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Fund Performance Overview | |
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Portfolio of Investments | |
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Performance | |||||||
Average Annual Total Returns | Cumulative Total Returns | ||||||
6
Months Ended 1/31/22 |
1
Year Ended 1/31/22 |
5
Years Ended 1/31/22 |
Inception (8/24/16) to 1/31/22 |
5
Years Ended 1/31/22 |
Inception (8/24/16) to 1/31/22 | ||
Fund Performance | |||||||
NAV | 3.69% | 24.31% | 12.50% | 11.85% | 80.20% | 83.83% | |
Market Price | 3.63% | 24.33% | 12.49% | 11.83% | 80.10% | 83.72% | |
Index Performance | |||||||
S&P 500® Index | 3.44% | 23.29% | 16.78% | 16.50% | 117.21% | 129.48% |
Performance | |||||||
Average Annual Total Returns | Cumulative Total Returns | ||||||
6
Months Ended 1/31/22 |
1
Year Ended 1/31/22 |
5
Years Ended 1/31/22 |
Inception (8/24/16) to 1/31/22 |
5
Years Ended 1/31/22 |
Inception (8/24/16) to 1/31/22 | ||
Fund Performance | |||||||
NAV | -2.09% | 5.73% | 4.60% | 3.50% | 25.24% | 20.60% | |
Market Price | -2.08% | 6.01% | 4.50% | 3.52% | 24.59% | 20.72% | |
Index Performance | |||||||
MSCI EAFE Index | -3.43% | 7.03% | 7.85% | 7.59% | 45.92% | 48.88% |
Performance | ||||
Average
Annual Total Returns |
Cumulative Total Returns | |||
6
Months Ended 1/31/22 |
1
Year Ended 1/31/22 |
Inception
(4/6/20) to 1/31/22 |
Inception
(4/6/20) to 1/31/22 | |
Fund Performance | ||||
NAV | -0.91% | 16.74% | 28.20% | 57.24% |
Market Price | -0.75% | 16.93% | 28.29% | 57.43% |
Index Performance | ||||
S&P 1000® Index | -2.08% | 12.98% | 42.20% | 89.92% |
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 Horizon Managed Volatility Domestic ETF (HUSV) | ||||
Actual | $1,000.00 | $1,036.90 | 0.70% | $3.59 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.68 | 0.70% | $3.57 |
First Trust Horizon Managed Volatility Developed International ETF (HDMV) | ||||
Actual | $1,000.00 | $979.10 | 0.80% | $3.99 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.17 | 0.80% | $4.08 |
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV) | ||||
Actual | $1,000.00 | $990.90 | 0.80% | $4.01 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,021.17 | 0.80% | $4.08 |
(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). |
Currency Exposure Diversification |
% of Total Investments |
Euro | 32.6% |
Japanese Yen | 19.9 |
Swiss Franc | 11.3 |
Hong Kong Dollar | 9.3 |
Singapore Dollar | 7.8 |
British Pound Sterling | 7.1 |
Australian Dollar | 4.6 |
Swedish Krona | 3.4 |
New Zealand Dollar | 1.1 |
Norwegian Krone | 1.1 |
Danish Krone | 0.9 |
Israeli Shekel | 0.5 |
United States Dollar | 0.4 |
Total | 100.0% |
Total Value at 1/31/2022 |
Level
1 Quoted Prices |
Level
2 Significant Observable Inputs |
Level
3 Significant Unobservable Inputs | |
Common Stocks: | ||||
Israel | $ 649,677 | $ 318,498 | $ 331,179 | $ — |
Other Country Categories* | 71,228,974 | — | 71,228,974 | — |
Real Estate Investment Trusts* | 2,096,736 | — | 2,096,736 | — |
Total Investments | $ 73,975,387 | $ 318,498 | $ 73,656,889 | $— |
* | See Portfolio of Investments for country breakout. |
First
Trust Horizon Managed Volatility Domestic ETF (HUSV) |
First
Trust Horizon Managed Volatility Developed International ETF (HDMV) |
First
Trust Horizon Managed Volatility Small/Mid ETF (HSMV) | |||
ASSETS: | |||||
Investments, at value
|
$ 127,412,302 | $ 73,975,387 | $ 14,650,176 | ||
Cash
|
171,733 | 51,177 | 43,161 | ||
Foreign currency
|
— | 1,159 | — | ||
Receivables: | |||||
Investment securities sold
|
1,698,967 | 507,430 | — | ||
Dividends
|
170,499 | 67,155 | 4,081 | ||
Dividend reclaims
|
1,833 | 242,148 | 114 | ||
Total Assets
|
129,455,334 | 74,844,456 | 14,697,532 | ||
LIABILITIES: | |||||
Payables: | |||||
Capital shares redeemed
