ASSETS
|
|
|
|
|
Investment securities:
|
|
|
|
|
At cost
|
|
$
|
9,029,516
|
|
At value
|
|
$
|
9,841,212
|
|
Foreign cash (Cost $119,184)
|
|
|
118,058
|
|
Dividends and interest receivable
|
|
|
28,110
|
|
Receivable for investments sold
|
|
|
174,256
|
|
Prepaid Expense
|
|
|
206
|
|
Due from Advisor
|
|
|
11,648
|
|
TOTAL ASSETS
|
|
|
10,173,490
|
|
|
|
|
|
|
LIABILITIES
|
|
|
|
|
Due to custodian
|
|
|
5,268
|
|
Capital shares redeemed payable
|
|
|
282,989
|
|
Payable to related parties
|
|
|
11,537
|
|
Accrued expenses and other liabilities
|
|
|
81,847
|
|
TOTAL LIABILITIES
|
|
|
381,641
|
|
NET ASSETS
|
|
$
|
9,791,849
|
|
|
|
|
|
|
Net Assets Consist Of:
|
|
|
|
|
Paid in capital
|
|
$
|
11,376,691
|
|
Accumulated deficit
|
|
|
(1,584,842
|
)
|
NET ASSETS
|
|
$
|
9,791,849
|
|
|
|
|
|
|
Net Asset Value Per Share:
|
|
|
|
|
Net Assets
|
|
$
|
9,791,849
|
|
Shares of beneficial interest outstanding ($0 par value, unlimited shares authorized)
|
|
|
350,000
|
|
Net asset value (Net Assets ÷ Shares Outstanding)
|
|
$
|
27.98
|
|
See
accompanying notes to financial statements.
Arrow
DWA Country Rotation ETF
|
STATEMENT
OF OPERATIONS (Unaudited)
|
For
the Six Months Ended January 31, 2020
|
INVESTMENT INCOME
|
|
|
|
|
Dividends (net of foreign withholding tax of $28,012)
|
|
$
|
183,264
|
|
TOTAL INVESTMENT INCOME
|
|
|
183,264
|
|
|
|
|
|
|
EXPENSES
|
|
|
|
|
Custodian fees
|
|
|
55,200
|
|
Investment advisory fees
|
|
|
45,057
|
|
Administrative services fees
|
|
|
12,293
|
|
Printing and postage expenses
|
|
|
7,562
|
|
Audit Fees
|
|
|
6,653
|
|
Transfer agent fees
|
|
|
6,050
|
|
Legal Fees
|
|
|
5,546
|
|
Trustees fees and expenses
|
|
|
2,622
|
|
Interest expense
|
|
|
650
|
|
Professional fees
|
|
|
513
|
|
Insurance expenses
|
|
|
309
|
|
Other expenses
|
|
|
2,017
|
|
TOTAL EXPENSES
|
|
|
144,472
|
|
Less: Fees waived/ expenses reimbursed by the Advisor
|
|
|
(63,451
|
)
|
NET EXPENSES
|
|
|
81,021
|
|
|
|
|
|
|
NET INVESTMENT INCOME
|
|
|
102,243
|
|
|
|
|
|
|
REALIZED AND UNREALIZED GAIN (LOSS) ON INVESTMENTS
|
|
|
|
|
Net realized gain (loss) on:
|
|
|
|
|
In-kind redemptions
|
|
|
247,207
|
|
Investments
|
|
|
(88,625
|
)
|
Foreign currency transactions
|
|
|
(33,389
|
)
|
|
|
|
125,193
|
|
|
|
|
|
|
Net change in unrealized appreciation (depreciation) on:
|
|
|
|
|
Investments
|
|
|
227,605
|
|
Foreign currency translations
|
|
|
(2,236
|
)
|
|
|
|
225,369
|
|
NET REALIZED AND UNREALIZED GAIN ON INVESTMENTS
|
|
|
350,562
|
|
|
|
|
|
|
NET INCREASE IN NET ASSETS RESULTING FROM OPERATIONS
|
|
$
|
452,805
|
|
See
accompanying notes to financial statements.
Arrow
DWA Country Rotation ETF
|
STATEMENTS
OF CHANGES IN NET ASSETS
|
|
|
Six Months Ended
|
|
|
For The
|
|
|
|
January 31, 2020
|
|
|
Year Ended
|
|
|
|
(Unaudited)
|
|
|
July 31, 2019
|
|
FROM OPERATIONS
|
|
|
|
|
|
|
|
|
Net investment income
|
|
$
|
102,243
|
|
|
$
|
360,917
|
|
Net realized gain (loss) on investments and foreign currency transactions
|
|
|
125,193
|
|
|
|
(1,754,311
|
)
|
Net change in unrealized appreciation on investments and foreign currency translations
|
|
|
225,369
|
|
|
|
485,735
|
|
Net increase (decrease) in net assets resulting from operations
|
|
|
452,805
|
|
|
|
(907,659
|
)
|
|
|
|
|
|
|
|
|
|
DISTRIBUTIONS TO SHAREHOLDERS
|
|
|
|
|
|
|
|
|
Total distribution paid
|
|
|
(139,475
|
)
|
|
|
(439,245
|
)
|
Net decrease in net assets resulting from distributions to shareholders
|
|
|
(139,475
|
)
|
|
|
(439,245
|
)
|
|
|
|
|
|
|
|
|
|
FROM SHARES OF BENEFICIAL INTEREST
|
|
|
|
|
|
|
|
|
Cost of shares redeemed
|
|
|
(5,435,956
|
)
|
|
|
(4,017,743
|
)
|
Net decrease in net assets resulting from shares of beneficial interest
|
|
|
(5,435,956
|
)
|
|
|
(4,017,743
|
)
|
|
|
|
|
|
|
|
|
|
TOTAL DECREASE IN NET ASSETS
|
|
|
(5,122,626
|
)
|
|
|
(5,364,647
|
)
|
|
|
|
|
|
|
|
|
|
NET ASSETS
|
|
|
|
|
|
|
|
|
Beginning of Period
|
|
|
14,914,475
|
|
|
|
20,279,122
|
|
End of Period
|
|
$
|
9,791,849
|
|
|
$
|
14,914,475
|
|
|
|
|
|
|
|
|
|
|
SHARE ACTIVITY
|
|
|
|
|
|
|
|
|
Shares Redeemed
|
|
|
(200,000
|
)
|
|
|
(150,000
|
)
|
Net decrease in shares of beneficial interest outstanding
|
|
|
(200,000
|
)
|
|
|
(150,000
|
)
|
See
accompanying notes to financial statements.
