Shareholder Letter and Manager's Note
Dear Shareholder,
Enclosed is the report for the Syntax ETF
Trust for the period ending December 31, 2019, together with Management's Discussion and Analysis for the Syntax Stratified LargeCap
ETF (“the Fund”) and its respective index - the Syntax Stratified LargeCap Index (“the Index”).
From a performance standpoint, 2019 proved
to be one of the strongest years for equity markets in recent times. The Fund returned 28.93%1 for the year, successfully
tracking the Index that was up 29.33%. The S&P 500® Index returned 31.49% for the year its fourth strongest annual performance
in 30 years. The S&P 500 Equal Weight Index returned 29.24% for the year.
In the first
half of the year, we saw a reversal in the hawkish tone from the Fed which led to positive equity market momentum. US equities
continued to rally in through the third quarter as economic data and earnings growth remained strong. The Fund returned 20.26%
through Q3, closely tracking the Index 20.49% and the S&P 500 20.55%. In contrast
with this strong performance, the US yield curve inverted deep into its term structure and the IPO market showed signs of weakness,
especially for high valuation companies. While the S&P 500 rose during the quarter, so too did the VIX2, breaking
its usual negative correlation. This is unusual, as the S&P 500 and the VIX have historically had a negative 70% correlation
and there are only 7 other instances in 25 years of both indices rising in consecutive quarters.3
Equity markets climbed the ‘wall
of worry’ in the fourth quarter as the Federal Reserve continued its dovish tone and geo-political uncertainty abated with
clarity on Brexit and the announcement of the “phase one trade deal” between the US and China. Additionally, favorable
unemployment data released in early December showed that joblessness decreased to 3.5%4 – its lowest point since
1969.
However, as we move further into 2020,
the US presidential election, rising middle east tensions, and the progress of the US-China Trade deal may lead to continued uncertainty
and persistent volatility throughout the year.
Related Business Risks:
While we optimistically await to see what
next year will bring, we note that many of the major cap-weighted and equal-weighted indices still carry significant and diversifiable
related business risk. The five largest holdings in the cap-weighted S&P 500 Index are all tech-related (Microsoft,
Apple, Alphabet, Amazon and Facebook), representing over-exposure to the IT and Information sectors. In 2019, this concentration
had a positive effect, propelling the S&P 500 to new highs, with the megacap tech stocks returning 51% on average5.
It also saw those five stocks end the year with a 16.8% share of the S&P 500, greater than the smallest 295 stocks, which had
a combined weight of 16.2% in the S&P 500. While the cap-weighted strategy benefited given its disproportional concentration
in these correlated companies, we believe that this overexposure puts investors at risk of a market event that could negatively
impact their performance.
While the Syntax Stratified LargeCap ETF
underperformed the S&P 500 Index this year, its performance was commensurate with its equal-weight counterpart, the S&P
500 Equal Weight Index, which returned 29.24% year to date. It is important to note that the equal-weight methodology can also
leave investors open to related business risk. While cap weighting can cause an investor’s ownership to accumulate in the
largest, most momentum-driven companies and industries, equal weighting can cause an investor’s ownership to accumulate in
the sectors and industries that have the most company representatives. For example, as of 12/31/19, 18.8% of the S&P 500 Equal
Weight Index was in the Industrials sector.
Syntax’s Stratified Weight™
approach is designed to control for business risk concentrations that regularly occur in cap-weighted and equal-weight indices.
Instead of concentrating in the largest companies or most represented sectors or industries, index weight is spread across business
risk groups to provide a diversified return from all the business opportunities of a benchmark.
The result this year is that the Fund broadly
kept up with the S&P 500 while maintaining diversified exposure: just under 1.5% of the Index’s weight was allocated
to the to the “big 5” megacap tech stocks as of 12/31/19. And instead of weighting by the number of companies in a
sector or industry, each of the eight Syntax sectors had a target allocation of 12.5%.
The strong full-year performance of the
Fund (28.93%), was consistent with our expectations.
We appreciate your support of The Syntax
ETF Trust and look forward to serving your investment needs in the future.
1 This return may differ from that in the audited
statements due to GAAP adjustments related to financial reporting as well as the timing of the conversion of assets into the ETF
from the previous private limited partnership.
2 The CBOE Volatility Index, or VIX, is a real-time
market index representing the market's expectations for volatility over the coming 30 days implied by S&P 500 index options
3 Source: Bloomberg. Syntax, LLC
4 Source: US Bureau of Labor Statistics
5 Source: S&P Dow
Jones Indices Indexology® Blog; From “Hard to Beat” to Nigh-On
Impossible by Chris Bennett; https://www.indexologyblog.com/2020/01/07/from-hard-to-beat-to-nigh-on-impossible/
Manager’s Note
Syntax Stratified LargeCap ETF (SSPY)
As an index fund, the Syntax Stratified
LargeCap ETF (the “Fund”) is passively managed and seeks to track the returns (before fees and expenses) of its underlying
index – the Syntax Stratified LargeCap Index (the “Index”). The Syntax Stratified LargeCap Index reweights the
constituents of the widely tracked S&P 500® to address the related business risk concentrations that occur in capitalization-weighted
indices. Its goal is to deliver an unbiased return that is representative of all the business opportunities in the market, not
just the largest ones.
In accordance with its guidelines and procedures,
Syntax, LLC (“Syntax” or the “Index Provider”) has contracted with S&P Opco, LLC (a subsidiary of S&P
Dow Jones Indices LLC) to calculate and maintain the Index, which is a Stratified WeightTM version of the S&P 500
Index. Unlike the S&P 500 Index, which employs a market capitalization weighted methodology, the Index utilizes a patented
investment technology to diversify the same constituents and use the same rebalancing schedule as the S&P 500, the only difference
is the weighting scheme applied. The Fund generally invests in all of the securities comprising the Index in proportion to their
weightings in the Index.
For the year ending December 31, 2019,
on a market price basis, the Fund returned 28.90%. On a net asset value (“NAV”) basis, the Fund returned 28.93%. During
the same time period, the Index returned 29.33%. During the year, the Fund fully replicated the components of the Index; therefore,
the Fund’s performance, on a NAV basis, differed from the return of the Index primarily due to fees and operating expenses
that the Fund incurred during the period.
During this same time period, the S&P
500 Index returned 31.49% and the S&P 500 Equal Weight Index returned 29.24%. The S&P 500 is an unmanaged index weighted
by market capitalization based on the average performance of approximately 505 equity securities. The S&P
Equal Weight 500 is an unmanaged index
and is the equal-weight version of the S&P 500 Index. It includes the same companies as the S&P 500 Index, but each company
is allocated a fixed weight or 0.2% of the index at each quarterly rebalance.
Both the S&P 500 Index and the S&P
500 Equal Weight Index were selected for their recognition in the marketplace. Their performance comparison is a useful measure
for investors as a broad representation of the U.S. equity market using two different weighting methodologies: capitalization weighting
and equal weighting. Both indices also use the same underlying universe as the Index. The performance of the Fund differed from
the S&P 500 Index and the S&P 500 Equal Weight Index in part because the Fund seeks to track its Index that employs a Stratified
Weight methodology.
Manager’s Note
Syntax Stratified LargeCap ETF (SSPY)
Portfolio Allocations
|
|
Due to rounding, numbers presented may not add up precisely to the totals provided and percentages may not precisely reflect the absolute figures.
|
Manager’s Note
Syntax Stratified LargeCap ETF (SSPY)
Performance: Growth
of $10,000
Performance
Return (%) As of December 31, 2019
|
|
|
Past performance is no guarantee of
future results. Performance results do not reflect the deduction of taxes that a shareholder would pay on fund distributions or
on the redemption or sale of fund shares. The Growth of $10,000 chart represents a hypothetical investment based upon the historical
performance of the Fund. It includes the reinvestment of dividends and capital gains at net asset value: actual returns may differ.
Performance reflects contractual reimbursements in effect until May 1, 2020. In the absence of such reimbursements, performance
would be reduced. The gross and net expense ratios of the Fund are 0.45% and 0.30%, respectively. Indexes are unmanaged and do
not incur fees, expenses and other costs. Investment return and principal value will fluctuate so that shares, when redeemed, may
be worth more or less than their original cost. Current performance may be lower or higher than that shown here. Please see important
disclosures relating to Portability of Performance on page 6.
Manager’s Note
Syntax Stratified LargeCap ETF (SSPY)
A privately offered fund managed by
Syntax Advisors, LLC was reorganized into the Syntax Stratified LargeCap ETF (“the Fund”) as of January 2, 2019 upon
commencement of the ETF operations. For periods prior to the commencement of ETF operations, the Fund’s performance is that
of the private fund. The Fund’s NAV price as of January 2, 2019 was used in calculating market price performance for January
2 and January 3, prior to the fund first trading on the New York Stock Exchange on January 4, 2019.
Portability of Performance: The returns
were calculated using the methodology the SEC requires of registered funds. However, since the private fund did not calculate its
returns on a per share basis, its returns have been calculated on its total net asset value. While the performance of the private
fund is net of all fees and expenses, the performance of the private fund has not been restated to reflect the management and fee
waivers applicable to the Fund. The Fund may be subject to higher fees which would negatively impact performance. The private fund
began operations on January 1, 2015 and, on January 2, 2019, was reorganized into the Fund. Prior to the reorganization, the private
fund had investment objectives, policies and strategies that were, in all material respects, the same as those of the Fund, and
was managed in a manner that, in all material respects, complied with the investment guidelines and restrictions of the Fund. However,
as a registered investment company, the Fund is subject to certain restrictions under the Investment Company Act of 1940 (the “1940
Act”) and the Internal Revenue Code of 1986 (the “Internal Revenue Code”) which did not apply to the private
fund. If the private fund had been subject to the provisions of the 1940 Act and the Internal Revenue Code, its performance could
have been adversely affected. However, these restrictions are not expected to have a material effect on the Fund’s investment
performance.
Performance data current to the most
recent month end is available by calling (866) 972-4492. The Fund is subject to certain risks, including but not limited to, equity
securities risk, large-capitalization risk, index tracking risk, passive strategy/index risk, and market trading risk. Investing
involves risk, including possible loss of principal.
Shares are bought and sold at market
price (not NAV) and are not individually redeemed from the Fund. Investors may purchase or sell individual shares on an exchange
on which they are listed. Market returns are based upon the midpoint of the bid/ask spread at 4:00 p.m. Eastern time (when NAV
is normally determined for most ETFs), and do not represent the returns you would receive if you traded shares at other times.
Please see the prospectus for more details.
The Syntax Stratified LargeCap Index™
is the property of Syntax, LLC, which has contracted with S&P Opco, LLC (a subsidiary of S&P Dow Jones Indices LLC) to
calculate and maintain the Index. The Index is not sponsored by S&P Dow Jones Indices or its affiliates or its third-party
licensors (collectively, “S&P Dow Jones Indices”). S&P Dow Jones Indices will not be liable for any errors
or omissions in calculating the Index. “Calculated by S&P Dow Jones Indices” and the related stylized mark(s) are
service marks of S&P Dow Jones Indices and have been licensed for use by Syntax, LLC, the parent company of Syntax Advisors,
LLC. S&P® is a registered trademark of Standard & Poor’s Financial Services LLC (“SPFS”), and Dow
Jones® is a registered trademark of Dow Jones Trademark Holdings LLC (“Dow Jones”).
The Syntax Stratified LargeCap Index™
is the property of Syntax, LLC, the Fund’s index provider. Syntax®, Stratified®, Stratified Indices®, Stratified
Weight™, and FIS™ are trademarks or registered trademarks of Locus LP. Performance of an index is not illustrative
of any particular investment. It is not possible to invest directly in an index.
This report is submitted for the general
information of the shareholders of the Funds. It is not authorized for distribution to prospective investors unless preceded or
accompanied by an effective prospectus, which includes information regarding the Funds’ risks, objectives, fees and expenses,
experience of its management, and other information.
