Report of Independent Registered Public Accounting Firm

(Continued)

 

 

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 September 30, 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.

 

We have served as the Funds’ auditor since 2016.

 

 

COHEN & COMPANY, LTD.
Milwaukee, Wisconsin
November 25, 2020

 

42

 

 

Exponential ETFs

 

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).

45

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).

45

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).

45

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).

45

None

 

43

 

 

Exponential ETFs

 

TRUSTEES AND OFFICERS

(Unaudited) (Continued)

 

 

The officers of the Trust conduct and supervise its daily business. 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).

 

44

 

 

Exponential ETFs

 

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. Zoller
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, or by accessing the SEC’s website at www.sec.gov, or by accessing the Funds’ websites at www.acsietf.com and www.reverseetf.com.

 

45

 

 

Exponential ETFs

 

Expense Examples

For the Six-Months Ended September 30, 2020 (Unaudited)

 

 

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

 

Actual Expenses

 

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

 

Hypothetical Example for Comparison Purposes

 

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

 

American Customer Satisfaction ETF

 

 

Beginning
Account Value
April 1, 2020

Ending
Account Value
September 30, 2020

Expenses
Paid During
the Period
(1)

Actual

$ 1,000.00

$ 1,114.40

$3.44

Hypothetical (5% annual return before expenses)

$ 1,000.00

$ 1,021.75

$3.29

 

(1)

The dollar amounts shown as expenses paid during the period are equal to the annualized expense ratio, 0.65%, multiplied by the average account value during the period, multiplied by 183/366, to reflect one-half year period.

 

46

 

 

Exponential ETFs

 

Expense Examples

For the Six-Months Ended September 30, 2020 (Unaudited) (Continued)

 

 

Reverse Cap Weighted U.S. Large Cap ETF

 

 

Beginning
Account Value
April 1, 2020

Ending
Account Value
September 30, 2020

Expenses
Paid During
the Period
(2)

Actual

$ 1,000.00

$ 933.00

$1.42

Hypothetical (5% annual return before expenses)

$ 1,000.00

$ 1,023.53

$1.49

 

(2)

The dollar amounts shown as expenses paid during the period are equal to the annualized expense ratio, 0.294%, multiplied by the average account value during the period, multiplied by 183/366, to reflect one-half year period.

 

47

 

 

Exponential ETFs

 

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.

 

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Exponential ETFs

 

Approval of Advisory Agreements & Board Considerations

(Unaudited)

 

 

Pursuant to Section 15(c) of the Investment Company Act of 1940 (the “1940 Act”), at a meeting held on April 21-22, 2020 (the “Meeting”), the Board of Trustees (the “Board”) of ETF Series Solutions (the “Trust”) considered the approval of the continuation of the Investment Advisory Agreement (the “Advisory Agreement”) between CSat Investment Advisory, L.P., doing business as Exponential ETFs (the “Adviser”), and the Trust, on behalf of the American Customer Satisfaction ETF and Reverse Cap Weighted U.S. Large Cap ETF (each, a “Fund”, and collectively, the “Funds”).

 

Prior to the Meeting, the Board, including the Trustees who are not parties to the Agreement or “interested persons” of any party thereto, as defined in the 1940 Act (the “Independent Trustees”), reviewed written materials from the Adviser (the “Materials”) regarding, among other things: (i) the nature, extent, and quality of the services provided by the Adviser; (ii) the historical performance of each Fund; (iii) the cost of the services provided and the profits realized by the Adviser from services rendered to the Funds; (iv) comparative fee and expense data for each Fund and other investment companies with similar investment objectives; (v) the extent to which the advisory fee for each Fund reflects economies of scale shared with the applicable Fund shareholders; and (vi) other factors the Board deemed to be relevant.

 

The Board also considered that the Adviser, along with other service providers of the Funds, presented written information to help the Board evaluate the Adviser’s fees and other aspects of the Agreement. Additionally, representatives from the Adviser provided an oral overview of each Fund’s strategy, the services provided to the Funds by the Adviser, and additional information about the Adviser’s personnel and operations. The Board then discussed the written materials and oral presentation that it had received and any other information that the Board received at the Meeting and deliberated on the approval of the Agreement in light of this information. In its deliberations, the Board did not identify any single piece of information discussed below that was all-important or controlling.

 

Approval of the Advisory Agreement with the Adviser

 

Nature, Extent, and Quality of Services Provided. The Trustees considered the scope of services provided under the Advisory Agreement, noting that the Adviser would continue to provide investment management services to the Funds. In considering the nature, extent, and quality of the services provided by the Adviser, the Board considered the quality of the Adviser’s compliance infrastructure and past reports from the Trust’s Chief Compliance Officer. The Board also considered its previous experience with the Adviser providing investment management services to the Funds. The Board noted that it had received a copy of the Adviser’s registration form (“Form ADV”), as well as the response of the Adviser to a detailed series of questions which included, among other things, information about the background and experience of the firm’s key personnel, the firm’s cybersecurity policy, and the services provided by the Adviser.

