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Performance | ||||
Average
Annual Total Returns |
Cumulative Total Returns | |||
6
Months Ended 1/31/22 |
1
Year Ended 1/31/22 |
Inception
(2/4/20) to 1/31/22 |
Inception
(2/4/20) to 1/31/22 | |
Fund Performance | ||||
NAV | 1.07% | 1.07% | -0.63% | -1.25% |
Market Price | 1.07% | 0.97% | -0.66% | -1.30% |
Index Performance | ||||
Hedge Fund Research Merger Arbitrage Index | 0.65% | 0.90% | 3.63% | 7.35% |
S&P 500® Index | 3.44% | 23.29% | 19.02% | 41.40% |
Beginning Account Value August 1, 2021 |
Ending Account Value January 31, 2022 |
Annualized Expense Ratio Based on the Six-Month Period |
Expenses Paid During the Six-Month Period (a) | |
First Trust Merger Arbitrage ETF (MARB) | ||||
Actual | $1,000.00 | $1,010.70 | 2.29% | $11.61 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,013.66 | 2.29% | $11.62 |
(a) | Expenses are equal to the annualized expense ratios as indicated in the table multiplied by the average account value over the period (August 1, 2021 through January 31, 2022), multiplied by 184/365 (to reflect the six-month period). |
Shares | Description | Value | ||
REAL ESTATE INVESTMENT TRUSTS SOLD SHORT – (4.1)% | ||||
Equity
Real Estate Investment Trusts – (4.1)% |
||||
(5,626) | VICI Properties, Inc. | $(161,016) | ||
(Proceeds $168,920) | ||||
Total Investments Sold Short – (47.5)% | (1,876,641) | |||
(Proceeds $1,746,222) | ||||
Net Other Assets and Liabilities – 61.0% | 2,409,408 | |||
Net Assets – 100.0% | $3,952,884 |
(a) | This security or a portion of this security is segregated as collateral for investments sold short. |
(b) | Non-income producing security. |
ASSETS TABLE | ||||
Total Value at 1/31/2022 |
Level
1 Quoted Prices |
Level
2 Significant Observable Inputs |
Level
3 Significant Unobservable Inputs | |
Common Stocks* | $ 3,093,787 | $ 3,093,787 | $ — | $ — |
Real Estate Investment Trusts* | 326,330 | 326,330 | — | — |
Total Investments | $ 3,420,117 | $ 3,420,117 | $— | $— |
LIABILITIES TABLE | ||||
Total Value at 1/31/2022 |
Level
1 Quoted Prices |
Level
2 Significant Observable Inputs |
Level
3 Significant Unobservable Inputs | |
Common Stocks Sold Short* | $ (1,715,625) | $ (1,715,625) | $ — | $ — |
Real Estate Investment Trusts Sold Short* | (161,016) | (161,016) | — | — |
Total Investments | $ (1,876,641) | $ (1,876,641) | $— | $— |
* | See Portfolio of Investments for industry breakout. |
ASSETS: | |
Investments, at value (Cost $3,306,733)
|
$ 3,420,117 |
Cash
|
192,581 |
Restricted Cash
|
2,222,253 |
Dividends receivable
|
2,943 |
Total Assets
|
5,837,894 |
LIABILITIES: | |
Investments sold short, at value (proceeds
$1,746,222)
|
1,876,641 |
Payables: | |
Investment advisory fees
|
4,572 |
Dividends on investments sold short
|
3,214 |
Margin interest expense
|
583 |
Total Liabilities
|
1,885,010 |
NET ASSETS
|
$3,952,884 |
NET ASSETS consist of: | |
Paid-in capital
|
$ 4,428,700 |
Par value
|
2,000 |
Accumulated distributable earnings (loss)
|
(477,816) |
NET ASSETS
|
$3,952,884 |
NET ASSET VALUE, per share
|
$19.76 |
Number of shares outstanding (unlimited number of
shares authorized, par value $0.01 per share)
|
200,002 |
INVESTMENT INCOME: | ||
Dividends
|
$ 30,689 | |
Interest
|
20 | |
Other
|
247 | |
Total investment income
|
30,956 | |
EXPENSES: | ||
Investment advisory fees
|
49,764 | |
Dividend expense on investments sold short
|
36,730 | |
Margin interest expense
|
4,864 | |
Total expenses
|
91,358 | |
NET INVESTMENT INCOME (LOSS)
|
(60,402) | |
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||
Net realized gain (loss) on: | ||
Investments
|
(61,198) | |
In-kind redemptions
|
(47,435) | |
Investments sold short
|
59,765 | |
Net realized gain (loss)
|
(48,868) | |
Net change in unrealized appreciation (depreciation) on: | ||
Investments
|
119,380 | |
Investments sold short
|
64,297 | |
Net change in unrealized appreciation
(depreciation)
|
183,677 | |
NET REALIZED AND UNREALIZED GAIN (LOSS)
|
134,809 | |
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS
|
$ 74,407 |
