UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM N-CSR
CERTIFIED SHAREHOLDER REPORT OF REGISTERED
MANAGEMENT INVESTMENT COMPANIES
Investment
Company Act file number: 811-23895
THE
2023 ETF SERIES TRUST II
(exact name of registrant as specified in charter)
The 2023 ETF Series Trust II
c/o Foreside Management Services, LLC
Three Canal Plaza, Suite 100
Portland,
Maine 04101
(Address of principal executive offices) (Zip code)
The Corporation Trust Company
1209 Orange Street
Wilmington,
Delaware 19801
(Name and address of agent for service)
Registrant’s telephone number, including area code: (614) 416-9058
Date of fiscal year end: June
30
Date of reporting period: June 30, 2024
Item 1. Report to Shareholders.
|
(a) |
The following is a copy of the report transmitted to stockholders pursuant to Rule 30e-1 under the Investment
Company Act of 1940, as amended (the “1940 Act”): |
0001981627falseN-CSR2023 ETF Series Trust IIN-1A2024-06-300001981627gmo:C000246461Member2023-11-132024-06-3000019816272023-07-012024-06-300001981627gmo:GMOIndexSP500Index5680BroadBasedIndexMember2023-11-132024-06-300001981627gmo:GMOIndexSP500Index5680BroadBasedIndexMember2023-11-130001981627gmo:GMOIndexSP500Index5680BroadBasedIndexMember2023-11-300001981627gmo:GMOIndexSP500Index5680BroadBasedIndexMember2023-12-310001981627gmo:GMOIndexSP500Index5680BroadBasedIndexMember2024-01-310001981627gmo:GMOIndexSP500Index5680BroadBasedIndexMember2024-02-290001981627gmo:GMOIndexSP500Index5680BroadBasedIndexMember2024-03-310001981627gmo:GMOIndexSP500Index5680BroadBasedIndexMember2024-04-300001981627gmo:GMOIndexSP500Index5680BroadBasedIndexMember2024-05-310001981627gmo:GMOIndexSP500Index5680BroadBasedIndexMember2024-06-300001981627gmo:C000246461Memberoef:WithoutSalesLoadMember2023-11-132024-06-300001981627gmo:C000246461Member2024-06-300001981627gmo:C000246461Membergmo:SoftwareServicesSectorMember2024-06-300001981627gmo:C000246461Membergmo:HealthCareEquipmentServicesSectorMember2024-06-300001981627gmo:C000246461Membergmo:PharmaceuticalsBiotechnologyLifeSciencesSectorMember2024-06-300001981627gmo:C000246461Membergmo:MediaEntertainmentSectorMember2024-06-300001981627gmo:C000246461Membergmo:FoodBeverageTobaccoSectorMember2024-06-300001981627gmo:C000246461Membergmo:ConsumerDiscretionaryDistributionRetailSectorMember2024-06-300001981627gmo:C000246461Membergmo:TechnologyHardwareEquipmentSectorMember2024-06-300001981627gmo:C000246461Membergmo:CapitalGoodsSectorMember2024-06-300001981627gmo:C000246461Membergmo:BanksSectorMember2024-06-300001981627gmo:C000246461Membergmo:ConsumerServicesSectorMember2024-06-300001981627gmo:C000246461Memberus-gaap:FinancialServicesSectorMember2024-06-300001981627gmo:C000246461Membergmo:HouseholdPersonalProductsSectorMember2024-06-300001981627gmo:C000246461Membergmo:ShortMinustermInvestmentsSectorMember2024-06-30iso4217:USDxbrli:sharesiso4217:USDxbrli:sharesxbrli:pureutr:Dgmo:Holding
Ticker: QLTY; Exchange: New York Stock Exchange Arca, Inc.
Annual Shareholder Report - June 30, 2024
This annual shareholder report contains important information about GMO U.S. Quality ETF for the period of November 14, 2023 to June 30, 2024. You can find additional information about the Fund at https://www.gmo.com/americas/etf-documents/. You can also request this information by contacting us at (844) 761-1102 (collect).
What were the Fund costs for the last year?
(based on a hypothetical $10,000 investment)
Fund Name | Costs of a $10,000 investmentFootnote Reference* | Costs paid as a percentage of a $10,000 investment |
|---|
GMO U.S. Quality ETF | $35 | 0.50% |
| Footnote | Description |
Footnote* | For the period November 14, 2023 (commencement of operations) through June 30, 2024. The costs would have been higher had the Fund operated the full year. |
How did the Fund perform last year and what affected its performance?
Although Grantham, Mayo, Van Otterloo & Co. LLC (GMO) does not manage the Fund to, or control the Fund’s risk relative to, any securities index or securities benchmark, a discussion of the Fund’s performance relative to the S&P 500 Index is included for comparative purposes.
The GMO U.S. Quality ETF returned +24.62% (net) at net asset value (NAV) for the period from commencement of operations on November 14, 2023, until the end of the fiscal year on June 30, 2024, as compared with +24.97% for the S&P 500 Index.
Relative to the S&P 500, sector allocation added some value. The Energy (underweight) and Information Technology (overweight) allocations helped returns while Health Care (overweight) and Consumer Staples (overweight) reduced returns. Security selection within sector made little impact on returns. Selection results in Industrials and Consumer Discretionary helped returns. Information Technology and Consumer Staples detracted from returns. Sector allocation was more significant than stock selection.
General Electric, KLA, and Lam Research made the largest positive impact while NVIDIA, UnitedHealth, and Accenture detracted.
The views expressed herein are exclusively those of Grantham, Mayo, Van Otterloo & Co. LLC as of the date of this report and are subject to change. GMO disclaims any responsibility to update such views. They are not meant as investment advice. References to specific securities are not recommendations of such securities and may not be representative of any GMO portfolio’s current or future investments. All information is unaudited.
Change in Value of a $10,000 Investment
| GMO U.S. Quality ETF at NAV | S&P 500 Index |
|---|
11/14/23 | $10,000 | $10,000 |
11/30/2023 | $10,322 | $10,368 |
12/31/2023 | $10,665 | $10,839 |
1/31/2024 | $10,997 | $11,021 |
2/29/2024 | $11,632 | $11,610 |
3/31/2024 | $11,921 | $11,983 |
4/30/2024 | $11,523 | $11,493 |
5/31/2024 | $11,882 | $12,064 |
6/30/2024 | $12,462 | $12,497 |
Performance data quoted represents past performance and is not indicative of future results. The investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance data may be lower or higher than the performance data provided herein. All information is unaudited.
For S&P disclaimers please visit https://www.gmo.com/north-america/benchmark-disclaimers/
The Fund’s expense ratio of 0.50% is equal to the Total annual Fund operating expense as set forth in the Fund’s most recent Prospectus dated October 30, 2023.
Average Annual Total Returns (%)
| Since 11/14/23
(commencement of operations)Footnote Reference* |
|---|
GMO U.S. Quality ETF at NAV | 24.62% |
GMO U.S. Quality ETF at Market Price | 23.29% |
S&P 500 Index | 24.97% |
| Footnote | Description |
Footnote* | The NAV and S&P 500 returns are calculated using the start of day values on November 14, 2023. |
The Fund’s past performance is not a good predictor of the Fund’s future performance. The returns do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
Total Net Assets | $830,803,355 |
# of Portfolio Holdings | 36 |
Portfolio Turnover Rate | 7% |
Total Advisory Fees Paid | $1,110,538 |
What does the Fund invest in?
