ANNUAL
report 2022
A series of The RBB Fund, Inc.
8/31/22
Stance Equity ESG Large Cap Core ETF |
This ETF is different from traditional ETFs.
Traditional ETFs tell the public what assets they hold each day. This ETF will not. This may create additional risks for your investment. For example:
• You may have to pay more money to trade the ETF's shares. This ETF will provide less information to traders, who tend to charge more for trades when they have less information.
• The price you pay to buy ETF shares on an exchange may not match the value of the ETF's portfolio. The same is true when you sell shares. These price differences may be greater for this ETF compared to other ETFs because it provides less information to traders.
• These additional risks may be even greater in bad or uncertain market conditions.
• The ETF will publish on its website each day a “Portfolio Reference Basket” designed to help trading in shares of the ETF. While the Portfolio Reference Basket includes all the names of the ETF's holdings, it is not the ETF's actual portfolio.
The differences between this ETF and other ETFs may also have advantages. By keeping certain information about the ETF portfolio secret, this ETF may face less risk that other traders can predict or copy its investment strategy. This may improve the ETF's performance. If other traders are able to copy or predict the ETF's investment strategy, however, this may hurt the ETF's performance.
| |
Stance Equity ESG Large Cap Core ETF (STNC) |
|
Table of Contents |
Letter to Shareholders |
1 |
Portfolio Characteristics |
3 |
Fund Expense Example |
5 |
Schedule of Investments |
6 |
Financial Statements |
9 |
Notes to Financial Statements |
13 |
Report of Independent Registered Public Accounting Firm |
22 |
Shareholder Tax Information |
23 |
Notice to Shareholders |
24 |
Privacy Notice |
27 |
Directors and Officers |
30 |
Stance Equity ESG Large Cap Core ETF
Letter to Shareholders
AUGUST 31, 2022 (UNAUDITED)
Dear Stance Equity ESG Large Cap Core ETF Shareholder:
The Stance Equity ESG Large Cap Core ETF (ticker: STNC) (the “Fund”) commenced investment operations during mid-March 2021 and has been structured to attempt to achieve long-term capital appreciation. The Fund is an actively managed exchange-traded fund (“ETF”) that invests, under normal circumstances at least 80% of the value of its net assets (plus the amount of any borrowings for investment purposes) in exchange-traded equity securities of U.S. large-capitalization issuers that meet environmental, social, and governance (“ESG”) standards, as determined and in the sole discretion of Stance Capital, LLC (“Stance”). The Fund currently considers companies within the Russell 1000® Index and S&P 500® Index to be large-capitalization issuers.
In identifying investments for the Fund, Stance generally utilizes three independent processes. First, we apply a rules-based methodology to the universe of large-capitalization companies and identify companies that successfully manage, in Stance’s view and in its sole discretion, sustainability-related key performance indicators (“KPIs”), which may include energy productivity,1 carbon intensity,2 water dependence,3 waste profile,4 and KPIs relating to governance, which may include capacity to innovate, unfunded pension fund liabilities, chief executive officer/average worker pay, safety performance, employee turnover, leadership diversity, percentage tax paid, and percent of bonus linked to sustainability performance. Companies that have engaged exclusively or primarily in weapons, tobacco, or thermal coal are generally excluded from consideration. Second, we apply a machine-learning model that uses financial, risk, and other factors to identify companies that, in our view and based on our sole discretion, are most likely to outperform both in absolute returns and in risk-adjusted returns over the next quarter. Finally, we attempt to optimize the Fund’s portfolio by minimizing tail risk and maximize diversification.
For the fiscal year ended August 31, 2022, the Fund’s total return was -10.50%, which compares to the S&P 500® Total Return Index’s return of -11.23% for the same period. For the year to date, the Fund has experienced strong relative returns to the S&P 500® Total Return Index. The Fund, which is managed generally to be more defensive while attempting to preserve as much upside as possible, returned -14.91% for the year-to-date, which compares to -16.14% for the S&P 500® Total Return Index for the same period.
In the opinion of the management team, the Fund’s outperformance was largely driven by the second quarter of 2022 (“Q2”), where the Fund outperformed the S&P 500® Total Return Index by over 5%. This outperformance was driven by our optimization tooling, which historically has shown resilience in risk management. The optimization weighted securities to minimize risk, which generated significant outperformance in Q2. This, combined with some small security selection edge in Q2, generated significant outperformance and avoided approximately one-third of the downturn in the market (a return of -10.68% for the Fund in Q2, which compares to a return of -16.10% in the S&P 500® Total Return Index over the same period).
The management team believes that its risk efficiency will pay off over the longer term as we enter more volatile environments with eyes on interest rate policy changes, global conflict, and a potential recession on the horizon.
In terms of improving our processes, the management team at Stance is constantly evaluating, testing, and implementing new sources of data and technology in order to continuously innovate and potentially deliver stronger outperformance and values alignment. We are confident that as we grow, our pace of innovation should accelerate, which we believe will deliver shareholder value.
1 | Energy productivity is a measure of the economic benefit a company receives from each unit of energy the company uses. |
2 | Carbon intensity is a measure of the degree to which a company’s revenues are linked to greenhouse gas production. |
3 | Water dependence is a measure of how dependent a company is on water as a resource. |
4 | Waste profile, or waste productivity, is a measure of how much (net) waste is created by a company. |
1 |
Stance Equity ESG Large Cap Core ETF
Letter to Shareholders (Concluded)
AUGUST 31, 2022 (UNAUDITED)
Several months ago, Stance determined that it is in the best interests of shareholders that the Fund be managed by a larger, more established platform. To that end, we are currently in the process of transitioning the Fund into a series of the Hennessy Funds Trust and changing the Fund’s current investment adviser from Red Gate Advisers, LLC, to Hennessy Advisors, Inc. It is our expectation that this administrative development, (the changing of the advisor) will not affect the investment process in any way, and will put us in a stronger position to improve risk adjusted returns for our unitholders.
We thank you for your continued trust and support in us and we hope to continuously earn and deliver upon it.
Sincerely,
Bill Davis
Bill Davis
Founding Partner, Portfolio Manager
Stance Capital, LLC
2 |
Stance Equity ESG Large Cap Core ETF
Portfolio Characteristics
(Unaudited)
AVERAGE ANNUAL TOTAL RETURNS FOR THE Periods ENDED AUGUST 31, 2022 | |||
ONE
|
Since
|
Inception
| |
Stance Equity ESG Large Cap Core ETF |
-10.50% |
-0.31% |
3/15/2021 |
S&P 500® Total Return Index** |
-11.23% |
1.23%(1) |
— |
Fund Expense Ratios (2): Gross 0.95% and Net 0.85% |
The performance data quoted represents past performance and does not guarantee future results. Current performance may be lower or higher. The investment return and principal value of an investment will fluctuate so that shares, when redeemed or sold, may be worth more or less than their original cost.
(1) |
Benchmark performance is from inception date of the Fund only and is not the inception date of the benchmark itself. |
(2) |
The expense ratios of the Fund are set forth according to the Prospectus for the Fund and may differ from the expense ratios disclosed in the Financial Highlights table in this report. See the Financial Highlights for most current expense ratios. |
** |
The S&P 500® Total Return Index is the total return version of the S&P 500® Index. Dividends are reinvested on a daily basis and all regular cash dividends are assumed reinvested in the index on the ex-dividend date. The S&P 500® Index is a market-capitalization-weighted index of 500 US stocks chosen for market size, liquidity and industry grouping, among other factors. The S&P 500® Index is designed to be a leading indicator of U.S. equities and is meant to reflect the risk/return characteristics of the large cap universe. The S&P 500® Index was first introduced on the 1st of January, 1923, though expanded to 500 stocks on March 4, 1957. |
The Adviser has contractually agreed to waive a portion of its’ unitary management fee to the extent necessary to limit the Fund’s annual operating expenses (excluding brokerage commissions, taxes, interest expense, acquired fund fees and expenses, and any extraordinary expenses) to an amount not exceeding 0.85% annually of the Fund’s average daily net assets. This contractual limitation is in effect until March 31, 2023 and may not be terminated without the approval of the Board. The Adviser may discontinue these arrangements at any time after March 31, 2023.
3 |
Stance Equity ESG Large Cap Core ETF
Portfolio Characteristics (Concluded)
(Unaudited)
The following tables show the top ten holdings and sector allocations, in which the Stance Equity ESG Large Cap Core ETF was invested in as of August 31, 2022. Portfolio holdings are subject to change without notice.
Top TEN Holdings |
%
OF Net |
Fortive Corp. |
4.0% |
Nielsen Holdings PLC |
4.0 |
Nasdaq, Inc. |
3.6 |
J M Smucker Co., (The) |
3.6 |
Illinois Tool Works, Inc. |
3.6 |
Home Depot, Inc., (The) |
3.6 |
Texas Instruments, Inc. |
3.5 |
Omnicom Group, Inc. |
3.5 |
Lowe’s Cos., Inc. |
3.5 |
Hershey Co., (The) |
3.4 |
36.3% |
The Stance Equity ESG Large Cap Core ETF uses the Global Industry Classification StandardSM (“GICSSM”) as the basis for the classification of securities on the Schedule of Investments (“SOI”).
Sector Allocation |
%
OF Net |
Health Care |
26.6% |
Information Technology |
21.9 |
Industrials |
14.3 |
Consumer Discretionary |
10.8 |
Financials |
9.2 |
Consumer Staples |
7.0 |
Communication Services |
3.5 |
Utilities |
3.4 |
Materials |
2.7 |
99.4% |
4 |
Stance Equity ESG Large Cap Core ETF
Fund Expense Example
AUGUST 31, 2022 (UNAUDITED)
As a shareholder of the Fund, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares, and (2) ongoing costs, including management fees. 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 ETFs.
This example is based on an investment of $1,000 invested at the beginning of the six-month period from March 1, 2022 through August 31, 2022, and held for the entire period.
