Table of Contents
Performance Overview | 1 |
Disclosure of Fund Expenses | 4 |
Report of Independent Registered Public Accounting Firm | 5 |
Financial Statements | |
Schedule of Investments | 6 |
Statement of Assets and Liabilities | 10 |
Statement of Operations | 11 |
Statements of Changes in Net Assets | 12 |
Financial Highlights | 13 |
Notes to Financial Statements | 14 |
Additional Information | 19 |
Board Considerations Regarding Approval of Investment Advisory Agreement and Sub-Advisory Agreement | 20 |
Trustees & Officers | 22 |
alpsfunds.com
ALPS Intermediate Municipal Bond ETF
Performance Overview | November 30, 2023 (Unaudited) |
Investment Objective
ALPS Intermediate Municipal Bond ETF (the “Fund") seeks to protect investor's capital and generate attractive risk-adjusted returns. The Fund seeks to actively achieve its investment objective by applying bottom-up fundamental analysis and investing in a long-term, tax-aware manner. Under normal circumstances, the Fund will invest at least 80% of its net assets in municipal bonds that pay interest that is generally excludable from gross income for federal income tax purposes (except that the interest paid by certain municipal securities may be includable in taxable income for purposes of the federal alternative minimum tax).
Performance Overview
The Fund produced a total return of 4.27%, based on its market price and 4.85%, based on its NAV for the Fund's fiscal year ended November 30, 2023, as compared to its benchmark, Bloomberg Municipal Bond 1-15 Year Blend Index, which had a return of 3.79% over the same period. Throughout the Fund's 2023 fiscal year, swings in investor expectations regarding inflation and monetary policy drove significant market volatility.
The objective of the Fund is to protect investors’ capital and generate attractive risk-adjusted returns. The Fund seeks to achieve this objective by investing in a limited number of durable credits that provide attractive yields or return potential. Year-over year, the Fund’s net assets remained stable, ending November 2023 at approximately $31 million.
In the Municipal market, valuations are often disconnected from their underlying fundamentals, particularly during periods of heightened market volatility. The Fund entered the 2023 fiscal year holding securities with very attractive valuations that ALPS Advisors believes resulted from the Federal Reserve Bank's (FED) most aggressive policy tightening in forty years, along with record outflows from industry funds. Throughout the 2023 fiscal year, the Fund enjoyed a broad opportunity set from higher base rates, wide credit spreads, and healthy compensation for off-the-run structures. Elevated market volatility also enhanced the Fund’s sub-adviser’s opportunity set. One notable weak spot was the second consecutive year of very light issuance, which helped drive strong competition for bonds in the primary market.
Belying the intra-period volatility, intermediate maturity interest rates ended November 2023 nearly unchanged from the prior fiscal year, while short maturity yields climbed 0.30%. The credit-sensitive portions of the Municipal market recovered significantly, with BBB-rated and Municipal High Yield, each outperforming AAA-rated by over 2% points during the 2023 fiscal year. Despite the Fund’s low exposure to BBB-rated bonds and no high-yield positions, it still performed strongly relative to the Bloomberg Municipal Bond 1-15 Year Blend Index and its peers. A core element of the Fund’s strategy is to focus on niches of the Municipal market that fall outside the comfort zone of household investors. This has allowed the sub-adviser to enhance the Fund's risk-adjusted return. To preserve Fund liquidity, the Fund’s sub-adviser focuses on high quality securities in these areas.
The Fund’s sub-adviser invests the Fund’s portfolio from the bottom-up and has continued to identify more opportunities in Revenue Bonds than in General Obligation (GO) issues. As of November 30, 2023, the Fund held approximately 85% of its net assets in Revenue Bonds and the balance in GOs. Within the Revenue sector, the Fund’s largest exposure remained to State Housing Finance Authority sector, which comprised approximately 24% of net assets. The Fund also held significant exposures to the Airport and Prepaid Natural Gas sectors, which represented approximately 15% and 13% of net assets, respectively. Also of note was the significant variability in money market valuations. Throughout 2023, the Fund’s sub-adviser traded actively between Variable Rate Demand Notes (VRDNs) and Treasury Bills to maximize the after-tax yield on the Fund’s cash balances. Consequently, portfolio turnover for the fiscal year was elevated.
The Fund continued to hold large exposures to bonds with non-standard structures, such as zero-coupon bonds and floating-rate notes. As of November 30, 2023, these two types of bonds comprised roughly 17% and 11% of the Fund’s net assets, respectively. Beyond these positions, the Fund’s sub-adviser also accumulated many longer maturity holdings that the sub-adviser believes will lock in their yields, help bridge over the yield curve inversion, and keep the Fund’s duration relatively in-line with its benchmark.
The Fund's 2023 fiscal year ended with a historic rally in municipal bonds, and the Fund’s sub-adviser continues to look patiently for opportunities. The Fund’s sub-adviser believes the Fund is well-positioned going forward with its holdings of high-quality credits that are providing attractive yields.
1 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Performance Overview | November 30, 2023 (Unaudited) |
Fund Performance (as of November 30, 2023)
1 Year | Since Inception^ | |
ALPS Intermediate Municipal Bond ETF - NAV | 4.85% | 4.73% |
ALPS Intermediate Municipal Bond ETF - Market* | 4.27% | 4.89% |
Bloomberg Municipal Bond 1-15 Year Blend Index | 3.79% | 3.80% |
Total Expense Ratio (per the current prospectus) is 0.50%.
Performance data quoted represents past performance. Past performance does not guarantee future results. Total return figures assume reinvestment of dividends and capital gains distributions, if any. The table does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when sold or redeemed, may be worth more or less than the original cost. Current performance data may be higher or lower than actual data quoted. For the most current month-end performance data please visit www.alpsfunds.com or call 1.866.759.5679.
Net Asset Value (NAV) is an exchange-traded fund’s per-share value. The per-share dollar amount of the Fund is derived by dividing the total value of all the securities in its portfolio, less any liabilities, by the number of Fund shares outstanding. Market Price is the price at which a share can currently be traded in the market. Information detailing the number of days the Market Price of the Fund was greater than the Fund’s NAV and the number of days it was less than the Fund’s NAV can be obtained at www.alpsfunds.com.
^ | The Fund commenced operations on May 19, 2022, with the first day of trading on the exchange of May 20, 2022. |
* | Market Price means the official closing price of a share or, if it more accurately reflects the market value of a share at the time as of which the Fund calculates current net asset value per share, the price that is the midpoint of the bid-ask spread as of that time. It does not represent the returns an investor would receive if shares were traded at other times. |
Bloomberg Municipal Bond 1-15 Year Blend Index is an unmanaged index comprised of fixed-rate, investment-grade tax-exempt bonds with remaining maturities between 1 and 17 years. One cannot invest directly in an index. Index performance does not reflect fund performance.
The Fund is new with limited operating history.
ALPS Intermediate Municipal Bond ETF's shares are not individually redeemable. Investors buy and sell shares of the Fund on a secondary market. Only market makers or “authorized participants” may trade directly with the Fund, typically in blocks of 25,000 shares.
ALPS Intermediate Municipal Bond ETF is not suitable for all investors. Investments in the Fund are subject to investment risks, including possible loss of the principal amount invested.
ALPS Portfolio Solutions Distributor, Inc., a FINRA member, is the distributor for the Fund.
2 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Performance Overview | November 30, 2023 (Unaudited) |
Top Ten Holdings* (as of November 30, 2023)
United States Treasury Bill | 6.33% |
Salt Verde Financial Corp. | 3.78% |
Port Authority of New York & New Jersey | 3.75% |
South Dakota Housing Development Authority | 3.67% |
New Jersey Transportation Trust Fund Authority | 3.27% |
Tennessee Housing Development Agency | 3.24% |
Connecticut State Health & Educational Facilities Authority | 3.15% |
Ohio Housing Finance Agency | 3.14% |
North Carolina Housing Finance Agency | 2.59% |
Central Plains Energy Project | 2.37% |
Total % of Top 10 Holdings | 35.29% |
* | % of Total Investments |
Future holdings are subject to change.
Sector Allocation* (as of November 30, 2023)
Revenue Bonds | 80.70% |
General Obligation Bonds | 12.75% |
Government Bonds | 6.33% |
Money Market Fund | 0.22% |
Total | 100.00% |
Growth of $10,000 (as of November 30, 2023)
Comparison of Change in Value of $10,000 Investment in the Fund and the Indexes
The chart above compares historical performance of a hypothetical investment of $10,000 in the Fund since inception with the performance of the Fund’s benchmark index. Results include the reinvestment of all dividends and capital gains distributions. Past performance does not guarantee future results. The chart does not reflect the deduction of taxes that a shareholder would pay on Fund distributions or the redemption of Fund shares.