The Fund invested primarily in U.S. equity securities. Below is the Fund's industry group summary shown as a percentage of the Fund's investments.
Software & Services | 16.8 |
Health Care Equipment & Services | 14.8 |
Semiconductors & Semiconductor Equipment | 13.1 |
Pharmaceuticals, Biotechnology & Life Sciences | 9.6 |
Media & Entertainment | 9.0 |
Food, Beverage & Tobacco | 6.8 |
Consumer Discretionary Distribution & Retail | 5.2 |
Technology Hardware & Equipment | 5.1 |
Capital Goods | 5.0 |
Banks | 4.2 |
Consumer Services | 4.1 |
Financial Services | 2.9 |
Household & Personal Products | 2.8 |
Short-term Investments | 0.6 |
Total | 100.0 |
The Fund is distributed by Foreside Fund Services LLC. GMO and Foreside Fund Services LLC are not affiliated.
An investor should consider the Fund's investment objectives, risks, charges and expenses before investing. This and other important information can be found in the Fund's prospectus. To obtain a prospectus please visit www.gmo.com. Read the prospectus carefully before investing.
For additional information about the Fund, including the Fund's prospectus, financial statements, quarterly portfolio holdings and proxy voting information, please visit https://www.gmo.com/americas/etf-documents/ or scan the QR code.
Annual Shareholder Report June 30, 2024
Item 2. Code of Ethics.
|
(a) |
The Registrant, as of the end of the period covered by the report, has adopted a code of ethics that applies
to the Registrant's principal executive officer, principal financial officer, principal accounting officer or controller or any persons
performing similar functions on behalf of the Registrant. |
|
(b) |
No disclosures are required by this Item 2(b). |
|
(c) |
During the period covered by this report, no amendments were made to the provisions of the code of ethics
adopted in 2(a) above. |
|
(d) |
During the period covered by this report, no implicit or explicit waivers to the provisions of the code of
ethics adopted in 2(a) above were granted. |
|
(f) |
The Registrant's Code of Ethics is attached as an Exhibit hereto. |
Item 3. Audit Committee Financial Expert.
|
(a)(1) |
The Registrant’s board of trustees has determined that the Registrant has at least one audit committee
financial expert serving on the audit committee |
|
(a)(2) |
The audit committee financial expert is Joan Binstock who is independent as defined in Form N-CSR Item 3(a)(2). |
Item 4. Principal Accountant Fees and Services.
Audit Fees
| |
Current Fiscal Year (1) |
| (a) Audit
Fees |
$64,000 |
| (b) Audit-Related
Fees |
$ - |
| (c) Tax
Fees(2) |
$12,100 |
| (d) All
Other Fees |
$ - |
(1) No fees were required to be
approved pursuant to paragraph (c)(7)(ii) of Rule 2-01 of Regulation S-X during the current fiscal year.
(2) The nature of the services
includes tax compliance, tax advice and tax planning.
|
(a) |
The aggregate fees billed for each of the last two fiscal years for professional services rendered
by the principal accountant for the audit of the registrant's annual financial statements or services that are normally provided by
the accountant in connection with statutory and regulatory filings or engagements for those fiscal years are $64,000 for 2024 and $0
for 2023. |
Audit-Related
Fees
|
(b) |
The aggregate fees billed in each of the last two fiscal years for assurance and related services by the principal
accountant that are reasonably related to the performance of the audit of the Registrant’s financial statements and are not reported
under paragraph (a) of this Item were $0 for 2024 and $0 for 2023. |
Tax Fees
|
(c) |
The aggregate fees billed in each of the last two fiscal years for professional services rendered by the principal
accountant for tax compliance, tax advice, and tax planning are $12,100 for 2024 and $0 for 2023. Services for which fees in the Tax Fees
category are billed include PricewaterhouseCoopers LLP’s (“PwC”) review of the registrant’s U.S. federal income
tax returns and the required state corporate income tax returns, as well as PwC’s review of excise tax distribution calculations
and identification and analyzation of the passive foreign investment company status of foreign corporate equities. |
All Other
Fees
|
(d) |
The aggregate fees billed in each of the last two fiscal years for products and services provided by the principal
accountant, other than the services reported in paragraphs (a) through (c) of this item are $0 for 2024 and $0 for 2023. |
|
(e)(1) |
Audit Committee’s pre-approval policies and procedures described in paragraph (c)(7) of Rule 2-01 of
Regulation S-X. |
All services to be performed by the Registrant's
principal auditors must be pre-approved by the Registrant's audit committee.
|
(e)(2) |
No services described in paragraphs (b) through (d) were approved pursuant to paragraph (c)(7)(i)(C) of Rule
2-01 of Regulation S-X. |
|
(g) |
The aggregate non-audit fees billed by the Registrant’s principal accountant for the last two fiscal
years was $449,890 for 2024 and $0 for 2023. |
Item 5. Audit Committee of Listed Registrants.
Item 6. Investments.
|
(a) |
The Schedule of Investments is included as part of the Report to Shareholders filed under Item 7(a) of this Form. |
Item 7. Financial Statements and Financial Highlights for Open-End Management
Investment Companies.
|
(a) |
The registrant’s Financial Statements are attached herewith. |
GMO U.S. Quality ETF
Annual Financial Statements and Other Information
June 30, 2024
For a free copy of the Fund’s proxy voting guidelines, shareholders
may call 1-844 761-1102 (toll-free), visit GMO’s website at www.gmo.com, or visit the Securities and Exchange Commission’s
website at www.sec.gov. Information regarding how the Fund voted proxies relating to portfolio securities during the most recent 12-month
period ended June 30 will be available without charge on GMO’s website at www.gmo.com and on the Securities and Exchange Commission’s
website at www.sec.gov no later than August 31 of each year.
The Fund files its complete schedule of portfolio holdings with the Securities
and Exchange Commission for the first and third quarter of each fiscal year on Form N-PORT which is available on the Commission’s
website at www.sec.gov or at www.gmo.com.
Information regarding how often shares of the Fund traded on the New York
Stock Exchange at a price above (i.e., at a premium) or below (i.e., at a discount) the NAV of the Fund can be found at www.gmo.com.
This report is prepared for the general information of shareholders. It
is authorized for distribution to prospective investors only when preceded or accompanied by a prospectus for The 2023 ETF Series Trust
II, which contains a complete discussion of the risks associated with an investment in this Fund and other important information. The
2023 ETF Series Trust II prospectus can be obtained at www.gmo.com or by calling toll-free (844) 761-1102. The 2023 ETF Series Trust II
Statement of Additional Information includes additional information about the Trustees of The 2023 ETF Series Trust II and is available
without charge, upon request, by calling (844) 761-1102 (toll-free).
An investment in the Fund is subject to risk, including the possible loss
of principal amount invested. There can be no assurance that the Fund will achieve its stated investment objectives. Please see the Fund’s
prospectus regarding specific principal risks. General risks may include: market risk-equities, management and operational risk, focused
investment risk, ETF risks, limited authorized participants, market makers and liquidity providers risk, new/smaller funds risk and market
disruption.
The Fund is distributed by Foreside Fund Services, LLC. Foreside Fund Services,
LLC is not affiliated with GMO.