Actual Expenses
The first line of the accompanying table provides information about actual account values and actual expenses. You may use the information in this line, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide your account value by $1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the number in the first line under the heading entitled “Expenses Paid During Period” to estimate the expenses you paid on your account during this period.
Hypothetical Example for Comparison Purposes
The second line of the accompanying table provides information about hypothetical account values 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 a Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
Please note that the expenses shown in the accompanying table are meant to highlight your ongoing costs only and do not reflect any transactional costs. Therefore, the second line of the accompanying table is useful in comparing ongoing costs only and will not help you determine the relative total costs of owning different funds. In addition, if these transactional costs were included, your costs would have been higher.
|
Beginning |
Ending |
Expenses |
Annualized
|
Actual
SIX-MONTH Total Investment Return |
Stance Equity ESG Large Cap Core ETF |
|||||
Actual |
$ 1,000.00 |
$ 957.00 |
$ 4.19 |
0.85% |
-4.30% |
Hypothetical (5% return before expenses) |
1,000.00 |
1,020.92 |
4.33 |
0.85% |
N/A |
(1) |
Expenses are equal to the Fund’s annualized expense ratio for the period March 1, 2022 through August 31, 2022, multiplied by the average account value over the period, multiplied by the number of days (184) in the most recent fiscal half-year, then divided by 365 to reflect the one-half year period. The Fund’s ending account value in the first section in the table is based on the actual six-month total investment return for the Fund. |
(2) |
Ratios reflect expenses waived by the Fund’s investment adviser. Without these waivers, the Fund’s expenses would have been higher and the ending account values would have been lower. |
5 |
Stance Equity ESG Large Cap Core ETF
Schedule of Investments
AUGUST 31, 2022
|
Number
of |
Value |
||||||
Common Stocks — 99.4% |
||||||||
Biotechnology — 8.7% |
||||||||
Incyte Corp. (United States)* |
14,122 | $ | 994,612 | |||||
Regeneron Pharmaceuticals, Inc. (United States)* |
2,409 | 1,399,774 | ||||||
Vertex Pharmaceuticals, Inc. (United States)* |
4,692 | 1,322,018 | ||||||
3,716,404 | ||||||||
Capital Markets — 9.2% |
||||||||
Moody’s Corp. (United States) |
4,704 | 1,338,382 | ||||||
Nasdaq, Inc. (United States) |
25,722 | 1,531,231 | ||||||
S&P Global, Inc. (United States) |
2,950 | 1,038,931 | ||||||
3,908,544 | ||||||||
Chemicals — 2.7% |
||||||||
Sherwin-Williams Co., (The) (United States) |
5,022 | 1,165,606 | ||||||
Electric Utilities — 3.4% |
||||||||
NRG Energy, Inc. (United States) |
34,760 | 1,434,893 | ||||||
Electronic Equipment, Instruments & Components — 1.9% |
||||||||
Keysight Technologies, Inc. (United States)* |
4,978 | 815,844 | ||||||
Food Products — 7.0% |
||||||||
Hershey Co., (The) (United States) |
6,421 | 1,442,606 | ||||||
J M Smucker Co., (The) (United States) |
10,934 | 1,530,651 | ||||||
2,973,257 | ||||||||
Health Care Equipment & Supplies — 4.7% |
||||||||
Abbott Laboratories (United States) |
12,296 | 1,262,184 | ||||||
Hologic, Inc. (United States)* |
10,826 | 731,405 | ||||||
1,993,589 |
The accompanying notes are an integral part of these financial statements.
6 |
Stance Equity ESG Large Cap Core ETF
Schedule of Investments (continued)
AUGUST 31, 2022
|
Number
of |
Value |
||||||
Common Stocks (continued) |
||||||||
Health Care Providers & Services — 10.4% |
||||||||
CVS Health Corp. (United States) |
9,883 | $ | 970,016 | |||||
Laboratory Corp. of America Holdings (United States) |
5,604 | 1,262,413 | ||||||
Quest Diagnostics, Inc. (United States) |
9,896 | 1,240,068 | ||||||
UnitedHealth Group, Inc. (United States) |
1,794 | 931,678 | ||||||
4,404,175 | ||||||||
IT Services — 6.0% |
||||||||
Mastercard, Inc., Class A (United States) |
3,976 | 1,289,695 | ||||||
Visa, Inc., Class A (United States) |
6,374 | 1,266,578 | ||||||
2,556,273 | ||||||||
Machinery — 7.6% |
||||||||
Fortive Corp. (United States) |
26,841 | 1,699,840 | ||||||
Illinois Tool Works, Inc. (United States) |
7,832 | 1,525,909 | ||||||
3,225,749 | ||||||||
Media — 3.5% |
||||||||
Omnicom Group, Inc. (United States) |
22,354 | 1,495,483 | ||||||
Multiline Retail — 0.9% |
||||||||
Dollar Tree, Inc. (United States)* |
2,714 | 368,235 | ||||||
Pharmaceuticals — 2.8% |
||||||||
Pfizer, Inc. (United States) |
19,357 | 875,517 | ||||||
Zoetis, Inc. (United States) |
1,946 | 304,607 | ||||||
1,180,124 | ||||||||
Professional Services — 6.7% |
||||||||
Jacobs Solutions, Inc. (United States) |
9,369 | 1,167,190 | ||||||
Nielsen Holdings PLC (United Kingdom) |
60,730 | 1,690,723 | ||||||
2,857,913 | ||||||||
Semiconductors & Semiconductor Equipment — 3.5% |
||||||||
Texas Instruments, Inc. (United States) |
9,094 | 1,502,420 |
The accompanying notes are an integral part of these financial statements.
7 |
Stance Equity ESG Large Cap Core ETF
Schedule of Investments (CONCLUDED)
AUGUST 31, 2022
|
Number
of |
Value |
||||||
Common Stocks (continued) |
||||||||
Software — 3.6% |
||||||||
Adobe, Inc. (United States)* |
2,063 | $ | 770,406 | |||||
Autodesk, Inc. (United States)* |
3,870 | 780,734 | ||||||
1,551,140 | ||||||||
Specialty Retail — 10.0% |
||||||||
AutoZone, Inc. (United States)* |
586 | 1,241,857 | ||||||
Home Depot, Inc., (The) (United States) |
5,273 | 1,520,839 | ||||||
Lowe’s Cos., Inc. (United States) |
7,615 | 1,478,376 | ||||||
4,241,072 | ||||||||
Technology Hardware, Storage & Peripherals — 6.8% |
||||||||
Apple, Inc. (United States) |
3,771 | 592,876 | ||||||
Hewlett Packard Enterprise Co. (United States) |
84,638 | 1,151,077 | ||||||
HP, Inc. (United States) |
39,722 | 1,140,419 | ||||||
2,884,372 | ||||||||
Total Common Stocks (Cost $43,073,235) |
42,275,093 | |||||||
Short-Term Investments — 0.5% |
||||||||
U.S. Bank Money Market Deposit Account, 2.00% (United States)(a) |
228,584 | 228,584 | ||||||
Total Short-Term Investments (Cost $228,584) |
228,584 | |||||||
Total Investments (Cost $43,301,819) — 99.9% |
42,503,677 | |||||||
Other Assets in Excess of Liabilities — 0.1% |
25,893 | |||||||
NET ASSETS — 100.0% |
||||||||
(Applicable to 1,715,000 shares outstanding) |
$ | 42,529,570 |
* |
Non-income producing security. |
PLC |
Public Limited Company |
(a) |
The rate shown is as of August 31, 2022. |
The accompanying notes are an integral part of these financial statements.
8 |
Stance Equity ESG Large Cap Core ETF
Statement of Assets and Liabilities
AUGUST 31, 2022
ASSETS |
||||
Investments in securities of unaffiliated issurers, at value (cost $43,073,235) |
$ | 42,275,093 | ||
Short-term investments, at value (cost $228,584) |
228,584 | |||
Receivables for: |
||||
Dividends |
57,437 | |||
Total assets |
42,561,114 | |||
LIABILITIES |
||||
Payables for: |
||||
Advisory fees |
31,544 | |||
Total liabilities |
31,544 | |||
Net assets |
$ | 42,529,570 | ||
NET ASSETS CONSIST OF: |
||||
Par value |
$ | 1,715 | ||
Paid-in capital |
45,018,226 | |||
Total distributable earnings/(losses) |
(2,490,371 | ) | ||
Net assets |
$ | 42,529,570 | ||
Shares outstanding ($0.001 par value, 100,000,000 shares authorized) |
1,715,000 | |||
Net asset value, price per share |
24.80 |
The accompanying notes are an integral part of these financial statements.
9 |
Stance Equity ESG Large Cap Core ETF
Statement of Operations
FOR THE YEAR ENDED AUGUST 31, 2022
INVESTMENT INCOME |
||||
Dividends (Less foreign taxes withheld $28) |
$ | 610,555 | ||
Total investment income |
610,555 | |||
EXPENSES |
||||
Advisory fees (Note 3) |
363,829 | |||
Total expenses |
363,829 | |||
Expense fees (waived)/reimbursed |
(38,298 | ) | ||
Net expenses after waivers/reimbursements |
325,531 | |||
Net investment income/(loss) |
285,024 | |||
NET REALIZED AND UNREALIZED GAIN/(LOSS) FROM INVESTMENTS |
||||
Net realized gain/(loss) from investments |
(4,552,863 | ) | ||
Net realized gain/(loss) from redemption in-kind |
2,995,770 | |||
Net change in unrealized appreciation/(depreciation) on investments |
(3,140,125 | ) | ||
Net realized and unrealized gain/(loss) on investments |
(4,697,218 | ) | ||
NET INCREASE/(DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS |
$ | (4,412,194 | ) |
The accompanying notes are an integral part of these financial statements.