This report is only intended for the
recipient it is addressed and delivered to by Syntax Advisors, LLC and may not be redistributed without prior written consent.
The report is provided for informational purposes and is not intended to be, nor should it be construed or used as an offer to
sell, or a solicitation of any offer to buy shares or limited partnership interests in any funds managed by Syntax Advisors, LLC.
These securities shall not be offered or sold in any jurisdiction in which such offer, solicitation or sale would be unlawful until
the requirements of the laws of such jurisdiction have been satisfied. If any offer is made, it shall be pursuant to the offering
documents prepared by or on behalf of a specific fund which contains detailed information concerning the investment terms and the
risks, fees and expenses associated with an investment in that fund. In the case of any inconsistency between the descriptions
or terms in this document and the offering documents, the offering documents shall control.
Index performance does not represent
actual fund or portfolio performance and such performance does not reflect the actual investment experience of any investor. An
investor cannot invest directly in an index. In addition, the results actual investors might have achieved would have differed
from those shown because of differences in the timing, amounts of their investments, and fees and expenses associated with an investment
in a portfolio invested in accordance with an index. None of the Syntax Indices or the benchmark indices portrayed herein charge
management fees or incur brokerage expenses, and no such fees or expenses were deducted from the performance shown; provided, however,
that the returns of any investment portfolio invested in accordance with such indices would be net of such fees and expenses. Additionally,
none of these indices lend securities, and no revenues from securities lending were added to the performance shown.
THESE MATERIALS DO NOT CONSTITUTE AN
OFFER OR SOLICITATION TO BUY ANY SECURITIES OR TO PARTICIPATE IN ANY PARTICULAR TRADING STRATEGY.
Syntax Stratified LargeCap ETF
Schedule of Investments
December 31, 2019
|
Security Description
|
Shares
|
Value
|
|
COMMON STOCK—99.8%
|
|
|
|
3M Co.
|
470
|
$82,917
|
|
Abbott Laboratories
|
2,449
|
212,720
|
|
AbbVie, Inc.
|
1,031
|
91,285
|
|
ABIOMED, Inc.(a)
|
175
|
29,853
|
|
Accenture PLC, Class A
|
512
|
107,812
|
|
Activision Blizzard, Inc.
|
3,606
|
214,269
|
|
Adobe, Inc.(a)
|
1,330
|
438,647
|
|
Advance Auto Parts, Inc.
|
613
|
98,178
|
|
Advanced Micro Devices, Inc.(a)
|
1,707
|
78,283
|
|
AES Corp.
|
11,175
|
222,382
|
|
Aflac, Inc.
|
1,989
|
105,218
|
|
Agilent Technologies, Inc.
|
1,263
|
107,747
|
|
Air Products & Chemicals, Inc.
|
138
|
32,429
|
|
Akamai Technologies, Inc.(a)
|
1,873
|
161,790
|
|
Alaska Air Group, Inc.
|
1,411
|
95,595
|
|
Albemarle Corp.
|
476
|
34,767
|
|
Alexandria Real Estate Equities, Inc., REIT
|
270
|
43,627
|
|
Alexion Pharmaceuticals, Inc.(a)
|
818
|
88,467
|
|
Align Technology, Inc.(a)
|
396
|
110,500
|
|
Allegion PLC
|
1,290
|
160,657
|
|
Allergan PLC
|
481
|
91,953
|
|
Alliance Data Systems Corp.
|
961
|
107,824
|
|
Alliant Energy Corp.
|
999
|
54,665
|
|
Allstate Corp.
|
1,446
|
162,603
|
|
Alphabet, Inc., Class A(a)
|
39
|
52,236
|
|
Alphabet, Inc., Class C(a)
|
39
|
52,144
|
|
Altria Group, Inc.
|
4,744
|
236,773
|
|
Amazon.com, Inc.(a)
|
26
|
48,044
|
|
Amcor PLC(a)
|
5,009
|
54,298
|
|
Ameren Corp.
|
704
|
54,067
|
|
American Airlines Group, Inc.
|
3,466
|
99,405
|
|
American Electric Power Co., Inc.
|
984
|
92,998
|
|
American Express Co.
|
339
|
42,202
|
|
American International Group, Inc.
|
1,536
|
78,843
|
|
American Tower Corp. REIT
|
199
|
45,734
|
|
American Water Works Co., Inc.
|
1,331
|
163,513
|
|
Ameriprise Financial, Inc.
|
541
|
90,120
|
|
AmerisourceBergen Corp.
|
1,870
|
158,987
|
|
AMETEK, Inc.
|
537
|
53,560
|
|
Amgen, Inc.
|
383
|
92,330
|
|
Amphenol Corp., Class A
|
1,111
|
120,244
|
|
Analog Devices, Inc.
|
1,783
|
211,892
|
|
ANSYS, Inc.(a)
|
1,665
|
428,588
|
|
Anthem, Inc.
|
596
|
180,010
|
|
AO Smith Corp.
|
1,705
|
81,226
|
|
Aon PLC
|
205
|
42,699
|
|
Apache Corp.
|
2,477
|
63,386
|
|
Apartment Investment & Management Co. REIT, Class A
|
1,551
|
80,109
|
|
Apple, Inc.
|
768
|
225,523
|
|
Applied Materials, Inc.
|
2,354
|
143,688
|
|
Security Description
|
Shares
|
Value
|
|
Aptiv PLC
|
2,543
|
$241,509
|
|
Archer-Daniels-Midland Co.
|
7,019
|
325,331
|
|
Arconic, Inc.
|
1,671
|
51,417
|
|
Arista Networks, Inc.(a)
|
822
|
167,195
|
|
Arthur J Gallagher & Co.
|
448
|
42,663
|
|
Assurant, Inc.
|
609
|
79,828
|
|
AT&T, Inc.
|
4,145
|
161,987
|
|
Atmos Energy Corp.
|
1,481
|
165,665
|
|
Autodesk, Inc.(a)
|
2,354
|
431,865
|
|
Automatic Data Processing, Inc.
|
628
|
107,074
|
|
AutoZone, Inc.(a)
|
77
|
91,731
|
|
AvalonBay Communities, Inc., REIT
|
380
|
79,686
|
|
Avery Dennison Corp.
|
1,221
|
159,731
|
|
Baker Hughes Co.
|
10,064
|
257,940
|
|
Ball Corp.
|
835
|
53,999
|
|
Bank of America Corp.
|
2,302
|
81,076
|
|
Bank of New York Mellon Corp.
|
1,579
|
79,471
|
|
Baxter International, Inc.
|
2,519
|
210,639
|
|
Becton Dickinson and Co.
|
197
|
53,578
|
|
Berkshire Hathaway, Inc., Class B(a)
|
1,408
|
318,912
|
|
Best Buy Co., Inc.
|
1,870
|
164,186
|
|
Biogen, Inc.(a)
|
306
|
90,799
|
|
BlackRock, Inc.
|
182
|
91,491
|
|
Boeing Co.
|
310
|
100,986
|
|
Booking Holdings, Inc.(a)
|
23
|
47,236
|
|
BorgWarner, Inc.
|
5,432
|
235,640
|
|
Boston Properties, Inc., REIT
|
313
|
43,150
|
|
Boston Scientific Corp.(a)
|
1,759
|
79,542
|
|
Bristol-Myers Squibb Co.
|
1,421
|
91,214
|
|
Broadcom, Inc.
|
447
|
141,261
|
|
Broadridge Financial Solutions, Inc.
|
662
|
81,783
|
|
Brown-Forman Corp., Class B
|
2,484
|
167,918
|
|
Cabot Oil & Gas Corp.
|
7,391
|
128,677
|
|
Cadence Design Systems, Inc.(a)
|
3,113
|
215,918
|
|
Campbell Soup Co.
|
2,841
|
140,402
|
|
Capital One Financial Corp.
|
1,013
|
104,248
|
|
Capri Holdings Ltd.(a)
|
3,272
|
124,827
|
|
Cardinal Health, Inc.
|
2,956
|
149,514
|
|
CarMax, Inc.(a)
|
972
|
85,215
|
|
Carnival Corp.
|
1,485
|
75,483
|
|
Caterpillar, Inc.
|
727
|
107,363
|
|
Cboe Global Markets, Inc.
|
366
|
43,920
|
|
CBRE Group, Inc., Class A(a)
|
726
|
44,497
|
|
CDW Corp.
|
575
|
82,133
|
|
Celanese Corp.
|
1,274
|
156,855
|
|
Centene Corp.(a)
|
2,932
|
184,335
|
|
CenterPoint Energy, Inc.
|
8,151
|
222,278
|
|
CenturyLink, Inc.
|
15,551
|
205,429
|
|
Cerner Corp.
|
1,465
|
107,516
|
|
CF Industries Holdings, Inc.
|
879
|
41,963
|
|
CH Robinson Worldwide, Inc.
|
518
|
40,508
|
|
Charles Schwab Corp.
|
2,117
|
100,685
|
See accompanying notes to
financial statements.
Syntax Stratified LargeCap ETF
Schedule of
Investments (continued)
December 31, 2019
|
Security Description
|
Shares
|
Value
|
|
Charter Communications, Inc., Class A(a)
|
446
|
$216,346
|
|
Chevron Corp.
|
4,033
|
486,017
|
|
Chipotle Mexican Grill, Inc.(a)
|
389
|
325,636
|
|
Chubb Ltd.
|
1,026
|
159,707
|
|
Church & Dwight Co., Inc.
|
3,885
|
273,271
|
|
Cigna Corp. (a)
|
891
|
182,201
|
|
Cimarex Energy Co.
|
2,472
|
129,755
|
|
Cincinnati Financial Corp.
|
1,501
|
157,830
|
|
Cintas Corp.
|
454
|
122,162
|
|
Cisco Systems, Inc.
|
3,505
|
168,100
|
|
Citigroup, Inc.
|
1,038
|
82,926
|
|
Citizens Financial Group, Inc.
|
879
|
35,696
|
|
Citrix Systems, Inc.
|
957
|
106,131
|
|
Clorox Co.
|
1,792
|
275,144
|
|
CME Group, Inc.
|
207
|
41,549
|
|
CMS Energy Corp.
|
867
|
54,482
|
|
Coca-Cola Co.
|
4,372
|
241,990
|
|
Cognizant Technology Solutions Corp., Class A
|
2,058
|
127,637
|
|
Colgate-Palmolive Co.
|
3,958
|
272,469
|
|
Comcast Corp., Class A
|
4,854
|
218,284
|
|
Comerica, Inc.
|
1,960
|
140,630
|
|
Conagra Brands, Inc.
|
4,791
|
164,044
|
|
Concho Resources, Inc.
|
670
|
58,672
|
|
ConocoPhillips
|
843
|
54,820
|
|
Consolidated Edison, Inc.
|
2,408
|
217,852
|
|
Constellation Brands, Inc., Class A
|
871
|
165,272
|
|
Cooper Companies, Inc.
|
334
|
107,311
|
|
Copart, Inc.(a)
|
512
|
46,561
|
|
Corning, Inc.
|
4,139
|
120,486
|
|
Corteva, Inc.(a)
|
1,497
|
44,251
|
|
Costco Wholesale Corp.
|
1,629
|
478,796
|
|
Coty, Inc., Class A
|
24,539
|
276,064
|
|
Crown Castle International Corp. REIT
|
319
|
45,346
|
|
CSX Corp.
|
544
|
39,364
|
|
Cummins, Inc.
|
290
|
51,898
|
|
CVS Health Corp.
|
5,748
|
427,019
|
|
Danaher Corp.
|
534
|
81,958
|
|
Darden Restaurants, Inc.
|
2,745
|
299,232
|
|
DaVita, Inc.(a)
|
970
|
72,779
|
|
Deere & Co.
|
613
|
106,208
|
|
Delta Air Lines, Inc.
|
1,678
|
98,129
|
|
DENTSPLY SIRONA, Inc.
|
938
|
53,081
|
|
Devon Energy Corp.
|
5,064
|
131,512
|
|
Diamondback Energy, Inc.