3 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Disclosure of Fund Expenses | November 30, 2023 (Unaudited) |
Shareholder Expense Example: As a shareholder of the Fund, you incur certain ongoing costs, including management fees and other Fund expenses. These examples are intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing costs of investing in other funds. The example is based on an investment of $1,000 invested at the beginning of the six month period and held through November 30, 2023.
Actual Return: The first line of the 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 incurred 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 attributable to your investment during this period.
Hypothetical 5% Return: The second line of the 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 ongoing costs of investing in the Fund and other funds. To do so, compare this 5% hypothetical example with the 5% hypothetical examples that appear in the shareholder reports of other funds.
The expenses shown in the table are meant to highlight ongoing Fund costs only and do not reflect any transaction costs, such as brokerage commissions and other fees to financial intermediaries. Therefore, the second line of the table is useful in comparing ongoing costs only, and will not help you determine the relative total costs of owning different funds. In addition, if these costs were included, your costs would have been higher.
Beginning
Account 6/1/23 |
Ending
Account 11/30/23 |
Expense |
Expenses
Paid | |
ALPS Intermediate Municipal Bond ETF | ||||
Actual | $1,000.00 | $1,025.50 | 0.50% | $2.54 |
Hypothetical (5% return before expenses) | $1,000.00 | $1,022.56 | 0.50% | $2.54 |
(a) | Annualized, based on the Fund's most recent fiscal half year expenses. |
(b) | Expenses are equal to the Fund's annualized expense ratio multiplied by the average account value over the period, multiplied by the number of days in the most recent fiscal half year (183), divided by 365. |
4 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Report of Independent Registered Public Accounting Firm |
To the Shareholders of ALPS Intermediate Municipal Bond ETF and Board of Trustees of ALPS ETF Trust
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including the schedule of investments, of ALPS Intermediate Municipal Bond ETF (the “Fund”), a series of ALPS ETF Trust, as of November 30, 2023, the related statements of operations and changes in net assets, the related notes, and the financial highlights for the year then ended (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 November 30, 2023, the results of its operations, the changes in net assets, and the financial highlights for the year then ended, in conformity with accounting principles generally accepted in the United States of America.
The Fund’s financial statements and financial highlights for the period ended November 30, 2022, were audited by other auditors whose report dated January 27, 2023, expressed an unqualified opinion on those financial statements and financial highlights.
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 audit. 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 audit 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 audit included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our procedures included confirmation of securities owned as of November 30, 2023 by correspondence with the custodian and brokers; when replies were not received from brokers, we performed other auditing procedures. Our audit also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audit provides a reasonable basis for our opinion.
We have served as the auditor of one or more investment companies advised by ALPS Advisors, Inc. since 2013.
COHEN & COMPANY, LTD.
Philadelphia, Pennsylvania
January 29, 2024
5 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Schedule of Investments | November 30, 2023 |
Security Description |
Principal Amount |
Value | ||||||
GOVERNMENT BONDS (6.41%) | ||||||||
United States Treasury Bill | ||||||||
5.50%, 12/05/2023(a) | $ | 1,200,000 | $ | 1,199,298 | ||||
5.48%, 12/26/2023(a) | 800,000 | 797,070 | ||||||
Total | 1,996,368 | |||||||
TOTAL GOVERNMENT BONDS | ||||||||
(Cost $1,996,361) | 1,996,368 |
Security Description |
Principal Amount |
Value | ||||||
MUNICIPAL BONDS (94.70%) | ||||||||
General Obligation Limited (2.30%) | ||||||||
Pennsylvania (2.30%) | ||||||||
School District of Philadelphia | ||||||||
5.00%, 09/01/2034 | 500,000 | 515,640 | ||||||
4.00%, 09/01/2036 | 200,000 | 201,630 | ||||||
Total Pennsylvania | 717,270 | |||||||
Total General Obligation Limited | 717,270 | |||||||
General Obligation Unlimited (10.62%) | ||||||||
California (5.38%) | ||||||||
Allan Hancock Joint Community College District | ||||||||
0.00%, 08/01/2042(a) | 350,000 | 282,622 | ||||||
Chaffey Joint Union High School District | ||||||||
0.00%, 08/01/2044(a) | 250,000 | 95,856 | ||||||
Chino Valley Unified School District | ||||||||
0.00%, 08/01/2035(a) | 135,000 | 87,450 | ||||||
Lake Tahoe Unified School District | ||||||||
0.00%, 08/01/2045(a) | 150,000 | 118,181 | ||||||
Mount San Antonio Community College District | ||||||||
0.00%, 08/01/2043(a) | 275,000 | 261,830 | ||||||
Rio Hondo Community College District | ||||||||
0.00%, 08/01/2036(a) | 300,000 | 184,041 | ||||||
0.00%, 08/01/2044(a) | 150,000 | 56,060 | ||||||
San Mateo County Community College District | ||||||||
0.00%, 09/01/2035(a) | 110,000 | 73,389 | ||||||
San Mateo Union High School District | ||||||||
0.00%, 09/01/2041(a) | 520,000 | 516,118 | ||||||
Total California | 1,675,547 | |||||||
Oregon (3.93%) | ||||||||
Clackamas & Washington Counties School District No 3 | ||||||||
0.00%, 06/15/2036(a) | 600,000 | 347,448 |
Security Description |
Principal Amount |
Value | ||||||
General Obligation Unlimited (continued) | ||||||||
Multnomah County School District No 40 | ||||||||
0.00%, 06/15/2043(a) | $ | 1,000,000 | $ | 382,320 | ||||
Multnomah County School District No 7 Reynolds | ||||||||
0.00%, 06/15/2035(a) | 500,000 | 298,117 | ||||||
Washington & Multnomah Counties School District No 48J Beaverton | ||||||||
0.00%, 06/15/2034(a) | 200,000 | 131,224 | ||||||
0.00%, 06/15/2041(a) | 150,000 | 66,825 | ||||||
Total Oregon | 1,225,934 | |||||||
Washington (1.31%) | ||||||||
Washington Clackamas & Yamhill Counties School District No 88J | ||||||||
0.00%, 06/15/2037(a) | 150,000 | 81,422 | ||||||
0.00%, 06/15/2039(a) | 255,000 | 123,633 | ||||||
0.00%, 06/15/2040(a) | 200,000 | 91,975 | ||||||
0.00%, 06/15/2041(a) | 250,000 | 109,014 | ||||||
Total Washington | 406,044 | |||||||
Total General Obligation Unlimited | 3,307,525 | |||||||
Revenue Bonds (81.78%) | ||||||||
Alabama (0.21%) | ||||||||
Industrial Development Board of the City of Mobile Alabama | ||||||||
3.92%, 06/01/2034(b) | 65,000 | 65,446 | ||||||
Total Alabama | 65,446 | |||||||
Arizona (4.40%) | ||||||||
Chandler Industrial Development Authority | ||||||||
4.10%, 12/01/2037(b) | 175,000 | 176,176 | ||||||
Salt Verde Financial Corp. | ||||||||
5.00%, 12/01/2032 | 675,000 | 715,837 | ||||||
5.00%, 12/01/2037 | 450,000 | 477,790 | ||||||
Total Arizona | 1,369,803 | |||||||
California (3.94%) | ||||||||
Anaheim Public Financing Authority | ||||||||
0.00%, 09/01/2030(a) | 275,000 | 216,260 | ||||||
Long Beach Bond Finance Authority 3M US SOFR + 1.45%, | ||||||||