10 |
Stance Equity ESG Large Cap Core ETF
STATEMENTS of Changes in Net Assets
|
FOR
THE |
FOR
THE |
||||||
INCREASE/(DECREASE) IN NET ASSETS FROM OPERATIONS: |
||||||||
Net investment income/(loss) |
$ | 285,024 | $ | 29,240 | ||||
Net realized gain/(loss) from investments |
(1,557,093 | ) | 1,400,128 | |||||
Net change in unrealized appreciation/(depreciation) on investments |
(3,140,125 | ) | 2,341,983 | |||||
Net increase/(decrease) in net assets resulting from operations |
(4,412,194 | ) | 3,771,351 | |||||
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS FROM: |
||||||||
Total distributable earnings |
(164,737 | ) | — | |||||
Net decrease in net assets from dividends and distributions to shareholders |
(164,737 | ) | — | |||||
CAPITAL SHARE TRANSACTIONS: |
||||||||
Proceeds from shares sold |
34,013,802 | 62,522,221 | ||||||
Shares redeemed |
(24,191,858 | ) | (29,009,015 | ) | ||||
Net increase/(decrease) in net assets from capital share transactions |
9,821,944 | 33,513,206 | ||||||
Total increase/(decrease) in net assets |
5,245,013 | 37,284,557 | ||||||
NET ASSETS: |
||||||||
Beginning of period |
37,284,557 | — | ||||||
End of period |
$ | 42,529,570 | $ | 37,284,557 | ||||
SHARES TRANSACTIONS: |
||||||||
Shares sold |
1,245,000 | 2,470,000 | ||||||
Shares redeemed |
(870,000 | ) | (1,130,000 | ) | ||||
Net increase/(decrease) in shares outstanding |
375,000 | 1,340,000 |
* |
Inception date of the Fund was March 15, 2021. |
The accompanying notes are an integral part of these financial statements.
11 |
Stance Equity ESG Large Cap Core ETF
Financial Highlights
Contained below is per share operating performance data for shares outstanding, total investment return/(loss), ratios to average net assets and other supplemental data for the respective periods. This information has been derived from information provided in the financial statements.
|
For
the YEAR |
For
the |
||||||
PER SHARE OPERATING PERFORMANCE |
||||||||
Net asset value, beginning of period |
$ | 27.82 | $ | 25.00 | ||||
Net investment income/(loss)(2) |
0.20 | 0.02 | ||||||
Net realized and unrealized gain/(loss) from investments |
(3.10 | ) | 2.80 | |||||
Net increase/(decrease) in net assets resulting from operations |
(2.90 | ) | 2.82 | |||||
Dividends and distributions to shareholders from: |
||||||||
Net investment income |
(0.10 | ) | — | |||||
Net realized capital gains |
(0.02 | ) | — | |||||
Total dividends and distributions to shareholders |
(0.12 | ) | — | |||||
Net asset value, end of period |
$ | 24.80 | $ | 27.82 | ||||
Market value, end of period |
$ | 24.83 | $ | 27.91 | ||||
Total investment return/(loss) on net asset value(3) |
-10.50 | % | 11.23 | %(5) | ||||
Total investment return/(loss) on market price(4) |
-10.63 | % | 11.56 | %(5) | ||||
RATIO/SUPPLEMENTAL DATA |
||||||||
Net assets, end of period (000’s omitted) |
$ | 42,530 | $ | 37,285 | ||||
Ratio of expenses to average net assets with waivers and/or reimbursements |
0.85 | % | 0.85 | %(6) | ||||
Ratio of expenses to average net assets without waivers and/or reimbursements |
0.95 | % | 0.95 | %(6) | ||||
Ratio of net investment income/(loss) to average net assets |
0.74 | % | 0.19 | %(6) | ||||
Portfolio turnover rate(7) |
290 | % | 180 | %(5) |
(1) |
Inception date of the Fund was March 15, 2021. |
(2) |
Per share data calculated using average shares outstanding method. |
(3) |
Total investment return/(loss) on net asset value is calculated assuming a purchase of shares on the first day and a sale of shares on the last day of each period reported and includes reinvestments of dividends and distributions, if any. |
(4) |
Total investment return/(loss) on market price is calculated assuming an initial investment made at the market price on the first day of the period, reinvestment of dividends and distributions at market price during the period and redemption at market price on the last day of the period. |
(5) |
Not annualized. |
(6) |
Annualized. |
(7) |
Excludes effect of in-kind transfers. |
The accompanying notes are an integral part of these financial statements.
12 |
Stance Equity ESG Large Cap Core ETF
Notes to Financial Statements
AUGUST 31, 2022
1. ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES
The RBB Fund, Inc. (“RBB” or the “Company”) was incorporated under the laws of the State of Maryland on February 29, 1988 and is registered under the Investment Company Act of 1940, as amended, (the “1940 Act”), as an open-end management investment company. RBB is a “series fund,” which is a mutual fund divided into separate portfolios. Each portfolio is treated as a separate entity for certain matters under the 1940 Act, and for other purposes, and a shareholder of one portfolio is not deemed to be a shareholder of any other portfolio. Currently, RBB has forty-eight separate investment portfolios, including the Stance Equity ESG Large Cap Core ETF (the “Fund”). The Fund commenced investment operations on March 15, 2021.
On July 26, 2022, the Board of Directors of the Company approved an Agreement and Plan of Reorganization with respect to the Fund (the “Plan”). The Plan provides for the sale of all of the assets of the Fund to, and the assumption of all of the liabilities of the Fund by, Hennessy Stance ESG Large Cap ETF (the “Acquiring Fund”), a newly-created series of Hennessy Funds Trust, in exchange for the Acquiring Fund’s shares with the same aggregate net asset value as shares of the Fund, which would be distributed pro rata by the Fund to the holders of its shares in complete liquidation of the Fund (the “Reorganization”). Hennessy Advisors, Inc. is the investment adviser of the Acquiring Fund. The investment objectives, investment policies and strategies of the Acquiring Fund and the Fund are the same or substantially similar. The Reorganization is subject to approval by the shareholders of the Fund. A special meeting of shareholders of the Fund will be scheduled to seek approval of the Plan and the related Reorganization (the “Shareholder Meeting”). A related proxy statement in connection with the Shareholder Meeting that further describes the Plan and the Reorganization will be distributed in advance of the Shareholder Meeting.
RBB has authorized capital of one hundred billion shares of common stock of which 90.023 billion shares are currently classified into two hundred and eleven classes of common stock. Each class represents an interest in an active or inactive RBB investment portfolio.
The investment objective of the Fund is to achieve long-term capital appreciation.
The Fund is an investment company and follows accounting and reporting guidance in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946 “Financial Services - Investment Companies”.
The end of the reporting period for the Fund is August 31, 2022, and the period covered by these Notes to Financial Statements is the fiscal year ended August 31, 2022 (the “current fiscal period”).
PORTFOLIO VALUATION — The Fund’s net asset value (“NAV”) is calculated once daily at the close of regular trading hours on the New York Stock Exchange (“NYSE”) (generally 4:00 p.m. Eastern time) on each day the NYSE is open. Securities held by the Fund are valued using the closing price or the last sale price on a national securities exchange or the National Association of Securities Dealers Automatic Quotation System (“NASDAQ”) market system where they are primarily traded. Equity securities traded in the over-the-counter (“OTC”) market are valued at their closing prices. If there were no transactions on that day, securities traded principally on an exchange or on NASDAQ will be valued at the mean of the last bid and ask prices prior to the market close. Fixed income securities are valued using an independent pricing service, which considers such factors as security prices, yields, maturities and ratings, and are deemed representative of market values at the close of the market. Foreign securities are valued based on prices from the primary market in which they are traded, and are translated from the local currency into U.S. dollars using current exchange rates. If market quotations are unavailable or deemed unreliable, securities will be valued in accordance with procedures adopted by the Company’s Board of Directors (the “Board”). Relying on prices supplied by pricing services or dealers or using fair valuation may result in values that are higher or lower than the values used by other investment companies and investors to price the same investments. Such procedures use fundamental valuation methods, which may include, but are not limited to, an analysis of the effect of any restrictions on the resale of the security, industry analysis and trends, significant changes in the issuer’s financial position, and any other event which could have a significant impact on the value of the security. Determination of fair value involves subjective judgment as the actual market value of a particular security can be established only by negotiations between the parties in a sales transaction, and the difference between the recorded fair value and the value that would be received in a sale could be significant.
13 |
Stance Equity ESG Large Cap Core ETF
Notes to Financial Statements (continued)
AUGUST 31, 2022
FAIR VALUE MEASUREMENTS — The inputs and valuation techniques used to measure the fair value of the Fund’s investments are summarized into three levels as described in the hierarchy below:
● |
Level 1 – Prices are determined using quoted prices in active markets for identical securities. |
● |
Level 2 – Prices are determined using other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment speeds, credit risk, etc.). |
● |
Level 3 – Prices are determined using significant unobservable inputs (including the Fund’s own assumptions in determining the fair value of investments). |
The inputs or methodologies used for valuing securities are not necessarily an indication of the risk associated with investing in those securities.
The following is a summary of the inputs used, as of the end of the reporting period, in valuing the Fund’s investments carried at fair value:
|
TOTAL |
LEVEL 1 |
LEVEL 2 |
LEVEL 3 |
||||||||||||
Common Stocks |
$ | 42,275,093 | $ | 42,275,093 | $ | — | $ | — | ||||||||
Short-Term Investments |
228,584 | 228,584 | — | — | ||||||||||||
Total Investments* |
$ | 42,503,677 | $ | 42,503,677 | $ | — | $ | — |
* |
Please refer to the Schedule of Investments for further details. |
At the end of each quarter, management evaluates the classification of Levels 1, 2 and 3 assets and liabilities. Various factors are considered, such as changes in liquidity from the prior reporting period; whether or not a broker is willing to execute at the quoted price; the depth and consistency of prices from third party pricing services; and the existence of contemporaneous, observable trades in the market. Additionally, management evaluates the classification of Levels 1, 2 and 3 assets and liabilities on a quarterly basis for changes in listings or delistings on national exchanges.