Arrow
DWA Country Rotation ETF
|
FINANCIAL
HIGHLIGHTS
|
Per
Share Data and Ratios for a Share of Beneficial Interest Outstanding Throughout each Period
|
|
|
Six Months Ended
|
|
|
For The
|
|
|
For The
|
|
|
|
January 31, 2020
|
|
|
Year Ended
|
|
|
Period Ended
|
|
|
|
(Unaudited)
|
|
|
July 31, 2019
|
|
|
July 31, 2018 (1)
|
|
Net asset value, beginning of period
|
|
$
|
27.12
|
|
|
$
|
28.97
|
|
|
$
|
30.00
|
|
Activity from investment operations:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income (2)
|
|
|
0.23
|
|
|
|
0.59
|
|
|
|
0.44
|
|
Net realized and unrealized gain (loss) on investments and foreign currency
|
|
|
0.96
|
|
|
|
(1.69
|
)
|
|
|
(1.47
|
)
|
Total from investment operations
|
|
|
1.19
|
|
|
|
(1.10
|
)
|
|
|
(1.03
|
)
|
Less distributions from:
|
|
|
|
|
|
|
|
|
|
|
|
|
Net investment income
|
|
|
(0.33
|
)
|
|
|
(0.75
|
)
|
|
|
—
|
|
Total distributions
|
|
|
(0.33
|
)
|
|
|
(0.75
|
)
|
|
|
—
|
|
Net asset value, end of period
|
|
$
|
27.98
|
|
|
$
|
27.12
|
|
|
$
|
28.97
|
|
Total return (4)(6)
|
|
|
4.38
|
%
|
|
|
(3.61
|
)%
|
|
|
(3.43
|
)%
|
Net assets, at end of period (000s)
|
|
$
|
9,792
|
|
|
$
|
14,914
|
|
|
$
|
20,279
|
|
Ratio of gross expenses to average net assets (3)(7)(9)
|
|
|
2.25
|
% (12)
|
|
|
1.60
|
% (11)
|
|
|
1.86
|
% (10)
|
Ratio of net expenses to average net assets (3)(7)
|
|
|
1.26
|
% (12)
|
|
|
0.87
|
% (11)
|
|
|
0.79
|
% (10)
|
Ratio of net investment income to average net assets (3)(7)(8)
|
|
|
1.59
|
%
|
|
|
2.17
|
%
|
|
|
2.50
|
%
|
Portfolio Turnover Rate (4)(5)
|
|
|
94
|
%
|
|
|
146
|
%
|
|
|
136
|
%
|
|
(1)
|
The
Arrow DWA Country Rotation ETF commenced operations on December 28, 2017.
|
|
(2)
|
Per
share amounts calculated using the average shares method, which more appropriately presents the per share data for the period.
|
|
(3)
|
Annualized
for periods less than one year.
|
|
(4)
|
Not
annualized for periods less than one year.
|
|
(5)
|
Portfolio
turnover rate excludes portfolio securities received or delivered as a result of processing capital share transactions in Creation
Units.
|
|
(6)
|
Total
return is calculated assuming a purchase of shares at net asset value on the first day and a sale at net asset value on the last
day of the period. Distributions are assumed, for the purpose of this calculation, to be reinvested at the ex-dividend date net
asset value per share on their respective payment dates. Had Arrow Investment Advisors, LLC not waived fees or reimbursed a portion
of the expenses, total returns would have been lower.
|
|
(7)
|
Does
not include the Funds share of the expenses of the underlying investment companies in which the Fund invests.
|
|
(8)
|
The
recognition of investment income by the Fund is affected by the timing and declaration of dividends by the underlying investment
companies in which the Fund invests.
|
|
(9)
|
Represents
the ratio of expenses to average net assets absent of fee waivers and/or expense reimbursements by Arrow Investment Advisors,
LLC.
|
|
(10)
|
Includes
0.05% for the period ended July 31, 2018 attributed to interest expense, which is not subject to waiver by Arrow Investment Advisors,
LLC.
|
|
(11)
|
Includes
0.12% for the year ended July 31, 2019 attributed to interest expense and foreign custody transaction costs, which are not subject
to waiver by the Arrow Investment Advisors, LLC.
|
|
(12)
|
Includes
0.51% for the six months ended January 31, 2020 attributed to interest expense and foreign custody transaction costs, which are
not subject to waiver by the Arrow Investment Advisors, LLC.
|
See
accompanying notes to financial statements.