Table of Contents
| |
Page |
| Investment Concentration Summary |
1 |
| Schedule of Investments |
2 |
| Statement of Assets and Liabilities |
3 |
| Statement of Operations |
4 |
| Statement of Changes in Net Assets |
5 |
| Financial Highlights |
6 |
| Notes to Financial Statements |
7 |
| Report of Independent Registered
Public Accounting Firm |
14 |
| Tax Information |
15 |
GMO U.S. Quality ETF
Investment Concentration Summary
June 30, 2024
| Industry Group Summary |
|
% of Investments |
|
| Software & Services |
|
|
16.8 |
% |
| Health Care Equipment & Services |
|
|
14.8 |
|
| Semiconductors & Semiconductor Equipment |
|
|
13.1 |
|
| Pharmaceuticals, Biotechnology & Life Sciences |
|
|
9.6 |
|
| Media & Entertainment |
|
|
9.0 |
|
| Food, Beverage & Tobacco |
|
|
6.8 |
|
| Consumer Discretionary Distribution & Retail |
|
|
5.2 |
|
| Technology Hardware & Equipment |
|
|
5.1 |
|
| Capital Goods |
|
|
5.0 |
|
| Banks |
|
|
4.2 |
|
| Consumer Services |
|
|
4.1 |
|
| Financial Services |
|
|
2.9 |
|
| Household & Personal Products |
|
|
2.8 |
|
| Short-Term Investments |
|
|
0.6 |
|
| |
|
|
100.0 |
% |
1
GMO U.S. Quality ETF
Schedule of Investments
(showing percentage of total net assets)
June 30, 2024
| Shares |
|
|
Description |
|
Value ($) |
|
| |
|
|
|
COMMON STOCKS — 99.6% |
|
|
|
|
| |
|
|
|
Banks — 4.2% |
|
|
|
|
| |
398,969 |
|
|
U.S. Bancorp |
|
|
15,839,069 |
|
| |
315,023 |
|
|
Wells Fargo & Co. |
|
|
18,709,216 |
|
| |
|
|
|
Total Banks |
|
|
34,548,285 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Capital Goods — 5.0% |
|
|
|
|
| |
147,111 |
|
|
General Electric Co. |
|
|
23,386,236 |
|
| |
191,436 |
|
|
Otis Worldwide Corp. |
|
|
18,427,629 |
|
| |
|
|
|
Total Capital Goods |
|
|
41,813,865 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Consumer Discretionary Distribution & Retail — 5.2% |
|
|
|
|
| |
115,946 |
|
|
Amazon.com, Inc. * |
|
|
22,406,564 |
|
| |
188,749 |
|
|
TJX Cos., Inc. |
|
|
20,781,265 |
|
| |
|
|
|
Total Consumer Discretionary Distribution & Retail |
|
|
43,187,829 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Consumer Services — 4.1% |
|
|
|
|
| |
622,673 |
|
|
Aramark |
|
|
21,183,335 |
|
| |
60,483 |
|
|
Hilton Worldwide Holdings, Inc. |
|
|
13,197,391 |
|
| |
|
|
|
Total Consumer Services |
|
|
34,380,726 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Financial Services — 2.9% |
|
|
|
|
| |
37,744 |
|
|
American Express Co. |
|
|
8,739,623 |
|
| |
59,324 |
|
|
Visa, Inc. – Class A |
|
|
15,570,771 |
|
| |
|
|
|
Total Financial Services |
|
|
24,310,394 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Food, Beverage & Tobacco — 6.8% |
|
|
|
|
| |
445,100 |
|
|
Coca-Cola Co. |
|
|
28,330,615 |
|
| |
57,498 |
|
|
Constellation Brands, Inc. – Class A |
|
|
14,793,086 |
|
| |
199,760 |
|
|
Mondelez International, Inc. – Class A |
|
|
13,072,294 |
|
| |
|
|
|
Total Food, Beverage & Tobacco |
|
|
56,195,995 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Health Care Equipment & Services — 14.9% |
|
|
|
|
| |
236,630 |
|
|
Abbott Laboratories |
|
|
24,588,223 |
|
| |
32,330 |
|
|
Cigna Group |
|
|
10,687,328 |
|
| |
43,747 |
|
|
Elevance Health, Inc. |
|
|
23,704,750 |
|
| |
48,546 |
|
|
Intuitive Surgical, Inc. * |
|
|
21,595,688 |
|
| |
72,804 |
|
|
Quest Diagnostics, Inc. |
|
|
9,965,412 |
|
| |
64,609 |
|
|
UnitedHealth Group, Inc. |
|
|
32,902,779 |
|
| |
|
|
|
Total Health Care Equipment & Services |
|
|
123,444,180 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Household & Personal Products — 2.8% |
|
|
|
|
| |
140,069 |
|
|
Procter & Gamble Co. |
|
|
23,100,180 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Media & Entertainment — 9.0% |
|
|
|
|
| |
223,934 |
|
|
Alphabet, Inc. – Class A |
|
|
40,789,578 |
|
| Shares |
|
|
Description |
|
Value ($) |
|
| |
67,938 |
|
|
Meta Platforms, Inc. – Class A |
|
|
34,255,698 |
|
| |
|
|
|
Total Media & Entertainment |
|
|
75,045,276 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Pharmaceuticals, Biotechnology & Life Sciences — 9.6% |
|
|
|
|
| |
19,119 |
|
|
Eli Lilly & Co. |
|
|
17,309,960 |
|
| |
221,393 |
|
|
Johnson & Johnson |
|
|
32,358,801 |
|
| |
177,899 |
|
|
Merck & Co., Inc. |
|
|
22,023,896 |
|
| |
14,064 |
|
|
Thermo Fisher Scientific, Inc. |
|
|
7,777,392 |
|
| |
|
|
|
Total Pharmaceuticals, Biotechnology & Life Sciences |
|
|
79,470,049 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Semiconductors & Semiconductor Equipment — 13.2% |
|
|
|
|
| |
7,928 |
|
|
Broadcom, Inc. |
|
|
12,728,642 |
|
| |
40,448 |
|
|
KLA Corp. |
|
|
33,349,781 |
|
| |
29,697 |
|
|
Lam Research Corp. |
|
|
31,622,850 |
|
| |
161,955 |
|
|
Texas Instruments, Inc. |
|
|
31,505,106 |
|
| |
|
|
|
Total Semiconductors & Semiconductor Equipment |
|
|
109,206,379 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Software & Services — 16.8% |
|
|
|
|
| |
70,664 |
|
|
Accenture PLC – Class A |
|
|
21,440,164 |
|
| |
137,038 |
|
|
Microsoft Corp. |
|
|
61,249,134 |
|
| |
255,412 |
|
|
Oracle Corp. |
|
|
36,064,175 |
|
| |
81,604 |
|
|
Salesforce, Inc. |
|
|
20,980,388 |
|
| |
|
|
|
Total Software & Services |
|
|
139,733,861 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
Technology Hardware & Equipment — 5.1% |
|
|
|
|
| |
202,777 |
|
|
Apple, Inc. |
|
|
42,708,892 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
TOTAL COMMON STOCKS |
|
|
|
|
| |
|
|
|
(COST $767,756,486) |
|
|
827,145,911 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
SHORT-TERM INVESTMENTS — 0.5% |
|
|
|
|
| |
|
|
|
Money Market Funds — 0.5% |
|
|
|
|
| |
4,625,637 |
|
|
State Street Institutional
Treasury Money Market Fund – Premier Class, 5.23% (a) |
|
|
4,625,637 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
TOTAL SHORT-TERM INVESTMENTS |
|
|
|
|
| |
|
|
|
(COST $4,625,637) |
|
|
4,625,637 |
|
| |
|
|
|
|
|
|
|
|
| |
|
|
|
TOTAL INVESTMENTS — 100.1% |
|
|
|
|
| |
|
|
|
(Cost $772,382,123) |
|
|
831,771,548 |
|
| |
|
|
|
Other Assets and Liabilities (net) — (0.1)% |
|
|
(968,193 |
) |
| |
|
|
|
TOTAL NET ASSETS — 100.0% |
|
$ |
830,803,355 |
|
Notes to Schedule of Investments:
|
* |
Non-income producing security. |
|
(a) |
The rate disclosed is the 7 day net yield as of June 30, 2024. |
| |
The
accompanying notes are an integral part of the financial statements. |
2 |
GMO U.S. Quality ETF
Statement of Assets and Liabilities — June 30, 2024
| Assets |
|
|
|
| Investments, at value (cost $772,382,123) |
|
$ |
831,771,548 |
|
| Cash |
|
|
7,358 |
|
| Dividends and interest receivable |
|
|
697,617 |
|
| Receivable for Fund shares sold |
|
|
5,271,207 |
|
| Total assets |
|
|
837,747,730 |
|
| Liabilities |
|
|
|
|
| Payable for investments purchased |
|
|
5,224,121 |
|
| Accrued advisory fee (Note 3) |
|
|
319,332 |
|
| Distributions payable (Note 2) |
|
|
1,400,422 |
|
| Accrued expenses |
|
|
500 |
|
| Total liabilities |
|
|
6,944,375 |
|
| Net assets |
|
$ |
830,803,355 |
|
| |
|
|
|
|
| Net assets consist of: |
|
|
|
|
| Paid in capital |
|
$ |
771,321,327 |
|
| Total distributable earnings |
|
|
59,482,028 |
|
| Net assets |
|
$ |
830,803,355 |
|
| Net asset value, offering and redemption price per share |
|
$ |
31.01 |
|
| Shares outstanding (unlimited authorized - no par value) |
|
|
26,794,000 |
|
| 3 |
The
accompanying notes are an integral part of the financial statements. |
|
GMO U.S. Quality ETF
Statement of Operations — For the Period Ended June 30,
2024(a)
| Investment income |
|
|
|
| Dividend income |
|
$ |
3,273,292 |
|
| Interest income |
|
|
90,821 |
|
| Total investment income |
|
|
3,364,113 |
|
| Expenses |
|
|
|
|
| Advisory fee (Note 3) |
|
|
1,110,538 |
|
| Total expenses |
|
|
1,110,538 |
|
| Net investment income (loss) |
|
|
2,253,575 |
|
| Realized and unrealized gain (loss): |
|
|
|
|
| Net realized gain (loss) on: |
|
|
|
|
| Investments |
|
|
(30,026 |
) |
| In-kind redemptions |
|
|
2,747,493 |
|
| Net realized gain (loss) |
|
|
2,717,467 |
|
| Net change in unrealized appreciation on: |
|
|
|
|
| Investments |
|
|
59,389,425 |
|
| Net realized and unrealized gain (loss) |
|
|
62,106,892 |
|
| Net increase (decrease) in net assets from operations |
|
$ |
64,360,467 |
|
|
(a) |
The Fund commenced operations on November 14, 2023. |
| |
The
accompanying notes are an integral part of the financial statements. |
4 |
GMO U.S. Quality ETF
Statement of Changes in Net Assets
| |
|
Period
Ended
June 30, 2024(a) |
|
| Operations: |
|
|
|
|
| Net investment income (loss) |
|
$ |
2,253,575 |
|
| Net realized gain (loss) |
|
|
2,717,467 |
|
| Net change in unrealized appreciation (depreciation) |
|
|
59,389,425 |
|
| Net increase (decrease) in net assets from operations |
|
|
64,360,467 |
|
| Distributions: |
|
|
|
|
| Net investment income |
|
|
(2,130,949 |
) |
| Total distributions |
|
|
(2,130,949 |
) |
| Capital share transactions: |
|
|
|
|
| Subscriptions |
|
|
779,492,154 |
|
| Redemptions |
|
|
(10,918,317 |
) |
| Increase (decrease) in net assets from capital transactions |
|
|
768,573,837 |
|
| Total increase (decrease) in net assets |
|
|
830,803,355 |
|
| Net Assets: |
|
|
|
|
| Beginning of period |
|
|
— |
|
| Ending |
|
$ |
830,803,355 |
|
| Share Transactions: |
|
|
|
|
| Shares sold |
|
|
27,154,000 |
|
| Redemptions |
|
|
(360,000 |
) |
| Net increase (decrease) in shares outstanding from share transactions |
|
|
26,794,000 |
|
|
(a) |
The Fund commenced operations on November 14, 2023. |
| 5 |
The
accompanying notes are an integral part of the financial statements. |
|
GMO U.S. Quality ETF
Financial Highlights
(For a share outstanding throughout the period)
| |
|
For
the Period Ended
June 30, 2024(a) |
|
| Net asset value, beginning of period |
|
$ |
25.00 |
|
| Income (loss) from investment operations: |
|
|
|
|
| Net investment income(b) |
|
|
0.19 |
|
| Net
realized & unrealized gain (loss)(c) |
|
|
5.96 |
|
| Total from investment operations |
|
|
6.15 |
|
| Distributions to shareholders |
|
|
|
|
| Net investment income |
|
|
(0.14 |
) |
| Total from distributions |
|
|
(0.14 |
) |
| Net asset value, end of period |
|
$ |
31.01 |
|
| Total return on
net asset value(d) (e) |
|
|
24.62 |
% |
| Supplemental data: |
|
|
|
|
| Net assets, end of period (000’s) |
|
$ |
830,803 |
|
| Ratio of expenses
to average net assets(f) |
|
|
0.50 |
% |
| Ratio of net investment
income (loss) to average net assets(f) |
|
|
1.01 |
% |
| Portfolio turnover(e) (g) |
|
|
7 |
% |
|
(a) |
The Fund commenced operations on November 14, 2023. |
|
(b) |
Calculated based on average shares outstanding during the period. |
|
(c) |
Realized and unrealized gains and losses per share in this caption are balancing amounts necessary to reconcile the change in net asset
value per share for the period and may not reconcile with the aggregate gains and losses in the statement of operations due to share transactions
for the period. |
|
(d) |
Total Return on Net Asset Value is based on the change in net asset value (“NAV”) of a share during the period and assumes
reinvestment of dividends and distributions at NAV. Total Return on Net Asset Value is for the period indicated and has not been annualized.
The return shown does not reflect the deduction of taxes that a shareholder would pay on fund distributions or redemption of fund shares.
The NAV return is based on the start of day values on November 14, 2023. |
|
(g) |
Portfolio turnover rate excludes in-kind transactions, if any. |
| |
The
accompanying notes are an integral part of the financial statements. |
6 |
GMO U.S. Quality ETF
Notes to Financial Statements
June 30, 2024
GMO U.S. Quality ETF (the “Fund”)
is a newly organized, diversified exchange-traded fund (“ETF”) and a separate operating series of The 2023 ETF Series Trust
II (the “Trust”), a Delaware statutory trust since June 13, 2023 that is registered with the Securities and Exchange Commission
as an open-end management investment company. The Fund commenced operations on November 14, 2023. The Fund is advised and managed by Grantham,
Mayo, Van Otterloo & Co. LLC (“GMO”) an investment adviser registered under the Investment Advisers Act of 1940, as amended,
and serves as the Fund’s investment adviser (the “Adviser”).