Due to the inherent uncertainty of determining the fair value of investments that do not have a readily available market value, the fair value of the Fund’s investments may fluctuate from period to period. Additionally, the fair value of investments may differ significantly from the values that would have been used had a ready market existed for such investments and may differ materially from the values the Fund may ultimately realize. Further, such investments may be subject to legal and other restrictions on resale or otherwise less liquid than publicly traded securities.
For fair valuations using significant unobservable inputs, U.S. generally accepted accounting principles (“U.S. GAAP”) requires the Fund to present a reconciliation of the beginning to ending balances for reported market values that presents changes attributable to total realized and unrealized gains or losses, purchase and sales, and transfers in and out of Level 3 during the period. Transfers in and out between levels are based on values at the end of the period. A reconciliation of Level 3 investments is presented only when the Fund had an amount of Level 3 investments at the end of the reporting period that was meaningful in relation to its net assets. The amounts and reasons for all Level 3 transfers are disclosed if the Fund had an amount of total Level 3 transfers during the reporting period that was meaningful in relation to its net assets as of the end of the reporting period.
14 |
Stance Equity ESG Large Cap Core ETF
Notes to Financial Statements (continued)
AUGUST 31, 2022
During the current fiscal period, the Fund had no Level 3 transfers.
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 and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and those differences could be significant.
INVESTMENT TRANSACTIONS, INVESTMENT INCOME AND EXPENSES — The Fund records security transactions based on trade date for financial reporting purposes. The cost of investments sold is determined by use of the specific identification method for both financial reporting and income tax purposes in determining realized gains and losses on investments. Interest income (including amortization of premiums and accretion of discounts) is accrued when earned. Dividend income is recorded on the ex-dividend date. Distributions received on securities that represent a return of capital or capital gains are recorded as a reduction of cost of investments and/or as a realized gain. Certain expenses are shared with The RBB Fund Trust (formerly, PENN Capital Funds Trust) (the “Trust”), a series trust of affiliated funds. Expenses incurred on behalf of a specific class, fund or fund family of the Company or Trust are charged directly to the class, fund or fund family (in proportion to net assets). Expenses incurred for all funds (such as director or professional fees) are charged to all funds in proportion to their average net assets of RBB and the Trust, or in such other manner as the Board deems fair or equitable. Expenses and fees, including investment advisory fees, are accrued daily and taken into account for the purpose of determining the NAV of the Fund. As discussed further in Note 3, most expenses of the Fund are paid by the Adviser under a unitary fee arrangement.
DIVIDENDS AND DISTRIBUTIONS TO SHAREHOLDERS — The Fund pays dividends from its net investment income and distributes any net capital gains that it realizes. Dividends and capital gains distributions are generally paid once a year and as required to comply with federal excise tax requirements. Distributions to shareholders are determined in accordance with tax regulations and recorded on ex dividend date. Quarterly, the Fund will report details of distributions including gain and loss distributions and related taxes.
U.S. TAX STATUS — No provision is made for U.S. income taxes as it is the Fund’s intention to continue to qualify for and elect the tax treatment applicable to regulated investment companies under Subchapter M of the Internal Revenue Code of 1986, as amended, and make the requisite distributions to its shareholders which will be sufficient to relieve it from U.S. income and excise taxes.
CORONAVIRUS (COVID-19) PANDEMIC — The global outbreak of COVID-19 (commonly referred to as “coronavirus”) has disrupted economic markets and the prolonged economic impact is uncertain. Although vaccines for COVID-19 are available, the ultimate economic fallout from the pandemic, and the long-term impact on economies, markets, industries and individual issuers are not known. The operational and financial performance of the issuers of securities in which the Fund invests depends on future developments, including the duration and spread of the outbreak and the pace of recovery which may vary market to market, and such uncertainty may in turn adversely affect the value and liquidity of the Fund’s investments, impair the Fund’s ability to satisfy redemption requests, and negatively impact the Fund’s performance.
UKRAINE-RUSSIA CONFLICT RISK — In February 2022, Russia commenced a military attack on Ukraine. The outbreak of hostilities between the two countries and the threat of wider-spread hostilities could have a severe adverse effect on the region and global economies, including significant negative impacts on the markets for certain securities and commodities, such as oil and natural gas. In addition, sanctions imposed on Russia by the United States and other countries, and any sanctions imposed in the future, could have a significant adverse impact on the Russian economy and related markets. The price and liquidity of investments may fluctuate widely as a result of the conflict and related events. How long the armed conflict and related events will last cannot be predicted. These tensions and any related events could have a significant impact on Fund performance and the value of Fund investments, even beyond any direct exposure the Fund may have to issuers located in these countries.
15 |
Stance Equity ESG Large Cap Core ETF
Notes to Financial Statements (continued)
AUGUST 31, 2022
CASH AND CASH EQUIVALENTS — Cash and cash equivalents are valued at cost plus accrued interest, which approximates market value.
OTHER — In the normal course of business, the Fund may enter into contracts that provide general indemnifications. The Fund’s maximum exposure under these arrangements is dependent on claims that may be made against the Fund in the future, and, therefore, cannot be estimated; however, the Fund expects the risk of material loss from such claims to be remote.
2. Investment Policies and Practices
The sections below describe some of the different types of investments that may be made by the Fund and the investment practices in which the Fund may engage.
TYPES OF EQUITY SECURITIES — In addition to common stock, the equity securities that the Fund may purchase include securities having equity characteristics, such as rights. Common stock represents an equity or ownership interest in a company. This interest often gives the Fund the right to vote on measures affecting the company’s organization and operations. Equity securities have a history of long-term growth in value, but their prices tend to fluctuate in the shorter term. Rights essentially are options to purchase equity securities at specific prices valid for a specific period of time. Their prices do not necessarily move parallel to the prices of the underlying securities. Rights normally have a short duration and are distributed directly by the issuer to its shareholders. Rights have no voting rights, receive no dividends, and have no rights with respect to the assets of the issuer.
SECURITIES OF OTHER INVESTMENT COMPANIES — The Fund may invest in securities of other investment companies, including ETF shares and shares of money market funds. The Fund’s investment in these securities (other than shares of money market funds and of certain ETFs) may be subject to certain limitations imposed by the 1940 Act — generally, a prohibition on acquiring more than 3 percent of the outstanding voting stock of another investment company. Investment companies such as ETFs and money market funds pay investment advisory and other fees and incur various expenses in connection with their operations. When the Fund invests in another investment company, shareholders of the Fund will indirectly bear these fees and expenses, which will be in addition to the fees and expenses of the Fund.
REAL ESTATE INVESTMENT TRUSTS — Real estate investment trusts (“REITs”) are pooled investment vehicles that manage a portfolio of real estate or real estate-related loans to earn profits for their shareholders. REITs are generally classified as equity REITs, mortgage REITs, or a combination of equity and mortgage REITs. Investing in REITs involves certain unique risks in addition to those risks associated with investing in the real estate industry in general. Equity REITs may be affected by changes in the value of the underlying property owned by the REITs, while mortgage REITs may be affected by the quality of the borrower on any credit extended. REITs are dependent upon management skills, may not be diversified geographically or by property type, and are subject to heavy cash-flow dependency, default by borrowers, and self-liquidation. REITs must also meet certain requirements under the Internal Revenue Code of 1986, as amended (the “Code”), to avoid entity level tax and be eligible to pass through certain tax attributes of their income to shareholders. REITs are consequently subject to the risk of failing to meet these requirements for favorable tax treatment and of failing to maintain their exemptions from registration under the 1940 Act. REITs are also subject to the risks of changes in the Code, affecting their tax status.
16 |
Stance Equity ESG Large Cap Core ETF
Notes to Financial Statements (continued)
AUGUST 31, 2022
REITs (especially mortgage REITs) are also subject to interest rate risks. When interest rates decline, the value of a REIT’s investment in fixed-rate obligations can be expected to rise. Conversely, when interest rates rise, the value of a REIT’s investment in fixed-rate obligations can be expected to decline. In contrast, as interest rates on adjustable-rate mortgage loans are reset periodically, yields on a REIT’s investments in such loans will gradually align themselves to reflect changes in market interest rates, causing the value of such investments to fluctuate less dramatically in response to interest rate fluctuations than would investments in fixed-rate obligations.
The management of a REIT may be subject to conflicts of interest with respect to the operation of the business of the REIT and may be involved in real estate activities competitive with the REIT. REITs may own properties through joint ventures or in other circumstances in which a REIT may not have control over its investments. REITs may use significant amounts of leverage.
TEMPORARY INVESTMENTS — During periods of adverse market or economic conditions, the Fund may temporarily invest all or a substantial portion of its assets in high-quality, fixed-income securities, money market instruments, and shares of money market mutual funds, or it may hold cash. At such times, the Fund would not be pursuing its stated investment objective with its usual investment strategies. The Fund may also hold these investments for liquidity purposes. Fixed-income securities will be deemed to be of high quality if they are rated “A” or better by S&P or Moody’s or, if unrated, are determined to be of comparable quality by the the Fund’s sub-adviser, Stance Capital, LLC. Money market instruments are high-quality, short-term fixed income obligations (which generally have remaining maturities of one year or less), and may include U.S. Government Securities, commercial paper, certificates of deposit and banker’s acceptances issued by domestic branches of United States banks that are members of the Federal Deposit Insurance Corporation, and repurchase agreements for US. Government Securities. In lieu of purchasing money market instruments, the Fund may purchase shares of money market mutual funds that invest primarily in U.S. Government Securities and repurchase agreements involving those securities, subject to certain limitations imposed by the 1940 Act. The Fund, as an investor in a money market fund, will indirectly bear the fees and expenses of the money market fund. These indirect fees and expenses will be in addition to the fees and expenses of the Fund. Repurchase agreements involve certain risks not associated with direct investments in debt securities.
