Reality Shares DIVCON Dividend Defender ETF

C000162447 Fund Overview

Reality Shares DIVCON Dividend Defender ETF is a US ETF managed by Reality Shares ETF Trust, categorised as Global (incl. US) Value Equity. ABC INVEST provides holdings, performance, costs, cashflows, risk data, prospectus documents and SEC filings, sourced from SEC filings.

• Type: US ETF
• Manager: Reality Shares ETF Trust
• Category: Global (incl. US) Value Equity
• Assets under management: $47.69M
• SEC CIK: 0001573496
• SEC series ID: S000051646
• Share class ID: C000162447

C000162447 Investment Objective and Strategy

Reality Shares DIVCON Dividend Defender ETF describes its objective and strategy as follows, from its latest prospectus filed with the SEC by Reality Shares ETF Trust.

Investment objective

The investment objective of the Reality Shares DIVCON Dividend Defender ETF (the Fund) is to seek long-term capital appreciation by tracking the performance, before fees and expenses, of the Reality Shares DIVCON Dividend Defender Index (the Benchmark Index).

Principal investment strategy

The Fund seeks to track the performance, before fees and expenses, of the Benchmark Index. The Benchmark Index was developed by Reality Shares, Inc. (Reality Shares), the parent company of the Adviser. The Benchmark Index is designed to capitalize on the theory that, over time, companies that consistently grow their dividends tend to have investment returns above overall market returns (each a Dividend Grower or High Quality Company), and companies that do not grow (or cut) their dividends tend to have investment returns below overall market returns (each a Dividend Cutter or Low Quality Company). The Benchmark Index is designed to select the companies for a long position that have the highest probability of increasing their dividend in a 12-month period, the High Quality Dividend Growers, and select the companies for a short position that have the highest probability of decreasing their dividend in a 12-month period, the Low Quality Dividend Cutters.

These Dividend Growers and Dividend Cutters (or High Quality Companies and Low Quality Companies) are determined by Reality Shares' DIVCON Dividend Health Scoring system, which is a proprietary, rules-based scoring and weighting methodology, and are chosen based on a ranking of each company as determined by its DIVCON Score and DIVCON Rating. The DIVCON Dividend Health Scoring system begins by identifying the 500 largest U.S. companies based on market capitalization as of the Benchmark Index reconstitution date and then narrows this universe to those companies that paid an ordinary dividend and announced a future dividend payment during the 12 months preceding such date. The DIVCON Dividend Health Scoring system analyzes seven quantitative factors that Reality Shares has determined to be correlated to a company's likelihood to increase or decrease future dividends, and weights each factor based on its effectiveness in predicting dividend changes to produce a company's DIVCON Score.

After a DIVCON Score is calculated for each company, it is assigned a rating from 1 to 5 according to the DIVCON Rating system: DIVCON 1, DIVCON 2, DIVCON 3, DIVCON 4 and DIVCON 5. Companies in the DIVCON 1 category are those determined most likely to decrease their dividend in the next twelve months. Companies in the DIVCON 5 category are those determined most likely to increase their dividend in the next twelve months. The Benchmark Index consists of a Long Portfolio and a Short Portfolio (together a Long/Short Portfolio). This Long/Short Portfolio seeks to provide more stable investment returns with lower volatility and lower equity market correlation than a long-only portfolio. The Long Portfolio consists of all DIVCON 5 stocks or the 30 stocks with the highest DIVCON Scores, whichever is greater.

All stocks in the Long Portfolio are reflected as long positions in such stocks. The value of the Long Portfolio reflected in the Benchmark Index is expected to increase if the prices of stocks included in the Long Portfolio increase. The Short Portfolio consists of all DIVCON 1 stocks or the 10 stocks with the lowest DIVCON Scores, whichever is greater. All stocks in the Short Portfolio are reflected as short positions in such stocks. The value of the Short Portfolio reflected in the Benchmark Index is expected to increase if the prices of stocks included in the Short Portfolio decrease. Companies are weighted in each Portfolio based on their DIVCON Scores. Companies with higher DIVCON Scores are weighted more heavily in the Long Portfolio, and companies with lower DIVCON Scores are weighted more heavily in the Short Portfolio.