The Fund’s investment objective is to seek total return
by investing primarily in equities of U.S. companies that the Adviser believes to be of high quality. The Adviser believes a high quality
company generally to be a company that has an established business that will deliver a high level of return on past investments.
|
2. |
Summary of 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 Accounting Standards Codification Topic
946 “Financial Services – Investment Companies.”
The preparation of financial statements in accordance with U.S.
generally accepted accounting principles (“U.S. GAAP”) requires management to make estimates and assumptions at the date of
the financial statements. Actual results could differ from those estimates.
The Fund’s policies are in conformity with U.S. GAAP and
have been consistently followed by the Fund in preparing the financial statements. The accompanying financial statements have been prepared
in accordance with U.S. GAAP on the accrual basis of accounting.
Security Valuation
In accordance with the authoritative guidance on fair value
measurements and disclosure under U.S. GAAP, the Fund discloses fair value of its investments in a hierarchy that prioritizes the inputs
to valuation techniques used to measure the fair value. The objective of a fair value measurement is to determine the price that would
be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement
date (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets
for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The three levels of the fair value
hierarchy are described below:
Level 1: Valuations based on quoted prices for identical securities
in active markets.
Level 2: Valuations determined using other significant direct
or indirect observable inputs.
Level 3: Valuations based primarily on inputs that are unobservable
and significant.
The valuation techniques used by the Fund to measure fair value
during the period ended June 30, 2024 maximized the use of observable inputs and minimized the use of unobservable inputs.
Securities in the portfolio of the Fund for which market quotations
are readily available are generally valued at the last sale price or official closing price, as applicable, on an exchange or the most
recent quoted price published by the exchange (if no reported last sale or official closing price); or the quoted price provided by a
pricing source (in the event the Adviser deems the private market to be a more reliable indicator or market value than the exchange).
The Fund’s Board of Trustees (the “Board”)
has designated the Adviser as the valuation designee for the Fund under Rule 2a-5 of the Investment Company Act of 1940 (the “1940
Act”), subject to its oversight. The Adviser has adopted procedures and methodologies to fair value Fund investments whose market
prices are not readily available or are deemed to be unreliable. Fair value determinations are made in good faith and in accordance with
the fair value methodologies included in the Adviser-adopted valuation procedures. Due to the subjective and variable nature of fair value
pricing, there can be no assurance that the Adviser will be able to obtain the fair value assigned to the investment upon the sale of
such investment.
The following is a summary of the fair valuations according
to the inputs used to value the Fund’s investments as of June 30, 2024.
7
GMO U.S. Quality ETF
Notes to Financial Statements — (Continued)
June 30, 2024
| |
|
Level 1 |
|
|
Level 2 |
|
|
Level 3 |
|
|
Total |
|
| Asset Valuation Inputs |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
| Common Stocks |
|
$ |
827,145,911 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
827,145,911 |
|
| Short-Term Investments |
|
|
4,625,637 |
|
|
|
— |
|
|
|
— |
|
|
|
4,625,637 |
|
| Total Investments |
|
|
831,771,548 |
|
|
|
— |
|
|
|
— |
|
|
|
831,771,548 |
|
| Total |
|
$ |
831,771,548 |
|
|
$ |
— |
|
|
$ |
— |
|
|
$ |
831,771,548 |
|
| |
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
For the period ended June 30, 2024, there were no transfers
into or out of Level 3 for the Fund.
Share Valuation
The net asset value (“NAV”) per share of the Fund
is computed by dividing the value of the net assets of the Fund (i.e., the value of its total assets less total liabilities and withholdings)
by the total number of shares of the Fund outstanding, rounded to the nearest cent. The NAV per share of the Fund is determined as of
the close of regular trading on the New York Stock Exchange (“NYSE”), generally at 4:00 p.m. Eastern time. Any assets or liabilities
denominated in currencies other than the U.S. dollar are typically translated into U.S. dollars at the close of regular trading on the
NYSE, generally at 4:00 p.m. Eastern time, at then current exchange rates or at such other rates as deemed appropriate.
Security Transactions and Investment Income
Throughout the reporting period, investment transactions are
generally accounted for no later than one business day following the trade date. Costs used in determining realized gains and losses on
the sale of investment securities are based on specific identification. Dividend income is recorded on the ex-dividend date or, if later,
when the Fund is informed of the ex-divdend date. Interest income is recognized on an accrual basis. Withholding taxes and reclaims on
foreign dividends, if any, have been provided for in accordance with the Fund’s understanding of the applicable country’s
tax rules and rates.
Dividends and Distributions
Dividends from net investment income, if any, are declared and
paid quarterly by the Fund. Distributions of net realized capital gains, if any, generally are declared and paid at least annually, but
the Fund may make distributions on a more frequent basis for the Fund to comply with the distribution requirements of the Internal Revenue
Code of 1986, as amended (the “Code”) in all events in a manner consistent with the provisions of the Investment Company Act
of 1940 (the “1940 Act”). Brokers may make available to their customers who own shares of the Fund the Depository Trust Company
book-entry dividend reinvestment service. If this service is available and used, dividend distributions of both income and capital gains
will automatically be reinvested in additional whole shares of the Fund purchased on the secondary market. Without this service, investors
would receive their distributions in cash.
Income and capital gain distributions are determined in accordance
with U.S. federal income tax regulations, which may differ from U.S. GAAP. Certain capital accounts in the financial statements are periodically
adjusted for permanent differences in order to reflect their tax character. These adjustments have no impact on net assets or net asset
value per share. Temporary differences that arise from recognizing certain items of income, expense, gain or loss in different periods
for financial statements and tax purposes will likely reverse at some time in the future.
Differences in distributable earnings on a U.S. GAAP and tax
accounting basis primarily relate to redemption in-kind transactions.
Federal Income Tax Information
The Fund has elected to be treated or intends to elect to be
treated and intends to qualify each year as a separate regulated investment company under Subchapter M of the Code. The Fund intends to
distribute its net investment income, if any, and its net realized short-term and long-term capital gains, if any, after giving effect
to any available capital loss carryforwards for U.S. federal income tax purposes. Therefore, the Fund makes no provision for U.S. federal
income or excise taxes.
Taxes on foreign interest and
dividend income are generally withheld in accordance with the applicable country’s tax treaty with the United States. The foreign
withholding rates applicable to the Fund’s investments in certain jurisdictions may be higher if a significant portion of the Fund
is held by non-U.S. shareholders. The Fund may be subject to taxation on realized capital gains, repatriation proceeds and other transaction-based
charges imposed by certain countries in which it invests. Transaction-based charges are generally calculated as a percentage of the transaction
amount. Taxes related to capital gains realized during the period ended June 30, 2024, if any, are reflected as part of Net realized
gain on investments in the Statement of Operations. Changes in tax liabilities related to capital gain taxes on unrealized investment
gains, if any, are reflected as part of Net change in unrealized appreciation on investments in the Statement of Operations.
8
GMO U.S. Quality ETF
Notes to Financial Statements — (Continued)
June 30, 2024
The tax character of distributions declared by the Fund to shareholders
is as follows:
| Ordinary
income (including any net short-term capital gain) |
|
$ |
2,130,949 |
|
| Net long-term capital gain |
|
|
— |
|
| Tax exempt income |
|
|
— |
|
| Total distributions |
|
$ |
2,130,949 |
|
Distributions in excess of the Fund’s current and accumulated
earnings and profits, if significant, are reported in the Fund’s financial statements as a return of capital.