|
623
|
57,852
|
|
Digital Realty Trust, Inc., REIT
|
1,395
|
167,037
|
|
Discover Financial Services
|
1,220
|
103,480
|
|
Discovery, Inc., Class A(a)
|
1,957
|
64,072
|
|
Discovery, Inc., Class C(a)
|
2,105
|
64,181
|
|
DISH Network Corp., Class A(a)
|
4,649
|
164,900
|
|
Dollar General Corp.
|
684
|
106,690
|
|
Dollar Tree, Inc.(a)
|
1,127
|
105,994
|
|
Security Description
|
Shares
|
Value
|
|
Dominion Energy, Inc.
|
1,120
|
$92,758
|
|
Dover Corp.
|
698
|
80,451
|
|
Dow, Inc.(a)
|
993
|
54,347
|
|
DR Horton, Inc.
|
2,894
|
152,658
|
|
DTE Energy Co.
|
726
|
94,286
|
|
Duke Energy Corp.
|
586
|
53,449
|
|
Duke Realty Corp. REIT
|
1,236
|
42,852
|
|
DuPont de Nemours, Inc.
|
816
|
52,387
|
|
DXC Technology Co.
|
3,383
|
127,167
|
|
E*TRADE Financial Corp.
|
2,338
|
106,075
|
|
Eastman Chemical Co.
|
404
|
32,021
|
|
Eaton Corp. PLC
|
1,271
|
120,389
|
|
eBay, Inc.
|
1,278
|
46,149
|
|
Ecolab, Inc.
|
285
|
55,002
|
|
Edison International
|
2,910
|
219,443
|
|
Edwards Lifesciences Corp.(a)
|
341
|
79,552
|
|
Electronic Arts, Inc.(a)
|
2,023
|
217,493
|
|
Eli Lilly & Co.
|
746
|
98,047
|
|
Emerson Electric Co.
|
348
|
26,538
|
|
Entergy Corp.
|
766
|
91,767
|
|
EOG Resources, Inc.
|
700
|
58,632
|
|
Equifax, Inc.
|
457
|
64,035
|
|
Equinix, Inc., REIT
|
288
|
168,106
|
|
Equity Residential, REIT
|
979
|
79,221
|
|
Essex Property Trust, Inc., REIT
|
264
|
79,427
|
|
Estee Lauder Companies, Inc., Class A
|
1,338
|
276,351
|
|
Everest Re Group Ltd.
|
289
|
80,007
|
|
Evergy, Inc.
|
842
|
54,806
|
|
Eversource Energy
|
650
|
55,296
|
|
Exelon Corp.
|
4,824
|
219,926
|
|
Expedia Group, Inc.
|
402
|
43,472
|
|
Expeditors International of Washington, Inc.
|
521
|
40,648
|
|
Extra Space Storage, Inc., REIT
|
775
|
81,856
|
|
Exxon Mobil Corp.
|
6,873
|
479,598
|
|
F5 Networks, Inc.(a)
|
1,136
|
158,642
|
|
Facebook, Inc., Class A(a)
|
544
|
111,656
|
|
Fastenal Co.
|
2,138
|
78,999
|
|
Federal Realty Investment Trust, REIT
|
331
|
42,610
|
|
FedEx Corp.
|
479
|
72,430
|
|
Fidelity National Information Services, Inc.
|
383
|
53,271
|
|
Fifth Third Bancorp
|
1,139
|
35,013
|
|
First Republic Bank
|
1,228
|
144,229
|
|
FirstEnergy Corp.
|
1,103
|
53,606
|
|
Fiserv, Inc.(a)
|
453
|
52,380
|
|
FleetCor Technologies, Inc.(a)
|
139
|
39,993
|
|
FLIR Systems, Inc.
|
4,486
|
233,586
|
|
Flowserve Corp.
|
1,639
|
81,573
|
|
FMC Corp.
|
400
|
39,928
|
|
Ford Motor Co.
|
17,187
|
159,839
|
|
Fortinet, Inc.(a)
|
1,000
|
106,760
|
|
Fortive Corp.
|
352
|
26,889
|
|
Fortune Brands Home & Security, Inc.
|
1,219
|
79,649
|
See accompanying notes to
financial statements.
Syntax Stratified LargeCap ETF
Schedule of
Investments (continued)
December 31, 2019
|
Security Description
|
Shares
|
Value
|
|
Fox Corp., Class A
|
1,723
|
$63,872
|
|
FoxCorp., Class B(a)
|
1,767
|
64,319
|
|
Franklin Resources, Inc.
|
3,486
|
90,566
|
|
Freeport-McMoRan, Inc.
|
16,440
|
215,693
|
|
Gap, Inc.
|
4,753
|
84,033
|
|
Garmin Ltd.
|
2,170
|
211,705
|
|
Gartner, Inc.(a)
|
805
|
124,051
|
|
General Dynamics Corp.
|
590
|
104,047
|
|
General Electric Co.
|
6,998
|
78,098
|
|
General Mills, Inc.
|
2,635
|
141,131
|
|
General Motors Co.
|
4,449
|
162,833
|
|
Genuine Parts Co.
|
754
|
80,097
|
|
Gilead Sciences, Inc.
|
1,382
|
89,802
|
|
Global Payments, Inc.
|
236
|
43,084
|
|
Globe Life, Inc.
|
1,001
|
105,355
|
|
Goldman Sachs Group, Inc.
|
705
|
162,101
|
|
H&R Block, Inc.
|
3,377
|
79,292
|
|
Halliburton Co.
|
4,959
|
121,347
|
|
Hanesbrands, Inc.
|
11,018
|
163,617
|
|
Harley-Davidson, Inc.
|
4,247
|
157,946
|
|
Hartford Financial Services Group, Inc.
|
1,299
|
78,940
|
|
Hasbro, Inc.
|
1,143
|
120,712
|
|
HCA Healthcare, Inc.
|
987
|
145,888
|
|
Healthpeak Properties, Inc., REIT
|
2,187
|
75,386
|
|
Helmerich & Payne, Inc.
|
2,826
|
128,385
|
|
Henry Schein, Inc.(a)
|
2,318
|
154,657
|
|
Hershey Co.
|
808
|
118,760
|
|
Hess Corp.
|
848
|
56,655
|
|
Hewlett Packard Enterprise Co.
|
9,900
|
157,014
|
|
Hilton Worldwide Holdings, Inc.
|
658
|
72,979
|
|
HollyFrontier Corp.
|
4,740
|
240,365
|
|
Hologic, Inc.(a)
|
2,983
|
155,742
|
|
Home Depot, Inc.
|
741
|
161,820
|
|
Honeywell International, Inc.
|
448
|
79,296
|
|
Hormel Foods Corp.
|
7,066
|
318,747
|
|
Host Hotels & Resorts, Inc., REIT
|
3,927
|
72,846
|
|
HP, Inc.
|
15,589
|
320,354
|
|
Humana, Inc.
|
479
|
175,563
|
|
Huntington Bancshares, Inc.
|
2,299
|
34,669
|
|
Huntington Ingalls Industries, Inc.
|
316
|
79,278
|
|
IDEX Corp.
|
474
|
81,528
|
|
IDEXX Laboratories, Inc.(a)
|
627
|
163,729
|
|
IHS Markit Ltd.(a)
|
1,418
|
106,846
|
|
Illinois Tool Works, Inc.
|
447
|
80,295
|
|
Illumina, Inc.(a)
|
325
|
107,816
|
|
Incyte Corp.(a)
|
989
|
86,359
|
|
Ingersoll-Rand PLC
|
395
|
52,503
|
|
Intel Corp.
|
1,219
|
72,957
|
|
Intercontinental Exchange, Inc.
|
460
|
42,573
|
|
International Business Machines Corp.
|
945
|
126,668
|
|
International Flavors & Fragrances, Inc.
|
237
|
30,578
|
|
International Paper Co.
|
1,140
|
52,497
|
|
Security Description
|
Shares
|
Value
|
|
Interpublic Group of Companies, Inc.
|
4,591
|
$106,052
|
|
Intuit, Inc.
|
407
|
106,606
|
|
Intuitive Surgical, Inc.(a)
|
55
|
32,513
|
|
Invesco Ltd.
|
5,144
|
92,489
|
|
IPG Photonics Corp.(a)
|
183
|
26,520
|
|
IQVIA Holdings, Inc.(a)
|
730
|
112,792
|
|
Iron Mountain, Inc., REIT
|
1,340
|
42,706
|
|
Jack Henry & Associates, Inc.
|
363
|
52,878
|
|
Jacobs Engineering Group, Inc.
|
2,643
|
237,421
|
|
JB Hunt Transport Services, Inc.
|
350
|
40,873
|
|
JM Smucker Co.
|
1,339
|
139,430
|
|
Johnson & Johnson
|
1,496
|
218,222
|
|
Johnson Controls International PLC
|
1,962
|
79,873
|
|
JPMorgan Chase & Co.
|
579
|
80,713
|
|
Juniper Networks, Inc.
|
6,574
|
161,918
|
|
Kansas City Southern
|
262
|
40,128
|
|
Kellogg Co.
|
1,795
|
124,142
|
|
KeyCorp
|
1,756
|
35,541
|
|
Keysight Technologies, Inc.(a)
|
245
|
25,144
|
|
Kimberly-Clark Corp.
|
2,000
|
275,100
|
|
Kimco Realty Corp. REIT
|
2,083
|
43,139
|
|
Kinder Morgan, Inc.
|
10,474
|
221,735
|
|
KLA Corp.
|
822
|
146,456
|
|
Kohl's Corp.
|
2,628
|
133,897
|
|
Kraft Heinz Co.
|
4,314
|
138,609
|
|
Kroger Co.
|
16,937
|
491,004
|
|
L Brands, Inc.
|
4,479
|
81,159
|
|
L3Harris Technologies, Inc.
|
1,188
|
235,070
|
|
Laboratory Corp. of America Holdings(a)
|
423
|
71,559
|
|
Lam Research Corp.
|
499
|
145,908
|
|
Lamb Weston Holdings, Inc.
|
1,617
|
139,111
|
|
Las Vegas Sands Corp.
|
1,021
|
70,490
|
|
Leggett & Platt, Inc.
|
1,564
|
79,498
|
|
Leidos Holdings, Inc.
|
1,382
|
135,284
|
|
Lennar Corp., Class A
|
2,721
|
151,805
|
|
Lincoln National Corp.
|
1,771
|
104,507
|
|
Linde PLC
|
152
|
32,361
|
|
Live Nation Entertainment, Inc.(a)
|
705
|
50,386
|
|
LKQ Corp.(a)
|
2,633
|
93,998
|
|
Lockheed Martin Corp.
|
205
|
79,823
|
|
Loews Corp.
|
6,269
|
329,060
|
|
Lowe's Companies, Inc.
|
1,339
|
160,359
|
|
LyondellBasell Industries N.V., Class A
|
571
|
53,948
|
|
M&T Bank Corp.
|
207
|
35,138
|
|
Macy's, Inc.
|
8,356
|
142,052
|
|
Marathon Oil Corp.
|
4,155
|
56,425
|
|
Marathon Petroleum Corp.
|
4,058
|
244,494
|
|
MarketAxess Holdings, Inc.
|
113
|
42,839
|
|
Marriott International, Inc., Class A
|
482
|
72,989
|
|
Marsh & McLennan Companies, Inc.
|
382
|
42,559
|
|
Martin Marietta Materials, Inc.
|
383
|
107,102
|
|
Masco Corp.
|
1,687
|
80,959
|
See accompanying notes to
financial statements.