Six
Months Ended 1/31/2022 (Unaudited) |
Year Ended 7/31/2021 | ||
OPERATIONS: | |||
Net investment income (loss)
|
$ (60,402) | $ (143,975) | |
Net realized gain (loss)
|
(48,868) | 414,482 | |
Net change in unrealized appreciation
(depreciation)
|
183,677 | (174,442) | |
Net increase (decrease) in net assets resulting
from operations
|
74,407 | 96,065 | |
SHAREHOLDER TRANSACTIONS: | |||
Proceeds from shares sold
|
— | 21,654,151 | |
Cost of shares redeemed
|
(6,873,954) | (23,646,537) | |
Net increase (decrease) in net assets resulting
from shareholder transactions
|
(6,873,954) | (1,992,386) | |
Total increase (decrease) in net assets
|
(6,799,547) | (1,896,321) | |
NET ASSETS: | |||
Beginning of period
|
10,752,431 | 12,648,752 | |
End of period
|
$3,952,884 | $10,752,431 | |
CHANGES IN SHARES OUTSTANDING: | |||
Shares outstanding, beginning of period
|
550,002 | 650,002 | |
Shares sold
|
— | 1,100,000 | |
Shares redeemed
|
(350,000) | (1,200,000) | |
Shares outstanding, end of period
|
200,002 | 550,002 |
Six
Months Ended 1/31/2022 (Unaudited) |
Year
Ended 7/31/2021 |
Period Ended 7/31/2020 (a) | |||
Net asset value, beginning of period
|
$ 19.55 | $ 19.46 | $ 20.01 | ||
Income from investment operations: | |||||
Net investment income (loss)
|
(0.45) | (0.26) | (0.07) | ||
Net realized and unrealized gain (loss)
|
0.66 | 0.35 | (0.48) | ||
Total from investment operations
|
0.21 | 0.09 | (0.55) | ||
Net asset value, end of period
|
$19.76 | $19.55 | $19.46 | ||
Total return
(b)
|
1.07% | 0.46% | (2.75)% | ||
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s)
|
$ 3,953 | $ 10,752 | $ 12,649 | ||
Ratio of total expenses to average net
assets
|
2.29% (c) | 2.23% | 2.30% (c) | ||
Ratio of total expenses to average net assets
excluding dividend expense and margin interest expense
|
1.25% (c) | 1.25% | 1.25% (c) | ||
Ratio of net investment income (loss) to average
net assets
|
(1.52)% (c) | (1.15)% | (1.71)% (c) | ||
Portfolio turnover rate (d)
|
256% | 280% | 137% |
(a) | Inception date is February 4, 2020, which is consistent with the commencement of investment operations and is the date the initial creation units were established. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period, reinvestment of all distributions at net asset value during the period, and redemption at net asset value on the last day of the period. The returns presented do not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption or sale of Fund shares. Total return is calculated for the time period presented and is not annualized for periods of less than a year. |
(c) | Annualized. |
(d) | Portfolio turnover is calculated for the time period presented and is not annualized for periods of less than a year and does not include securities received or delivered from processing creations or redemptions and in-kind transactions. |
1) | the type of security; |
2) | the size of the holding; |
3) | the initial cost of the security; |
4) | transactions in comparable securities; |
5) | price quotes from dealers and/or third-party pricing services; |
6) | relationships among various securities; |
7) | information obtained by contacting the issuer, analysts, or the appropriate stock exchange; |
8) | an analysis of the issuer’s financial statements; and |
9) | the existence of merger proposals or tender offers that might affect the value of the security. |
• | Level 1 – Level 1 inputs are quoted prices in active markets for identical investments. An active market is a market in which transactions for the investment occur with sufficient frequency and volume to provide pricing information on an ongoing basis. |
• | Level 2 – Level 2 inputs are observable inputs, either directly or indirectly, and include the following: |
o | Quoted prices for similar investments in active markets. |
o | Quoted prices for identical or similar investments in markets that are non-active. A non-active market is a market where there are few transactions for the investment, the prices are not current, or price quotations vary substantially either over time or among market makers, or in which little information is released publicly. |