3. INVESTMENT adviser and other services
Red Gate Advisers, LLC (the “Adviser”) serves as the investment adviser to the Fund. Stance Capital, LLC and Vident Advisory, LLC each serves as an investment sub-adviser (“Sub-Adviser”) to the Fund. Subject to the supervision of the Board, the Adviser manages the overall investment operations of the Fund, primarily in the form of oversight of the Fund’s sub-advisers, pursuant to the terms of the Investment Advisory Agreement between the Adviser and the Company on behalf of the Fund. The Fund compensates the Adviser with a unitary management fee for its services at an annual rate of 0.95%; based on the Fund’s average daily net assets (the “Advisory Fee”), payable on a monthly basis in arrears. From the Advisory Fee, the Adviser pays most of the expenses of the Fund, including the cost of sub-advisory, transfer agency, custody, fund administration, legal, audit and other services. However, the Adviser is not responsible for interest expenses, brokerage commissions and other trading expenses, taxes and other extraordinary costs such as litigation and other expenses not incurred in the ordinary course of business.
The Adviser has contractually agreed to waive a portion of its’ unitary management fee to the extent necessary to limit the Fund’s annual operating expenses (excluding brokerage commissions, taxes, interest expense, acquired fund fees and expenses, and any extraordinary expenses) to an amount not exceeding 0.85% annually of the Fund’s average daily net assets. This contractual limitation is in effect until March 31, 2023 and may not be terminated without the approval of the Board. The Adviser may discontinue these arrangements at any time after March 31, 2023.
17 |
Stance Equity ESG Large Cap Core ETF
Notes to Financial Statements (continued)
AUGUST 31, 2022
During the current fiscal period, investment advisory fees accrued and waived were as follows:
GROSS |
RECOUPMENT/ |
NET |
|||||||||
$ | 363,829 | $ | (38,298 | ) | $ | 325,531 |
U.S. Bancorp Fund Services, LLC (“Fund Services”), doing business as U.S. Bank Global Fund Services, serves as administrator for the Fund. For providing administrative and accounting services, Fund Services is entitled to receive a monthly fee, subject to certain minimum and out of pocket expenses.
Fund Services serves as the Fund’s transfer and dividend disbursing agent. For providing transfer agent services, Fund Services is entitled to receive a monthly fee, subject to certain minimum and out of pocket expenses.
U.S. Bank, N.A. (the “Custodian”) provides certain custodial services to the Fund. The Custodian is entitled to receive a monthly fee, subject to certain minimum and out of pocket expenses.
Vigilant Distributors, LLC (the “Distributor”), an affiliate of the Adviser, serves as the principal underwriter and distributor of the Fund’s shares pursuant to a Distribution Agreement with RBB.
Under the Fund’s unitary fee, the Adviser compensates Fund Services and the Custodian for its services provided.
DIRECTOR AND OFFICER COMPENSATION — The Directors of the Company receive an annual retainer and meeting fees for meetings attended. An employee of Vigilant Compliance, LLC serves as Chief Compliance Officer of the Company and served as President of the Company until August 2022. Vigilant Compliance, LLC, an affiliate of the Adviser, is compensated for the services provided to the Company. Employees of RBB serve as President, Chief Financial Officer, Chief Operating Officer, Secretary and Director of Marketing & Business Development of the Company. They are compensated for services provided. Certain employees of Fund Services serve as officers of the Company. They are not compensated by the Funds or the Company. As of the end of the reporting period, there were no director and officer fees charged or paid by the Fund.
4. PURCHASES AND SALES OF INVESTMENT SECURITIES
During the current fiscal period, aggregate purchases and sales of investment securities (excluding in-kind transactions and short-term investments) of the Fund were as follows:
Purchase |
Sales |
||||||
$ | 111,220,754 | $ | 110,708,087 |
There were no purchases or sales of long-term U.S. Government Securities during the current fiscal period.
During the current fiscal period, aggregate purchases and sales of in-kind transactions of the Fund were as follows:
Purchase |
Sales |
||||||
$ | 33,483,746 | $ | 24,012,164 |
18 |
Stance Equity ESG Large Cap Core ETF
Notes to Financial Statements (continued)
AUGUST 31, 2022
5. Federal Income tax information
It is the Fund’s intention to meet the requirements of Subchapter M of the Internal Revenue Code of 1986, as amended (the “Code”), that are applicable to a regulated investment company (“RIC”). The Fund intends to continue to operate so as to qualify to be taxed as a RIC under the Code and, as such, to not be subject to federal income tax on the portion of its taxable income and gains distributed to stockholders. To qualify for RIC tax treatment, among other requirements, the Fund is required to distribute at least 90% of its investment company taxable income, as defined by the Code. Accordingly, the Fund intends to distribute its taxable income and net realized gains, if any, to shareholders in accordance with timing requirements imposed by the Code. While the Fund intends to distribute substantially all of its taxable net investment income and capital gains, if any, in a manner necessary to minimize the imposition of a 4% excise tax, there can be no assurance that it will avoid any or all of the excise tax. In such event, the Fund will be liable only for the amount by which it does not meet the foregoing distribution requirements. The Fund has adopted October 31 as its tax year end.
In accounting for income taxes, the Fund follows the guidance in FASB ASC Codification 740, as amended by ASU 2009-06, “Accounting for Uncertainty in Income Taxes” (“ASC 740”). ASC 740 prescribes the minimum recognition threshold a tax position must meet in connection with accounting for uncertainties in income tax positions taken or expected to be taken by an entity before being measured and recognized in the financial statements. Management has concluded, there were no uncertain tax positions as of August 31, 2022 for federal income tax purposes or in, the Fund’s major state and local tax jurisdiction of Delaware.
Because U.S. federal income tax regulations differ from U.S. GAAP, distributions in accordance with tax regulations may differ from net investment income and realized gains recognized for financial reporting purposes. Differences may be permanent or temporary. Permanent difference are reclassified among capital accounts in the financial statements to reflect the applicable tax characterization. Temporary differences arise when certain items of income, expense, gain or loss are recognized at some time in the future. The tax basis components of distributable earnings may differ from the amount reflected in the Statement of Assets and Liabilities due to temporary book/tax differences due to a tax free incorporation transfer.
As of August 31, 2022, the federal tax cost, aggregate gross unrealized appreciation and depreciation of securities held by the Fund were as follows:
FEDERAL
|
UNREALIZED |
UNREALIZED |
NET
UNREALIZED |
||||||||||||
$ | 43,430,659 | $ | 1,560,805 | $ | (2,487,787 | ) | $ | (926,982 | ) |
Permanent differences as of August 31, 2022, primarily attributable to tax fiscal year end October 31, 2021 redemptions-in-kind and transfer-in-kind cost basis difference between GAAP and tax, were reclassified among the following accounts:
DISTRIBUTABLE |
PAID-IN |
||||||
$ | (1,684,791 | ) | $ | 1,684,791 |
19 |
Stance Equity ESG Large Cap Core ETF
Notes to Financial Statements (continued)
AUGUST 31, 2022
The tax basis of undistributed earnings for the fiscal tax year ended October 31, 2021, shown below represents distribution requirements met by the Fund subsequent to the fiscal tax year end in order to satisfy income tax requirements:
UNDISTRIBUTED
|
UNDISTRIBUTED
|
NET
UNREALIZED |
|||||||||
$ | 69,170 | $ | 30,318 | $ | 2,014,900 |
The tax character of dividends and distributions paid during the fiscal years ended August 31, 2022 and August 31, 2021 was a follows:
|
ORDINARY INCOME |
LONG-TERM GAINS |
total |
|||||||||
2022 |
$ | 134,419 | $ | 30,318 | $ | 164,737 | ||||||
2021 |
— | — | — |
6. SHARE TRANSACTIONS
Shares of the Fund are listed and traded on the NYSE Arca, Inc. (the “Exchange”). Market prices for the shares may be different from their NAV. The Fund issues and redeems shares on a continuous basis at NAV only in blocks of 5,000 shares, called “Creation Units.” Creation Units are issued and redeemed principally in-kind for securities included in a specified universe. Once created, shares generally trade in the secondary market at market prices that change throughout the day. Except when aggregated in Creation Units, shares are not redeemable securities of the Fund. Creation Units may only be purchased or redeemed by certain financial institutions (“Authorized Participants”). An Authorized Participant is either (i) a broker-dealer or other participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation or (ii) a Depository Trust Company participant and, in each case, must have executed a Participant Agreement with the Distributor. Most retail investors do not qualify as Authorized Participants nor have the resources to buy and sell whole Creation Units. Therefore, they are unable to purchase or redeem shares directly from the Fund. Rather, most retail investors may purchase shares in the secondary market with the assistance of a broker and are subject to customary brokerage commissions or fees.
The Fund currently offers one class of shares, which has no front-end sales load, no deferred sales charge, and no redemption fee. A fixed transaction fee is imposed for the transfer and other transaction costs associated with the purchase or sale of Creation Units. The standard fixed transaction fee for the Fund is $300, payable to the custodian. In addition, a variable fee may be charged on all cash transactions or substitutes for Creation Units of up to a maximum of 2% as a percentage of the value of the Creation Units subject to the transaction. Variable fees are imposed to compensate the Fund for the transaction costs associated with the cash transactions. Variable fees received by the Fund, if any, are displayed in the capital shares transactions section of the Statement of Changes in Net Assets. Shares of the Fund have equal rights and privileges.
20 |
Stance Equity ESG Large Cap Core ETF
Notes to Financial Statements (CONCLUDED)
AUGUST 31, 2022
7. In-Kind SUBSCRIPTION
On March 15, 2021, the Fund received securities in connection with an in-kind subscription transaction. The seed shares totaled 1,105,000 with a NAV of $25.0159. For financial reporting purposes, these transactions were treated as purchases of securities and recognized based on the market value of the securities. The value of the initial in-kind subscriptions was $27,642,570.