Syntax Stratified LargeCap ETF
Schedule of
Investments (continued)
December 31, 2019
|
Security Description
|
Shares
|
Value
|
|
Mastercard, Inc., Class A
|
143
|
$42,698
|
|
Maxim Integrated Products, Inc.
|
3,552
|
218,484
|
|
McCormick & Co., Inc.
|
812
|
137,821
|
|
McDonald's Corp.
|
2,414
|
477,031
|
|
McKesson Corp.
|
1,128
|
156,025
|
|
Medtronic PLC
|
279
|
31,653
|
|
Merck & Co., Inc.
|
1,016
|
92,405
|
|
MetLife, Inc.
|
2,099
|
106,986
|
|
Mettler-Toledo International, Inc.(a)
|
34
|
26,972
|
|
MGM Resorts International
|
2,153
|
71,630
|
|
Microchip Technology, Inc.
|
690
|
72,257
|
|
Micron Technology, Inc.(a)
|
1,376
|
74,001
|
|
Microsoft Corp.
|
2,742
|
432,413
|
|
Mid-America Apartment Communities, Inc., REIT
|
608
|
80,171
|
|
Mohawk Industries, Inc.(a)
|
575
|
78,419
|
|
Molson Coors Brewing Co., Class B
|
3,122
|
168,276
|
|
Mondelez International, Inc., Class A
|
2,235
|
123,104
|
|
Monster Beverage Corp.(a)
|
3,828
|
243,269
|
|
Moody's Corp.
|
270
|
64,101
|
|
Morgan Stanley
|
3,157
|
161,386
|
|
Mosaic Co.
|
2,130
|
46,093
|
|
Motorola Solutions, Inc.
|
1,318
|
212,383
|
|
MSCI, Inc.
|
244
|
62,996
|
|
Mylan N.V.(a)
|
16,624
|
334,142
|
|
Nasdaq, Inc.
|
405
|
43,376
|
|
National Oilwell Varco, Inc.
|
10,000
|
250,500
|
|
NetApp, Inc.
|
2,507
|
156,061
|
|
Netflix, Inc.(a)
|
151
|
48,859
|
|
Newell Brands, Inc.
|
6,142
|
118,049
|
|
Newmont Goldcorp Corp.
|
5,124
|
222,638
|
|
News Corp., Class A
|
4,674
|
66,090
|
|
News Corp., Class B
|
4,563
|
66,209
|
|
NextEra Energy, Inc.
|
382
|
92,505
|
|
Nielsen Holdings PLC
|
5,302
|
107,631
|
|
NIKE, Inc., Class B
|
1,298
|
131,500
|
|
NiSource, Inc.
|
5,901
|
164,284
|
|
Noble Energy, Inc.
|
5,311
|
131,925
|
|
Nordstrom, Inc.
|
3,306
|
135,315
|
|
Norfolk Southern Corp.
|
209
|
40,573
|
|
Northern Trust Corp.
|
839
|
89,135
|
|
Northrop Grumman Corp.
|
230
|
79,113
|
|
NortonLifeLock, Inc.
|
4,069
|
103,841
|
|
Norwegian Cruise Line Holdings Ltd.(a)
|
1,264
|
73,830
|
|
NRG Energy, Inc.
|
5,369
|
213,418
|
|
Nucor Corp.
|
3,744
|
210,712
|
|
NVIDIA Corp.
|
315
|
74,120
|
|
NVR, Inc.(a)
|
42
|
159,953
|
|
Occidental Petroleum Corp.
|
1,401
|
57,735
|
|
Old Dominion Freight Line, Inc.
|
212
|
40,233
|
|
Omnicom Group, Inc.
|
1,289
|
104,435
|
|
ONEOK, Inc.
|
2,890
|
218,686
|
|
Security Description
|
Shares
|
Value
|
|
Oracle Corp.
|
1,940
|
$102,781
|
|
O'Reilly Automotive, Inc.(a)
|
216
|
94,664
|
|
PACCAR, Inc.
|
1,289
|
101,960
|
|
Packaging Corp. of America
|
476
|
53,307
|
|
Parker-Hannifin Corp.
|
256
|
52,690
|
|
Paychex, Inc.
|
1,241
|
105,559
|
|
PayPal Holdings, Inc.(a)
|
490
|
53,003
|
|
Pentair PLC
|
1,730
|
79,355
|
|
People's United Financial, Inc.
|
12,714
|
214,867
|
|
PepsiCo, Inc.
|
863
|
117,946
|
|
PerkinElmer, Inc.
|
1,120
|
108,752
|
|
Perrigo Co. PLC
|
5,883
|
303,916
|
|
Pfizer, Inc.
|
2,365
|
92,661
|
|
Philip Morris International, Inc.
|
2,810
|
239,103
|
|
Phillips 66
|
2,105
|
234,518
|
|
Pinnacle West Capital Corp.
|
614
|
55,217
|
|
Pioneer Natural Resources Co.
|
377
|
57,066
|
|
PNC Financial Services Group, Inc.
|
222
|
35,438
|
|
PPG Industries, Inc.
|
397
|
52,996
|
|
PPL Corp.
|
1,484
|
53,246
|
|
Principal Financial Group, Inc.
|
1,670
|
91,850
|
|
Procter & Gamble Co.
|
2,167
|
270,658
|
|
Progressive Corp.
|
2,198
|
159,113
|
|
Prologis, Inc., REIT
|
477
|
42,520
|
|
Prudential Financial, Inc.
|
1,123
|
105,270
|
|
Public Service Enterprise Group, Inc.
|
1,548
|
91,409
|
|
Public Storage, REIT
|
386
|
82,203
|
|
PulteGroup, Inc.
|
3,928
|
152,406
|
|
PVH Corp.
|
759
|
79,809
|
|
Qorvo, Inc.(a)
|
1,245
|
144,706
|
|
QUALCOMM, Inc.
|
1,605
|
141,609
|
|
Quanta Services, Inc.
|
5,797
|
235,996
|
|
Quest Diagnostics, Inc.
|
670
|
71,549
|
|
Ralph Lauren Corp.
|
678
|
79,475
|
|
Raymond James Financial, Inc.
|
1,164
|
104,131
|
|
Raytheon Co.
|
365
|
80,205
|
|
Realty Income Corp. REIT
|
584
|
43,000
|
|
Regency Centers Corp. REIT
|
693
|
43,721
|
|
Regeneron Pharmaceuticals, Inc.(a)
|
241
|
90,491
|
|
Regions Financial Corp.
|
2,052
|
35,212
|
|
Republic Services, Inc.
|
1,335
|
119,656
|
|
ResMed, Inc.
|
688
|
106,619
|
|
Robert Half International, Inc.
|
1,715
|
108,302
|
|
Rockwell Automation, Inc.
|
130
|
26,347
|
|
Rollins, Inc.
|
3,611
|
119,741
|
|
Roper Technologies, Inc.
|
151
|
53,489
|
|
Ross Stores, Inc.
|
1,097
|
127,713
|
|
Royal Caribbean Cruises Ltd.
|
561
|
74,899
|
|
S&P Global, Inc.
|
234
|
63,894
|
|
salesforce.com, Inc.(a)
|
656
|
106,692
|
|
SBA Communications Corp. REIT
|
179
|
43,137
|
|
Schlumberger Ltd.
|
3,050
|
122,610
|
See accompanying notes to
financial statements.
Syntax Stratified LargeCap ETF
Schedule of
Investments (continued)
December 31, 2019
|
Security Description
|
Shares
|
Value
|
|
Seagate Technology PLC
|
2,697
|
$160,471
|
|
Sealed Air Corp.
|
1,390
|
55,364
|
|
Sempra Energy
|
355
|
53,775
|
|
ServiceNow, Inc.(a)
|
387
|
109,258
|
|
Sherwin-Williams Co.
|
92
|
53,686
|
|
Simon Property Group, Inc., REIT
|
293
|
43,645
|
|
Skyworks Solutions, Inc.
|
1,893
|
228,826
|
|
SL Green Realty Corp. REIT
|
477
|
43,827
|
|
Snap-on, Inc.
|
698
|
118,241
|
|
Southern Co.
|
870
|
55,419
|
|
Southwest Airlines Co.
|
1,758
|
94,897
|
|
Stanley Black & Decker, Inc.
|
723
|
119,830
|
|
Starbucks Corp.
|
3,577
|
314,490
|
|
State Street Corp.
|
1,002
|
79,258
|
|
STERIS PLC
|
209
|
31,856
|
|
Stryker Corp.
|
391
|
82,087
|
|
SVB Financial Group(a)
|
567
|
142,340
|
|
Synchrony Financial
|
2,805
|
101,008
|
|
Synopsys, Inc.(a)
|
1,543
|
214,786
|
|
Sysco Corp.
|
5,696
|
487,236
|
|
T Rowe Price Group, Inc.
|
736
|
89,674
|
|
Take-Two Interactive Software, Inc.(a)
|
1,736
|
212,538
|
|
Tapestry, Inc.
|
4,892
|
131,937
|
|
Target Corp.
|
831
|
106,543
|
|
TE Connectivity Ltd.
|
1,266
|
121,333
|
|
TechnipFMC PLC
|
5,948
|
127,525
|
|
Teleflex, Inc.
|
147
|
55,337
|
|
Texas Instruments, Inc.
|
1,668
|
213,988
|
|
Textron, Inc.
|
2,437
|
108,690
|
|
Thermo Fisher Scientific, Inc.
|
330
|
107,207
|
|
Tiffany & Co.
|
949
|
126,834
|
|
TJX Companies, Inc.
|
2,102
|
128,348
|
|
T-Mobile US, Inc.(a)
|
2,103
|
164,917
|
|
Tractor Supply Co.
|
833
|
77,836
|
|
TransDigm Group, Inc.
|
92
|
51,520
|
|
Travelers Companies, Inc.
|
1,169
|
160,095
|
|
Truist Financial Corp.
|
630
|
35,482
|
|
Twitter, Inc.(a)
|
3,478
|
111,470
|
|
Tyson Foods, Inc., Class A
|
3,606
|
328,290
|
|
UDR, Inc., REIT
|
1,714
|
80,044
|
|
Ulta Salon Cosmetics & Fragrance, Inc.(a)
|
625
|
158,212
|
|
Under Armour, Inc., Class A(a)
|
3,248
|
70,157
|
|
Under Armour, Inc., Class C(a)
|
3,570
|
68,473
|
|
Union Pacific Corp.
|
224
|
40,497
|
|
United Airlines Holdings, Inc.(a)
|
1,086
|
95,666
|
|
United Parcel Service, Inc., Class B
|
668
|
78,196
|
|
United Rentals, Inc.(a)
|
488
|
81,384
|
|
United Technologies Corp.
|
532
|
79,672
|
|
UnitedHealth Group, Inc.
|
593
|
174,330
|
|
Universal Health Services, Inc., Class B
|
977
|
140,160
|
|
Unum Group
|
3,486
|
101,652
|
|
US Bancorp
|
585
|
34,685
|
|
Security Description
|
Shares
|
Value
|
|
Valero Energy Corp.
|
2,537
|
$237,590
|
|
Varian Medical Systems, Inc.(a)
|
224
|
31,810
|
|
Ventas, Inc., REIT
|
2,541
|
146,717
|
|
VeriSign, Inc.(a)
|
827
|
159,346
|
|
Verisk Analytics, Inc.
|
425
|
63,470
|
|
Verizon Communications, Inc.
|
2,609
|
160,193
|
|
Vertex Pharmaceuticals, Inc.(a)
|
414
|
90,645
|
|
VF Corp.
|
1,703
|
169,721
|
|
ViacomCBS, Inc., Class B
|
3,278
|
137,578
|
|
Visa, Inc., Class A
|
228
|
42,841
|
|
Vornado Realty Trust, REIT
|
648
|
43,092
|
|
Vulcan Materials Co.
|
739
|
106,409
|
|
Walgreens Boots Alliance, Inc.
|
7,328
|
432,059
|
|
Walmart, Inc.
|
3,956
|
470,131
|
|
Walt Disney Co.
|
867
|
125,394
|
|
Waste Management, Inc.
|
1,062
|
121,026
|
|
Waters Corp.(a)
|
452
|
105,610
|
|
WEC Energy Group, Inc.
|
1,016
|
93,706
|
|
WellCare Health Plans, Inc.(a)
|
338
|
111,611
|
|
Wells Fargo & Co.