 

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Exponential ETFs

 

APPROVAL OF ADVISORY AGREEMENTs & BOARD CONSIDERATIONs
(Unaudited) (Continued)

 

 

The Board also considered other services currently provided by the Adviser to the Funds, such as monitoring adherence to each Fund’s investment restrictions, monitoring compliance with various policies and procedures and with applicable securities regulations, and monitoring the extent to which each Fund achieved its investment objective as a passively-managed fund. The Board further considered the oral information provided by the Adviser with respect to the impact of the COVID-19 pandemic on the Adviser’s operations.

 

Historical Performance. The Board noted that it had received information regarding each Fund’s performance for various time periods in the Materials and primarily considered each Fund’s performance for periods ended March 31, 2020, unless otherwise indicated below. Because each Fund is designed to track the performance of an index, the Board considered the extent to which each Fund tracked its index before fees and expenses.

 

American Customer Satisfaction ETF: The Board noted that, for the one-year, three-year, and since inception periods, the Fund’s performance was generally in line with that of its underlying index before fees and expenses, but had trailed the performance of the S&P 500 Index. The Board further noted that, for the one-year period ended January 31, 2020, the Fund had underperformed the median for funds in the universe of U.S. Large Blend ETFs as reported by Morningstar (the “Category Peer Group”). The Board also considered that, for the period ended December 31, 2019, the Fund underperformed the median for its most direct competitors as identified by the Adviser (the “Selected Peer Group”). The Board noted that the Selected Peer Group was comprised of funds that did not focus on customer satisfaction data, but did include funds with smart beta strategies, typically a large cap bias, and a particular focus on either proprietary data sources or quality, value, and fundamental factors.

 

Reverse Cap Weighted U.S. Large Cap ETF: The Board noted that the Fund slightly outperformed its underlying index before fees and expenses for the one-year and since inception periods, but had significantly underperformed relative to the S&P 500 Index. The Board further noted that, for the one-year period ended January 31, 2020, the Fund had outperformed the median for funds in the universe of U.S. Mid-Cap Value ETFs as reported by Morningstar (the “Category Peer Group”). The Board noted that, although Morningstar had assigned the Fund to the U.S. Mid-Cap Value category, the Category Peer Group may not be an apt comparison for the Fund, which is comprised of companies in the S&P 500 Index. The Board considered that, for the period ended December 31, 2019, the Fund underperformed the median for its most direct competitors as identified by the Adviser (the “Selected Peer Group”), which was comprised of large-cap funds with an investment strategy that relies on S&P 500 components, employs an alternative weight scheme focused on size, or employs a mean reversion strategy. The Board further noted that the Fund had less than two years of operating history, which was a relatively short period of time over which to evaluate the Fund’s performance and draw meaningful conclusions.

 

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Exponential ETFs

 

APPROVAL OF ADVISORY AGREEMENTs & BOARD CONSIDERATIONs
(Unaudited) (Continued)

 

 

Cost of Services Provided and Economies of Scale. The Board reviewed the expense ratio for each of the Funds and compared each Fund’s expense ratio to its respective Category Peer Group and Selected Peer Group as follows:

 

American Customer Satisfaction ETF: The Board noted that the expense ratio for the Fund was significantly higher than the median of its Category Peer Group and near the top of the Category Peer Group. The Board also noted that, because the Category Peer Group included a number of significantly larger, low-cost ETFs, the peer group may not allow for an apt comparison by which to judge the Fund’s expense ratio. The Board further noted that the Fund’s expense ratio was higher than the median for its Selected Peer Group, but within the range of funds in the Selected Peer Group.

 

Reverse Cap Weighted U.S. Large Cap ETF: The Board noted that the expense ratio for the Fund was lower than the median of its Category Peer Group. The Board further noted that the Fund’s expense ratio was higher than the median for its Selected Peer Group, but within the range of funds in the Selected Peer Group.

 

The Board took into consideration that the advisory fee for each Fund was a “unified fee,” meaning the Fund paid no expenses other than the advisory fee and certain other costs such as interest, brokerage, acquired fund fees and expenses, extraordinary expenses and, to the extent it is implemented, fees pursuant to a Distribution and/or Shareholder Servicing (12b-1) Plan. The Board noted that the Adviser continued to be responsible for compensating the Trust’s other service providers and paying each Fund’s other expenses out of its own fee and resources. The Board also evaluated the compensation and benefits received by the Adviser from its relationship with the Funds, taking into account analyses of the Adviser’s profitability with respect to each Fund.

 

The Board expressed the view that it currently appeared that the Adviser might realize economies of scale in managing the Funds as assets grow in size. The Board further determined that, based on the amount and structure of each Fund’s unitary fee, such economies of scale would be shared with the applicable Fund shareholders, although the Board intends to monitor fees as each Fund grows in size and assess whether fee breakpoints may be warranted.