|
1,702,329 | — | — | ||
Investment advisory fees
|
78,304 | 51,508 | 10,263 | ||
Total Liabilities
|
1,780,633 | 51,508 | 10,263 | ||
NET ASSETS
|
$127,674,701 | $74,792,948 | $14,687,269 | ||
NET ASSETS consist of: | |||||
Paid-in capital
|
$ 157,862,110 | $ 99,912,101 | $ 14,230,124 | ||
Par value
|
37,500 | 24,000 | 4,500 | ||
Accumulated distributable earnings (loss)
|
(30,224,909) | (25,143,153) | 452,645 | ||
NET ASSETS
|
$127,674,701 | $74,792,948 | $14,687,269 | ||
NET ASSET VALUE, per share
|
$34.05 | $31.16 | $32.64 | ||
Number of shares outstanding (unlimited number of
shares authorized, par value $0.01 per share)
|
3,750,002 | 2,400,002 | 450,002 | ||
Investments, at cost
|
$113,628,258 | $72,960,997 | $14,658,037 | ||
Foreign currency, at cost (proceeds)
|
$— | $1,151 | $— |
First
Trust Horizon Managed Volatility Domestic ETF (HUSV) |
First
Trust Horizon Managed Volatility Developed International ETF (HDMV) |
First
Trust Horizon Managed Volatility Small/Mid ETF (HSMV) | ||||
INVESTMENT INCOME: | ||||||
Dividends
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$ 1,350,369 | $ 931,356 | $ 152,205 | |||
Interest
|
5 | 5 | — | |||
Foreign withholding tax
|
— | (64,085) | — | |||
Other
|
— | 4 | 87 | |||
Total investment income
|
1,350,374 | 867,280 | 152,292 | |||
EXPENSES: | ||||||
Investment advisory fees
|
445,015 | 333,046 | 60,690 | |||
Total expenses
|
445,015 | 333,046 | 60,690 | |||
NET INVESTMENT INCOME (LOSS)
|
905,359 | 534,234 | 91,602 | |||
NET REALIZED AND UNREALIZED GAIN (LOSS): | ||||||
Net realized gain (loss) on: | ||||||
Investments
|
3,997,892 | 1,951,183 | (165,040) | |||
In-kind redemptions
|
249,603 | 348,186 | 918,968 | |||
Foreign currency transactions
|
— | (8,545) | — | |||
Net realized gain (loss)
|
4,247,495 | 2,290,824 | 753,928 | |||
Net change in unrealized appreciation (depreciation) on: | ||||||
Investments
|
(568,701) | (4,678,486) | (952,870) | |||
Foreign currency translation
|
— | (29,004) | — | |||
Net change in unrealized appreciation
(depreciation)
|
(568,701) | (4,707,490) | (952,870) | |||
NET REALIZED AND UNREALIZED GAIN (LOSS)
|
3,678,794 | (2,416,666) | (198,942) | |||
NET INCREASE (DECREASE) IN NET ASSETS RESULTING
FROM OPERATIONS
|
$ 4,584,153 | $(1,882,432) | $(107,340) |
First Trust Horizon Managed Volatility Domestic ETF (HUSV) |
First Trust Horizon Managed Volatility Developed International ETF (HDMV) | ||||||
Six
Months Ended 1/31/2022 (Unaudited) |
Year Ended 7/31/2021 |
Six
Months Ended 1/31/2022 (Unaudited) |
Year Ended 7/31/2021 | ||||
OPERATIONS: | |||||||
Net investment income (loss)
|
$ 905,359 | $ 2,290,770 | $ 534,234 | $ 2,610,309 | |||
Net realized gain (loss)
|
4,247,495 | 32,204,187 | 2,290,824 | 10,415,785 | |||
Net increase from payment by the advisor
|
— | — | — | 6,254 | |||
Net change in unrealized appreciation
(depreciation)
|
(568,701) | (4,733,783) | (4,707,490) | 3,610,545 | |||
Net increase (decrease) in net assets resulting
from operations
|
4,584,153 | 29,761,174 | (1,882,432) | 16,642,893 | |||
DISTRIBUTIONS TO SHAREHOLDERS FROM: | |||||||
Investment operations
|
(946,271) | (2,308,451) | (982,681) | (2,737,667) | |||
SHAREHOLDER TRANSACTIONS: | |||||||
Proceeds from shares sold
|
4,981,407 | 127,467,991 | — | — | |||
Cost of shares redeemed
|
(1,702,329) | (248,985,087) | (9,303,716) | (50,656,967) | |||
Net increase (decrease) in net assets resulting
from shareholder transactions
|
3,279,078 | (121,517,096) | (9,303,716) | (50,656,967) | |||
Total increase (decrease) in net assets
|
6,916,960 | (94,064,373) | (12,168,829) | (36,751,741) | |||
NET ASSETS: | |||||||
Beginning of period
|
120,757,741 | 214,822,114 | 86,961,777 | 123,713,518 | |||
End of period
|
$127,674,701 | $120,757,741 | $74,792,948 | $86,961,777 | |||