|
1,474
|
79,301
|
|
Welltower, Inc., REIT
|
1,792
|
146,550
|
|
Western Digital Corp.
|
2,922
|
185,459
|
|
Western Union Co.
|
3,884
|
104,014
|
|
Westinghouse Air Brake Technologies Corp.
|
703
|
54,693
|
|
Westrock Co.
|
1,292
|
55,440
|
|
Weyerhaeuser Co. REIT
|
3,568
|
107,754
|
|
Whirlpool Corp.
|
534
|
78,781
|
|
Williams Companies, Inc.
|
9,313
|
220,904
|
|
Willis Towers Watson PLC
|
212
|
42,811
|
|
WR Berkley Corp.
|
2,281
|
157,617
|
|
WW Grainger, Inc.
|
239
|
80,906
|
|
Wynn Resorts Ltd.
|
543
|
75,406
|
|
Xcel Energy, Inc.
|
849
|
53,903
|
|
Xerox Holding Corp. (a)
|
8,612
|
317,524
|
|
Xilinx, Inc.
|
733
|
71,665
|
|
Xylem, Inc.
|
1,021
|
80,445
|
|
Yum! Brands, Inc.
|
4,754
|
478,870
|
|
Zebra Technologies Corp., Class A(a)
|
205
|
52,365
|
|
Zimmer Biomet Holdings, Inc.
|
535
|
80,079
|
|
Zions Bancorp NA
|
4,135
|
214,689
|
|
Zoetis, Inc.
|
728
|
96,351
|
|
INVESTMENTS IN
COMMON STOCK—99.8%
(Cost $51,837,688)
|
|
61,993,730
|
|
OTHER ASSETS IN EXCESS OF LIABILITIES—0.2%
|
|
155,202
|
|
NET ASSETS—100.0%
|
|
$62,148,932
|
|
(a)
|
Non-income producing security.
|
|
PLC=Public Limited Company
|
|
REIT=Real Estate Investment Trust
|
See accompanying notes to
financial statements.
Syntax Stratified LargeCap ETF
Schedule of Investments
(continued)
December 31, 2019
INDUSTRY BREAKDOWN
AS OF December 31, 2019*
|
INDUSTRY
|
PERCENTAGE OF
NET ASSETS
|
|
Upstream Energy
|
3.3%
|
|
Processed Foods
|
3.2
|
|
Business Software for Specific Uses
|
3.1
|
|
Food Distributors
|
3.1
|
|
Downstream Energy
|
3.1
|
|
Branded Pharmaceuticals
|
3.1
|
|
Restaurants
|
3.1
|
|
Commercial Hardware
|
2.3
|
|
Transaction Services
|
2.2
|
|
Investment Services
|
2.2
|
|
Commercial Insurance
|
2.2
|
|
Electric Competitive
|
2.2
|
|
Internet Services and Websites
|
2.1
|
|
Content Providers
|
2.1
|
|
Rental
|
2.1
|
|
Telecommunication Networks
|
2.1
|
|
End User Hardware
|
2.1
|
|
Management and IT Services
|
2.1
|
|
Operators and Developers
|
2.1
|
|
Electric Regulated
|
2.0
|
|
Consumer Insurance
|
1.9
|
|
Midstream and Gas
|
1.9
|
|
Non Real Estate Banking
|
1.7
|
|
Healthcare Insurance
|
1.6
|
|
Alcohol and Tobacco
|
1.6
|
|
Primary Foods
|
1.6
|
|
Capital Markets
|
1.6
|
|
Home Office and Consumer Equipment Retail
|
1.6
|
|
Auto Products
|
1.5
|
|
Specialty Services
|
1.5
|
|
Home Office and Consumer Equipment Manufacture
|
1.5
|
|
Distribution Services
|
1.5
|
|
Information and Electrical Components
|
1.5
|
|
Transportation Services
|
1.5
|
|
Analog and Mixed Signal Integrated Circuits
|
1.4
|
|
Digital Integrated Circuits
|
1.4
|
|
Healthcare Providers and Facilities
|
1.4
|
|
Semiconductor Services and Equipment
|
1.4
|
|
Drugstores
|
1.4
|
|
Personal Products
|
1.3
|
|
Accessories and Footwear
|
1.3
|
|
Diversified Household and Personal Products
|
1.3
|
|
Chemicals
|
1.3
|
|
Other Natural Resources
|
1.3
|
|
Mechanical Components
|
1.3
|
|
Transport Aerospace and Defense Equipment
|
1.2
|
|
Medical Devices
|
1.1
|
|
Medical Research Services and Equipment
|
1.1
|
|
Apparel Retailers
|
1.1
|
|
INDUSTRY
|
PERCENTAGE OF
NET ASSETS
|
|
Hospital Equipment
|
1.1%
|
|
Metals
|
1.0
|
|
Diversified Drugs and Devices
|
1.0
|
|
Healthcare Products Distribution
|
1.0
|
|
Industrial Conglomerates
|
0.9
|
|
Production Equipment
|
0.8
|
|
Branded Apparel
|
0.8
|
|
Operating Systems and Middleware
|
0.7
|
|
Consumer Paper Products
|
0.4
|
|
Real Estate Banking
|
0.3
|
|
Business Software for Specific Industries
|
0.2
|
|
Other Assets in Excess of Liabilities
|
0.2
|
|
Total
|
100.0%
|
* The Fund’s industry breakdown is expressed as a percentage of net assets and may change over time.
See accompanying notes to
financial statements.
Syntax Stratified LargeCap ETF
Statement of Assets and
Liabilities
December 31, 2019
|
ASSETS
|
|
|
Investments in securities of unaffiliated issuers
|
$61,993,730
|
|
Cash
|
92,187
|
|
Receivable from the Advisor
|
75,546
|
|
Dividends receivable
|
79,528
|
|
Total Assets
|
62,240,991
|
|
LIABILITIES
|
|
|
Accrued Management fee
|
23,652
|
|
Accrued Trustee Fees
|
25,000
|
|
Accrued Other fees and expenses
|
43,407
|
|
Total Liabilities
|
92,059
|
|
NET ASSETS
|
$62,148,932
|
|
NET ASSETS CONSISTS OF:
|
|
|
Paid in Capital
|
52,831,599
|
|
Distributable earnings
|
9,317,333
|
|
NET ASSETS
|
$62,148,932
|
|
NET ASSET VALUE PER SHARE
|
$50.73
|
|
SHARES OUTSTANDING (unlimited number of shares authorized, no par value)
|
1,225,000
|
|
COST OF INVESTMENTS:
|
|
|
Cost of Investments
|
$51,837,688
|
See accompanying notes to financial
statements.
Syntax Stratified LargeCap ETF
Statement of Operations
|
|
For the Period 1/2/19(a)
to 12/31/19
|
|
INVESTMENT INCOME
|
|
|
Dividend income
|
$1,101,662
|
|
Total Investment Income
|
1,101,662
|
|
EXPENSES
|
|
|
Management fee
|
235,145
|
|
Trustee fee
|
100,000
|
|
CCO fee
|
49,999
|
|
Audit fee
|
36,500
|
|
Total Expenses
|
421,644
|
|
Expense Waiver/Reimbursement
|
(262,321)
|
|
Net Expenses
|
159,323
|
|
NET INVESTMENT INCOME (LOSS)
|
942,339
|
|
REALIZED AND UNREALIZED GAIN (LOSS)
|
|
|
Net realized gain (loss) on Investments
|
(428,382)
|
|
Net change in unrealized appreciation/depreciation on Investments
|
12,145,204
|
|
NET REALIZED AND UNREALIZED GAIN (LOSS)
|
11,716,822
|
|
NET INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS
|
$12,659,161
|
|
(a)
|
Fund commenced operations on January 2, 2019.
|
See accompanying notes to financial
statements.
Syntax Stratified LargeCap ETF
Statement of Changes in Net
Assets
|
|
For the Period 1/2/19(a)
to 12/31/19
|
|
INCREASE (DECREASE) IN NET ASSETS FROM OPERATIONS:
|
|
|
Net investment income (loss)
|
$942,339
|
|
Net realized gain (loss)
|
(428,382)
|
|
Net change in unrealized appreciation/depreciation
|
12,145,204
|
|
NET INCREASE (DECREASE) IN NET ASSETS RESULTING FROM OPERATIONS
|
12,659,161
|
|
DISTRIBUTIONS TO SHAREHOLDERS
|
|
|
Distributions to Shareholders
|
(964,675)
|
|
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS:
|
|
|
Proceeds from Shares Sold
|
56,595,018
|
|
Cost of Shares Redeemed
|
(6,240,572)
|
|
INCREASE (DECREASE) IN NET ASSETS FROM SHARE TRANSACTIONS:
|
50,354,446
|
|
NET INCREASE (DECREASE) IN NET ASSETS DURING THE PERIOD
|
62,048,932
|
|
NET ASSETS AT BEGINNING OF PERIOD
|
100,000
|
|
NET ASSETS AT END OF PERIOD
|
$62,148,932
|
|
SHARE TRANSACTIONS:
|
|
|
Shares sold
|
1,372,500
|
|
Shares redeemed
|
(150,000)
|
|
NET INCREASE
|
1,222,500
|
|
(a)
|
Fund commenced operations on January 2, 2019.
|
See accompanying notes to financial
statements.
Syntax Stratified LargeCap ETF
Financial Highlights
Selected data for a share
outstanding throughout this period
|
|
For the
Period
1/2/19(a)
to 12/31/19
|
|
Net asset value, beginning of period
|
$40.00
|
|
Income (loss) from investment operations:
|
|
|
Net investment income (loss)(b)
|
0.84
|
|
Net realized and unrealized gain (loss)
|
10.68
|
|
Total from investment operations
|
11.52
|
|
Less Distributions from:
|
|
|
Net investment income
|
(0.79)
|
|
Net asset value, end of period
|
$50.73
|
|
Total return(c)
|
28.81%(d)
|
|
Ratios and Supplemental Data:
|
|
|
Net assets, end of period (000s)
|
$62,149
|
|
Ratios to average net assets:
|
|
|
Total expenses
|
0.80%(e)
|
|
Net expenses(f)
|
0.30%(e)
|
|
Net investment income (loss)(f)
|
1.80%(e)
|
|
Portfolio turnover rate(g)
|
34%(d)
|
|
(a)
|
Fund commenced operations on January 2, 2019.
|
|
(b)
|
Per Share numbers have been calculated using the average shares method.
|
|
(c)
|
Total return is calculated assuming a purchase of Shares at net asset value per Share on the first day and a sale at net asset value per Share on the last day of
each period reported. Distributions are assumed, for the purposes of this calculation, to be reinvested at the net asset value per Share on the respective payment dates of the Fund. Total return for a period of less
than one year is not annualized. Broker commission charges are not included in this calculation. Past performance is no guarantee of future results. Performance results do not reflect the deduction of taxes that a
shareholder would pay on fund distributions or on the redemption or sale of fund shares.
|
|
(d)
|
Not annualized.
|
|
(e)
|
Annualized.
|
|
(f)
|
Net of expenses waived/reimbursed by the Advisor.
|
|
(g)
|
Portfolio turnover rate excludes securities received or delivered from in-kind processing of creations or redemptions of Shares.
|
See accompanying notes to financial
statements.
Syntax Stratified LargeCap ETF
Notes to Financial
Statements
December 31, 2019
Note 1—Organization
Syntax ETF Trust (the
“Trust”), was organized under the laws of the State of Delaware as a statutory trust on June 27, 2013 pursuant to an Agreement and Declaration of Trust (the “Trust Deed”). Syntax Stratified
LargeCap ETF (the "ETF" or the “Fund”), is a series of the Trust.
The Fund is
registered under the U.S. Investment Company Act of 1940, as amended (the “1940 Act”), as an open-end, diversified management investment company. The Fund has no fixed termination date and will continue
unless the Fund is otherwise terminated under the terms of the Trust or unless and until required by law. Syntax Advisors, LLC (the “Advisor” or “Syntax Advisors”), a New York limited liability
company, serves as the Fund’s investment adviser.