ARROW
DWA COUNTRY ROTATION ETF
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited)
|
January
31, 2020
|
|
The
Arrow DWA Country Rotation ETF (the Fund) is a diversified series of Arrow Investments Trust, a statutory trust
organized under the laws of the State of Delaware on August 2, 2011, and is registered under the Investment Company Act of 1940,
as amended (the 1940 Act), as an open-end management investment company. The Funds investment objective is
to seek long-term capital appreciation by tracking the investment results of the Dorsey Wright Country and Stock Momentum Index
(the Index). The investment objective is non-fundamental. The Fund commenced operations on December 28, 2017.
|
2.
|
SIGNIFICANT
ACCOUNTING POLICIES
|
The
following is a summary of significant accounting policies followed by the Fund in preparation of its financial statements. These
policies are in conformity with accounting principles generally accepted in the United States of America (GAAP).
The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts
of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the
reported amounts of income and expenses for the period. Actual results could differ from those estimates. 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 including
FASB Accounting Standards Update (ASU) 2013-08.
Securities
valuation – Securities listed on an exchange (including exchange-traded funds (ETFs)) are valued at the
last reported sale price at the close of the regular trading session of the exchange on the business day the value is being determined,
or in the case of securities listed on NASDAQ at the NASDAQ Official Closing Price (NOCP). In the absence of a sale,
such securities shall be valued at the last bid price on the day of valuation. Debt securities (other than short-term obligations)
are valued each day by an independent pricing service approved by the Board of Trustees (the Board) using methods
which include current market quotations from a major market maker in the securities and based on methods which include the consideration
of yields or prices of securities of comparable quality, coupon, maturity and type. Investments valued in currencies other than
the U.S. dollar are converted to U.S. dollars using exchange rates obtained from pricing services. If market quotations are not
readily available or if Arrow Investment Advisors, LLC (the Advisor) believes the market quotations are not reflective
of market value, securities will be valued at their fair value as determined in good faith by the Advisor and in accordance with
the Trusts Portfolio Securities Valuation Procedures (the Procedures), subject to review by the Board. The
Board will review the fair value method in use for securities requiring a fair market value determination and supporting documentation
from the Advisor at least quarterly for consistency with the Procedures. The Procedures consider, among others, the following
factors to determine a securitys fair value: the nature and pricing history (if any) of the security; whether any dealer
quotations for the security are available; and possible valuation methodologies that could be used to determine the fair value
of the security. Fair value may also be used by the Board if extraordinary events occur after the close of the relevant world
market but prior to the NYSE close. Short-term debt obligations having 60 days or less remaining until maturity, at time of purchase,
may be valued at amortized cost.
ARROW
DWA COUNTRY ROTATION ETF
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (Continued)
|
January
31, 2020
|
|
Valuation
of Fund of Funds – The Fund may invest in portfolios of open-end or closed-end investment companies (the Underlying
Funds). Underlying open-end funds (other than ETFs) are valued at their respective NAVs as reported by such investment
companies. The Underlying Funds value securities in their portfolios for which market quotations are readily available at their
market values (generally the last reported sale price) and all other securities and assets at their fair value by the methods
established by the boards of the Underlying Funds. The shares of many closed-end investment companies, after their initial public
offering, frequently trade at a price per share, which is different than the net asset value per share. The difference represents
a market premium or market discount of such shares. There can be no assurances that the market discount or market premium on shares
of any closed-end investment company purchased by the Fund will not change.
Exchange
Traded Funds – The Fund may invest in ETFs. ETFs are a type of fund bought and sold on a securities exchange. An ETF
trades like common stock and represents a portfolio of securities. The risks of owning an ETF generally reflect the risks of owning
the underlying securities it holds, although the lack of liquidity on an ETF could result in it being more volatile. Additionally,
ETFs have fees and expenses that reduce their value.
The
Fund utilizes various methods to measure the fair value of all of its investments on a recurring basis. GAAP establishes a
hierarchy that prioritizes inputs to valuation methods. The three levels of input are:
Level
1 – Unadjusted quoted prices in active markets for identical assets and liabilities that the Fund has the ability to access.
Level
2 – Observable inputs other than quoted prices included in Level 1 that are observable for the asset or liability, either
directly or indirectly. These inputs may include quoted prices for the identical instrument in an inactive market, prices for
similar instruments, interest rates, prepayment speeds, credit risk, yield curves, default rates and similar data.
Level
3 – Unobservable inputs for the asset or liability, to the extent relevant observable inputs are not available, representing
the Funds own assumptions about the assumptions a market participant would use in valuing the asset or liability, and would
be based on the best information available.
The
availability of observable inputs can vary from security to security and is affected by a wide variety of factors, including,
for example, the type of security, whether the security is new and not yet established in the marketplace, the liquidity of markets,
and other characteristics particular to the security. To the extent that valuation is based on models or inputs that are less
observable or unobservable in the market, the determination of fair value requires more judgment. Accordingly, the degree of judgment
exercised in determining fair value is greatest for instruments categorized in Level 3.
The
inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, for disclosure purposes,
the level in the fair value hierarchy within which the fair value measurement falls in its entirety, is determined based on the
lowest level input that is significant to the fair value measurement in its entirety.