CHANGES IN SHARES OUTSTANDING: | |||||||
Shares outstanding, beginning of period
|
3,650,002 | 7,900,002 | 2,700,002 | 4,400,002 | |||
Shares sold
|
150,000 | 4,600,000 | — | — | |||
Shares redeemed
|
(50,000) | (8,850,000) | (300,000) | (1,700,000) | |||
Shares outstanding, end of period
|
3,750,002 | 3,650,002 | 2,400,002 | 2,700,002 |
First Trust Horizon Managed Volatility Small/Mid ETF (HSMV) | ||
Six
Months Ended 1/31/2022 (Unaudited) |
Year Ended 7/31/2021 | |
$ 91,602 | $ 155,806 | |
753,928 | 4,216,877 | |
— | — | |
(952,870) | (131,960) | |
(107,340) | 4,240,723 | |
(84,555) | (160,236) | |
5,088,820 | 23,515,729 | |
(5,115,847) | (32,712,721) | |
(27,027) | (9,196,992) | |
(218,922) | (5,116,505) | |
14,906,191 | 20,022,696 | |
$14,687,269 | $14,906,191 | |
450,002 | 800,002 | |
150,000 | 800,000 | |
(150,000) | (1,150,000) | |
450,002 | 450,002 |
Six Months Ended 1/31/2022 (Unaudited) |
Year Ended July 31, | Period Ended 7/31/2017 (a) | ||||||||||
2021 | 2020 | 2019 | 2018 | |||||||||
Net asset value, beginning of period
|
$ 33.08 | $ 27.19 | $ 26.71 | $ 23.49 | $ 22.03 | $ 19.96 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss)
|
0.24 | 0.46 | 0.37 | 0.37 | 0.30 | 0.24 | ||||||
Net realized and unrealized gain (loss)
|
0.98 | 5.87 | 0.52 | 3.17 | 1.46 | 2.05 | ||||||
Total from investment operations
|
1.22 | 6.33 | 0.89 | 3.54 | 1.76 | 2.29 | ||||||
Distributions paid to shareholders from: | ||||||||||||
Net investment income
|
(0.25) | (0.44) | (0.41) | (0.32) | (0.30) | (0.22) | ||||||
Net asset value, end of period
|
$34.05 | $33.08 | $27.19 | $26.71 | $23.49 | $22.03 | ||||||
Total return
(b)
|
3.69% | 23.48% | 3.41% | 15.24% | 8.04% | 11.51% | ||||||
Ratios to average net assets/supplemental data: | ||||||||||||
Net assets, end of period (in 000’s)
|
$ 127,675 | $ 120,758 | $ 214,822 | $ 224,389 | $ 133,888 | $ 62,799 | ||||||
Ratio of total expenses to average net
assets
|
0.70% (c) | 0.70% | 0.70% | 0.70% | 0.70% | 0.70% (c) | ||||||
Ratio of net investment income (loss) to average
net assets
|
1.42% (c) | 1.42% | 1.39% | 1.58% | 1.37% | 1.50% (c) | ||||||
Portfolio turnover rate (d)
|
23% | 152% | 211% | 147% | 157% | 149% |
(a) | Inception date is August 24, 2016, 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. |
Six Months Ended 1/31/2022 (Unaudited) |
Year Ended July 31, | Period Ended 7/31/2017 (a) | ||||||||||
2021 | 2020 | 2019 | 2018 | |||||||||
Net asset value, beginning of period
|
$ 32.21 | $ 28.12 | $ 32.92 | $ 33.72 | $ 33.05 | $ 29.89 | ||||||
Income from investment operations: | ||||||||||||
Net investment income (loss)
|
0.21 | 0.89 | 0.65 | 0.86 | 0.91 | 0.63 | ||||||
Net realized and unrealized gain (loss)
|
(0.88) | 4.13 | (4.61) | (0.79) | 0.87 | 3.13 | ||||||
Total from investment operations
|
(0.67) | 5.02 | (3.96) | 0.07 | 1.78 | 3.76 | ||||||
Distributions paid to shareholders from: | ||||||||||||
Net investment income
|
(0.38) | (0.93) | (0.84) | (0.87) | (1.11) | (0.60) | ||||||
Net asset value, end of period
|
$31.16 | $32.21 | $28.12 | $32.92 | $33.72 | $33.05 | ||||||
Total return
(b)
|
(2.09)% | 18.01% (c) | (12.37)% | 0.21% | 5.48% | 12.68% | ||||||
Ratios to average net assets/supplemental data: | ||||||||||||
Net assets, end of period (in 000’s)
|
$ 74,793 | $ 86,962 | $ 123,714 | $ 128,394 | $ 59,010 | $ 29,745 | ||||||
Ratio of total expenses to average net
assets
|
0.80% (d) | 0.80% | 0.80% | 0.80% | 0.80% | 0.80% (d) | ||||||
Ratio of net investment income (loss) to average
net assets
|
1.28% (d) | 2.68% | 2.08% | 2.74% | 2.73% | 2.74% (d) | ||||||
Portfolio turnover rate (e)
|
22% | 127% | 196% | 99% | 133% | 150% |