As of June 30, 2024 , the components of distributable earnings
on a tax basis and certain tax attributes for the Fund consisted of the following:
| Undistributed
ordinary income (including any net short-term capital gain) |
|
$ |
122,626 |
|
| Undistributed net long-term
capital gain |
|
|
— |
|
| Late-year ordinary loss deferral |
|
|
— |
|
| Capital loss carryforwards |
|
|
— |
|
| Post-october capital losses
deferral |
|
$ |
(26,022 |
) |
As of June 30, 2024, the Fund had no capital loss carryforwards
available to offset future realized gains, if any, to the extent permitted by the Code. Net capital losses are carried forward without
expiration and generally retain their short-term and/or long-term tax character, as applicable. Utilization of the capital loss carryforwards,
post-october capital losses, late-year ordinary losses, and other losses, if any, could be subject to further limitations imposed by the
Code related to share ownership activity.
As of June 30, 2024, the approximate total
cost, aggregate investment-level gross/net unrealized appreciation (depreciation) in the value of total investments, and the net unrealized
appreciation (depreciation) of outstanding financial instruments, for U.S. federal income tax purposes were as follows:
| Tax
cost of investments |
|
$ |
722,386,124 |
|
| Gross tax unrealized appreciation |
|
$ |
69,579,715 |
|
| Gross tax unrealized depreciation |
|
$ |
(10,194,291 |
) |
| Net tax unrealized appreciation
(depreciation) |
|
$ |
59,385,424 |
|
The Fund is subject to authoritative guidance related to the
accounting and disclosure of uncertain tax positions under U.S. GAAP. The Fund may recognize an income tax liability related to an uncertain
tax position under U.S. GAAP when the uncertain tax position has a less than 50% probability that it would be sustained upon examination
by the tax authorities, based on technical merits. United States and non-U.S. tax rules (including the interpretation and application
of tax laws) are subject to change. The Fund files tax returns and/or adopts certain tax positions in various jurisdictions. Non-U.S.
taxes are provided for based on the Fund’s understanding of the prevailing tax rules of the non-U.S. markets in which it invests.
Recently enacted tax rules, including interpretations of tax laws and tax legislation/initiatives currently under consideration in various
jurisdictions, including the U.S., might affect the way the Fund and its investors are taxed prospectively and/or retroactively. Prior
to the expiration of the relevant statutes of limitations, if any, the Fund is subject to examination by U.S. federal, state, local and
non-U.S. jurisdictions with respect to the tax returns it has filed and the tax positions it has adopted. The Fund’s U.S. federal
income tax returns are generally subject to examination by the Internal Revenue Service for a period of three years after they are filed.
State, local and/or non-U.S. tax returns and/or other filings may be subject to examination for different periods, depending upon the
tax rules of each applicable jurisdiction. As of June 30, 2024, the Fund has determined that no tax liability is required to be accrued
in its financial statements related to uncertain tax positions for any tax years which are subject to examination.
9
GMO U.S. Quality ETF
Notes to Financial Statements — (Continued)
June 30, 2024
Purchase and Sale of Fund Shares
Shares of the Fund are listed on NYSE Arca,
Inc. (the “Exchange”), a national securities exchange and trade in the secondary market, where most investors may buy and
sell them at market prices that change throughout the day. Such market prices may be lower, higher or equal to net asset value (“NAV”).
Accordingly, when transacting in the secondary market, investors may pay more than NAV when purchasing shares and receive less than NAV
when selling shares. They may also be subject to brokerage commissions and charges. The Fund issues and redeems shares at NAV only in
aggregations of a specified number of shares (“Creation Units”), generally in exchange for a basket of securities (“Basket”),
together with a specified cash payment or, in certain circumstances, for an all cash payment. Unlike mutual funds, shares are not individually
redeemable.
Indemnification
Under the Fund’s organizational documents, its officers
and Trustees are indemnified against certain liabilities arising out of the performance of their duties to the Fund. The Fund may enter
into contracts that contain representations and that provide general indemnifications. The Fund’s maximum liability exposure under
these arrangements is unknown, as future claims that have not yet occurred may be made against the Fund.
|
3. |
Investment Advisory Agreement and Other Services |
Under an investment advisory agreement between the Trust, on
behalf of the Fund, and the Adviser (the “Advisory Agreement”), the Adviser provides investment advisory services to the Fund.
For such investment advisory services, the Fund has agreed to pay the Adviser a unitary advisory fee payable at the annual rate of 0.50%
of the Fund’s average daily net assets.
In addition, the Adviser has contractually agreed to pay all
expenses incurred by, and appropriately allocated to, the Funds except for: the fee paid to the Adviser pursuant to the Advisory Agreement;
investment-related costs (such as interest charges on any borrowings, brokerage commissions and other expenses incurred in placing orders
for the purchase and sale of securities and other investment instruments); taxes; proxy and shareholder meeting expenses (unless the need
for a shareholder meeting is caused by the Adviser, such as a change of control of the Adviser); fees and expenses related to the provision
of securities lending services; acquired fund fees and expenses (other than management and shareholder service fees paid to the Adviser
attributable to the Fund’s investment in such acquired funds); legal fees or expenses in connection with any arbitration, litigation,
or pending or threatened arbitration or litigation, including any settlements in connection therewith; legal fees incurred at the request
or direction of a Fund service provider other than the Adviser; extraordinary (as mutually determined by the Board and the Adviser) or
non-recurring expenses not incurred in the ordinary course of the Fund’s business; and distribution fees and expenses paid by the
Fund under any distribution plan adopted pursuant to Rule 12b-1 under the 1940 Act.
The Fund has adopted a Distribution Plan (the “Distribution
Plan”) that allows the Fund to pay distribution fees to Foreside Fund Services, LLC (the “Distributor”) and other firms
that provide distribution services (“Service Providers”). Under the Distribution Plan, if a Service Provider provides distribution
services, the Fund would pay distribution fees to the Distributor at an annual rate not to exceed 0.25% of average daily net assets, pursuant
to Rule 12b-1 under the 1940 Act. The Distributor would, in turn, pay the Service Provider out of its fees. The Board currently has determined
not to implement any 12b-1 fees pursuant to the Plan. 12b-1 fees may only be imposed after approval by the Board.
State Street Bank & Trust Company (“State Street”)
serves as administrator, custodian and transfer agent for the Fund. State Street maintains all necessary shareholder records.
|
4. |
Organizational Expenses and Offering Costs |
The Adviser (and not the Fund) has agreed to pay all of the
Fund’s organizational expenses and offering costs appropriately allocated to them. As a result, organizational expenses and offering
costs of the Fund are not reflected in the Fund’s Statement of Assets and Liabilities, or Statement of Operations. The Fund is not
obligated to repay any such organizational expenses or offering costs paid by the Adviser.
10
GMO U.S. Quality ETF
Notes to Financial Statements — (Continued)
June 30, 2024
|
5. |
Investment Transactions |
For period ended June 30, 2024, the purchases and sales of investments
in securities, excluding in-kind transactions, long-term U.S. Government and short-term securities were $35,727,457 and $27,796,752, respectively.
There were no purchases or sales of long-term U.S. Government
securities by the Fund.