ARROW
DWA COUNTRY ROTATION ETF
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (Continued)
|
January
31, 2020
|
|
The
inputs or methodology used for valuing securities are not necessarily an indication of the risk associated with investing in those
securities. The following tables summarize the inputs used as of January 31, 2020 for the Funds assets measured at fair
value:
Assets *
|
|
Level 1
|
|
|
Level 2
|
|
|
Level 3
|
|
|
Total
|
|
Common Stocks
|
|
$
|
9,485,950
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,485,950
|
|
Preferred Stocks
|
|
|
355,262
|
|
|
|
—
|
|
|
|
—
|
|
|
|
355,262
|
|
Total
|
|
$
|
9,841,212
|
|
|
$
|
—
|
|
|
$
|
—
|
|
|
$
|
9,841,212
|
|
The
Fund did not hold any Level 3 securities during the period.
|
*
|
See
Portfolio of Investments for classification.
|
Security
transactions and related income – Security transactions are accounted for on the trade date. Interest income is recognized
on an accrual basis. Discounts are accreted and premiums are amortized on securities purchased over the lives of the respective
securities. Dividend income is recorded on the ex-dividend date. Realized gains or losses from sales of securities are determined
by comparing the identified cost of the security lot sold with the net sales proceeds.
Dividends
and distributions to shareholders – Dividends from net investment income, if any, are declared and paid quarterly. Distributable
net realized capital gains, if any, are declared and distributed annually. Dividends from net investment income and distributions
from net realized gains are determined in accordance with federal income tax regulations, which may differ from GAAP. These book/tax
differences are considered either temporary (e.g., deferred losses) or permanent in nature. To the extent these differences are
permanent in nature, such amounts are reclassified within the composition of net assets based on their federal tax-basis treatment;
temporary differences do not require reclassification. Dividends and distributions to shareholders are recorded on the ex-dividend
date.
Federal
Income Taxes – The Fund intends to continue to comply with the requirements of the Internal Revenue Code of 1986, as
amended, applicable to regulated investment companies and to distribute all of its taxable income to its shareholders. Therefore,
no provision for federal income tax is required. The Fund recognizes the tax benefits of uncertain tax positions only where the
position is more likely than not to be sustained assuming examination by tax authorities. Management has analyzed
the Funds tax positions, and has concluded that no liability for unrecognized tax benefits should be recorded related to
uncertain tax positions taken on returns filed for the open tax years July 31, 2018 – July 31, 2019 or expected to be taken
in the Funds July 31, 2020 tax returns. The Fund identified its major tax jurisdictions as U.S. Federal and foreign jurisdictions
where the Fund makes significant investments. The Fund is not aware of any tax positions for which it is reasonably possible that
the total amounts of unrecognized tax benefits will change materially in the next twelve months.
ARROW
DWA COUNTRY ROTATION ETF
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (Continued)
|
January
31, 2020
|
|
Foreign
Currency – The accounting records of the Fund are maintained in U.S. dollars. Investment securities and other assets
and liabilities denominated in a foreign currency, and income receipts and expense payments are translated into U.S. dollars using
the prevailing exchange rate at the London market close. Purchases and sales of securities are translated into U.S. dollars at
the contractual currency rates established at the approximate time of the trade. Net realized gains and losses on foreign currency
transactions represent net gains and losses from currency realized between the trade and settlement dates on securities transactions,
gains and losses on the purchase and sale of foreign currencies and the difference between income accrued versus income received.
The effects of changes in foreign currency exchange rates on investments in securities are included with the net realized and
unrealized gain or loss on investment securities.
Expenses
– Expenses of the Trust that are directly identifiable to a specific fund are charged to that fund. Expenses, which
are not readily identifiable to a specific fund, are allocated in such a manner as deemed equitable (as determined by the Board),
taking into consideration the nature and type of expense and the relative sizes of the funds in the Trust.
Indemnification
– The Trust indemnifies its officers and Trustees for certain liabilities that may arise from the performance of their
duties to the Trust. Additionally, in the normal course of business, the Fund enters into contracts that contain a variety of
representations and warranties and which provide general indemnities. The Funds 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, the risk of loss due to these warranties and indemnities appears to be remote.
Time
Deposits – Time deposits are issued by a depository institution in exchange for the deposit of funds. The issuer agrees
to pay the amount deposited plus interest to the depositor on the date specified with respect to the deposit. Time deposits do
not trade in the secondary market prior to maturity. However, some time deposits may be redeemable prior to maturity and may be
subject to withdrawal penalties.
Emerging
Markets Risk – In addition to all of the risks of investing in foreign developed markets, emerging market securities
involve risks attendant to less mature and stable governments and economies, such as lower trading volume, trading suspension,
security price volatility, repatriation restrictions, government confiscation, inflation, deflation, currency devaluation and
adverse government regulations of industries or markets. As a result of these risks, the prices of emerging market securities
tend to be more volatile than the securities of issuers located in developed markets.
Foreign
Investment Risk – Returns on investments in foreign securities could be more volatile than, or trail the returns
on, investments in U.S. securities. Exposures to foreign securities entail special risks, including risks due to: (i)
differences in information available about foreign issuers; (ii) differences in investor protection standards in other
jurisdictions; (iii) capital controls risks, including the risk of a foreign jurisdiction imposing restrictions on the
ability to repatriate or transfer currency or other assets; (iv) political, diplomatic and economic risks; (v)
regulatory risks; and (vi) foreign market and trading risks, including the costs of trading and risks of settlement in
foreign jurisdictions. In addition, the Funds
ARROW
DWA COUNTRY ROTATION ETF
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (Continued)
|
January
31, 2020
|
|
investments
in securities denominated in other currencies could decline due to changes in local currency relative to the value of the U.S.
dollar, which may affect the Funds returns.
|
3.
|
INVESTMENT
TRANSACTIONS
|
For
the six months ended January 31, 2020, cost of purchases and proceeds from sales of portfolio securities (excluding in-kind transactions
and short-term investments), amounted to $12,042,935 and $13,443,349, respectively.