8. NEW ACCOUNTING PRONOUNCEMENTS AND REGULATORY UPDATES
In October 2020, the Securities and Exchange Commission (“SEC”) adopted new regulations governing the use of derivatives by registered investment companies (“Rule 18f-4”). Rule 18f-4 imposes limits on the amount of derivatives a fund can enter into, eliminates the asset segregation framework previously used by funds to comply with Section 18 of the 1940 Act, and requires funds whose use of derivatives is greater than a limited specified amount to establish and maintain a comprehensive derivatives risk management program and appoint a derivatives risk manager. The Fund is required to comply with Rule 18f-4 and has adopted procedures for investing in derivatives and other transactions in compliance with Rule 18f-4. Rule 18f-4 may require the Fund to observe more stringent requirements than were previously imposed by the 1940 Act, which could adversely affect the ability of the Fund to engage in certain derivatives transactions and/or increase the costs of such derivatives transactions, which could adversely affect the Fund’s performance and increase costs related to the Fund’s use of derivatives.
In December 2020, the SEC adopted a new rule providing a framework for fund valuation practices (“Rule 2a-5”). Rule 2a-5 establishes requirements for determining fair value in good faith for purposes of the 1940 Act. Rule 2a-5 will permit fund boards to designate certain parties to perform fair value determinations, subject to board oversight and certain other conditions. Rule 2a-5 also defines when market quotations are “readily available” for purposes of the 1940 Act and the threshold for determining whether a fund must fair value a security. In connection with Rule 2a-5, the SEC also adopted related recordkeeping requirements and is rescinding previously issued guidance, including with respect to the role of a board in determining fair value and the accounting and auditing of fund investments. The Fund will be required to comply with the rules by September 8, 2022. Effective September 8, 2022 and pursuant to the requirements of Rule 2a-5, the Board designated the Adviser as its valuation designee to perform fair value determinations and approved new valuation procedures for the Fund.
In June 2022, the FASB issued Accounting Standards Update 2022-03, which amends Fair Value Measurement (Topic 820): Fair Value Measurement of Equity Securities Subject to Contractual Sale Restrictions (“ASU 2022-03”). ASU 2022-03 clarifies guidance for fair value measurement of an equity security subject to a contractual sale restriction and establishes new disclosure requirements for such equity securities. ASU 2022-03 is effective for fiscal years beginning after December 15, 2023 and for interim periods within those fiscal years, with early adoption permitted. Management is currently evaluating the impact of these amendments on the financial statements.
9. Subsequent Events
Management has evaluated the impact of all subsequent events on the Fund through the date the financial statements were issued and has determined that there were no significant events requiring recognition or disclosure in the financial statements.
21 |
Stance Equity ESG Large Cap Core ETF
Report of Independent Registered Public Accounting Firm
To the Board of Directors of The RBB Fund, Inc. and Shareholders of Stance Equity ESG Large Cap Core ETF
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of Stance Equity ESG Large Cap Core ETF (one of the funds constituting The RBB Fund, Inc., hereafter referred to as the “Fund”) as of August 31, 2022, the related statement of operations for the year ended August 31, 2022, the statements of changes in net assets for the year ended August 31, 2022 and for the period March 15, 2021 (commencement of operations) through August 31, 2021, including the related notes, and the financial highlights for the year ended August 31, 2022 and for the period March 15, 2021 (commencement of operations) through August 31, 2021 (collectively referred to as the “financial statements”). In our opinion, the financial statements present fairly, in all material respects, the financial position of the Fund as of August 31, 2022, the results of its operations for the year then ended, the changes in its net assets for the year ended August 31, 2022 and for the period March 15, 2021 (commencement of operations) through August 31, 2021 and the financial highlights for the year ended August 31, 2022 and for the period March 15, 2021 (commencement of operations) through August 31, 2021 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management. Our responsibility is to express an opinion on the Fund’s financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits of these financial statements 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 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. Our procedures included confirmation of securities owned as of August 31, 2022 by correspondence with the custodian. We believe that our audits provide a reasonable basis for our opinion.
/s/PricewaterhouseCoopers
LLP
Philadelphia, Pennsylvania
October 28, 2022
We have served as the auditor of one or more Red Gate Advisers, LLC investment companies since 2021.
22 |
Stance Equity ESG Large Cap Core ETF
Shareholder Tax Information
(Unaudited)
Certain tax information regarding the Fund is required to be provided to shareholders based upon the Fund’s income and distributions for the taxable period ended August 31, 2022. The information and distributions reported herein may differ from information and distributions taxable to the shareholders for the calendar year ending December 31, 2022. During the fiscal year ended August 31, 2022, the following dividends and distributions were paid by the Fund:
Ordinary
|
Long-Term |
||||||
$ | 134,419 | $ | 30,318 |
Dividends from net investment income and short-term capital gains are treated as ordinary income dividends for federal income tax purposes.
Under the Jobs and Growth Tax relief Reconciliation Act of 2003 the following percentages of ordinary dividends paid during the fiscal year ended August 31, 2022 are designated as “qualified dividend income,” as defined in the Act, and are subject to reduced tax rates:
0.00% |
The percentage of total ordinary income dividends paid qualifying for the corporate dividends received deduction for the Fund is as follows:
0.00% |
Because the Fund’s fiscal year is not the calendar year, another notification will be sent with respect to calendar year 2022. The second notification, which will reflect the amount, if any, to be used by calendar year taxpayers on their U.S. federal income tax returns, will be made in conjunction with Form 1099-DIV and will be mailed in January 2023.
Foreign shareholders will generally be subject to U.S. withholding tax on the amount of their ordinary income dividends. They will generally not be entitled to a foreign tax credit or deduction for the withholding taxes paid by the Fund, if any.
In general, dividends received by tax-exempt recipients (e.g., IRAs and Keoghs) need not be reported as taxable income for U.S. federal income tax purposes. However, some retirement trusts (e.g., corporate, Keogh and 403(b)(7) plans) may need this information for their annual information reporting.
Shareholders are advised to consult their own tax advisers with respect to the tax consequences of their investment in the Fund.
23 |
Stance Equity ESG Large Cap Core ETF
Notice to Shareholders
(Unaudited)
Information on Proxy Voting
Policies and procedures that the Fund uses to determine how to vote proxies relating to portfolio securities as well as information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 are available (i) without charge, upon request, by calling (800) 617-0004; and (ii) on the SEC’s website at http://www.sec.gov.
Quarterly Schedule of Investments
The Company files a complete schedule of portfolio holdings with the SEC for the first and third fiscal quarters of each fiscal year (quarters ended November 30 and May 31) as an exhibit to its report on Form N-PORT. The Company’s Forms N-PORT are available on the SEC’s website at http://www.sec.gov.
Frequency Distributions of Premiums and Discounts
Information regarding how often shares of the Fund trade on an exchange at a price above (i.e., at a premium) or below (i.e., at a discount) the NAV of the Fund is available, without charge, on the Fund’s website at www.stancefunds.com.
LIQUIDITY RISK MANAGEMENT PROGRAM
The Company has adopted and implemented a Liquidity Risk Management Program (the “Company Program”) as required by rule 22e-4 under the 1940 Act. In accordance with the Company Program, the Adviser has adopted and implemented a liquidity risk management program (the “Adviser Program” and together with the Company Program, the “Programs”) on behalf of the Fund. The Programs seek to assess, manage and review the Fund’s Liquidity Risk. “Liquidity Risk” is defined as the risk that the Fund could not meet requests to redeem shares issued by the Fund without significant dilution of remaining investors’ interest in the Fund.
The Board has appointed Vigilant Compliance, LLC (“Vigilant”) as the program administrator for the Company Program and the Liquidity Risk Management Committee of the Adviser as the program administrator for the Adviser Program. The process of monitoring and determining the liquidity of the Fund’s investments is supported by one or more third-party vendors.
At meetings held during the current fiscal period, the Board and its Regulatory Oversight Committee received and reviewed a written report (the “Report”) of Vigilant and the Adviser concerning the operation of the Programs for the period from July 1, 2021 to December 31, 2021 (the “Period”). The Report summarized the operation of the Programs and the information and factors considered by Vigilant and the Adviser in reviewing the adequacy and effectiveness of the implementation of the Programs with respect to the Fund. Such information and factors included, among other things: (i) the methodology used to classify the liquidity of the Fund’s portfolio investments and the Adviser’s assessment that the Fund’s strategy remained appropriate for an open-end mutual fund; (ii) analyses of the Fund’s trading environment and reasonably anticipated trading size; (iii) that the Fund held primarily highly liquid assets (investments that the Fund anticipates can be converted to cash within 3 business days or less in current market conditions without significantly changing their market value); (iv) that the Fund did not require the establishment of a highly liquid investment minimum and the methodology for that determination; (v) confirmation that the Fund did not breach the 15% maximum illiquid security threshold (investments that cannot be sold or disposed of in seven days or less in current market conditions without the sale of the investment significantly changing the market value of the investment) during the Period and the procedures for monitoring compliance with the limit; (vi) that the processes, technologies and third-party vendors used to assess, manage, and/or periodically review the Fund’s Liquidity Risk functioned appropriately during the Period; and (vii) that the Programs operated adequately during the Period. The Report also indicated that there were no material changes made to the Programs during the Period.
24 |
Stance Equity ESG Large Cap Core ETF
Notice to Shareholders (CONtinued)
(Unaudited)
Based on the review, the Report concluded that the Programs were being implemented effectively and reasonably designed to assess and manage Liquidity Risk in the Fund’s portfolio.
There can be no assurance that the Company Program or the Adviser Program will achieve its objectives under all circumstances in the future. Please refer to the Fund’s prospectus for more information regarding the Fund’s exposure to liquidity risk and other risks to which it may be subject.