11/15/2027(b) | 430,000 | 428,362 | ||||||
Modesto Irrigation District 3M US SOFR + 0.63%, | ||||||||
09/01/2037(b) | 200,000 | 187,465 | ||||||
Northern California Gas Authority No 1 3M US SOFR + 0.72%, | ||||||||
07/01/2027(b) | 230,000 | 226,918 |
6 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Schedule of Investments | November 30, 2023 |
Security Description |
Principal Amount |
Value | ||||||
Revenue Bonds (continued) | ||||||||
San Diego County Regional Airport Authority | ||||||||
5.25%, 07/01/2036 | $ | 150,000 | $ | 168,160 | ||||
Total California | 1,227,165 | |||||||
Colorado (2.59%) | ||||||||
City & County of Denver Co. Airport System Revenue | ||||||||
5.25%, 11/15/2035 | 250,000 | 283,301 | ||||||
5.75%, 11/15/2036 | 250,000 | 302,588 | ||||||
E-470 Public Highway Authority | ||||||||
0.00%, 09/01/2035(a) | 300,000 | 172,376 | ||||||
1D US SOFR + 0.35%, 09/01/2039(b) | 50,000 | 49,842 | ||||||
Total Colorado | 808,107 | |||||||
Connecticut (4.20%) | ||||||||
Connecticut Housing Finance Authority | ||||||||
4.00%, 11/15/2047 | 315,000 | 313,208 | ||||||
Connecticut State Health & Educational Facilities Authority | ||||||||
0.25%, 07/01/2037(b) | 1,000,000 | 993,470 | ||||||
Total Connecticut | 1,306,678 | |||||||
District of Columbia (2.33%) | ||||||||
Metropolitan Washington Airports Authority Aviation Revenue | ||||||||
5.00%, 10/01/2030 | 200,000 | 200,846 | ||||||
5.00%, 10/01/2031 | 245,000 | 251,277 | ||||||
5.00%, 10/01/2037 | 250,000 | 269,971 | ||||||
Total District of Columbia | 722,094 | |||||||
Florida (3.21%) | ||||||||
City Of South Miami Health Facilities Authority, Inc. | ||||||||
5.00%, 08/15/2042 | 300,000 | 305,636 | ||||||
County of Broward FL Airport System Revenue | ||||||||
5.00%, 10/01/2031 | 200,000 | 215,355 | ||||||
Florida Housing Finance Corp. | ||||||||
5.50%, 01/01/2054 | 150,000 | 157,109 | ||||||
Greater Orlando Aviation Authority | ||||||||
5.00%, 10/01/2033 | 300,000 | 322,526 | ||||||
Total Florida | 1,000,626 | |||||||
Georgia (5.42%) | ||||||||
Development Authority of Burke County | ||||||||
1.50%, 01/01/2040(b) | 255,000 | 243,654 | ||||||
1.70%, 12/01/2049(b) | 650,000 | 634,441 |
Security Description |
Principal Amount |
Value | ||||||
Revenue Bonds (continued) | ||||||||
Main Street Natural Gas, Inc. | ||||||||
4.00%, 08/01/2049(b) | $ | 500,000 | $ | 498,970 | ||||
5.00%, 12/01/2053(b) | 300,000 | 314,666 | ||||||
Total Georgia | 1,691,731 | |||||||
Illinois (2.68%) | ||||||||
Illinois Finance Authority | ||||||||
5.00%, 08/15/2035 | 225,000 | 246,335 | ||||||
5.00%, 02/15/2036 | 370,000 | 381,571 | ||||||
Illinois Housing Development Authority | ||||||||
6.25%, 04/01/2054 | 190,000 | 206,628 | ||||||
Total Illinois | 834,534 | |||||||
Indiana (0.50%) | ||||||||
Indiana Finance Authority | ||||||||
5.00%, 11/01/2043 | 150,000 | 154,720 | ||||||
Total Indiana | 154,720 | |||||||
Kentucky (3.07%) | ||||||||
County of Trimble KY | ||||||||
4.70%, 06/01/2054(b)(c) | 300,000 | 301,698 | ||||||
Kentucky Public Energy Authority | ||||||||
4.00%, 12/01/2049(b) | 210,000 | 209,088 | ||||||
1D US SOFR + 1.20%, 08/01/2052(b) | 460,000 | 445,094 | ||||||
Total Kentucky | 955,880 | |||||||
Massachusetts (0.50%) | ||||||||
Massachusetts Housing Finance Agency | ||||||||
3.00%, 12/01/2050 | 160,000 | 155,458 | ||||||
Total Massachusetts | 155,458 | |||||||
Minnesota (0.36%) | ||||||||
Minnesota Housing Finance Agency | ||||||||
2.47%, 01/01/2050 | 128,851 | 111,730 | ||||||
Total Minnesota | 111,730 | |||||||
Missouri (0.75%) | ||||||||
Missouri Housing Development Commission | ||||||||
4.00%, 05/01/2050 | 235,000 | 233,308 | ||||||
Total Missouri | 233,308 | |||||||
Nebraska (3.05%) | ||||||||
Central Plains Energy Project | ||||||||
5.00%, 05/01/2053(b) | 725,000 | 746,408 | ||||||
Nebraska Investment Finance Authority | ||||||||
3.50%, 09/01/2046 | 205,000 | 202,365 | ||||||
Total Nebraska | 948,773 |
7 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Schedule of Investments | November 30, 2023 |
Security Description |
Principal Amount |
Value | ||||||
Revenue Bonds (continued) | ||||||||
New Jersey (4.93%) | ||||||||
New Jersey Economic Development Authority | ||||||||
5.00%, 06/15/2034(c) | $ | 250,000 | $ | 276,413 | ||||
New Jersey Health Care Facilities Financing Authority | ||||||||
5.00%, 07/01/2045(b) | 220,000 | 228,237 | ||||||
New Jersey Transportation Trust Fund Authority | ||||||||
0.00%, 12/15/2031(a) | 1,375,000 | 1,033,064 | ||||||
Total New Jersey | 1,537,714 | |||||||
New Mexico (1.94%) | ||||||||
City of Farmington NM | ||||||||
1.80%, 04/01/2029 | 375,000 | 317,993 | ||||||
New Mexico Mortgage Finance Authority | ||||||||
5.25%, 03/01/2053 | 275,000 | 287,060 | ||||||
Total New Mexico | 605,053 | |||||||
New York (8.81%) | ||||||||
Metropolitan Transportation Authority | ||||||||
1D US SOFR + 0.43%, 11/01/2026(b) | 65,000 | 64,300 | ||||||
1D US SOFR + 0.80%, 11/01/2032(b) | 460,000 | 457,985 | ||||||
1D US SOFR + 0.33%, 11/01/2035(b) | 445,000 | 444,386 | ||||||
New York State Dormitory Authority | ||||||||
4.00%, 07/01/2038 | 100,000 | 102,507 | ||||||
Port Authority of New York & New Jersey | ||||||||
5.00%, 11/01/2030 | 1,100,000 | 1,183,341 | ||||||
Triborough Bridge & Tunnel Authority | ||||||||
0.00%, 11/15/2039(a) | 1,000,000 | 490,565 | ||||||
Total New York | 2,743,084 | |||||||
North Carolina (2.63%) | ||||||||
North Carolina Housing Finance Agency | ||||||||
6.25%, 01/01/2055 | 750,000 | 818,528 | ||||||
Total North Carolina | 818,528 | |||||||
North Dakota (2.27%) | ||||||||
North Dakota Housing Finance Agency | ||||||||
4.25%, 01/01/2049 | 390,000 | 389,624 | ||||||
5.75%, 07/01/2053 | 300,000 | 317,696 | ||||||
Total North Dakota | 707,320 |
Security Description |
Principal Amount |
Value | ||||||
Revenue Bonds (continued) | ||||||||
Ohio (3.18%) | ||||||||
Ohio Housing Finance Agency | ||||||||
5.00%, 03/01/2052 | $ | 965,000 | $ | 990,688 | ||||
Total Ohio | 990,688 | |||||||
Oklahoma (1.63%) | ||||||||
Oklahoma Housing Finance Agency | ||||||||
5.00%, 03/01/2052 | 495,000 | 508,657 | ||||||
Total Oklahoma | 508,657 | |||||||
Oregon (0.71%) | ||||||||
Port of Portland OR Airport Revenue | ||||||||
5.00%, 07/01/2036 | 200,000 | 220,219 | ||||||
Total Oregon | 220,219 | |||||||
South Carolina (0.52%) | ||||||||
South Carolina State Housing Finance & Development Authority | ||||||||
5.75%, 01/01/2054 | 150,000 | 161,702 | ||||||
Total South Carolina | 161,702 | |||||||
South Dakota (3.72%) | ||||||||
South Dakota Housing Development Authority | ||||||||
5.00%, 05/01/2053 | 970,000 | 996,248 | ||||||
6.00%, 05/01/2054 | 150,000 | 160,211 | ||||||
Total South Dakota | 1,156,459 | |||||||
Tennessee (4.00%) | ||||||||
New Memphis Arena Public Building Authority | ||||||||
0.00%, 04/01/2030(a) | 240,000 | 216,464 | ||||||
Tennessee Housing Development Agency | ||||||||
5.00%, 01/01/2053 | 1,000,000 | 1,023,600 | ||||||
Total Tennessee | 1,240,064 | |||||||
Texas (6.06%) | ||||||||
City of Austin TX Airport System Revenue | ||||||||
5.00%, 11/15/2036 | 200,000 | 216,615 | ||||||
City of Houston TX Airport System Revenue | ||||||||
5.00%, 07/01/2036 | 135,000 | 147,059 | ||||||
Texas Department of Housing & Community Affairs | ||||||||
3.50%, 07/01/2052 | 330,000 | 321,593 | ||||||
Texas Municipal Gas Acquisition and Supply Corp. I | ||||||||