(a) | Inception date is August 24, 2016, 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) | The Fund received a reimbursement from the advisor in the amount of $6,254, which represents less than $0.01 per share. Since the advisor reimbursed the Fund, there was no effect on the Fund’s total return. |
(d) | Annualized. |
(e) | 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. |
Six
Months Ended 1/31/2022 (Unaudited) |
Year
Ended 7/31/2021 |
Period Ended 7/31/2020 (a) | |||
Net asset value, beginning of period
|
$ 33.12 | $ 25.03 | $ 21.10 | ||
Income from investment operations: | |||||
Net investment income (loss)
|
0.21 | 0.29 | 0.02 | ||
Net realized and unrealized gain (loss)
|
(0.50) | 8.09 | 3.92 | ||
Total from investment operations
|
(0.29) | 8.38 | 3.94 | ||
Distributions paid to shareholders from: | |||||
Net investment income
|
(0.19) | (0.29) | (0.01) | ||
Net realized gain
|
— | (0.00) (b) | — | ||
Total distributions
|
(0.19) | (0.29) | (0.01) | ||
Net asset value, end of period
|
$32.64 | $33.12 | $25.03 | ||
Total return
(c)
|
(0.91)% | 33.72% | 18.67% | ||
Ratios to average net assets/supplemental data: | |||||
Net assets, end of period (in 000’s)
|
$ 14,687 | $ 14,906 | $ 20,023 | ||
Ratio of total expenses to average net
assets
|
0.80% (d) | 0.80% | 0.80% (d) | ||
Ratio of net investment income (loss) to average
net assets
|
1.21% (d) | 1.02% | 0.60% (d) | ||
Portfolio turnover rate (e)
|
32% | 118% | 5% |
(a) | Inception date is April 6, 2020, which is consistent with the commencement of investment operations and is the date the initial creation units were established. |
(b) | Amount represents less than $0.01 per share. |
(c) | 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. |
(d) | Annualized. |
(e) | 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. |
1) | the value of similar foreign securities traded on other foreign markets; |
2) | ADR trading of similar securities; |
3) | closed-end fund or exchange-traded fund trading of similar securities; |
4) | foreign currency exchange activity; |
5) | the trading prices of financial products that are tied to baskets of foreign securities; |
6) | factors relating to the event that precipitated the pricing problem; |
7) | whether the event is likely to recur; and |
8) | whether the effects of the event are isolated or whether they affect entire markets, countries or regions. |
• | 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. |
Distributions paid from Ordinary Income |
Distributions paid from Capital Gains |
Distributions paid from Return of Capital | |||
First Trust Horizon Managed Volatility Domestic
ETF
|
$ 2,308,451 | $ — | $ — | ||
First Trust Horizon Managed Volatility Developed
International ETF
|
2,737,667 | — | — | ||
First Trust Horizon Managed Volatility Small/Mid
ETF
|
160,081 | 155 | — |
Undistributed Ordinary Income |
Accumulated Capital and Other Gain (Loss) |
Net Unrealized Appreciation (Depreciation) | |||
First Trust Horizon Managed Volatility Domestic
ETF
|
$ 163,103 | $ (48,327,956) | $ 14,302,062 | ||
First Trust Horizon Managed Volatility Developed
International ETF
|
512,282 | (28,169,828) | 5,379,506 | ||
First Trust Horizon Managed Volatility Small/Mid
ETF
|
4,006 | (249,714) | 890,248 |
Non-Expiring Capital Loss Carryforward | |
First Trust Horizon Managed Volatility Domestic
ETF
|
$ 48,327,956 |
First Trust Horizon Managed Volatility Developed
International ETF
|
28,169,828 |
First Trust Horizon Managed Volatility Small/Mid
ETF
|
249,714 |
Tax Cost | Gross Unrealized Appreciation |
Gross Unrealized (Depreciation) |
Net
Unrealized Appreciation (Depreciation) | ||||
First Trust Horizon Managed Volatility Domestic
ETF
|
$ 113,628,258 | $ 15,215,077 | $ (1,431,033) | $ 13,784,044 | |||
First Trust Horizon Managed Volatility
Developed International ETF
|
72,960,997 | 4,983,818 | (3,969,428) | 1,014,390 | |||
First Trust Horizon Managed Volatility Small/Mid