For
the six months ended January 31, 2020, cost of purchases and proceeds from sales of portfolio securities for in-kind transactions,
amounted to $0 and $3,946,371, respectively.
|
4.
|
INVESTMENT
ADVISORY AGREEMENT / TRANSACTIONS WITH RELATED PARTIES
|
The
business activities of the Fund are overseen by the Board, which is responsible for the overall management of the Fund. The Advisor
serves as the Funds investment advisor pursuant to an investment advisory agreement with the Trust on behalf of the Fund
(the Advisory Agreement). The Trust has entered into a Global Custody Agreement with Brown Brothers Harriman &
Co. to serve as custodian and to act as transfer and shareholder services agent. The Trust has also entered into an ETF Distribution
Agreement (the Distribution Agreement) with Northern Lights Distributors, LLC (NLD or the Distributor)
to serve as the distributor for the Fund.
Archer
Distributors, LLC, an affiliate of the Advisor is also a party to the Distribution Agreement and provides marketing services to
the Fund, including responsibility for all the Funds marketing and advertising materials.
Pursuant
to the Advisory Agreement, the Advisor, under the oversight of the Board, directs the daily operations of the Fund and supervises
the performance of administrative and professional services provided by others. As compensation for its services and the related
expenses borne by the Advisor, the Fund pays the Advisor a fee, computed and accrued daily and paid monthly, at an annual rate
of 0.70% of the Funds average daily net assets.
Pursuant
to a written contract (the Waiver Agreement), the Advisor has agreed, at least until December 31, 2020 to waive a
portion of its advisory fee and has agreed to reimburse the Fund for other expenses to the extent necessary so that total expenses
incurred (exclusive of any taxes, leverage interest, brokerage commissions, expenses incurred in connection with any merger or
reorganization, dividend expense on securities sold short, underlying fund fees and expenses, foreign custody transaction costs
and foreign account set-up fees, and extraordinary expenses such as litigation expenses) will not exceed 0.75% of the Funds
average daily net assets. This amount will herein be referred to as the Expense Limitation.
If
the Advisor waives any fee or reimburses any expenses pursuant to the Waiver Agreement, and the Funds operating expenses
are subsequently lower than its Expense Limitation, the Advisor, on a rolling three year basis (within three years after the fees
have been waived or reimbursed), shall be entitled to reimbursement by the Fund provided that such reimbursement does not cause
the Funds operating
ARROW
DWA COUNTRY ROTATION ETF
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (Continued)
|
January
31, 2020
|
|
expense
to exceed the Expense Limitation. Such expenses may only be reimbursed to the extent they were waived or paid after the effective
date of the Waiver Agreement. The Board may terminate this expense reimbursement arrangement at any time.
If
the Funds operating expenses subsequently exceed the Expense Limitation, the reimbursements for the Fund shall be suspended.
For the six months ended January 31, 2020, the Advisor waived and reimbursed fees in the amount of $63,451, pursuant to the Waiver
Agreement.
The
following amounts are subject to recapture by the Advisor by the following dates:
July 31, 2021
|
July 31, 2022
|
$ 75,972
|
$ 121,526
|
The
Trust, with respect to the Fund, has adopted a distribution and service plan (Plan) pursuant to Rule 12b-1 under
the 1940 Act. Under the Plan, the Fund is authorized to pay distribution fees to the Distributor and other firms that provide
distribution and shareholder services (Service Providers). If a Service Provider provides these services, the Fund
may pay fees at an annual rate not to exceed 0.25% of average daily net assets, pursuant to Rule 12b-1 under the 1940 Act.
No
distribution or service fees are currently paid by the Fund and there are no current plans to impose these fees. In the event
Rule 12b-1 fees were charged, over time they would increase the cost of an investment in the Fund.
Gemini
Fund Services, LLC (GFS) – GFS, an affiliate of the Distributor, provides administration and fund
accounting services to the Trust. Pursuant to separate servicing agreements with GFS, the Fund pays GFS customary fees for providing
administration and fund accounting services to the Fund. Certain officers of the Trust are also officers of GFS, and are not paid
any fees directly by the Fund for serving in such capacities.
Blu
Giant, LLC (Blu Giant) – Blu Giant, an affiliate of GFS and the Distributor, provides
EDGAR conversion and filing services as well as print management services for the Fund on an ad-hoc basis. For the provision of
these services, Blu Giant receives customary fees from the Funds.
Effective
February 1, 2019, NorthStar Financial Services Group, LLC, the parent company of GFS and its affiliated companies including NLD
and Northern Lights Compliance Services, LLC (collectively, the Gemini Companies), sold its interest in the Gemini
Companies to a third party private equity firm that contemporaneously acquired Ultimus Fund Solutions, LLC (an independent mutual
fund administration firm) and its affiliates (collectively, the Ultimus Companies). As a result of these separate
transactions, the Gemini Companies and the Ultimus Companies are now indirectly owned through a common parent entity, The Ultimus
Group, LLC.
ARROW
DWA COUNTRY ROTATION ETF
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (Continued)
|
January
31, 2020
|
|
|
5.
|
CAPITAL
SHARE TRANSACTIONS
|
Shares
are not individually redeemable and may be redeemed by the Fund at NAV only in large blocks known as Creation Units.