3M US SOFR + 0.70%, 12/15/2026(b) | 620,000 | 615,182 | ||||||
6.25%, 12/15/2026 | 45,000 | 46,497 |
8 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Schedule of Investments | November 30, 2023 |
Security Description |
Principal Amount |
Value | ||||||
Revenue Bonds (continued) | ||||||||
Texas Municipal Gas Acquisition and Supply Corp. II | ||||||||
3M US SOFR + 1.06%, 09/15/2027(b) | $ | 415,000 | $ | 410,186 | ||||
3M US SOFR + 0.86%, 09/15/2027(b) | 130,000 | 127,910 | ||||||
Total Texas | 1,885,042 | |||||||
Virginia (0.96%) | ||||||||
York County Economic Development Authority | ||||||||
3.65%, 05/01/2033(b) | 300,000 | 298,652 | ||||||
Total Virginia | 298,652 | |||||||
Washington (1.70%) | ||||||||
District of Columbia | ||||||||
5.00%, 07/15/2040 | 200,000 | 202,150 | ||||||
Port of Seattle WA | ||||||||
5.00%, 04/01/2027 | 250,000 | 252,415 | ||||||
Washington Health Care Facilities Authority | ||||||||
4.00%, 10/01/2042(b) | 75,000 | 74,534 | ||||||
Total Washington | 529,099 | |||||||
Wisconsin (1.51%) | ||||||||
County of Milwaukee WI Airport Revenue | ||||||||
5.00%, 12/01/2030 | 125,000 | 128,253 | ||||||
Public Finance Authority | ||||||||
3.70%, 10/01/2046(b) | 150,000 | 151,034 | ||||||
Wisconsin Health & Educational Facilities Authority | ||||||||
4.00%, 11/15/2043 | 200,000 | 191,152 | ||||||
Total Wisconsin | 470,439 | |||||||
Total Revenue Bonds | 25,458,773 | |||||||
TOTAL MUNICIPAL BONDS | ||||||||
(Cost $29,296,138) | 29,483,568 |
7 Day Yield | Shares | Value | ||||||||||
SHORT TERM INVESTMENTS (0.21%) | ||||||||||||
Money Market Fund | ||||||||||||
State Street Institutional US Government Money Market Fund (Premier Class) | 5.31 | % | 65,911 | 65,911 | ||||||||
TOTAL SHORT TERM INVESTMENTS | ||||||||||||
(Cost $65,911) | 65,911 | |||||||||||
TOTAL INVESTMENTS (101.32%) | ||||||||||||
(Cost $31,358,410) | $ | 31,545,847 | ||||||||||
LIABILITIES IN EXCESS OF OTHER ASSETS (-1.32%) | (411,246 | ) | ||||||||||
NET ASSETS - 100.00% | $ | 31,134,601 |
Investment Abbreviations:
SOFR - Secured Overnight Financing Rate
Reference Rates:
1D US SOFR - 1 Day SOFR as of November 30, 2023 was 5.33%
3M US SOFR - 3 Month SOFR as of November 30, 2023 was 5.37%
(a) | Zero coupon bond. |
(b) | Floating or variable rate security. Interest rate resets periodically on specific dates. The rate shown represents the coupon or interest rate in effect as of November 30, 2023. Security description includes the reference rate and spread if published and available. |
(c) | Represents a security purchased on a when-issued basis. |
See Notes to Financial Statements.
9 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Statement of Assets and Liabilities | November 30, 2023 |
ASSETS: | ||||
Investments, at value | $ | 31,545,847 | ||
Receivable for investments sold | 126,555 | |||
Interest receivable | 233,984 | |||
Total Assets | 31,906,386 | |||
LIABILITIES: | ||||
Payable for investments purchased | 759,253 | |||
Payable to adviser | 12,532 | |||
Total Liabilities | 771,785 | |||
NET ASSETS | $ | 31,134,601 | ||
NET ASSETS CONSIST OF: | ||||
Paid-in capital | $ | 30,876,770 | ||
Total distributable earnings/(accumulated losses) | 257,831 | |||
NET ASSETS | $ | 31,134,601 | ||
INVESTMENTS, AT COST | $ | 31,358,410 | ||
PRICING OF SHARES | ||||
Net Assets | $ | 31,134,601 | ||
Shares of beneficial interest outstanding (Unlimited number of shares authorized, par value $0.01 per share) | 1,225,002 | |||
Net Asset Value, offering and redemption price per share | $ | 25.42 |
See Notes to Financial Statements.
10 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Statement of Operations | For the Year Ended November 30, 2023 |
INVESTMENT INCOME: | ||||
Interest | $ | 1,164,943 | ||
Dividends | 6,040 | |||
Total Investment Income | 1,170,983 | |||
EXPENSES: | ||||
Investment adviser fees | 154,687 | |||
Net Expenses | 154,687 | |||
NET INVESTMENT INCOME | 1,016,296 | |||
REALIZED AND UNREALIZED GAIN/(LOSS): | ||||
Net realized gain on investments | 68,236 | |||
Net change in unrealized appreciation on investments | 375,330 | |||
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS | 443,566 | |||
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS | $ | 1,459,862 |
See Notes to Financial Statements.
11 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Statements of Changes in Net Assets |
For
the |
For
the Period |
|||||||
OPERATIONS: | ||||||||
Net investment income | $ | 1,016,296 | $ | 433,446 | ||||
Net realized gain | 68,236 | 225,977 | ||||||
Net change in unrealized appreciation/(depreciation) | 375,330 | (187,893 | ) | |||||
Net increase in net assets resulting from operations | 1,459,862 | 471,530 | ||||||
DISTRIBUTIONS TO SHAREHOLDERS: | ||||||||
From distributable earnings | (1,244,614 | ) | (428,947 | ) | ||||
Total distributions | (1,244,614 | ) | (428,947 | ) | ||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Proceeds from sale of shares | – | 30,876,770 | ||||||
Net increase from capital share transactions | – | 30,876,770 | ||||||
Net increase in net assets | 215,248 | 30,919,353 | ||||||
NET ASSETS: | ||||||||
Beginning of period | 30,919,353 | – | ||||||
End of year | $ | 31,134,601 | $ | 30,919,353 | ||||
OTHER INFORMATION: | ||||||||
CAPITAL SHARE TRANSACTIONS: | ||||||||
Beginning shares | 1,225,002 | – | ||||||
Shares sold | – | 1,225,002 | ||||||
Shares outstanding, end of period | 1,225,002 | 1,225,002 |
See Notes to Financial Statements.
12 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Financial Highlights | For a Share Outstanding Throughout the Periods Presented |
For the Year Ended November 30, 2023 |
For the Period May 19, 2022 (Commencement of Operations) to November 30, 2022 |
|||||||
NET ASSET VALUE, BEGINNING OF PERIOD | $ | 25.24 | $ | 25.00 | ||||
INCOME FROM OPERATIONS: | ||||||||
Net investment income(a) | 0.85 | 0.36 | ||||||
Net realized and unrealized gain | 0.34 | 0.23 | ||||||
Total from investment operations | 1.19 | 0.59 | ||||||
DISTRIBUTIONS: | ||||||||
From net investment income | (1.01 | ) | (0.35 | ) | ||||
Total distributions | (1.01 | ) | (0.35 | ) | ||||
NET INCREASE IN NET ASSET VALUE | 0.18 | 0.24 | ||||||
NET ASSET VALUE, END OF PERIOD | $ | 25.42 | $ | 25.24 | ||||
TOTAL RETURN(b) | 4.85 | % | 2.38 | % | ||||
RATIOS/SUPPLEMENTAL DATA: | ||||||||
Net assets, end of period (in 000s) | $ | 31,135 | $ | 30,919 | ||||
RATIOS TO AVERAGE NET ASSETS | ||||||||
Ratio of expenses to average net assets | 0.50 | % | 0.50 | %(c) | ||||
Ratio of net investment income to average net assets | 3.28 | % | 2.67 | %(c) | ||||
Portfolio turnover rate(d) | 129 | %(e) | 75 | % |
(a) | Based on average shares outstanding during the period. |
(b) | Total return is calculated assuming an initial investment made at the net asset value at the beginning of the period and redemption at the net asset value on the last day of the period and assuming all distributions are reinvested at the reinvestment prices. Total return calculated for a period of less than one year is not annualized. |
(c) | Annualized. |
(d) | Portfolio turnover for periods less than one year are not annualized and does not include securities received or delivered from processing creations or redemptions in-kind. |
(e) | The portfolio turnover rate excluding variable rate demand notes was 50%. |
See Notes to Financial Statements.