Investment Objectives:
The Fund seeks to
provide investment results that, before expenses, correspond generally to the total return performance of publicly traded equity securities of companies in the Syntax Stratified LargeCap Index (the
“Index”).
The Fund’s
investment objective is to provide long-term total investment returns (capital gains plus income). To achieve the Fund’s investment objective, the Advisor will seek to track the performance of the Syntax
Stratified LargeCap Index, which is a stratified-weight version of the widely used S&P 500® Index. In addition, the Fund may invest in cash and cash equivalents or money market instruments, such as repurchase
agreements and money market funds. Refer to the Additional Strategies Information section of the Fund’s prospectus for more information on the methodology of the Syntax Indices.
Note 2—Significant Accounting Policies
The Fund is an
investment company and accordingly follows the investment company accounting and reporting guidance of the Financial Accounting Standards Board (FASB) Accounting Standards Codification Topic 946 Financial Services
– Investment Companies. The accompanying financial statements of the Fund are prepared in accordance with accounting principles generally accepted in the United States (“GAAP”) and in accordance with
Accounting Standards Codification (ASC) as set forth by the Financial Accounting Standards Board (“FASB”). The Fund maintains its financial records in U.S. dollars and follows the accrual basis of
accounting.
In preparing the
Fund’s financial statements in accordance with GAAP, estimates or assumptions (which could differ from actual results) may be used that affect reported amounts and disclosures.
The following is a
summary of significant accounting policies followed by the Fund.
Tax Free Exchange
The ETF acquired the
assets of the Syntax 500 LP (the “LP”) on January 2, 2019 (the “Transaction”). The LP was an unregistered Fund managed by the Advisor. The Transaction was structured as a tax-free exchange of
shares. Accordingly, the Fund has elected to carry forward the historical cost basis of investments and cumulative unrealized gains and losses as reported by the LP prior to the Transaction (the
“Election”). Investment companies carry substantially all their assets at fair market value for periodic and ongoing reporting. The primary use of historical cost basis is to determine both realized and
unrealized gains and losses.
The ETF’s
decision to make the Election was therefore designed to more closely align subsequent reporting of realized gains or losses with actual tax-basis gains distributable to ETF shareholders. The Transaction resulted in an
initial market value of securities acquired by the ETF of $33,554,457, with a cost basis of $35,543,619 and unrealized loss of $1,989,162.
Syntax Stratified LargeCap ETF
Notes to Financial
Statements (continued)
December 31, 2019
Note 2—Significant Accounting Policies–(continued)
Investment Valuation
The following
methodologies are used to determine the market value or fair value of investments. Equity investments (including preferred stocks and registered investment companies that are exchange-traded funds) traded on a
recognized securities exchange for which market quotations are readily available are valued at the last sale price or official closing price, as applicable, on the primary market or exchange on which they trade.
Equity investments traded on a recognized exchange for which there were no sales on that day are valued at the last published sale price or at fair value.
Investments for which
valuations or market quotations are not readily available or are deemed unreliable are valued at fair value using methods determined in good faith by or at the direction of the Trustees of the Fund in a manner that
fairly reflects the security’s value, or the amount that the Fund might reasonably expect to receive for the security upon its current sale in the ordinary course. Each such determination is based on a
consideration of relevant factors, which are likely to vary from one pricing context to another. These factors may include, but are not limited to, the type of security, the existence of any contractual restrictions
on the security’s disposition, the price and extent of public trading in similar securities of the issuer or of comparable companies or entities, quotations or relevant information obtained from broker/dealers
or other market participants, information obtained from the issuer, analysts, and/or the appropriate stock exchange (for exchange-traded securities), an analysis of the company’s or entity’s financial
condition, and an evaluation of the forces that influence the issuer and the market(s) in which the security is purchased and sold.
Under generally
accepted accounting principles for fair value measurements, a three-tier hierarchy to prioritize the assumptions, referred to as inputs, is used in valuation techniques to measure fair value. The three-tier hierarchy
of inputs is summarized in the three broad levels listed below.
The three levels of
the fair value hierarchy are as follows:
|
•
|
Level 1 — Quoted prices in active markets for identical investments
|
|
•
|
Level 2 — Other significant observable inputs (including quoted prices for similar investments, interest rates, prepayment speeds, credit risk, etc.)
|
|
•
|
Level 3 — Significant unobservable inputs (including a fund’s own assumptions in determining the fair value of investments)
|
The following table
summarizes the value of the Fund’s investments according to the fair value hierarchy as of December 31, 2019.
|
Description
|
Level 1—
Quoted
Prices
|
Level 2—
Other Significant
Observable
Inputs
|
Level 3—
Significant
Unobservable
Inputs
|
Total
|
|
ASSETS:
|
|
|
|
|
|
INVESTMENTS:
|
|
|
|
|
|
Common Stock
|
$61,993,730
|
$—
|
$—
|
$61,993,730
|
The tax character of
distributions paid during the period ended December 31, 2019 were as follows:
|
Distributions paid from:
|
|
2019
|
|
Ordinary Income
|
|
$964,675
|
During the period
ended December 31, 2019, distributable earnings was decreased by $387,991 and paid-in capital was increased by $387,991. These reclassifications had no effect on the net assets or net asset value per share of the
Fund.
Syntax Stratified LargeCap ETF
Notes to Financial
Statements (continued)
December 31, 2019
Note 2—Significant Accounting Policies–(continued)
As of December 31, 2019, the components of distributable earnings (accumulated loss) on a tax basis were as follows:
|
Undistributed ordinary income
|
$70,122
|
|
Undistributed long-term capital gains
|
$0
|
|
Net unrealized appreciation
|
$9,247,211
|
The differences
between components of distributable earnings (accumulated losses) on a tax basis and the amounts reflected in the Statement of Assets and Liabilities are primarily due to wash sales.
Distributions: The
Fund declares and distributes dividends from net investment income to its holders of Shares ("Shareholders"), if any, annually. Capital gain distributions, if any, are generally declared and paid annually. Additional
distributions may be paid by the Fund to avoid imposition of federal income and excise tax on any remaining undistributed net investment income and capital gains. The amount and character of income and gains to be
distributed are determined in accordance with federal tax regulations which may differ from net investment income and realized gains recognized for U.S. GAAP purposes.
Cash: Cash consists
of cash held at the Fund’s custodian, State Street Bank and Trust Company.
Investment
Transactions and Investment Income: Investment transactions for financial statement purposes are accounted for on a trade date basis. Realized gains and losses on investments sold are determined on the basis of
identified cost. Dividend income, if any, is recorded on the ex-dividend date or, in the case of foreign securities, as soon as the Fund is informed of the ex-dividend dates, net of foreign taxes. Interest income,
including accretion of discounts and amortization of premiums, is recorded on the accrual basis commencing on the settlement date.
Non-cash dividends
received in the form of stock, if any, are recorded as dividend income at fair value. Distributions received by the Fund may include a return of capital that is estimated by the Advisor. Such amounts are recorded as a
reduction of the cost of investments or reclassified to capital gains. The Fund may invest in real estate investment trusts (“REITs”) if they are part of the index. REITs determine the characterization of
their income annually and may characterize a portion of their distributions as a return of capital or capital gain. The Fund’s policy is to record all REIT distributions as dividend income initially and
re-designate the prior calendar year’s return of capital or capital gain distributions at year end.
Organizational and
Offering costs: Syntax Advisors has agreed to pay all of the Fund’s organizational and offering costs. The organizational and offering costs are not subject to repayment to Syntax Advisors by the Fund.
Federal Income Taxes:
For U.S. federal income tax purposes, the Fund intends to qualify as a “regulated investment company” under Sub-chapter M of the Internal Revenue Code of 1986, as amended (a “RIC”), and intends
to continue to qualify as a RIC. As a RIC, the Fund will generally not be subject to U.S. federal income tax for any taxable year on income, including net capital gains, that it distributes to its Shareholders,
provided that it distributes on a timely basis at least 90% of its “investment company taxable income” determined prior to the deduction for dividends paid by the Fund (generally, its taxable income other
than net capital gain) for such taxable year. In addition, provided that the Fund distributes substantially all of its ordinary income and capital gains during each calendar year, the Fund will not be subject to U.S.
federal excise tax. Income and capital gain distributions are determined in accordance with tax regulations which may differ from U.S. GAAP. These book-tax differences are primarily due to differing treatments for
in-kind transactions, REITs and losses deferred due to wash sales. In addition, the Fund claimed a portion of the payments made to redeeming shareholders as a distribution for income tax purposes.
U.S. GAAP requires
the evaluation of tax positions taken in the course of preparing the Fund’s tax returns to determine whether the tax positions are “more-likely-than-not” to be sustained by the applicable tax
authority. For U.S. GAAP purposes, the Fund recognizes the tax benefits of uncertain tax positions only when the position is more likely than not to be sustained, assuming examination by tax authorities.
Syntax Stratified LargeCap ETF
Notes to Financial
Statements (continued)
December 31, 2019
Note 2—Significant Accounting Policies–(continued)
The Fund has reviewed its tax positions and has determined that no provision for income tax is required in the Fund’s financial statements. Generally, the Fund’s tax returns for
the prior three fiscal years remain subject to examinations by the Fund’s major tax jurisdictions, which include the United States of America, and the State of New York. The Fund recognizes interest and
penalties, if any, related to tax liabilities as income tax expense in the Statement of Operations. There were no such expenses for the period ended December 31, 2019.
No income tax returns
are currently under examination. The Advisor has analyzed the relevant tax laws and regulations and their application to the Fund’s facts and circumstances and does not believe there are any uncertain tax
positions that require recognition of any tax liabilities. Any potential tax liability is also subject to ongoing interpretation of laws by taxing authorities. The tax treatment of the Fund’s investments may
change over time based on factors including, but not limited to, new tax laws, regulations and interpretations thereof.
At December 31, 2019,
gross unrealized appreciation and gross unrealized depreciation of investment based on cost for federal income tax purposes were as follows:
|
|
Tax Cost
|
|
Gross
Unrealized
Appreciation
|
|
Gross
Unrealized
Depreciation
|
|
Net Unrealized
Appreciation
(Depreciation)
|
|
Syntax Stratified LargeCap ETF
|
$52,746,519
|
|
$10,145,508
|
|
$(898,297)
|
|
$9,247,211
|
Note 3—Investment Transactions
For the period ended
December 31, 2019, the Fund had in-kind contributions, in-kind redemptions, purchases and sales of investment securities of $53,187,940, $1,166,529, $18,578,205 and $18,294,465, respectively. Net realized gain (loss)
on investment transaction in the Statement of Operation includes net gains resulting from in-kind transactions of $449,673.
Note 4—Capital Share Transactions
The Fund will issue
or redeem capital shares to certain institutional investors (typically market makers or other broker dealers) on a continuous basis through the Distributor in large blocks of 25,000 capital shares (“Creation
Units”). Creation Unit transactions are typically conducted in exchange for the deposit or delivery of a designated portfolio of in-kind securities and/or cash constituting a substantial replication, or a
representation, of the securities included in the Syntax Stratified LargeCap Index.