APPROVAL OF INVESTMENT ADVISORY AGREEMENTs
As required by the 1940 Act, the Board, including all of the Directors who are not “interested persons” of the Company, as that term is defined in the 1940 Act (the “Independent Directors”), considered the renewal of the investment advisory agreement between Red Gate and the Company (the “Investment Advisory Agreement”) on behalf of the Stance Equity ESG Large Cap Core ETF (for this section only, “Fund”) and the Sub-Advisory Agreements between Red Gate and each of Stance Capital, LLC and Vident Investment Advisory, LLC (each a “Sub-Adviser” and together the “Sub-Advisers”) at a meeting of the Board held on May 11-12, 2022 (for this section only, the “Meeting”). At the Meeting, the Board, including all of the Independent Directors, approved the Investment Advisory Agreement and the Sub-Advisory Agreements for an additional one-year term. The Board’s decision to approve the Investment Advisory Agreement and the Sub-Advisory Agreements reflects the exercise of its business judgment to continue the existing arrangement. In approving the Investment Advisory Agreement and the Sub-Advisory Agreements, the Board considered information provided by Red Gate with the assistance and advice of counsel to the Independent Directors and the Company.
In considering the renewal and approval of the Investment Advisory Agreement between the Company and Red Gate with respect to the Fund and the Sub-Advisory Agreements between Red Gate and each Sub-Adviser with respect to the Fund, the Directors took into account all the materials provided prior to and during the Meeting and at other meetings throughout the past year, the presentations made during the Meeting, and the discussions held during the Meeting. Among other things, the Directors considered (i) the nature, extent, and quality of Red Gate’s and the Sub-Advisers’ services provided to the Fund; (ii) descriptions of the experience and qualifications of Red Gate’s and the Sub-Advisers’ personnel providing those services; (iii) Red Gate’s and the Sub-Advisers’ investment philosophies and processes; (iv) Red Gate’s and the Sub-Advisers’ assets under management and client descriptions; (v) Red Gate’s and the Sub-Advisers’ soft dollar commission and trade allocation policies, including information on the types of research and services obtained in connection with soft dollar commissions; (vi) Red Gate’s and the Sub-Advisers’ advisory fee arrangement with the Company and other similarly managed clients; (vii) Red Gate’s and the Sub-Advisers’ compliance policies and procedures; (viii) Red Gate’s and the Sub-Advisers’ financial information, insurance coverage and profitability analysis related to providing advisory services to the Fund; (ix) the extent to which economies of scale are relevant to the Fund; (x) a report prepared by Broadridge/Lipper comparing the Fund’s management fees and total expense ratio to those of its Lipper peer group; and (xi) a report comparing the performance of the Fund to the performance of its respective benchmark.
As part of their review, the Directors considered the nature, extent and quality of the services provided by Red Gate and each Sub-Adviser. The Directors concluded that Red Gate and each Sub-Adviser had substantial resources to provide services to the Fund and that Red Gate’s and the Sub-Advisers’ services had been acceptable.
The Directors also considered the investment performance of the Fund and considered the Fund’s investment performance in light of its investment objectives and investment strategies. The Directors concluded that the investment performance of the Fund as compared to its respective benchmarks and Lipper Group was acceptable.
25 |
Stance Equity ESG Large Cap Core ETF
Notice to Shareholders (CONCLUDED)
(Unaudited)
The Directors then noted the performance of the Fund. The Directors noted the Fund had underperformed its benchmark for the year-to-date and since-inception periods ended March 31, 2022. The Directors also noted that the Fund ranked in the 2nd quintile in its Lipper Performance Group for the since-inception period ended December 31, 2021.
The Board also considered the advisory fee rates payable by the Fund under the Investment Advisory Agreement and Sub-Advisory Agreements. In this regard, information on the fees paid by the Fund and the Fund’s total operating expense ratios (before and after fee waivers and expense reimbursements) were compared to similar information for ETFs advised by other, unaffiliated investment advisory firms. The Directors also considered the fees payable to each Sub-Adviser under the Sub-Advisory Agreement.
The Directors noted that the actual advisor fee and the total expenses of the Fund ranked in the 5th quintile of its Lipper Expense Group.
The Board also took into consideration that the advisory fee for the Fund was a “unitary fee,” meaning the Fund paid no expenses other than the advisory fee and certain other costs such as interest, brokerage and extraordinary expenses. The Board noted that Red Gate continued to be responsible for compensating the Company’s other service providers and paying other expenses of the Fund out of its own fees and resources.
After reviewing Red Gate’s and the Sub-Advisers’ costs, profitability and economies of scale, and after considering the services to be provided by Red Gate and the Sub-Advisers, the Directors concluded that the investment advisory fees to be paid by the Fund to Red Gate and the sub-advisory fees to be paid to each Sub-Adviser were fair and reasonable and that the Investment Advisory Agreement and Sub-Advisory Agreements should be approved and continued for an additional one-year period ending August 16, 2023.
26 |
Stance Equity ESG Large Cap Core ETF
Privacy Notice
(Unaudited)
Exhibit A
FACTS |
WHAT DOES RED GATE ADVISERS, LLC (“RED GATE”) DO WITH YOUR PERSONAL INFORMATION? | ||
Why? |
Financial companies choose how they share your personal information. Federal law gives consumers the right to limit some but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal information. Please read this notice carefully to understand what we do. | ||
What? |
The type of personal information we collect, and share depend on the product of service you have with us. This information can include: ● Social Security number and transaction history ● Account balances and checking account information ● Account transactions and wire transfer instructions When you are no longer a customer, we continue to share your information as described in this notice. | ||
How? |
All financial companies need to share customers’ personal information to run their everyday business. In the section below, we list the reasons financial companies can share their customers’ personal information; the reasons Red Gate chooses to share; and whether you can limit this sharing. | ||
Reasons we share your personal information |
Does Red Gate share? |
Can you limit this? | |
For
our everyday business purposes — |
Yes |
No | |
For
our marketing purposes — |
Yes |
Yes | |
For joint marketing with other financial companies |
No |
We don’t share. | |
For
our affiliates’ everyday business purposes — |
Yes |
No | |
For
our affiliates’ everyday business purposes — |
No |
We don’t share. | |
For our affiliates to market to you |
Yes |
No | |
For non-affiliates to market to you |
No |
We don’t share. |
To limit our sharing |
Please note: If you are a new customer, we can begin sharing your information 30 days from the days from the date we sent this notice. When you are no longer our customer, we continue to share your information as described in this notice. However, you can contact us at any time to limit our sharing |
Questions? |
Call 1-888-229-1855 or visit https://redgateadvisers.com/ should you have any questions. |
27 |
Stance Equity ESG Large Cap Core ETF
Privacy Notice (continued)
(Unaudited)
Exhibit A
What we do |
|
How does Red Gate protect my personal information? |
To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. |
How does Red Gate collect my personal information? |
We collect your personal information, for example, when you ● open an account ● provide account information ● give us your contact information ● make a wire transfer ● tell us where to send the money We also collect your information from others, such as credit bureaus, affiliates, or other companies |
Why can’t I limit all sharing? |
Federal law gives you the right to limit only ● sharing for affiliates’ everyday business purposes-information about your creditworthiness ● affiliates from using your information to market to you ● sharing for nonaffiliates to market to you State laws and individual companies may give you additional rights to limit sharing. |
What happens when I limit sharing for an account I hold jointly with someone else? |
In addition to the above information, where applicable, you have the following rights under the European Union’s General Data Protection Regulation (“GDPR”) and U.S. Privacy Laws, as applicable and to the extent permitted by law, to ● Check whether we hold personal information about you and to access such data (in accordance with our policy) ● Request the correction of personal information about you that is ● inaccurate ● Have a copy of the personal information we hold about you provided to you or another “controller” where technically feasible ● Request the erasure of your personal information ● Request the restriction of processing concerning you The legal grounds for processing of your personal information is for contractual necessity and compliance with law. If you wish to exercise any of your rights above, please call:1-888-229-1855. You are required to ensure the personal information we hold about you is up-to-date and accurate and you must notify us of any changes to the personal data you provided to us. The Funds shall retain your personal data for as long as you are an investor in the Funds and thereafter as long as necessary to comply with applicable laws that require the Funds to retain your personal data, such as the Securities and Exchange Commission’s data retention rules. Your personal data will be transferred to the United States so that the Funds may provide the agreed upon services for you. No adequacy decision has been rendered by the European Commission as to the data protection of your personal data when transferring it to the United States. However, the Funds do take the security of your personal data seriously. |
European Union’s General Data Protection Regulation |
To protect your personal information from unauthorized access and use, we use security measures that comply with federal law. These measures include computer safeguards and secured files and buildings. |
28 |
Stance Equity ESG Large Cap Core ETF
Privacy Notice (CONCLUDED)
(Unaudited)
Exhibit A
Definitions |
|
Affiliates |
Companies related by common ownership or control. They can be financial and nonfinancial companies. Red Gate shares ownership with Vigilant Compliance, LLC, Vigilant Distributors, LLC and Red Gate Distribution, LLC. |
Non-affiliates |
Companies not related by common ownership or control. They can be financial and nonfinancial companies. Red Gate does not share with non-affiliates so they can market to you. |
Joint marketing |
A formal agreement between non-affiliated financial companies that together market financial products or services to you. Red Gate doesn’t jointly market. |
Controller |
“Controller” means the natural or legal person, public authority, agency or other body which, alone or jointly with others, determines the purposes and means of the processing of personal data; where the purposes and means of such processing are determined by European union or European Member state law, the controller or the specific criteria for its nomination may be provided for by European union or European Member state law. |
29 |
Stance Equity ESG Large Cap Core ETF
Directors and Officers
(Unaudited)
Directors and Executive Officers
The business and affairs of the Company are managed under the direction of the Company’s Board of Directors. The Company is organized under and managed pursuant to Maryland law. The Directors and executive officers of the Company, their ages, business addresses and principal occupations during the past five years are set forth below. The statement of additional information (“SAI”) includes additional information about the Directors and is available without charge, upon request, by calling (800) 617-0004.