13 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Notes to Financial Statements | November 30, 2023 |
1. ORGANIZATION
ALPS ETF Trust (the “Trust”), a Delaware statutory trust, is an open-end management investment company registered under the Investment Company Act of 1940, as amended (the “1940 Act”). As of November 30, 2023, the Trust consisted of twenty-three separate portfolios. Each portfolio represents a separate series of the Trust. This report pertains solely to the ALPS Intermediate Municipal Bond ETF (the “Fund”). The investment objective of the Fund is to protect investor’s capital and generate attractive risk-adjusted returns. The Fund has elected to qualify as a diversified series of the Trust under the 1940 Act.
The Fund’s Shares (“Shares”) are listed on the NYSE Arca, Inc. (the “NYSE Arca”). The Fund issues and redeems Shares, at net asset value (“NAV”) in blocks of 25,000 Shares, each of which is called a “Creation Unit”. Creation Units are issued and redeemed principally in-kind for securities. Except when aggregated in Creation Units, Shares are not redeemable securities of the Fund.
Pursuant to the Trust’s organizational documents, its Officers and Trustees are indemnified against certain liability arising out of the performance of their duties to the Trust. Additionally, in the normal course of business, the Trust enters into contracts with service providers that contain general indemnification clauses. The Trust’s maximum exposure under these arrangements is unknown, as this would involve future claims that may be made against the Trust that have not yet occurred.
2. SIGNIFICANT ACCOUNTING POLICIES
The following is a summary of significant accounting policies consistently followed by the Fund in the preparation of the financial statements. The accompanying financial statements were prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The preparation of financial statements in conformity with U.S. GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the period. Actual results could differ from those estimates. The Fund is considered an investment company under U.S. GAAP and follows the accounting and reporting guidance applicable to investment companies in the Financial Accounting Standards Board (“FASB”) Accounting Standards Codification Topic 946.
A. Portfolio Valuation
The Fund’s NAV is determined daily, as of the close of regular trading on the New York Stock Exchange (the "NYSE"), normally 4:00 p.m. Eastern Time, on each day the NYSE is open for trading. The NAV is computed by dividing the value of all assets of the Fund (including accrued interest and dividends), less all liabilities (including accrued expenses and dividends declared but unpaid), by the total number of shares outstanding.
Portfolio securities listed on any exchange other than the NASDAQ Stock Market LLC (“NASDAQ”) are valued at the last sale price on the business day as of which such value is being determined. If there has been no sale on such day, the securities are valued at the mean of the most recent bid and ask prices on such day. Securities traded on the NASDAQ are valued at the NASDAQ Official Closing Price as determined by NASDAQ. Portfolio securities traded on more than one securities exchange are valued at the last sale price on the business day as of which such value is being determined at the close of the exchange representing the principal market for such securities. Portfolio securities traded in the over-the-counter market, but excluding securities traded on the NASDAQ, are valued at the last quoted sale price in such market.
The market price for debt securities is generally the evaluated price supplied by an independent third-party pricing service approved by the Board, which references a combination of transactions and quotations for the same or other securities believed to be comparable in quality, coupon, maturity, type of issue, call provisions, trading characteristics and other features deemed to be relevant. To the extent the Fund’s debt securities are valued based on price quotations or other equivalent indications of value provided by a third-party pricing service, any such third-party pricing service may use a variety of methodologies to value some or all of the Fund’s debt securities to determine the market price.
The Fund’s investments are valued at market value or, in the absence of market value with respect to any portfolio securities, at fair value according to procedures adopted by the Trust’s Board. Pursuant to Rule 2a-5 under the 1940 Act, the Board of Trustees designated ALPS Advisors, Inc. (the “Adviser”) as the valuation designee ("Valuation Designee") for the Fund to perform the fair value determinations relating to all Fund investments. The Adviser may carry out its designated responsibilities as Valuation Designee through various teams and committees. When market quotations are not readily available or when events occur that make established valuation methods unreliable, securities of the Fund may be valued in good faith by the Valuation Designee. These securities generally include, but are not limited to, restricted securities (securities which may not be publicly sold without registration under the Securities Act of 1933) for which a pricing service is unable to provide a market price; securities whose trading has been formally suspended; a security whose market price is not available from a pre-established primary pricing source or the pricing source is not willing to provide a price; a security with respect to which an event has occurred that is most likely to materially affect the value of the security after the market has closed but before the calculation of the Fund’s NAV or make it difficult or impossible to obtain a reliable market quotation; or a security whose price, as provided by the pricing service, does not reflect the security’s “fair value” due to the security being de-listed from a national exchange or the security’s primary trading market is temporarily closed at a time when, under normal conditions, it would be open. As a general principle, the current “fair value” of a security would be the amount which the owner might reasonably expect to receive from the sale on the applicable exchange or principal market. A variety of factors may be considered in determining the fair value of such securities.
14 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Notes to Financial Statements | November 30, 2023 |
B. Fair Value Measurements
The Fund discloses the classification of its fair value measurements following a three-tier hierarchy based on the inputs used to measure fair value. Inputs refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability that are developed based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity’s own assumptions about the assumptions market participants would use in pricing the asset or liability that are developed based on the best information available.
Valuation techniques used to value the Fund’s investments by major category are as follows:
Equity securities, including restricted securities, for which market quotations are readily available, are valued at the last reported sale price or official closing price as reported by a third party pricing vendor on the primary market or exchange on which they are traded and are categorized as Level 1 in the hierarchy. In the event there were no sales during the day or closing prices are not available, securities are valued at the mean of the most recent quoted bid and ask prices on such day and are generally categorized as Level 2 in the hierarchy. Investments in open-end mutual funds are valued at their closing NAV each business day and are categorized as Level 1 in the hierarchy.
Debt securities, including restricted securities, are valued based on evaluated prices received from third party pricing vendors or from brokers who make markets in such securities. For municipal bonds, pricing vendors utilize matrix pricing which considers yield or price of bonds of comparable quality, coupon, maturity and type as well as broker-supplied prices. When independent prices are unavailable or unreliable, debt securities may be valued utilizing pricing methodologies which consider similar factors that would be used by third party pricing vendors. Debt securities are generally categorized as Level 2 in the hierarchy but may be Level 3 depending on the circumstances.
Changes in valuation techniques may result in transfers in or out of an assigned level within the disclosure hierarchy.
Various inputs are used in determining the value of the Fund’s investments as of the end of the reporting period. When inputs used fall into different levels of the fair value hierarchy, the level in the hierarchy within which the fair value measurement falls is determined based on the lowest level input that is significant to the fair value measurement in its entirety. The designated input levels are not necessarily an indication of the risk or liquidity associated with these investments.
These inputs are categorized in the following hierarchy under applicable financial accounting standards:
Level 1 – | Unadjusted quoted prices in active markets for identical investments, unrestricted assets or liabilities that a Fund has the ability to access at the measurement date; |
Level 2 – | Quoted prices which are not active, quoted prices for similar assets or liabilities in active markets or inputs other than quoted prices that are observable (either directly or indirectly) for substantially the full term of the asset or liability; and |
Level 3 – | Significant unobservable prices or inputs (including the Fund’s own assumptions in determining the fair value of investments) where there is little or no market activity for the asset or liability at the measurement date. |
15 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Notes to Financial Statements | November 30, 2023 |
The following is a summary of the inputs used to value the Fund’s investments as of November 30, 2023:
ALPS Intermediate Municipal Bond ETF
Investments in Securities at Value |
Level 1 - Quoted and Unadjusted Prices |
Level 2 - Other Significant Observable Inputs |
Level 3 - Significant Unobservable Inputs |
Total | ||||||||||||
Government Bonds | $ | – | $ | 1,996,368 | $ | – | $ | 1,996,368 | ||||||||
Municipal Bonds* | – | 29,483,568 | – | 29,483,568 | ||||||||||||
Short Term Investments | 65,911 | – | – | 65,911 | ||||||||||||
Total | $ | 65,911 | $ | 31,479,936 | $ | – | $ | 31,545,847 |
* | For a detailed breakdown of sectors, see the accompanying Schedule of Investments. |
The Fund did not have any securities that used significant unobservable inputs (Level 3) in determining fair value and there were no transfers into or out of Level 3 during the year ended November 30, 2023.