Note 5—Fund Fees and Expenses
Investment Management
Fees: The Fund pays the Advisor monthly, in arrears, a unitary management fee at a rate of 0.45% of the Fund’s average daily net assets that is subject to an Expense Limitation Agreement. The Advisor provides
investment advisory, supervisory and administration services under an investment management agreement. The Advisor has agreed to waive its fees and/or absorb expenses of the Fund to ensure that Total Annual Operating
Expenses (excluding any (i) interest expense, (ii) taxes, (iii) acquired fund fees and expenses, (iv) brokerage expenses and other expenses (such as stamp taxes) connected with the execution of portfolio transactions
or in connection with creation and redemption transactions, (v) expenses associated with shareholder meetings, (vi) compensation and expenses of the Independent Trustees, (vii) compensation and expenses of the
Trust’s chief compliance officer and his or her staff, (viii) distribution fees and expenses paid by the Trust under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act, (ix) legal fees or
expenses in connection with any arbitration, litigation or pending or threatened arbitration or litigation, including any settlements in connection therewith, and (x) extraordinary expenses of the Fund) ("Excluded
Expenses") do not exceed 0.30%. In addition, the Advisor has agreed to waive its fees and/or absorb Excluded Expenses of the Fund to ensure that Total Annual Operating Expenses do not exceed 0.30%. These arrangements
cannot be terminated prior to one year from the effective date of the prospectus without the approval of the Board of Trustees. In connection with this arrangement, the Advisor has waived and reimbursed $262,321 in
expenses for the period ended
Syntax Stratified LargeCap ETF
Notes to Financial
Statements (continued)
December 31, 2019
Note 5—Fund Fees and Expenses–(continued)
December 31, 2019 and has a Receivable from the Advisor of $75,546. Subject to approval by the Fund’s Board of Trustees, any waiver and/or reimbursement under the Expense Limitation
Agreement is subject to repayment by the Fund within 36 months following the month in which fees are waived or reimbursed, if the Fund is able to make the payment without exceeding the applicable expense limitation.
At December 31, 2019, the waivers and reimbursements subject to repayment is $262,321.
Distributor,
distribution and service fees: Foreside Fund Services, LLC (“Distributor”) is the Distributor of Fund shares. The Distributor will not distribute Fund shares in less than Creation Units and does not
maintain a secondary market in Fund shares. The Distributor may enter into selected dealer agreements with other broker-dealers or other qualified financial institutions for the sale of Creation Units of Fund
shares.
The Fund has a
distribution and service plan (“Distribution Plan”) pursuant to Rule 12b-1 under the 1940 Act, to which payments at an annual rate of up to 0.25% of the Fund’s average daily net assets may be made
for the sale and distribution of its Fund shares. No payments pursuant to the Distribution Plan will be made through at least the next twelve (12) months of operations. Additionally, the implementation of any such
payments would be approved by the Board prior to implementation.
Vantage Consulting
Group, Inc. (“Vantage” or the “Sub-Adviser”) serves as the sub-adviser to the Fund and performs the day to day management of the Fund and places orders for the purchase and sale of securities
for the Fund. For its services to the Fund, the Sub-Adviser is compensated by Syntax Advisors.
Note 6—Indemnifications
In the normal course
of business, the Fund enters into contracts that contain a variety of representations and warranties which provide general indemnifications. The Fund’s maximum exposure under these arrangements is unknown, as
this would involve future claims that may be made against the Fund that have not yet occurred. However, based on experience and knowledge of management, the Fund expects the risk of loss to be remote.
Note 7—Related Party Transactions
There are no related
party transactions during the period except as previously disclosed.
Note 8—Subsequent Events
Management has
evaluated the impact of all subsequent events on the Funds through the date on which the financial statements were issued and has determined that there were no subsequent events requiring adjustment or disclosure in
the financial statements.
Note 9—Market Risk
In the normal course
of business, the Fund invests in securities and enters into transactions where risks exist due to fluctuations in the market (market risk). Due to the level of risk associated with certain investments, it is at least
reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the financial statements.
An investment in the
Fund involves risks similar to those of investing in any fund of equity securities, such as market fluctuations caused by such factors as economic and political developments, changes in interest rates and perceived
trends in stock prices. The value of a Share will increase or decline, more or less, in correlation with any increase or decline in value of the holdings of the Syntax Stratified LargeCap Index (the "Index", the
"Underlying Index"). The values of equity securities could increase or decline generally or could over or under perform other investments.
Other Risks
Syntax Stratified LargeCap ETF
Notes to Financial
Statements (continued)
December 31, 2019
Note 9—Market Risk–(continued)
Index Risk: Unlike many investment companies, the Fund does not utilize an investing strategy that seeks returns in excess of its Underlying Index. Therefore, the Fund would not necessarily
buy or sell a security unless that security is added or removed, respectively, from its Underlying Index, even if that security generally is underperforming.
Equity Risk: Equity
risk is the risk that the value of the securities that the Fund holds will fall due to general market and economic conditions, perceptions regarding the industries in which the issuers of securities the Fund holds
participate or factors relating to specific companies in which the Fund invests. For example, an adverse event, such as an unfavorable earnings report, may depress the value of securities the Fund holds; the price of
securities may be particularly sensitive to general movements in the stock market; or a drop in the stock market may depress the price of most or all of the securities the Fund holds. In addition, securities of an
issuer in the Fund’s portfolio may decline in price if the issuer fails to make anticipated dividend payments because, among other reasons, the issuer of the security experiences a decline in its financial
condition.
Non-Correlation Risk:
The Fund’s return may not match the return of its Underlying Index for a number of reasons. For example, the Fund incurs operating expenses not applicable to its Underlying Index, and incurs costs in buying and
selling securities, especially when rebalancing the Fund’s securities holdings to reflect changes in the composition of its Underlying Index. In addition, the performance of the Fund and its Underlying Index may
vary due to asset valuation differences and differences between the Fund’s portfolio and its Underlying Index resulting from legal restrictions, cost or liquidity constraints.
Report of Independent Registered
Public Accounting Firm
To the Board of Trustees of Syntax ETF
Trust and Shareholders of Syntax Stratified LargeCap ETF
Opinion on the Financial Statements
We have audited the accompanying
statement of assets and liabilities of Syntax Stratified LargeCap ETF (the “Fund”) (one of the funds constituting the
Syntax ETF Trust (the “Trust”)), including the portfolio of investments, as of December 31, 2019 and the statements
of operations and changes in net assets and the financial highlights for the period from January 2, 2019 (commencement of operations)
to December 31, 2019 and the related notes (collectively referred to as the “financial statements”) In our opinion,
the financial statements present fairly, in all material respects, the financial position of the Fund at December 31, 2019, the
results of its operations, the changes in its net assets and its financial highlights for the period from January 2, 2019 (commencement
of operations) to December 31, 2019, in conformity with U.S. generally accepted accounting principles.
Basis for Opinion
These financial statements are
the responsibility of the Trust’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 Trust 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. The Trust is not required to
have, nor were we engaged to perform, an audit of the Trust’s internal control over financial reporting. As part of our audit,
we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an
opinion on the effectiveness of the Trust’s internal control over financial reporting. Accordingly, we express no such opinion.
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 December 31, 2019, through correspondence with the custodian. 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 Syntax investment companies since 2018.
Boston, Massachusetts
February 26, 2020
Syntax Stratified LargeCap ETF
Other Information
December 31, 2019
(Unaudited)
Federal Tax Information
(Unaudited)
The Form 1099-DIV you
received in February 2019 showed the tax status of all distributions paid to your account in calendar year 2019. Shareholders are advised to consult their own tax adviser with respect to the tax consequences of their
investment in the Fund. As required by the Internal Revenue Code and/or regulations, shareholders must be notified regarding the status of qualified dividend income for individuals and the dividends received deduction
for corporations.
Qualified Dividend
Income: For the fiscal year ended December 31, 2019, the Fund designates approximately $1,062,279, or up to the maximum amount of such dividends allowable pursuant to the Internal Revenue Code, as
qualified dividend income eligible for the reduced tax rate of 15%.
Dividends Received
Deduction: Corporate shareholders are generally entitled to take the dividends received deduction on the portion of the Fund’s dividend distribution that qualifies under tax law. For the
Fund’s fiscal 2019 ordinary income dividends, 96.25% qualifies for the corporate dividends received deduction.
Syntax Stratified LargeCap ETF
Other
Information (continued)
December 31, 2019
(Unaudited)
Expense Example
As a shareholder of
the Fund, you incur two types of costs: (1) transaction costs, including brokerage commissions on purchases and sales of Fund shares and (2) ongoing costs, including advisory fees and to the extent applicable,
distribution (12b-1) and/or service fees; and other Fund expenses. This example is intended to help you understand your ongoing costs (in dollars) of investing in the Fund and to compare these costs with the ongoing
costs of investing in other mutual funds. It is based on an investment of $1,000 made at the beginning of the period shown and held for the entire period from July 01, 2019 to December 31, 2019.
The table below
illustrates your Fund’s cost in two ways:
Based on actual fund
return ——This section helps you to estimate the actual expenses that you paid over the period. The “Ending Account Value” shown is derived from each Fund’s actual
return, and the third column shows the dollar amount that would have been paid by an investor who started with $1,000 in the Fund. You may use the information here, together with the amount you invested, to estimate
the expenses that you paid over the period. To do so, 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 given for the
Fund under the heading “Expenses Paid During Period”.
Based on hypothetical
5% return ——This section is intended to help you compare your Fund’s costs with those of other mutual funds. It assumes that the Funds had a yearly return of 5% before expenses,
but that the expense ratio is unchanged. In this case, because the return used is not the Fund’s actual return, the results do not apply to your investment. The example is useful in making comparisons because
the SEC requires all mutual funds to calculate expenses based on a 5% return. You can assess your Fund’s costs by comparing this hypothetical example with the hypothetical examples that appear in shareholder
reports of other funds.
Please note that the
expenses shown in the table are meant to highlight your ongoing costs only and do not reflect any transaction costs, such as brokerage commissions on purchases and sales of Fund shares. Therefore, the hypothetical 5%
return section 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 transaction costs were included, your
costs would have been higher.
|
|
Actual
|
|
Hypothetical (assuming a 5%
return before expenses)
|
|
|
|
Annualized
Expense Ratio
|
|
Ending Account
Value
|
|
Expenses Paid
During Period
|
|
Ending Account
Value
|
|
Expenses Paid
During Period
|
|
Syntax Stratified LargeCap ETF
|
0.30%
|
|
$1,086.90
|
|
$1.58
|
|
$1,023.70
|
|
$1.53
|
Syntax Stratified LargeCap ETF
Other
Information (continued)
December 31, 2019
(Unaudited)
Premium/Discount
Information
Information regarding
how often the Shares of each Fund traded on the exchange at a price above (i.e., at a premium) or below (i.e., at a discount) the NAV of the Fund during the past calendar year can be found at
www.syntaxadvisors.com.
Proxy Voting Policies
and Procedures and Records
A description of the
Fund's proxy voting policies and procedures that are used by the Fund's investment adviser to vote proxies relating to the Fund's portfolio of securities are available (i) without charge, upon request by calling
1-866-972-4492 (toll free) or (ii) on the SEC’s website at www.sec.gov. Information regarding how the investment adviser voted for the 12-month period ended June 30, is available by August 31 of each year by
calling the same number, on the SEC’s website at www.sec.gov, and on the Fund's website at www.syntaxadvisors.com.
Quarterly Portfolio
Schedule
Following the Fund's
first and third fiscal quarter-ends, a complete schedule of investments is filed with the SEC as an exhibit on Form N-Q, which can be found on the SEC’s website at www.sec.gov. The Fund's schedule of investments
are available upon request, without charge, by calling 1-866-972-4492 (toll free) and on the Funds’ website at www.syntaxadvisors.com.
Other information
regarding the Fund is available on the Fund’s website at www.syntaxadvisors.com as well as on the website of the Securities and Exchange Commission at www.sec.gov.
Syntax Stratified LargeCap ETF
Other
Information (continued)
December 31, 2019
(Unaudited)
Approval of Investment
Advisory and Sub-Advisory Agreements
At an in-person
meeting held prior to December 31, 2019, the Board of Trustees of the Trust (the “Board”) evaluated proposals under the same terms and conditions of the original advisory agreement”) the Investment
Advisory Agreement and Sub-Advisory Agreement (the “Agreements”) between the Trust and Syntax Advisors, LLC (the “Adviser” or “Syntax”) and Vantage Consulting Group Inc. (the
“Sub-Adviser”) with respect to new Series of the Trust: the Syntax Stratified MidCap ETF and the Syntax Stratified SmallCap ETF (collectively, the “New Syntax ETFs”). The Trustees who are not
“interested persons” of the Trust within the meaning of the Investment Company Act of 1940, as amended (the “Independent Trustees”), also met separately to consider the Agreement. The
Independent Trustees were advised by legal counsel throughout the process.