Shares are created and redeemed by the Fund only in Creation Unit size aggregations of 50,000 shares. Only Authorized Participants
are permitted to purchase or redeem Creation Units from the Fund. An Authorized Participant is either (i) a broker-dealer or other
participant in the clearing process through the Continuous Net Settlement System of the National Securities Clearing Corporation
or (ii) a DTC participant and, in each case, must have executed a Participant Agreement with the Distributor. Such transactions
are generally permitted on an in-kind basis, with a balancing cash component to equate the transaction to the NAV per share of
the Fund on the transaction date. Cash may be substituted equivalent to the value of certain securities generally when they are
not available in sufficient quantity for delivery, not eligible for trading by the Authorized Participant or as a result of other
market circumstances. In addition, the Fund may impose transaction fees on purchases and redemptions of Fund shares to cover the
custodial and other costs incurred by the Fund in effecting trades. A fixed fee payable to the Custodian may be imposed on each
creation and redemption transaction regardless of the number of Creation Units involved in the transaction (Fixed Fee).
Transactions in capital shares for the Fund are disclosed in the Statements of Changes in Net Assets.
The
Transaction Fees for the Fund are listed in the table below:
For
the six months ended January 31, 2020, the Fund received $3,300 in fixed fees.
|
6.
|
DISTRIBUTIONS
TO SHAREHOLDERS AND TAX COMPONENTS OF CAPITAL
|
The
tax character of distributions paid during the following years/periods was as follows:
|
|
Fiscal Year Ended
|
|
|
Fiscal Period Ended
|
|
|
|
July 31, 2019
|
|
|
July 31, 2018
|
|
Ordinary Income
|
|
$
|
439,245
|
|
|
$
|
—
|
|
|
|
$
|
439,245
|
|
|
$
|
—
|
|
ARROW
DWA COUNTRY ROTATION ETF
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (Continued)
|
January
31, 2020
|
|
As
of July 31, 2019, the components of accumulated earnings/(deficit) on a tax basis were as follows:
Undistributed
|
|
|
Undistributed
|
|
|
Post October Loss
|
|
|
Capital Loss
|
|
|
Other
|
|
|
|
|
|
Total
|
|
Ordinary
|
|
|
Long-Term
|
|
|
and
|
|
|
Carry
|
|
|
Book/Tax
|
|
|
Unrealized
|
|
|
Accumulated
|
|
Income
|
|
|
Gains
|
|
|
Late Year Loss
|
|
|
Forwards
|
|
|
Differences
|
|
|
Appreciation
|
|
|
Deficits
|
|
$
|
35,931
|
|
|
$
|
—
|
|
|
$
|
(1,228,160
|
)
|
|
$
|
(1,288,025
|
)
|
|
$
|
—
|
|
|
$
|
582,082
|
|
|
$
|
(1,898,172
|
)
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
Capital
losses incurred after October 31 within the fiscal year are deemed to arise on the first business day of the following fiscal
year for tax purposes. The Fund incurred and elected to defer such capital losses of $1,228,160
The
Fund has capital loss carry forwards for federal income tax purposes available to offset future capital gains as follows:
|
|
|
Non-Expiring
|
|
|
Non-Expiring
|
|
|
|
|
|
|
|
Expiring
|
|
|
Short-Term
|
|
|
Long-Term
|
|
|
Total
|
|
|
CLCF Utilized
|
|
$
|
—
|
|
|
$
|
1,288,025
|
|
|
$
|
—
|
|
|
$
|
1,288,025
|
|
|
$
|
—
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
The
difference between book basis and tax basis unrealized appreciation and accumulated net realized gains from investments is attributable
to the tax deferral of losses on wash sales.
Permanent
book and tax differences, primarily a result of realized gains (losses) on in-kind redemptions, resulted in reclassification for
the year ended July 31, 2019 as follows:
Paid
|
|
|
|
|
In
|
|
|
Accumulated
|
|
Capital
|
|
|
Earnings (Losses)
|
|
$
|
(181,057
|
)
|
|
$
|
181,057
|
|
|
|
|
|
|
|
|
|
7.
|
AGGREGATE
UNREALIZED APPRECIATION AND DEPRECIATION – TAX BASIS
|
|
|
|
Gross
|
|
|
Gross
|
|
|
|
|
|
|
|
Unrealized
|
|
|
Unrealized
|
|
|
Net Unrealized
|
|
Tax Cost
|
|
|
Appreciation
|
|
|
Depreciation
|
|
|
Appreciation
|
|
$
|
9,031,049
|
|
|
$
|
980,743
|
|
|
$
|
(170,580
|
)
|
|
$
|
810,163
|
*
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
|
*
|
Excludes
FX unrealized.
|
ARROW
DWA COUNTRY ROTATION ETF
|
NOTES
TO FINANCIAL STATEMENTS (Unaudited) (Continued)
|
January
31, 2020
|
|
The
beneficial ownership, either directly or indirectly, of more than 25% of the voting securities of the Fund creates presumption
of the control of the Fund, under Section 2(a)9 of the 1940 Act. As of January 31, 2020, Arrow DWA Balanced Fund, an affiliate
of the Fund, held 81.03% of the voting securities of the Fund.
Subsequent
events after the date of the Statement of Assets and Liabilities have been evaluated through the date the financial statements
were issued.
Management
has determined that no events or transactions occurred requiring adjustment or disclosure in the financial statements.
Arrow
DWA Country Rotation ETF
|
EXPENSE
EXAMPLES (Unaudited)
|
January
31, 2020
|
|
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; (2) ongoing costs, including management 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.
The
example is based on an investment of $1,000 invested at the beginning of the period and held for the entire period from August
1, 2019 through January 31, 2020.
Actual
Expenses
The
Actual line in the table below provides information about actual account values and actual expenses. You may use
the information below, together with the amount you invested, to estimate the expenses that you paid over the period. Simply divide
your account value by $ 1,000 (for example, an $8,600 account value divided by $1,000 = 8.6), then multiply the result by the
number in the table under the heading entitled Expenses Paid During Period to estimate the expenses you paid on
your account during this period.