ETF
|
14,658,037 | 644,725 | (652,586) | (7,861) |
Purchases | Sales | ||
First Trust Horizon Managed Volatility Domestic ETF | $ 28,828,731 | $ 28,792,405 | |
First Trust Horizon Managed Volatility Developed International ETF | 17,678,612 | 18,464,581 | |
First Trust Horizon Managed Volatility Small/Mid ETF | 4,891,087 | 4,739,604 | |
Purchases | Sales | ||
First Trust Horizon Managed Volatility Domestic ETF | $ 4,970,664 | $ 1,698,967 | |
First Trust Horizon Managed Volatility Developed International ETF | — | 9,270,538 | |
First Trust Horizon Managed Volatility Small/Mid ETF | 5,077,676 | 5,118,890 |
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 each Fund’s investments. In considering the Sub-Advisor’s management of the Funds, 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 each Fund by the Sub-Advisor were satisfactory and that the Sub-Advisor, under the oversight of the Advisor, has managed each Fund consistent with the Fund’s investment objective, policies and restrictions. |
• | The Board noted that the sub-advisory fee for each Fund is paid by the Advisor from the unitary fee payable under the Fund’s investment advisory agreement and its understanding that each Fund’s sub-advisory fee rate was the product of an arm’s length negotiation. The Board received and reviewed information showing the sub-advisory fee rate for each 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 each 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. The Board received and reviewed information comparing each Fund’s performance for periods ended December 31, 2020 to that of one or more relevant benchmark indexes and to that of a performance group of funds and a broad performance universe of funds (the “Performance Universe”), each assembled by Broadridge Financial Solutions, Inc., an independent source. Based on the information provided, the Board noted that each of HUSV and HDMV underperformed its Performance Universe median and benchmark index for the one- and three-year periods ended December 31, 2020. The Board noted the Advisor’s discussion of HUSV’s and HDMV’s performance at the April 26, 2021 meeting. Because HSMV commenced operations on April 6, 2020 and therefore has a limited performance history, comparative performance information for the Fund was not considered. |
• | On the basis of all the information provided on the unitary fee and performance, as applicable, of each Fund and the ongoing oversight by the Board, the Board concluded that the unitary fee for each Fund (out of which the Sub-Advisor is compensated) continues to be reasonable and appropriate in light of the nature, extent and quality of the services provided by the Advisor and the Sub-Advisor to each Fund under the Investment Management and Sub-Advisory Agreements. |
• | The Board considered the Sub-Advisor’s statements to the effect that it is difficult to know if or precisely when measurable economies of scale will be achieved for the Sub-Advisor and that the Sub-Advisor presumes expenses related to providing services will remain approximately the same over the next twelve months. The Board did not review the profitability of the Sub-Advisor with respect to each Fund. The Board noted that the Advisor pays the Sub-Advisor for each Fund from its unitary fee and its understanding that each 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 Funds. The Board noted that the Sub-Advisor is not responsible for coordinating execution of Fund trades and that the only known fall-out benefit the Sub-Advisor receives from managing the Funds is publicity related to managing an ETF in a closely monitored sector of the ETF universe. The Board concluded that the character and amount of potential fall-out benefits to the Sub-Advisor were not unreasonable. |