o | Inputs other than quoted prices that are observable for the investment (for example, interest rates and yield curves observable at commonly quoted intervals, volatilities, prepayment speeds, loss severities, credit risks, and default rates). |
o | Inputs that are derived principally from or corroborated by observable market data by correlation or other means. |
• | Level 3 – Level 3 inputs are unobservable inputs. Unobservable inputs may reflect the reporting entity’s own assumptions about the assumptions that market participants would use in pricing the investment. |
Undistributed ordinary income
|
$— |
Accumulated capital and other gain (loss)
|
(349,814) |
Net unrealized appreciation (depreciation)
|
(202,409) |
Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized (Depreciation) |
Net
Unrealized Appreciation (Depreciation) | |||
$1,560,511 | $244,877 | $(261,912) | $(17,035) |
NOT FDIC INSURED | NOT BANK GUARANTEED | MAY LOSE VALUE |
• | The Board considered the nature, extent and quality of the services provided by the Sub-Advisor and that the Sub-Advisor actively manages the Fund’s investments. In considering the Sub-Advisor’s management of the Fund, the Board noted the background and experience of the Sub-Advisor’s portfolio management team, including the Board’s prior meetings with members of the portfolio management team. In light of the information presented and the considerations made, the Board concluded that the nature, extent and quality of the services provided to the Fund by the Sub-Advisor were satisfactory and that the Sub-Advisor, under the oversight of the Advisor, has managed the Fund consistent with the Fund’s investment objective, policies and restrictions. |
• | The Board noted that the sub-advisory fee for the Fund is paid by the Advisor from the unitary fee payable under the Fund’s investment advisory agreement. The Board received and reviewed information showing the sub-advisory fee rate for the Fund as compared to fees charged to other clients of the Sub-Advisor. |
• | The Board considered performance information for the Fund. The Board noted the process that it has established for monitoring the Fund’s performance and portfolio risk on an ongoing basis, which includes quarterly performance reporting |
from the Sub-Advisor for the Fund. The Board determined that this process continues to be effective for reviewing the Fund’s performance. Because the Fund commenced operations on February 4, 2020 and therefore had a limited performance history, comparative performance information for the Fund was not considered. | |
• | The Board considered the Sub-Advisor’s statement that it believes that the sub-advisory fee is appropriate based on expected economies of scale. The Board noted the Sub-Advisor’s statements that the majority of its expenses are fixed and are shared and allocated across various funds advised or sub-advised by the Sub-Advisor and that it has added additional personnel over the past year. The Board did not review the profitability of the Sub-Advisor with respect to the Fund. The Board noted that the Advisor pays the Sub-Advisor for the Fund from its unitary fee and its understanding that the Fund’s sub-advisory fee rate was the product of an arm’s length negotiation. The Board considered the potential fall-out benefits to the Sub-Advisor from being associated with the Advisor and the Fund, and noted the Sub-Advisor’s statement that, although it benefits from the name recognition associated with its role as sub-advisor to the Fund, it has not received and does not anticipate receiving any reduction in fees incurred for research or other services as a result of its management of the Fund. The Board also noted the Sub-Advisor’s statement that the Sub-Advisor does not intend to use soft dollars in connection with the Fund. The Board concluded that the character and amount of potential fall-out benefits to the Sub-Advisor were not unreasonable. |