Hypothetical
Example for Comparison Purposes
The
Hypothetical line in the table below provides information about hypothetical account values and hypothetical expenses
based on the Funds actual expense ratio and an assumed rate of return of 5% per year before expenses, which is not the
Funds actual return. The hypothetical account values and expenses may not be used to estimate the actual ending account
balances or expenses you paid for the period. You may use this information to compare this 5% hypothetical example with the 5%
hypothetical examples that appear in the 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 transactional
costs, such as brokerage commissions paid on purchases and sales of Fund shares. Therefore, 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 transactional
costs were included, your costs would have been higher.
|
Beginning
|
Ending
|
Expenses
Paid
|
Expenses
Paid
|
|
Account
Value
|
Account
Value
|
During
Period*
|
During
Period**
|
|
8/1/19
|
1/31/2020
|
8/1/19
- 1/31/20
|
8/1/19
- 1/31/20
|
Actual
|
$1,000.00
|
$1,043.80
|
$6.42
|
1.25%
|
Hypothetical
|
$1,000.00
|
$1,018.85
|
$6.34
|
1.25%
|
(5%
return before expenses)
|
|
|
|
|
|
*
|
Expenses
are equal to the average account value over the period, multiplied by each Funds annualized expense ratio, multiplied by
the number of days in the period (184) divided by the number of days in the fiscal year (366).
|
ARROW
DWA COUNTRY ROTATION ETF
|
SUPPLEMENTAL
INFORMATION (Unaudited)
|
January
31, 2020
|
|
FACTORS
CONSIDERED BY THE INDEPENDENT TRUSTEES IN APPROVING THE INVESTMENT ADVISORY AGREEMENT
At
an in person meeting held September 19, 2019 (the Meeting), the Board of Trustees (the Board) including
the Trustees who are not interested persons, as such term is defined under Section 2(a)(19) of the Investment Company
Act of 1940, as amended (the Independent Trustees), considered the renewal of the investment advisory agreement
(the Advisory Agreement) between the Arrow Investments Trust (the Trust), and Arrow Investment Advisors,
LLC (the Adviser) with respect to the Arrow DWA Country Rotation ETF (Country Rotation ETF) or (the
Fund).
The
Board, including the Independent Trustees, unanimously approved continuance of the Advisory Agreement based upon its review of
the written materials provided at the Meeting, the reports provided at each quarterly meeting of the Board and the Boards
discussions with key personnel of the Adviser. In their deliberations, the Trustees did not identify any particular information
that was all-important or controlling, and individual Trustees may have attributed different weights to the various factors. Below
is a summary of the Boards conclusions regarding various factors relevant to approval of continuance of the Advisory Agreement:
Nature,
Extent and Quality of Services. In considering the renewal of the Advisory Agreement, the Board considered the nature,
extent, and quality of services that the Adviser provided to the Fund, including the Advisers personnel and resources,
a description of the manner in which investment decisions are made and executed, and a review of the financial condition of Arrow.
The Board reviewed the services the Adviser provided, including the backgrounds of the personnel that provided the investment
management and related services. They also reviewed information provided regarding risk management and compliance and regulatory
matters. The Board also considered the Advisers management of service provider relationships and oversight of sub-advisers.
The
Board found that the Adviser had a strong culture of research and compliance at the firm and had demonstrated an ongoing commitment
to analyzing various investment strategies in an effort to enhance returns to shareholders. Further, the Board considered the
consistency of the Advisers team, which provided the Adviser with tremendous experience and intellectual capital. The Board
concluded that the Adviser had sufficient quality and depth of personnel, resources, investment methodologies and compliance policies
and procedures to perform its duties under the Advisory Agreement and that the nature, overall quality and extent of the management
services provided by the Adviser to the Fund was satisfactory.
Performance.
The Board reviewed the Funds total return compared to the total returns of a group of funds selected by the Adviser
that employed similar investment strategies as the Fund (the peer group), benchmark index, and Morningstar category
average.
Country
Rotation ETF: The Board reviewed the Funds average total return compared to the average total returns of its peer group,
Morningstar category average (Morningstar U.S. Fund Foreign Large Blend), and benchmark index (DWA Country & Stock Momentum
Index). The Board noted that the Fund outperformed its benchmark index over the year-to-date and one-year periods. The Board also
noted that the Fund outperformed its peer group and Morningstar category average over the one-year period. The Fund also performed
in-line with its peer group and underperformed the Morningstar category average since the Funds inception. The Board considered
the Advisers observation that the Funds
ARROW
DWA COUNTRY ROTATION ETF
|
SUPPLEMENTAL
INFORMATION (Unaudited) (Continued)
|
January
31, 2020
|
|
exposure
to certain foreign markets, which declined meaningfully, generally detracted from performance. The Board also considered that
the Adviser would continue to closely monitor performance. The Board concluded that the performance of the Fund was satisfactory.
Advisory
Fee. The Board reviewed the Funds advisory fee and expense ratio, taking into account the Funds average
net assets, and reviewed information comparing the advisory fee and expense ratio to those of the Funds peer group and
Morningstar category average. The Board discussed their duties to evaluate whether the advisory fee was not unreasonable. The
Board noted that the Advisers fees are reasonably applied based on the nature of the Funds investment strategy.
The Board noted that alternative strategies may generally require enhanced oversight compared to more traditional
asset classes and that such additional cost may be evident in the level of the advisory fee. The Board discussed the level of
work involved in the Advisers oversight of the Fund.
