Exchange Traded Concepts Files For Yorkville High Income Composite MLP ETF (YMLC)
Exchange Traded Concepts has filed paperwork with the SEC for a “Yorkville High Income Composite MLP ETF.” The Yorkville High Income Composite MLP ETF (the “Composite Fund or the “Fund”) seeks to provide investment results that, before fees and expenses, correspond generally to the price and yield performance of the Solactive High Income MLP Composite Index. They plan to trade this ETF on the NYSEArca under the symbol: (NYSEArca:YMLC)
Principal Investment Strategies
The Fund will normally invest at least 80% of its total assets in securities of the Index. The Index is a rules-based index designed to provide investors a means of tracking the performance of selected Master Limited Partnerships (“MLPs”) and royalty trusts structured as partnerships (“qualifying royalty trusts”), which are publicly traded on a U.S. securities exchange. Under normal circumstances, the Fund invests at least 80% of its net assets, plus the amount of any borrowings for investment purposes, in securities of MLPs. This investment policy may be changed without shareholder approval, upon 60 days’ prior notice to shareholders.
The Index consists of MLPs operating with one of the following as a substantial business segment:
· transportation, operation of storage terminals and storage of refined petroleum products, including gasoline, diesel, jet fuel, kerosene and heating oil; · one or more of the following natural gas activities: gathering, compressing, treating, processing, marketing and fractionation of natural gas liquids; · transportation and/or storage of natural gas and natural gas liquids; · transportation of crude oil and/or refined petroleum products and other liquids; · exploration and production of oil and/or natural gas; · sale, distribution and retail marketing of propane and/or other natural gas liquids; · marine transportation of one or more of the following: crude oil, dry bulk, refined products, liquefied natural gas (“LNG”), and other commodities; and · direct mining, production and marketing of natural resources, including timber, fertilizers, coal and other minerals.
As of XX, the U.S. dollar-denominated market capitalizations of the Index components ranged from approximately $XX to approximately $XX .
The Fund employs a “passive management” investment strategy in seeking to achieve its investment objective. The Fund generally will use a replication methodology, meaning it will invest in all of the securities comprising the Index in proportion to the weightings in the Index. However, the Fund may utilize a sampling methodology under various circumstances where it may not be possible or practicable to purchase all of the securities in the Index.
MLPs are publicly traded partnerships engaged in the transportation, storage, processing, refining, marketing, exploration, production, and mining of natural resources. By confining their operations to these specific activities, their interests, or units, are able to trade on public securities exchanges exactly like the shares of a corporation, without entity level taxation.
An MLP consists of a general partner and limited partners (or in the case of MLPs organized as limited liability companies, a managing member and members). The general partner or managing member typically controls the operations and management of the MLP and has an ownership stake in the MLP. The limited partners or members, through their ownership of limited partner or member interests, provide capital to the entity, are intended to have no role in the operation and management of the entity and receive cash distributions. The Fund will be a limited partner (or a member) in the MLPs in which it invests. The MLPs themselves generally do not pay United States federal income taxes. Thus, unlike investors in corporate securities, direct MLP investors are generally not subject to double taxation (i.e., corporate level tax and tax on corporate dividends). Currently, most MLPs operate in the energy and/or natural resources sectors.
To qualify as an MLP and to not be taxed as a corporation, a partnership must receive at least 90% of its income from qualifying sources as set forth in Section 7704(d) of the Internal Revenue Code (the “Code”). These qualifying sources include natural resource-based activities such as the processing, transportation and storage of mineral or natural resources and other commodities.
Royalty trusts are publicly traded investment vehicles that gather income on royalties and pay out almost all cash flows to stockholders as distributions. Royalty trusts typically have no physical operations and no management or employees. Typically royalty trusts own the rights to royalties on the production and sales of a natural resource, including oil, gas, minerals and timber. As these deplete, production and cash flows steadily decline, which may decrease distribution rates. Royalty trusts are, in some respects, similar to certain MLPs and include risks similar to those MLPs.
Of the XX partnerships and royalty trusts eligible for inclusion in the Index, approximately XX trade on the New York Stock Exchange (“NYSE”) and the rest trade on the NASDAQ National Market (“NASDAQ”). Partnerships and royalty trusts eligible for inclusion in the Index are subject to further liquidity screens before they may be included in the Index.
The Fund will concentrate its investments (i.e. hold 25% or more of its total assets) in a particular industry or group of industries to approximately the same extent that the Index concentrates in an industry or group of industries. [As of the date of the Prospectus, the Index is concentrated in the energy sector.]
For the complete filing click: HERE