C. Securities Transactions and Investment Income
Securities transactions are recorded as of the trade date. Realized gains and losses from securities transactions are recorded on the specific identification in accordance with GAAP. Dividend income and capital gains distributions, if any, are recorded on the ex-dividend date. Interest income, if any, is recorded on the accrual basis, including amortization of premiums and accretion of discounts.
D. Dividends and Distributions to Shareholders
Dividends from net investment income of the Fund, if any, are declared and paid monthly or as the Board may determine from time to time. Distributions of net realized capital gains earned by the Fund, if any, are distributed at least annually.
E. Federal Tax and Tax Basis Information
The timing and character of income and capital gain distributions are determined in accordance with income tax regulations, which may differ from U.S. GAAP. Reclassifications are made to the Fund’s capital accounts for permanent tax differences to reflect income and gains available for distribution (or available capital loss carryforwards) under income tax regulations. For the fiscal year ended November 30, 2023, there were no reclassifications between Paid-in-Capital and Total Distributable Earnings.
The tax character of the distributions paid during the fiscal year ended November 30, 2023 and fiscal period ended November 30, 2022 was as follows:
Fund |
Ordinary Income |
Tax-Exempt Income |
Short-Term Capital Gain |
Long-Term Capital Gain |
Return
|
|||||||||||||||
November 30, 2023 | ||||||||||||||||||||
ALPS Intermediate Municipal Bond ETF | $ | 446,400 | $ | 798,214 | $ | – | $ | – | $ | – |
Fund |
Ordinary Income |
Tax-Exempt Income |
Short-Term Capital Gain |
Long-Term Capital Gain |
Return
|
|||||||||||||||
November 30, 2022 | ||||||||||||||||||||
ALPS Intermediate Municipal Bond ETF | $ | 83,654 | $ | 345,293 | $ | – | $ | – | $ | – |
The character of distributions made during the period may differ from its ultimate characterization for federal income tax purposes.
Under current law, capital losses maintain their character as short-term or long-term and are carried forward to the next tax year without expiration. As of November 30, 2023, the Fund did not have any amounts available to carry forward to the next tax year.
As of November 30, 2023, the components of distributable earnings on a tax basis were as follows.
Fund |
Undistributed Ordinary |
Tax -Exempt Undistributed Income |
Accumulated Net Realized Gain/(Loss) on Investments |
Net Unrealized Appreciation/(Depreciation) on Investments |
Total | |||||||||||||||
ALPS Intermediate Municipal Bond ETF | $ | 68,043 | $ | 2,463 | $ | – | $ | 187,325 | $ | 257,831 |
16 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Notes to Financial Statements | November 30, 2023 |
As of November 30, 2023, the cost of investments for federal income tax purposes and accumulated net unrealized appreciation/(depreciation) on investments were as follows:
ALPS
Intermediate Municipal Bond ETF |
||||
Gross appreciation (excess of value over tax cost) | $ | 451,469 | ||
Gross depreciation (excess of tax cost over value) | (264,144 | ) | ||
Net unrealized appreciation/(depreciation) | $ | 187,325 | ||
Cost of investments for income tax purposes | $ | 31,358,522 |
The differences between book-basis and tax-basis are primarily due to the deferral of losses from wash sales.
G. Income Taxes
No provision for income taxes is included in the accompanying financial statements, as the Fund intends to distribute to shareholders all taxable investment income and realized gains and otherwise comply with Subchapter M of the Internal Revenue Code of 1986, as amended, applicable to regulated investment companies. The Fund evaluates tax positions taken (or expected to be taken) in the course of preparing the Fund’s tax returns to determine whether these positions meet a “more-likely-than-not” standard that, based on the technical merits, have a more than fifty percent likelihood of being sustained by a taxing authority upon examination. A tax position that meets the “more-likely-than-not” recognition threshold is measured to determine the amount of benefit to recognize in the financial statements.
As of and during the year ended November 30, 2023, the Fund did not have a liability for any unrecognized tax benefits. The Fund files U.S. federal, state, and local tax returns as required. The Fund’s tax returns are subject to examination by the relevant tax authorities until expiration of the applicable statute of limitations, which is generally three years after the filing of the tax return, but may extend to four years in certain jurisdictions. Tax returns for open years have incorporated no uncertain tax positions that require a provision for income taxes.
3. INVESTMENT ADVISORY FEE AND OTHER AFFILIATED TRANSACTIONS
ALPS Advisors, Inc. serves as the Fund’s investment adviser pursuant to an Investment Advisory Agreement with the Trust on behalf of the Fund (the “Advisory Agreement”). Pursuant to the Advisory Agreement, the Fund pays the Adviser an annual management fee for the services and facilities it provides, payable on a monthly basis at the annual rate of 0.50% of the Fund’s average daily net assets.
Out of the unitary management fee, the Adviser pays substantially all expenses of the Fund, including the cost of sub-advisory, transfer agency, custody, fund administration, legal, audit, trustees and other services, except for acquired fund fees and expenses, interest expenses, distribution fees or expenses, brokerage expenses, taxes and extraordinary expenses not incurred in the ordinary course of the Fund's business. The Adviser’s unitary management fee is designed to pay substantially all of the Fund’s expenses and to compensate the Adviser for providing services to the Fund.
Brown Brothers Harriman & Co. (the “Sub-Adviser”) serves as the Fund's sub-adviser pursuant to a sub-advisory agreement with the Trust (the ‘‘Sub-Advisory Agreement’’). Pursuant to the Sub-Advisory Agreement, the Adviser pays the Sub-Adviser a sub-advisory fee out of the Adviser's advisory fee for the services it provides. The fee is payable on a monthly basis at the annual rate of 0.25% of the Fund's average daily net assets.
ALPS Fund Services, Inc., an affiliate of the Adviser, is the administrator of the Fund.
Effective July 1, 2023, each Trustee receives (1) a quarterly retainer of $25,000, (2) a per meeting fee of $15,000, (3) $2,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, the Chairman of the Board receives a quarterly retainer of $5,000, the Chairman of the Audit Committee receives a quarterly retainer of $3,000, and the Chairman of the Nominating & Governance Committee receives a quarterly retainer of $2,000, each in connection with their respective roles. Prior to July 1, 2023, each Trustee received (1) a quarterly retainer of $20,000, (2) a per meeting fee of $10,000, (3) $2,500 for any special meeting held outside of a regularly scheduled board meeting, and (4) reimbursement for all reasonable out-of-pocket expenses relating to attendance at meetings. In addition, the Chairman of the Board received a quarterly retainer of $5,000, the Chairman of the Audit Committee received a quarterly retainer of $3,000, and the Chairman of the Nominating & Governance Committee received a quarterly retainer of $2,000, each in connection with their respective roles.
17 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Notes to Financial Statements | November 30, 2023 |
4. PURCHASES AND SALES OF SECURITIES
For the year ended November 30, 2023, the cost of purchases and proceeds from sales of investment securities, excluding short-term investments and in-kind transactions, were as follows:
Fund | Purchases | Sales | ||||||
ALPS Intermediate Municipal Bond ETF | $ | 40,139,694 | $ | 41,523,858 |
For the year ended November 30, 2023, there were no in-kind transactions or realized gain/(loss) on in-kind transactions.
5. CAPITAL SHARE TRANSACTIONS
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 25,000 Shares. Only broker-dealers or large institutional investors with creation and redemption agreements called Authorized Participants (“AP”) are permitted to purchase or redeem Creation Units from the Fund. Such transactions are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per unit of the Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are not available in sufficient quantity for delivery, not eligible for trading by the AP or as a result of other market circumstances.
6. MARKET RISK
The Fund is subject to investment and operational risks associated with financial, economic and other global market developments and disruptions, including those arising from war, terrorism, market manipulation, government interventions, defaults and shutdowns, political changes or diplomatic developments, public health emergencies (such as the spread of infectious diseases, pandemics and epidemics) and natural/environmental disasters, which can negatively impact the securities markets and cause the Fund to lose value. Securities in the Fund's portfolio may underperform in comparison to securities in general financial markets, a particular financial market or other asset classes due to a number of factors, including inflation (or expectations for inflation), deflation (or expectations for deflation), interest rates, global demand for particular products or resources, market instability, debt crises and downgrades, embargoes, tariffs, sanctions and other trade barriers, regulatory events, other governmental trade or market control programs and related geopolitical events. In addition, the value of the Fund's investments may be negatively affected by the occurrence of global events such as war, terrorism, environmental disasters, natural disasters or events, country instability, and infectious disease epidemics or pandemics.