To evaluate the
Agreements, the Board requested and received, such materials as the Board, with the advice of counsel, deemed reasonably necessary. In deciding whether to approve the Agreement, the Board considered various factors,
including the (i) nature, extent and quality of services provided by the Adviser with respect to the Syntax ETFs under the Agreement, (ii) investment performance of the Syntax ETFs, (iii) profits realized by the
Adviser and its affiliates from its relationship with the Trust, (iv) fees charged to comparable funds, (v) other benefits to the Adviser, and (vi) extent to which economies of scale would be shared as the New Syntax
ETFs grow.
Nature, Extent and
Quality of the Services to be Provided. The Trustees considered the nature, extent and quality of the services expected to be provided by the Adviser and Sub-Adviser. In particular, the Trustees considered the proposed
investment strategies and approach for the New Syntax ETFs; the experience, capability and integrity of Syntax’s senior management; the financial resources of Syntax; Syntax’s management oversight process;
the continuous and regular portfolio management services to be provided by Vantage; the experience of Vantage with the proposed investment strategies; and the professional qualifications and experience of
Vantage’s portfolio management team. The Trustees also considered the advisory and other services to be provided by Syntax.
Based on these and
other considerations, the Trustees determined that Syntax and Vantage can provide investment and related services that are appropriate in scope and extent in light of the proposed investment programs for the New
Syntax ETFs.
Investment
Performance. The Trustees considered Vantage’s past performance, investment advisory experience, capabilities and resources. The Trustees recognized that not all New Syntax ETF strategies are yet
in existence and therefore had no historical performance as ETFs for the Trustees to review. However, the Trustees considered the performance history of Syntax Stratified LargeCap ETF and the historical performance of
the MidCap LPs, which employed the same Stratified Weight methodology as the Syntax Stratified MidCap ETF, and they considered Syntax’s representation of simulated back-tested performance for the Syntax
Stratified SmallCap Index. On the basis of this information and the Trustees’ assessment of the nature, extent and quality of the services to be provided by Syntax and Vantage, the Trustees concluded that
Vantage is capable of generating a level of investment performance that is appropriate in light of the New Syntax ETFs’ proposed investment objectives, policies and strategies.
Advisory and
Sub-Advisory Fees and Total Expense Ratio. The Trustees considered the proposed unitary fee and anticipated total expense ratios of the New Syntax ETFs, including information comparing the advisory fees and total expense ratios of
the New Syntax ETFs to the investment advisory fees and total expense ratios of comparable investment companies in their respective peer universes. The Trustees also considered the fee to be charged by Vantage for
sub-advisory services. The Trustees further noted that Syntax proposed to enter into an expense limitation arrangement with the New Syntax ETFs, which could result in Syntax waiving fees for the benefit of
shareholders. On the basis of these and other considerations, together with the other information it considered, the Trustees determined that the advisory and sub-advisory fees to be received by Syntax and Vantage
under the agreements are reasonable in light of the services to be provided.
Syntax Stratified LargeCap ETF
Other
Information (continued)
December 31, 2019
(Unaudited)
Cost of Services to be
Provided and Profitability. The Trustees noted that the New Syntax ETFs were not yet in existence and therefore no revenue, cost or profitability data was available for the Board to review. However, the Trustees
considered comparable information for the operational Syntax Stratified LargeCap ETF and the nature of the unitary fee structure under which the Advisor pays most other service provider fees out of its management fee
for the New Syntax ETFs. They reviewed projected profitability information provided by Syntax regarding its costs of procuring advisory services as well as the costs of providing administration, transfer agency and
other services to the New Syntax ETFs. Based on this information, the Trustees determined that the profitability of Syntax and its affiliates from their relationships with the New Syntax ETFs was not anticipated to be
excessive.
Economies of Scale.
In evaluating the extent to which the proposed fees payable under the New Syntax ETFs’ Agreements reflected economies of scale or would permit economies of scale to be realized in the
future, the Trustees noted that they would have the opportunity to periodically reexamine the appropriateness of the advisory fees payable by the New Syntax ETFs to Syntax, and the sub-advisory fees payable by Syntax
to Vantage, in light of any economies of scale experienced in the future.
Fall-Out
Benefits. The Trustees considered any other benefits expected to be derived by Syntax, its affiliates, and/or Vantage from their relationships with the New Syntax ETFs. No such benefits were
expected. The Trustees noted that they would have the opportunity in the future to review the benefits over time.
Other Considerations.
The Trustees considered the investment objectives of the New Syntax ETFs and noted that Syntax believes that the New Syntax ETFs would enhance Syntax’s ETF product offerings. The
Trustees noted that Syntax has made a commitment to the recruitment and retention of quality personnel, and maintains the financial, compliance and operational resources reasonably necessary to manage the New Syntax
ETFs in a professional manner that is consistent with the best interests of the New Syntax ETFs and their shareholders. In this regard, the Trustees favorably considered Syntax’s procedures and policies to
enforce compliance and oversee the portfolio management activities of Vantage.
Conclusion. After consideration of the factors described above, none of which was dispositive in and of itself and may have been weighed differently by each Trustee, as well as other secondary
factors, the Trustees, including all of the Independent Trustees, concluded that the approval of the New Syntax ETFs’ Agreements would be in the best interests of the New Syntax ETFs and their respective
shareholders and unanimously approved the New Syntax ETFs’ Agreements.
TRUSTEES AND OFFICERS OF THE TRUST
TRUSTEES
|
NAME, ADDRESS
AND YEAR OF BIRTH
|
POSITION(S)
WITH TRUST
|
TERM OF OFFICE
AND LENGTH
OF TIME SERVED
|
PRINCIPAL
OCCUPATION(S)
DURING PAST 5 YEARS
|
NUMBER OF
PORTFOLIOS
IN FUND
COMPLEX
OVERSEEN BY
TRUSTEE
|
OTHER
DIRECTORSHIPS
HELD BY
TRUSTEE DURING
THE LAST 5 YEARS
|
|
Independent Trustees
|
|
|
|
|
|
Deborah Fuhr
(1959)
|
Independent Trustee
|
Term: Unlimited Trustee since 2018
|
Co-Founder and Managing Partner, ETFGI LLP (research and consulting) (2012 to present);
|
3
|
Co-Founder and Board Member, Women in ETFs (Not for Profit) (2014 to present); Co- founder and Board Member, Women in ETFs Europe Limited (Educational Association) (2015 to present); Director and Board Member, 2 Culford Gardens RTM (Property) (2011 to present); Director and Board Member (2 Culford Gardens Freehold (Property) (2011 to present)
|
|
George Hornig
(1954)
|
Independent Trustee and Chairman of the Audit Committee
|
Term: Unlimited Trustee since 2018
|
Managing Member, George Hornig, LLC (2017 to present)
(investments); Senior Managing Director and Chief Operating Officer, Pinebridge Investments (investment adviser) (2010 to 2016).
|
3
|
Director, Forrester
Research, Inc. (technology research company) (1996 to 2018); Director, Daniel J. Edelman Holding (2016 to present)
(communications marketing firm); Director, Xometry (advanced manufacturing platform business) (2014 to present); Director,
KBL Merger Corp IV (2017 to present) (healthcare).
|
|
Richard Lyons
(1961)
|
Lead Independent Trustee and Chairman of the Nominating and Governance Committee
|
Term: Unlimited Trustee since 2018
|
Chief Innovation and Entrepreneurship
Officer, UC Berkeley (since 2020); Professor and William & Janet Cronk Chair in Innovative Leadership (2019), Dean (2008-
19), Haas School of Business, UC Berkeley;, Haas School of Business, UC Berkeley; Chief Learning Officer (2006 to 2008),
Goldman Sachs (investment banking and investment management); Executive Associate Dean (2005 to 2006), Acting Dean (2004 to
2005), Professor (2000 to 2004), Associate Professor (1996 to 2000), Assistant Professor (1993 to 1996), Haas School of
Business, UC Berkeley.
|
3
|
Director (2013 to 2016), Matthews A Share
Selections Fund, LLC (mutual funds).
|
|
Stewart Myers
(1940)
|
Independent Trustee
|
Term: Unlimited Trustee since 2018
|
Professor, MIT Sloan School of Management (since 2015); Principal, The Brattle Group, Inc. (since 1991).
|
3
|
Director, Entergy Corp. (2009 to 2015).
|
|
Interested
Trustees
|
|
|
|
|
|
|
Rory Riggs
(1953)
|
Trustee and Chief Executive Officer
|
Term: Unlimited Trustee since 2017
|
Founder and Chief Executive Officer,
Locus Analytics, LLC (since 2010); Founder and Chief Executive Officer, Syntax Advisors, LLC (Since 2013); Chief Executive Officer
and Founder of Syntax LLC (Since 2009).
|
3
|
Managing Member of Balfour, LLC (since 2001); Board Member, Nuredis, Inc. (2016 to present); Co-founder and Chairman, RP Management, LLC Chairman and co- founder, Royalty Pharma (1996 to present) (biopharmaceuticals); Chairman and Co- Founder, Cibus Global, Ltd. (2012 to present) (gene editing agriculture); Director GeneNews Limited (2000 to present); Director, Intra-Cellular Therapies, Inc. (since 2014); Director, FibroGen, Inc. (1993 to present).
|
|
Kathy Cuocolo
(1952)
|
Trustee and President
|
Term: Unlimited Trustee since 2018
|
President and Senior Vice President,
Syntax Advisors, LLC and predecessor companies (2014 to present); Managing Director, Head of Global ETF Services, BNY Mellon (2008
to 2013); Executive Vice President, State Street (1982 to 2003).
|
3
|
Greenbacker Renewable Energy LLC,
Audit Chair (2013 to present); Guardian Life Family of Funds (2005 – 2007); Select Sector Trust, Chairman (2000 to 2007);
The China Fund (1999 to 2003).
|
The Statement of Additional Information contains
further information about the trustees and is available without charge upon your request by calling (866) 972-4492 (toll-free)
or by visiting www.syntaxadvisors.com.
OFFICERS
NAME, ADDRESS
AND YEAR OF BIRTH
|
POSITION(S)
WITH TRUST
|
TERM OF
OFFICE
AND LENGTH
OF TIME
SERVED
|
PRINCIPAL
OCCUPATION(S)
DURING PAST 5 YEARS
|
|
OFFICERS
|
|
|
|
Rory Riggs
(1953)
|
Chief Executive
|
Since 2018
|
See Trustee table above
|
|
Kathy Cuocolo
(1952)
|
President
|
Since 2018
|
See Trustee table above
|
|
David Jaffin
(1954)
|
Treasurer
|
Since 2019
|
Partner, B2B CFO®
(January 2019 to present); Chief Financial Officer, Poliwogg Holdings, Inc. (October 2012 to August 2018).
|
|
Carly Arison
(1990)
|
Secretary
|
Since 2018
|
Senior Vice President Vice President, and Manager,, Syntax
Advisors, LLC and predecessor companies
(2012 to present)
|
|
Brandon Kipp
(1983)
|
Chief Compliance Officer
|
Since 2019
|
Director, Foreside Financial Group, LLC (since May 2019); Senior Fund Compliance Officer, Ultimus Fund Solutions, LLC (from July 2017 to May 2019); Assistant Vice President and Compliance Manager, UMB Fund Services, Inc. (March 2014 to July 2017).
|
Syntax Stratified LargeCap ETF
(Unaudited)
Fund Advisor
Syntax Advisors,
LLC
One Liberty Plaza 46th FI.
New York, NY 10006
Administrator, Custodian and Transfer Agent
State Street Bank and
Trust Company
One Lincoln Street
Boston, MA 02111
Distributor
Foreside Fund
Services, LLC
Three Canal Plaza, Suite 100
Portland, ME 04101
Independent Registered Public Accounting Firm
Ernst & Young
LLP
200 Clarendon Street
Boston, MA 02116