For the period ended June 30, 2024, there were in-kind transactions
associated with creations and redemptions of $767,742,104 and $10,633,789, respectively.
• Market Risk – Equities.
The market price of an equity in the Fund’s portfolio may decline due to factors affecting the issuer or its industry or the economy
and equity markets generally. If the Fund purchases an equity for less than its fundamental fair (or intrinsic) value as assessed by the
Adviser and the Adviser’s assessment proves to be incorrect, the Fund runs the risk that the market price of the equity will not
appreciate or will decline. The Fund also may purchase equities that typically trade at higher multiples of current earnings than other
securities, and the market prices of these equities often are more sensitive to changes in future earnings expectations and interest rates
than the market prices of equities trading at lower multiples. Declines in stock market prices generally are likely to reduce the value
of an investment in the Fund.
• Management and Operational
Risk. The Fund runs the risk that the Adviser’s investment techniques will fail to produce intended results. The Fund also
runs the risk that the Adviser’s assessment of an investment (including a security’s fundamental fair (or intrinsic) value)
is wrong or that deficiencies in the Adviser’s or another service provider’s internal systems or controls will cause losses
for the Fund or impair Fund operations.
• Focused
Investment Risk. Investments focused in countries, regions, asset classes, sectors, industries, currencies, or issuers that are
subject to the same or similar risk factors and investments whose market prices are closely correlated are subject to higher overall risk
than investments that are more diversified or whose market prices are not as closely correlated.
• ETF Risks. The
Fund is an ETF and, as a result of this structure, is exposed to the following risks:
• Costs of Buying or
Selling Shares Risk. Due to the costs of buying or selling Fund shares, including brokerage commissions imposed by brokers and
the variance in bid-ask spreads, frequent trading of Fund shares may significantly reduce investment results and an investment in Fund
shares may not be advisable for investors who anticipate regularly making small investments.
• Limited Authorized Participants, Market
Makers and Liquidity Providers Risk. Because the Fund is an ETF, typically only a limited number of institutional investors (known
as “Authorized Participants”) are authorized to purchase and redeem shares directly from the Fund. Retail investors cannot
transact directly with the Fund. In addition, there may be a limited number of market makers and/or liquidity providers in the marketplace
to transact in Fund shares, there may be demand for Fund shares thereby increasing the market price above NAV, or lack of demand, which
may decrease the market price below NAV, or in stressed market conditions, the market for Fund shares may become less liquid in response
to deteriorating liquidity in the markets for the Fund’s underlying portfolio holdings. As a result of these considerations, Fund
shares may trade at a material premium or discount to NAV or these factors may, in turn, lead to wider spreads between the bid and ask
price of Fund shares. In addition, the Fund may face possible delisting if: (i) Authorized Participants exit the business or otherwise
become unable to process creation and/or redemption orders and no other Authorized Participants step forward to perform these services,
or (ii) market makers and/or liquidity providers exit the business or significantly reduce their business activities and no other entities
step forward to perform their functions.
• Trading Risk. Shares of the Fund
may trade on the NYSE Arca, Inc. (the “Exchange”) above (premium) or below (discount) their NAV. In stressed market conditions,
the market for Fund shares may become less liquid in response to deteriorating liquidity in the markets for the Fund’s underlying
portfolio holdings, which may increase the variance between the market price of the Fund shares and the value of its underlying holdings.
This can be reflected as a spread between the bid and ask prices for the Fund shares quoted during the day or a premium or discount in
the closing price from the Fund’s NAV. In addition, although the Fund’s shares are currently listed on the Exchange, there
can be no assurance that an active trading market for Fund shares will develop or be maintained. Trading in Fund shares may be halted
due to market conditions or for reasons that, in the view of the Exchange, make trading in shares of the Fund inadvisable.
11
GMO U.S. Quality ETF
Notes to Financial Statements — (Continued)
June 30, 2024
• New/Smaller Fund Risk.
A new or smaller fund is subject to the risk that its performance may not represent how the fund is expected to or may perform in the
long term. In addition, new funds have limited operating histories for investors to evaluate and new and smaller funds may not attract
sufficient assets to achieve investment and trading efficiencies. There can be no assurance that the Fund will achieve an economically
viable size, in which case it could ultimately liquidate.
• Market Disruption and Geopolitical
Risk. Geopolitical and other events (e.g., wars, pandemics, sanctions, terrorism) often disrupt securities markets and adversely
affect the general economy or particular economies and markets. Those events, as well as other changes in non-U.S. and U.S. economic and
political conditions, could exacerbate other risks or otherwise reduce the value of the Fund’s investments.
• Other
Investment Company Risk. The Fund is indirectly exposed to all of the risks of an investment in the underlying funds in which
it invests, including the risk that those underlying funds will not perform as expected. In addition, the Fund indirectly bears its pro
rata portion of an underlying fund’s fees and expenses in addition to the fees and expenses borne by the Fund. As a result, shareholders
will be subject to two layers of fees and expenses when the Fund invests in underlying funds.
|
7. |
Capital Share Transactions |
Fund shares are listed and traded on the Exchange each day that
the Exchange is open for business (“Business Day”). Individual Fund shares may only be purchased and sold on the Exchange
through a broker-dealer at market price. Because Fund shares trade at market prices rather than at NAV, Fund shares may trade at a price
equal to NAV, greater than NAV (premium) or less than NAV (discount). The Fund issues its shares to and redeems its shares from, on a
continuous basis, certain institutional investors known as “Authorized Participants” (typically market makers or other broker-dealers)
only in large blocks of Fund shares known as Creation Units. Currently, the number of Fund shares that constitute a Creation Unit is 10,000
shares. Creation Unit transactions are generally conducted in exchange for the deposit or delivery of a portfolio of in-kind securities
designated by the Fund and as needed, a specified amount of cash.
Most retail investors will not qualify as Authorized Participants,
therefore, they will be unable to purchase or redeem the shares directly from the Fund. Rather, most retail investors will purchase Fund
shares in the secondary market with the assistance of a broker, which will be subject to customary brokerage commissions or fees.
A purchase (i.e., creation) transaction fee may be imposed for
the transfer and other transaction costs associated with the purchase of Creation Units. The Fund may adjust the creation transaction
fee from time to time. In addition, a variable fee may be imposed for cash purchases, non-standard orders, or partial cash purchases of
Creation Units. The variable fee is primarily designed to cover non-standard charges, e.g., brokerage, taxes, foreign exchange, execution,
market impact, and other costs and expenses related to the execution of trades resulting from such transaction. The Fund may determine
not to charge a variable fee on certain orders when the Adviser has determined that doing so is in the best interests of Fund shareholders.
Investors who use the services of an Authorized Participant, broker or other such intermediary may be charged a fee for such services
which may include an amount for the creation transaction fee and non-standard charges. Investors are responsible for the costs of transferring
the securities constituting the deposit securities to the account of the Trust. The Adviser may retain all or a portion of the transaction
fee to the extent the Adviser bears the expenses that otherwise would be borne by the Trust in connection with the issuance of a Creation
Unit, which the transaction fee is designed to cover. The standard Creation Unit transaction fee for the Fund, regardless of the number
of Creation Units in the transaction, is $150 for an in-kind transaction and $100 for a cash transaction.