7. REGULATORY UPDATE
The U.S. Securities and Exchange Commission ("SEC") adopted rule and form amendments that will change the format and content of the Fund's annual and semi-annual reports. Certain information, including the financial statements, will not appear in the Fund's new tailored shareholder reports but will be available online, delivered free of charge upon request, and filed on a semi-annual basis on Form N-CSR. The rule and form amendments have a compliance date of July 24, 2024. At this time, the Trust is evaluating the impact of these rule and form amendment changes.
8. SUBSEQUENT EVENTS
Subsequent events, if any, after the date of the Statement of Assets and Liabilities have been evaluated through the date the financial statements were issued. Management has determined that there were no subsequent events to report through the issuance of these financial statements.
18 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Additional Information | November 30, 2023 (Unaudited) |
PROXY VOTING RECORDS, POLICIES AND PROCEDURES
Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month period ended June 30 and a description of the Fund’s proxy voting policies and procedures used in determining how to vote for proxies are available without charge on the SEC’s website at www.sec.gov and upon request, by calling (toll-free) 1-866-759-5679.
PORTFOLIO HOLDINGS
The Fund files a complete schedule of portfolio holdings with the U.S. Securities and Exchange Commission (“SEC”) for the first and third quarters of each fiscal year on Form N-PORT within 60 days after the end of the period. Copies of the Fund’s Form N-PORT are available without a charge, upon request, by contacting the Fund at 1-866-759-5679 and on the SEC’s website at https://www.sec.gov.
TAX INFORMATION
The ALPS Intermediate Municipal Bond ETF designates the following as a percentage of taxable ordinary income distributions, or up to the maximum amount allowable, for the calendar year ended December 31, 2022:
Qualified Dividend Income | Dividend Received Deduction | |
ALPS Intermediate Municipal Bond ETF | 0% | 0% |
In early 2023, if applicable, shareholders of record received this information for the distributions paid to them by the Funds during the calendar year 2022 via Form 1099. The Funds will notify shareholders in early 2024 of amounts paid to them by the Funds, if any, during the calendar year 2023.
19 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Board Considerations Regarding Approval of | November 30, 2023 (Unaudited) |
Investment Advisory Agreement and Sub-Advisory Agreement
At its meetings held on June 5, 2023 and June 20, 2023, the Board of Trustees of the Trust (the “Board” or the “Trustees”), where each Trustee is not an “interested person” of the Trust within the meaning of the Investment Company Act of 1940, as amended (the “Independent Trustees”), evaluated a proposal to approve the continuance of the Investment Advisory Agreement between the Trust and ALPS Advisors, Inc. (the “Adviser” or “AAI”) with respect the ALPS Intermediate Municipal Bond ETF (the "Fund" or “MNBD”) and the Investment Sub-Advisory Agreement between AAI and Brown Brothers Harriman & Co. (the “Sub-Adviser” or “BBH”) with respect to MNBD (the “BBH Sub-Advisory Agreement”). In evaluating the renewal of the Investment Advisory Agreement with respect to the Fund, the Board, including the Independent Trustees, considered various factors, including (i) the nature, extent and quality of the services provided by AAI with respect to the Fund under the Investment Advisory Agreement; (ii) the advisory fees and other expenses paid by the Fund compared to those of similar funds managed by other investment advisers; (iii) the costs of the services provided to the Fund by AAI and the profits realized by AAI and its affiliates from its relationship to the Fund; (iv) the extent to which economies of scale have been or would be realized if and as the assets of the Fund grow and whether fees reflect the economies of scale for the benefit of shareholders; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided by AAI under the Investment Advisory Agreement, the Board considered and reviewed information concerning the services provided under the Investment Advisory Agreement, financial information regarding AAI and its parent company, information describing AAI’s current organization and the background and experience of the persons responsible for the day-to-day management of the Fund.
The Board reviewed information on the performance of the Fund and its applicable benchmark for the 1-, 3-, and 5-year periods, as applicable, and against the appropriate FUSE performance universe. Based on this review, the Board, including the Independent Trustees found that the nature and extent of services provided to the Fund under the Investment Advisory Agreement was appropriate and that the quality of such services was satisfactory.
The Board noted that the advisory fees for the Fund were unitary fees pursuant to which AAI assumes all expenses of the Fund (including the cost of transfer agency, custody, fund administration, legal, audit and other services) other than the payments under the Advisory Agreement, brokerage expenses, taxes, interest, litigation expenses and other extraordinary expenses.
Based on the information available to them, including the Fund-specific summary set forth below, the Board, including the Independent Trustees, concluded that the advisory fee rate for the Fund was reasonable under the circumstances and in light of the quality of the services provided.
The Board, including the Independent Trustees, considered other benefits available to AAI because of its relationship with the Fund and concluded that the advisory fees were reasonable taking into account any such benefits.
The Board, including the Independent Trustees, also considered with respect to the Fund the information provided by AAI about the costs and profitability of AAI with respect to the Fund, including the asset levels and other factors that influence the profitability and financial viability of the Fund. The Board, including the Independent Trustees, reviewed and noted the relatively small size of the Fund and the analysis AAI had conducted to support AAI’s assertion that it was not realizing any economies of scale with respect to such Fund. The Independent Trustees determined that AAI should continue to keep the Board informed on an ongoing basis of any significant developments (e.g., material increases in asset levels) so as to facilitate the Independent Trustees’ evaluation of whether further economies of scale have been achieved.
The Board, including the Independent Trustees, also considered other potential benefits available to AAI because of its relationship with the Fund, known as fall-out benefits.
With respect to the Fund, the Board, including the Independent Trustees, noted the following:
The gross management fee rate for MNBD is higher than the median of its FUSE expense group. MNBD’s net expense ratio is higher than the median of its FUSE expense group.
The Board took into account, among other things, the comparatively strong performance of MNBD relative to peers over the since-inception period and the Adviser’s assertions related to the lack of economies of scale given MNBD’s current assets.
The Board, including the Independent Trustees, reviewed and noted the relatively small size of MNBD and the analysis AAI had conducted to support AAI’s assertion that it was not realizing any economies of scale with respect to MNBD.
In voting to renew the Investment Advisory Agreement with AAI, the Board, including the Independent Trustees, concluded that the terms of the Investment Advisory Agreement are reasonable and fair in light of the services to be performed, the fees paid by certain other funds, expenses to be incurred and such other matters as the members of the Board, including the Independent Trustees, considered relevant in the exercise of their reasonable business judgment. The Independent Trustees did not identify any single factor or group of factors as all important or controlling and considered all factors together.
20 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Board Considerations Regarding Approval of | November 30, 2023 (Unaudited) |
Investment Advisory Agreement and Sub-Advisory Agreement
BBH Sub-Advisory Agreement
The Board, including the Independent Trustees, discussed the BBH Sub-Advisory Agreement.
In evaluating the BBH Sub-Advisory Agreement, the Board, including the Independent Trustees, considered various factors, including (i) the nature, extent and quality of the services provided by BBH with respect to MNBD under the BBH Sub-Advisory Agreement; (ii) the advisory fees and other expenses paid by MNBD compared to those of similar funds managed by other investment advisers; (iii) the profitability to BBH of its sub-advisory relationship with MNBD and the reasonableness of compensation to BBH; (iv) the extent to which economies of scale would be realized if, and as, MNBD’s assets increase, and whether the fee level in the BBH Sub-Advisory Agreement reflects these economies of scale; and (v) any additional benefits and other considerations.
With respect to the nature, extent and quality of the services provided by BBH under the BBH Sub-Advisory Agreement, the Board, including the Independent Trustees, considered and reviewed information concerning the services provided under the BBH Sub-Advisory Agreement, MNBD’s performance, financial information regarding BBH, information describing BBH’s current organization and the background and experience of the persons responsible for the day-to-day management of MNBD. Based upon their review, the Board, including the Independent Trustees, concluded that BBH was qualified to oversee the portfolio management of BBH and that the services provided by BBH to MNBD are satisfactory. The Board, including the Independent Trustees, considered that the contractual sub-advisory fee to be paid to BBH with respect to MNBD was 0.25% of MNBD’s average daily net assets out of a total management fee of 0.50% of MNBD’s average daily net assets.
In reviewing MNBD’s profitability with respect to BBH, the Board, including the Independent Trustees, considered the resources involved in managing MNBD.