Name,
Address, |
Positions(s) |
Term
of |
Principal
Occupation(s) |
Number
of |
Other |
INDEPENDENT DIRECTORS | |||||
Julian
A. Brodsky |
Director |
1988 to present |
From 1969 to 2011, Director and Vice Chairman, Comcast Corporation (cable television and communications). |
55 |
AMDOCS Limited (service provider to telecommunications companies). |
Gregory
P. Chandler |
Director |
2012
to |
Since 2020, Chief Financial Officer, Herspiegel Consulting LLC (life sciences consulting services); 2020, Chief Financial Officer, Avocado Systems Inc. (cyber security software provider); 2009-2020, Chief Financial Officer, Emtec, Inc. (information technology consulting/services). |
55 |
FS Energy and Power Fund (business development company); Wilmington Funds (12 portfolios) (registered investment company); Emtec, Inc. (until December 2019); FS Investment Corporation (business development company) (until December 2018). |
Lisa A. Dolly 615 East Michigan Street Milwaukee, WI, 53202 Age: 56 |
Director |
October 2021 to present |
From July 2019-December 2019, Chairman, Pershing LLC (broker dealer, clearing and custody firm); January 2016-June 2019, Chief Executive Officer, Pershing, LLC. |
55 |
Allfunds Group PLC (United Kingdom wealthtech and fund distribution provider); Securities Industry and Financial Markets Association (trade association for broker dealers, investment banks and asset managers); Hightower Advisors (wealth management firm). |
30 |
Stance Equity ESG Large Cap Core ETF
Directors and Officers (CONTINUED)
(Unaudited)
Name,
Address, |
Positions(s) |
Term
of |
Principal
Occupation(s) |
Number
of |
Other |
Nicholas
A. Giordano |
Director |
2006 to present |
Since 1997, Consultant, financial services organizations. |
55 |
IntriCon Corporation (biomedical device manufacturer); Wilmington Funds (12 portfolios) (registered investment company); Independence Blue Cross (healthcare insurance) (until 2021); Kalmar Pooled Investment Trust (registered investment company) (until September 2017). |
Arnold
M. Reichman 615 East Michigan Street Milwaukee, WI 53202 |
Chairman
Director |
2005 to present
1991 to present |
Retired. |
55 |
EIP Investment Trust (registered investment company) (until August 2022). |
Brian
T. Shea |
Director |
2018 to present |
From 2014-2017, Chief Executive Officer, BNY Mellon Investment Services (fund services, global custodian and securities clearing firm); from 1983-2014, Chief Executive Officer and various positions, Pershing LLC (broker dealer, clearing and custody firm). |
55 |
Fidelity National Information Services, Inc. (financial services technology company); Ameriprise Financial, Inc. (financial services company); WisdomTree Investments, Inc. (asset management company) (until March 2019). |
Robert
A. Straniere |
Director |
2006 to present |
Since 2009, Administrative Law Judge, New York City; since 1980, Founding Partner, Straniere Law Group (law firm). |
55 |
None. |
31 |
Stance Equity ESG Large Cap Core ETF
Directors and Officers (CONTINUED)
(Unaudited)
Name,
Address, |
Positions(s) |
Term
of |
Principal
Occupation(s) |
Number
of |
Other |
INTERESTED DIRECTOR2 | |||||
Robert
Sablowsky |
Vice Chairman
Director |
2016 to present
1991 to present |
Since 2002, Senior Director – Investments and, prior thereto, Executive Vice President, of Oppenheimer & Co., Inc. (a registered broker-dealer). |
55 |
None. |
OFFICERS | |||||
Steven Plump 615 East Michigan Street Milwaukee, WI 53202 Age: 63 |
President |
August 2022 to present |
From 2011 to 2021, Executive Vice President, PIMCO Investments LLC. |
N/A |
N/A |
Salvatore
Faia, JD, CPA, CFE Vigilant Compliance, LLC Gateway Corporate Center,
Suite 216 |
Chief Compliance Officer |
2004 to present |
Since 2004, President, Vigilant Compliance, LLC (investment management services company); since 2005, Independent Trustee of EIP Investment Trust (registered investment company); since 2021, Chief Compliance Officer of The RBB Fund Trust; President of The RBB Fund Trust from 2021 to 2022; President of The RBB Fund, Inc. from 2009 to 2022. |
N/A |
N/A |
James
G. Shaw |
Chief Financial Officer and Secretary
Chief Operating Officer |
2016 to present
2022 to present |
Chief Financial Officer and Secretary (since 2016) and Chief Operating Officer (since 2022) of The RBB Fund, Inc.; from 2005 to 2016, Assistant Treasurer of The RBB Fund, Inc.; from 1995 to 2016, Senior Director and Vice President of BNY Mellon Investment Servicing (US) Inc. (financial services company). |
N/A |
N/A |
32 |
Stance Equity ESG Large Cap Core ETF
Directors and Officers (CONTINUED)
(Unaudited)
Name,
Address, |
Positions(s) |
Term
of |
Principal
Occupation(s) |
Number
of |
Other |
Craig
A. Urciuoli |
Director of Marketing & Business Development |
2019 to present |
Director of Marketing & Business Development of The RBB Fund, Inc. (since 2019) and The RBB Fund Trust (since 2021); from 2000-2019, Managing Director, Third Avenue Management LLC (an investment advisory firm). |
N/A |
N/A |
Jennifer
Witt |
Assistant Treasurer |
2018 to present |
Since 2020, Vice President, U.S. Bank Global Fund Services (fund administrative services firm); from 2016 to 2020, Assistant Vice President, U.S. Bank Global Fund Services; from 2007 to 2016, Supervisor, Nuveen Investments (registered investment company). |
N/A |
N/A |
Edward
Paz |
Assistant Secretary |
2016 to present |
Since 2007, Vice President and Counsel, U.S. Bancorp Fund Services, LLC (fund administrative services firm). |
N/A |
N/A |
Michael
P. Malloy |
Assistant Secretary |
1999 to present |
Since 1993, Partner, Faegre Drinker Biddle & Reath LLP (law firm). |
N/A |
N/A |
Jillian
L. Bosmann |
Assistant Secretary |
2017 to present |
Since 2017, Partner, Faegre Drinker Biddle & Reath LLP (law firm). |
N/A |
N/A |
* |
Each Director oversees 55 portfolios of the fund complex, consisting of the series in the Company and The RBB Fund Trust (7 portfolios) |
1. |
Subject to the Company’s Retirement Policy, each Director may continue to serve as a Director until the last day of the calendar year in which the applicable Director attains age 75 or until his or her successor is elected and qualified or his or her death, resignation or removal. The Board reserves the right to waive the requirements of the Policy with respect to an individual Director. The Board has approved waivers of the policy with respect to Messrs. Brodsky, Carnall, Giordano, Sablowsky and Straniere. Each officer holds office at the pleasure of the Board until the next special meeting of the Company or until his or her successor is duly elected and qualified, or until he or she dies, resigns or is removed. |
2. |
Mr. Sablowsky is considered an “interested person” of the Company as that term is defined in the 1940 Act and is referred to as an “Interested Director.” Mr. Sablowsky is considered an “Interested Director” of the Company by virtue of his position as an employee of Oppenheimer & Co., Inc., a registered broker-dealer. |
33 |
Stance Equity ESG Large Cap Core ETF
Directors and Officers (CONCLUDED)
(Unaudited)
Director Experience, Qualifications, Attributes and/or Skills
The information above includes each Director’s principal occupations during the last five years. Each Director possesses extensive additional experience, skills and attributes relevant to his or her qualifications to serve as a Director. The cumulative background of each Director led to the conclusion that each Director should serve as a Director of the Company. Mr. Brodsky has over 40 years of senior executive-level management experience in the cable television and communications industry. Mr. Chandler has demonstrated leadership and management abilities as evidenced by his senior executive level positions in the investment technology consulting/services and investment banking/brokerage industries, and also serves on various boards. Ms. Dolly has over three decades of experience in the financial services industry, and she has demonstrated her leadership and management abilities by serving in numerous senior executive-level positions. Mr. Giordano has years of experience as a consultant to financial services organizations and also serves on the boards of other registered investment companies. Mr. Reichman brings decades of investment management experience to the Board, in addition to senior executive-level management experience. Mr. Sablowsky has demonstrated leadership and management abilities as evidenced by his senior executive-level positions in the financial services industry. Mr. Shea has demonstrated leadership and management abilities as evidenced by his senior executive-level positions in the brokerage, clearing, and investment services industry, including service on the boards of industry regulatory organizations and a university. Mr. Straniere has been a practicing attorney for over 30 years and has served on the boards of an asset management company and another registered investment company.
34 |
(This Page Intentionally Left Blank.)
(This Page Intentionally Left Blank.)
INVESTMENT ADVISER
Red
Gate Advisers, LLC
Gateway Corporate Center, Ste
216
223 Wilmington West Chester Pike Chadds Ford, PA 19317
INVESTMENT SUB-ADVISERS
Stance
Capital, LLC
75
Central Street, 5th Floor
Boston, Massachusetts 02109
Vident
Investment Advisory, LLC
1125 Sanctuary Parkway
Suite
515
Alpharetta, GA 30009
ADMINISTRATOR AND TRANSFER AGENT
U.S.
Bancorp Fund Services, LLC
615 East Michigan Street
Milwaukee, WI 53202
CUSTODIAN
U.S.
Bank, N.A.
1555
North Rivercenter Drive, Suite 302
Milwaukee, WI 53202
INDEPENDENT
REGISTERED
PUBLIC ACCOUNTING FIRM
PricewaterhouseCoopers
LLP
Two Commerce
Square, Suite 1800
2001 Market Street
Philadelphia, PA 19103
UNDERWRITER
Vigilant
Distributors, LLC
Gateway Corporate Center, Ste
216
223 Wilmington West Chester Pike
Chadds Ford, PA 19317
LEGAL COUNSEL
Faegre
Drinker Biddle & Reath LLP
One Logan Square, Suite 2000
Philadelphia, PA 19103
37 |