 

Conclusion. No single factor was determinative of the Board’s decision to approve the continuation of the Advisory Agreement; rather, the Board based its determination on the total mix of information available to it. Based on a consideration of all the factors in their totality, the Board, including a majority of the Independent Trustees, determined that the Advisory Agreement, including the compensation payable under the agreement, was fair and reasonable to each Fund. The Board, including a majority of the Independent Trustees, therefore determined that the approval of the continuation of the Advisory Agreement was in the best interests of each Fund and its respective shareholders.

 

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Exponential ETFs

 

Federal Tax Information

(Unaudited)

 

 

For the fiscal year ended September 30, 2020, certain dividends paid by the Funds may be subject to the 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 were as follows:

 

American Customer Satisfaction ETF

100.00%

Reverse Cap Weighted U.S. Large Cap ETF

99.83%

 

For corporate shareholders, the percentage of ordinary income distributions qualified for the corporate dividend received deduction for the fiscal year ended September 30, 2020 were as follows:

 

American Customer Satisfaction ETF

100.00%

Reverse Cap Weighted U.S. Large Cap ETF

97.01%

 

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 each Fund were as follows:

 

American Customer Satisfaction ETF

0.00%

Reverse Cap Weighted U.S. Large Cap ETF

0.00%

 

Information About Portfolio Holdings
(Unaudited)

 

 

Each Fund files its complete schedule 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. Each Fund’s portfolio holdings are posted on their respective websites at www.acsietf.com and www.reverseetf.com daily.

 

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Information About Proxy Voting

(Unaudited)

 

 

A description of the policies and procedures the Funds use 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 each Fund’s website at www.acsietf.com and www.reverseetf.com.

 

Information regarding how the Funds 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.

 

Frequency Distribution of Premiums and Discounts
(Unaudited)

 

 

Information regarding how often shares of the Funds trade on the exchange at a price above (i.e. at a premium) or below (i.e. at a discount) the NAV of the Fund is available, without charge, on each Fund’s website at www.acsietf.com and www.reverseetf.com.

 

53

 

 

Advisor and Index Provider

CSat Investment Advisory, L.P. d/b/a Exponential ETFs
1001 Woodward Avenue, Suite 500
Detroit, Michigan 48226

 

Distributor

Foreside Fund Services, LLC
Three Canal Plaza
Portland, Maine 04101

 

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

 

American Customer Satisfaction ETF

Symbol – ACSI
CUSIP – 26922A776

 

Reverse Cap Weighted U.S. Large Cap ETF

Symbol – RVRS
CUSIP – 226922A685

 

 

Item 2. Code of Ethics.

 

The registrant has adopted a code of ethics that applies to the registrant’s principal executive officer and principal financial officer. The registrant has not made any 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.

A copy of the registrant’s Code of Ethics is filed herewith.

 

Item 3. Audit Committee Financial Expert.

 

The registrant’s board of trustees 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.

 

American Customer Satisfaction ETF

  FYE 9/30/2020 FYE  9/30/2019
Audit Fees  $14,500 $14,500
Audit-Related Fees N/A N/A
Tax Fees $3,000 $3,000
All Other Fees N/A N/A

 

Reverse Cap Weighted U.S. Large Cap ETF

  FYE 9/30/2020 FYE 9/30/2019
Audit Fees $14,500 $14,500
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:

 

American Customer Satisfaction ETF

  FYE 9/30/2020 FYE  9/30/2019
Audit-Related Fees 0% 0%
Tax Fees 0% 0%
All Other Fees 0% 0%

 

Reverse Cap Weighted U.S. Large Cap ETF

  FYE 9/30/2020 FYE  9/30/2019
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.

 

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.

 

American Customer Satisfaction ETF

Non-Audit Related Fees FYE 9/30/2020 FYE  9/30/2019
Registrant N/A N/A
Registrant’s Investment Adviser N/A N/A

 

Reverse Cap Weighted U.S. Large Cap ETF

Non-Audit Related Fees FYE 9/30/2020 FYE  9/30/2019
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: Janet D. Olsen, David A. Massart, and Leonard M. Rush.

 

 

 

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 for 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. Furnished 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 registrant’s independent public accountant. There was no change in the registrant’s public accountant for the period covered by the report.

 

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

 

 

SIGNATURES

 

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

 

(Registrant)   ETF Series Solutions  
     
By (Signature and Title)* /s/ Kristina R. Nelson  
  Kristina R. Nelson, President (principal executive officer)  
     
Date  12/08/2020  

 

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)  
     
Date 12/08/2020  
     
By (Signature and Title)* /s/ Kristen M. Weitzel  
  Kristen M. Weitzel Treasurer (principal financial officer)  
     
Date 12/08/2020