The Board, including the Independent Trustees, also considered other benefits that have been and may be realized by BBH from its relationships with MNBD, known as fall-out benefits.
The Board, including the Independent Trustees, considered the extent to which economies of scale may be realized if MNBD’s assets continue to grow in size and whether fee levels reflect a reasonable sharing of such economies of scale for the benefit of the Fund’s investors. The Board, including the Independent Trustees, noted that MNBD commenced operations on May 19, 2022 and has not yet achieved scale in terms of assets. The Independent Trustees determined that AAI should continue to keep the Board informed on an ongoing basis of any significant developments (e.g., material increases in asset levels) so as to facilitate the Independent Trustees’ evaluation of whether further economies of scale have been achieved with respect to MNBD.
In voting to approve the BBH Sub-Advisory Agreement, the Board, including the Independent Trustees, concluded that the terms of the BBH Sub- Advisory Agreement are reasonable and fair in light of the services performed, expenses incurred and such other matters as the Board, including the Independent Trustees, considered relevant in the exercise of their reasonable business judgment. The Board, including the Independent Trustees, did not identify any single factor or group of factors as all important or controlling and considered all factors together.
21 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Trustees & Officers | November 30, 2023 (Unaudited) |
The general supervision of the duties performed by the Adviser for the Fund under the Investment Advisory Agreement is the responsibility of the Board of Trustees. The Trust currently has four Trustees, each of whom have no affiliation or business connection with the Adviser or any of its affiliated persons and do not own any stock or other securities issued by the Adviser. These are the “non-interested” or “independent” Trustees (“Independent Trustees”).
The Independent Trustees of the Trust, their term of office and length of time served, their principal business occupations during the past five years, the number of portfolios in the Fund Complex overseen by each Independent Trustee, and other directorships, if any, held by the Trustee are shown below.
INDEPENDENT TRUSTEES
Name, Address
and Year of Birth of Officer* |
Position(s)
Held with Trust |
Length
of Time Served** |
Principal
Occupation(s) During Past 5 Years |
Number
of Portfolios in Fund Complex Overseen by Trustees*** |
Other Directorships
Held by Trustees |
Mary K. Anstine, 1940 |
Trustee | Since March 2008 | Ms. Anstine is Trustee/Director of AV Hunter Trust and Colorado Uplift Board. | 38 | Ms. Anstine is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (29 funds); and Reaves Utility Income Fund. |
Jeremy W. Deems, 1976 |
Trustee | Since March 2008 | Mr. Deems is the Co-Founder and Chief Financial Officer of Green Alpha Advisors, LLC, a registered investment advisor, and Co- Portfolio Manager of the AXS Green Alpha ETF. | 38 | Mr. Deems is a Trustee of ALPS Variable Investment Trust (7 funds); Financial Investors Trust (29 funds); and Reaves Utility Income Fund; and Clough Funds Trust (1 fund). |
Rick A. Pederson, 1952 |
Trustee | Since March 2008 | Mr. Pederson is Partner, Bow River Capital Partners (private equity management), 2003 - present; Board Member, Prosci Inc. (private business services) 2013-2016; Advisory Board Member, Citywide Banks (Colorado community bank) 2014- 2017; Board Member, Strong- Bridge Consulting, 2015-2019; Board Member, IRI/ODMS Holdings LLC, 2017 – 2019; Director, National Western Stock Show (not for profit) 2010 - present; Director, History Colorado (not for profit) 2015- present; Director, Citywide Bank Advisory Board 2017-present; Trustee, Boettcher Foundation, 2018 -present. | 24 | Mr. Pederson is Trustee of Segall Bryant & Hamill Trust (14 funds) and Principal Real Estate Income Fund (1 fund). |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1000, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his or her successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
22 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Trustees & Officers | November 30, 2023 (Unaudited) |
Name,
Address and |
Position(s) |
Length
of |
Principal
Occupation(s) |
Number
of |
Other
Directorships |
Edmund J. Burke, 1961 |
Trustee | Since December 2017 | Mr. Burke joined ALPS in 1991 and served as the President and Director of ALPS Holdings, Inc., and ALPS Advisors, Inc., and Director of ALPS Distributors, Inc., ALPS Fund Services, Inc. (“ALPS”), and ALPS Portfolio Solutions Distributor, Inc. (collectively, the “ALPS Companies”). Mr. Burke retired from the ALPS Companies in June 2019. Mr. Burke is currently a partner at ETF Action, a web-based system that provides data and analytics to registered investment advisers, (since 2020) and a Director of Alliance Bioenergy Plus, Inc., a technology company focused on emerging technologies in the renewable energy, biofuels, and bioplastics technology sectors (since 2020). | 33 | Mr. Burke is a Trustee of Clough Global Dividend and Income Fund (1 fund); Clough Global Equity Fund (1 fund); Clough Global Opportunities Fund (1 fund); Clough Funds Trust (1 fund); Liberty All-Star Equity Fund (1 fund); Director of the Liberty All-Star Growth Fund, Inc. (1 fund) and Financial Investors Trust (29 funds). |
* | The business address of the Trustee is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1000, Denver, Colorado 80203. |
** | This is the period for which the Trustee began serving the Trust. Each Trustee serves an indefinite term, until his or her successor is elected. |
*** | The Fund Complex includes all series of the Trust and any other investment companies for which ALPS Advisors, Inc. provides investment advisory services. |
23 | November 30, 2023
ALPS Intermediate Municipal Bond ETF
Trustees & Officers | November 30, 2023 (Unaudited) |
OFFICERS:
Name,
Address and |
Position(s) |
Length
of |
Principal
Occupation(s) |
Laton Spahr, 1975 |
President | Since June 2021 | Mr. Spahr joined ALPS in 2019 and currently serves as President and Portfolio Manager of AAI. Prior to his current role, Mr. Spahr was a Senior Vice President and Strategy Leader of the Value & Income Team for Oppenheimer Funds from 2013 to 2019. |
Matthew Sutula, 1985 |
Chief Compliance Officer ("CCO") | Since December 2019 | Mr. Sutula joined ALPS in 2012 and currently serves as Chief Compliance Officer of AAI. Prior to his current role, Mr. Sutula served as interim Compliance Officer of the Trust (September 2019 to December 2019). Compliance Manager and Senior Compliance Analyst for AAI, as well as Compliance Analyst for AFS. Prior to joining ALPS, he spent seven years at Morningstar, Inc. in various analyst roles supporting the registered investment company databases. Mr. Sutula is also Chief Compliance Officer of Principal Real Estate Income Fund, ALPS Variable Investment Trust, Liberty All-Star Equity Fund and Liberty All-Star Growth Fund, Inc. From September 2019 to September 2022 he served as Chief Compliance Officer of RiverNorth Opportunities Fund, Inc. |
Erich Rettinger, 1985 | Treasurer | Since September 2023 | Mr. Rettinger is Vice President of AAI (since 2021) and serves as Treasurer of Principal Real Estate Income Fund, Liberty All-Star Equity Fund, Liberty All-Star Growth Fund, Inc., and ALPS Variable Investment Trust. From December 2021 to October 2022 he also served as Treasurer of RiverNorth Opportunities Fund, Inc. Because of his position with AAI, Mr. Rettinger is deemed an affiliate of the Fund as defined under the 1940 Act. From 2013-2021, he served as Vice President and Fund Controller of ALPS Fund Services. |
Michael P. Lawlor, 1969 |
Secretary | Since December 2022 | Mr. Lawlor joined ALPS in January 2022, and is currently Vice President and Principal Legal Counsel. Prior to joining ALPS, Mr. Lawlor was Lead Fund Counsel at Brighthouse Financial (insurance company) (January 2007-April 2021). Mr. Lawlor also serves as Secretary of Financial Investors Trust and ALPS Variable Investment Trust. |
Susan M. Cannon, 1974 |
Assistant Secretary | Since May 2023 | Ms. Cannon joined ALPS in September 2022, and is currently a Senior Paralegal of ALPS Fund Services, Inc. Prior to joining ALPS, Ms. Cannon worked for World Premier Private Partnership, Brown Brothers Harriman & Co. |
* | The business address of each Officer is c/o ALPS Advisors, Inc., 1290 Broadway, Suite 1000, Denver, Colorado 80203. Each Officer is deemed an affiliate of the Trust as defined under the 1940 Act. |
** | This is the period for which the Officer began serving the Trust. Each Officer serves an indefinite term, until his or her successor is elected. |
The Statement of Additional Information includes additional information about the Funds' Trustees and is available, without charge, upon request by calling (toll-free) 1-866-759-5679.
24 | November 30, 2023