The Benchmark Index will direct approximately 75% exposure to the Long Portfolio and approximately 25% exposure to the Short Portfolio. The Benchmark Index is rebalanced at the end of any calendar quarter if the value of the Short Portfolio has increased 10% or more from the last rebalancing date. The Benchmark Index also is rebalanced if the value of either the sum of or difference between the Long Portfolio and Short Portfolio changes in an amount greater than predetermined levels, effective the next business day. The Benchmark Index is reconstituted annually on the first Friday in December. As of December 30, 2017, the market capitalizations of the 500 largest U.S. companies included in the DIVCON Scoring System ranged from $3.42 billion to $860.88 billion. The Adviser employs a passive indexing investment approach.

Under normal circumstances, at least 80% of the Fund's assets (other than collateral held from securities lending, if any) will be invested in component securities of the Benchmark Index. The Fund generally uses a replication strategy to achieve its investment objective, meaning that it will invest in all of the securities included in the Benchmark Index. The Fund may, however, use a representative sampling approach to achieve its investment objective when the Adviser believes it is in the best interest of the Fund, meaning that the Fund may invest in a subset, or sample, of the securities included in the Benchmark Index and whose risk, return and performance characteristics generally match the risk, return and performance characteristics of the Benchmark Index as a whole. The Fund reserves the right to invest up to 20% of its assets in swaps, futures, forwards, options, exchange traded funds (ETFs) and other securities that are not components of the Benchmark Index that the Adviser believes will help the Fund track the Benchmark Index.

The Fund seeks to remain fully invested at all times in securities and or financial instruments that, in combination, provide exposure to the Benchmark Index without regard to market conditions, trends or direction. The Fund is considered to be non-diversified under the Investment Company Act of 1940, as amended, and may invest in fewer instruments or in the securities of fewer issuers than a diversified fund. To the extent the Benchmark Index has significant exposure to a particular sector or is concentrated in a particular industry, the Fund will necessarily have significant exposure to that sector or be concentrated in that industry. As of the date of this Prospectus, the Fund anticipates that it may have significant exposure to the Consumer Discretionary Sector, Energy Sector, Industrials Sector, and Information Technology Sector, as each sector is defined by the Global Industry Classification Standard, a widely recognized industry classification methodology developed by MSCI, Inc.

and Standard & Poor's Financial Services LLC.

C000162447 Costs and Fees

C000162447 costs about $144 per $10,000 invested per year in fund expenses.

• Net expense ratio: 1.44%
• Gross expense ratio: 1.44%
• Portfolio turnover: 57%
• Brokerage commissions: 1.72 bps of average net assets (SEC N-CEN)

C000162447 Cashflows

Over the 12 months to 2020-10, Reality Shares DIVCON Dividend Defender ETF had net inflows of $82.27M, from monthly SEC N-PORT filings.

C000162447 Debt Constituents

No individual debt constituents are reported in Reality Shares DIVCON Dividend Defender ETF's latest SEC N-PORT filing.

C000162447 Prospectus and SEC Filings

Official Reality Shares DIVCON Dividend Defender ETF filings on SEC EDGAR — prospectus, portfolio holdings and annual reports.

• Prospectus (485BPOS) — filed 2020-03-20
• Prospectus (485BPOS) — filed 2019-03-19
• Prospectus (485BPOS) — filed 2018-03-14
• Portfolio holdings (N-PORT) — filed 2020-12-22
• Portfolio holdings (N-PORT) — filed 2020-09-25
• Portfolio holdings (N-PORT) — filed 2020-06-23
• Annual census (N-CEN) — filed 2021-01-12
• Annual census (N-CEN) — filed 2020-01-10

Related Funds

Other Global (incl. US) Value Equity funds tracked on ABC INVEST:

• FPA U.S. Value Fund, Inc. (FPPFX)
• ICON Consumer Discretionary Fund (ICCCX)
• ICON Industrials Fund (ICTRX)
• Gabelli RBI Fund (GRBIX)
• Gabelli RBI NextShares (GRBIC)

Data Sources

ABC INVEST compiles this page from public filings made to the U.S. Securities and Exchange Commission (SEC) through EDGAR: portfolio holdings and monthly cashflows from Form N-PORT, expenses and returns from fund prospectuses (Form 485BPOS) and the SEC DERA Risk/Return Summary data sets, annual data from Form N-CEN, and shareholder reports from Form N-CSR.