The
Board noted that with respect to the Country Rotation ETF, the advisory fee was lower than the average of its peer group and Morningstar
category, and the overall expense ratio was in a reasonable range.
In
light of the nature, quality and extent of services the Adviser provided, the Board concluded that the Funds advisory fee
was not unreasonable.
Economies
of Scale. The Board considered the extent to which economies of scale would be realized as the Fund grows and whether
fee levels reflect a reasonable sharing of economies of scale for the benefit of Fund investors. The Board noted the Fund had
yet reached an asset level where the Adviser could realize meaningful economies of scale. The Board observed that economies of
scale would be considered in the future as Fund asset levels grow.
Profitability. The
Board also reviewed the profitability of the Adviser with respect to the Fund. The Board noted that the Adviser did not
realize a profit in connection with the management of the Fund.
Fallout
Benefits. Because of its relationship with the Fund, the Adviser and its affiliates may receive certain benefits. The
Board reviewed materials provided by the Adviser as to any such benefits.
Conclusion.
Based on all of the information considered and the conclusions reached, the Board determined that the terms of the Advisory
Agreement were fair and reasonable, and that the continuation of the Advisory Agreement was in the best interests of the Fund.
PRIVACY
NOTICE
Arrow Investments Trust
FACTS
|
WHAT DOES ARROW INVESTMENTS TRUST DO WITH YOUR PERSONAL INFORMATION?
|
Why?
|
Financial
companies choose how they share your personal information. Federal law gives consumers the right to limit some,
but not all sharing. Federal law also requires us to tell you how we collect, share, and protect your personal
information. Please read this notice carefully to understand what we do.
|
What?
|
The
types of personal
information we
collect and share
depends on the
product or service
that you have with
us. This information
can include:
●
Social Security number and wire transfer instructions
●
account transactions and transaction history
●
investment experience and purchase history
When you are no longer our customer, we continue to share your information as
described in this notice.
|
How?
|
All financial companies need to share customers personal information
to run their everyday business. In the section below, we list the
reasons financial companies can share their customers personal
information; the reasons Arrow Investments Trust chooses to share;
and whether you can limit this sharing.
|
Reasons
we can share your
personal information:
|
Does Arrow Investments
Trust share information?
|
Can
you limit this
sharing?
|
For
our everyday business purposes - such as to process your transactions, maintain your account(s), respond to court orders
and legal investigations, or report to credit bureaus.
|
YES
|
NO
|
For
our marketing purposes - to offer our products and services to you.
|
NO
|
We
dont share
|
For
joint marketing with other financial companies.
|
NO
|
We
dont share
|
For
our affiliates everyday business purposes - information about your transactions and records.
|
NO
|
We
dont share
|
For
our affiliates everyday business purposes - information about your credit worthiness.
|
NO
|
We
dont share
|
For
nonaffiliates to market to you
|
NO
|
We
dont share
|
QUESTIONS?
|
Call 1-877-277-6933
|
PRIVACY
NOTICE
Arrow
Investments Trust
What
we do:
|
How
does Arrow Investments Trust protect my personal information?
|
To
protect
your
personal
information
from
unauthorized
access
and
use,
we
use
security
measures
that
comply
with
federal
law.
These
measures
include
computer
safeguards
and
secured
files
and
buildings.
Our
service providers are held accountable for adhering to strict policies and procedures to prevent any misuse of your nonpublic
personal information.
|
How
does Arrow Investments Trust collect my personal information?
|
We
collect
your
personal
information,
for
example,
when
you
●
open an account or deposit money
●
direct us to buy securities or direct us to sell your securities
●
seek advice about your investments
We
also collect your personal information from others, such as credit bureaus, affiliates, or other companies.
|
Why
cant I limit all sharing?
|
Federal
law
gives
you
the
right
to
limit
only:
●
sharing for affiliates everyday business purposes – information about your creditworthiness.
●
affiliates from using your information to market to you.
●
sharing for nonaffiliates to market to you.
State
laws and individual companies may give you additional rights to limit sharing.
|
Definitions
|
Affiliates
|
Companies
related
by
common
ownership
or
control.
They
can
be
financial
and
nonfinancial
companies.
●
Arrow Investments Trust does not share with our affiliates.
|
Nonaffiliates
|
Companies
not
related
by
common
ownership
or
control.
They
can
be
financial
and
nonfinancial
companies.
●
Arrow Investments Trust does not share with nonaffiliates so they can market to you.
|
Joint
marketing
|
A
formal agreement between nonaffiliated financial companies that together market financial products or services to
you.
●
Arrow Investments Trust does not jointly market.
|
PROXY
VOTING POLICY
Information
regarding how the Fund voted proxies relating to portfolio securities for the most recent twelve-month period ended June 30 as
well as a description of the policies and procedures that the Fund uses to determine how to vote proxies is available without
charge, upon request, by calling 1-877-277-6933 or by referring to the Securities and Exchange Commissions (SEC)
website at http://www.sec.gov.
PORTFOLIO
HOLDINGS
The
Fund files its complete schedule of portfolio holdings with the SEC for the first and third quarters of each fiscal year on Form
N-Q. Form N-Q is available on the SECs website at http://www.sec.gov. The information on Form N-Q is available without
charge, upon request, by calling 1-877-277-6933.
INVESTMENT
ADVISOR
|
Arrow
Investment Advisors, LLC
|
6100
Chevy Chase Drive
|
Suite
100
|
Laurel,
MD 20707
|
|
ADMINISTRATOR
|
Gemini
Fund Services, LLC
|
4221
North 203rd Street, Suite 100
|
Elkhorn,
NE 68022-3474
|