A redemption transaction fee may be imposed for the transfer
and other transaction costs associated with the redemption of Creation Units. The Fund may adjust the redemption transaction fee from
time to time. In addition, a variable fee, payable to the Fund, may be imposed for cash redemptions, non-standard orders, or partial cash
redemptions for the Fund. The variable fee is primarily designed to cover non-standard charges, e.g., brokerage, taxes, foreign exchange,
execution, market impact, and other costs and expenses related to the execution of trades resulting from such transaction. The Fund may
determine not to charge a variable fee on certain orders when the Adviser has determined that doing so is in the best interests of Fund
shareholders. Investors who use the services of an Authorized Participant, broker or other such intermediary may be charged a fee for
such services which may include an amount for the redemption transaction fee and non-standard charges. Investors are responsible for the
costs of transferring the securities constituting the Fund securities to the account of the Trust. The standard redemption transaction
fee for the Fund, regardless of the number of Creation Units redeemed in the transaction, is $150 for an in-kind transaction and $100
for a cash transaction.
12
GMO U.S. Quality ETF
Notes to Financial Statements — (Continued)
June 30, 2024
Management has evaluated all subsequent events through the date
on which these statements were issued and has determined that no additional items require adjustment to or disclosure in these financial
statements.
13
Report of Independent Registered Public Accounting
Firm
To the Board of Trustees of The 2023 ETF Series Trust II and Shareholders
of GMO U.S. Quality ETF
Opinion on the Financial Statements
We have audited the accompanying statement of assets and liabilities, including
the schedule of investments, of GMO U.S. Quality ETF (the “Fund”) as of June 30, 2024, the related statements of operations
and changes in net assets, including the related notes, and the financial highlights for the period November 14, 2023 (commencement of
operations) through June 30, 2024 (collectively referred to as the “financial statements”). In our opinion, the financial
statements present fairly, in all material respects, the financial position of the Fund as of June 30, 2024, and the results of its operations,
changes in its net assets and the financial highlights for the period November 14, 2023 (commencement of operations) through June 30,
2024 in conformity with accounting principles generally accepted in the United States of America.
Basis for Opinion
These financial statements are the responsibility of the Fund’s management.
Our responsibility is to express an opinion on the Fund’s financial statements based on our audit. We are a public accounting firm
registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect
to the Fund in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange
Commission and the PCAOB.
We conducted our audit of these financial statements
in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance
about whether the financial statements are free of material misstatement, whether due to error or fraud.
Our audit included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures
included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our 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. Our procedures included confirmation of securities owned as of June 30, 2024 by correspondence with the custodian
and brokers. We believe that our audit provides a reasonable basis for our opinions.
/s/ PricewaterhouseCoopers LLP
Boston, MA
August 26, 2024
We have served as the auditor of one or more investment companies in the
GMO mutual fund complex since 1985.
14
GMO U.S. Quality ETF
Tax Information for the Tax Year Ended June 30, 2024 (Unaudited)
The following information is being provided in order to meet
reporting requirements set forth by the Code and/or to meet state-specific requirements. Shareholders should consult their tax advisors.
With respect to distributions paid, the Fund designates the
following amounts (or, if subsequently determined to be different, the maximum amount allowable) for the fiscal year-ended June 30, 2024:
| Dividend
Received Deduction (corporate shareholders)(1) |
Qualified
Dividend Income (non-corporate shareholders)(1) |
| 100.00% |
100.00% |
|
(1) |
Presented as a percentage of net investment income and short-term capital gain distributions paid, if any. |
In early 2025, the Fund or a financial intermediary will notify
applicable shareholders of amounts for use in preparing 2024 U.S. federal income tax forms.
15
| Investment Adviser |
Distributor |
| Grantham, Mayo, Van Otterloo & Co. LLC |
Foreside Fund Services, LLC |
| 53 State Street |
Three Canal Plaza, Suite 100 |
| Boston, MA 02109 |
Portland, ME 04101 |
| Administrator, Transfer Agent and
Custodian |
Independent Registered Public Accounting
Firm |
| State Street Bank & Trust Company |
PricewaterhouseCoopers, LLP |
| One Congress Street, Suite 1 |
101 Seaport Boulevard, Suite 500 |
| Boston, MA 02114 |
Boston MA 02210 |
| |
Legal Counsel |
| |
Morgan, Lewis & Bockius LLP |
| |
1111 Pennsylvania Avenue NW |
| |
Washington, DC 20004 |
|
(b) |
The registrant’s Financial Highlights are included as part of the Financial Statements filed under Item
7(a) of this Form. |
Item 8. Changes in and Disagreements with Accountants for Open-End Management
Investment Companies.
Not applicable.
Item 9. Proxy Disclosures for Open-End Management Investment Companies.
Not applicable.
Item 10. Remuneration Paid to Directors, Officers, and Others of Open-End
Management Investment Companies.
Not applicable.
Item 11. Statement Regarding Basis for Approval of Investment Advisory
Contract.
Not applicable.
Item 12. Disclosure of Proxy Voting
Policies and Procedures for Closed-End Management Investment Companies.
Not applicable to this registrant.
Item 13. Portfolio Managers of Closed-End Management Investment Companies.
Not applicable to this registrant.
Item 14. Purchases of Equity Securities by Closed-End Management Investment
Company and Affiliated Purchasers.
Not applicable to this registrant.
Item 15. Submission of Matters to a Vote of Security Holders.
There have been no material changes to the
procedures by which shareholders may recommend nominees to the registrant’s Board of Trustees.
Item 16. Controls and Procedures.
|
(a) |
The registrant’s principal executive officer and principal financial officer have evaluated the registrant’s
disclosure controls and procedures (as defined in Rule 30a-3(c) under the Investment Company Act of 1940, as amended) within 90 days of
the filing date and have concluded that the registrant’s disclosure controls and procedures were effective, as of that date. |
|
(b) |
There were no changes to the registrant’s internal control over financial reporting (as defined in Rule
30a-3(d) under the Investment Company Act of 1940, as amended) during the period covered by this report that has materially affected,
or is reasonably likely to materially affect, the registrant’s internal control over financial reporting. |
Item 17. Disclosure of Securities Lending Activities for Closed-End
Management Investment Companies
Not applicable to this registrant.
Item 18. Recovery of Erroneously Awarded
Compensation.
Not applicable.
Item 19. Exhibits.
|
(a)(2) |
Any policy required by the listing standards adopted pursuant to Rule 10D-1 under the Exchange Act (17 CFR
240.10D-1) by the registered national securities exchange or registered national securities association upon which the registrant’s
securities are listed – Not applicable. |
|
(a)(4) |
Any written solicitation to purchase securities under Rule 23c-1 – Not applicable. |
|
(a)(5) |
Change in Registrant’s independent public accountant – Not applicable. |
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
The 2023 ETF Series Trust II
| By: |
/s/Trent Statczar |
|
| |
Trent Statczar |
|
| |
President (Principal Executive Officer) |
|
| |
|
|
| Date: |
September 6, 2024 |
|
Pursuant to the requirements of the Securities Exchange Act of 1934 and
the Investment Company Act of 1940, this report has been signed below by the following persons on behalf of the registrant and in the
capacities and on the dates indicated.
| By: |
/s/Trent Statczar |
|
| |
Trent Statczar |
|
| |
President (Principal Executive Officer) |
|
| |
|
|
| Date: |
September 6, 2024 |
|
| By: |
/s/ Michael Minella |
|
| |
Michael Minella |
|
| |
Treasurer (Principal Financial Officer) |
|
| |
|
|
| Date: |
September 6, 2024 |
|
